Atascocita Realty Inc. v. Western Heritage Insruance Company et al
Filing
42
OPINION AND ORDER granting 32 Motion to Lift Stay; granting 37 Defts' Motion to Dismis ; granting 40 Motion to Dismiss. The motions to dismiss are GRANTED with respoct to Pltf's claims for fraud, conspiracy to commit fraud, unfair settlement practices and breach of Insurance Code's requirement.(Signed by Judge Melinda Harmon) Parties notified.(htippen, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ATASCOCITA REALTY INC; dba NEW
ENERGY TRADING INC,
Plaintiff,
VS.
WESTERN HERITAGE INSURANCE
COMPANY, et al,
Defendants.
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CIVIL ACTION NO. 4:10-CV-4519
OPINION AND ORDER
Pending before the Court are Defendants Western Heritage Insurance Company
(“Western Heritage”), Sherman Smith, and Crawford & Company’s (“Crawford”) motions to
dismiss Plaintiff Atascocita Realty Inc.’s extra-contractual claims contained in its first amended
complaint. Docs. 37, 40.1
Also pending before the Court is Plaintiff’s previously filed motion to lift the Court
ordered abatement of this action. Doc. 32. On March 4, 2011, Magistrate Judge Frances Stacy
granted the Defendants’ motion to abate the case pursuant to Section 541.155 of the Texas
Insurance Code because of the Plaintiff’s failure to provide adequate written notice of its claims.2
Plaintiff subsequently sent two additional letters on March 21 and August 17, purporting to
comply with the requirements of Section 541.155. Docs. 32-2, 32-3. Because the Court finds that
Plaintiff’s claims under the Texas Insurance Code should be dismissed, the Court orders that the
stay entered pursuant to that Code should be lifted. The Court therefore grants Plaintiff’s motion
1
Defendants Western Heritage and Sherman Smith jointly submitted a motion to dismiss. Doc. 37. Crawford
subsequently submitted its own motion to dismiss which is in every way identical to Document 37 save the name of
the moving party in the summary and in the prayer for relief. See Doc. 40.
2
Section 541.155 requires any person making a claim under the Insurance code to provide written notice the
opposing party sixty days before filing an action. TEX. INS. CODE § 541.155(a).
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to lift the abatement.
Having considered Defendants’ motions, the Court finds that these motions should be
granted.
Background
This case arises out of damages to Plaintiff’s property caused by Hurricane Ike. Doc. 35
at 2. Plaintiff alleges that its “building sustained extensive roof and window damage during the
storm. Water intrusion through the roof and windows caused significant damage throughout the
entire building including, but not limited to, the building’s ceilings, walls, insulation, and
flooring. The building also sustained substantial structural and exterior damage during the
storm.” Id. at 3. Plaintiff then submitted a claim to Western Heritage, its insurance carrier for the
property, and “asked that Western Heritage cover the cost of repairs to the Property pursuant to .
. . [Plaintiff’s insurance] Policy.” Id.
Western Heritage assigned Crawford to adjust Plaintiff’s insurance claim and Crawford
subsequently assigned Beth Moodenbaugh and Defendant Sherman Smith, individual adjusters,
to inspect Plaintiff’s property. Id. Plaintiff contends that Moodenbaugh “conducted a substandard
inspection of Plaintiff’s property” as a result of which Western Heritage failed to compensate
Plaintiff for the full amount of Plaintiff’s loss. Id.
Plaintiff filed suit against Western Heritage, Crawford, Moodenbaugh, and Smith in the
113th Judicial District for Harris County. In its original petition, Plaintiff asserted claims against
Moodenbaugh, Smith, and Crawford for unfair settlement practices under the Texas Insurance
Code, against Western Heritage for breach of contract, unfair settlement practices and failure to
promptly pay claims under the Insurance Code, and for breach of the common law duty of good
faith and fair dealing, and against all Defendants for fraud and conspiracy to commit fraud. Doc.
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1-4 at 10-16.
On February 8, 2012, this Court granted Defendants’ motions to dismiss Plaintiff’s
original petition for failure to comply with the federal pleading requirements, but granted
Plaintiff leave to amend its complaint. Doc. 34. Plaintiff filed an amended complaint re-urging
its claims against all Defendants. Doc. 35.
Legal Standard
Despite Plaintiff’s argument to the contrary, a Rule 12(b)(6) motion is the proper vehicle
by which a defendant may challenge the sufficiency of the plaintiff’s complaint under the
applicable pleading standards.
Defendants have limited their motions to Plaintiff’s claims for fraud, conspiracy to
commit fraud, unfair settlement practices under the Texas Insurance Code, and breach of the
Insurance Code’s requirement to promptly pay claims.3 Docs. 37 & 40. The first three claims are
subject to the heightened pleading standards of Rule 9(b). “Rule 9(b) applies by its plain
language to all averments of fraud, whether they are part of a claim of fraud or not.” Lone Star
Ladies Inv. Club v. Schlotzsky's Inc., 238 F.3d 363, 368 (5th Cir. 2001). Courts have found that
“[c]laims alleging violations under the Texas Insurance Code that are substantively identical to
fraud are subject to the Rule 9(b) pleading requirements.” Carter v. Nationwide Property and
Cas. Ins. Co., Civil Action No. H–11–561, 2011 WL 2193385, at *1 (S.D.Tex. June 6, 2011)
(citing Berry v. Indianapolis Life Ins. Co., 608 F.Supp.2d 785, 789, 800 (N.D.Tex. 2009))
(internal quotations omitted). Plaintiff’s claim for unfair settlement practices under the Texas
Insurance Code is premised on Defendants’ purported misrepresentation of facts and is,
therefore, an averment of fraud subject to Rule 9(b). Plaintiff’s claim for breach of the Insurance
3
Defendants did not explicitly address Plaintiff’s extra-contractual claim for breach of the common law duty of
good faith and fair dealing.
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Code’s requirement to promptly pay claims, however, is subject to the more lenient standards of
Rule 8. See, e.g., Khan v. Allstate Fire and Cas. Ins. Co., 2012 WL 1601302 (S.D.Tex. May 7,
2012); Stewart v. Nationwide Property & Cas. Ins. Co., 2011 WL 4592256 (S.D.Tex. Sept. 29,
2011).
Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can
be granted.” FED. R. CIV. P. 12(b) (6). In Bell Atlantic Corp. v. Twombly,550 U.S. 544, 555, 127
S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949,
173 L.Ed.2d 868 (2009), the Supreme Court confirmed that Rule 12(b)(6) must be read in
conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that
the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2).
To withstand a Rule 12(b)(6) motion, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see also Elsensohn v. St.
Tammany Parish Sheriff's Office, 530 F.3d 368, 372 (5th Cir. 2008). Under Rule 8(a)(2),
plaintiffs are not required to include “‘detailed factual allegations,’ but more than ‘an unadorned,
the-defendant-unlawfully-harmed-me accusation’ is needed.” Id. (quoting Twombly, 550 U.S. at
555). “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. “The plausibility standard is not akin to a ‘probability requirement,’ but
it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting
Twombly, 550 U.S. at 556).
Allegations of fraud, however, must meet the stricter standards of Federal Rule of Civil
Procedure 9(b). Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.” The particularity required for such
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pleading, however, varies from case to case. See Benchmark Elec., Inc. v. J.M. Huber Corp., 343
F.3d 719, 724 (5th Cir. 2003), modified on other grounds, 355 F.3d 356 (5th Cir.2003). The Fifth
Circuit has reasoned that “[a]t a minimum, Rule 9(b) requires allegations of the particulars of
time, place, and contents of the false representations, as well as the identity of the person making
the misrepresentation and what he obtained thereby.” Benchmark Elecs., 343 F.3d at 724. More
precisely, Rule 9(b)’s particularity requirement compels that “the who, what, when, where, and
how [ ] be laid out.” Benchmark Elecs., 343 F.3d at 724.
Plaintiff’s Claims Against Moodenbaugh and Smith
At the outset, the Court notes that in its earlier opinion and order, the Court stated that
Defendant Moodenbaugh had not filed an appearance in the case and that it was not clear from
the record whether Plaintiff had served her with process. Doc. 34 at 3 n.1. To date, there has
been no change in the record to indicate that Plaintiff served Moodenbaugh, nor has Plaintiff
addressed the Court’s concern. Because Plaintiff has not served Moodenbaugh, the Court orders
that Plaintiff’s claims against her are dismissed.
Additionally, this Court previously has stated that when an adjuster’s actions “can be
accomplished by [the insurer] through an agent” and when the claims against the adjuster are
identical to those against the insurer, the adjuster’s actions “are indistinguishable from [the
insurer’s] actions” and hence are insufficient to support a claim against the adjuster. Centro
Cristiano Cosecha Final, Inc. v. Ohio Cas. Ins. Co., 2011 WL 240335, *14 (S.D.Tex. Jan. 20,
2011).
Here, Plaintiff’s claims against Defendants Sherman Smith and Beth Moodenbaugh are
identical to his claims against the corporate Defendants. Plaintiff attempts to assert claims
against Smith and Moodenbaugh for conduct undertaken in their capacity as employees and
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agents of the corporate Defendants. Such claims are, in essence, claims against the insurer. For
that reason, Plaintiff’s claims against Smith must be dismissed.
Plaintiff’s Claims Against Western Heritage and Crawford
Turning to Plaintiff’s amended claims against the corporate Defendants, the Court notes
that Plaintiff has added very little detail in its attempt to remedy the insufficiencies of its
previous complaint. In its previous order, the Court stated that Plaintiff’s original petition did not
“identify the particular damages which Moodenbaugh omitted from her report and that an
adequate review by Smith would have identified, nor does it state either the true value of the
Plaintiff’s damages and the extent to which Defendants underpaid on such damages.” Doc. 34 at
3.
Plaintiff has supplemented its complaint with a detailed description of the damages to its
roof and the deficiency in Defendants’ valuation of that damage. Plaintiff similarly includes
specific allegations that Defendants “only allowed for replacement of soffits and fascia on one
side of the building, but not on all sides” and “did not allow for any repairs or replacement of the
two vent stacks obviously appearing on the roof of the building” and that Moodenbaugh failed to
inspect the interior of the home at all. Doc. 35 at 4-5. Plaintiff likewise makes some allegations
regarding the true cost of roof repairs, and claims that the valuation of repairs improperly
included deductions for depreciation. Id. These allegations are sufficient to support its
contractual claims, as Defendants acknowledge. Likewise, Plaintiff’s additional allegations
indicate that Defendants failed to use ordinary care and prudence in the employment and
supervision of its adjusters. These allegations, taken as true, are sufficient to state a claim for
breach of the common law duty of good faith and fair dealing.
Nevertheless, Plaintiff’s additional allegations are again insufficient under Rules 8 and
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9(b) to support its claims for fraud and conspiracy to commit fraud and claims under the Texas
Insurance Code. Plaintiff fails to plead facts indicating that Defendants’ communications with it
were fraudulent or were misrepresentations under the Texas Insurance Code, rather than merely
inaccurate evaluations of the true value of its damages. Plaintiff’s claims are again based on
vague and conclusory language that Defendants “misrepresented that the damage to the Property
was not covered under the policy.”
The sole communication at issue is a November 24, 2008 letter in which Defendants
acknowledged that Plaintiff’s damages were covered under the policy but, Plaintiff contends,
offered an amount that did not reflect the true extent of Plaintiff’s damages. Doc. 35 at 6. This
directly contradicts Plaintiff’s claim that the Defendants “misrepresented that the damage to the
Property was not covered under the Policy, even though the damage was caused by a covered
occurrence.” Id. at 7.
Plaintiff also fails to allege any facts indicating that Defendants’ failed to respond to
Plaintiff’s claim “within a reasonable time” as required by the Texas Insurance Code, instead
merely alleging that “Plaintiff did not receive timely indication of acceptance or rejection.” Id. at
8.
In short, while Plaintiff’s additional factual allegations tend to support its contractual
claims and claim for breach of the duty of good faith and fair dealing, which Defendants do not
dispute, they are again insufficient to support its claims for fraud, conspiracy to commit fraud,
unfair settlement practices under the Texas Insurance Code, and breach of the Insurance Code’s
requirement to promptly pay claims. Because the Court previously has granted Plaintiff
opportunity to amend its complaint, these claims are dismissed with prejudice.
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Conclusion
For the foregoing reasons, the Court hereby
ORDERS that Plaintiff Atascocita Realty Inc.’s motion to lift stay (Doc. 32) is
GRANTED. Further, the Court
ORDERS that Defendants Western Heritage, Sherman Smith, and Crawford’s motions to
dismiss Plaintiff Atascocita Realty Inc.’s extra-contractual claims contained in its first amended
complaint (Docs. 37, 40) are GRANTED with respect to Plaintiff’s claims for fraud, conspiracy
to commit fraud, unfair settlement practices under the Texas Insurance Code, and breach of the
Insurance Code’s requirement to promptly pay claims, and these claims are DISMISSED.
SIGNED at Houston, Texas, this 13th day of September, 2012.
___________________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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