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Jack v. State Farm Fire & Casualty Co.

United States District Court, E.D. Pennsylvania

March 3, 2017

LAWRENCE JACK
v.
STATE FARM FIRE AND CASUALTY COMPANY

          MEMORANDUM RE: MOTION TO DISMISS

         I. Introduction

         This case involves a dispute over a failure to negotiate an extension of Defendant State Farm Fire and Casualty Company's (“State Farm”) one-year suit limitation policy. Plaintiff Lawrence Jack filed a complaint against State Farm, his insurance carrier, which consists of two claims: (1) breach of contract, and (2) bad faith under 42 Pa.C.S. Section 8371. Before the Court now is State Farm's Motion to Dismiss Plaintiff's bad faith claim under Federal Rule of Civil Procedure 12(b)(6). For the reasons explained below, State Farm's Motion is granted without prejudice.

         II. Factual and Procedural History

         Taking Plaintiff's allegations as true, the factual background is as follows. Plaintiff held a homeowner's insurance policy (the “Policy”) with State Farm that included a provision stating that any lawsuit by an insured must be filed within one year of the date of loss. ECF No. 1, Notice of Removal, Ex. A (Complaint) ¶ 5. On March 6, 2015, Plaintiff suffered a covered loss under the Policy, and he made a timely claim for loss to his building and personal property as well as for living expenses. Id. ¶ 4. State Farm paid Plaintiff the limits of liability for the building claim and an additional sum for his personal property. Id. ¶¶ 6-7. On July 23, 2015, State Farm sent a letter to Plaintiff which notified Plaintiff that he would be able to receive further benefits for the loss to the building upon Plaintiff's completion of repairs and replacements of the damaged property. Id. ¶ 8. It further stated that Plaintiff could recover withheld depreciation of his personal property upon Plaintiff's replacement of that property. Id. ¶ 9. On October 5, 2015, State Farm issued another letter, stating that the building loss benefits described in the July 23, 2015 letter would be available until March 6, 2017 and the personal property benefits offered would be available until March 31, 2016. Id. ¶ 10.

         Cognizant of the Policy's one-year suit limitation clause, which would bar Plaintiff from filing suit against State Farm in regard to the covered loss after March 6, 2016, Plaintiff consulted with a public adjuster. Id. ¶ 11. The adjuster notified State Farm that the necessary repairs might not be done before March 6, 2016, and asked for a six-month extension of the provision to ensure that Plaintiff would not lose his right to sue if the repairs were not completed before the suit period expired. Id. ¶¶ 11, 13. State Farm refused to extend the one-year suit provision and, as a result, Plaintiff initiated this action by filing a praecipe for writ of summons on March 2, 2016. Id. ¶¶ 13-15. On September 13, 2016, State Farm filed a praecipe for a rule to file a complaint, prompting Plaintiff's request that State Farm withdraw it and enter into a tolling agreement stating that Plaintiff would not waive his right to sue if the repairs were not completed by March 6, 2016. Id. ¶¶ 17-19. State Farm's counsel responded that Plaintiff would have to release any bad faith claim against State Farm in order for State Farm to consider entering into a tolling agreement. Id. ¶ 20. However, when Plaintiff's counsel offered to waive any claims of past bad faith in exchange for a tolling agreement which would give Plaintiff an additional year to complete any necessary repairs, State Farm sent a status letter reiterating the one-year suit limitation provision and not responding to Plaintiff's offer. Id. ¶ 22.

         Soon after, Plaintiff filed a complaint consisting of two claims: (1) breach of contract, and (2) bad faith under 42 Pa.C.S. Section 8371. Id. ¶ 23. The complaint was filed in Lancaster County Court of Common Pleas and later removed to this Court. On November 14, 2016, State Farm filed a Motion to Dismiss the bad faith claim under Rule 12(b)(6), alleging that Plaintiff had failed to state a claim upon which relief can be granted (ECF No. 3). Plaintiff responded on December 1, 2016 (ECF No. 5) and State Farm filed a reply on December 7, 2016 (ECF No. 7).

         III. Legal Standard

         In considering a motion to dismiss under Rule 12(b)(6), “we accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff. Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011) (internal quotation marks and citations omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.”' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Pleadings must include at least some factual allegations to support the legal claims asserted.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). “[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (quoting Iqbal, 556 U.S. at 678).

         IV. Discussion

         At issue is whether Plaintiff has stated a claim under 42 Pa.C.S. Section 8371, which allows plaintiffs to recover interest, punitive damages, court costs, and attorneys' fees for bad faith conduct by insurers in denying benefits or handling claims. See Terletsky v. Prudential & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. 1994). The term “bad faith” concerns “any frivolous or unfounded refusal to pay proceeds of policy.” Toy v. Metro. Life Ins. Co., 928 A.2d 186, 199 (Pa. 2007) (quoting Black's Law Dictionary 139 (6th ed. 1990)). “[M]ere negligence or bad judgment does not constitute bad faith; knowledge or reckless disregard of a lack of a basis for denial of coverage is necessary [and] [e]ven questionable conduct giving the appearance of bad faith is not sufficient to establish it so long as the insurer had a reasonable basis to deny coverage.” Post v. St. Paul Travelers Ins. Co., 691 F.3d 500, 523 (3d Cir. 2012). To state a claim for bad faith, a plaintiff must allege sufficient facts to establish that (1) the insurer lacked a reasonable basis for denying the benefits under the policy and (2) the insurer knew or recklessly disregarded its lack of reasonable basis. Id. at 522 (citing Condio v. Erie Ins. Exch., 899 A.2d 1136, 1143 (Pa. Super. Ct. 2006)).

         The Eastern District of Pennsylvania recently decided a motion to dismiss a bad faith claim, and its decision is instructive here. In Davis v. Nationwide Mutual Insurance Company, No. 16-3878, 2017 WL 85388 (E.D. Pa. Jan. 10, 2017), the plaintiff alleged that Nationwide had breached its contract with him and acted in bad faith by refusing to pay benefits due under his automobile insurance policy after he suffered serious injuries in a car accident. Id. at *1. The court held that, regardless of whether Nationwide failed to pay the plaintiff entirely or made an offer of $7, 500 as Nationwide contended, the plaintiff had alleged enough facts for his bad faith claim to survive, due to the extent of his injuries and the amount of coverage he had. Id. at *3. The court concluded that, “[a]ssuming the truth of these allegations, an unreasonably low offer, or no offer, could be bad faith on the part of Nationwide.” Id.

         Conversely, this Court has recently held that a number of complaints were insufficient to overcome a Rule 12(b)(6) motion. See Zinno v. Geico, No. 16-792, 2016 WL 5100540 (E.D. Pa. Sept. 19, 2016); Mills v. Allstate Ins. Co., No. 15-4824, 2015 WL 5707303 (E.D. Pa. Sept. 29, 2015); Allen v. State Farm Mut. Auto. Ins. Co., No. 14-7367, 2015 WL 1072968 (E.D. Pa. Mar. 12, 2015); Eley v. State Farm Ins. Co., No. 10-5564, 2011 WL 294031 (E.D. Pa. Jan. 31, 2011).

         Most recently, in Zinno, this Court considered a complaint in which the plaintiff alleged that his insurer had unreasonably declined to offer him underinsured motorist coverage benefits. Zinno, 2016 WL 5100540, at *1. The plaintiff's claims could be distilled to the following:

“Defendant has failed to evaluate Plaintiff's claim, Defendant has failed to make a reasonable settlement offer, Defendant is prioritizing its own interests over Plaintiff's interests, and Defendant is forcing ...

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