Crow v. Travelers Indemnity Company et al
ORDER granting 7 Motion to Dismiss for Failure to State a Claim. Defendant The Travelers Indemnity Company is dismissed. Signed by U.S. District Judge Jeffrey L. Viken on 2/17/21. (SB)
Case 5:20-cv-05015-JLV Document 14 Filed 02/17/21 Page 1 of 13 PageID #: 164
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
TRAVELERS INDEMNITY COMPANY,
and CHARTER OAK FIRE INSURANCE
Defendant Travelers Indemnity Company moves to dismiss plaintiff’s
complaint pursuant to Fed. R. Civ. P. 12(b)(6). (Docket 7). Plaintiff opposes
defendant’s motion. (Docket 12). For the reasons stated below, defendant’s
motion is granted.
Plaintiff Rex Crow filed a multi-count complaint against the defendants.
(Docket 1). Count I alleges the defendants are liable for bad faith and unfair and
deceptive practices relating to plaintiff’s worker’s compensation claim. Id. at
pp. 3-5. Count II alleges defendants’ conduct was the result of and caused
plaintiff intentional infliction of emotional distress. Id. at p. 5. Count III
alleges that by the defendants’ delay in paying worker’s compensation benefits to
plaintiff, the defendants converted funds in which plaintiff had a superior
interest. Id. at pp. 5-6. Count IV alleges defendants engaged in unfair and
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deceptive trade practices in violation of S.D.C.L. § 58-33-7. Id. at p. 6. Count
V alleges plaintiff is entitled to attorney’s fees incurred to secure defendants’
payment of plaintiff’s “underinsured motorist claim.” Id. at pp. 6-7. Count
VI alleges plaintiff is entitled to punitive damages for defendants’ conduct. Id. at
Defendant Travelers Indemnity Company (“Travelers Indemnity”) filed a
motion to dismiss plaintiff’s complaint pursuant to Rule 12(b)(6). (Docket 7).
Defendant asserts “[no] claim exists against Travelers Indemnity Company and it
is entitled to judgment as a matter of law.” Id.
Travelers Indemnity first asserts plaintiff fails to properly identify the
defendants as “The Travelers Indemnity Company” and “The Charter Oak Fire
Insurance Company.” (Docket 8 at p. 1) (emphasis added). See also Dockets
5 and 10 ¶¶ 2 & 3. The affidavit of Wendy Skjerven, corporate secretary of both
Travelers Indemnity and Charter Oak, indicates without “The” neither of the
named defendants is “a legal entity.” Docket 10 ¶¶ 2 & 3. Travelers Indemnity
does not argue these errors invalidate plaintiff’s complaint or whether the errors
can be corrected pursuant to Fed. R. Civ. P. 15(a) & (c). See Docket 8.
Plaintiff’s response does not address the error in properly naming the
defendants. See Docket 12. Part of the confusion may exist, however, because
of the answer filed by Defendant Charter Oak Fire Insurance Company (“Charter
Oak”). (Docket 6). In its answer, Charter Oak, which is represented by the
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same attorney as Travelers Indemnity, “admits paragraphs 2 and 3 of plaintiff’s
complaint.” Id. ¶ 4. Those paragraphs of plaintiff’s complaint state:
Defendant, Traveler’s Indemnity Company is incorporated, or
has its principal place of business in a state other than South
Defendant, Charter Oak Fire Insurance Company, is a wholly
owned subsidiary of Traveler’s Indemnity Company.
(Docket 1 ¶¶ 2 & 3). While represented by a different attorney, Charter Oak
permitted a similar error to occur in the settlement agreement and release with
Mr. Crow in the worker’s compensation case before the South Dakota
Department of Labor and Regulation, Division of Labor and Management.
(Docket 6-1 at p. 1) (Insurer identified in the caption as “Charter Oak Fire
Insurance Company”) (some capitalization omitted).
Pursuant to Rule 15, the court finds the defendants having “received
notice of the action . . . will not be prejudiced in defending on the merits; and
. . . knew . . . that the action would [be] brought against [them], but for [the]
mistake concerning the proper part[ies’] identification.” Fed. R. Civ. P.
15(c)(1)(C)(i) & (ii). The caption of the case will be amended to identify and name
the defendants as “The Travelers Indemnity Company and The Charter Oak Fire
Next, Travelers Indemnity contends “the complaint’s allegations are
insufficient to state a claim against [Travelers Indemnity].” (Docket 8 at p. 1).
Travelers Indemnity argues “Plaintiff makes no specific claims as to the
individual defendants, but lumps them all together. This is improper shotgun
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pleading.” Id. at p. 4. Defendant submits “[l]umping [both] defendants
together, without specifying the conduct each defendant is called upon to defend,
is inadequate.” Id. at pp. 4-5.
Specifically addressing plaintiff’s bad faith claim, Travelers Indemnity
contends the complaint has “no allegation that [Travelers Indemnity] had any
‘duty under an insurance contract.’ ” Id. Instead, defendant notes the
language of the complaint alleges “a policy of insurance . . . by its terms, required
Acuity to pay workers’ compensation benefits.” Id. (emphasis in original)
(referencing Docket 1 ¶ 7).
Plaintiff’s response to Travelers Indemnity’s motion does not address this
glaring error in the complaint. See Docket 12. Reading paragraph seven of the
complaint, it is clear the insertion of “Acuity” is a scrivener’s error. The
complaint intended or should have intended to insert the word “defendants” so
that the full content of the paragraph reads as follows:
At all times relevant to this action, Defendants Travelers and
Charter Oak Insurance Company had in place a policy of
insurance that, by its terms, required defendants to pay
workers’ compensation benefits to employees of RCS
Construction, who were injured within the course and scope
of their employment.
(Docket 1 at p. 2).
“The court may correct a clerical mistake or a mistake arising from
oversight or omission whenever one is found in a judgment, order, or other part
of the record. The court may do so on motion or on its own, with or without
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notice.” Fed. R. Civ. P. 60(a). The court makes this clerical correction to the
Travelers Indemnity argues factual allegations against it “do not exist
because [Travelers Indemnity] was not the insurer for the worker compensation
benefits plaintiff claimed. To the contrary, the Complaint explicitly recognizes
that Charter Oak―not [Travelers Indemnity]―denied the claim.” (Docket 8 at
pp. 5-6) (referencing Dockets 1 ¶12 & 1-1). “This is not surprising” Travelers
Indemnity argues “because, [it], did not issue the insurance policy at issue. The
policy was underwritten and issued by Charter Oak.” Id. at p. 6 (referencing
Docket 10). This is “[u]ndeniabl[e],” in Travelers Indemnity’s view because
[T]he first line of the policy in bold print identifies the insurer as “The
Charter Oak Fire Insurance Company.”. . . The General Section of
the policy states, in relevant part, “It is a contract of insurance
between you (the employer named in Item 1 of the Information Page)
and us (the insurer named on the Information Page).
Id. (referencing Docket 10-1). Travelers Indemnity notes “Charter Oak was the
only entity named in the petition in the underlying workers compensation case in
the Department of Labor.” Id. (referencing Docket 6-1). The last documentary
evidence according to Travelers Indemnity is the letter “attached to the
Complaint, directed to plaintiff denying the claim, specifically identified Charter
Oak – not [Travelers Indemnity].” Id. at p. 6 (referencing Docket 1-1).
“[A]s a matter of law,” Travelers Indemnity argues it “cannot be liable for
bad faith. . . . Plaintiff has failed to ‘plead factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
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alleged.’ ” Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
Addressing the remaining claims of plaintiff’s complaint, Travelers
Indemnity maintains the same position. That is, beyond the conclusory
allegations the defendants engaged in conduct subjecting them to the various
claims, there is no specific allegation of misconduct by Travelers Indemnity. Id.
at pp. 7-9.
Plaintiff’s response contends Travelers Indemnity’s motion should be
denied for the following reasons:
Charter Oak is a wholly owned subsidiary of [Travelers
[Travelers Indemnity] uses Charter Oak as a mere
instrumentality, therefore, South Dakota law disregards the
formal separation of the two entities;
Plaintiff should be afforded discovery
inter-relatedness of the two entities; and
The allegations in the Complaint, when taken as true, defeat
(Docket 12 at p. 1).
Plaintiff addresses his discovery request first. Mr. Crow argues he has
“no idea” if Travelers Indemnity’s assertion “the policy was issued by Charter
Oak and Charter Oak made all the decisions regarding workers’ compensation
benefits . . . . is accurate.” Id. at p. 4. He asserts “[d]iscovery has not been
conducted in any fashion in this case. . . . Only the discovery process will
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demonstrate if [Travelers Indemnity] was completely separate from Charter Oak.”
Plaintiff submits “[t]his case deals with a subsidiary company acting on
behalf of its parent corporation. [Travelers Indemnity] admits in its answer that
Charter Oak is a wholly owned subsidiary. . . . The allegations in the complaint
make clear that each Defendant was acting in concert with one another.” Id.
(referencing Docket 6). For this reason, plaintiff argues Travelers Indemnity
“should be held liable for the acts of its subsidiary.” Id. at p. 5.
In reply, Travelers Indemnity argues “[c]entral to a claim of bad faith denial
of benefits under an insurance policy is the existence of a policy that would
provide insurance benefits.” (Docket 13 at p. 1) (referencing Hein v. Acuity, 731
N.W.2d 231 (S.D. 2007)). “As a part of its motion to dismiss,” Travelers
Indemnity contends, it “submitted publicly-available material establishing that
the entity providing workers’ compensation insurance coverage to Mr. Crow’s
employer at the time of his claimed injury was The Charter Oak Fire Insurance
Company.” Id. at p. 3 (referencing Dockets 9-1, 9-2 & 10-1). In the view of
Travelers Indemnity, these documents substantiate it had nothing to do with Mr.
Crow’s worker’s compensation claim. Id. at p. 4.
Defendant further argues:
Nowhere in the complaint is there an allegation that The Charter
Oak Fire Insurance Company was a mere instrumentality of The
Travelers Indemnity Company. . . . Nowhere in the complaint is there
a claim that the separate corporate entity of The Charter Oak Fire
Insurance Company would otherwise be misused, or that adhering
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to the rule of corporate separateness would produce injustices and
Id. at p. 7. Travelers Indemnity contends “Plaintiff must show something more
than simply a parent-subsidiary relationship. Under South Dakota law, a
corporation shall be considered a separate legal entity until there is sufficient
reason to the contrary.” Id. (bold omitted) (referencing Bollwerk v.
Susquehanna Corp., 811 F. Supp. 472, 477 (D.S.D. 1993)). Travelers
Indemnity submits Charter Oak “is a separate corporate entity responsible for
payment of proceeds due under the policy or for liability arising out of the policy.”
Id. (referencing Docket 10 ¶ 6).
If plaintiff intends to advance a theory that Charter Oak “was a mere
instrumentality of [Travelers Indemnity]” the defendant argues, “it would require,
among other things, an allegation that [Travelers Indemnity] misused [Charter
Oak] by treating it, and by using it, as a mere business conduit.” Id. at p. 8
(referencing Great West Casualty Co. v. The Travelers Indemnity Co., 925 F.
Supp. 1455, 1464 (D.S.D. 1996). The defendant argues, “this effort by plaintiff
to raise new claims not pled in the complaint cannot preclude dismissal.” Id.
“[B]ecause plaintiff cannot prove an essential part of his claim premised on
insurance bad faith; that [Travelers Indemnity] issued a policy that could be
called upon to provide benefits, or that the South Dakota Department of Labor
awarded him benefits from [Travelers Indemnity][,]” defendant proposes “no
additional discovery is warranted[.]” Id. at p. 9.
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Rule 12(b)(6) provides for dismissal if the plaintiff fail to state a claim upon
which relief can be granted. Fed. R. Civ. P. 12(b)(6). In evaluating Travelers
Indemnity’s Rule 12(b)(6) motion, the court accepts as true all of the factual
allegations contained in plaintiff’s complaint and grants all reasonable
inferences in favor of plaintiff as the nonmoving party. Braden v. Wal-Mart, 588
F.3d 585, 594 (8th Cir. 2009) (“a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ”)
(citing Iqbal, 556 U.S. at 663). See also Crooks v. Lynch, 557 F.3d 846, 848 (8th
Cir. 2009) (the court must review “a Rule 12(b)(6) motion to dismiss for failure to
state a claim, accepting the facts alleged in the complaint as true and granting all
reasonable inferences in favor of the plaintiff, the nonmoving party.”) (brackets
omitted). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do[.]” Twombly, 550 U.S. at 555 (citations omitted). “[O]nly a complaint
that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556
U.S. at 679. At this point in the litigation, the court is “bound to accept as true,
for purposes of [a Rule 12(b)(6)] motion, the facts alleged by the plaintiff.”
Stephens v. Associated Dry Goods Corp., 805 F.2d 812, 814 (8th Cir. 1986).
Because the complaint references the insurance policy providing workers’
compensation coverage, the policy is embraced in the pleadings. Gorog v. Best
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Buy Co., Inc., 760 F.3d 787, 791 (8th Cir. 2014) (“Though matters outside the
pleading may not be considered in deciding a Rule 12 motion to dismiss,
documents necessarily embraced by the complaint are not matters outside the
pleading.”) (internal citation omitted).
The “ “Workers Compensation and Employers Liability Policy” in this case
is a multi-state policy providing coverage to “RCS Construction Inc.” (Docket
10-1 at p. 2) (some capitalization omitted). The “Information Page,” identifies
the “Insurer” as “The Charter Oak Fire Insurance Company[.]” Id. (some
capitalization omitted). The policy provides coverage in “NE SD.” Id.
The “NCCI CO Code” is “15318.” Id. (some capitalization omitted). The
“NCCI codes are four digit codes, produced by the National Council on
Compensation Insurance, used to classify businesses for workers’ compensation
insurance.” https://classcodes.com/ncci-codes/ (last visited January 21,
2021). The court has been unable to determine why the NCCI codes used in this
case are five digits. “These codes are used to collect data to help insurance
companies classify and underwrite businesses for workers compensation
insurance.” Id. Each page of the extension of the information page related to
Charter Oak includes the NCCI code “15318.” See, Docket 10-1 at p. 12.
The policy later identifies the insurer as “The Travelers Indemnity
Company of Connecticut.” Id. at p. 9. It is clear coverage by Travelers
Indemnity is provided for the employer’s business activities in the state of
Nebraska by the NCCI Code designation “12637-NE.” Id. Travelers Indemnity
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also provided coverage for the employer’s “clerical office employees” in Wyoming
by the NCCI Code designation “13579-WY[.]” Id. at p. 15.
While both insurance companies use the same terms for their policy, the
endorsements outline the differences in the terms of the policy for each state.
Any pages not specifically related to Nebraska or Wyoming coverage are
applicable to the South Dakota policy. For the South Dakota workers
compensation coverage provided by the policy, those endorsements are located
at id. at pp. 16, 28-29, 31, 34, 37, 45, 49-52, 64-66, 70-76, 78-80 & 83-85.
While the policy is a multiple state–multiple insurance carrier policy, the only
insurer for the South Dakota coverage is Charter Oak.
The same logic holds true with the settlement agreement and release
approved by the South Dakota Division of Labor and Management. Because
plaintiff references the agreement and release in paragraphs 24 and 25 of the
complaint and cites to paragraph 8 of the document, it is “embraced by the
pleadings.” Gorog, 760 F.3d at 791. The caption of the case before the Division
of Labor and Management includes as the insurer only “Charter Oak Fire
Insurance Company.” (Docket 6-1 at p. 1) (some capitalization omitted).
Paragraph 8 of the settlement agreement and release references a reservation of
any tort claim “including claims for bad faith, stemming from the manner in
which Claimant’s worker’s compensation claim was handled[,]” against the
“Insurer.” Id. ¶ 8. Again, the only insurer identified in the settlement
agreement and release is Charter Oak. Plaintiff points to no provision of the
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worker’s compensation insurance policy of Charter Oak which provides South
Dakota coverage to the employer and ultimately to Mr. Crow, its employee,
through Travelers Indemnity.
Based on a review of the entire record, the court finds plaintiff fails to state
a claim against Travelers Indemnity. While plaintiff argues he should be
allowed to conduct discovery to clarify Travelers Indemnity’s role in processing of
Mr. Crow’s worker’s compensation case, the complaint makes no specific
allegation against Travelers Indemnity and he presents no evidence by which the
court could find Travelers Indemnity was engaged in any activity associated with
Mr. Crow’s worker’s compensation claim. Plaintiff’s “formulaic recitation of the
elements of a cause of action” and the use of “labels and conclusions” attempting
to create claims against Travelers Indemnity “will not do.” Twombly, 550 U.S. at
555. For that reason, pursuant to Rule 12 (b)(6), the court must grant Travelers
Indemnity’s motion to dismiss for failure to state a claim upon which relief could
Based on the above analysis, it is
ORDERED that defendant The Travelers Indemnity Company’s motion to
dismiss for failure to state a claim (Docket 7) is granted.
IT IS FURTHER ORDERED that plaintiff’s complaint (Docket 1) as it relates
to The Travelers Indemnity Company is dismissed with prejudice.
Case 5:20-cv-05015-JLV Document 14 Filed 02/17/21 Page 13 of 13 PageID #: 176
IT IS FURTHER ORDERED that the caption of the case is amended to read
Rex Crow, Plaintiff, vs. The Charter Oak Fire Insurance Company,
IT IS FURTHER ORDERED pursuant to Fed. R. Civ. P. 60(a), that
paragraph seven of the complaint shall now read as follows:
At all times relevant to this action, Defendant The Charter
Oak Insurance Company had in place a policy of insurance
that, by its terms, required defendant to pay workers’
compensation benefits to employees of RCS Construction,
who were injured within the course and scope of their
Dated February 17, 2021.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
UNITED STATES DISTRICT JUDGE
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