Turner et al v. State Farm Fire and Casualty Company

Filing 14

MEMORANDUM (Order to follow as separate docket entry) Defendant's motion to dismiss pursuant to Rule 12(b)(6) of the FRCP is denied. (See Memo)Signed by Honorable Richard P. Conaboy on 1/13/15. (cc)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
Ronald Turner and
Bonnie Coenen
Plaintiffs

Case No. 15-CV-906

v.
State Farm Fire and
Casualty Company
Judge Richard P. Conaboy
Defendant

1
Memorandum
G

Pending before the Court is a Motion to Dismiss Count II of
Plaintiff's Complaint filed by Defendant State Farm Fire and
Casualty Company ("Defendant" or "State Farm").

That motion

(Doc. 5) seeks to dismiss Plaintiffs' claim that Defendant
exhibited "bad faith",

as that phrase is defined at 42 Pa. CSA §

8371, in refusing to pay $159,060.00 for the loss of personal
property and miscellaneous damages incident to a fire that
destroyed Plaintiffs' dwelling place, a dwelling place that was
insured by State Farm pursuant to a Homeowner's Policy Plaintiffs
had purchased.

This motion has been briefed by the parties

6 and 7) and is now ripe for disposition.

For the reasons

discussed below, we will deny Defendant's motion.

(Doc.

10i5

I,

'-_

'\

I .

Background.

PIa

1

iffs initially filed this action in the Luzerne County
1 6, 2015.

Court of Common Pleas on

( Doc. 1- 2, Ex. A).

Defendant removed this case to federal court on diversity grounds
on May 8, 2015.
Count I

(Doc. 1).

The compla

contains two counts:

of Contract and Count I I premised upon statutory

bad faith.

As indicated above, Defendant's motion seeks only to

dismiss

bad faith count, a result justified, according to the

Defendant, because the bad faith all
requisite speci

lack
PI

ions of the complaint

city to support a bad faith claim.

iffs Ronald Turner and Bonn

414 Bloomingdale Road,

ckshinny,

Coenen own a property at

Pennsylvania.

On December

24, 2013 that property was severely damaged by fire.
insured Plaintiff's

Defendant

ses and paid $193,200.00 to Plaintiffs

in recognition of the damage to the structure itself.
appli

Ie State Farm

icy ("PolicyH) that covered Plaintiffs'

property also included coverages for

intiffs' personal

property, shrubs and trees, and additional living
incurred while the home remained uninhabitable.

ses
P

intiffs seek

recovery of a total of $159,060.00 in recognition of t
coverages and, as yet, some two years after the fire,
has not

The

id Plaintiffs any sum towards these addit

se other
Defendant
1 claims.

! The Background is derived from allegations in Plaintiff s Complaint which, in the
context ofa Rule 12(b)(6) motion, must be regarded as true. Kranz v. Prudential Investment
Fund Management LLC, 305 F.3d 140 (3d. Cir. 2002).

2

ated demands for

Plaintiffs
contested sums.

De

yment of the

ite the fact that t

payments Plaintiffs

seek were documented by a public adjustor Plaintiffs retained,
to date to reimburse

Defendant has re

intiffs to any

of their lost personal property, the va

extent for the va

of their damaged trees and shrubs, or the value of their
unreimbursed living
refusal to honor

ses.

As a result of the Defendant's

se obligations under t

allege that they were compelled to bring

t "to recover policy
id".

proceeds which should have been promptly

II.

Policy, Plaintiffs

(Doc. 7 at 4).

Discussion.
A.

Motion to Dismiss Standard.

A party may move to dismiss a claim or claims set forth in a
plaintiff's complaint under Rule 12(b) (6) of the Federal Rules of
Civil Procedure for "failure to state a
can be granted.

a

legal suffici

aim under which relief

The purpose of a motion to dismiss is to test
of the complaint.

1009, 1011 (3d. Cir. 1987).

Sturm v. Clark, 835 F.
s the burden of

The Defendant

showing that no claim has been presented.

See e.g., Hedges v.

United States, 404 F.3d 744, 750 (3d. Cir. 2005) (citation
omi tted) .
The Third Ci
appropriate standa

Court of Appeals has articulated the
icable to a motion to

smiss in light

of the United States Supreme Court's decisions in Bell Atlantic

3

Corporation v. Twombly, 550 U.S. 433 (2007), and Ashcro

u.s.

Iqbal, 556

662

v.

(2009):

"[T]o survive a motion to di

ss, a

complaint must contain suffic

factual matter,

accepted as true to 'state a claim that relief is
plaus

e on its face.'" Iqbal, 129 S.Ct. at 1949

(citing Twombly, 550

u.s.

at 570).

The Court

that "only a complaint t

emphasi

states a

e claim for relief survives a motion to

plaus

smiss."

Id at 1950.

McTernen v. City York, 577 F.3d 521, 530 (3d. Cir. 2009). The
rd Circuit Court discussed the effects of Twombly and I
detail and provided a roadmap for district courts

only one week

a case filed

fore McTernen, Fowler v. UPMC Shadyside"

F.3d 203 (3d. Cir. 2009).

Dist

sented with

r failure to state a claim

a motion to dismiss

of a cIa

578

That case states:

ct Courts should conduct a two

analysis.

I in

rt

rst, the factual and legal elements
should be

The

strict

Court must accept all of the complaint's well­
pleaded facts as true, but may disregard any legal
conclusions.
a

[Iqbal, 129 S.Ct. at 1949].

strict Court must then dete

4

Second,

whether t

facts alleged in the compla

are sufficient to

show that the Plaintiff has a "plausible claim for
relief."

Id at 1950.

In other words, a complaint

must do more than all
to relief.

a Plaintiff's ent

lement

A complaint has to "show" such an

entitlement with

s facts.

See Phillips v.

County of Allegheny, 515 F.3d 224, 234-35 (3d.
r. 2008).

As the Supreme Court instructed

Iqbal, "[w]here the well-pleaded facts do not
permit

Court to infer more than the mere

possibility of misconduct, the complaint has
all

but it has not shown that the pleader

is entitled to relief."

Iqbal, 129 S.Ct. At 1949.

This "plausibility" determination will be "a
contact-specific task that requires the reviewing
court to draw on its judici
common sense."

experience and

Id.

Fowler, 578 F.3d at 201-11.
The Circuit Court's guidance makes clear that legal
conclusions are not entitled to the same deference as well-pled
facts.

In ot

r words, "the Court is 'not bound to accept as

true a legal conclusion couched as a factual alle
Guirguis v. Movers Spe

ion.'"

alty Services, Inc., No. 09-1104, 2009 WL

3041992 at 2(3d. Cir. September 24, 2009)

5

(not

precedential) (quoting Twombly, 550 u.s. at 555).
B.

Insurance Bad Faith

Defendants assert that Plaintiffs' insurance bad faith claim
(Count II)

should be dismissed for failure to state a claim

pursuant to Rule 12(b) (6) of the Federal Rules of Civil
Procedure.

For the reasons discussed below, we disagree.

Pennsylvania has established the statutory remedy for bad
faith on the part of insurance companies.

42 Pa. CSA § 8371

states:
In an action arising under an insurance policy,

if

the court finds that the insurer has acted in bad
faith toward the insured, the court may take all
of the following actions:
(1) Award interest on the amount of the claim
from the date the claim was made by the
insured in an amount equal to the prime rate
of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorneys fees against
the insurer.
The standard for determining bad faith is well established:
The term bad faith includes any frivolous or
unfounded refusal to pay proceeds of a policy. For
purposes of an action against an insurer for

6

failure to pay a claim, such conduct imports a
dishonest purpose and means a breach of a known
duty (i.e., good faith and fair dealing), through
some motive of self-interest or ill will; mere
negligence or bad judgment is not bad faith."
Keefe v. Prudential Property and Casualty Insurance Company, 203
F.3d 218, 225 (3d. Cir 2002) (quoting Terletsky v. Prudential
Property and Casualty Insurance Company,
Super. 1997).

649 A.2d 680,

688

(Pa.

Based on these principles, a plaintiff must show

two things to recover on a bad faith claim: "(1) that the
defendant did not have a reasonable basis for denying benefits
under the policy; and (2) that the defendant knew or recklessly
disregarded its lack of reasonable basis in denying the claim."
Id.

Bad faith must be proven by clear and convincing evidence.

Id. at 227.
The Third Circuit Court of Appeals recently summarized
additional guidance from Pennsylvania courts in Luse v. Liberty
Mutual Fire Insurance Company, No. 10-3363, 2011 WL 477728 (3d.
Cir. February 11, 2011) (not precedential) :
While an insurer has a duty to investigate claims
fairly and objectively, Diamon v. Penn Mutual Fire
Insurance Company, 247 Pa. Super. 534, 372 A.2d
1218, 1226 (Pa. Super. 1997), an insurer may
defeat a bad faith claim by showing that it

7

conducted a review or investigation sufficiently
Id a reasonable foundation for

thorough to
action.

s

fe Insurance Company v.

See J.C. Penney

losi, 393 F.3d 356, 367 (3d. Cir. 2004) ("A
reasonable basis is all that is required to defeat
a claim of bad fa

.").

Luse, 2011 WL 477728 at 2.
C.

Sufficiency of Plaintiffs' Complaint

While Plaintiffs complaint is not lengthy or highly
detailed, it does allege that State Farm insured the subject
property for contents coverage and other miscellaneous coverages
in the amount of $159,060.00.
repe

It also alleges that, despite

demands, State Farm has refused to make any payment to

Plaintiffs related to their claim for these sums incident to the
Common sense does suggest

aforementioned coverages.

the

items of personalty in the Plaintiffs' damaged residence almost
necessarily had some value.
had offered nothing at the t

Because we are told that State Farm
the s

to assume that State Farm's refusal to

was filed, we are asked
t any amount in

recognition of these claims is enough to est
complaint states a bad faith
supra, "is plausible on
Plaintiffs' compla
as true.

lish

this

aim which, in terms of Twombly,

s face".

Given the allegations in

, sparse as they may be, we must accept them

Thus, we must also accept as true PI

8

ntiffs'

representation that it documented the value of its claim through
rt of a

the

lic adjustor it had retained and that this

report was furnished to the insurer.
that, despite being advis

We must also

as true

of the extent of Plaintiffs' losses,

State Farm has

no offer to compensate Plaintiffs for

covered losses.

Given these allegations, the Court can only

se

conclude that Plaintiffs have stated a "plausible u cIa
faith statutory damages via their complaint.

Moreover, the

Complaint affords Defendant adequate notice of the
which it must

fend itself

s upon

it constitutes the sort of "short

and plain statement of the claim"

red by

8 (a) (2) of the

s of Civil Procedure.

Federal

smatter,

As discovery proceeds in
the

r bad

may well be

t

s gleaned through that process will permit the Defendant

to file a subsequent claim for summary judgment against
faith count.

However, we cannot conclude at this point in t

that Plaintiffs lack a plausible claim for relief here.
result, De
of the Federal

bad

As a

's motion to dismiss pursuant to Rule 12 (b) (6)
es of Civil Procedure must be denied.

BY THE COURT

onorable Richard
United States
Da ted : _-I-I_--_I_rl:-----....--I-(---'ft~--

9