Pinkhasov v. Allstate Property and Casualty Co.
MEMORANDUM and ORDER denying 3 defendant's Motion to Dismiss Signed by Honorable James M. Munley on 6/20/11 (sm, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
Before the court is the defendant’s motion to dismiss Counts II and III
of the plaintiff’s complaint. (Doc. 3). The motion has been fully briefed and
is ripe for disposition.
Plaintiff Yuriy Pinkhasov resides and owns property in Pittston,
Pennsylvania. (Doc. 1-1, Ex. A to Notice of Removal, Complaint, ¶ 1)
(hereinafter “Complaint”). Defendant Allstate Property and Casualty
Insurance Company (hereinafter “Allstate” or “defendant”) is a foreign
corporation, organized and existing under the laws of the State of Illinois.
(Id. at ¶ 2). Allstate regularly engages in the sale of insurance in
Pennsylvania as a qualified insurer. (Id. at ¶ 3). Prior to the events
described below, defendant issued a Homeowners Insurance Policy to the
plaintiff covering his Pittston residence.FN1 (Id. at ¶ 5).
Specifically, the policy set coverage limits of $250,000 for the
dwelling, $25,000 for other structures, and $150,000 for personal property.
The insurance policy number is 9 38 706983 (Doc. 1-1, Ex. A to
Notice of Removal, Complaint, ¶ 5).
(Id. at 14). The insurance contract also provides compensation for
temporary loss of use, debris removal and temporary repairs after a loss.
(Id. at ¶¶ 9-10). The policy covers damage from sudden and accidental
escape of water. (Id. at 17). It does not, however, cover losses caused by
continuous or repeated seepage and leakage. (Id.). The policy also does
not compensate for damage from wear and tear, deterioration, mold, wet
rot, etc. (Id.).
On or about August 10, 2010, while the policy was in effect, the
plaintiff discovered extensive water damage to his dwelling, and belongings
therein, throughout the basement. (Id. at ¶¶ 12, 18, 26-27). The water
originated from a leak, rupture, and/or break in the main water line in the
basement. (Id. at ¶ 14). The plaintiff immediately reported the loss to
Allstate, and provided any relevant information requested. (Id. at ¶¶ 13-15).
Allstate refused payment on the claim, without investigation or inspection
of the property.FN2 (Id. at ¶¶ 16-17). As a result of the leak, the plaintiff
incurred costs of repair, mitigation, debris removal, and loss of use. (Id. at
¶¶ 29-31). Also, in the absence of payment, the plaintiff has been unable to
complete necessary structural repairs, resulting in further damage
including the growth of mold. (Id. at ¶ 31).
Plaintiff Pinkhasov filed a complaint in the Lackawana Court of
Common Pleas asserting the following three counts against Defendant
Allstate: Count I, breach of contract; Count II, violation of the duty to act in
good faith pursuant to 42 PA. CONST. STAT. ANN. §8731; and Count III,
In its motion to dismiss, defendant Allstate asserts that plaintiff
informed them directly of the ongoing nature of the loss, and the denial
was based on this information. (Doc. 3 ¶ 3). A court reviewing a motion to
dismiss may only consider allegations in the complaint, so this contention
is outside the scope of our analysis here.
violation of the Unfair Trade Practices and Consumer Protection Law,
(hereinafter “UTPCPL”), 75 PA. STAT. §201-1 et seq. (Complaint). Plaintiff
seeks $74,962.82 in compensatory damages from the breach of contract
claim. (Doc. 1 ¶ 10). Under his bad faith claim, plaintiff seeks punitive
damages, interest and attorney’s fees. Finally, plaintiff may be eligible for
treble damages for defendant’s violations of the UTPCPL. (Id. at ¶¶ 1112).
Defendant removed the case to this court on January 25, 2011,
asserting this court’s diversity jurisdiction. (Doc. 1). Defendant then filed a
motion to dismiss Counts II and III of the complaint pursuant to rule
12(b)(6) of the Federal Rules of Civil Procedure, which brings this case to
its present posture.
The court has removal jurisdiction over this case pursuant to the
diversity statute, 28 U.S.C. § 1332. Complete diversity exists between the
plaintiff, a citizen of Pennsylvania, and the defendant, an Illinois
corporation, with its principle place of business in Illinois. (Complaint ¶ 1;
Doc. 1 ¶ 5). The amount in controversy exceeds $75,000. (Id. at ¶¶ 9-13).
Because we are sitting in diversity, the substantive law of Pennsylvania
shall apply to the instant case. Chamberline v. Giampapa, 201 F.3d 154,
158 (3d Cir. 2000) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct.
817, 82 L.Ed. 1188 (1938)).
STANDARD OF REVIEW
When a 12(b)(6) motion is filed, the sufficiency of the complaint is
tested. Federal Rule of Civil Procedure 12(b)(6) authorizes a court to
dismiss a complaint that fails “to state a claim upon which relief can be
granted.” FED. R. CIV. P. 12(b)(6). In deciding a motion to dismiss, a district
court generally should consider only the complaint, exhibits attached to the
complaint, and matters of public record. Sands v. McCormick, 502 F.3d
263, 268 (3d Cir. 2007); Pension Benefit Guar. Corp v. White Consul.
Indus., Inc., 998 F.2d 1192, 1196 (3d. Cir. 1993).
Pleadings pursuant to Rule 8 need only provide “a short and plain
statement of the claim showing that the pleader is entitled to relief.” FED. R.
CIV. P. 8(a)(2). The purpose of Rule 8 is to “give the defendant fair notice
of what . . . the claim is and the grounds upon which it rests.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 570 (2007).
When analyzing a 12(b)(6) motion to dismiss, we first separate the
factual and legal elements in a complaint and the attached exhibits. Fowler
v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). The court must
accept as true all factual allegations and give the pleader the benefit of all
reasonable inferences that can be fairly drawn therefrom, and view them in
the light most favorable to the plaintiff. Id. at 210-11; Morse v. Lower
Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). However, the court is
“not bound to accept as true a legal conclusion couched as a factual
allegation.” Twombly, 550 U.S. at 555.
We then determine whether the facts alleged in the complaint “are
sufficient to show that the plaintiff has a ‘plausible claim for relief.’” Fowler,
578 F.3d at 211 (quoting Ashcroft v. Iqbal, -- U.S. --, 129 S.Ct. 1937, 1950
(2009)). A plaintiff survives a motion to dismiss if the asserted facts have
“nudged [his or her] claims across the line from conceivable to plausible.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Specifically, a
plaintiff must describe “enough facts to raise a reasonable expectation that
the discovery will reveal evidence of” each necessary element of the claims
alleged in the complaint. Phillips v. County of Alleheny, 515 F.3d 224, 234
(3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). Thus, the plaintiff must
allege facts that “justify moving the case beyond the pleadings to the next
stage of litigation.” Id. at 234-35. In general, the determination of
“plausibility . . . will be a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.” Fowler, 578
F.3d at 211 (quoting Iqbal, 129 S.Ct. at 1949).
Defendant’s motion challenges two counts in the complaint. We will
address each in turn.
I. BAD FAITH
Defendant moves to dismiss Count II of plaintiff’s complaint alleging
bad faith. (Doc. 3 ¶ 31). Pennsylvania’s bad faith statute, 42 PA. CONS.
STAT. ANN § 8371, authorizes recovery for an insurance company’s bad
faith toward an insured. It provides several remedies upon a finding of bad
faith: (1) an award of “interest in the amount of the claim” at a rate equal to
“the prime rate of interest plus 3%”; (2) an award of “punitive damages
against the insurer”; and/or (3) an assessment of “court costs and attorney
fees against the insurer.” Id. Under section 8371, a plaintiff must support
both elements of a bad faith claim with clear and convincing evidence: “(1)
that the insurer lacked a reasonable basis for denying benefits; and (2) that
the insurer knew or recklessly disregarded its lack of reasonable basis.”
Klinger v. State Farm Mut. Auto Ins. Co., 115 F.3d 230, 233 (3d Cir. 1997)
(citing Terletsky v. Prudential Property and Casualty Ins. Co., 649 A.2d 680
(Pa. Super. Ct. 1994). Generally, “bad faith claims are fact-specific and
depend upon the specific conduct of the insurer vis-a-vis its insured.”
Zimmerman v. Harleysville Mutual Insurance Co.,860 A.2d 167, 173 (Pa.
Super. Ct. 2004).
Here, defendant asserts that plaintiff makes no factual averments
supporting a bad faith claim other than a litany of “boiler-plate, conclusory
allegations.” (Doc 3, at ¶ 34). They claim that Pinkhasov asserts no facts
indicating that Allstate lacked a reasonable basis for their actions, or “knew
or recklessly disregarded a lack of reasonable basis” in denying the
plaintiff’s claim,(Id. at ¶¶ 32-33). However, in his complaint, plaintiff lists
over twenty (20) actions he avers constitute bad faith by the defendant.
(Complaint ¶ 33). The plaintiff asserts that by “denying the claim and/or
conducting an improper investigation,” the defendant’s conduct and actions
constitute bad faith. (Id. at ¶ 33). Specifically, plaintiff allege that Allstate
did not inspect the property, did not investigate the claim, and if it did
investigate the claim it did so without adopting and implementing
reasonable standards. (Id. at ¶ 33 (f)-(l)).
At a minimum, plaintiff alleges facts that show the failure by
defendant to conduct a good faith investigation. The failure to conduct a
good faith investigation into a claim constitutes acting in bad faith. Greene
v. United Services Auto. Ass’n, 936 A.2d 1178, 1188 (Pa. Super. Ct. 2007);
Frog, Switch & Mfg. Co., Inc v. Travelers Ins. Co., 193 F.3d 742, 751 n.9
(3d Cir. 1999). Because the allegation is sufficient to withstand a motion to
dismiss, we deny Allstate’s motion with respect to Count II of the
II. Unfair Trade Practices and Consumer Protection Law
Defendant also moves to dismiss Count III of the Complaint in which
plaintiff asserts Allstate violated the UTPCPL, 75 PA. STAT. §201-1 et seq.
(Doc. 3, ¶ ¶ 10-18). The UTPCPL establishes a private right of action
under which a plaintiff may recover “up to three times the actual damages
sustained.” 75 PA. STAT. §201-9.2(a). The statute “is designed to protect
the public from fraud and deceptive business practices.” Gardner v. State
Farm Fire & Cas. Co., 544 F.3d 553, 564 (3d Cir. 2008).
However, the “mere refusal to pay a claim which constitutes nonfeasance,
the failure to perform a contractual duty, is not actionable.” Id.
To succeed on a fraudulent misrepresentation claim under the
UTPCPL law, a plaintiff must prove the following elements of common law
fraud “by clear and convincing evidence: ‘(1) a misrepresentation; (2) a
fraudulent utterance; (3) an intention by the maker that the recipient will be
induced to act; (4) justifiable reliance on the misrepresentation; and (5)
damage to the recipient as a proximate result.’” Tran v. Metropolitan Life
Ins. Co., 408 F.3d 130, 135 n.8 (3d Cir. 2005) (quoting Tunis Bros. Co.,
Inc. v. Ford Motor Co., F.2d 715, 731(3d Cir.1991)); Debbs v. Chrsler
Corp., 810 A.2d 137 (Pa. Super. Ct. 2002).
Plaintiff easily satisfies four out of five elements of common law
fraud. Id. Taking the facts asserted in the complaint as true, as we must
here, Allstate misrepresented their policy in the letter denying Pinkhasov’s
claim. (Complaint ¶¶ 16-18). Because Allstate did not investigate the claim
or inspect the property, they sent a fraudulent denial letter that cited a
provision inapplicable to the loss. (Id.) By shouldering repair costs
personally, plaintiff justifiably relied upon, and suffered damage from, the
denial of his claim. (Id. at ¶¶ 27-28).
Defendant asserts that plaintiff did not allege any facts showing that
the defendant, or its representatives, made a material or fraudulent
utterance to the plaintiff with the intent to mislead him into relying on that
utterance. (Doc 3 ¶ 15-18). In deciding a 12(b)(6) motion to dismiss, a
reviewing court gives the pleader the benefit of all reasonable inferences
that can be fairly drawn therefrom, and views them in the light most
favorable to the plaintiff. Morse, 132 F.3d at 906. Accepting the complaint
as true, Allstate performed no investigation and had no basis for denying
the claim, yet sent an official letter citing inapplicable policy provisions
denying the claim. (Complaint ¶¶ 13, 16). The court has no difficulty
inferring that when Allstate sends official letters, they intend the receiver to
rely on the contents. Therefore, plaintiff pleads a set of facts from which
the court may reasonably conclude that Allstate made a fraudulent
utterance with the intent to induce reliance from Pinkhasov and that he
justifiably relied upon that utterance and suffered damage as a result.
Thus, plaintiff’s complaint satisfies all of the elements of common law
fraud. Metropolitan Life Ins. Co., 408 F.3d at 135 n.8. Accordingly, it would
be improper to grant the motion to dismiss on this ground.
For the reasons set forth above, the court denies in full the
defendant’s motion to dismiss plaintiff’s complaint. An appropriate order
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
AND NOW, to wit, this 20th day of June 2011, the defendant’s motion
to dismiss (Doc. 3) is hereby DENIED in all respects.
BY THE COURT:
s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court
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