Hart et al v. Safeco Insurance Co et al
ORDER AND OPINION granting 36 American Auto's Motion to Dismiss and dismissing Defendant American Auto from this action; denying as moot 42 Plaintiffs' Motion to Compel discovery from American Auto and 45 American Auto's Motion to Stay discovery. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 12/16/2016.(sshe, )
IN THE UNITED STATES DISTRICl£WlD-ecERK'S OFFICE
DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION 20th DEC 1q i A q: I q
Juanita Hart and Devon Hart-Barron,
Safeco Insurance Co., a subsidiary of
Liberty Mutual Insurance Company d/b/a
First National Insurance Company of
America, and American Auto Club
ORDER AND OPINION
This matter is before the Court on Defendant American Auto Club Insurance Agency's
("American Auto") motion to dismiss the amended complaint under Rule 12(b)(6) of the Federal
Rules of Civil Procedure. For the reasons set forth below, the Court grants the motion.
This is an automobile insurance coverage case. Plaintiffs Juanita Hart and Devon Hart-
Barron allege that, in August 2015, they purchased an automobile insurance policy (number
F3013258) issued by Defendant Safeco Insurance Company ("Safeco") from American Auto, an
independent insurance agent. (Am. Compl. ~~ 4, 7.) Effective December 31,2015, Ms. Hart added
a 2015 Nissan Sentra to the Safeco policy and Plaintiff Devon Hart-Barron as a named insured.
(Id. ~~ 7, 11-14.) Plaintiffs allege American Auto and Safeco setup a monthly automatic draft
payment plan for the insurance premiums. (Jd.
On February 1, 2016, Ms. Hart-Barron was involved in an automobile accident that
rendered the 2015 Sentra a total loss. (Jd.
15-16.) Plaintiffs notified Safeco and American Auto.
(Jd.) On February 4, 2016, Safeco acknowledged coverage for the accident and offered to pay fair
market value for the vehicle. (/d.~. 18.) That offer was contingent on Plaintiffs executing a power
of attorney authorizing Safeco to salvage the vehicle. (/d. ~ 19.)
Plaintiffs allege that on February 9, 2016, Ms. Hart called American Auto to ask for
instructions regarding transfer ofthe vehicle to Safeco, she was informed that the January premium
payment was not processed and that her policy may be cancelled. (/d. ~ 21.) It is undisputed that
the premium due on January 3, 2016 premium was not paid. (See id. ~ 24.) Plaintiffs allege Safeco
never executed the scheduled automatic draft and provided no notice of nonpayment. (/d.)
Plaintiffs nonetheless executed the power of attorney and Safeco took possession of the vehicle on
February 15,2016. (/d.
22.) After Safeco took possession ofthe vehicle, Safeco informed them
that it was cancelling the insurance policy and denying coverage because the January 2016
premium payment was not made. (Id.
23, 25.) Plaintiffs allege they learned the policy was in
fact cancelled from a South Carolina Department of Motor Vehicles letter. (/d.
have not made any representation about the date of that letter, but assuming the allegation to be
true, the letter likely must have been received after February 15, 2016 (when Safeco took
possession of the vehicle) and before or very near to February 23, 2016, which is the date of a
letter from Safeco to an attorney for Raymond Baumil, denying Mr. Baumil's claim against Ms.
Hart-Barron's policy number F3013258 arising from a February 1,2016 incident. (See Dkt. No.
On July 5, 2016, Plaintiffs filed the present action in the Charleston County Court of
Common Pleas. The case was removed to this court on August 9, 2016. The amended complaint
asserts two causes of action against American Auto: equitable estoppel and breach of fiduciary
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits the dismissal of an action if
the complaint fails '''to state a claim upon which relief can be granted." Such a motion tests the
legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits
of the claim, or the applicability of defenses. . .. Our inquiry then is limited to whether the
allegations constitute 'a short and plain statement of the claim showing that the pleader is entitled
to relief. ", Republican Party olN.e. v. Martin, 980 F.2d 943,952 (4th Cir. 1992) (quotation marks
and citation omitted). In a Rule 12(b)( 6) motion, the Court is obligated to "assume the truth of all
facts alleged in the complaint and the existence of any fact that can be proved, consistent with the
complaint's allegations." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd P'ship, 213 F.3d 175, 180 (4th
Cir. 2000). However, while the Court must accept the facts in a light most favorable to the non
moving party, it "need not accept as true unwarranted inferences, unreasonable conclusions, or
To survive a motion to dismiss, the complaint must state "enough facts to state a claim to
relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544,570 (2007). Although
the requirement of plausibility does not impose a probability requirement at this stage, the
complaint must show more than a "sheer possibility that a defendant has acted unlawfully."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has "facial plausibility" where the
pleading "allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged." Id
Plaintiffs claim American Auto "should be estopped from denying coverage under the
Safeco policy." (Am. Compi.
69.) That equitable estoppel claim is without merit. American
Auto cannot be "estopped" from denying insurance coverage because it is not a provider of
insurance and because it has no role in insurers' coverage decisions.
Further, even if American Auto somehow had control of the coverage decision at issue in
this case, it could be equitably estopped from denying coverage only if it represented it would
notify Plaintiffs of any failed premium payment and if Plaintiffs had relied upon that
representation. '''The elements of an equitable estoppel as related to the party claiming the
estoppel are (l) lack of knowledge and of the means of knowledge of the truth as to the facts in
question; (2) Oustifiable] reliance upon the conduct of the party estopped; and (3) the ...
[prej udicial] change [in] position of the party claiming the estoppel. '" Walton v. Walton, 318
S.E.2d 14,16 (S.C. 1984) (quoting Murphyv. Hagan, 271 S.E.2d311, 313 (S.C. 1980». Plaintiffs
allege Safeco failed to initiate the bank draft for the January premium and failed to notify them of
the resulting nonpayment of premium before the February 1,2016 accident. (See Am. CompI. ~~
24, 56.) They allege American Auto knew of Safeco's alleged failures (id), but, as American
Auto rightly notes, they fail to allege American Auto represented it would notify them of failed
premium payments (see Dkt. No. 36 at 8). In other words, Plaintiffs identify no representation that
they relied upon to their detriment.
Plaintiffs also claim American Auto breached fiduciary duties owed Plaintiffs by failing to
notify them that the January 2016 premium payment was not processed under the automatic
payment plan that American Auto allegedly helped setup. (See Am. CompI. ~~ 51-58.) That claim
is also without merit because no fiduciary relationship existed between American Auto and
Plaintiffs. "A confidential or fiduciary relationship exists when one imposes a special confidence
in another, so that the latter, in equity and good conscience, is bound to act in good faith and with
due regard to the interests of the one imposing the confidence." Hendricks v. Clemson Univ., 578
S.E.2d 711, 715 (S.C. 2003) (internal quotation marks omitted). The sale of insurance is an arm's
length transaction that does not create a fiduciary relationship between buyer and seller. Pitts v.
Jackson Nat. Life Ins. Co., 574 S.E.2d 502, 508 (S.C. Ct. App. 2002). Plaintiffs allege no
relationship with American Auto beyond the purchase of an insurance policy and interactions
incidental to that purchase, such as the addition of a named insured and an additional vehicle to
the policy. American Auto had no fiduciary duties to breach.
In response to American Auto's motion to dismiss the breach of fiduciary duty claim,
Plaintiffs claim American Auto was their insurance broker rather than an insurance agent because
the definitions section of the South Carolina Insurance Law defines insurance broker as "an
individual licensed by the department to represent citizens of this State in placing their insurance."
(Dkt. No. 38 at 5.) Plaintiffs claim that definition is "fitting" with regard to American Auto
because Ms. Hart testified in her deposition that she asked American Auto to switch her insurance
from Progressive to Safeco. (Dkt. No. 38 at 5.) The Court cannot consider Ms. Hart's deposition
testimony or other matters beyond the pleadings on a motion to dismiss. However, the Court may
consider documents "integral to and explicitly relied on in the complaint." Phillips v. LCI Int 'I,
Inc., 190 F .3d 609, 618 (4th Cir. 1999). Plaintiffs allege American Auto "is an insurance agency
licensed to do business in the State of South Carolina and acted as the Harts' insurance broker."
4.) American Auto's licensure therefore is integral to and explicitly relied on in
the amended complaint.
The full statutory definition of an insurance broker is "an individual licensed by the
department to represent citizens of this State in placing their insurance. An insurance broker may
place that insurance either with an eligible surplus lines insurer or with a licensed insurance
producer in an insurance carrier licensed in this State." S.C. Code § 38-1-20(27). Public licensure
records show that the only South Carolina licensed individual at American Auto is licensed as a
https:llonline.doi.sc.gov/EnglPublic/Queries/AgncyLicSrch.aspx. A "producer" is one who "sells,
solicits, or negotiates insurance policies"-exactly what Plaintiffs allege American Auto did in
this case. Id. A "broker" is one who "sells, solicits, or negotiates insurance policies for Eligible
Surplus Lines insurers." Id. There is no allegation that surplus line insurance has any relevance
to this case.
Even if American Auto were Plaintiffs' insurance broker, Plaintiffs do not attempt to
explain why that would create a fiduciary relationship. Fiduciary duties arise from the nature of
the relationship between the parties, not from licensure terminology. Hendricks, 578 S.E.2d at
711. Plaintiffs instead merely assert that American Auto's "denial of its broker status" creates "a
question of fact ... as to whether American Auto acted as a broker or as an agent when dealing
with Plaintiffs." (Dkt. No. 38 at 5.) Plaintiffs fail to explain how that purported question of fact
is material in this case (i.e., how it would create a fiduciary duty). Further, the conflict between a
false statement and the truth does not raise a "question of fact" that precludes summary disposition.
Where the truth is known, there is no question of fact.
The gravamen of Plaintiffs' claims against American Auto appears to be that American
Auto incorrectly setup Plaintiffs' automatic draft payment plan, resulting in loss of coverage. Yet
Plaintiffs never actually make that allegation. Instead, they allege American Auto failed to inform
them ofnonpayment ofthe January 2016 premium. (Am. Compl. ~ 67.) Yet Plaintiffs never allege
American Auto represented it would provide notice of failed premium payments. Instead, they
argue American Auto entered into a fiduciary relationship with them when it sold them an
insurance policy, and so had a continuing duty to protect Plaintiffs' interests proactively. (ld.
57.) That argument is contrary to law-American Auto did not enter into a fiduciary relationship
when it sold Plaintiffs an insurance product in an arm's length transaction. Pitts, 574 S.E.2d at
508. Plaintiff therefore fails to state a claim for breach of fiduciary duty or a claim for equitable
estoppel against Defendant American Auto. 1
For the foregoing reasons, the Court GRANTS American Auto's motion to dismiss (Dkt.
No. 36) and DISMISSES Defendant American Auto from this action. Plaintiffs' motion to compel
discovery from American Auto (Dkt. No. 43) and American Auto's motion to stay discovery (Dkt.
No. 45) are DENIED AS MOOT.
AND IT IS SO ORDERED.
United States Di rict Court Judge
December ~ 2016
Charleston, South Carolina
I The Court expresses no view on whether Plaintiffs could state a plausible negligence or other
claim for damages against American Auto. The Court's consideration is confined to the two causes
of action asserted against American Auto in the amended complaint: breach of fiduciary duty (fifth
cause of action) and equitable estoppel (seventh cause of action).
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