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Gina Mcwalters and Irene Gallagher v. State Farm Mutual Automobile Insurance Company

July 20, 2011


The opinion of the court was delivered by: Joyner, C.J.


This declaratory judgment, proposed class action has been brought before the Court on Motion of the Defendant to Dismiss Plaintiffs' Complaint. As is explained in the pages which follow, the motion shall be granted in part and several counts of the complaint dismissed.

Factual Background

According to the complaint, Plaintiffs Gina McWalters and Irene Gallagher are residents of Pennsylvania who hold automobile insurance policies issued by Defendant, State Farm Mutual Automobile Company pursuant to the laws of the Commonwealth of Pennsylvania. (Complaint, ¶s 1, 16, 17). Both Plaintiffs were subsequently injured in motor vehicle accidents for which they received treatment from out-of-state medical providers who were not subject to Pennsylvania law. Plaintiffs allege that"Defendant refused to provide proper payments for [their] medical costs by unlawfully applying improper fee schedules in order to reduce the amount that Defendant had to pay in benefits." (Complaint, ¶s 2, 3). Plaintiffs submit that Defendants so acted "purposefully, deliberately, intentionally, willfully, wantonly, recklessly and/or negligently," and they thus seek "class wide determinations of liability and punitive damages to be shared by the Class on behalf of all others similarly situated," as well as "individual damages" under the theories of breach of contract and implied contract, negligence, breach of fiduciary duty, negligent and intentional misrepresentation, and in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law,73 P.S. §201, et. seq. ("UTPCPL"), and Bad Faith Statute, 42 Pa.C. S. §8371. (See, e.g., Complaint, ¶s 4, 5).

By way of the pending motion, Defendant seeks to dismiss the complaint in its entirety pursuant to Fed. R. Civ. P. 12(b)(6).

Standards Governing Rule 12(b)(6) Motions

In considering motions to dismiss, the district courts must "accept as true the factual allegations in the complaint and all reasonable inferences that can be drawn therefrom." Krantz v. Prudential Investments Fund Management, 305 F.3d 140, 142 (3d Cir. 2002); Allah v. Seiverling, 229 F.3d 220, 224 (3d cir. 2000). In so doing, the courts must consider whether the complaint has alleged enough facts to state a claim to reliefthat is plausible on its face. Bell Atlantic v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929, 949 (2007). "It is therefore no longer sufficient to allege mere elements of a cause of action; instead a complaint must allege facts suggestive of the proscribed conduct." Umland v. Planco Financial Services, Inc., 542 F.3d 59, 64 (3d Cir. 2008), quoting Philips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868(2009).


A. Standing to Sue

Defendants first submit that the complaint should be dismissed in its entirety because plaintiffs fail to allege any injury in fact and therefore lack standing to sue under Article III of the Constitution.

It is true that to have standing, a plaintiff must have suffered an "injury in fact" that is "concrete and particularized" and "actual or imminent;" that there must be a causal connection between the injury and the complained-of conduct; and that it must be "'likely ... that the injury will be redressed by a favorable decision.'" Lujan v. Defenders ofWildlife, 504 U.S. 555, 560-561, 112 S. Ct. 2130, 2136, 119 L.Ed.2d 351 (1992)( internal citations omitted). "At the pleading stage, however, general factual allegations of injury resulting from the defendant's conduct may suffice, for, on a motion to dismiss, we presume that general allegations embrace those specific facts that are necessary to support the claim." Id. 504 U.S. at 561, 112 S. Ct. At 2137; Common Cause v. Pennsylvania, 558 F.3d 249, 257 (3d Cir. 2009)(quoting Lujan).

In this case, while we concur with Defendant that the complaint does not contain many factual averments concerning the particulars of their damages, Plaintiffs do nevertheless allege that:

"[a]s a direct and proximate cause of Defendant's breach, Plaintiffs and members of the class have suffered injuries in the form of economic loss, specifically the obligation to pay medical bills which should have been paid by Defendant in accordance with Plaintiffs' insurance policies..." (Complaint, ¶s are 34, 39, 44, 53, 62-63, 74, 83, 89). These allegations are, we find, sufficient to withstand a 12(b)(6) motion and to confer standing on the plaintiffs. The motion to dismiss on the grounds of insufficient standing is therefore denied.

B. Gist of the Action and Economic Loss Doctrines

Defendants next assert that the economic loss rule and the gist of the action doctrine bar the tort claims contained in Counts 3 (negligence), 5 (intentional misrepresentation) and 6(negligent misrepresentation). Because Plaintiffs concede that Counts II (Breach of Implied Covenant), III (Negligence) and Four (Breach of Fiduciary Duty) should be dismissed based upon the arguments advanced by Defendant, *fn1 those counts shall be dismissed with prejudice from the Complaint. We thus need only consider the impact of the gist of the action and economic loss doctrines on Counts Five and Six.

Although yet to be formally adopted by the Pennsylvania Supreme Court, the gist of the action and economic loss doctrines have repeatedly been applied by the Pennsylvania Superior and Commonwealth courts, the Third Circuit and the U.S. District Courts in Pennsylvania, all of which have predicted its eventual adoption. See, e.g., Werwinski v. Ford Motor Co., 286 F.3d 661 (2002); Factory Market v. Schuller International, 987 F. Supp. 387 (E.D. Pa. 1997); Grode v. Mutual Fire Insurance Co., 156 Pa. Cmwlth. 366, 623 A.2d 933 (1993); REM Coal Co. v. Clark Equipment Co., 386 Pa. Super. 401, 563 A.2d 128 (1989). "The gist of the action doctrine bars plaintiffs from bringing a tort claim that merely replicates a claim for breach of an underlying ...

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