Machado v. Safeco Insurance Company of America et al

Filing 19

MEMORANDUM (Order to follow as separate docket entry) re 7 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM (Partial) Signed by Honorable James M. Munley on 4/7/17. (sm)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
SABLE ANGELICA MACHADO,
Plaintiff

:
No. 3:16cv1685
:
:
(Judge Munley)
v.
:
:
SAFECO INSURANCE COMPANY
:
OF ILLINOIS and
:
JOHN DOES 1-10,
:
Defendants
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

MEMORANDUM
Before the court for disposition is defendants’ motion to dismiss
portions of the plaintiff’s complaint regarding mishandling of an insurance
claim. The matter has been fully briefed and is ripe for disposition.
Background
Plaintiff Sable Angelcia Machado (hereinafter “plaintiff”) owned a
house located at 238 Braiside Avenue, East Stroudsburg, PA. (Doc. 1,
Compl. ¶ 6). A homeowner’s policy of insurance issued by Defendant
Safeco Insurance covered the property. (Id.) On August 14, 2015, fire
destroyed the house and plaintiff’s personal belongings stored therein. (Id.
¶ 7). Plaintiff made a claim on her homeowner’s policy for the loss she
experienced.
Safeco Investigator Defendant David Klitsch contacted plaintiff on

August 15, 2015, and demanded that they meet at plaintiff’s property on
August 18, 2015. (Id. ¶ 10). Plaintiff met the Safeco investigator on
August 18, 2015. (Id. ¶ 13). The investigator asked accusatory questions
and acted hostilely and aggressively. (Id.) Four times during the meeting,
Klitsch accused plaintiff, without any basis, of setting the fire herself. (Id. ¶
14). Klitsch made other erratic and baseless accusations. (Id. ¶ 15). For
example, he accused plaintiff of not being home enough; of not having
enough clothes; having another home in New Jersey; and never living in
the property. (Id.) He also accused plaintiff’s roommates of avoiding him.
(Id. ¶ 16). During the meeting, Klitsch implied that Safeco would find a
way to deny the claim by indicating, in a threatening manner, that if
defendants found plaintiff uncooperative, they would deny her claim. (Id. ¶
17).
For approximately three weeks after the meeting, Klitsch investigated
the fire each day. (Id. ¶ 18). Safeco never revealed the results of the
investigation to plaintiff. (Id.)
Plaintiff alleges other abusive treatment during the claims handling
procedure. For example, Safeco scheduled to take her statement, which
was to last several hours, in a driveway on a very hot, ninety-degree day.

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(Id. at ¶ 20). During the statement, which eventually took place at an
office, the interviewer was aggressive, accusatory and badgering. (Id. ¶
22). Then a month and a half later, Safeco required a second recorded
statement. (Id. ¶ 23).
Finally, on February 23, 2016, Safeco denied plaintiff’s claim
indicating that plaintiff had violated the “Concealment or Fraud Condition”
contained in the policy. (Id. ¶ 29). Plaintiff concealed no information from
Safeco and did not commit fraud. (Id. ¶ 30). The basis of the denial of
insurance benefits is false and baseless. (Id.)
Plaintiff alleges that she suffered personal property loss of
$76,662.69 and that an adjustment company concluded that the cost to
rebuild the dwelling would be over $437,000. (Id. ¶ 33). She also avers
that she suffered severe, ongoing emotional distress. (Id. ¶ 34).
Based upon these facts, plaintiff filed the instant five-count complaint.
The complaint’s five counts are as follows: 1) Bad faith; 2) Negligence; 3)
Violation of the Unfair Trade Practices and Consumer Protection Law; 4)
Breach of contract/covenant of good faith and fair dealing; and 5) Breach
of fiduciary duty. Defendants have moved to dismiss several of these
counts, bringing the case to its present posture.

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Jurisdiction
Plaintiff asserts this court’s jurisdiction pursuant to the diversity
jurisdiction statute, 28 U.S.C. § 1332. (Doc. 1, Compl. ¶ 1). Because we
are sitting in diversity, the substantive law of Pennsylvania shall apply to
the instant case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir.
2000) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)).
Standard of review
This case is before the court pursuant to defendants’ motion to
dismiss for failure to state a claim upon which relief can be granted filed
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. When a
12(b)(6) motion is filed, the sufficiency of the allegations in the complaint is
tested. Granting the motion is appropriate if, accepting as true all the facts
alleged in the complaint, the plaintiff has not pleaded “enough facts to state
a claim to relief that is plausible on its face,” or put another way, “nudged
[his or her] claims across the line from conceivable to plausible.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Third Circuit
interprets Twombly to require the plaintiff to describe “enough facts to raise
a reasonable expectation that discovery will reveal evidence of” each
necessary element of the claims alleged in the complaint. Phillips v. Cty.

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of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S.
at 556). Moreover, the plaintiff must allege facts that “justify moving the
case beyond the pleadings to the next stage of litigation.” Id. at 234-35.
In relation to Federal Rule of Civil Procedure 8(a)(2), the complaint
need only provide “‘a short and plain statement of the claim showing that
the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests.’” Twombly, 550
U.S. at 555 (citation omitted). “[T]he factual detail in a complaint [cannot
be] so undeveloped that it does not provide a defendant the type of notice
of claim which is contemplated by Rule 8.” Phillips, 515 F.3d at 232
(citation omitted). “Rule 8(a)(2) requires a ‘showing’ rather than a blanket
assertion of an entitlement to relief.” Id.
The issue is whether the facts alleged in the complaint, if true,
support a claim upon which relief can be granted. In deciding a 12(b)(6)
motion, the court must accept as true all factual allegations in the
complaint and give the pleader the benefit of all reasonable inferences that
can fairly be drawn therefrom, and view them in the light most favorable to
the plaintiff. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d
Cir.1997). To decide a motion to dismiss, a court generally should

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consider only the allegations in the complaint, exhibits attached to the
complaint, matters of public record, and documents that form the basis of a
claim. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426
(3d Cir. 1997); Pension Benefit Guar. Corp. v. White Consol. Indus., Inc.,
998 F.2d 1192, 1196 (3d Cir. 1993).
Discussion
Defendants filed a motion to dismiss the following from plaintiff’s
complaint: Count II-negligence; Count III-Unfair Trade Practices and
Consumer Protection Law (hereinafter “UTPCPL”); Count V-breach of
fiduciary duty; and claims for costs, attorney fees and punitive damages in
Counts II and IV. In response to the motion to dismiss, the plaintiff
concedes the dismissal of all issues raised by the defendants except for
Count III - the UTPCPL claim - and the attorney fees, costs and punitive
damages claim in Count IV. We will address these two issues separately.
I. Count III - UTPCPL
Count III of plaintiff’s complaint asserts a cause of action under the
UTPCPL. It incorporates by reference the prior paragraphs of the
complaint and asserts that the claims handling conduct that defendants
engaged in constitutes “unfair or deceptive practice” within the meaning of

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the UTPCPL. Plaintiff seeks treble damages and attorney’s fees under this
statute. Defendants argue that the facts alleged do not fall under the
UTPCPL.
The Pennsylvania UTPCPL prohibits “[u]nfair methods of competition
and unfair or deceptive acts or practices in the conduct of any trade or
commerce.” 73 PA. STAT. § 201-3. Plaintiff is unclear as to which section
of the UTPCPL she asserts that the defendants violated. She merely
incorporates all the facts set forth in the complaint and asserts that they
were a violation of the UTPCPL. The facts alleged in the complaint deal
with the claims handling/denial by the defendants.
In the insurance context, the UTPCPL applies only to conduct related
to the sale of an insurance policy, not to the handling of insurance claims.
“Mere refusal to pay a claim, or failure to investigate or take other action, is
nonfeasance and is, thus, not actionable [under the UTPCPL].” Nordi v.
Keystone Health Plan West, Inc., 989 A.2d 376, 385 (Pa. Super. Ct. 2010);
Kelly v. Progressive Advanced Ins. Co., 159 F. Supp. 3d 562, 564 (E.D.
Pa. 2016) (explaining that an insured may not bring an action under the
UTPCPL “based on the insurer’s failure to pay a claim or to investigate a

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claim.”).1
Accordingly, because plaintiff complains about the claims handling
and not the sale of the insurance policy, she cannot assert a cause of
action under the UTPCPL. Count III of the complaint will be dismissed.
II. Count IV - punitive damages and attorney’s fees
The other contested portion of the defendants’ motion to dismiss
involves plaintiff’s claim for attorney’s fees, costs and punitive damages
under Count IV, which is the breach of contract cause of action. We will
address each issue separately.
A. Attorney’s Fees
Under the breach of contract claim, plaintiff seeks attorney’s fees as
a remedy. Such a remedy is not available. Under Pennsylvania law,
counsel fees generally are not available except by agreement of the parties
or where a statutory or contractual basis for such relief exists. Lucchino v.
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Plaintiff cites Berg v. Nationwide Mut. Ins. Co., Inc., 44 A.3d 1164
(Pa. Super. Ct. 2012) for the proposition that the UTPCPL applies to claims
handling as well as to the purchase/solicitation of an insurance policy.
Berg, however, did not address that issue. Berg dealt with whether a
finding of a UTPCPL violation is evidence of bad faith under 42 PA. CONS.
STAT. ANN. § 8371. See Romero v. Allstate, Civ. No. 16-4037; 2017 WL
895593 *4 n.2 (E.D. Pa. Mar. 7, 2017) (explaining that Berg does not
provide for a separate cause of action for a UTPCPL violation, but that
such violation may constitute evidence to support a bad faith cause of
action.).
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Comm. of Pa., 809 A.2d 264, 282 (Pa. 2002). Here, plaintiff cites to no
agreement or statute which provides for attorney’s fees as a remedy for a
breach of contract. Thus, the attorney fee claim in Count IV will be
dismissed.
B. Costs
Plaintiff also seeks “costs” under Count IV. Defendants move to
dismiss this element of damages. Plaintiff points out, however, that costs
are provided for in Rule 54 of the Federal Rules of Civil Procedure. We
agree. Rule 54 provides: “Unless federal statute, these rules, or a court
order provides otherwise, costs - other than attorney’s fees - should be
allowed to the prevailing party.” FED. R. CIV. P. 54. Accordingly, we will
not dismiss the plaintiff’s request for “costs”.
C. Punitive damages
Plaintiff also seeks punitive damages under the breach of contract
claim in Count IV. Under Pennsylvania law, punitive damages are not
available solely for a breach of contract. Nicholas v. Pa. State Univ., 227
F.3d 133, 147 (3d Cir. 2000). Accordingly, the claim for punitive damages
in Count IV will be dismissed.
Conclusion

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Based upon the above reasoning, the motion to dismiss will be
granted with regard to Count III and with regard to punitive damages and
attorney’s fees under Count IV. The motion to dismiss “costs” as a
potential remedy will be denied. Additionally, the following counts will be
dismissed because the plaintiff concedes that they should be dismissed:
Count V-breach of fiduciary duty; Count II-negligence; and claims for
attorney’s fees and punitive damages in Counts II and IV. Remaining in
the case are Count I, Bad Faith and Count IV, Breach of Contract. An
appropriate order follows.

Date: 4/7/17

s/ James M. Munley
JUDGE JAMES M. MUNLEY
UNITED STATES DISTRICT COURT

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