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Mary Ann Robinson and Daniel Robinson, Husband and Wife v. Nationwide Mutual Insurance Company

February 26, 2013


The opinion of the court was delivered by: Buckwalter, S.J.


Currently pending before the Court is Defendant Erie Insurance Company's Motion to Dismiss Plaintiffs Mary Ann and Daniel Robinson's Bad Faith Claims, Defendant S.W. Krout, Inc.'s Motion to Dismiss Plaintiffs' Punitive Damage Claims, and Defendant Nationwide's Motion to Bifurcate. For the following reasons, Erie and Nationwide's Motions are denied and S.W. Krout's Motion is granted.


This suit arises out of two floods that damaged Plaintiffs' home. The facts, as set forth in the Second Amended Complaint, are as follows. Plaintiffs' home in Horsham, Pennsylvania, was insured by Defendants Nationwide Mutual Insurance Company ("Nationwide") and Erie Insurance Company ("Erie"). (Second Am. Compl. ¶¶ 1, 5--8.) Nationwide provided a flood insurance policy on the property while Erie provided a homeowner's insurance policy. (Id. ¶¶ 5--8.)

On August 28, 2011, the property flooded as a result of Hurricane Irene, causing property damage. (Id. ¶¶ 9--10.) On August 29th, the Robinsons had the water from the flooded basement pumped out. (Id. ¶ 11.) Thereafter, they hired Defendant S.W. Krout Inc. ("Krout") to repair their heater and level their oil tank. (Id.) However, Defendant Krout failed to cap off the fuel oil tank. (Id. ¶ 12.) Upon noticing this, the Robinsons called Krout to return to the residence and properly cap the tank. (Id.) Defendant Krout failed to come out and cap the tank. (Id. ¶ 13.) Krout stated on the phone to Plaintiffs that they were too busy to come out and fix the dangerous condition. (Id. ¶ 14.) On or about September 4th, a flood adjuster from Nationwide came to the property to assess the damage from the hurricane. (Id. ¶ 20.) The adjustor informed the Robinsons that their heater could be repaired or replaced, but that the fuel tank did not need replacement. (Id.)

On September 8th, the property was again flooded as a result of Tropical Storm Lee. (Id. ¶ 21.) As a result of this flooding, the fuel oil tank in the Robinsons' home fell over, and half a tank of oil-approximately 130 gallons-spilled out of the tank. (Id. ¶ 23.) Due to the damage, Plaintiffs were unable to continue living in their home and were forced to pay for a rental unit. (Id. ¶¶ 25--26.) Plaintiffs also needed to hire an environmental company to assess and clean up the hazardous condition at their home. (Id. ¶ 28.) Additionally, Plaintiffs suffered serious medical problems. (Id. ¶ 27.) Neither Nationwide nor Erie has paid for the damage sustained to Plaintiffs' property. (Id. ¶¶ 35, 42, 51, 59.)

On August 12, 2012, the Robinsons filed suit against Nationwide, Erie, and S.W. Krout in the Court of Common Pleas for Montgomery County, Pennsylvania. The case was removed to this Court on September 5, 2012. After an Amended Complaint and two rounds of Motions to Dismiss, a Second Amended Complaint was filed on December 24, 2012 alleging ten claims: Counts I and II for breach of contract against Nationwide; Counts III and IV for breach of contract against Erie; Counts V and VI for bad faith against Erie, Counts VII and VIII for negligence against S.W. Krout by Mary Ann and Daniel Robinson respectively; and Counts IX and X for loss of consortium against S.W. Krout by Mary Ann and Daniel Robinson respectively. On January 14, 2013, Erie filed a Motion to Dismiss the bad faith claims against it. On the same day, S.W. Krout filed a Motion to Dismiss the claims against it for punitive damages. The Robinsons filed responses to both Erie and Krout's motions on January 29, 2013. Additionally, on January 24, 2013, Nationwide filed a Motion to Bifurcate the Trial. On February 8, 2013, Krout filed a Response in opposition to Nationwide's Motion. On February 11, 2013, the Robinsons also filed a Response in opposition. Finally, on February 19, 2013, Nationwide filed a Reply. The Court will now consider the merits of these Motions.


A. Standard of Review

Under Rule 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. Fed. R. Civ. P.12(b)(6); see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the United States Supreme Court recognized that "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. Following these basic dictates, the Supreme Court, in Ashcroft v. Iqbal, 556 U.S. 662 (2009), subsequently defined a two-pronged approach to a court's review of a motion to dismiss. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678. Thus, although "Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era . . . it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Id. at 678--79. Second, the Supreme Court emphasized that "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679. "Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. A complaint does not show an entitlement to relief when the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct. Id.; see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232-34 (3d Cir. 2008) (holding that: (1) factual allegations of complaint must provide notice to defendant; (2) complaint must allege facts suggestive of the proscribed conduct; and (3) the complaint's "'factual allegations must be enough to raise a right to relief above the speculative level'") (quoting Twombly, 550 U.S. at 555)).

Notwithstanding these new dictates, the basic tenets of the Rule 12(b)(6) standard of review have remained static. Spence v. Brownsville Area Sch. Dist., No. Civ.A.08-626, 2008 WL 2779079, at *2 (W.D. Pa. July 15, 2008). The general rules of pleading still require only a short and plain statement of the claim showing that the pleader is entitled to relief and need not contain detailed factual allegations. Phillips, 515 F.3d at 233. Further, the court must "accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff." Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). Finally, the court must "determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Pinkerton v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002).

B. Discussion

The Pennsylvania General Assembly has promulgated a statute under which insurers may be held liable for their "bad faith" actions towards insureds.*fn1 While the statute does not explicitly define "bad faith," both the Pennsylvania federal and state courts have recognized that, in the insurance context, "bad faith" is synonymous with "frivolous or unfounded refusal to pay proceeds of a policy." Keefe v. Prudential Prop. & Cas. Ins. Co., 203 F.3d 218, 225 (3d Cir. 2000) (internal citations and quotations omitted); Treadways, LLC v. Travelers Indem. Co., No. Civ.A.08-4751, 2011 WL 1672022, at *2--3 (E.D. Pa. May 4, 2011) (citing Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994)) (further citation omitted); Atiyeh v. Nat'l Fire Ins. Co., 742 F. Supp. 2d 591, 598 (E.D. Pa. 2010) (internal citations omitted). In order to prevail on a bad faith claim, a claimant must show by clear and convincing evidence that: (1) the defendant insurer did not have a reasonable basis for denying the policy benefits; and (2) that the insurer knew or recklessly disregarded its lack of reasonable basis when it denied the claim. Keefe, 203 F.3d at 225 (3d Cir. 2000) (further citation omitted). The "clear and convincing" standard requires a claimant to show that "the evidence is so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith." J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 367 (3d Cir. 2004) (internal quotations and citation omitted). Moreover, the claimant must show that the insurer acted in bad faith based on some motive of self-interest or ill will. Atiyeh, 742 F. Supp. 2d at 598 (citing Brown v. Progressive Ins. Co., 860 A.2d 493, 501 (Pa. Super. Ct. 2004)). In doing so, a claimant need not show that the insurer's conduct was fraudulent, but mere negligence or bad judgment is insufficient to make out a claim based on bad faith. Id.

In seeking to dismiss the bad faith claim, Erie contends that Plaintiffs have failed to allege facts sufficiently to support an allegation of bad faith. In doing so, Erie cites this Court's opinion in an analogous case, Miracle Temple Christian Academy v. Church Mut. Ins. Co., No. Civ.A.12-995, 2012 WL 1286751, at *3 (E.D. Pa., Apr. 16, 2012). In that case, we dismissed a bad faith allegation by noting that the claim fell short of Iqbal's standard since it alleged nothing more than conclusory legal statements. Id. In doing so, we remarked that the complaint failed to allege ...

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