United States District Court, W.D. Pennsylvania
Barry Fischer Senior U.S. District Judge.
case arises out of a contractual agreement between Plaintiff
Pittsburgh Logistics Systems, Inc. (“PLS”) and
Defendant MRE -- Money Running Enterprize (“MRE”)
pursuant to which MRE was to ship stainless steel tubes from
Houston, Texas to Wellington, Ohio on behalf of PLS'
client but the goods were either lost or stolen during
transit. (Docket No. 17). Despite being served, MRE did not
appear and defend PLS' breach of contract, fraud,
negligent misrepresentation, and negligence claims, resulting
in the recent entry of a default judgment against MRE in the
amount of $88, 909.15. (Docket No. 54). The instant disputes
surround PLS' remaining claims of fraud, negligent
misrepresentation and negligence against Defendants
Progressive Casualty Insurance Company
(“Progressive”) and Coverwallet, Inc,
(“Coverwallet”), which are MRE's insurer and
insurance agent. (Id.). In short, PLS reimbursed its
client for the loss but its claim against MRE's insurance
policy with Progressive was denied because the policy was
cancelled due to non-payment by MRE. (Id.).
Presently before the Court are contested motions to dismiss
filed by Progressive and Coverwallet and a motion by PLS
seeking leave to file a Second Amended Complaint reinstating
a statutory bad faith claim against these Defendants. (Docket
Nos. 19; 21; 23). The motions have been exhaustively briefed
and the Court heard oral argument, making them ripe for
disposition. (Docket Nos. 19-25; 27; 30-31; 36; 40; 42;
46-47). After careful consideration of all of the
parties' arguments, and for the following reasons,
Progressive and Coverwallet's motions to dismiss ,
 will be granted, and PLS' motion to amend  will
Court writes primarily for the parties, it dispenses with a
lengthy recitation of the facts and only briefly references
the well-established standards governing motions to dismiss
under Rule 12(b)(6) and motions to amend under Rule 15(a),
which are more fully set forth in other decisions by this
Court. See e.g., Battle Born Munitions, Inc. v.
Dick's Sporting Goods, Inc., Civ. A. No. 18-1418,
2019 WL 1978429, at *4 (W.D. Pa. May 3, 2019). To this end,
when reviewing a motion to dismiss under Rule 12(b)(6), the
Court must “accept all factual allegations in the
complaint as true, [and] construe the complaint in the light
most favorable to the plaintiff, ” see Phillips v.
County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008),
however, a complaint must be dismissed if it does not allege
“enough facts to state a claim for relief that is
plausible on its face, ” see Bell Atlantic
v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167
L.Ed.2d 929 (2007). Leave to amend may be denied under Rule
15 if the proposed amended complaint would fail to state a
plausible claim for relief. See Shane v.
Fauver, 213 F.3d 113, 115 (3d Cir. 2000)
(“Futility” in this context “means that the
complaint, as amended, would fail to state a claim
Court's estimation, PLS has failed to state plausible
claims for relief against Progressive and Coverwallet in both
the operative First Amended Complaint and its proposed Second
Amended Complaint, making this case subject to dismissal
without leave to amend. See Twombly, 550 U.S. at
570; see also Shane, 213 F.3d at 115. The
Court reaches these conclusions for several reasons.
neither Progressive nor Coverwallet have any relationship
with PLS, (contractual or otherwise), and it is settled law
that injured parties generally have no direct cause of action
against a tortfeasor's insurer or insurance agent to
recover a loss purportedly covered by an insurance policy, as
PLS is attempting here. See e.g., Apalucci v.
Agora Syndicate, 145 F.3d 630, 633 (3d Cir. 1998)
(“It is well-settled that under Pennsylvania law, an
injured party has no right to directly sue the insurer of an
alleged tortfeasor unless a provision of the policy or a
statute create such a right.”). Rather, the proper
course of action is to bring claims against the insured
tortfeasor, as PLS has done here by asserting various causes
of action and obtaining a default judgment against MRE.
“[t]o sustain a claim for negligence under Pennsylvania
law, Plaintiff must show that: (1) Defendants owed a duty to
Plaintiff; (2) Defendants breached that duty; and (3) that
breach was the proximate cause of Plaintiff's
injuries.” Chandler v. L'Oreal USA, Inc.,
340 F.Supp.3d 551, 562 (W.D. Pa. 2018), aff'd sub
nom. Chandler v. L'Oreal USA, Inc, No.
18-3277, 2019 WL 2452331 (3d Cir. June 12, 2019). PLS'
allegations of negligence against Progressive and Coverwallet
fail to state plausible claims for relief because the federal
regulations cited by PLS, i.e., 49 C.F.R. §§ 387.15
and 387.313(d), do not establish that either entity owed a
duty to PLS or other members of the public regarding the
cancellation of MRE's insurance policy; hence no such
duties were breached nor was there any resulting harm to PLS.
See Id. To the contrary, the cited
regulations pertain to MRE's responsibilities as an
interstate motor carrier to notify the Department of
Transportation of its financial responsibility to protect the
general public from losses caused by its interstate
activities and require certain endorsements to be maintained
as part of insurance policies if it provides proof of
financial responsibility through a certificate of insurance.
See e.g., McGirt v. Gulf. Ins. Co., 207 Fed.Appx.
305, 307-08 (4th Cir. 2006) (explaining regulations).
Relevant here, an MCS-90 endorsement essentially creates a
suretyship by the insurer to protect the public from certain
losses not covered by the insured's policy but the
endorsement is not triggered until a final judgment is
reached against the tortfeasor and a claim is made against
the endorsement. See e.g. Canal Ins. Co. v. Underwriters
at Lloyd's London, 435 F.3d 431, 442 (3d
Cir. 2006) (“an insurer's responsibilities under
the endorsement are triggered when the policy to which it is
attached does not provide coverage to the insured. The
peculiar nature of the MCS-90 endorsement grants the judgment
creditor the right to demand payment directly from the
insurer, and simultaneously grants the insurer the right to
demand reimbursement from the insured.”).
cases have recognized that while the insurer is required to
comply with the notice regulations and advise the Department
of Transportation when a policy is cancelled, a failure to do
so does not affect the policy terms, but could result in the
MCS-90 endorsement being extended until compliance with the
regulations is demonstrated. See e.g. Nat'l
Indep. Truckers Ins. Co. v. Gadway, 860 F.Supp.2d 946,
955 (D. Neb. 2012) (“The Court concludes that as to
injured members of the public, the MCS-90 endorsement
attached to the policy remains in effect at least until the
notice requirement of 49 C.F.R. § 387.313(d) has been
satisfied.”). In its various pleadings, all of which
were submitted before the default judgment was entered, PLS
has not referenced any policy endorsement nor made any claim
as to same. (Docket Nos. 17; 23-1). Regardless, PLS cannot
maintain a direct claim of negligence against Progressive or
Coverwallet based on an alleged failure to comply with the
federal notice regulations because those entities did not owe
any duty to PLS as to same. See id. Thus,
PLS' negligence claims are subject to dismissal.
PLS' fraud and negligent misrepresentation claims
similarly fail due to its inability to sufficiently plead all
of the essential elements of these claims. “In
Pennsylvania, negligent misrepresentation requires proof of:
(1) a misrepresentation of a material fact; (2) made under
circumstances in which the misrepresenter ought to have known
its falsity; (3) with an intent to induce another to act on
it; and; (4) which results in injury to a party acting in
justifiable reliance on the misrepresentation.”
Fleming Steel Co. v. Jacobs Eng'g Grp., Inc.,
373 F.Supp.3d 567, 595 (W.D. Pa. 2019) (quotation omitted)).
“To demonstrate fraud, the plaintiff must establish the
following elements: (1) a representation; (2) which is
material to the transaction at hand; (3) made falsely, with
knowledge of its falsity or recklessness as to whether it is
true or false; (4) with the intent of misleading another into
relying on it; (5) justifiable reliance on the
misrepresentation; and (6) the resulting injury was
proximately caused by the reliance.” Waldschmidt v.
NVR, Inc., No. CV 18-1372, 2018 WL 6433910, at *8 (W.D.
Pa. Dec. 7, 2018) (quotation omitted). Even if PLS had
sufficiently averred that these entities misrepresented that
the policy had been cancelled, which it has not, PLS did not
justifiably rely on same as it proceeded to file this lawsuit
against MRE and obtained a default judgment in the amount of
$88, 909.15. See id. Therefore, PLS'
fraud and negligent misrepresentation claims are dismissed.
PLS' proposed amendment seeking to reinstate its
statutory bad faith claim against Progressive and Coverwallet
is also without merit. Pennsylvania precedent is clear that
only the insured has a right to bring a bad faith claim
against its insurer. See e.g., LeBoon v. Zurich
Am. Ins. Co., 673 Fed.Appx. 173, 176 (3d Cir. 2016)
(“In that LeBoon plainly is not an Insured under the
liability policy, he failed to state a plausible claim for
relief on his allegations of bad faith.”);
Grudkowski v. Foremost Ins. Co., 556 Fed.Appx. 165,
170 (3d Cir. 2014) (quoting Toy v. Metro. Life Ins.
Co., 593 Pa. 20, 928 A.2d 186, 199 (2007) (“The
term “bad faith” in section 8371 concerns
“the duty of good faith and fair dealing in the
parties' contract and the manner by which an insurer
discharged its obligations of defense and indemnification in
the third-party claim context or its obligation to pay for a
loss in the first party claim context.”)); Vella v.
State Farm Mut. Auto. Ins. Co., No. 1:17-CV-1900, 2018
WL 1907335, at *2 (M.D. Pa. Apr. 23, 2018) (“In
Pennsylvania, it is well-settled law that a third-party
claimant cannot bring a cause of action for bad faith against
an alleged tortfeasor's liability insurer.”)
(citations omitted). PLS is not the insured and any statutory
bad faith claim is rightly disposed of under Rule 12(b)(6)
for failure to state a plausible claim for relief.
PLS' motion for leave to amend must be denied as the
proposed amendments are futile, for the reasons set forth
above. Shane, 213 F.3d at 115. In addition, PLS has
been provided with numerous opportunities to demonstrate that
this case should move beyond the pleading stage, i.e., it has
filed three separate versions of its complaint, submitted
numerous briefs and presented oral argument, but none of its
allegations nor any of its arguments have demonstrated to
this Court that it has any plausible claims against
Progressive or Coverwallet for negligence, negligent
misrepresentation, fraud or statutory bad faith.
(See Docket Nos. 1-2; 17; 23-2). Accordingly,
PLS' motion seeking leave to amend is denied.
of these reasons, Progressive and Coverwallet's motions
to dismiss ,  are granted and PLS' motion to