Hinkle v. Matthews et al

Filing 52

MEMORANDUM OPINION AND ORDER granting defendant Safe-Guard Products International, LLC's 12 MOTION for partial dismissal with regard to Hinkle's WVCCPA claims; the hearing on the motion for class certification has been rendered moot b y the dismissal of those claims; directing that in lieu of the class certification hearing, a status conference in this action shall be held on 7/21/2016 at 10:30 a.m. in the courts chambers. Signed by Judge John T. Copenhaver, Jr. on 7/19/2016. (cc: counsel of record; any unrepresented party) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
ROBIN L. HINKLE,
Plaintiff,
v.

Civil Action No. 2:15-13856

CASEY JOE MATTHEWS, TIMOTHY
MAY, CONNIE MAY, SANTANDER
CONSUMER, USA, INC., SAFEGUARD PRODUCTS INTERNATIONAL,
LLC, and JOHNNY HINKLE,
Defendants.

MEMORANDUM OPINION AND ORDER
Pending is a motion for partial dismissal by defendant
Safe-Guard Products International, LLC, (“Safe-Guard”) filed
November 23, 2015.

I. Factual and Procedural History
Plaintiff Robin L. Hinkle (“Hinkle”) is a resident of
Delbarton, Mingo County, West Virginia.1

Defendant Safe-Guard is

a limited liability company organized in Georgia doing business
in West Virginia.

Safe-Guard offered Guaranteed Auto Protection

(“GAP”) insurance to vehicle purchasers in West Virginia.

1

In

The facts recited are drawn from the allegations of the
operative pleading and are accepted as true for purposes of the
motion to dismiss.

the event of an accident resulting in the total loss of a
vehicle, GAP insurance covers any difference between the
outstanding balance owed by the purchaser and the amount paid by
the purchaser’s primary insurer toward the loss.
In July 2006, Hinkle purchased a vehicle and entered
into a GAP insurance policy with Safe-Guard.

Hinkle paid $495

upfront for the policy, which constituted the only payment due
to Safe-Guard.

On June 1, 2011, Hinkle was involved in an

automobile accident resulting in the total loss of her vehicle.
At the time of the accident, Hinkle owed a balance of $11,983.81
on the vehicle.

After payment by her primary insurer, which was

calculated based on the actual cash value of the vehicle, Hinkle
had an outstanding debt of $4,698.81.

By letter dated July 21,

2011, Safe-Guard denied Hinkle’s claim under her GAP policy and
refused to cover the remaining debt.
On July 20, 2012, Hinkle instituted this action in the
Circuit Court of Mingo County.

In the state courts, the parties

extensively litigated the issue of whether the state’s insurance
laws apply to GAP insurance policies.

Safe-Guard argued, based

on its interpretation of a memorandum issued by the West
Virginia Insurance Commissioner, that GAP policies did not
constitute insurance under the state’s insurance laws.

On March

11, 2015, the West Virginia Supreme Court of Appeals found as a
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matter of first impression that Safe-Guard’s GAP insurance plans
are insurance under the laws of West Virginia.

State ex rel.

Safe-Guard Prods. Int’l, LLC v. Thompson, 235 W. Va. 197, 772
S.E.2d 603 (2015).
Following the ruling by the Supreme Court of Appeals,
on May 28, 2015, Hinkle moved to amend her complaint to include
class action claims against Safe-Guard under the West Virginia
Consumer Credit and Protection Act (“WVCCPA”), W. Va. Code ch.
46A, on behalf of all purchasers of GAP insurance in West
Virginia.

In response, Safe-Guard removed the action to this

court pursuant to the removal provision of the Class Action
Fairness Act, 28 U.S.C. § 1453.

In the Amended Class Action

Complaint (“operative pleading”), Hinkle alleges that Safe-Guard
violated various provisions of the WVCCPA by engaging in the
sale of insurance in West Virginia without a license.

While the

WVCCPA does not explicitly prohibit the unlicensed sale of
insurance, Hinkle argues that Safe-Guard’s conduct was governed
by the statute’s provisions prohibiting unfair or deceptive
trade practices and unfair debt collection practices.

Hinkle

seeks, inter alia, compensatory damages, a refund of premiums
paid, punitive damages, and civil penalties for each violation
of the WVCCPA.

3

In support of its motion for dismissal of Hinkle’s
claims insofar as they are based on the WVCCPA, Safe-Guard
argues that any claim against it under the WVCCPA fails as a
matter of law because its alleged conduct, as well as the sale
of insurance generally, fall outside the ambit of the WVCCPA.

II. Motion to Dismiss Standard
Federal Rule of Civil Procedure 8(a)(2) requires that
a pleader provide “a short and plain statement of the claim
showing . . . entitle[ment] to relief.”

Fed. R. Civ. P.

8(a)(2); Erickson v. Pardus, 127 S. Ct. 2197, 2200 (2007).

Rule

12(b)(6) correspondingly permits a defendant to challenge a
complaint when it “fail[s] to state a claim upon which relief
can be granted . . . .”

Fed. R. Civ. P. 12(b)(6).

The required “short and plain statement” must provide
“‘fair notice of what the . . . claim is and the grounds upon
which it rests.’”

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

545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957),
overruled on other grounds, Twombly, 550 U.S. at 563); see also
Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007).
In order 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.’”
4

Ashcroft v.

Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S.
at 570); see also Monroe v. City of Charlottesville, 579 F.3d
380, 386 (4th Cir. 2009).
Application of the Rule 12(b)(6) standard
requires that the court “‘accept as true all of the factual
allegations contained in the complaint . . . .’”

Erickson, 127

S. Ct. at 2200 (quoting Twombly, 127 S. Ct. at 1965); see also
South Carolina Dept. Of Health And Environmental Control v.
Commerce and Industry Ins. Co., 372 F.3d 245, 255 (4th Cir.
2004) (quoting Franks v. Ross, 313 F.3d 184, 192 (4th Cir.
2002)).

Factual allegations are to be distinguished from legal

conclusions, which the court need not accept as true.

Iqbal,

556 U.S. at 678 (“the tenet that a court must accept as true all
of the allegations contained in a complaint is inapplicable to
legal conclusions”).

The court must also “draw[] all reasonable

. . . inferences from th[e] facts in the plaintiff's favor . . .
.”

Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir.

1999).

III. Discussion
Safe-Guard contends that Hinkle’s WVCCPA claims should
be dismissed because they relate to the sale of insurance, and
such sales are not covered by the statute.

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Indeed, the WVCCPA

explicitly exempts insurance sales:

the statute “does not apply

to . . . [t]he sale of insurance by an insurer, except as
otherwise provided . . .”

W. Va. Code § 46A-1-105(a)(2).

While

Hinkle recognizes that the WVCCPA generally excludes insurance
sales, she relies on the proviso that insurers are subject to
the WVCCPA where “otherwise provided,” identifying several
provisions of the WVCCPA which purportedly cover Safe-Guard’s
sale of GAP insurance.

First, Hinkle argues that Safe-Guard is

a “debt collector” subject to the statute’s prohibition of
unfair debt collection practices.

See W. Va. Code § 46A-2-127.

Second, she argues that Article 6 of the WVCCPA, which contains
a number of general consumer protections, covers the sale of
insurance.

Third, she argues that Safe-Guard’s conduct violated

West Virginia’s insurance laws, and that the WVCCPA allows a
plaintiff to recover for violations of other state statutes.
After a careful review of the provisions cited by Hinkle, the
court concludes that none of the WVCCPA provisions relied upon
are applicable to the sale of insurance.

A.

Debt Collection Provisions

The WVCCPA provides that “[n]o debt collector shall
use any fraudulent, deceptive or misleading representation or
means to collect or attempt to collect claims . . . .”

6

W. Va.

Code § 46A-2-127.

Understanding the scope of this brief

provision requires review of several statutory definitions:
“Debt collection” is defined as “any action, conduct or
practice of soliciting claims for collection or in the
collection of claims owed or due or alleged to be owed
or due by a consumer.” W. Va. Code § 46A-2-122(c).
A “claim” is defined as “any obligation or alleged
obligation of a consumer to pay money arising out of a
transaction in which the money, property, insurance or
service which is the subject of the transaction is
primarily for personal, family or household purposes,
whether or not such obligation has been reduced to
judgment.” W. Va. Code § 46A-2-122(b).
“Services” are defined as including “(a) Work, labor and
other personal services; (b) privileges with respect to
transportation, use of vehicles, hotel and restaurant
accommodations, education, entertainment, recreation,
physical culture, hospital accommodations, funerals,
cemetery accommodations, and the like; and (c)
insurance.” W. Va. Code § 46A-1-102(47).
Hinkle argues that Safe-Guard was engaged in
“debt collection” as defined by the statute to the extent
it sought to collect on a claim for services, namely, the
insurance service it offered as part of the GAP contract.
This argument has superficial appeal inasmuch as the
statutory definition of “services” includes insurance.
However, the court does not construe the debt collection
provisions as broadly as Hinkle suggests.

First, while the

debt collection provision arguably applies to attempts to
collect on claims resulting from insurance transactions,
there is no “claim” at issue in this case on the facts
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alleged.

Hinkle paid upfront for her GAP insurance

coverage, and at no point was Safe-Guard the holder of “any
obligation or alleged obligation . . . to pay money arising
out of [the] transaction.”

While the West Virginia Supreme Court of Appeals
has not addressed whether insurance contracts with a single
upfront premium payment involve the collection of a “claim”
under the WVCCPA, it has acknowledged that the definition
of “claim” in the statute is “essentially identical” to the
definition of “debt” in the analogous federal Fair Debt
Collection Practices Act.

Fleet v. Webber Springs Owners

Ass’n, Inc., 235 W. Va. 184, 193 (2015) (citing 15 U.S.C. §
1692a(5)).

Indeed, the two definitions are in virtually

verbatim language.

It is held that “the type of

transaction which may give rise to a ‘debt’ as defined in
the FDCPA, is . . . one involving the offer or extension of
credit to a consumer.

Specifically it is a transaction in

which a consumer is offered or extended the right to
acquire ‘money, property, insurance, or services’ which are
‘primarily for household purposes’ and to defer payment.”
Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168-69
(3rd Cir. 1987) (quoted in Mabe v. G.C. Services Ltd.
Partnership, 32 F.3d 86, 88 (4th Cir. 1994)) (emphasis

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added).

There can be no “debt” under the FDCPA without a

deferral of payment.

The court sees no reason that a

“claim” under the WVCCPA should not also require a deferral
of payment.

Consequently, Safe-Guard has not been shown to

have engaged in debt collection.

B.

Article 6 of the WVCCPA
The remainder of Hinkle’s WVCCPA claims are based on

Article 6 of the statute, which includes a broad range of
consumer protections including protections for non-consumer
credit transactions.

See § 46A-6-101 et seq.

In particular,

Hinkle relies on W. Va. Code § 46A-6-104, which prohibits unfair
or deceptive acts or practices in trade or commerce.

Safe-Guard

argues that nothing in that section makes it applicable to SafeGuard’s sale of insurance given the WVCCPA’s general exclusion
of insurance sales.
Hinkle supports her assertion that Article 6 of the
WVCCPA applies to the sale of insurance with two arguments.
First, Hinkle contends that Article 6 contains its own list of
exempted transactions, which does not include the sale of
insurance.

See W. Va. Code § 46A-6-105.

She argues that if the

Legislature had intended to exclude insurance sales from Article
6, it would have listed insurance among these exemptions.
9

Not

so.

Section 46A-6-105 merely adds one additional exclusion,

applicable only in Article 6, to those exclusions that apply
throughout Chapter 46A as specified in § 46A-1-105.

That one

additional exclusion under Article 6 simply covers the
publication by news media of certain advertisements.

The

Chapter 46A exclusions remain intact.

Second, Hinkle contends that Article 6 prohibits
unfair or deceptive acts in the sale of insurance because it
provides for recovery by any person who purchases a “service”
and is harmed as a result of a violation of the WVCCPA.
46A-6-106(a).

See §

“Services” is defined to include insurance.

W.

Va. Code § 46A-1-102(47).
The court concludes that the sale of insurance is not
covered by the general consumer protections in Article 6.

As

earlier noted, the WVCCPA provides that “This chapter [46A] does
not apply to . . . [t]he sale of insurance by an insurer, except
as otherwise provided in this chapter.”

§ 46A-1-105(a)(2).

While Article 6 does cover “services,” thereby making use of a
term that is defined to include a broad range of transactions
including insurance, it does not sweep sales of insurance into
the Article where it is not otherwise provided for.

Given the

broad use of the word “services” throughout the statute,
adopting Hinkle’s reading would render the explicit exclusion of
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insurance sales from the statute meaningless.

Notably, other

sections of the WVCCPA expressly provide for their applicability
to the sale of insurance, but those sections do not provide a
basis for Hinkle’s claims.

See, e.g., W. Va. Code § 46A-3-109

(prescribing rules related to insurance purchases associated
with charges additional to finance charges); W. Va. Code § 46A3-109a (prescribing rules related to the purchase of collateral
insurance).2

IV. Conclusion
It is, accordingly, ORDERED that Safe-Guard’s motion
for dismissal with regard to Hinkle’s WVCCPA claims be, and it
hereby is, granted.
The parties are scheduled to appear before the court
on July 21 for a hearing on the pending motion by Hinkle for
class certification.

Because the motion for class certification

is premised on Hinkle’s WVCCPA claims, it appears at this

2

The court also considers that subsequent to the passage of the
WVCCPA, the West Virginia Legislature has added a number of
consumer protection provisions to Title 33 of the West Virginia
Code, which covers insurance transactions in the state. In
1997, the Legislature enacted the Insurance Sales Consumer
Protection Act as Article 11A of that Title; in 2001, the
Legislature added the Unauthorized Insurance Act as Article 44.
While these statutes did not alter the scope of the earlierenacted WVCCPA, their passage suggests that the Legislature saw
a need for consumer protections covering the sale of insurance.
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juncture that the hearing has been rendered moot by the
dismissal of those claims.

=
Accordingly, it is ORDERED that in

lieu of the class certification hearing, a status conference in
this action shall be held on July 21 at 10:30 a.m. in the
court’s chambers.

The Clerk is directed to transmit copies of this
written opinion and order to all counsel of record and any
unrepresented parties.
DATED:

July 19, 2016

John T. Copenhaver, Jr.
United States District Judge

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