Bare v. Innovative Aftermarket Systems, LP
Filing
19
MEMORANDUM OPINION AND ORDER granting Defendant Innovative Aftermarket Systems, LP's 6 MOTION to Dismiss; the Court DISMISSES this case, and DIRECTS the Clerk to remove this action from the Court's docket. Signed by Judge Thomas E. Johnston on 5/5/2017. (cc: counsel of record; any unrepresented party) (taq)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
JUSTIN BARE,
Plaintiff,
v.
CIVIL ACTION NO. 2:16-cv-11049
INNOVATIVE AFTERMARKET SYSTEMS, LP,
Defendant.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Innovative Aftermarket Systems, LP’s (“Innovative”)
Motion to Dismiss. (ECF No. 6.) For reasons discussed below, the Court GRANTS the motion.
I. BACKGROUND
This action arises out of a complaint brought by Plaintiff in the Circuit Court of Logan
County, West Virginia. (ECF No. 1-1 at 1–8.) According to the First Amended Class Action
Complaint (the “Complaint”), Plaintiff purchased a vehicle from a Kentucky automobile dealer on
April 14, 2012. (Id. at 2 ¶ 4.) “As part of the sale, Plaintiff also purchased a ‘Protection Plus’
policy from [Innovative] for $299.00.”
(Id. ¶ 5.)
This “Protection Plus” policy allegedly
“guaranteed that the anti-theft system [‘the product’] installed on the vehicle would be an effective
deterrent to vehicle theft.”1 (Id. ¶ 6.) In the event that the product did not deter theft and the
As the product is explained in a brochure attached to Innovative’s Motion to Dismiss—the authenticity of which
Plaintiff does not contest—six “permanent, tamper resistant labels” that are visible only under ultraviolet light and
“impossible to remove intact” are attached on different areas of the vehicle. (ECF No. 6-2 at 1.) A “WARNING:
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vehicle was “not recovered within 30 days or recovered and declared a total loss as the result of
the theft,” then Innovative would pay Plaintiff a sum of $2,500. (Id. ¶ 7.) Plaintiff states that his
vehicle was stolen on December 7, 2014, and his automobile insurer allegedly issued him a
settlement check on April 24, 2015, for $15,239.61 after declaring the vehicle a total loss. (Id. ¶¶
8–9.) Plaintiff asserts that he made a claim under the “Protection Plus” policy on December 15,
2015, and that Innovative denied the claim as untimely based on the policy’s filing requirements.
(Id. ¶¶ 10–11.)
Based on these alleged facts, Plaintiff contends that Innovative’s actions and its product’s
policy generate the following causes of action: (1) unlawful sale of insurance in violation of West
Virginia insurance law and the West Virginia Consumer Credit and Protection Act (“WVCCPA”),
(2) common law breach of contract, (3) violations of the West Virginia Unfair Trade Practices Act
(“WVUTPA”), and (4) common law bad faith. (Id. at 3–6 ¶¶ 17–37.) Plaintiff seeks the
following remedies on behalf of a similarly situated class of plaintiffs: actual, compensatory, and
punitive damages, a refund of premiums paid, a civil penalty for statutory violations, attorneys’
fees and costs, pre- and post-judgment interest, and any other just relief. (Id. at 7 ¶¶ 2–9.)
Plaintiff filed the Complaint in the Circuit Court of Logan County, and Innovative removed
the case to this Court on November 17, 2016, pursuant to 28 U.S.C. § 1332(a), (d). (ECF No. 1
at 1; see also id. at 4–8 ¶¶ 17–28.) Innovative filed its Motion to Dismiss on December 9, 2016.
(ECF No. 6.) The motion argues that all of Plaintiff’s claims should be dismissed because they
all hinge upon the product being insurance, which Innovative contends it is not. (Id. at 3.)
Traceable Anti-Theft” decal is placed on the car to discourage potential thieves from stealing the vehicle, and any
attempt to remove the labels, which “will be obvious,” alerts law enforcement that the vehicle is stolen. (Id.) Thus,
the product aims to both decrease the chances of theft and increase the chances of recovery if theft occurs.
2
Plaintiff responded to Innovative’s motion on December 22, 2016, (ECF No. 8), and Innovative
filed its reply on January 6, 2017, (ECF No. 12). The Court stayed discovery in this case for a
three-month period beginning on February 6, 2017. (ECF No. 17.) The Motion to Dismiss is
fully briefed and ripe for adjudication.
II. STANDARD OF REVIEW
A motion to dismiss for failure to state a claim upon which relief may be granted tests the
legal sufficiency of a civil complaint. Fed. R. Civ. P. 12(b)(6). A plaintiff must allege sufficient
facts, which, if proven, would entitle him to relief under a cognizable legal claim. Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 554–55 (2007). A case should be dismissed if, viewing the wellpleaded factual allegations in the complaint as true and in the light most favorable to the plaintiff,
the complaint does not contain “enough facts to state a claim to relief that is plausible on its face.”
Id. at 570. In applying this standard, a court must utilize a two-pronged approach. First, it must
separate the legal conclusions in the complaint from the factual allegations. Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). Second, assuming the truth of only the factual allegations, the court
must determine whether the plaintiff’s complaint permits a reasonable inference that “the
defendant is liable for the misconduct alleged.”
Id.
Well-pleaded factual allegations are
required; labels, conclusions, and a “formulaic recitation of the elements of a cause of action will
not do.” Twombly, 550 U.S. at 555; see also King v. Rubenstein, 825 F.3d 206, 214 (4th Cir.
2016) (“Bare legal conclusions ‘are not entitled to the assumption of truth’ and are insufficient to
state a claim.” (quoting Iqbal, 556 U.S. at 679)). A plaintiff’s “[f]actual allegations must be
enough to raise a right to relief above the speculative level,” thereby “nudg[ing] [the] claims across
the line from conceivable to plausible.” Twombly, 550 U.S. at 555, 570.
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III. DISCUSSION
Innovative’s first argument in its Motion to Dismiss relies on the premise that the theftprevention product’s accompanying policy is not insurance, which would preclude all of Plaintiff’s
claims. (See ECF No. 7 at 8.) Innovative states that the West Virginia Insurance Code, the basis
for Count I of the Complaint, does not apply to warranties as they are defined in West Virginia
Code § 33-4-2(b)(5). (Id. at 4.) Because the product and its accompanying policy fall within a
statutory exception to state insurance law, Innovative avers, the company was not required to have
any insurance license.
(See id. at 5–8.)
Innovative argues that this finding also prevents
Plaintiff’s other three claims from being legally cognizable because Count II, “premised upon an
administrative code provision found in the Insurance Commissioner regulations title,” applies only
to insurers; Count III, “premised upon the Unfair Trade Practices article of insurance code,” applies
only to the sale of insurance; and “Count IV again refers to [Plaintiff] as an insured and refers to
West Virginia insurance law.” (Id. at 8.) Alternatively, Innovative attacks all four counts
substantively. (See id. at 8–11.)
Plaintiff responds that Innovative did not establish as a matter of law that the product’s
accompanying policy is not insurance. (See ECF No. 8 at 8 (citing W. Va. Code § 33-1-1).)
After attempting to distinguish the policy at issue in this case from several in cases cited in
Innovative’s memorandum of law, Plaintiff concludes that the “aspect of [Innovative]’s motion to
dismiss dependent on accepting its characterization of the policy as a warranty should be denied.”
(Id. at 17.) Plaintiff further argues that each of the claims is adequately pled. (See id. at 17–24.)
Innovative reiterates in its reply that West Virginia adopted a statute in 2000 defining and
exempting warranties from the definition of “insurance.” (ECF No. 12 at 4 (citing W. Va. Code
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§ 33-4-2(a)(4)).) It contends that the Safe-Guard Products International, LLC case that Plaintiff
relies on is inapposite to the product and policy at issue in this case. (See id. at 5–6.) Innovative
further argues that the Riffe case decided by the West Virginia Supreme Court of Appeals and
relied upon by Plaintiff does not affect the application of the “warranty-exemption statute,” which
was passed after the Riffe decision. (See id. at 6–7.) Innovative asserts that the federal cases
cited by Plaintiff in support of his argument are easily distinguished. (See id. at 8–9.)
A. The “Protection Plus” Policy is Not Insurance2
The State of West Virginia has codified the definition of “insurance” to mean “a contract
whereby one undertakes to indemnify another or to pay a specified amount upon determinable
contingencies.” W. Va. Code § 33-1-1. “Generally, an insurance policy sets forth an agreement
between parties whereby the insured agrees to pay a specified premium, and, in exchange, the
insurer agrees to indemnify the insured against the type of losses contemplated within the terms of
the policy yet unknowable at its issuance.” McDaniel v. Kleiss, 503 S.E.2d 840, 846 (W. Va.
1998) (citations omitted). These policies are typically “issued by third parties and are based on a
theory of distributing a particular risk among many customers.” Riffe v. Home Finders Assocs.,
Inc., 517 S.E.2d 313, 318 (W. Va. 1999) (quoting Griffin Sys., Inc. v. Washburn, 505 N.E.2d 1121,
1124 (Ill. App. Ct. 1987)). See also 1 Eric Mills Holmes & Mark S. Rhodes, Appleman on
Insurance § 1.3 (2d ed. 1996) (“In the insurance contract, the risk of an actual loss is distributed
(socialized) among a large group of persons exposed to a comparable risk of loss.”). For the
purposes of determining whether a particular policy is one for insurance, courts must look to the
2
In determining whether the product at issue is insurance, this Court is bound by the substantive law of West Virginia.
See, e.g., Johnson v. Hugo’s Skateway, 974 F.2d 1408, 1416 (4th Cir. 1992) (citing Erie R.R. Co. v. Tompkins, 304
U.S. 64, 73 (1938)).
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substance of the agreement because “[p]olicy means the contract effecting insurance, or the
certificate thereof, by whatever name called . . . .” Riffe, 517 S.E.2d at 317 (emphasis in original)
(quoting W. Va. Code § 33-1-16).
Chapter 33 of the State’s code, which is dedicated to insurance law, specifically exempts
warranties from the chapter’s reach. W. Va. Code § 33-4-2(a)(4). That same section defines
“warranty” in the following manner:
“Warranty” means in relation to a product or service an undertaking that guarantees
indemnity for defective parts, mechanical or electrical breakdown, labor costs or
other remedial measures, such as repair or replacement of the product or repetition
of services and that is made solely by the manufacturer, importer or seller of the
product or services made without payment of additional consideration, not
negotiated or separated from the sale of the product or service and incidental to the
sale of the product or service.
§ 33-4-2(b)(5). Commentators have noted that, generally, “a warranty is not an insurance contract
in that the former only promises indemnity against defects in the article sold, while the latter
indemnifies against loss or damage resulting from perils outside of and unrelated to defects in the
article itself.” 1 Eric Mills Holmes & Mark S. Rhodes, Appleman on Insurance § 1.3 (2d ed.
1996) (citations omitted) (noting that a warranty “may be so drafted, however, as to contain an
agreement to indemnify from peril outside of and unrelated to inherent weaknesses in the goods
themselves and thus may fall within the purview of an insurance statute”).
The West Virginia Supreme Court of Appeals has discussed in a limited number of cases
what constitutes insurance within the meaning of W. Va. Code § 33-1-1. In Riffe, the court
examined a “home warranty contract” that indemnified a new homeowner for repairs to both the
home itself and certain personal property items on the property that became necessary after the
transfer of ownership. See 517 S.E.2d at 315. The company promoting the policy claimed that
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homes protected by the plan sold faster and for more money. See id. The Riffes inherited the
policy’s benefits from the home’s sellers as part of the real estate transaction and sued the company
after it denied their claim regarding a problem with the home’s foundation. See id. at 316. While
the company maintained that the contract was a warranty and not insurance, the court held that it
was insurance because “a homeowner would file a claim, have the repair made, and would be
indemnified by [the company that sold the policy] for the cost of a covered repair, minus any
deductible.” Id. at 317 (citing W. Va. Code § 33-1-1) (noting that there was “no question” that
the policy was insurance under state statute). The court went on to explain the following:
[T]he distinguishing feature which sets [warranties and service contracts] apart
from an insurance policy is the fact that the respective companies manufacture or
sell the products which they agreed to repair or replace . . . Through a warranty or
service contract, a company simply guarantees that its own product will perform
adequately for a period of time.
Id. at 317–18 (emphasis in original).3
The reach of “insurance” as defined under West Virginia law was reconsidered in State ex
rel. Safe-Guard Products International, LLC v. Thompson (Safe-Guard), 772 S.E.2d 603 (W. Va.
2015). At issue in Safe-Guard was whether GAP Insurance4 was insurance under § 33-1-1 or a
debt cancellation contract outside the scope of the statutory definition of “insurance.” See id. at
604–05. Following “[d]ispositive guidance” from an Informational Letter issued by the West
Virginia Offices of the Insurance Commissioner (“OIC”), the court held that “a debt cancellation
3
This Court recognizes that Riffe was decided a year before the West Virginia Legislature enacted a statutory
definition of “warranty,” exempting policies that fit that definition from the State’s insurance laws. However, the
West Virginia Supreme Court of Appeals’ explanation of the policy at issue in Riffe and the distinction between
insurance and warranties comports with the statutory definition of “warranty” and suggests that the court would rule
similarly had the case been decided after the passage of W. Va. Code § 33-4-2(b)(5). See Riffe, 517 S.E.2d at 317–
18.
4
GAP Insurance, as explained by the Safe-Guard Court, involved a policy relieving car buyers of “payments owed
on [a] vehicle if it was declared a total loss as a result of an accident, and more was owed for the vehicle than the value
assigned to it at the time it was totaled.” 722 S.E.2d at 604.
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contract is not considered insurance[] if it is directly provided by a lending institution to the
purchaser of a product.” Id. at 606. However, Safe-Guard was not the lender in that scenario.
Rather, Safe-Guard issued a policy to the plaintiff that would indemnify her lender “in the event
Ms. Hinkle’s vehicle was a total loss and she still had a balance owed to the lender.” See id. at
608. Because the policy “require[d] a third party to indemnify a lender,” the court found that the
GAP Insurance was insurance under § 33-1-1. See id. at 606, 608–09.
The West Virginia Supreme Court of Appeals has not applied the statutory definitions of
“insurance” or “warranty” to automobile theft prevention products and their policies.
Nevertheless, at least four federal district courts have examined whether this type of product’s
policy constitutes “insurance” under the laws of the states in which those courts are located. For
example, Pope v. TT of Lake Norman, LLC involved an amended complaint whose claims hinged
on the court’s determination of whether the etching product at issue was insurance.5 See 505 F.
Supp. 2d 309, 310–11 (W.D.N.C. 2007). The product purported to “deter theft of vehicles by
making resale of stolen vehicles containing the Etching product more difficult and risky for car
thieves.” Id. at 310. Upon a one-time payment of $349 by the car buyer, the product’s seller
guaranteed that it would pay “$5000 to any customer whose car [was] stolen and not recovered
within 30 days.” Id. at 310–11. North Carolina previously enacted a statutory definition of
“warranty” that exempted policies falling under its ambit from the state’s insurance laws. See id.
at 311.
The court concluded that the etching product met the statutory requirements of a
“warranty” because “it [was] clear that Etch’s limited warranty protect[ed] customers in the event
the product fail[ed] as a theft deterrent.” Id. at 312. It dismissed the plaintiffs’ claims “based
The etching product in Pope consisted of “a small number applied to the windshield or other windows of a vehicle
with a kit consisting of a piece of scored paper and a dab of chemical.” 505 F. Supp. 2d 309, 310 (W.D.N.C. 2007).
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upon their allegations that Etch is insurance.” Id. (relying on an advisory letter issued by the
North Carolina Attorney General indicating that a comparable product was a warranty and not
insurance).
Similarly, the guarantee accompanying Alexico Corporation’s (“Alexico”) product known
as Premium Care Theft-Gard (“PCTG”) was deemed warranty and not insurance by two district
courts in Moroz and Falkenberg. See Falkenberg v. Alexico Corp., No. 07-4149 (RBK), 2008
WL 2478384, at *3 (D.N.J. June 17, 2008); Moroz v. Alexico Corp., No. 07–3188, 2008 WL
109675, at *4 (E.D. Pa. Jan. 7, 2008). PCTG, which was distributed, sold, and administered by
Alexico, consisted of a unique number etched into a car’s front windows and registered into
company records. See 2008 WL 109675, at *1, 4 (finding that the purpose of PCTG was to deter
car theft and aid in the recovery of stolen vehicles). Alexico guaranteed that if a vehicle was
stolen within three years of PCTG’s installation and not recovered within thirty days or recovered
but considered a total loss, it would pay to PCTG’s owner $3,000 or the vehicle’s wholesale value
if less. See id. at *1. The court in Moroz held that PCTG was not insurance under common law.
Id. at *4 (noting that “insurance” was not defined under Pennsylvania statutory law). While
PCTG required that the purchaser carry comprehensive theft insurance, the Moroz Court found
that Alexico sought “to guarantee the performance of the product, not to insure against car theft”
and dismissed five counts in the complaint that were premised on the contention that PCTG was
insurance. Id. (“[T]he ‘overall objective’ of the arrangement is simply to warrant [PCTG]’s
performance.”). The Falkenberg Court reached the same conclusion under common law that
PCTG is not insurance and dismissed three counts in the complaint that were premised on the
status of PCTG as insurance. See 2008 WL 2478384, at *2–3 (noting that while New Jersey does
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not have a statutory definition of “insurance,” the court’s conclusion was “supported by holdings
from other branches of the New Jersey government”). The court reasoned as follows:
Though Plaintiff characterizes this payment as indemnification, the Court agrees
with Defendants, who characterize the payment as a warranty of [PCTG]. The
warranty, which accompanies the window etch product and cannot be purchased
separately, merely provides some monetary benefit in the event that [PCTG] does
not work and the vehicle is stolen and not recovered . . . The fact that there may be
some shifting of the risk of loss from the customer to the manufacturer is not enough
to transform the essential nature of the product. Because Defendants’ guarantee is
based on [PCTG]’s performance and not merely the happening of a future
occurrence, it constitutes a warranty and not insurance.
Id. at *3.
At least one district court has ruled that, under the laws of New York, facts supporting an
allegation that an anti-theft window etching product was insurance were adequately pleaded to
survive a motion to dismiss. See Seekamp v. Fuccillo Auto. Grp., Inc., No. 1:09–CV–0018
(LEK/DRH), 2010 WL 980581, at *7 (N.D.N.Y. Mar. 15, 2010). Under that product’s policy,
the issuing company would indemnify the car dealership “if the dealer had to issue a credit towards
a new vehicle purchase due to theft.” See id. at *1 (explaining that the dealer would provide the
product owner “with a 10% discount towards the purchase of a replacement vehicle, in an amount
up to $2000”). An “insurance contract” was statutorily defined in New York, and the court noted
that “the New York Insurance Department has interpreted a ‘fortuitous event’ [under the definition
of ‘insurance contract’] to be the theft or non-recovery of a vehicle, which is the triggering event
under the ‘etch’ theft-deterrent agreement.” Id. at *5–6 & n.5 (citations omitted) (recognizing
that “warranty” was not defined under New York insurance law). The court cited a New York
Insurance Department opinion, which was directly relevant to the policy at issue, finding that “by
offering a discount on a vehicle purchase following an unrecovered theft or total loss, the consumer
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would ultimately be provided with a ‘benefit of pecuniary value upon the happening of a fortuitous
event.’”
Id. at *6 (citation omitted).
Partly because the policy’s issuing company would
indemnify the dealership and not the product owner, the court found that the policy may be
considered insurance and the plaintiff’s complaint could survive the motion to dismiss. See id. at
*7.
Here, the statutory definition of “warranty” in West Virginia is similar to that in North
Carolina, which was analyzed by the Pope Court.6 See Pope, 505 F. Supp. 2d at 311–12. Both
definitions require an indemnity guarantee from the product’s manufacturer or seller for defective
parts also made by the product’s manufacturer or seller without additional payment. See supra
note 6. The West Virginia definition contains an additional requirement that a warranty is not
negotiated or separated from the product’s sale; it must be incidental to the sale of the product.
See W. Va. Code § 33-4-2(b)(5). Plaintiff claims that he paid $299 for the policy, and “[i]n the
Protection Plus policy, [Innovative] guaranteed that the anti-theft system installed on the vehicle
would be an effective deterrent to vehicle theft.” (ECF No. 1-1 at 2 ¶¶ 5-7.) While Plaintiff’s
6
Compare W. Va. Code § 33-4-2(b)(5) (“‘Warranty’ means in relation to a product or service an undertaking that
guarantees indemnity for defective parts, mechanical or electrical breakdown, labor costs or other remedial measures,
such as repair or replacement of the product or repetition of services and that is made solely by the manufacturer,
importer or seller of the product or services made without payment of additional consideration, not negotiated or
separated from the sale of the product or service and incidental to the sale of the product or service.”), with N.C. Gen.
Stat. § 58-1-15(b), cited in Pope, 505 F. Supp. 2d at 311 (“Any warranty made solely by a manufacturer, distributor,
or seller of goods or services without charge . . . that guarantees indemnity from defective parts, mechanical or
electrical breakdown, labor, or any other remedial measure, including replacement of goods or repetition of services,
shall not be a contract of insurance . . . .”).
The Court notes that, while not considered by the court in Pope, North Carolina also has a statutory definition
for “ancillary anti-theft protection program warranty” that specifically exempts these types of products from state
insurance laws. See N.C. Gen. Stat. § 66-370(b)(1a) (“A written agreement by a warrantor that provides if the
ancillary anti-theft protection program fails to prevent loss or damage to a motor vehicle from a theft, that the warrantor
will pay to or on behalf of the warranty holder specified incidental costs, as a result of the failure of the ancillary antitheft protection program to perform pursuant to the terms of the ancillary anti-theft protection program warranty.”);
see also § 66-370(b)(1) (defining an “ancillary anti-theft protection program” to include “window etch products” that
are installed on automobiles and “designed to prevent loss or damage to a motor vehicle from theft”).
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Complaint does not describe the product, it states that the product includes a policy intended to
guarantee the product’s performance. (See id. ¶¶ 5–6.) He further alleges that the policy
“guaranteed Plaintiff a payment of $2,500.00 if the anti-theft system failed and the vehicle was
stolen and not recovered within 30 days or recovered and declared a total loss as the result of the
theft.” (Id. ¶ 7 (emphasis added).) Thus, the Complaint alleges that Innovative sold him the
policy that included without additional payment a guarantee to indemnify him if Innovative’s
product failed. (See id. ¶¶ 4–7.) Plaintiff does not allege that the product and policy were sold
separately. (See id. ¶¶ 4–5.)
Moreover, the purpose of the product here is similar to that of the products in Pope, Moroz,
and Falkenberg—to deter vehicle theft and aid in the vehicle’s recovery if stolen. See 2008 WL
2478384, at *3; 2008 WL 109675, at *4; 505 F. Supp. 2d at 312. This is evidenced by the
Protection Plus Warranty Registration form, which is attached to the Motion to Dismiss, relied on
by Plaintiff in the Complaint, and not contested by Plaintiff in terms of authenticity.7 (See ECF
No. 6-1 at 1 (“The Vehicle Security Anti-Theft System installed on the vehicle guarantees to the
Registered Owner/Lessee of the described vehicle that the System installed will be an effective
deterrent against vehicle theft. In the event the System fails and the described vehicle is stolen
and not recovered within thirty (30) days or is RECOVERED and declared a Total Loss as a result
“[W]hen a defendant attaches a document to its motion to dismiss, ‘a court may consider it in determining whether
to dismiss the complaint [if] it was integral to and explicitly relied on in the complaint and [if] plaintiffs do not
challenge its authenticity.’” Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004)
(quoting Phillips v. LCI Int’l Inc., 190 F.3d 609, 618 (4th Cir. 1999)). Consideration of these documents at the
12(b)(6) stage is appropriate and comports with the following policy rationale allowing for consideration of these
types of documents in a 12(b)(6) analysis: “The rationale underlying this exception is that the primary problem raised
by looking to documents outside the complaint—lack of notice to the plaintiff—is dissipated ‘[w]here plaintiff has
actual notice . . . and has relied upon these documents in framing the complaint.’” Id. (quoting In re Burlington Coat
Factory Secs. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)). Plaintiff here relies on the “Protection Plus” policy form
throughout the Complaint, and the policy is central to all of the Complaint’s claims. (See ECF No. 1-1 at 2 ¶¶ 5–7,
11; 3–6 ¶¶ 17–37.) Thus, the Court will consider that document, (ECF No. 6-1), in ruling on the Motion to Dismiss.
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of the theft, $2,500 Benefit will be paid directly to the Registered Owner/Lessee.”); see also ECF
No. 8 at 12–13.) As the Pope Court concluded, “it is clear” that the policy here “protects
customers in the event the product fails as a theft deterrent.” See 505 F. Supp. 2d at 312.
Plaintiff relies on Seekamp to discredit the decisions in Moroz and Falkenberg, (see ECF
No. 8 at 15–17), but the dispute in Seekamp involved a policy issuer indemnifying a car dealership
after the dealer issued a credit to the policyholder purchasing a replacement vehicle. See 2010
WL 980581, at *1.
In effect, the policy issuer indemnified a third party rather than the
policyholder herself in the event that the vehicle was stolen. Further, the New York Insurance
Department had previously issued an opinion specifically including anti-theft window etching
products within the ambit of the state’s insurance laws. See id. at *6. The West Virginia OIC
has not issued similar guidance,8 nor does the product’s policy at issue here purport to indemnify
anyone other than the person who purchases the policy. (See ECF No. 6-1 at 1.)
The policies examined under West Virginia law in Safe-Guard and Riffe are distinguishable
from the policy in this case. Plaintiff attempts to equate the policy here to the GAP Insurance in
Safe-Guard and the home warranty contract in Riffe. (See ECF No. 8 at 8–12.) However, neither
of those cases involved a company seeking to guarantee indemnity for the failure of a product that
Plaintiff states in his response to the Motion to Dismiss that “it should be remembered that the OIC determined that
contracts analogous to the one at issue here are considered in West Virginia to be an insurance transaction.” (ECF
No. 8 at 14.) The only prior reference in Plaintiff’s response to a state agency opinion on insurance contracts was in
his discussion of Safe-Guard. (See id. at 9–10.) In Safe-Guard, the West Virginia Supreme Court of Appeals
analyzed Information Letter No. 171 issued by the OIC. See 772 S.E.2d at 606. That letter set out the U.S.
Department of the Treasury’s definition of a debt cancellation contract and concluded that “[a] contract in which a
third party is obligated to indemnify the lender—as a result of a specified event that causes the lender to not be repaid
by the borrower—is not a debt cancellation contract or debt suspension agreement. This type of contract is an
insurance transaction and is subject to the insurance laws of the State of West Virginia.” Id. The court relied on that
Information Letter to hold that “a debt cancellation contract is not considered insurance, if it is directly provided by a
lending institution to the purchaser of a product.” Id. This appears inapposite to the facts here as Plaintiff has not
alleged that the product involves a debt cancellation contract of any kind. Further, the parties have not alluded to any
other Information Letter issued by the OIC that may be relevant to the current issue.
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the company itself manufactured or sold.
The defendant company in Safe-Guard did not
manufacture or sell the vehicle that, when totaled in a crash, triggered the indemnity, see 772
S.E.2d at 604–05, and the defendant company in Riffe did not manufacture or sell the home or the
personal property that, when in need of repair, triggered the indemnity, see 517 S.E.2d at 315–16.
The situation here is like in Moroz and Falkenberg, where the courts found that Alexico’s product
was not insurance because the policy simply warranted the product’s performance, the policy could
not be purchased separately from the product, and the monetary benefit upon the product’s failure
was paid directly to the product purchaser. See 2008 WL 2478384, at *3; 2008 WL 109675, at
*4. Similarly, the policy here, which Plaintiff does not claim was purchased separately from the
product, guarantees the product’s performance, and the monetary benefit would be paid to Plaintiff
who purchased the policy. (See ECF No. 1-1 at 2 ¶¶ 5–7; ECF No. 6-1 at 1.)
Plaintiff alleges in the Complaint that he purchased the policy from Innovative and that
Innovative guaranteed to pay him if its product failed to deter vehicle theft. (See ECF No. 1-1 at
2 ¶¶ 5–7.) It is this alleged relationship between Plaintiff and Innovative and the circumstances
under which the product was purchased that lead this Court to conclude that, assuming all the
factual allegations in the Complaint are true, the product’s policy fits squarely within West
Virginia’s statutory definition of “warranty.” See W. Va. Code § 33-4-2(b)(5). Because the
policy at issue here is a warranty, it is exempt from the State’s insurance laws. See § 33-4-5(a)(4).
B. Count I
Count I of the Complaint alleges unlawful sale of insurance in violation of W. Va. Code §
33-3-1. (ECF No. 1-1 at 4 ¶ 18.) The Court determined that Chapter 33 of the West Virginia
Code does not govern the policy here because it is not insurance, so this claim must fail. Count I
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also claims that Innovative violated provisions of the WVCCPA “[b]y collecting premiums that it
was not entitled to recover and selling an insurance product while not licensed to sell such product
. . . .” (Id. ¶ 19 (alleging violations of W. Va. Code §§ 46A-2-127, 46A-6-102, 46A-6-104, 46A6-106).)
Innovative argues that regardless of whether the policy is insurance, the WVCCPA claims
in Count I still fail to survive Rule 12(b)(6) because Count I relies on Innovative being a debt
collector, which it says it is not. (See ECF No. 7 at 8.) Plaintiff contends that Count I should
partially survive despite a ruling that the policy is not insurance because Innovative is a “debt
collector,” bringing regulation of its policy under the WVCCPA. (See ECF No. 8 at 19.)
Innovative’s reply submits that Count I should be dismissed regardless of the Court’s decision as
to whether the product’s policy here is insurance because Innovative is not a debt collector as
provided by the statutory definition and because the WVCCPA does not apply to the alleged
improper sale of insurance. (See ECF No. 12 at 10–12.)
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 . . . .” W. Va. Code §
46A-2-127. Where the defendant is not a debt collector or creditor of the plaintiff within the
definition of the WVCCPA, 9 the state statute does not apply.
See Grubb v. Jos. A. Bank
Clothiers, Inc., No. 2:05-0056, 2005 WL 1378721, at *7 (S.D. W.Va. June 2, 2005) (“There being
no credible allegation that defendant became plaintiff’s creditor in the transaction, plaintiff has no
The WVCCPA defines “debt collector” as “any person or organization engaging directly or indirectly in debt
collection.” W. Va. Code § 46A-2-122(d). “Creditor” is defined by the WVCCPA as “an institution, the deposits
of which are insured by the Federal Deposit Insurance Agency, the National Credit Union Share Insurance Fund, or a
subsidiary of such an institution, or a subsidiary of a holding company owning such an institution . . . .” Id. § 46A3-109a(a)(5).
9
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colorable right to the imposition of a civil penalty under [the WVCCPA].”). Further, “the sale of
insurance is not covered by the general consumer protections in [WVCCPA] Article 6,” violations
of which Plaintiff alleges here. See Hinkle v. Matthews, No. 2:15-13856, 2016 WL 3945734, at
*2–4 (S.D. W.Va. July 19, 2016) (analyzing the same GAP Insurance at issue in Safe-Guard and
granting the defendant’s motion to dismiss with regard to the plaintiff’s WVCCPA claim). In
Hinkle, this Court determined that a deferral of payment is necessary to find a “claim” under the
WVCCPA:
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 [“FDCPA”] . . . 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.
Id. at *3 (citations omitted).
Plaintiff alleges that he made an upfront, one-time payment of $299 for the policy, and he
does not claim that there was any deferral of payment or additional payment required. (ECF No.
1-1 at 2 ¶ 5.) Without a deferral of payment, Plaintiff cannot allege a collectable “claim” as
defined under the WVCCPA. See Hinkle, 2016 WL 3945734, at *3 (citing W. Va. Code § 46A2-122(b)). In addition to finding that the policy is not insurance, the Court also finds that
Innovative is not a debt collector or creditor under the WVCCPA. Thus, Plaintiff’s claims under
West Virginia insurance law and the WVCCPA must fail, and the Court DISMISSES Count I.
C. Count II
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Plaintiff concedes that “there is no independent ground for addressing” Count II if the
Court accepts Innovative’s argument that the policy at issue is not insurance. (ECF No. 8 at 17.)
While the Court does not agree that the breach of contract claim found in Count II relies on the
policy’s status at insurance, Plaintiff has failed nonetheless to state a claim upon which relief can
be granted as he does not assert that a valid, enforceable contract has been breached. (See ECF
No. 1-1 at 4 ¶¶ 21–24.) See also Sneberger v. Morrison, 776 S.E.2d 156, 171 (W. Va. 2015)
(citations omitted) (“A claim for breach of contract requires proof of the formation of a contract,
a breach of the terms of that contract, and resulting damages.”). Rather, Plaintiff claims that the
contract is void because it does not conform to West Virginia regulatory requirements, (see id. ¶
22), which is an improper basis for a breach of contract claim. See Gen. Elec. Capital Corp. v.
Bishop, No. 1:11–cv–00315, 2012 WL 6202758, at *4 (S.D. W.Va. Dec. 12, 2012) (citations
omitted) (“In order to establish a claim for breach of contract under West Virginia law, a plaintiff
must prove . . . the existence of a valid, enforceable contract . . . .”). Accordingly, the Court now
DISMISSES Count II.
D. Count III
Count III of the Complaint alleges that Innovative “violated its statutory duties set forth in
the [WVUTPA] in W. Va. Code § 33-11-4, et seq.[,] as well as all regulations promulgated
thereunder . . . .” (Id. at 5 ¶ 33.) The WVUTPA falls within Chapter 33 of the West Virginia
Code, and as the Court outlined earlier, that chapter specifically exempts warranties from the
statute’s reach. See W. Va. Code § 33-4-2(a)(4). The Court determined that the product’s policy
here is a warranty under West Virginia law, which precludes the State’s insurance statutes,
including the WVUTPA, from governing it. See Hawkins v. Ford Motor Co., 566 S.E.2d 624,
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629 (W. Va. 2002) (holding that the WVUTPA applies “only to those persons or entities and their
agents who are engaged in the business of insurance”). Plaintiff’s claim relying on the WVUTPA
must fail, and the Court DISMISSES Count III.
E. Count IV
Plaintiff concedes that “there is no independent ground for addressing” Count IV if the
Court accepts Innovative’s argument that the policy at issue is not insurance. (ECF No. 8 at 17.)
The Court agrees that a common law bad faith claim is not available to Plaintiff if Innovative did
not provide insurance. See Hawkins, 566 S.E.2d at 629 (holding that the tort of bad faith only
applies to those who are engaged in the business of insurance). The Court found that the policy
is not insurance, and as such, the Court now DISMISSES Count IV.
IV. CONCLUSION
For the reasons stated above, the Court GRANTS Innovative’s Motion to Dismiss, (ECF
No. 6). Further, the Court DISMISSES this case, and DIRECTS the Clerk to remove this action
from the Court’s docket.
IT IS SO ORDERED.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:
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May 5, 2017
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