The opinion of the court was delivered by: Hay, Chief Magistrate Judge
Gregory L. Fitzpatrick ("Fitzpatrick" or "plaintiff") and Nancy L. Fitzpatrick, his wife, (collectively, "the Fitzpatricks" or "plaintiffs") bring this action against State Farm Insurance Companies and State Farm Mutual Automobile Insurance Company (collectively, "State Farm" or "defendants") seeking damages revolving around State Farm's conduct in settling the Fitzpatricks' claims for underinsured motorist benefits. In their Complaint, filed on October 19, 2009, in the Court of Common Pleas of Allegheny County, Pennsylvania, the Fitzpatricks assert four causes of action: bad faith in violation of 42 Pa. C.S.A. § 8371 (Count I); breach of contract (Count II); breach of fiduciary duty (Count III); and a claim for violating the Unfair Trade Practice and Consumer Protection Law, 73 P.S. § 201, et seq. ("UTPCPL") (Count IV). State Farm timely removed the case to this Court based on diversity and, on November 13, 2009, promptly filed a Motion to Dismiss [Dkt. 3] asking that Counts II, III and IV be dismissed pursuant to Fed. R. Civ. P. 12(b)(6). Because the Fitzpatricks have failed to state claim with respect to Counts III and IV, the motion will be granted in part. Although their breach of contract claim brought at Count II survives, State Farm's motion is also granted to the extent that the Fitzpatricks seek attorney's fees in relation to the alleged breach.
The Fitzpatricks maintained a motor vehicle insurance policy ("the Policy") with State Farm that provided for medical benefits as well as underinsured motorist ("UIM") benefits of $1,000,000 per person, stacked, covering two vehicles. Compl. ¶¶ 13-14, 16. In March of 1997 and again in March of 1998, while the Policy was in effect, Fitzpatrick was involved in two separate automobile accidents in which he was seriously injured. Id. ¶¶ 6, 10, 15. Sometime thereafter State Farm was notified of Fitzpatrick's underlying liability claims and underinsurance claims on the Policy.*fn1 Id. ¶ 17. Fitzpatrick settled all of the underlying liability claims between September of 2000 and February of 2001. Id. ¶ 27.
On October, 26, 2004, counsel for the Fitzpatricks notified State Farm's respective Claims Specialists of the Arbitrator he was naming in the underinsured motorist claims. Id. ¶¶ 31, 32. Over the course of the next two years State Farm sought, and received, certain documentation and information on the claims including Fitzpatrick's medical records; discovery from the underlying liability cases; Fitzpatrick's school transcripts; plaintiffs' expert reports; Fitzpatrick's tax returns from 1993 through 1999 and from 2002 through 2004; and documentation of the salaries and bonuses of similarly situated attorney's at the law firm where Fitzpatrick had been employed. As well, State Farm took Fitzpatrick's Statement Under Oath, had him undergo a psychiatric evaluation and deposed a managing partner at Fitzpatrick's law firm. Id. ¶¶ 35-48.
On November 14, 2006, the Fitzpatricks made a demand of $1,750,000.00 to settle the claims. Id. ¶ 49. After several months of negotiations and counter-offers, the Fitzparticks agreed to settle their claims for $915,000.00, which was paid by State Farm on May 25, 2007. Id. 50-57. The Fitzpatricks allege, however, that State Farm failed to fairly, objectively or diligently evaluate and settle their claims and by failing to act in good faith by, amongst other things, prolonging the process and making offers substantially less than the full value of their claims.
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the United States Supreme Court held that a complaint is properly dismissed under Fed. R. Civ. P. 12(b)(6) where it does not allege "enough facts to state a claim to relief that is plausible on its face." Id. at 570. In assessing the sufficiency of the complaint, the Court must accept as true all allegations in the complaint and all reasonable factual inferences must be viewed in the light most favorable to the plaintiff. Odd v. Malone, 538 F.3d 202, 205 (3d Cir. 2008). The Court, however, need not accept inferences drawn by the plaintiff if they are unsupported by the facts as set forth in the complaint. See California Public Employees' Retirement System v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004), citing Morse v. Lower Merion School District, 132 F.3d 902, 906 (3d Cir. 1997). Nor must the Court accept legal conclusions set forth as factual allegations; rather, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. at 555, citing Papasan v. Allain, 478 U.S. 265, 286 (1986). See Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (Finding that, under Twombly, "labels, conclusions, and a formulaic recitation of the elements of a cause of action" do not suffice; noting that the complaint "must allege facts suggestive of [the proscribed] conduct;" and requiring plaintiff to allege "enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s] of his claim").
State Farm first argues that the Fitzpatricks are unable to succeed on a claim for breach of contract because it has already tendered the proceeds of the Policy to them.
A plaintiff asserting a breach of contract claim under Pennsylvania law must establish three elements: (1) the existence of a contract; (2) a breach of a duty imposed by the contract; and (3) resultant damages. Pennsy Supply, Inc. v. American Ash Recycling Corp., 895 A.2d 595, 600 (Pa. Super. 2006). Generally, a breach of contract claim cannot be sustained where the proceeds of the policy have been paid since, if the plaintiff has received everything due under the policy, there are no damages. Amitia v. Nationwide Mut. Ins. Co., 2009 WL 111578 at *3 (M.D. Pa. Jan. 15, 2009).
The Restatement (Second) of Contracts § 205, however, provides that "[e]very contract imposes on each party a duty of good faith and fair dealing in its performance and its enforcement." Although the Pennsylvania Supreme Court has not formally adopted the Restatement in this regard, it has nevertheless suggested that parties to a contract have a duty to act in good faith and that their failure to do so constitutes a breach of contract. Birth Center v. St. Paul Companies, Inc., 567 Pa. 386, 399, 787 A.2d 376, 385 (2001), quoting Gray v. Nationwide Mut. Ins. Co., 422 Pa. 500, 508, 223 A.2d 8, 11 (1966) ("Breach of [the] obligation [to act in good faith] constitutes a breach of the insurance contract for which an action in assumpsit will lie"). See Ash v. Cont'l Ins. Co., 593 Pa. 523, 533 n.2, 932 A.2d 877, 833 n.2 (2007) (Recognizing that the Superior Court and some members of the Supreme Court have in some cases suggested that the Restatement has been adopted in Pennsylvania). See also Zaloga v. Provident Life and Accidental Ins. Co., 671 F. Supp. 2d 623, 629-30 (M.D. Pa. 2009) (Predicting that "the Supreme Court of Pennsylvania would adopt § 205 -- and impart a contractual obligation of good faith and fair dealing to all contracts -- if it were squarely presented with the issue").
Moreover, the Pennsylvania Supreme Court has found that even where payment has been made to an insured under an insurance policy, he or she may nevertheless have a cause of action for breach of contract against the insurer where he or she has suffered other damages because of the insurer's bad faith conduct in handling the claim. In Birth Center v. St. Paul Companies, Inc., 567 Pa. 386, 787 A.2d 376, for instance, the insurance company refused to make a good faith effort to settle a case brought against its insured despite offers by the plaintiffs to settle the case within the policy limits. The case proceeded to trial resulting in a verdict against the insured in excess of those limits. Id., 567 Pa. At 393, 787 A.2d at 381. Although the insurance company ultimately paid the excess verdict, the insured subsequently brought suit against the insurance company bringing claims for, inter alia, breaching its implied covenant of good faith as well as Pennsylvania's bad faith statute, 42 Pa. C.S.A. § 8371. Id. The insurance company argued, much as State Farm has here, that its payment of the excess verdict precluded the plaintiff's bad faith claims. The Court, however, rejected that argument finding that "there is no reason to limit damages to the amount of the verdict where the insured can show that the insurer's bad faith conduct caused it additional damages." Id., 567 Pa. at 400, 787 A.2d at 385. The Court went on to explain that "[w]here... the insured can prove that it sustained damages in excess of the verdict, the insurer's payment of the excess has little to do with the insured's damages. Accordingly, the insurer's payment of the excess should not free it from other known or foreseeable damages it has caused its insured to incur." Id. See Amitia v. Nationwide Mut. Ins. Co., 2009 WL 111578, at *3 (Declining to dismiss the plaintiff's breach of contract claim despite the fact that benefits under the insurance contract had been paid where the plaintiff sought compensation for the emotional distress that the delayed payment caused). See also Aquila v. Nationwide Mut. Ins. Co., 2008 WL 5348137, at *5 (E.D. Pa. Dec. 15, 2008), ...