PALMISANO et al v. STATE FARM FIRE AND CASUALTY COMPANY

Filing 11

MEMORANDUM OPINION indicating that Defendant's Motion to Dismiss 4 is GRANTED and Plaintiffs' breach of contract and bad faith claims are dismissed, with prejudice; An appropriate order follows. Signed by Judge Nora Barry Fischer on 8/20/2012. (bdk)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
JERRY J. PALMISANO and
KATHY EVANS-PALMISANO,

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Plaintiffs,
v.
STATE FARM FIRE AND CASUALTY
COMPANY,
Defendant.

Civil Action No. 12-886
Judge Nora Barry Fischer

MEMORANDUM OPINION
I.

INTRODUCTION
In this action, Plaintiffs Jerry J. Palmisano and Kathy Evans-Palmisano (“Plaintiffs”)

have sued Defendant State Farm Fire and Casualty Company (“State Farm” or “Defendant”) for
breach of contract and bad faith insurance practices in violation of 42 Pa.C.S. § 8371. (Docket
No. 1-3). They argue that State Farm breached their homeowners insurance policy by denying
their claim for coverage and indemnity for losses or damages sustained to the foundation of their
home and contend that State Farm engaged in bad faith insurance practices through its
investigation and denial of their insurance claim. (Docket No. 1-3). Presently before the Court is
a motion to dismiss brought by State Farm, wherein it argues that Plaintiffs’ breach of contract
claim is barred by a one-year contractual limitations period set forth in the policy and that
Plaintiffs have failed to sufficiently plead their bad faith claim in light of the pleading standards
under Ashcroft v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544
(2007).

(Docket Nos. 4, 5).

Plaintiffs oppose State Farm’s motion and counter that the

contractual limitations clause should not be enforced and that they have sufficiently pled their
bad faith claim. (Docket No. 8). For the following reasons, State Farm’s Motion is GRANTED.
1

II.

FACTUAL BACKGROUND1
A. Damage to Plaintiffs’ Home
Plaintiffs own a two-story home on King Charles Drive in Pittsburgh, Pennsylvania.

(Docket No. 1-3 at 2). Relevant here, the home has a kitchen on the first level and a finished
basement. (Id. at 38-41). The finished basement consists of a game room, bathroom and storage
area. (Id.). The game room is directly below the kitchen. (Id.). A small crawl space is located
beneath the basement and can be accessed through the garage, which is on the street level. (Id.).
In October of 2010,2 Plaintiffs discovered damage to their home, including buckling and
cracking of the floor in the kitchen and numerous cracks in the walls. (Id. at ¶¶ 8-9). Plaintiffs
hired contractor Greg Cannella of Cannella Construction to inspect the home and determine the
cause of the problems. (Id. at ¶ 10). During his initial inspection, Cannella identified problems
with the foundation of the home and a main structural beam in the basement. (Id. at ¶ 12).
Plaintiffs immediately directed Cannella to remedy these issues. (Id. at ¶ 13).
In the course of conducting the repairs, Cannella cut a hole in the basement floor of the
home, and found “that a main sewer pipe had separated, spilling water which pooled in large
quantities in the back of the house.” (Id. at ¶ 15). The failed sewer pipe caused the interior wall
of the rear portion of the foundation to be covered with approximately five feet of water. (Id. at
¶ 16). Cannella removed the water with a submersible pump and fixed the damaged sewer pipe.
(Id. at ¶ 17). Cannella later determined “that the foundation had dropped across the rear of the
Home by from four to six inches, with the center of the rear foundation having dropped by the
1

In evaluating a motion to dismiss, this Court must accept the Plaintiffs’ well-pleaded allegations as true and
construe them in their favor. See Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949-50 (2009). The Court may
also fully consider the documents which are relied upon in Plaintiffs’ Complaint or attached thereto, including the
insurance policy, correspondence between the parties and the report produced by Nelson Architectural Engineers.
Lum v. Bank of Am., 361 F.3d 217, 222 n. 3 (3d Cir. 2004).
2
Plaintiffs do not specify the date of the loss in their Complaint. However, as is noted below, the documents
attached to their Complaint indicate that the date of the loss was October 9, 2010.

2

largest amount” and that “the sub-base under the rear footer [was] at 36%, well above accepted
levels for this type of structure.” (Id. at ¶¶ 18, 19). Plaintiffs allege that both they and Cannella
“believe that the broken pipe and water spillage was the primary cause of the foundation’s
failure.” (Id. at ¶ 20).
B. Plaintiffs’ Homeowners Insurance
Plaintiffs insured their home by purchasing Homeowners Policy No. 38-LD-4477-5 from
State Farm. (Id. at ¶ 6). This policy was initially in effect from October 23, 2009 through
October 23, 2010, and was subsequently renewed for two additional one-year terms, the last of
which ends on October 23, 2012.3 (Id.).
The declaration sheet indicates that the Plaintiffs purchased a standard policy with limits
of $354,600 for losses to the dwelling and an additional $35,460 for a dwelling extension.
(Docket No. 4-1 at 6). The policy also provided standard coverage for personal property,
personal liability and damage to property of others, although those types of coverage are not at
issue in this case. (Id.). All losses to the dwelling were subject to a $500 deductible and the
annual premium for coverage was $1,268.00. (Id.). Plaintiffs allege that they made all necessary
premium payments. (Docket No. 1-3 at ¶ 49).
The policy sets forth the terms for coverage for the dwelling in Coverage-A. (Docket No.
4-1 at 11). The “Losses Insured” for the Coverage A-Dwelling section is broadly drafted,
indicating that “[w]e insure for accidental direct physical loss to the property described in

3

Plaintiffs attached the current version of their homeowners insurance policy to their Complaint (i.e., the
version which provides coverage from October 23, 2011 to October 23, 2012). State Farm has attached the version
of the policy in effect on the date of the loss, October 9, 2010, to its motion to dismiss. (Docket No. 4-1). Plaintiffs
have not disputed that the policy provided by State Farm is the correct version, (see Docket No. 8), and the policy
provides that “[t] his policy applies only to loss under Section I … which occurs during the period this policy is in
effect.”)). As such, the Court considers the policy in effect on the date of the loss.

3

Coverage A, except as provided in SECTION I – LOSSES NOT INSURED.” (Id. at 15-16).
The exclusions found in that section include the following:
2. We do not insure under any coverage for any loss which would
not have occurred in the absence of one or more of the following
excluded events. We do not insure for such loss regardless of: (a)
the cause of the excluded event; or (b) others causes of the loss; or
(c) whether other causes acted concurrently or in any sequence
with the excluded event to produce the loss; or (d) whether the
event occurs suddenly or gradually, involves isolated or
widespread damages, arises from natural or external forces, or
occurs as a result of any combination of these:
…
b.
Earth Movement, meaning the sinking, rising, shifting,
expanding or contracting of earth, all whether combined with water
or not. Earth movement includes but is not limited to earthquake,
landslide, mudflow, mudslide, sinkhole, subsidence, erosion or
movement resulting from improper compaction, site selection or
any other external forces.
c.

Water Damage, meaning:

(3) water below the surface of the ground, including water which
exerts pressure on, or seeps or leaks through a building, sidewalk,
driveway, foundation, swimming pool or other structure.
…
3. We do not insure under any coverage for any loss consisting of
one or more of the items below. Further, we do not insure for loss
described in paragraphs 1 and 2 immediately above regardless of
whether one or more of the following: (a) directly or indirectly
cause, contribute to or aggravate the loss; or (b) occur before, at
the same time, or after the loss or any other cause of the loss:
…
b.

defect, weakness, inadequacy, fault or unsoundness in:
(1) planning, zoning, development, surveying, siting;
(2) design, specifications, workmanship, construction, grading,
compaction;
(3) materials used in construction or repair; or
(4) maintenance.
4

(Id. at 17-18). Among the many “Conditions” set forth in the policy, it contains a one-year
limitations clause which provides that:
SECTION 1 – CONDITIONS
6. Suits Against Us. No action shall be brought unless there has
been compliance with the policy provisions. The action must be
started within one year after the date of loss or damage.
(Id. at 22 (emphasis added)).
D. Plaintiffs’ Insurance Claim and Initial Inspection by Defendant
Plaintiffs timely submitted a claim to State Farm for coverage under their homeowners
policy. (Id. at ¶ 21). State Farm responded by sending a representative4 to conduct an initial
inspection. (Id. at ¶ 22). The precise date of this visit is unclear from the Complaint, which
provides only that it occurred approximately one month before December 2, 2010. (Id. at ¶ 25).
At that time, the representative took photographs of the damage to the home, which had not yet
been remedied. (Id. at ¶ 22). He also spoke to Cannella about the damage. (Id.). State Farm’s
representative advised the Plaintiffs that a structural engineer would be sent to complete a more
thorough inspection of the home. (Id. at ¶ 23). This representative also counseled Plaintiffs to
immediately complete the repairs to the home so as to avoid any further damage. (Id.). Given
this instruction, Plaintiffs directed Cannella to complete the repairs to the foundation and
Cannella promptly finished the job, mitigating the damage to the home. (Id. at ¶ 24).
E. Inspection by NAE
State Farm retained Paul White of Nelson Architectural Engineers (“NAE”) to evaluate
the damage to Plaintiffs’ home. (Id. at ¶ 25). NAE is based in Dallas, Texas. (Id. at ¶ 25).

4

The name of the State Farm representative is not set forth in the Complaint. However, it appears from the
Nelson Architectural Engineers’ Report that John Forgrave was the individual who conducted this initial inspection.
(Docket No. 1-3 at 44).

5

Plaintiffs allege that State Farm sought out and chose this company because the “core services”
advertised on NAE’s website include “Expert Witness, Litigation and Subrogation Resource
Support.” (Id.) Plaintiffs maintain that because State Farm retained a company based in Dallas
which provides litigation services to investigate their claim at their Pittsburgh home, State Farm
effectively hired an “adversarial litigation expert” to evaluate their insurance claim. (Id. at ¶¶
35-37).

However, Plaintiffs conveniently omit other relevant passages from the webpage,

including that another of NAE’s “core services” is “Consulting Services” and that NAE conducts
business “worldwide.”5 (Docket No. 1-3 at 51).
White arrived at Plaintiffs’ home on December 2, 2010 in order to conduct his
inspection. (Id. at ¶ 25). All of the remedial repairs were completed before White arrived. (Id. at
26). White met with and conducted informal interviews of Jerry Palmisano and Cannella. (Id.).
Cannella was present at that time in order to provide all of his measurements to the inspector and
to show him all of the repairs that he had completed. Plaintiffs aver that Cannella advised White
that the house “had fallen at least six inches and had been jacked back up to that level.” (Id. at ¶¶
40-42). Palmisano and Cannella offered White the opportunity to go under the house and inspect
the foundation and completed repairs, but he declined the opportunity. (Id. at 27). Instead,
White allegedly took photographs and sketched the inside and outside of the house. (Id.).
F.

NAE Report

White produced a report detailing his findings from the inspection. (Id. at ¶ 34; 36-50).
Plaintiffs maintain that the report “largely ignores or glosses over” much of the information
provided by Cannella to White during his inspection. (Id. at ¶¶ 39, 43). They further contend
that the report “presents a biased view of the situation based upon selective information favoring
the insurer and ignoring or failing to give proper weight to undisputed evidence and facts
5

The webpage is attached to Plaintiffs’ Complaint. (Docket No. 1-3 at 51).

6

favoring a conclusion that would result in State Farm having a coverage obligation to the
Palmisanos under the Policy.” (Id. at ¶ 44).
Plaintiffs have attached the report to their Complaint. (Docket No. 1-3 at 36-51). As
such, the Court may fully consider its contents in resolving the present motion to dismiss.
White’s report is titled a “Residential Foundation Distress Evaluation” and is dated
January 19, 2011.6 (Id. at 36). The purpose of his investigation of Plaintiffs’ home was “to
provide professional assistance to determine the cause(s) of distress in the structure and its
finishes, specifically the cause of damage and appropriate repair to the I-beam below the garage,
and also what caused the home to lean and an appropriate repair for this condition.” (Id.). White
details the scope of his investigation, noting that he: conducted a “walk through” of the home;
met informally with Mr. Palmisano and Cannella7; reviewed photographs of the damage to the
home taken by State Farm representative John Forgrave at his earlier visit; and conducted
plumbness tests of the walls. (Id. at 36-37).
The report provides a detailed summary of the information provided to White by Mr.
Palmisano and Cannella.

(Id. at 38-39).

White’s summary is largely consistent with the

allegations in Plaintiffs’ Complaint as to the damage to the home, the measurements taken by
Cannella and the repairs he completed. (Id.). Of note, they advised White of the following
damage to the house: the kitchen floor was deflected or buckled; a beam in the basement was
failing; there were cracks in the wall which were not previously present; the house “leaned” to
the west; and there was a leak in the sewer line in the crawl space area beneath the game
room/basement. (Id. at 38-39). White recounts that Cannella advised that the northwest corner of

6

The Court notes that the report references certain attachments including Photographs and Illustrations
which are not attached to the Complaint or part of the Court’s record. (Docket No. 1-3 at 40).
7
The Court recognizes that the Report refers to Cannella as “Kannel” throughout. It is unclear which is
party uses the correct spelling. As such, the Court adopts the spelling used in Plaintiffs’ Complaint.

7

the kitchen was approximately 1 ¾ inches high and the northwest corner of the dining room was
measured to be approximately 2 ½ inches low, or a difference of 4 ¼ inches between the two
points. (Id. at 39). White was also aware of the repairs which were performed to that point in
time, including that Cannella had:


Mudjacked west side to level the house.



Installed 9 underpins along the back side [west side] of the house.



Straightened the existing I-beam in the basement below the garage.



Replaced a segment of the sanitary sewer pipe below the exercise
room/game room area. An access hole was created in the storage
area of the basement at the west wall.



Bricks added to support the south side of the I-beam.



Replaced some [concrete masonry unit] on the north wall and at
the northeast corner beneath the garage.



Straightened floor joist in the crawlspace. Joists were not
deteriorated (rotted).

(Id.). The summary of White’s “site visit observations” indicates that he was plainly aware of
the repairs which had been completed. (Id. at 40-41). With respect to the wastewater leaks
complained of by Plaintiffs and Cannella, White noted that:
[t]he homeowner and his contractor reported that a leak in the
sanitary sewer pipe was found in the crawl space beneath the
exercise/game room area. The length of time over which
wastewater leaks occur is generally indeterminate. In general,
significant time and voluminous leakage would be required to
accumulate an amount of wastewater sufficient to influence the
volumetric stability of the subgrade. If a sufficient volume of water
were available, the influence would generally be limited although
migration through granular or loose fill in plumbing trenches
should also be considered to the area of the leak.
(Id. at 45).

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White’s report concluded that “distress reported at the I-beam . . . is in my opinion, a
result of long-term wear and movement at the CMU [(concrete masonry unit)] south wall
beneath the garage. Influences contributing to the distress at the I-beam, as well as distress at
multiple other areas on the CMU walls, include hydrostatic and soil pressures in the soils outside
the walls in conjunction with long-term differential movement of the foundation supporting the
walls. . . . [T]he distress . . . at the CMU walls of the basement beneath the garage indicate
movement . . . in the walls. This movement correlates to the distress, and rotation, at the Ibeam.” (Id.). In response to the assertion that the house was “leaning” west, White declared that
the “lean was relatively small.” (Id.). White also determined that “the distress at the I-beam is
unrelated to the reported leaning of the structure or the reported sag in the kitchen floor.” (Id. at
46).
In reaching these decisions, White noted that the information he had received to that
point from Plaintiffs and Cannella as to the damaged condition of the property before the
remedial repairs was insufficient to “fully evaluate the cause and extent of the reported lean.”
(Id. at 45). He suggested that he required additional information including, “details of the
conditions before the house was leveled as reported by [Cannella] including physical
measurements of the lean or any separations; … the number of underpins, location of underpins,
and the amount of lift.” (Id.). In addition, among the many “limitations” set forth at the end of
the report, White states that “[i]n the event that additional information becomes available that
could affect the conclusions reached in this investigation this office reserves the right to review,
and, if required, change some or all of the opinions presented herein.” (Id. at 49). Plaintiffs have
not alleged that any additional information was provided to State Farm or NAE. (See Docket
No. 1-3).

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G.

State Farm’s Denial of Coverage and Subsequent Action

Through a letter dated January 25, 2011 from Claim Representative Jonathan Forgrave,
State Farm denied coverage for Plaintiffs’ insurance claim. (Docket No. 1-3 at ¶ 28, pp. 33-35).
In its decision, State Farm relied on the report prepared by White of NAE, an “independent
structural engineer.” (Id.). State Farm concurred with White that the damage to the house was
the “result of long-term wear and movement of the south wall beneath the garage influenced by
hydrostatic and soil pressures in conjunction with long-term differential movement of the
foundation supporting walls.” (Id. at 33). Forgrave concluded that “this type of damage is
specifically excluded under your Homeowners Policy … and, therefore, coverage is unavailable
for your loss.” (Id.).

In support, Forgrave fully quoted the exclusion provisions which are

detailed in Section B above. (Id. at 33-35). He also quoted the suit limitation clause contained
in the “Conditions” section which requires any legal action to be “started within one year after
the date of loss or damage” and noted that by specifying the grounds for denial State Farm was
not waiving but reserving all of its rights to assert other defenses applicable to Plaintiffs’ claim.
(Id. at 35).
Plaintiffs note that “[o]n or about February 13, 2011, [Plaintiffs] received a notice that the
structural engineer’s invoice was being paid as a claim under the Policy.” (Docket No. 1-3 at ¶
45). “Thus, not only did State Farm retain an adversarial, purported ‘expert witness’ service to
assess [Plaintiffs’] claim, State Farm charged this expense against [Plaintiffs’] Policy.” (Id. at ¶
46). A copy of Defendant’s letter informing Plaintiffs that the expense from the inspection was
being charged to their policy is attached to the docket as Exhibit D. (Doc. No. 1-3 at 52).
H.

Plaintiffs’ Claims

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With respect to their breach of contract claim, Plaintiffs allege that they made all required
premium payments under the policy and that State Farm breached the policy by denying
coverage for their claim. (Id. at ¶¶ 47-51). They specifically allege that:
State Farm’s denial of coverage is in error. Contrary to State
Farm’s conclusion, the damage to the home was caused by the
sewer water that had accumulated as a result of the separation of
the main sewer pipe, which caused the deterioration and sinking
and/or collapse of the foundation. These issues with the
foundation, in turn, caused stress on the structure of the home,
including the support I-beams, resulting buckling of the floor,
cracks in the walls, shifting and sinking of the home, and other
damage to the home.
(Docket No. 1-3 at ¶ 30). They further contend that to the extent that the damage was caused in
this manner, that State Farm had a duty and obligation to provide coverage under the policy and
thereby breached these obligations when it denied coverage. (Id. at ¶ 32). Plaintiffs request
damages in excess of $50,000.00, along with interest, costs, and all other available relief. (Id. at
¶ 51).
As to their bad faith claim, Plaintiffs allege that State Farm acted in bad faith:
a. by failing to fairly and properly investigate the claim;
a.8 by denying its clearly-established coverage obligations under
the Policy;
b. by repeatedly asserting bases for denying or attempting to deny
coverage that have no basis in fact or law and by ignoring
information in its possession refuting the denial of coverage;
c. by engaging in improper, unfair, and unlawful claims handling
and insurance practices;
d. by violating the fiduciary duty owed its insured;
e. by engaging in an adversarial relationship with the Palmisanos;

8

The Court notes that Plaintiffs’ Complaint contains two subparagraph (a)s.

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f. by violating the legal requirements for proper insurance
practices; and
g. by requiring the plaintiff to expend funds for counsel fees to
obtain and/or retain coverage for which the plaintiff has already
paid.
(Id. at ¶ 53). They also assert that State Farm “acted willfully, fraudulently, intentionally and in
bad faith in refusing to provide coverage and indemnity for the Palmisanos’ loss without any
contractual or legal basis” and “acted knowingly, intentionally and/or recklessly for the purpose
of discouraging the Palmisanos from pursuing a claim against State Farm and/or avoiding the
payment(s) due to the Palmisanos under the terms of the policy.” (Id. at ¶¶ 54-55). Plaintiffs
then maintain that “State Farm had no legitimate reason for refusing to pay the Palmisanos’ valid
claim.” (Id. at ¶ 56). Plaintiffs seek consequential damages, punitive damages and attorneys’
fees for the alleged bad faith conduct. (Id.).
III.

PROCEDURAL HISTORY
Plaintiffs initiated this case by filing a Praecipe for Writ of Summons in the Court of

Common Pleas of Allegheny County, Pennsylvania on January 23, 2012. (Docket No 1-2 pgs. 12). Plaintiffs subsequently filed their Complaint in the Court of Common Pleas on May 31,
2012. (Docket No. 1-3 pgs. 1-15). State Farm then timely removed the case to this Court based
on diversity jurisdiction. (Docket No. 1).
State Farm filed its Motion to Dismiss and Brief in Support on July 3, 2012. (Docket
Nos. 4, 5).

Plaintiffs countered by filing their Response in Opposition on July 24, 2012.

(Docket No. 8). State Farm then submitted its Reply Brief on August 3, 2012. (Docket No. 9).
The parties have not requested that they be permitted to engage in any further briefing; thus, this
matter is fully briefed and ripe for disposition.
IV.

LEGAL STANDARD
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A motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6) challenges the legal sufficiency
of a complaint. The United States Supreme Court has held that “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.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955 (2007) (citing Papasan v. Allain, 478 U.S. 265,
286, 106 S.Ct. 2932 (1986)) (alterations in original).
The Court must accept as true all well-pleaded facts and allegations and must draw all
reasonable inferences therefrom in favor of the plaintiff. See Ashcroft v. Iqbal, 556 U.S. 662,
129 S. Ct. 1937, 1949-50 (2009); Twombly, 550 U.S. at 555. As the Supreme Court made clear
in Twombly, however, the “factual allegations must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555. The Supreme Court has subsequently broadened
the scope of this requirement, stating that “only a complaint that states a plausible claim for relief
survives a motion to dismiss.” Iqbal, 129 S. Ct. at 1950 (citing Twombly, 550 U.S. at 556). This
standard requires showing “more than a sheer possibility that a defendant has acted unlawfully.”
Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 556). “Where a complaint pleads facts
that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between
possibility and plausibility of entitlement to relief.” Iqbal, 129 S. Ct. at 1949 (quoting Twombly,
550 U.S. at 557). “This ‘plausibility’ determination will be ‘a context-specific task that requires
the reviewing court to draw on its judicial experience and common sense.’” Fowler v. UPMC
Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (quoting Iqbal, 129 S. Ct. at 1949).
After Iqbal, the United States Court of Appeals for the Third Circuit explained that a
district court must conduct the following analysis to determine the sufficiency of a complaint:
First, the court must “tak[e] note of the elements a plaintiff must
plead to state a claim.” Second, the court should identify
13

allegations that, “because they are no more than conclusions, are
not entitled to the assumption of truth.” Finally, “where there are
well-pleaded factual allegations, a court should assume their
veracity and then determine whether they plausibly give rise to an
entitlement for relief.”
Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 129 S. Ct. at
1947, 1950); see also Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir. 2011), cert.
denied, 2012 WL 296904 (Apr. 2, 2012); Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).
Twombly and Iqbal have not changed the other pleading standards for a motion to dismiss
pursuant to FED. R. CIV. P. 12(b)(6), and the requirements of FED. R. CIV. P. 8 must still be
met. See Burtch, 662 F.3d at 220. Rule 8 requires a showing, rather than a blanket assertion, of
entitlement to relief, and “contemplates the statement of circumstances, occurrences, and events
in support of the claim presented and does not authorize a pleader's bare averment that he wants
relief and is entitled to it.” Twombly, 550 U.S. at 555 n.3 (internal alterations, citations, and
quotations omitted). The Supreme Court has explained that a complaint need not be “a model of
the careful drafter’s art” or “pin plaintiffs’ claim for relief to a precise legal theory” so long as it
states “a plausible ‘short and plain’ statement of the plaintiff’s claim.” Skinner v. Switzer, --U.S. ---, 131 S. Ct. 1289, 1296 (2011); see also Matrixx Initiatives, Inc. v. Siracusano, --- U.S. --, 131 S. Ct. 1309, 1322 n.12 (2011) (emphasizing that “to survive a motion to dismiss,
respondents need only allege ‘enough facts to state a claim to relief that is plausible on its face’”)
(quoting Twombly, 550 U.S. at 570)).
In deciding a Rule 12(b)(6) motion to dismiss, the Court may 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.” Lum v. Bank of Am., 361 F.3d 217, 222 n. 3 (3d Cir.
2004). “The purpose of this rule is to avoid the situation where a plaintiff with a legally deficient

14

claim that is based on a particular document can avoid dismissal of that claim by failing to attach
the relied upon document.” Lum, 361 F.3d at 222. A document forms the basis of a claim if it is
“integral to or explicitly relied upon in the complaint.” In re Rockefeller Ctr. Props., Inc. Sec.
Litig., 184 F.3d 280, 287 (3d Cir. 1999) (emphasis in original; internal citations and quotations
omitted).
V. DISCUSSION
State Farm argues that Plaintiffs’ breach of contract claim is barred by the one-year
contractual limitations period in their policy and that they have failed to sufficiently plead a
claim for bad faith under § 8371. (Docket Nos. 4-5). Plaintiffs maintain that their claims are
sufficiently pled to survive the instant motions to dismiss. (Docket No. 8 at 5-10). The parties
do not dispute that substantive Pennsylvania law applies to both the breach of contract and bad
faith claims. (See Docket Nos. 4, 5, 8, 9). The Court agrees that Pennsylvania law applies to
both claims. The Court will now discuss the parties’ positions as to each claim, in turn.
A. Breach of Contract Claim
The statute of limitations for a breach of contract claim under Pennsylvania law is
generally a period of four (4) years. 42 Pa. C.S. § 5525. However, the parties to a contract may
validly limit the limitations period to a shorter time “which is not manifestly unreasonable.” 42
Pa. C.S. § 5501. Contractual limitations periods of one year in insurance policies have routinely
been upheld as reasonable in Pennsylvanian courts. See Lardas v. Underwriters Ins. Co., 426 Pa.
47, 231 A.2d 740, 741 (Pa. 1967) (noting that 12 month suit limitation period was reasonable);
see also Prime Medica Assoc. v. Valley Forge Ins. Co., 970 A.2d 1149, 1156 (Pa. Super. Ct.
2009) (“Pennsylvania law recognizes as valid suit limitation clauses in insurance policies.”).
Federal courts applying Pennsylvania law have reached the same conclusion. See Atiyeh v.
National Fire Ins. Co. of Hartford, Civ. A. No. 07-cv-04798, 2008 WL 4444253, at *4-5
15

(E.D.Pa. Sept. 30, 2008); see also McElhiney v. Allstate Ins. Co., 33 F. Supp. 2d 405, 406
(E.D.Pa. 1999).
Here, the limitation clause in the insurance policy provides that: “Suits Against Us. No
action shall be brought unless there has been compliance with the policy provisions. The action
must be started within one year after the date of loss or damage.” (Docket No. 4-1 at 22
(emphasis in original)). The loss or damage in this case occurred on October 9, 2010 and this
lawsuit was initiated, at the earliest, when Plaintiffs filed a praecipe for writ of summons in the
Court of Common Pleas on January 23, 2012. See Gold v. State Farm Fire and Cas. Co., --F.Supp.2d ----, 2012 WL 3020352, at *5 (E.D.Pa. Jul. 24, 2012) (citing Pa. R. Civ. P. 1007)
(noting that an action is generally considered to have commenced upon the filing of a praecipe
absent evidence that the plaintiff did not make a good faith effort at service). Thus, if the
contractual limitation is reasonable, Plaintiffs’ breach of contract claim is untimely because it
was filed outside the one-year limitations period.
Plaintiffs set forth two arguments in opposition, neither of which are sufficient to
overcome the application of the contractual limitations period. (Docket No. 8 at 6). They first
contend that the Court should follow the District Court’s holding in Margolis v. State Farm Fire
& Casualty Co., 810 F. Supp. 637 (E.D. Pa. 1992), that a one-year limitations clause in a
casualty insurance policy was manifestly unreasonable as violative of Pennsylvania insurance
law. (Id.). However, Margolis is a non-binding and outdated decision which is not persuasive to
this Court. Indeed, in McElhiney v. Allstate Ins. Co., 33 F. Supp 2d. 405, 407-08 (E.D. Pa.
1999), the Court convincingly explains why Margolis should not be followed. As the Court in
McElhiney details, the statutory basis for the Margolis decision, 40 Pa.Stat.Ann. § 753, was
incorrectly interpreted to apply to a casualty insurance policy, while that section plainly applies

16

to only health and accident policies. McElhiney, 33 F. Supp. 2d at 407-08. This Court agrees
with McElhiney and further recognizes that the vast majority of cases hold that such clauses are
reasonable in casualty policies. See Lardas, 231 A.2d at 741; see also Prime Medica Assoc., 970
A.2d at 1156.
Plaintiffs next maintain that the contractual limitations defense should be rejected
because “State Farm should not be permitted to benefit from its alleged bad faith conduct.”
(Docket No. 8 at 6). They further reason that “State Farm should not be permitted to rely upon a
technical policy defense to coverage when it has breached both its common law and contractual
duties of good faith and fair dealing to its insured.” (Id.). As State Farm points out, Plaintiffs
have not cited any authority supporting their proposition that an allegation that the insurance
company breached the insurance policy or acted in bad faith is sufficient to save an otherwise
untimely claim. (Docket No. 9). To this end, the cases teach that bad faith insurance practices
which do not include acts of misleading the insured as to the applicability of the contractual
limitations period or causing intentional delays to avoid coverage do not preclude an insurance
company from raising a suit limitations clause as a defense. See McElhiney, 33 F. Supp. 2d at
408 (“we conclude that any bad faith failure to investigate and pay an insurance claim on the part
of Allstate does not preclude it from asserting the suit limitation clause against plaintiffs on their
breach of contract claim”).
Pennsylvania courts have recognized limited exceptions to the application of an
otherwise valid contractual limitations clause, including that such clauses may be defeated by
estoppel or waiver. See Prime Medica Assoc., 970 A.2d at 1156-57. To succeed on either
theory, a plaintiff must set forth a factual basis to demonstrate “reasonable grounds for believing
that the time limit would be extended or that the insurer would not strictly enforce the suit

17

limitation provision.” Id. (internal quotation omitted). In this Court’s estimation, Plaintiffs’
Complaint is devoid of any facts which would state a plausible claim that etoppel or waiver may
apply. Indeed, the facts pled show that State Farm promptly investigated Plaintiffs’ claim and
reached its coverage decision in less than four (4) months. To this end, Plaintiffs identified the
loss on October 9, 2010. (Docket No. 1-3 at ¶ 21). State Farm sent out its claims representative
in late October or early November to conduct an initial evaluation of the damage to the home.
(Id. at ¶ 22). State Farm commissioned the follow-up evaluation by an independent structural
engineer which was completed on December 2, 2010. (Id. at ¶ 25). Plaintiffs were ultimately
notified of State Farm’s decision informally by telephone on January 24, 2011 and in a letter
dated January 25, 2011. (Id. at ¶ 28; Ex. B). Given these circumstances, Plaintiffs could not
plausibly claim that State Farm should be estopped from asserting its defense.
It is equally clear that Plaintiffs could not plausibly assert that waiver should bar the
application of the limitations clause. The contractual limitations clause is clearly set forth in the
policy, (see Docket No. 4-1 at 22), which the insured has a duty to read and is presumed to
understand, see Schoble v. Cvhoble, 349 Pa. 408, 37 A.2d 604 (Pa. 1944); see also Schilachi v.
Flying Dutchman Motorcycle Club, 751 F. Supp. 1169, 1174-75 (E.D Pa. 2000). State Farm
then quoted the entirety of the limitations clause in its denial letter dated January 25, 2011,
plainly reminding Plaintiffs that it intended to enforce the clause. (Docket No. 1-3 at 35). As the
limitations period did not expire until October 9, 2011, Plaintiffs had nearly nine months to
timely initiate this action after their claim was denied but did not do so.
For these reasons, the Court finds that the contractual limitations clause is reasonable and
should be enforced. See Prime Medica, 970 A.2d at 1156. As such, State Farm’s motion to
dismiss Plaintiffs’ breach of contract claim is granted.

18

B. Bad Faith
The Court next turns to State Farm’s challenge to Plaintiffs’ bad faith claim in light of the
application of the pleading standards set forth in Twombly and Iqbal. At the outset, the Court
recognizes that bad faith is generally an independent cause of action separate from the contract
claim. See Gold v. State Farm Fire and Cas. Co., --- F. Supp. 2d -----, 2012 WL at *8-9 (E.D.
Pa. Jul. 24, 2012). In addition, Plaintiffs are not precluded from potentially recovering under a
bad faith theory solely because the contractual limitations period has been enforced and the
breach of contract claim has been dismissed. See Atiyeh, 2008 WL 4444253, at *7 (citing March
v. Paradise Mut. Ins. Co., 646 A.2d 1254, 1256 (Pa. Super. Ct. 1994)) (“a claim for bad faith can
survive even if plaintiff’s breach of contract claim is barred by the policy’s limitation
provision.”). Thus, the Court must fully evaluate the parties’ arguments as to the bad faith claim.
To establish a bad faith claim under Pennsylvania law, “‘a plaintiff must show by clear
and convincing evidence that the insurer (1) did not have a reasonable basis for denying benefits
under the policy and (2) knew or recklessly disregarded its lack of a reasonable basis in denying
the claim.’” Post v. St. Paul Travelers Ins. Co., 10-3088, --- F.3d ----, 2012 WL 3095352, at *21
(3d Cir. July 31, 2012) (quoting Condio v. Erie Ins. Exch., 899 A.2d 1136, 1143 (Pa. Super. Ct.
2006)).
“Bad faith” on [the] part of [an] insurer is any 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 self-interest or ill
will; mere negligence or bad judgment is not bad faith.
Post, 2012 WL 3095352, at *21 (quoting Terletsky v. Prudential Prop. & Cas. Ins. Co., 649
A.2d 680, 688 (Pa.Super.Ct.1994)) (further quotation omitted). “[A]n insurer may defeat a claim

19

of bad faith by showing that it had a reasonable basis for its actions.” Amica Mut. Ins. Co. v.
Fogel, 656 F.3d 167, 179 (3d Cir. 2011).
Many federal district courts have recently been called upon to evaluate bad faith
complaints in light of Iqbal and Twombly. Under these Supreme Court decisions, plaintiffs must
plead sufficient facts to make out a plausible claim for relief against the defendant. See Iqbal,
129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 557). In the bad faith context, district courts
have required more than “conclusory” or “bare-bones” allegations that an insurance company
acted in bad faith by listing a number of generalized accusations without sufficient factual
support. See e.g., Liberty Ins. Corp. v. PGT Trucking, Inc., Civ. A. No. 11–151, 2011 WL
2552531, at *4 (W.D.Pa. Jun. 27, 2011); Pfister v. State Farm Fire & Cas. Co., Civ. A. No. 11799, 2011 WL 3651349 (W.D. Pa. Aug. 18, 2011); Atiyeh, 742 F. Supp. 2d at 599 (“However,
these averments are merely conclusory legal statements and not factual averments.”).

For

example, in Liberty Ins. Corp. v. PGT Trucking, the Honorable Terrence F. McVerry of this
Court found that a pleading was deficient as it set forth only a “laundry list” of many such
generalized accusations, including, among other things, that the insurer had: failed to adequately
investigate; failed to settle at appropriate values; failed to act in the best interest of the insured;
and/or failed to adequately protect the insured’s interests. Liberty Ins. Corp., 2011 WL 2552531
at *4.9 Judge McVerry held that these types of allegations were insufficient because they were

9

The Honorable Arthur J. Schwab rejected similar allegations in Pfister v. State Farm Fire & Cas. Co., 2011
WL 3651349. The deficient pleading in that case stated merely that the insurer:
1) failed “to conduct a complete and thorough investigation of the claim”; 2)
failed to “objectively and fairly value Plaintiffs' claim”; 3) relied upon an
estimate compiled by its own consultant while ignoring an estimate provided by
Plaintiffs; 4) “failed to negotiate the claim in good faith”; 5) failed to “respond
to Plaintiffs' additional written request to discuss resolution of the claim without
litigation”; an d 6) “failed to provide a reasonable factual explanation of the
basis for Defendant's refusal” to pay the full amount sought by Plaintiffs.
Id.

20

not supported by any facts which “describe who, what, where, when, and how the alleged bad
faith occurred.” Id.
Plaintiffs’ bad faith claim fails for similar reasons. They allege generally that State Farm
acted in bad faith:
a. by failing to fairly and properly investigate the claim;
a. by denying its clearly-established coverage obligations under the
Policy;
b. by repeatedly asserting bases for denying or attempting to deny
coverage that have no basis in fact or law and by ignoring
information in its possession refuting the denial of coverage;
c. by engaging in improper, unfair, and unlawful claims handling
and insurance practices;
d. by violating the fiduciary duty owed its insured;
e. by engaging in an adversarial relationship with the Palmisanos;
f. by violating the legal requirements for proper insurance
practices; and
g. by requiring the plaintiff to expend funds for counsel fees to
obtain and/or retain coverage for which the plaintiff has already
paid.
(Docket No. 1-3 at ¶ 54). They further aver in a conclusory fashion that State Farm:


“acted willfully, fraudulently, intentionally and in bad faith in
refusing to provide coverage and indemnity for the Palmisanos’
loss without any contractual or legal basis”;



“acted knowingly, intentionally and/or recklessly for the
purpose of discouraging the Palmisanos from pursuing a claim
against State Farm and/or avoiding the payment(s) due to the
Palmisanos under the terms of the policy.”; and



“State Farm had no legitimate reason for refusing to pay the
Palmisanos’ valid claim.”

21

(Id. at ¶¶ 55-56). These types of generalized accusations are insufficient without supporting
facts setting forth “who, what, where, when, and how the alleged bad faith occurred.” Liberty
Ins. Corp., 2011 WL 2552531 at *4.
In this Court’s estimation, the facts pled by Plaintiffs in an attempt to establish bad faith
are not enough to sustain a bad faith claim under Pennsylvania law.

See Post, 2012 WL

3095352, at *21; see also Liberty Ins. Corp., 2011 WL 2552531 at *4.

Stripped of its

conclusory averments, Plaintiffs’ Complaint essentially alleges that State Farm acted in bad faith
by retaining an “adversarial litigation expert,” i.e., Paul White of NAE, to evaluate their
insurance claim. (Docket No. 1-3 at ¶¶ 35-37). Plaintiffs concede that such litigation animus
was “unbeknownst to them” at the time but aver that because NAE advertises as its “core
services” that it provides, among other things, expert witness, litigation and subrogation services,
State Farm must have engaged it for litigation purposes. (Id.). As further support of the
supposed litigation animus, Plaintiffs point to the fact that NAE is based in Texas 10 but was
retained to conduct the investigation in Pittsburgh. (Id. at ¶34). The Court finds that these facts
are insignificant and certainly do not show “who, what, when, why or how” State Farm acted in
bad faith toward Plaintiffs. Further, when the Court considers the entire passage of the webpage
attached to their Complaint upon which Plaintiffs rely, NAE also provides “consulting services”
and operates “worldwide,” with multiple offices across the country, undermining Plaintiffs’
apparent suggestion that State Farm flew in an expert witness from Texas to stifle their claim.
(Docket No. 1-3 at 51).
At most, Plaintiffs have pled a breach of contract claim alleging that the denial of
coverage by State Farm was “in error” because White conducted a cursory investigation and
allegedly “glossed over” or “ignored” certain information that they provided him. (Id. at ¶¶ 39,
10

The Court notes that State Farm is based in Bloomington, Illinois. (See Docket No. 1 at ¶ 9).

22

43). But, “‘mere negligence or bad judgment is not bad faith,’” and “‘bad faith must be proven
by clear and convincing evidence and cannot be merely insinuated.’” Brewer, 446 F. App’x at
510 (quoting Terletsky, 649 A.2d at 688). There is simply no factual support for Plaintiffs’
conclusory allegations concerning State Farm’s alleged bad faith conduct and their averments
surely do not suffice to allege a plausible claim that could sustain their burden at trial. See
Amica Mut. Ins. Co., 656 F.3d at 179 (quotation omitted) (“this heightened standard requires the
insured to provide evidence so clear, direct, weighty and convincing as to enable a clear
conviction, without hesitation, about whether or not the defendants acted in bad faith.”).
“[A]n insurer may defeat a claim of bad faith by showing that it had a reasonable basis
for its actions.” Amica Mut. Ins. Co., 656 F.3d at 179. This is a defense to a bad faith claim
which is typically evaluated by the Court at the summary judgment stage based on evidence
submitted by both parties. Id. Although we are at the motion to dismiss stage, the Court’s
record already includes this type of evidence because Plaintiffs have attached their insurance
policy, State Farm’s denial letter and the NAE report to their Complaint and these materials may
be considered without converting the motion to one for summary judgment.11 (See Docket No.
1-3). By placing these matters before the Court, Plaintiffs are “on notice that the document[s]
will be considered.” Lum, 361 F.3d at 221 n.3. As such, the Court can more fully consider the
defense posture in the present case.
“Pennsylvania law provides that it is not bad faith to conduct a thorough investigation
into a questionable claim.” Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 138 (3d Cir. 2005);
see also Cantor v. Equitable Life Assurance Soc'y of the U.S., No. 97–5711, 1999 WL 219786, at
*3 (E.D. Pa. Apr. 12, 1999) (“Courts repeatedly have held that an insurance company’s

11

As is set forth in n.3, supra, the Court considers the policy in effect on the date of the loss, which was filed
by State Farm. (Docket No. 4-1).

23

substantial, thorough investigation, based upon which the insurance company refuses to make or
continue benefit payments, establishes a reasonable basis that defeats a bad faith claim.”). It is
likewise not bad faith “where the insurer made a reasonable legal conclusion based on an area of
the law that is uncertain or in flux.” Id. (citing Terletsky, 649 A.2d at 688-89). Additionally,
courts have recognized that an insurer’s reasonable reliance on an engineering expert’s report for
a coverage decision does not constitute bad faith. See El Bor Corp. v. Fireman's Fund Ins. Co.,
787 F. Supp. 2d 341, 349 (E.D. Pa. 2011) (insurance company’s reliance on engineer report’s
findings as a basis for denial of coverage “provide[d] reasonable grounds to deny benefits”).
Here, Plaintiffs do not contest that State Farm relied upon the NAE report in its denial of
coverage or argue that, if the conclusions in the NAE report were accepted, their losses would
not be excluded from coverage under the provisions quoted by State Farm in its denial letter.
(See Docket No. 1-3 at ¶ 33 (“Nelson’s report, upon which State Farm relied to deny coverage
under the Policy”); see also Docket No. 8, generally).

They primarily argue that it was

unreasonable for State Farm to rely on the report because the investigation by NAE “glossed
over” or “ignored” certain information provided by Plaintiffs. This Court believes that Plaintiffs’
claim that this information was “overlooked” is completely refuted by the report. (Docket No. 13 at ¶¶ 39, 43). In fact, White’s summary of the information which is contained in the report
with respect to the damage to the home, the measurements taken by Cannella and the repairs he
completed is consistent with the allegations Plaintiffs make in their Complaint concerning these
issues. (Compare Docket No. 1-3 at ¶¶ 8-20, 40-41, with Docket No. 1-3 at 38-39). Thus,
without these facts, Plaintiffs’ claim is reduced to a dispute about the conclusions reached by
White in his report rather than any bad faith mishandling of the investigation.12

12

The Court notes that the allegation that State Farm charged NAE’s fees “against their policy” does not
constitute bad faith. (Docket No. 1-3 at ¶¶ 44-45; Docket No. 1-3 at 52). Plaintiffs have not alleged that they were

24

Their allegations are further undermined by White’s statements in the report that he
lacked sufficient information to fully evaluate the supposed “lean” of the house but that he
reserved the right to change his opinions, and his report, if additional information was provided.
(Docket No. 1-3 at 45, 49). Plaintiffs have not alleged that they submitted any additional
information to State Farm or took any action after they received the denial letter from State Farm
before filing suit. (See generally Docket No. 1-3). As such, they cannot demonstrate that State
Farm’s reliance on White’s report was without a reasonable basis.
In all, the Court finds that State Farm had a reasonable basis to rely on the conclusions of
the structural engineer’s report as to the cause of the damage to Plaintiffs’ home and deny
coverage under the exclusions cited in its letter. See El Bor Corp., 787 F. Supp. 2d at 349. NAE
determined that the cause of the damage was the “result of long-term wear and movement of the
south wall beneath the garage influenced by hydrostatic and soil pressures in conjunction with
long-term differential movement of the foundation supporting walls.” (Docket No. 1-3 at 45).
The policy specifically excluded coverage for losses to the home caused by: earth movement
including “subsidence, erosion or movement resulting from improper compaction”; water
damage meaning “water below the surface of the ground, including water which exerts pressure
on, or seeps or leaks through a … foundation”; and “defects in the design, specifications,
workmanship, construction, grading, [or] compaction.” (Docket No. 4-1 at 17-18). Given
NAE’s findings, State Farm had a reasonable basis to deny coverage under the cited exclusions.
See El Bor Corp., 787 F. Supp. 2d at 349.

directly required to pay this fee nor that this type of administrative expense increased their premiums or otherwise
affected them in any fashion. (See Docket No. 1-3). Even if they had, the total amount of this charge was
$3,755.00. (Id. at 52). Since the remainder of Plaintiffs’ claims must be dismissed, the value of this portion of the
claim, if any, certainly takes it below the $75,000 threshold of diversity jurisdiction which would necessitate
dismissal for lack of jurisdiction. For these reasons, no further discussion of this “charge” is warranted.

25

For these additional reasons, Defendant’s motion to dismiss Plaintiffs’ bad faith claim is
granted.
C.

Leave to Amend

In their response to State Farm’s Motion, Plaintiffs “request leave to file an amended
complaint to address any issues the Court may have” if the motion to dismiss is granted. (Docket
No. 8). Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that leave to amend
should be freely granted “when justice so requires.” The “grant or denial of an opportunity to
amend is within the discretion of the District Court.” Foman v. Davis, 371 U.S. 178, 182 (1962).
“Among the grounds that justify a denial of leave to amend are undue delay, bad faith, dilatory
motive, prejudice and futility.” Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000) (quoting In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997)). A proposed
amendment is futile if “the complaint, as amended, would fail to state a claim upon which relief
could be granted.” Shane, 213 F.3d at 115 (citing In re Burlington Coat Factory Sec. Litig., 114
F.3d at 1434).
Plaintiffs have not provided a proposed amended complaint for the Court to evaluate to
determine if leave to amend is warranted. See Graham v. Progressive Direct Ins. Co., 271
F.R.D. 112 (W.D. Pa. Sept. 15, 2010) (discussing motion for leave to amend and evaluating a
proposed amended complaint). Nor have they set forth any additional facts in their response to
State Farm’s motion to dismiss which would indicate that they could sufficiently plead either of
their claims to overcome State Farm’s defenses. (See Docket No. 8). As is discussed above,
Plaintiffs’ breach of contract claim is untimely and barred by the contractual limitations clause in
the policy. In addition, their bad faith claim is insufficiently pled under Iqbal and Twombly, and,
more importantly, the record before the Court demonstrates that State Farm had a reasonable

26

basis to deny coverage in reliance on the NAE report and the exclusions in the policy.
Moreover, Plaintiffs’ bad faith claim relies on an alleged litigation animus against them by State
Farm but they have pled that this conduct was “unbeknownst to them” at the time, which
suggests that they do not have any additional factual information to include in a potential
amended complaint. (Docket No. 1-3 at ¶ 37). Therefore, the Court concludes that leave to
amend either claim would be futile. See Shane, 213 F.3d at 115. Accordingly, Plaintiffs’ claims
will be dismissed, with prejudice.
VI. CONCLUSION
Based on the foregoing, Defendant’s Motion to Dismiss [4] is GRANTED and Plaintiffs’
breach of contract and bad faith claims are dismissed, with prejudice. An appropriate order
follows.

s/Nora Barry Fischer
Nora Barry Fischer
U.S. District Judge
Date: August 20, 2012
cc:

All counsel of record

27