First Horizon National Corporation et al v. Certain Underwriters at Lloyd's Syndicate Nos. 2987 et al

Filing 77

ORDER granting plaintiffs' motion to amend 59 . Signed by Judge Samuel H. Mays, Jr on 09/11/2012.

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

FIRST HORIZON NATIONAL
CORPORATION, et al.,

)
)
)
)
)
)
)
)
)
)
)

Plaintiffs,
v.
CERTAIN UNDERWRITERS AT
LLOYD’S, et al.,
Defendants.

No. 11-2608

ORDER GRANTING PLAINTIFFS’ MOTION TO AMEND

Before

the

Corporation,
Tennessee

Court

FTN

is

Plaintiffs

Financial

Bank

National

First

Securities

Corporation,

Association’s

Horizon

National
and

(collectively,

First
“First

Horizon”) motion for leave to file a Second Amended Complaint.
(ECF No. 59) (the “Motion.”)

Defendants Certain Underwriters at

Lloyd’s (“Lloyd’s”), Aspen Insurance UK Limited, U.S. Specialty
Insurance,

and

Federal

Insurance

Company

“Defendants”) have all timely responded.
64.)

(collectively,

the

(See ECF Nos. 60-62,

Federal Insurance Company filed the primary response, in

which the remaining Defendants joined.
August

10,

2012.

(See

Pl.’s

Reply,

First Horizon replied on
ECF

No.

70.)

following reasons, First Horizon’s Motion is GRANTED.
I.

Background

For

the

The parties’ underlying dispute arises from five separate,
but related insurance policies (the “Policies”) between First
Horizon and Defendants.
1-14.)

(See Proposed Second Amended Compl. ¶¶

On July 18, 2011, First Horizon filed suit, alleging

that Defendants had refused to honor provisions in the Policies
that

protected

First

Horizon

from

losses

incurred

in

(Id. ¶

lawsuits, which are referred to as the “Grede Lawsuits.”
1.)

two

First Horizon sought relief for breach of contract and

violation

of

the

(Id. ¶¶ 42-60.)

Tennessee

Consumer

Protection

Act

(“TCPA”).

On August 3, 2011, First Horizon filed an

Amended

Complaint.

Horizon

sought

allege

facts

(ECF

leave
that

No.

to

file

were

6.)
a

On

June

29,

Amended

available

not

Second

when

2012,

First

Complaint
the

to

original

complaints were filed and to add a claim for Defendants’ badfaith refusal to honor their obligations under the Policies.
(See id. ¶¶ 77-84.)

First Horizon seeks statutory damages and

attorney’s

addition

fees,

in

to

compensatory

damages

and

a

declaration that the Policies cover First Horizon’s losses.
II.

Standard of Review

Under Rule 15(a)(1)(B), a party may amend its complaint
within twenty-one days after service of a responsive pleading.
Fed.

R.

Civ.

P.

15(a)(1)(B);

accord

Molly

Maid,

Inc.

v.

O’Daniel, No. 10-cv-1337, 2011 U.S. Dist. LEXIS 81447, at *5
(E.D. Mich. June 20, 2011);

Gleich v. St. Andrew Sch., No.
2

2:10-cv-894,

2011

U.S.

Dist.

LEXIS

113176,

at

*1

(S.D.

Ohio

Sept. 30, 2011); Middleton v. Rogers Ltd., Inc., No. 1:10-CV821, 2011 U.S. Dist. LEXIS 81204, at *13 (S.D. Ohio July 26,
2011).

In all other cases, “a party may amend its pleading only

with the opposing party’s written consent or the court’s leave.”
Fed. R. Civ. P. 15(a)(2).
amendment.
The

Defendants have not consented to

Leave of court is required.

Court’s

discretion

to

allow

amendment

is

guided

by

“Rule 15’s mandate that leave is to be freely given when justice
so requires.”

Liberty Mut. Ins. Co. Hurricane Logistics Co.,

216 F.R.D. 14, 16 (D.D.C. 2003) (citing Forman v. Davis, 371
U.S. 178, 182 (1962)); see also Roloff v. Arabian Am. Oil Co.,
421 F.2d 240, 242 (2d Cir. 1970) (“This mandate that leave to
amend be freely given is to be heeded.”).

“Normally, federal

courts favor liberality in permitting amendments to pleadings.”
Hayden v. Ford Motor Co., 497 F.2d 1292, 1293 (6th Cir. 1974).
Courts follow the policy of liberality to facilitate decisions
on

the

merits,

technicalities.”
(6th

Cir.

2005)

rather

than

decisions

“based

on

procedural

Chase v. Matsu Mfg., 147 F. App’x 507, 515
(citing

Forman,

371

U.S.

at

181);

see

also

United States v. Hougham, 364 U.S. 310, 317 (1960) (“The Federal
Rules reject the approach that pleading is a game of skill in
which one misstep by counsel may be decisive to the outcome and
accept

the

principle

that

the
3

purpose

of

pleading

is

to

facilitate

a

proper

Distinctive

Pers.,

decision

Inc.,

on

2011

the

U.S.

merits.”);

Dist.

LEXIS

Guelen

86064,

at

v.
*8

(E.D.N.Y. Aug. 4, 2011).
The right to amend is neither absolute nor automatic.

See

Tucker v. Middleburg-Legacy Place, LLC, 539 F.3d 545, 551 (6th
Cir. 2008).

A motion to amend should be denied where it is

“brought in bad faith, for dilatory purposes, results in undue
delay or prejudice to the opposing party, or would be futile.”
Colvin v. Caruso, 605 F.3d 282, 294 (6th Cir. 2010) (citation
omitted);

see

also

New

Albany

Tractor,

Inc.

v.

Louisville

Tractor, Inc., 650 F.3d 1046, 1052-53 (6th Cir. 2011) (citation
omitted).
III. Analysis
Defendants oppose the Second Amended Complaint as futile.
According to Defendants, inconsistencies in demand letters sent
by First Horizon, “coupled with [First Horizon’s] failure to
respond

to

Federal’s

reasons

for

believing

that

there

is

no

coverage at its high excess level, shows that First Horizon has
not

fairly

complied

with

Tennessee’s

(Federal Mem. 18, ECF No. 61.)

Bad

Faith

Statute.”

Defendants also argue that First

Horizon’s bad-faith claim would not survive a motion to dismiss
under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
It is well-settled that a “trial court may assess the legal
sufficiency

of

a

contemplated

amendment
4

in

considering

the

propriety of granting leave to amend under Fed. R. Civ. P. 15(a)
and deny the motion if amendment would be futile.”

Gibson v.

Mortg. Elec. Registration Sys., No. 11-2173-STA, 2012 U.S. Dist.
LEXIS 63510, at *11 (W.D. Tenn. May 7, 2012) (citing Ziegler v.
IBP Hog Market, Inc., 249 F.3d 509, 519 (6th Cir. 2001)).

A

proposed amended pleading is futile if it would not withstand a
motion to dismiss under Rule 12(b)(6).

Id. (citing Riverview

Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 520 (6th
Cir. 2010)).
In addressing a motion to dismiss for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6), the court
must construe the complaint in the light most favorable to the
plaintiff and accept all well-pled factual allegations as true.
League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523,
527

(6th

Cir.

2007).

A

plaintiff

can

support

a

claim

“by

showing any set of facts consistent with the allegations in the
complaint.”
(2007).

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563

This standard requires more than bare assertions of

legal conclusions.

Bovee v. Coopers & Lybrand C.P.A., 272 F.3d

356, 361 (6th Cir. 2001).

“[A] formulaic recitation of the

elements of a cause of action will not do.”
at 555.

Twombly, 550 U.S.

Any claim for relief must contain “a short and plain

statement of the claim showing that the pleader is entitled to
relief.”

Erickson

v.

Pardus,
5

551

U.S.

89,

93

(2007)

(per

curiam).

“Specific facts are not necessary; the statement need

only ‘give the defendant fair notice of what the . . . claim is
and the grounds upon which it rests.’”

Id. (quoting Twombly,

550 U.S. at 555).
Nonetheless, a complaint must contain sufficient facts “to
‘state a claim to relief that is plausible on its face’” to
Ashcroft v. Iqbal, 556 U.S. 662,

survive a motion to dismiss.
678

(2009)

(quoting

plausibility

Twombly,

standard

is

550

not

U.S.

akin

at

to

570).
a

“The

‘probability

requirement,’ but it asks for more than a sheer possibility that
Id. (citing Twombly, 550

a defendant has acted unlawfully.”
U.S. at 556).
of

action,

suffice.”

“Threadbare recitals of the elements of a cause

supported

by

mere

conclusory

Id. (citation omitted).

statements,

do

not

A plaintiff with no facts

and “armed with nothing more than conclusions” cannot “unlock
the doors of discovery.”

Id.

A. First Horizon Complied With the 60-day Demand Requirement
Count Four of the Second Amended Complaint alleges that
Defendants “have failed to act in good faith in refusing to pay
First

Horizon’s

claim

under

the

Policies.

There

are

no

legitimate or substantial legal grounds for the [Defendants’]
denial of coverage.”

(Second Am. Compl. ¶ 82.)

The legal basis

for First Horizon’s bad-faith claim is Tenn. Code. Ann. § 56-7105,

otherwise

known

as

Tennessee’s
6

bad-faith

statute.

See

Croom v. Guideone Am. Ins. Co., No-06-cv-1238, 2009 U.S. Dist.
LEXIS 105723, at *12 (W.D. Tenn. Mar. 23, 2009).

To recover

under § 56-7-105, an insured must satisfy four elements: (1) the
policy of insurance must, by its terms, have become due and
payable, (2) a formal demand for payment must have been made,
(3) the insured must have waited 60 days after making his demand
before filing suit . . . and, (4) the refusal to pay must not
have been in good faith.”

Id. (quoting Palmer v. Nationwide

Mutual Fire Insurance Co., 723 S.W.2d 124, 126 (Tenn. Ct. App.
1986)).

The parties contest whether First Horizon satisfied the

third element, which requires a 60-day waiting period before a
plaintiff may file suit under § 56-7-105.
Defendants argue that First Horizon has forfeited its badfaith claim because the original complaint included allegations
of bad faith under the TCPA.

More specifically, because First

Horizon raised “a bad faith claim” in its original complaint,
First Horizon may not initiate and complete the 60-day formal
demand period before amending the complaint to include claims
under § 56-7-105.

(Federal’s Mem. 20.)

First Horizon argues

that the TCPA and § 56-7-105 are different statutes with unique
requirements.

First Horizon also argues that nothing precludes

a party from initiating the demand process after a case has been
filed,

so

long

as

the

original

allegations under § 56-7-105.

complaint

does

not

include

Both parties rely on Wilmington
7

Plantation, Inc. v. Fidelity Nat’l Title Ins. Co., No. 3:101218, 2011 U.S. Dist. LEXIS 124372 (M.D. Tenn. Oct. 27, 2011).
In Wilmington Plantation, a district court in this circuit
denied

as

futile

a

request

to

amend

a

complaint

allegations of bad faith under § 56-7-105.

to

include

Id. at *3.

The

original complaint had included allegations of bad faith under
§ 56-7-105, but the plaintiff had not satisfied that statute’s
60-day formal demand requirement.

Id.

The court concluded that

a plaintiff may not initiate the formal demand process after
filing a complaint that included bad-faith allegations under §
56-7-105.

Id. at 4.

The court’s conclusion rested on notice.

Section 56-7-105’s formal demand requirement notifies parties of
the need to avoid suit, “‘the underlying thought being that the
insurers on formal demand [] would . . . be induced to pay the
loss without suit.’”

Id. at *6 (quoting Cracker Barrel Old

Country Store, Inc. v. Cincinnati Ins. Co., 590 F. Supp. 2d 970,
975 (M.D. Tenn. 2008), overruled on other grounds by Heil Co. v.
Evanston Ins. Co., No. 11-6252, 2012 U.S. App. LEXIS 16104, at
*18-19 (6th Cir. Aug. 3, 2012) (a formal “demand” under § 56-7105

does

not

litigation.”)).

require

an

“explicit

threat

of

bad

faith

Because “the actual demand came after statutory

penalties for bad faith had been sought, and at a time when
Fidelity was actively engaged in defending itself against a bad

8

faith

claim[,]”

the

plaintiff’s

with § 56-7-105 was futile.
The

plaintiff

in

subsequent

attempt

to

comply

Id. at *7 (emphasis added).

Wilmington

Plantation,

unlike

First

Horizon, sought damages for bad faith under § 56-7-105 before
satisfying the 60-day formal demand requirement.

Id. at *3-4.

The court distinguished Mitchell v. New Hampshire Ins. Co., 1990
Tenn. App. LEXIS 286 (Tenn. Ct. App. Apr. 25, 1990), in which
the Tennessee Court of Appeals permitted a plaintiff to amend
its

complaint

requirement.

after

complying

Id. at *4.

with

the

60-day

Horizon’s

initial

demand

The plaintiff’s initial complaint had

not contained allegations under § 56-7-105.
First

formal

complaints

violations under § 56-7-105.

did

not

Id.

Similarly,

allege

bad-faith

First Horizon did not seek to

amend its Complaint to include § 56-7-105 violations until it
had complied with the 60-day formal demand requirement.

First

Horizon complied with the requirements of § 56-7-105.
Defendants

argue

that

First

Horizon

forfeited

its

claim

under § 56-7-105 by initially bringing “a bad faith claim” under
the

TCPA.

(Federal

Mem.

20.)

Section

56-7-105

permits

plaintiffs to bring bad-faith actions “in all cases when a loss
occurs and [insurers] refuse to pay the loss within sixty (60)
days after a demand has been made by the holder of the policy.”
Under Defendants’ theory, the 60-day demand requirement “in all

9

cases” would apply, not only to § 56-7-105, but also to the
TCPA.
The TCPA does not include a notice or demand requirement.
Indeed, the

TCPA

explicitly

provides

that

an

“action

may

be

brought in a court of competent jurisdiction in the county where
the alleged unfair or deceptive act or practice took place, is
Tenn. Code Ann. § 47-

taking place, or is about to take place.”
18-109(a)(2) (emphasis added).

The plain language of the TCPA

permits plaintiffs to file suits prospectively, not only after a
wrong has occurred.

The differences between the TCPA and § 56-

7-105 suggest that bad-faith claims brought under the respective
statutes are not identical and that the 60-day demand provision
does not apply to claims brought under the TCPA.

See, e.g.,

Wilson v. State Farm Fire & Cas. Co., 799 F. Supp. 2d 829, 84144 (E.D. Tenn. 2011) (separately considering and applying facts
to claims brought under the TCPA and § 56-7-105).
have

cited

no

authority,

concluding otherwise.
sixty

days

after

and

the

Court

has

Defendants
found

none,

First Horizon has alleged that it waited

demand

before

seeking

the

First

Amended Complaint to include violations of § 56-7-105.

(See

Second Amended Complaint ¶¶ 63, 81.)

to

amend

First Horizon has not

forfeited its bad-faith claim under § 56-7-105.
B. First Horizon’s Bad-faith Claim is Plausible

10

Defendants argue that First Horizon’s bad-faith claim is
implausible.

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.”

Iqbal, 129 S. Ct. at 1949.

A plaintiff's

claim “need not be probable, only plausible: ‘a well-pleaded
complaint may proceed even if it strikes a savvy judge that
actual proof of those facts is improbable, and that a recovery
is very remote and unlikely.’” Indep. Trust Corp. v. Stewart
Info. Servs. Corp., 665 F.3d 930, 935 (7th Cir. 2012) (quoting
Twombly, 550 U.S. at 556); accord McLemore v. Regions Bank, 682
F.3d 414, 421 (6th Cir. 2012).
complaint

in

the

light

most

The Court “must construe the

favorable

to

the

plaintiff

accept all well-pled factual allegations as true.”

and

Murphy v.

Sw. Tenn. Cmty. Coll., No. 08-2760, 2010 U.S. Dist. LEXIS 13506,
at

*6

(W.D.

Tenn.

Feb.

17,

2010)

(internal

citation

and

quotation marks omitted).
To

state

a

claim

for

bad-faith

refusal

to

pay

under

Tennessee law, a plaintiff must plead that: (1) the policy of
insurance must, by its terms, have become due and payable, (2) a
formal demand for payment must have been made, (3) the insured
must have waited 60 days after making his demand before filing
suit . . . and, (4) the refusal to pay must not have been in
good faith.”

See Croom, 2009 U.S. Dist. LEXIS 105723, at *12.
11

First

Horizon

avers

that

the

Policies

protected

against

“losses arising from third-party claims alleging wrongful acts
related

to

Plaintiffs’

professional services.”

rendering

of,

or

failure

(Second Am. Compl. ¶ 1.)

to

render,

Defending

against the Grede Lawsuits allegedly caused First Horizon to
incur defense costs that exceeded its “retention by more than
$20 million, thereby triggering coverage under the Policies.”
(Id. ¶ 54.)

First Horizon also allegedly settled the Grede

Lawsuits for more than $36 million and funded the entire amount.
(Id.

¶

79.)

“Defendants’

coverage

obligations

under

the

Policies are triggered by the settlement and the defense costs
incurred in excess of the self-insured retention.”

(Id. ¶ 40.)

First Horizon alleges that its claim “under the Policies for
reimbursement of the $36,626,363.27 settlement payment and the
$20 million in defense costs in excess of the retention has, []
by the Policies’ terms, become due and payable.”
First

Horizon

allegedly

sent

formal

(Id. ¶ 79.)

demand

letters

to

Defendants on August 4, 2011, “which demanded that the Insurers
fulfill their legal obligations under the Policies by agreeing
to fund the settlements and defense costs related to the Grede
Lawsuits.”

(Id. ¶ 59.)

The letters informed Defendants that a

failure to comply with “their obligations under the Policies”
would result in First Horizon’s asserting a claim under § 56-7105.

(Id. ¶¶ 57, 78.)

Subsequent formal demand letters were
12

sent to Defendants on April 4, 2012, threatening a lawsuit under
§ 56-7-105.

(Id. ¶¶ 61, 80.)

The Second Amended Complaint

alleges that, “[u]pon the date of filing this Second Amended
Complaint,
Horizon’s

more

than

August

4,

sixty

2011

and

days

have

April

4,

passed
2012

since

demand

First

letters.”

(Id. ¶ 81; see also id. ¶ 78.)
First Horizon alleges that Defendants wrongfully relied on
exclusion

provisions

in

the

Policies.

(Id.

¶

44.)

First

Horizon alleges that it responded to Defendants’ explanations,
arguing that there was “no substantial or sound legal basis for
invoking

[the]

Lawsuits.”

exclusion

(Id. ¶ 45.)

to

preclude

coverage

for

the

Grede

First Horizon avers that Defendants

never directly responded to arguments in favor of reimbursement.
(Id. ¶ 49.)
provided

The August 4 and April 4 demand letters allegedly

Defendants

with

“ample

opportunity

to

consider

the

consequences of continuing to deny coverage of a due and payable
claim without any legal basis for their denials.”

(Id. ¶ 62.)

Defendants’ alleged “failure to act in good faith has inflicted
upon First Horizon expense, loss, and injury in addition to the
amount claimed under the Policies.”

(Id. ¶ 83.)

Accepting its facts as true, the Second Amended Complaint
states a claim for relief that is plausible on its face.

First

Horizon has pled direct or inferential facts that support each
element of a claim under § 56-7-105.
13

First Horizon alleges

timely demand that otherwise conforms to the requirements of §
56-7-105,

including

the

contention

that

“there

were

no

legitimate grounds for disagreement about the coverage of the
insurance policy.”

State Auto. Mut. Ins. Co. v. R.H.L., Inc.,

No. 07-1197, 2010 U.S. Dist. LEXIS 23390, at *44 (W.D. Tenn.
Mar.

12,

2010)

(citation

omitted).

Although

Defendants

may

disagree with the substance of First Horizon’s allegations, the
facts as pled establish a right to relief that is above the
speculative level.
Defendants argue that First Horizon’s bad-faith claim is
implausible, identifying provisions in the Policies that support
exclusion and exhibits outside the pleadings.

As a threshold

matter, “Rule 12(b)(6) . . . does not permit courts to consider
evidence

extrinsic

to

the

pleadings.”

Tackett

Polymers, 561 F.3d 478, 487 (6th Cir. 2006).

v.

M

&

G

Only when “a

document is referred to in the complaint and is central to the
plaintiff’s claim” may the defendant “submit an authentic copy
to

the

court

to

be

considered

on

a

motion

to

dismiss.”

Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir.
1999) (quotation marks omitted); accord Notredan, LLC v. Old
Republic Exch. Facilitator Co., No. 11-2987-STA-tmp, 2012 U.S.
Dist.

LEXIS

48976,

at

*13

(W.D.

Tenn.

Apr.

6,

2012).

The

exhibits offered by Defendants are not referred to in the Second
Amended Complaint.
14

To the extent Defendants rely on provisions in the Policies
to

justify

appropriate

their
for

denial
a

of

later

coverage,
stage

of

that
the

reliance

is

more

litigation.

The

authorities cited by Defendants address the application of § 567-105 at the summary judgment stage or later.

See, e.g., State

Auto, 2010 U.S. Dist. LEXIS 23390, at *43-44 (granting summary
judgment to defendant insurer because the court found a policy
exception applicable).

To entertain Defendants’ argument would

exceed the scope of the Court’s inquiry under Rule 12.

See Gunn

v. Bluecross Blueshield of Tenn., Inc., No. 1:11-CV-183, 2012
U.S.

Dist.

LEXIS

68455,

at

*14

(E.D.

Tenn.

May

15,

2012)

(“[G]enerally, the existence of an affirmative defense will not
support a rule 12(b)(6) motion to dismiss for failure to state a
claim.”) (quoting Fortner v. Thomas, 983 F.2d 1024, 1028 (11th
Cir. 1993)); see also Salois v. Dime Sav. Bank, FSB, 1996 U.S.
Dist. LEXIS 21901, at *12 (D, Mass. Nov. 13, 1996) (“In ruling
on a motion to dismiss for failure to state a claim, the Court
may

look

only

to

the

complaint

itself,

.

.

.

even

if

the

defendant raises affirmative defenses.”).
C. Local Rule 7.2(b)
Defendants

argue

that

First

Horizon’s

Motion

should

denied for failure to comply with Local Rule 7.2(B).

be

First

Horizon originally filed its Second Amended Complaint without
consulting Defendants, based on its understanding of the Joint
15

Proposed Scheduling Order.
ECF

No.

71)

(vacating

Defendants’ argument is moot.

the

previously

filed

Second

(See

Amended

Complaint.)
IV.

Conclusion

For

the

foregoing

reasons,

First

Horizon’s

Motion

is

GRANTED.
So ordered this 11th day of September, 2012.

s/ Samuel H. Mays, Jr._______
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

16