Colter v. Omni Insurance Company et al

Filing 69

ORDER AND OPINION granting 17 Motion to Dismiss; denying as moot 41 Motion to Quash; denying as moot 41 Motion to Stay; denying as moot 49 Motion to Strike; denying as moot 56 Motion to Amend/Correct; denying a s moot 18 Motion to Quash; denying as moot 19 Motion to Quash; denying as moot 20 Motion for Summary Judgment; denying as moot 21 Motion to Compel; denying as moot 22 Motion to Compel; denying as moot 28 Motion to Stay; denying as moot 30 Motion to Certify Class. Signed by Honorable J Michelle Childs on 7/12/2016.(asni, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
Allison Colter, on behalf of herself and all
others similarly situated,

)
)
)
Plaintiff,
)
v.
)
)
Omni Insurance Company and Omni
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Indemnity Company,
)
)
Defendants.
)
___________________________________ )

Civil Action No. 3:15-cv-04171-JMC

ORDER AND OPINION

Plaintiff Allison Colter (“Plaintiff”), on behalf of herself and all others similarly situated,
filed the instant putative class action seeking damages from Defendants Omni Insurance
Company and Omni Indemnity Company (together “Defendants”) for their alleged imposition of
an illegal and unauthorized “betterment” or depreciation charge on property settlements for
accidents. (ECF No. 1-1.)
This matter is before the court on Defendants’ Motion to Dismiss pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure (ECF No. 17). Specifically, Defendants argue
that they are entitled to dismissal of this matter “because a ‘betterment’ [or depreciation charge]
is not illegal in South Carolina and because each and every cause of action raised by Plaintiff is
based on the incorrect assertion that a ‘betterment’ is illegal in South Carolina, Plaintiff has
failed to state any claim for which relief can be granted by this court and this court must dismiss
the Complaint with prejudice.” (ECF No. 17 at 2.) Plaintiff opposes Defendants’ Motion to
Dismiss asserting that her “Complaint clearly and succinctly sets out facts sufficient to support
the causes of action; specifically, that Omni has acted wrongfully towards its insureds and third
parties by deducting ‘betterments’ from property damage settlements.” (ECF No. 25 at 2.)

For the reasons set forth below, the court GRANTS Defendants’ Motion to Dismiss.
I.

RELEVANT BACKGROUND TO PENDING MOTIONS

Defendants are automobile insurers for Kayla McDaniels (the “Insured”). (ECF No. 1-1
at 3 ¶ 5.)

On February 17, 2015, Plaintiff was involved in a motor vehicle accident with

Defendants’ Insured. (Id.) After determining that their Insured was liable for the damage to
Plaintiff’s vehicle, Defendants told Plaintiff that she would receive payment for her damages
equal to her repair estimate minus a betterment or depreciation charge for certain damaged parts.
(Id. at ¶ 6.) Specifically, Defendants deducted a betterment charge of $313.87 from the total
repair bill of $4,291.80 to account for depreciation in the muffler. (Id. at 9.)
Because she believes the betterment charge is illegal and not allowed under South
Carolina law, Plaintiff filed an action in the Richland County (South Carolina) Court of Common
Pleas on September 18, 2015, asserting causes of action against Defendants for breach of
contract, fraud, violation of the South Carolina Unfair Trade Practices Act (“SCUTPA”), S.C.
Code Ann. §§ 39-5-10 to -560 (2014), negligent misrepresentation, and negligence. (ECF No. 11 at 4–7.) On October 8, 2015, Defendants removed the matter to this court on the basis of
diversity jurisdiction pursuant to 28 U.S.C. § 1332. (ECF No. 1.) After removing the matter,
Defendants filed their Motion to Dismiss on December 4, 2015. (ECF No. 17.) Plaintiff filed
opposition to Defendants’ Motion to Dismiss on December 21, 2015. (ECF No. 25.)
On June 28, 2016, the court held a hearing on the pending Motion. (ECF No. 66.)
II.

JURISDICTION

The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)(1) based on
Defendants’ allegations that there is complete diversity of citizenship between Plaintiff and
Defendants, and the amount in controversy herein exceeds the sum of Seventy-Five Thousand

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($75,000.00) Dollars, exclusive of interest and costs. (See ECF No. 1 at 2 ¶¶ 4–5.)
III.

LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which
relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli,
588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does
not resolve contests surrounding the facts, the merits of a claim, or the applicability of
defenses.”). To be legally sufficient a pleading must contain a “short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim should not be
granted unless it appears certain that the plaintiff can prove no set of facts that would support her
claim and would entitle her to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.
1993). When considering a motion to dismiss, the court should accept as true all well-pleaded
allegations and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v.
Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at 1134. “To survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “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.” Id.
IV.
A.

ANALYSIS

The Parties’ Arguments
Defendants move for dismissal of the action on the basis that the betterment or

depreciation charge imposed on Plaintiff is not illegal under current South Carolina law. (ECF
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No. 17 at 1–2.) Defendants argue that “[e]ach and every cause of action raised by Plaintiff in the
Complaint is predicated on the assertion that a ‘betterment’ is illegal in South Carolina.” (Id. at
2.) Defendants further argue that “because a “betterment” is not illegal in South Carolina and
because each and every cause of action raised by Plaintiff is based on the incorrect assertion that
a ‘betterment’ is illegal in South Carolina, Plaintiff has failed to state any claim for which relief
can be granted by this court . . . .” (Id.)
In response to Defendants’ arguments for dismissal of her action, Plaintiff asserts that her
Complaint “clearly and succinctly sets out facts sufficient to support the causes of action;
specifically, that Omni has acted wrongfully towards its insureds and third parties by deducting
‘betterments’ from property damage settlements.” (ECF No. 25 at 2.) Moreover, Plaintiff
asserts that under South Carolina law a betterment deduction is illegal because “the measure of
damages is the cost of repair, plus the value of the loss of use.” (Id. (citing Hutson v. Cummins
Carolinas, Inc., 314 S.E.2d 19 (S.C. Ct. App. 1984); Newman v. Brown, 90 S.E.2d 649 (S.C.
1955)).)
B.

The Court’s Review
The premise of Defendants’ Motion to Dismiss is that all of Plaintiff’s claims fail since a

betterment charge is not illegal under South Carolina law. Plaintiff opposes the Motion to
Dismiss on the grounds that a betterment charge is illegal because South Carolina common law
has defined the measure of damage to a vehicle in terms that do not contemplate a betterment
charge. More specifically, Plaintiff’s position is that betterment is illegal in South Carolina
based on the definition of damages provided by Hutson and Newman. For a betterment charge
to be illegal in South Carolina, it must be “unlawful” or “not authorized by law.” Black’s Law
Dictionary Online, http://thelawdictionary.org/illegal/ (last visited July 8, 2016). After failing to
locate any South Carolina statutory law or common law expressly addressing the legality of a
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betterment charge, the court finds that neither Hutson, Newman, nor any other decisions by the
appellate courts of South Carolina define the measure of damages in South Carolina in such a
way that would make the imposition of a betterment charge by Defendants illegal in this state. A
brief discussion of the relevant case law informs the issue.
“The general rule is that the owner of personal property, injured by the negligence of
another, is entitled to recover the difference between the market value of the property
immediately before the injury and its market value immediately after the injury.” Coleman v.
Levkoff, 122 S.E. 875, 876 (S.C. 1924) (citations omitted). “If . . . the owner has the property
repaired and restored to a condition in which its market value equals or exceeds the market value
before the injury, the measure of damages in that case is the reasonable cost of restoring the
property to its previous condition, together with the value of the use of the property during the
time reasonably required to repair it.” Id. In Newman, “diminution in value” was added to the
“proper measure of damages.” 90 S.E.2d at 652. A few years after Newman, the South Carolina
Supreme Court decided that a “deductible specified in the [insurance] policy” could be part of
the damages calculation. Campbell v. Calvert Fire Ins. Co., 109 S.E.2d 572, 577 (S.C. 1959).
Thereafter, in Hutson, the South Carolina Court of Appeals observed that the value of loss of use
and either the cost of repair or the depreciation in a vehicle’s value may constitute the measure of
damages recoverable from the tortfeasor (not the tortfeasor’s insurer). 314 S.E.2d at 23 (citing
Newman, Coleman). In addition, the Hutson court speculated that lost profits could be part of
the measure of damages. Id. (citing Charles v. Tex. Co., 18 S.E.2d 719 (S.C. 1942)).
After considering the aforementioned case law, the court concludes that it is unable to
infer the illegality of a betterment charge in South Carolina since the measure of damages is not
just the cost of repair, plus the value of the loss of use as Plaintiff asserts. In reaching this

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conclusion, the court finds support for the propriety of a betterment charge from observations
made by other jurisdictions. See, e.g., Pizani v. M/V Cotton Blossom, 737 F.2d 1334, 1337 (5th
Cir. 1984) (“An increase in value effected by the repair or replacement of a damaged item is
properly deducted from the plaintiff’s recovery for the cost of repairs.”) (citation omitted); Delta
Towing LLC v. Basic Energy Servs., C/A No. 6:08CV0075, 2011 WL 102717, at *6 (W.D. La.
Jan. 12, 2010) (“But where the market value of the property is known, and the repairs necessary
to correct the damage enhance the pretort value of the property (a concept referred to as
“betterment”), the increase in value is typically deducted from the plaintiff’s recovery for the
cost of repairs.”); Patterson Terminals, Inc. v. S.S. Johannes Frans, 209 F. Supp. 705, 710 (E.D.
Pa. 1962) (“It violates reason to find that a responsible party should be obligated to replace in a
new condition that which was deteriorated prior to the time he became responsible. If some of
the repairs are required because of age, deteriorated condition, service, or because of prior
collisions, the entire cost of the repairs will not be allowed as damages.”). Therefore, because
the illegality of a betterment charge was a condition precedent for the claims against Defendants,
the court’s finding entitles Defendants to dismissal of the Amended Complaint pursuant to Rule
12(b)(6).1
V.

CONCLUSION

For the reasons set forth above, the court hereby GRANTS Defendants Omni Insurance
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Additionally, the court notes that Defendants are also entitled to dismissal of the SCUTPA
claim for the alternative reason that Plaintiff may not maintain an action against insurers for
violation of the SCUTPA. Hill v. Canal Ins. Co., C/A No.: 2:15-cv-4902-PMD, 2012 WL
3135402, at 3 (D.S.C. Aug. 1, 2012). “Insurance providers are separately regulated under South
Carolina law and are not subject to the SCUPTA.” Id. (citing S.C. Code Ann. § 39–5–40(c)
(2016) (stating that the SCUTPA is inapplicable to trade practices regulated by §§ 38–57–10
through–320, which is the codification of the Insurance Trade Practices Act); Trs. of Grace
Reformed Episcopal Church v. Charleston Ins. Co., 868 F. Supp. 128, 130–31 (D.S.C. 1994)
(“[A]ll unfair trade practices regarding the insurance business are regulated by the Insurance
Trade Practices Act, §§ 38–57–10 et seq., and are exempt from the coverage of SCUTPA.”)).
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Company and Omni Indemnity Company’s Motion to Dismiss pursuant to Rule 12(b)(6). (ECF
No. 17.) As a result of the foregoing, all remaining pending motions are DENIED AS MOOT.
(ECF Nos. 18, 19, 20, 21, 22, 28, 30, 41, 49 & 56.)
IT IS SO ORDERED.

United States District Judge
July 12, 2016
Columbia, South Carolina

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