Opinion
CIVIL ACTION NO. 1:19-00213-JB-N
01-29-2020
Danny Ray BONNER and Stacy Bonner, Plaintiffs, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant.
Thomas M. O'Hara, O'Hara Law Firm LLC, Daphne, AL, for Plaintiffs. Jeffrey M. Grantham, Joshua B. Baker, Joshua Robert Hess, Maynard, Cooper, and Gale P.C., Birmingham, AL, for Defendant.
Thomas M. O'Hara, O'Hara Law Firm LLC, Daphne, AL, for Plaintiffs.
Jeffrey M. Grantham, Joshua B. Baker, Joshua Robert Hess, Maynard, Cooper, and Gale P.C., Birmingham, AL, for Defendant.
ORDER
JEFFREY U. BEAVERSTOCK, UNITED STATES DISTRICT JUDGE
This matter is before the Court on Defendant Safeco Insurance Company of America's ("Safeco") Motion to Dismiss Count Two of Plaintiffs' Complaint, or in the Alternative, to Bifurcate (Doc. 13), Plaintiffs' Response in Opposition (Doc. 15), and Safeco's Reply (Doc. 16). The issue is ripe for resolution. After careful consideration, Defendant's Motion to Dismiss Count Two of Plaintiffs' Complaint is GRANTED.
FACTS
This action is a dispute over unpaid homeowner's insurance benefits. The Court previously addressed the factual background in this case in its order granting Plaintiffs' Motion for Leave to File an Amended Complaint on July 1, 2019. (Doc. 11 at 1 – 3). Plaintiffs filed their First Amended Complaint ("FAC") on July 12, 2019. In their FAC, Plaintiffs provide new factual averments and reallege their bad faith claim against Defendant. (Doc. 13 at 2 – 5). Safeco filed a second Motion to Dismiss Count Two of Plaintiffs' FAC, or in the Alternative, to Bifurcate. Safeco argues that the Court should dismiss Plaintiffs' bad faith claim because Plaintiffs failed to satisfy the pleading standard required by Rule 8 of the Federal Rules of Civil Procedure. Safeco also contends that it had an arguable or debatable reason for denying coverage, based on Plaintiffs' allegations and the terms of the insurance contract that is central to Plaintiffs' claim. (Doc. 13 at 6 – 13).
In response, Plaintiffs argue that their FAC satisfied Rule 8's pleading requirements in accordance with this District's precedent in Georgia-Pacific Consumer Prod. LP v. Zurich Am. Ins. Co. , 184 F. Supp. 3d 1337 (S.D. Ala. 2016). (Doc. 15 at 1 – 4). As to Safeco's argument that it had an arguable or debatable reason for denying coverage, Plaintiffs' counter that an insurer's reliance on a policy provision does not establish an arguable or debatable reason as a matter of law. (Doc. 15 at 1 – 2). In its Reply, Safeco reiterates that Plaintiffs insufficiently pled their bad faith claim by merely reciting and relying on upon the elements of bad faith. (Doc. 16 at 2 – 7). Safeco also urges the Court to dismiss Plaintiffs' bad faith claim because Plaintiffs failed to adequately plead that Safeco lacked an arguable or debatable reason for denying coverage, where Safeco had provided ample reason for denial. (Doc. 16 at 7 – 11). Safeco contends that Plaintiffs' failure to adequately respond is enough, itself, to warrant dismissal of the bad faith claim. (Doc. 16 at 8 n.1).
LEGAL STANDARD
Safeco's Rule 12(b)(6) Motion to Dismiss requires the court to construe "the complaint in the light most favorable to the plaintiff and accept[ ] all well-pled facts alleged ... in the complaint as true." Austin v. Auto Owners Ins. Co. , 2012 WL 3101693, at *2 n.2, 2012 U.S. Dist. LEXIS 105862, at *5 n. 2 (S.D. Ala. 2012) ; see also Boyd v. Medtronic, PLC , No. 2:17-cv-01588-LSC, 2018 WL 1964572 at *3, 2018 U.S. Dist. LEXIS 69962 at *7-8 (N.D. Ala. Apr. 26, 2018) (stating "This Court ... ‘assume[s] the[ ] veracity’ of the complaint's ‘well-pleaded factual allegations’ and ‘determine[s] whether they plausibly give rise to an entitlement to relief.["] ) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). To withstand Safeco's Motion to Dismiss, Plaintiffs must plead enough facts to state a claim to relief that is plausible on its face, so as to nudge their claims across the line from conceivable to plausible. See Iqbal , 556 U.S. 662, 678–680, 129 S.Ct. 1937. A claim has facial plausibility when plaintiffs plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937 ; see also Austin , 2012 WL 3101693, at *4, 2012 U.S. Dist. LEXIS 105862, at *16 ("The complaint must ‘allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ ") (quoting Speaker v. United States HHS CDC & Prevention , 623 F.3d 1371, 1380 (11th Cir. 2010) ). Review of the complaint is a context-specific task that requires the Court to draw on its judicial experience and common sense. Iqbal , 556 U.S. at 679, 129 S.Ct. 1937. "Although notice pleading does not require a plaintiff to specifically plead every element of his cause of action, a complaint must still contain enough information regarding the material elements of a cause of action to support recovery under some ‘viable legal theory.’ " American Federation of Labor and Congress of Indus. Organizations v. City of Miami , 637 F.3d 1178, 1186 (11th Cir. 2011). Minimum pleading standards "require[ ] more than labels and conclusions." Young v. Midwest Recovery Sys. , 2019 WL 7882532 at *6, 2019 U.S. Dist. LEXIS 213587 at *14 (S.D. Ala. Dec. 10, 2019) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). General accusations and "a formulaic recitation of the elements of a cause of action will not do." ( Id. ).
DISCUSSION
Safeco claims that Plaintiffs' bad faith claim should be dismissed because Plaintiffs' allegations demonstrate that Safeco had a reasonable or debatable reason for denying coverage under the policy. (Doc. 13 at 6 – 7). Specifically, Safeco argues that because "Earth Movement" is not a covered peril under the policy and Plaintiff's FAC shows that earth movement caused, in part, the damage their home sustained, Plaintiffs fail to state a bad faith claim as a matter of law. In response, Plaintiffs assert that adoption of Safeco's argument would allow insurers to escape liability where a complaint alleges that the insurer relied on a policy provision for denying a claim. Plaintiffs reiterate, too, that they adequately pled their claim per Georgia-Pac. Consumer Prod. LP v. Zurich Am. Ins. Co. , 184 F. Supp. 3d 1337 (S.D. Ala. 2016). (Doc. 15 at 1 – 5). In reply, Safeco repeats that Plaintiffs failed to demonstrate that it lacked a reasonable or debatable reason for denying Plaintiffs coverage, and that Plaintiffs' reliance on Georgia-Pacific is misplaced. (Id. at 7 – 11).
Safeco also points out that Plaintiffs failed to specifically respond to its arguments on this front. See Doc. 18 at 8 n. 1.
The Court finds Safeco's argument that Plaintiffs failed to proffer sufficient allegations to show Safeco lacked a reasonable or debatable reason for denying coverage persuasive. Under Alabama law, Plaintiffs must demonstrate the following to succeed on a bad faith claim:
(a) an insurance contract between the parties and a breach thereof by the defendant;
(b) an intentional refusal to pay the insured's claim;
(c) the absence of any reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason);
(d) the insurer's actual knowledge of the absence of any legitimate or arguable reason;
(e) if the intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer's intentional failure to determine whether there is a legitimate or arguable reason to refuse to pay the claim.
Ex parte Alfa Mut. Ins. Co. , 799 So.2d 957, 962 (Ala. 2001) (quoting National Security Fire & Casualty Co. v. Bowen , 417 So.2d 179, 183 (Ala. 1982) ). Neither party disputes the existence of the homeowner's insurance contract or Safeco's denial of coverage. The issue is whether Plaintiffs have adequately pled the absence of a debatable reason for Safeco's denial of coverage. Indeed, Safeco contends that Plaintiffs have effectively pled the existence of a debatable reason for denial.
In their FAC, Plaintiffs allege that their insurance policy from Safeco covered certain "enumerated perils," and that sometime in December 2016, they noticed cracks in the concrete slab in their home. Plaintiffs filed a claim with Safeco after observing this damage. (Doc. 12 at 2). Thereafter, Safeco representatives met with Plaintiffs' contractor at Plaintiffs' home to discuss the damage. (Id. at 2). During the meeting, Plaintiffs' contractor gave Safeco's representatives an invoice from Twin States Plumbing, LLC. The invoice indicated that the cracks in Plaintiffs' home were caused by a plumbing leak on the supply side of Plaintiffs' home. (Id. ). Safeco denied coverage on March 30, 2017. Safeco's letter to Plaintiffs stated as the reason for denial that "all damage appears to be related to earth movement of your structure;" no further explanation was provided. (Id. ). Plaintiffs' contractor sent Safeco an email on May 4, 2017, requesting it review the claim information and re-evaluate its coverage decision. (Id. at 3). In that email, Plaintiffs' contractor stated that the "sudden and accidental below slab plumbing leak affected the slab support soils which, in turn, caused the slab cracking and settlement." (Id. ).
Plaintiffs allege that the policy provision upon which Safeco relied to deny coverage was inapplicable, that Safeco intentionally misapplied said provision, that Safeco intentionally failed to investigate the claim, that Safeco intentionally and wrongfully denied coverage, that Safeco knew its liability to pay the full claim in accordance with the policy, and that no reasonable insurance company would have denied coverage under the circumstances. (Id. ).
In order to demonstrate a bad faith claim, an insured must show that "he is entitled to a directed verdict on the contract claim." Nationwide Mut. Fire Ins. Co. v. D.R. Horton, Inc. , 2016 WL 5867044 at *14, 2016 U.S. Dist. LEXIS 139043 at *44 (S.D. Ala. Oct. 6, 2016). However, to defeat a bad faith claim, a defendant "does not have to show that its reason for denial was correct, only that it was arguable." Id. "Ordinarily, if the evidence produced by either side creates a fact issue with regard to the validity of the [insurance] claim and, thus, the legitimacy of the denial thereof, the [bad faith] tort claim must fail and should not be submitted to the jury." Nat. Sav. Life Ins. Co. v. Dutton , 419 So.2d 1357, 1362 (Ala. 1982).
In the instant case, Plaintiffs' FAC shows Safeco relied on a policy provision in order to deny coverage. According to Plaintiffs, the Defendant is attempting to thwart their recovery by merely noting this, i.e., Plaintiffs' acknowledgment that Safeco relied on a policy provision to deny coverage. (Doc. 15 at 1 – 3). Plaintiffs mischaracterize Safeco's argument. Safeco does not contend that bad faith claims fail merely because a plaintiff acknowledges that the insurer relied on a policy provision as a basis for denial. Rather, Safeco has demonstrated that the policy provision, which Plaintiffs acknowledge, arguably applied based on Plaintiffs' allegations regarding the cause of their loss.
The FAC reveals that Plaintiffs' contractor acknowledged, and Plaintiffs do not dispute, that earth movement played some part in the damage Plaintiffs suffered. Safeco correctly notes that the contract between the parties specifically excludes coverage for damages to Plaintiffs' home related to earth movement, whether or not the earth movement was the result of water damage. The first paragraph of the contract provision titled, "BUILDING PROPERTY LOSSES WE DO NOT COVER," states:
Here, the Court may consider Safeco's attached insurance contract because it is central to Plaintiffs' claims and neither party challenges its authenticity. Crespo v. Fla. Comm'n on Offender Review , 2017 WL 9324513 at *2, 2017 U.S. App. LEXIS 27918, at *6-7 (11th Cir. Dec. 6, 2017) ; Griffin Indus., Inc. v. Irvin , 496 F.3d 1189, 1199 (11th Cir. 2007) ; Lewis v. BAC Home Loan Servicing LP , 2012 WL 253230, at *1, 2012 U.S. Dist. LEXIS 9106, at *3 (S.D. Ala. Jan. 9, 2012) ("... though the scope of review with respect to a motion to dismiss is generally limited to the four corners of the complaint, the court may consider a document attached to a motion to dismiss without converting the motion into one for summary judgment if the attached document is (1) central to the plaintiff's claim and (2) undisputed.") (internal quotations omitted).
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We do not cover loss caused directly or indirectly by any of the following excluded perils. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area
(Doc. 1-2 at 12). In section nine (9) of that same paragraph, "Earth Movement" is listed as a non-covered loss. Also under section 9, the contract provides that earth movement means, inter alia , the shifting of earth whether combined with water or not. (Doc. 1-2 at 13). Immediately after the "Earth Movement" section, in the "BUILDING PROPERTY LOSSES WE DO NOT COVER" paragraph, the contract notes that water damage is also not covered. To avoid ambiguity, the contract specifies that water damage includes, under sub-section (d):
water which escapes or overflows from drains or related plumbing appliances on the residence premises . However, this exclusion does not apply to overflow and escape caused by malfunction on the residence premises , or obstruction on the residence premises , of a drain or plumbing appliance on the residence premises ...
(Doc. 1-2 at 14) (emphasis in original). Though water damage may be covered in the event that there was a malfunction on the covered premises, subsequent or concurrent earth movement is not. According to Plaintiffs' FAC, their contractor stated that earth movement in conjunction with water damage caused their loss.
Plaintiffs' reliance on Georgia-Pacific, supra, is misplaced. There, the plaintiff's complaint listed the reasons the defendant offered for denying coverage. Georgia-Pacific , 184 F. Supp.3d 1337, at 1340 n. 4. Defendant attempted to show it had arguable reasons for its denial, based merely on the fact that the plaintiff listed the defendant's reasons for denial in its complaint. The court found the defendant's argument unpersuasive stating, "[t]he complaint, however, does not reflect that the reasons [the defendant] gave for denying coverage were arguable, only that they were given. Far from suggesting that [the defendant's] reasons were arguable, the complaint characterizes them as erroneous ..." ( Id. ). The court further found that the defendant could not simply note plaintiff's inclusion of defendant's reasons in the complaint, and then demand that plaintiff rebut the reasons. That would "demand[ ] far too much of the plausibility standard." ( Id. ). Here, unlike Georgia-Pacific , Plaintiffs' FAC does not merely reflect that Defendant's reason were given, but that that they were arguable. The acknowledged contract terms together with the FAC's allegations establish that Defendant's reasons for denial were debatable. See, e.g., Jason's Port City Health Club, Inc. v. Hartford Fire Ins. Co. , 2005 WL 1527692 at *2, 2005 U.S. Dist. LEXIS 48237 at *5 (S.D. Ala. June 27, 2005) (denying a motion to dismiss a bad faith claim because "none of [the complaint's] allegations negate[d] the plaintiff's ability to prove such [the] claim ....").
Plaintiffs' FAC fails to state a bad faith claim as a matter of law.
CONCLUSION
For the reasons set forth herein, Plaintiffs' bad faith claim (Count II) is hereby dismissed for failing to state a claim upon which relief can be granted.
DONE and ORDERED this 29th day of January, 2020.