Hughes v. State Farm Mutual Automobile Insurance Company
MEMORANDUM (Order to follow as separate docket entry). Signed by Honorable Edwin M. Kosik on 1/12/2017. (emksec, )
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
STATE FARM MUTUAL
Civil Action No. 3:16-CV-02240
Before the Court for disposition is Defendant State Farm Insurance Company’s (“State
Farm” or “Defendant”), motion to dismiss Count II of Plaintiff Robert Hughes’s (“Hughes” or
“Plaintiff”) complaint, which alleges insurance bad faith. The motion has been fully briefed and
is ripe for disposition. For the reasons that follow, we will deny the motion.
Plaintiff alleges serious and permanent physical and mental injuries as a result of an
unknown and unidentified tortfeasor, crossing into Plaintiff’s lane of travel, causing Plaintiff to
swerve out of the way, leaving the roadway, and striking a telephone pole. (Doc. 1, Not. of
Removal, Ex. A, Compl. (hereinafter “Compl.”) ¶ 5). At the time of the accident, Plaintiff
alleges that he was insured under a policy with the Defendant, providing uninsured motorist
coverage in the aggregate amount of $200,000.00. (Compl. ¶ 14, 15). Plaintiff alleges that he
presented a claim for uninsured motorist (“UM”) coverage, as well as all pertinent medical
records and documents in support of his UM claim to Defendant. (Id. ¶ 17). When Defendant
allegedly failed to provide Plaintiff with a reasonable settlement offer, Plaintiff initiated this suit
in the Court of Common Pleas of Lackawanna County on October 4, 2016. (Id. ¶ 19; Doc. 1,
Not. of Removal). On November 4, 2016, Defendant removed the action to this Court on the
basis of diversity jurisdiction. (Doc. 1, Not. of Removal). On November 11, 2016, Defendant
filed a motion to dismiss Count II of Plaintiff’s two Count complaint. (Id.).
This Court has jurisdiction pursuant to the diversity jurisdiction statute, 28 U.S.C. § 1332.
The Plaintiff is domiciled in and resides in Old Forge, Pennsylvania. (Compl. ¶1). Defendant is
an Illinois corporation with a principal place of business in Bloomington, Illinois. (Doc. 1, Not.
of Removal ¶12-14). The amount in controversy exceeds $75,000. (Id. ¶ 15). Because we are
sitting in diversity, the substantive law of Pennsylvania applies 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
III. Standard of Review
Defendant files the motion to dismiss for failure to state a claim under Rule 12(b)(6) of
the Federal Rules of Civil Procedure. In considering a motion to dismiss Rule 12(b)(6), the court
must accept all allegations in the complaint as true, and view all factual disputes in favor of the
plaintiff. Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 368 (3d Cir. 2002). A motion under
Rule 12(b)(6) allows the defendant to raise the defense that the plaintiff fails to state a claim
upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Rule 8 of the Federal Rules of Civil
Procedure provides that a pleading must set forth a claim for relief, which contains a short and
plain statement of the claim, showing that the pleader is entitled to relief. The complaint must
provide the defendant with fair notice of the claim. See Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007). The issue in a motion to dismiss is whether the plaintiff should be entitled to
offer evidence to support the claim, not whether the plaintiff will ultimately prevail. See Phillips
v. Cnty. of Allegheny, 515 F. 3d 224, 232 (3d Cir. 2008) (the Rule 8 pleading standard “simply
calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the
necessary element”); Nami v. Fauver, 82 F. 3d 63, 65 (3d Cir. 1996).
The onus is on the plaintiff to provide a well-drafted complaint that alleges factual
support for its claims. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (alteration in original
and internal citations omitted). The court need not accept unsupported inferences, Cal. Pub.
Employees Ret. Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004), nor legal
conclusions cast as factual allegations, Twombly, 550 U.S. at 556. Legal conclusions without
factual support are not entitled to the assumption of truth. See Ashcroft v. Iqbal, 556 U.S. 662,
677-679 (2009) (“Threadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not” satisfy the requirements of Rule 8).
Once the court winnows the conclusory allegations from those allegations supported by
fact, which it accepts as true, the court must engage in a common sense review of the claim to
determine whether it is plausible. This is a context-specific task, for which the court should be
guided by its judicial experience. The court must dismiss the complaint if it fails to allege
enough facts “to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 677
(quoting Twombly, 550 U.S. at 570). A “claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 677.
Defendant moves to dismiss the bad faith count of Plaintiff’s complaint on the basis that
it merely makes “conclusory” allegations that provide insufficient factual averments to support a
bad faith claim. Count II of Plaintiff’s complaint asserts a statutory bad faith claim against
Defendant, alleging, among other things, that: (1) Defendant provided an unreasonable settlement
offer; (2) Defendant failed to pay benefits to Plaintiff when it should have paid; (3) Defendant
ignored correspondence and settlement demands/offers; and (4) Defendant refused to provide
justification of how it calculated its settlement offer to Plaintiff. (Compl. ¶¶ 18-20). In
Paragraph 43(a) - (zz), Plaintiff further asserts Defendant’s alleged bad faith conduct and actions.
(Id. ¶ 43(a)-(zz)).
Pennsylvania’s bad faith statute provides:
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 attorney fees against the insurer.
42 Pa. Cons. Stat. Ann § 8371.
The statute does not define “bad faith.” Pennsylvania courts, however, have adopted the
following definition of “bad faith” on the part of an insurer:
[A]ny frivolous or unfounded refusal to pay proceeds of a policy; it
is not necessary that such refusal be fraudulent. For purposes of an
action against an insurer for 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 selfinterest or ill will; mere negligence or bad judgement is not bad
Perkins v. State Farm Ins. Co., 589 F. Supp. 2d 559, 562 (M.D. Pa. 2008) (citing Terletsky v.
Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)).
The legal standard established by the Pennsylvania Superior Court for testing the sufficiency
of bad faith claims under Section 8371 has been adopted by the United States Court of Appeals for
the Third Circuit. The courts apply a two-part test “both elements of which must be supported 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, 649 A.2d at 688).
Defendant argues that Plaintiff fails to sufficiently allege a bad faith claim because he merely
makes only general, conclusory statements, and merely states boilerplate legal conclusions.
According to Defendant, Plaintiff has alleged no facts to support its allegations. After review of the
complaint, we disagree.
As stated above, the Third Circuit requires that the plaintiff’s complaint 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. Cnty. of Allegheny, 515 F.3d 224, 234 (3d. Cir.
2008) (quoting Twombly, 550 U.S. at 556). Additionally, the plaintiff must allege facts that “justify
moving the case beyond the pleadings to the next state of litigation.” Id. at 234-35.
We find that at this stage of the litigation, taking Plaintiff’s allegations as true, Plaintiff
has adequately pled a bad faith cause of action. In Paragraph 18, Plaintiff alleged that Defendant
provided an unerasable settlement offer when it should have paid the benefits due to Plaintiff.
(Compl. ¶ 18). That Defendant ignored correspondence and settlement demands/offers by
Plaintiff on many occasions. (Id. at ¶ 19). And that Defendant “refused to provide Plaintiff with
the justification for, the basis of, or the method of how it calculated its low settlement offer.” (Id.
at ¶ 20). Accordingly, we find that the complaint states a plausible claim and presents a
reasonable expectation that discovery will reveal evidence of the elements of a bad faith claim.
Therefore, we will deny Defendant’s motion to dismiss at this juncture.
For the reasons set forth above, the Court will deny Defendant’s motion to dismiss. An
appropriate order follows.
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