Griffith v. State Farm Fire and Casualty Company
ORDER granting 11 Motion to Dismiss for Failure to State a Claim; finding as moot 12 Motion to Stay. Signed by Honorable David C Norton on 6/6/12. (juwo)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
BRENT J. GRIFFITH, INDIVIDUALLY
AND ON BEHALF OF ALL OTHERS
STATE FARM FIRE AND CASUALTY
This matter is before the court on defendant’s motion to dismiss the complaint.
For the reasons set forth below, the court grants defendant’s motion.
Plaintiff Brent J. Griffith (Griffith) filed this action in the Court of Common Pleas
for the Ninth Judicial Circuit on December 22, 2011. On January 26, 2012, defendant
State Farm Fire and Casualty Company (State Farm) filed a notice of removal in federal
court, asserting jurisdiction based on diversity of citizenship and under the Class Action
Fairness Act. On February 15, 2012, State Farm filed a Federal Rule of Civil Procedure
12(b)(6) motion to dismiss for failure to state a claim.
In his complaint, Griffith alleges as follows: On May 11, 2008, Griffith’s home
on Wadmalaw Island, South Carolina suffered wind damage. Compl. ¶¶ 1, 5, 7. The
home was insured against such damage by State Farm. Id. ¶ 6. Griffith filed a claim but
the parties disagreed on the cost of repairs. Id. ¶ 7. Ultimately, on May 10, 2010, State
Farm paid Griffith $311,171.00 for his loss. Id. ¶ 11. Griffith then sought interest on his
claim, which State Farm refused to pay. Id. ¶¶ 15.
Griffith’s essential theory of liability is that his claim was a liquidated sum at the
time of the loss that began to accrue interest on that date based on State Farm’s failure to
pay his claim within sixty days of his submission of a proof of loss. Id. ¶¶ 10, 12-14, 18.
He brings this action individually and as a class action on behalf of
all persons in the State of South Carolina whose home is insured by
Defendant and who submitted a claim for a covered property loss to
Defendant and to whom Defendant failed to make payment for that loss
within sixty days of the claim submission and to whom Defendant failed
to pay interest on the loss amount when it ultimately paid the loss (the
Id. ¶ 18. Griffith alleges that State Farm has a policy, practice, or pattern of delaying
payments and refusing to pay interest. Id. ¶¶ 16-17. Griffith specifically asserts causes
of action for breach of contract, breach of contract accompanied by a fraudulent act,
unjust enrichment and quantum meruit, bad faith refusal to pay, and declaratory
II. MOTION TO DISMISS STANDARD
The Federal Rules of Civil Procedure govern civil actions that are removed from a
state court. See Fed. R. Civ. P. 81(c)(1). Under Federal Rule of Civil Procedure
12(b)(6), a party may move to dismiss for “failure to state a claim upon which relief can
be granted.” When considering a Rule 12(b)(6) motion to dismiss, the court must accept
the plaintiff’s factual allegations as true and draw all reasonable inferences in the
plaintiff’s favor. See E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435, 440
(4th Cir. 2011).
On a motion to dismiss, the court’s task is limited to determining whether the
complaint states a “plausible claim for relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009). The Supreme Court recently articulated a “two-pronged approach” to assessing
the sufficiency of a complaint. See id. First, a complaint must contain factual allegations
in addition to legal conclusions. Although Rule 8(a)(2) requires only a “short and plain
statement of the claim showing that the pleader is entitled to relief,” “a formulaic
recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). Second, “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). This standard “demands
more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. In other
words, “Facts pled that are ‘merely consistent with’ liability are not sufficient.” A Soc’y
Without a Name v. Virginia, 655 F.3d 342, 346 (4th Cir. 2011) (quoting Iqbal, 556 U.S.
“[T]he tenet that a court must accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. Thus, the court
need not accept as true “legal conclusions drawn from the facts,” “unwarranted
inferences, unreasonable conclusions, or arguments.” E. Shore Mkts., Inc. v. J.D.
Assocs., Ltd. P’ship, 213 F.3d 175, 180 (4th Cir. 2000). Ultimately, the court’s task is
not mechanical but “context-specific,” requiring “the reviewing court to draw on its
judicial experience and common sense.” Iqbal, 556 U.S. at 679.
The gravamen of Griffith’s complaint is that State Farm owes interest on his
claim for property damage accruing from the date of the loss. Griffith alleges that State
Farm failed to pay his claim within sixty days of the date he filed the claim, which he
contends amounts to a “breach” giving rise to an obligation to pay interest. But for there
to be a breach, there must first be a duty or agreement, and Griffith’s theory relies on the
assumption that State Farm owes a duty to pay every covered claim within sixty days of
the submission of the claim. To evince such a duty, Griffith looks to the South Carolina
legal rate of interest statute and South Carolina case law.
State Farm responds that the insurance policy is silent as to payment of interest
and that South Carolina law does not impose a duty on homeowners insurance companies
to pay claims within sixty days; nor does it require homeowners insurers to pay interest
from the date of loss when the claim is not paid within sixty days. State Farm submits
that if no such duties exist, each of Griffith’s claims fail as a matter of law.1
Griffith brings claims for breach of contract, breach of contract accompanied by a fraudulent
act, unjust enrichment and quantum meruit, bad faith refusal to pay, and declaratory judgment.
State Farm is correct in pointing out that each of Griffith’s causes of action presuppose a breach
for failure to pay interest, not for refusal to pay Griffith’s underlying claim for property damage
(which Griffith concedes was paid by State Farm). For example, Griffith’s cause of action for
“bad faith refusal to pay” rests on a claim that the “failure to pay interest resulted from
Defendant’s bad faith or unreasonable action in breach of an implied covenant of good faith and
fair dealing.” Compl. ¶ 59 (emphasis added). That is, the complaint does not appear to allege
that State Farm’s delay in payment itself is the reason for its purported breach of the duty of good
faith and fair dealing; rather, it is the failure to pay interest that allegedly caused the breach. See
Def.’s Mem. Supp. 4 (“The Complaint alleges five causes of action, a fundamental premise of
each is that State Farm has a legal duty to pay interest on claims not paid in full within 60 days.”).
It is true that under South Carolina law, an insurer must diligently and in good faith investigate,
evaluate, and settle claims. See Royal Ins. Co. of Am. v. Reliance Ins. Co., 140 F. Supp. 2d 609,
617 (D.S.C. 2001). Still, the crux of each of Griffith’s claims is that State Farm breached its
obligations by failing to pay interest on a covered claim.
The Insurance Policy
The natural starting point is the plain language of the policy. See Andy Warhol
Found. for Visual Arts, Inc. v. Fed. Ins. Co., 189 F.3d 208, 215 (2d Cir. 1999) (“We start
our analysis with the premise that an insurance policy, like any contract, must be
construed to effectuate the intent of the parties as derived from the plain meaning of the
policy’s terms.”). “Courts interpret insurance policy language in accordance with its
plain, ordinary, and popular meaning . . . .” M & M Corp. of S.C. v. Auto-Owners Ins.
Co., 701 S.E.2d 33, 35 (S.C. 2010).
Here, Griffith concedes that the insurance policy is silent as to payment of
interest. Section I, Paragraph 8 of the insurance policy, entitled “CONDITIONS,” is
relevant to the issue of whether State Farm owes a duty to pay a claim within sixty days
of its submission. This provision states:
Loss Payment. We will adjust all losses with you. We will pay you
unless some other person is named in the policy or is legally entitled to
receive payment. Loss will be payable 60 days after we receive your
proof of loss and:
a. reach agreement with you;
b. there is an entry of a final judgment; or
c. there is a filing of an appraisal award with us.
Def.’s Mot. Dismiss Ex. 2 at 25 (emphasis added). This provision establishes three, and
only three, conditions precedent for State Farm to be required to pay a claim within sixty
days of the submission of a proof of loss. The parties agree that none of the three
conditions was met at the time Griffith submitted his claim; therefore, under the plain
language of the policy, State Farm was neither obligated to make payment on Griffith’s
claim within sixty days nor to pay interest from the date of loss.
When the language of a contract is clear and unambiguous, courts are bound to
interpret the existing contract language and are not authorized to make a new contract for
the parties. See B.L.G. Enters., Inc. v. First Fin. Ins. Co., 491 S.E.2d 695, 697 (S.C. Ct.
App. 1997). Within certain statutory parameters, insurers and insureds have the freedom
to contract for the terms they want in a policy. See id. at 698 n.2. This court is limited to
interpreting the contract to which both parties agreed, “regardless of its wisdom or folly,
apparent unreasonableness, or failure to guard their rights carefully.” C.A.N. Enters., Inc.
v. S.C. Health & Human Serv. Fin. Comm’n, 373 S.E.2d 584, 586 (S.C. 1988). As a
matter of law, the four corners of the policy do not support a theory of liability in which
relief may be granted in favor of Griffith. See, e.g., Roche v. Liberty Mut. Managed
Care, Inc., No. 07-331, 2008 WL 4378432, at *2 (S.D. Ill. Sept. 23, 2008) (“Only a duty
imposed by the terms of a contract can give rise to a breach.”). Therefore, absent a legal
duty imposed by South Carolina law, Griffith’s claims must be dismissed.
South Carolina Legal Rate of Interest Statute
To overcome the silence regarding payment of interest in the insurance policy,
Griffith relies on South Carolina Code Ann. § 34-31-20(A) as providing the purported
duty to pay interest on covered claims not paid within sixty days of a proof of loss. This
statute, entitled “Legal rate of interest,”2 provides:
In all cases of accounts stated and in all cases wherein any sum or sums of
money shall be ascertained and, being due, shall draw interest according to
law, the legal interest shall be at the rate of eight and three-fourths percent
While the statute is entitled “Legal rate of interest,” South Carolina courts have referred to § 3431-20(A) as authorizing an award of “prejudgment interest.” See Austin v. Stokes-Craven
Holding Corp., 691 S.E.2d 135, 154 (S.C. 2010); QHG of Lake City, Inc. v. McCutcheon, 600
S.E.2d 105, 110 (S.C. Ct. App. 2004) (“Section 34-31-20(A) of the South Carolina Code of Laws
provides the statutory basis for prejudgment interest.”).
S.C. Code Ann. § 34-31-20(A). Courts have construed § 34-31-20(A) as permitting an
award of interest when a monetary obligation is a “sum certain” or “capable of being
reduced to certainty,” “accruing from the time a payment may be demanded either by the
agreement of the parties or the operation of law.” Austin v. Stokes-Craven Holding
Corp., 691 S.E.2d 135, 154 (S.C. 2010); see also Historic Charleston Holdings, LLC v.
Mallon, LLC, 673 S.E.2d 448, 457 (S.C. 2009) (same).
Griffith alleges that at the time his property was damaged, the obligation owed by
State Farm to him was a sum certain. Compl. ¶¶ 13-14. Even though Griffith admits that
the amount of his claim was in dispute, he asserts that the amount was capable of being
reduced to certainty because “the measure of recovery was fixed by conditions existing at
the time of the loss.” Id. ¶ 12. He likens State Farm’s position as an insurer to that of a
debtor, whereby at the date of the loss, State Farm’s obligation to pay a “debt” arose and
the money no longer belonged to State Farm, regardless of the time it took the parties to
determine the exact amount owed to Griffith.3
Section 34-31-20(A) does not support the imposition of a comprehensive duty on
homeowners insurers in South Carolina to pay interest on covered losses within sixty
days or to pay interest from the date of loss for breach of that purported duty. In Jacobs
v. American Mutual Fire Insurance Co. of Charleston, 340 S.E.2d 142 (S.C. 1986), relied
on by Griffith, the South Carolina Supreme Court stated that interest is owed under § 3431-20(A) in cases involving property damage or loss when a party “fails to perform a
duty.” Id. at 143. The court reasoned that interest is owed because the breaching party is
This argument would seem to presume that State Farm was obligated to pay Griffith on the date
of loss, rather than sixty days thereafter as Griffith alleges in his complaint. In this regard,
Griffith’s position is somewhat unclear and has become a “moving target,” as noted by State
bound to “make good all damages that accrue naturally from a breach, and a party who
has had the use of money owed to another may justly be required to pay interest from the
time the payment should have originally been made.” Id. Thus, to impose on State Farm
a duty to pay interest, the court would first have to find that State Farm breached some
sort of underlying it duty owed to Griffith.
To determine whether there was a breach, courts look to the insurance contract,
but Griffith concedes that State Farm did not breach the “Loss Payment” provision of the
policy. Therefore, Griffith’s argument under § 34-31-20(A) leaves the court where it
started—in search of a basis for the purported duty that State Farm pay interest on
covered claims that were not satisfied within sixty days of claim submission. When a
plaintiff cannot establish a legal duty owed to it under South Carolina law, the claim is
properly subject to dismissal. See Sanders v. Norfolk S. Ry. Co., No. 10-1189, 2010 WL
4386881, at *2 (4th Cir. Nov. 5, 2010).
Griffith ignores the absence of a legal duty to pay interest and instead maintains
that the “real question” is “whether and how that interest is calculated.” He alleges that
under the statute, his loss was a sum certain when it occurred and became demandable
either at the time of loss or sixty days after submission of his claim. While “prejudgment
interest is not appropriate when a plaintiff seeks to recover unliquidated damages,”
Liberty Mut. Ins. Co. v. Emp. Res. Mgmt., Inc., 176 F. Supp. 2d 510, 540-41 (D.S.C.
2001), a “claim is liquidated if the sum claimed is certain or capable of being reduced to a
certainty.” Dixie Bell, Inc. v. Redd, 656 S.E.2d 765, 769 (S.C. 2007). “The fact that the
amount due is disputed does not render the claim unliquidated for purposes of awarding
prejudgment interest.” Historic Charleston, 673 S.E.2d at 457. “Rather, the proper test is
whether or not the measure of recovery, not necessarily the amount of damages, is fixed
by conditions existing at the time the claim arose.” Id. (internal quotation marks
Griffith relies on Brooklyn Bridge, Inc. v. South Carolina Insurance Co., 420
S.E.2d 511 (S.C. Ct. App. 1992), for the proposition that South Carolina law allows
prejudgment interest on obligations to pay money even where the amount owed is in
dispute. In Brooklyn Bridge, the insurer appealed a trial judge’s award of prejudgment
interest to the insured following a jury verdict against the insurer for failure to pay. The
insurer argued that the lower court erred because the parties did not agree on an amount.
The South Carolina Court of Appeals affirmed, holding that prejudgment interest is
payable “even if the parties do not agree on the amount of the obligation,” when “the
evidence shows the sum due under the policy was capable of being reduced to certainty.”
Id. at 513. Interest was therefore properly awarded from the date of denial of coverage,
the court held.
Brooklyn Bridge is distinguishable from the present case because, first, there is no
allegation that State Farm refused to pay Griffith’s claim and, second, there has been no
judgment against State Farm. For many years, insurance cases involving prejudgment
interest have involved an underlying claim for damages based on the insurer’s breach of
the insurance policy for failure to pay proceeds. See, e.g., Heffron v. Jersey Ins. Co. of
N.Y., 144 F. Supp. 5, 13 (D.S.C. 1956) (emphasis added) (holding insured was “entitled
to interest on the amount due from the date of defendant’s refusal to pay the claim, on the
ground that this refusal constituted a breach of contract, and that it is a proper element of
his damages that he be compensated for the money and the use of the money to which he
was entitled under his contract on that date”). Here, each of Griffith’s causes of action is
founded on the premise that State Farm is in breach for the failure to pay interest alone.
Moreover, interest under § 34-31-20(A) is generally awarded after an insured first
secures a judgment against her insurer for refusal to pay insurance proceeds. See
Rutledge v. St. Paul Fire & Marine Ins. Co., 334 S.E.2d 131, 139 (S.C. Ct. App. 1985)
(vacating an award of prejudgment interest when there was no longer a judgment).
Griffith frames State Farm’s position as that it should never be required to pay
prejudgment interest, even when a judgment is entered against it. State Farm correctly
denies this allegation as a “straw man,” recognizing that if it improperly denies a claim
and therefore breaches the contract, it can be held liable for prejudgment interest as an
element of damages. For example, if under the “Loss Payment” clause State Farm failed
to pay for a loss within sixty days of a final judgment or appraisal award, then an insured
could receive interest on its judgment against State Farm.
In finding that § 34-31-20(A) does not provide Griffith with a plausible claim for
relief, the court is also persuaded by the fact that there are no provisions in the South
Carolina Insurance Code that obligate homeowners insurers to pay claims within sixty
days, whereas the South Carolina Legislature has specifically imposed a requirement that
life insurance claims be paid within thirty days of the proper submission of a claim. The
failure to pay such a claim entitles the insured to interest on the sum owed under the
policy. See S.C. Code Ann. § 38-63-220(f).4 The legislature could have similarly
S.C. Code Ann. § 38-63-220(f) provides:
When a policy provides for payment of its proceeds in a lump sum upon the
death of the insured and the insurer fails to pay the proceeds within thirty days of
submission of proof of death . . ., the payment must include interest at the legal
mandated that homeowners insurers pay proceeds within thirty (or sixty) days of
submission of a proof of loss, and that the failure to pay renders an insurer liable for
interest from the date of loss. However, the legislature has not imposed such a
requirement, which evidences legislative intent. It is for the legislature, not this court, to
levy this obligation on homeowners insurers.
South Carolina Case Law
Finally, Griffith relies on a series of cases applying South Carolina law—Flynn,
Varnadore, Jacobs, and Shadow Creek—to support his theory that if a covered claim
under a homeowners insurance policy is not paid within a sixty days, the insurer owes
interest from the date of loss.
In Flynn v. Nationwide Mutual Insurance Co., 315 S.E.2d 817 (S.C. Ct. App.
1984), and Jacobs v. American Mutual Fire Insurance Co. of Charleston, 340 S.E.2d 142
(S.C. 1986), an insured received a jury verdict against the insurer for failure to pay
insurance proceeds. The trial court then awarded prejudgment interest—in Flynn, the
Court of Appeals affirmed an award of interest from the date of loss, while in Jacobs, the
Supreme Court affirmed an award of interest from sixty days after the loss. Later, in
Varnadore v. Nationwide Mutual Insurance Co., 345 S.E.2d 711 (S.C. 1986), the
Supreme Court relied on Flynn in upholding a trial court’s award of interest from the date
of loss on a verdict against the insurer for bad faith refusal to pay.
In each of these cases, the insured received a jury verdict against the insurer
before receiving an award of interest from the trial court. Reviewing these decisions, the
Fourth Circuit in Shadow Creek Apartments, L.L.C. v. Hartford Fire Insurance Co., Nos.
rate of interest from the date of death of the insured until the date the claim is
01-2212, 01-2251, 2002 WL 1932358 (4th Cir. Aug. 22, 2002), summarized the rule in
South Carolina as follows: “[P]rejudgment interest for an award of insurance coverage is
computed from the date of the loss, absent contractual language to the contrary.” Id. at
*5. The court relied on Flynn, which it found to hold that “when the insurance company
denies a claim and must be sued before it will pay, the court will compute interest starting
on the date of loss.” Id. (emphasis added). Yet again, in Shadow Creek, the insurer
refused to pay a claim submitted by its insured and a jury returned a verdict for the
The above cases are immediately distinguishable because they all involve a
judgment against an insurer for refusal to pay under a policy. Here, there is no
underlying allegation that State Farm breached its obligations to Griffith by failing to pay
benefits when due under the policy. Therefore, these cases cannot support the imposition
of a rigid duty on State Farm to pay prejudgment interest from the date of loss on each
claim that it fails to pay within sixty days. See Edens v. S.C. Farm Bureau Mut. Ins. Co.,
343 S.E.2d 49, 50 (S.C. Ct. App. 1986) (“[T]he allowance of prejudgment interest is a
matter of discretion.”).
Griffith fails to state a plausible claim for relief because he cannot point to a
source of State Farm’s alleged duty to pay claims within sixty days or to pay interest
from the date of loss. Neither the insurance contract nor the applicable statutes or case
law confer such duties on State Farm. The court is not required to give Griffith’s
assertions of a legal duty, which are legal conclusions, “the assumption of truth.” Iqbal,
556 U.S. at 680. Therefore, even taking the factual allegations in Griffith’s complaint as
true, the court holds that Griffith fails to state a claim upon which relief can be granted.
Based on the foregoing, the court GRANTS defendant’s motion to dismiss.
Defendant has additionally filed a motion to stay discovery, which the court FINDS AS
AND IT IS SO ORDERED.
DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
June 6, 2012
Charleston, South Carolina
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