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Clugston v. Nationwide Mutual Insurance Co.

May 10, 2006

LAWRENCE CLUGSTON, PLAINTIFF
v.
NATIONWIDE MUTUAL INSURANCE COMPANY, DEFENDANT



The opinion of the court was delivered by: Chief Judge Vanaskie

MEMORANDUM

Plaintiff Lawrence Clugston has filed this diversity action, asserting breach of contract, bad faith liability under 42 Pa. Cons. Stat. Ann. § 8371, and violation of the Unfair Trade Practices and Consumer Protection Law (75 P.S. § 201.1-1, et seq.). Clugston contends that Defendant Nationwide Mutual Insurance Company ("Nationwide") has refused to handle in good faith his claim for benefits arising out of damage to his motor vehicle caused by flooding in his basement garage.

On August 29, 2005, Clugston filed a complaint in the Monroe County Court of Common Pleas. Asserting diversity of citizenship jurisdiction, Nationwide removed the case to the United States District Court for the Middle District of Pennsylvania. Currently pending is Nationwide's motion to dismiss based on Federal Rule of Civil Procedure 12(b)(6), Nationwide's motion to strike Paragraph 20 of Plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(f), and Clugston's motion to strike Exhibit A of Nationwide's motion to dismiss.

Nationwide contends that Clugston has failed, on all counts of his complaint, to state a claim upon which relief can be granted. Because Clugston may not bring a claim based on the implied covenant of good faith and fair dealing (Count I) in this instance, Nationwide's motion to dismiss will be granted as to that count and it will be dismissed with prejudice. In all other respects, Nationwide's motion to dismiss will be denied. Nationwide's motion to strike Paragraph 20 of Plaintiff's complaint will be granted, and Clugston's motion to strike Exhibit A of Nationwide's motion to dismiss will be denied.

BACKGROUND

The Complaint avers as follows: On July 19, 2003, Clugston's automobile suffered damage from flooding in his basement garage caused by heavy rains. Clugston promptly notified Nationwide, his automobile insurance carrier. Nationwide responded by stating that it would have Clugston's automobile repaired within three days. Nationwide, however, did not conduct an evaluation of the damage to Clugston's automobile until August 5, 2003, sixteen (16) days after being presented the claim. Nationwide did not assess the damage to the automobile's interior at this time, only doing so on its second estimate performed on November 23, 2003. Moreover, Nationwide did not repair Clugston's automobile, even though Clugston complained to Nationwide in December 2003 and Nationwide indicated that it would follow up with an appointment.

DISCUSSION

A. Motion to Dismiss Standard

In deciding a motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must draw all reasonable inferences from the facts pled in the complaint and construe them in the light most favorable to the claimant. Unger v. National Residents Matching Program, 928 F.2d 1392, 1400 (3d Cir. 1991); Truhe v. Rupell, 641 F. Supp. 57 (M.D. Pa. 1985). The court, however, need not accept as true "conclusory allegations of law, unsupported conclusions and unwarranted inferences." Pennsylvania House, Inc. v. Barrett, 760 F. Supp. 439, 449-50 (M.D. Pa. 1991). Thus, a Rule 12(b)(6) motion does not serve to question a plaintiff's well-pled facts, but rather tests the legal foundation of the plaintiff's claims. United States v. Marisol, Inc., 725 F. Supp. 833, 836 (M.D. Pa. 1989). The Rule 12(b)(6) movant carries the burden of showing the legal insufficiency of the claims asserted. Johnsrud v. Carter, 620 F. 2d 29, 33 (3d Cir. 1980). A Rule12(b)(6) motion will be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Pennsylvania House, 760 F. Supp. at 449-50; see Brown v. Philip Morris, Inc., 250 F.3d 789, 796 (3d Cir. 2001) ("[w]e may dismiss the complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations").*fn1

B. Count I: Breach of Contract

Count I of Clugston's complaint sounds in breach of contract. Clugston asserts that Nationwide contractually breached the implied covenant of good faith and fair dealing. The Third Circuit found in Northview Motors, Inc. v. Chrysler Motors Corp. 227 F.3d 78, 92 (3d Cir. 2000), however, that Pennsylvania courts would likely deny a claim based on the implied covenant of good faith and fair dealing where another cause of action could be brought based on the same facts.*fn2 See Grider v. Keystone Health Plan, Inc., No. Civ. A. 01-CV-05641, 2003 WL 22182905, at *32-33 (E.D. Pa. Sept. 18, 2003); Hardinger v. Motorists Mut. Ins. Co. No. Civ. A. 03-CV-115, 2003 WL 21250664, at *1-2 (E.D. Pa. Feb. 27, 2003). See also Bohinick v. State Farm Mut. Auto. Ins. Co. No. Civ. A. 99-CV-2278,1999 WL 238947, at *2 n.2 (E.D. Pa. May 29, 1999) ("Nor does Pennsylvania allow a common law breach of contract suit to be brought predicated upon the violation of the implied covenant of good faith and fair dealing. D'Ambrosio v. Pennsylvania Nat. Mut. Cas. Ins. Co., 431 A.2d 966 (Pa. 1981); Evans v. GEICO, 435 A.2d 1258, 1259 (Pa. Super. 1981). Rather, relief for bad faith dealing is appropriately sought under the statutory provisions of 42 Pa. Cons. Stat. Ann. § 8371."). Because Clugston brings a bad faith liability claim, pursuant to 42 Pa. Cons. Stat. Ann. § 8371, based on the same set of facts, he may not bring a claim based on the implied covenant of good faith and fair dealing. Accordingly, Nationwide's motion to dismiss Count I will be granted.

C. Count II: Bad Faith Liability

In Count II of the complaint, Clugston asserts a cause of action under Pennsylvania's "Bad Faith" statute, 42 Pa. Cons. Stat. Ann. § 8371. Clugston alleges that Nationwide acted in bad faith when it failed or refused to adequately investigate and evaluate his loss, to maintain proper communications in the handling of his claim, and to pay his insurance benefits. Nationwide disputes this allegation and argues that its actions do not fall within the ambit of 42 Pa. Cons. Stat. Ann. § 8371.

In Klinger v. State Farm Mut. Auto. Ins. Co, 115 F.3d 230, 233 (3d Cir. 1997), the Third Circuit declared that the proper standard for bad faith claims under section 8371 is set forth in Terletsky v. Prudential Prop. & Cas. Ins. Co., 437 Pa. Super. 108, 649 A.2d 680, 688 (1994), app. denied, 540 Pa. 641, 659 A.2d 560 (1995).*fn3 In Terletsky, the Pennsylvania Superior Court applied a two-part test, both elements of which must be supported with clear and convincing evidence: (1) that the insurer lacked a reasonable basis for ...


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