-PAL Engel et al v. Hartford Insurance Company of the Midwest, No. 2:2011cv01103 - Document 27 (D. Nev. 2011)
Court Description: ORDER Granting in part and Denying in part 4 Motion to Dismiss. The second claim for unfair claims practices under the NRS is dismissed with respect to claims under subsections 686A.310(1)(c) and (1)(f). Granting 13 Motion to Dismiss. The fourth claim for unfair claims practices under the NAC is dismissed. Signed by Chief Judge Robert C. Jones on 12/7/2011. (Copies have been distributed pursuant to the NEF - SLR)
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-PAL Engel et al v. Hartford Insurance Company of the Midwest Doc. 27 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF NEVADA 8 TERESA ENGEL et al., 9 Plaintiffs, 10 vs. 11 12 HARTFORD INSURANCE CO. OF THE MIDWEST, 13 Defendant. ) ) ) ) ) ) ) ) ) ) ) 2:11-cv-01103-RCJ-PAL ORDER 14 15 This case arises out of the refusal of an insurance company to pay the full amount of 16 underinsured motorist (“UIM”) coverage demanded by the injured insured. Pending before the 17 Court is Defendant’s Motions to Dismiss (ECF Nos. 4, 13). Plaintiffs filed an Amended 18 Complaint (“AC”) after the first motion to dismiss but before the second. For the reasons given 19 herein, the Court grants the first motion to dismiss in part and grants the second motion to 20 dismiss in full, as against the AC. 21 I. FACTS AND PROCEDURAL HISTORY 22 Plaintiff Teresa Engel (“Engel”) was injured in a car crash in Clark County, Nevada that 23 was the fault of a non-party. (Compl. ¶ 9, June 6, 2011, ECF No. 1-1). That non-party’s liability 24 insurance only covered $15,000, although Engel’s past economic damages totaled $115,445. (Id. 25 ¶¶ 17, 21). Engel demanded that her insurance company, Defendant Hartford Insurance Co. of Dockets.Justia.com 1 the Midwest (“Hartford”), tender her the UIM policy limits of $250,000. (Id. ¶¶ 12, 48). 2 Hartford ultimately tendered Engel a check for only $85,000 on April 21, 2010. (Id. ¶ 50). In 3 February 2010, Engel’s employer had paid her a lump sum of $105,988.35 as a workers 4 compensation settlement, which amount covered Engel’s economic damages, because the 5 accident occurred within the scope of her employment. (See id. ¶ 38). Engel believes Hartford 6 should still be made to pay the remainder of the $250,000 policy limit on her UIM policy to 7 cover future economic damages and non-economic damages. 8 9 Engel and her husband, Thomas Engel, Sr., sued Hartford in state court on six causes of action: (1) breach of contract; (2) unfair claims practices under Chapter 686A of the Nevada 10 Revised Statutes (“NRS”); (3) breach of the covenant of good faith and fair dealing; (4) breach 11 of fiduciary duty; (5) fraud; and (6) punitive damages. Hartford removed and moved to dismiss 12 the claims for unfair claims practices, breach of fiduciary duty, fraud, and punitive damages. 13 Plaintiffs responded and filed the AC, which includes only four causes of action: (1) breach of 14 contract; (2) unfair claims practices under Chapter 686A; (3) breach of the covenant of good 15 faith and fair dealing; and (4) violations of the Nevada Administrative Code (“NAC”). Hartford 16 filed a new motion to dismiss, targeting only the fourth cause of action in the AC. The Court 17 will consider both motions to dismiss as against the AC, i.e., as against the second and fourth 18 claims for unfair claims practices under the NRS and the NAC. The first and third claims of the 19 AC for breach of contract and bad faith, respectively, are not at issue in the present motions. 20 II. LEGAL STANDARDS 21 Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the 22 claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of 23 what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 24 (1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action 25 that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule Page 2 of 7 1 12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720 2 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for 3 failure to state a claim, dismissal is appropriate only when the complaint does not give the 4 defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell 5 Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is 6 sufficient to state a claim, the court will take all material allegations as true and construe them in 7 the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th 8 Cir. 1986). The court, however, is not required to accept as true allegations that are merely 9 conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden 10 State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action 11 with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a violation 12 is plausible, not just possible. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Twombly, 13 550 U.S. at 555). 14 “Generally, a district court may not consider any material beyond the pleadings in ruling 15 on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the 16 complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner 17 & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents 18 whose contents are alleged in a complaint and whose authenticity no party questions, but which 19 are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) 20 motion to dismiss” without converting the motion to dismiss into a motion for summary 21 judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule 22 of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay 23 Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court 24 considers materials outside of the pleadings, the motion to dismiss is converted into a motion for 25 summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Page 3 of 7 1 Cir. 2001). 2 III. 3 ANALYSIS The first motion to dismiss is mostly moot, because Plaintiffs have abandoned three of 4 the four claims targeted therein, but the first motion can be applied against the AC as to the 5 second claim for unfair claims practices under the NRS, and the second motion to dismiss targets 6 only the fourth claim for unfair claims practices under the NAC. 7 NRS section 686A.310 lists sixteen ways in which a party may violate the statute. See 8 Nev. Rev. Stat. § 686A.310(a)–(p). Plaintiffs did not identify which provision they alleged 9 Defendant to have violated in the Complaint. (See Compl. ¶ 78). In the AC, they now identify 10 subsections (1)(a), (1)(b), (1)(c), (1)(e), (1)(f), (1)(n), and (1)(o) as the bases for the claim, 11 although they mislabel subsections (1)(b) and (1)(c) as (1)(a) and (1)(b), respectively. (See Am. 12 Compl. 15–29, July 29, 2011, ECF No. 8). 13 Subsection (1)(a) makes it a violation to “[m]isrepresent[] to insureds or claimants 14 pertinent facts or insurance policy provisions relating to any coverage at issue.” Nev. Rev. Stat. 15 § 686A.310(1)(a). Plaintiffs allege Defendant violated this provision by offering Engel less than 16 she demanded. (See Am. Compl. ¶ 106). This is not a sufficient claim of misrepresentation. It is 17 a claim of breach. Plaintiffs, however, also allege that Defendant told Engel that in order to 18 receive UIM in excess of $85,000, she first had to petition her employer to reopen her worker’s 19 compensation claim, which was a misrepresentation of the insurance policy provisions. (See 20 id. ¶¶ 107–08). This is a sufficient claim of a misrepresentation regarding the policy provisions. 21 Subsection (1)(b) makes it a violation to “[f]ail[] to acknowledge and act reasonably 22 promptly upon communications with respect to claims arising under insurance policies.” Nev. 23 Rev. Stat. § 686A.310(1)(b). Plaintiffs allege that Defendant had adequate time to investigate 24 the UIM claim because Engel notified Defendant of the accident on February 15, 2008 but that it 25 didn’t make its first offer to her until March 24, 2010, approximately ten weeks after it received Page 4 of 7 1 a doctor’s report concerning her condition. (See Am. Compl. ¶¶ 110–17). Although the dates of 2 communications will become clearer on summary judgment, this is sufficient to state a claim 3 under subsection (1)(b). 4 Subsection (1)(c) makes it a violation to “[f]ail[] to adopt and implement reasonable 5 standards for the prompt investigation and processing of claims arising under insurance 6 policies.” Nev. Rev. Stat. § 686A.310(1)(c). Plaintiffs make no plausible claims under this 7 subsection. They simply allege past and future damages arising out of the accident, note that 8 worker’s compensation does not cover most non-economic damages, and note that Defendant 9 has not compensated her for them. Plaintiffs do not attempt to impugn Defendant’s general 10 11 claim processing standards. Subsection (1)(e) makes it a violation to “[f]ail[] to effectuate prompt, fair and equitable 12 settlements of claims in which liability of the insurer has become reasonably clear.” Nev. Rev. 13 Stat. § 686A.310(1)(e). This claim will likely rest dispositively on the breach of contract claim. 14 If it turns out that there was no breach, then this claim will not be viable. But assuming there 15 was a breach by failure to pay the entire $250,000 claimed under the UIM policy, this claim may 16 be viable. 17 Subsection (1)(f) makes it a violation to “[c]ompel[] insureds to institute litigation to 18 recover amounts due under an insurance policy by offering substantially less than the amounts 19 ultimately recovered in actions brought by such insureds, when the insureds have made claims 20 for amounts reasonably similar to the amounts ultimately recovered.” Nev. Rev. Stat. 21 § 686A.310(1)(f). This provision of the code is somewhat confusing. It seems to say that if an 22 insured makes a claim for X dollars, the insurer offers “substantially less” than X dollars, this 23 causes the insured to sue the insurer, and the insured recovers an amount “reasonably similar” to 24 X dollars, then the insured has a claim under subsection (1)(f). The Court will dismiss this 25 claim. Although it seems clear that Plaintiffs demanded $250,000 and Defendant offered no Page 5 of 7 1 more than $85,000, which is “substantially less,” and that Plaintiffs sued because of this, under 2 the circumstances of this case, the claim is redundant with the other claims. 3 Subsection (1)(n) makes it a violation to “[f]ail[] to provide promptly to an insured a 4 reasonable explanation of the basis in the insurance policy, with respect to the facts of the 5 insured’s claim and the applicable law, for the denial of the claim or for an offer to settle or 6 compromise the claim.” Nev. Rev. Stat. § 686A.310(1)(n). Plaintiffs allege that Defendant’s 7 response to their demand was simply a bald denial that “we have evaluated the case on the 8 information received.” Assuming for the purposes of the motion to dismiss that Defendant gave 9 no further explanation, a claim under subsection (1)(n) is plausible. 10 Subsection (1)(o) makes it a violation to “[a]dvise[] an insured or claimant not to seek 11 legal counsel.” Nev. Rev. Stat. § 686A.310(1)(o). Plaintiffs specifically allege that a Ms. Pavett, 12 one of Defendant’s claims adjusters, told Engel in October 2009 that she did not need an 13 attorney in pursual of her UIM claim. (See Am. Compl. ¶ 203). 14 Finally, Defendant has separately moved to dismiss the claim for violation of Chapter 15 686A of the NAC. Defendant argues that the (“Nevada Department of Insurance”) has exclusive 16 original jurisdiction over claims arising out of insurance regulation violations. The Nevada 17 Supreme Court has held that failure to pursue an administrative violation with NDOI does not 18 preclude subject matter jurisdiction in the district courts but does render the claim unripe and 19 therefore “nonjusticiable.” Allstate Ins. Co. v. Thorpe, 170 P.3d 989, 993–94 (Nev. 2007); see 20 also Brown v. State Farm Fire & Cas. Co., No. 2:10–cv–01843–KJD–LRL, 2011 WL 2295162, 21 at *2 (D. Nev. June 8, 2011) (Dawson, J.) (citing Thorpe, 170 P.3d at 993). 22 /// 23 /// 24 /// 25 /// Page 6 of 7 1 2 CONCLUSION IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 4) is GRANTED in 3 part and DENIED in part. The second claim for unfair claims practices under the NRS is 4 dismissed with respect to claims under subsections 686A.310(1)(c) and (1)(f). The motion is 5 otherwise denied. 6 7 8 9 10 11 IT IS FURTHER ORDERED that the Motion to Dismiss (ECF No. 13) is GRANTED. The fourth claim for unfair claims practices under the NAC is dismissed. IT IS SO ORDERED. Dated this 8th day of November, 2011. 7th day of December, 2011. _____________________________________ ROBERT C. JONES United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 7 of 7
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