Yoon v. The Travelers Indemnity Company

[3] 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 * * * 7 TAEKKEUN YOON, et al., Case No. 2:20-CV-1507 JCM (EJY) 8 Plaintiff(s), ORDER 9 v. 10 THE TRAVELERS INDEMNITY COMPANY Dba TRAVELERS HOME AND MARINE 11 INSURNCE COMPANY, 12 Defendant(s). [13] 14 Presently before the court is defendant The Standard Fire Insurance Company’s 15 (“Standard”) motion to dismiss plaintiffs’ second amended complaint. (ECF No. 27). 16 Plaintiffs Taekkeun Yoon and Su Jung Kim responded in opposition (ECF No. 30) to which 17 Standard replied (ECF No. 33). 18 I. BACKGROUND 19 This is a case about an insurer allegedly mishandling an underinsured/uninsured 20 motorist claim. Plaintiffs were rear-ended by non-party driver Bradley Biles. (Second Am. 21 Compl., ECF No. 24 ¶¶ 6–10). They suffered personal injuries and need ongoing treatment. 22 (Id. ¶¶ 12–13). Biles settled with plaintiffs for his full $30,000 policy limit. (Id. ¶¶ 14–15). 23 Plaintiffs made a claim with Standard for their full $100,000 per person and $300,000 per 24 accident UIM policy limit. (Id. ¶¶ 16–19). They presented Standard “with $43,624 in past 25 medical specials and $21,375–$44,375 in future medical specials” incurred by Yoon and 26 “$29,663.20 in past medical specials and $13,600–$18,600 in future medical specials” 27 incurred by Kim. (Id. ¶¶ 24–27 (cleaned up)). [28] 1 After its investigation, Standard “made a final settlement offer . . . of $6,500 for 2 [Yoon] and $6,000 for [Kim].” (Id. ¶ 29). Standard has still not made any payments nor has 3 it provided “a reasonable explanation of the basis in the insurance policy, with response to 4 the facts of Plaintiff’s claim and the applicable law, for the denial of the UIM Claim or for an 5 offer to settle or compromise the UIM Claim.” (Id. ¶ 35). Plaintiffs allege five claims for 6 relief: (1) breach of contract, (2) contractual breach of the implied covenant of good faith and 7 fair dealing, (3) tortious breach of the implied covenant of good faith and fair dealing, (4) 8 violations of Nevada’s Unfair Claims Practices Act, and (5) declaratory relief. (Id. ¶¶ 50– 9 94). Standard now moves to dismiss under Rule 12(b)(6). (ECF No. 27). 10 II. LEGAL STANDARD 11 Federal Rule of Civil Procedure 8 requires every complaint to contain a 12 “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. 13 Civ. P. 8. Although Rule 8 does not require detailed factual allegations, it does require more 14 than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” 15 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). In other words, a complaint 16 must have plausible factual allegations that cover “all the material elements necessary to 17 sustain recovery under some viable legal theory.” Bell Atl. Corp. v. Twombly, 550 U.S. 544 , 18 562 (2007) (citation omitted) (emphasis in original); see also Mendiondo v. Centinela Hosp. 19 Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). 20 The Supreme Court in Iqbal clarified the two-step approach to evaluate a complaint’s 21 legal sufficiency on a Rule 12(b)(6) motion to dismiss. First, the court must accept as true all 22 well-pleaded factual allegations and draw all reasonable inferences in the plaintiff’s favor. 23 Iqbal, 556 U.S. at 678–79. Legal conclusions are not entitled to this assumption of truth. Id. 24 Second, the court must consider whether the well-pleaded factual allegations state a plausible 25 claim for relief. Id. at 679. A claim is facially plausible when the court can draw a 26 reasonable inference that the defendant is liable for the alleged misconduct. Id. at 678. 27 When the allegations have not crossed the line from conceivable to plausible, the complaint [28] 1 must be dismissed. Twombly, 550 U.S. at 570 ; see also Starr v. Baca, 652 F.3d 1202 , 1216 2 (9th Cir. 2011). 3 If the court grants a Rule 12(b)(6) motion to dismiss, it should grant leave to amend 4 unless the deficiencies cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., [5] 957 F.2d 655, 658 (9th Cir. 1992). Under Rule 15(a), the court should “freely” give leave to 6 amend “when justice so requires,” and absent “undue delay, bad faith or dilatory motive on 7 the part of the movant, repeated failure to cure deficiencies by amendments . . . undue 8 prejudice to the opposing party . . . futility of the amendment, etc.” Foman v. Davis, 371 9 U.S. 178 , 182 (1962). The court should grant leave to amend “even if no request to amend 10 the pleading was made.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) 11 (internal quotation marks omitted). 12 III. DISCUSSION 13 The gravamen of the second amended complaint is that Standard gave plaintiffs a 14 lowball final settlement offer. (ECF No. 24 ¶¶ 25–35; see also ECF No. 30 at 4 n.1 15 (“Defendant is alleged to have ultimately made an offer to Plaintiff that is approximately 16 $7,000 below Plaintiff [sic] past medical specials, and does not account or [sic] any pain and 17 suffering or the cost of future medical treatment.”)). Aside from this, most if not all the 18 complaint is legal conclusions or formulaic recitations of elements or statutes. In fact, 19 exactly the same formulaic recitations are pled under each claim. (ECF No. 24 ¶¶ 54, 67, 20 84). Even so, the court will address some more specific defects of each claim in turn. But 21 plaintiffs may be able to cure some defects through amendment and, after all, the court did 22 not address the sufficiency of plaintiffs’ factual allegations in its first dismissal order. (See 23 ECF No. 23). Thus, dismissal is without prejudice and with leave to amend where 24 appropriate, giving plaintiffs a third and likely final bite at the apple. 25 A. Breach of Contract 26 Plaintiffs allege that Standard breached the contract by “failing to honor the UIM 27 insurance contract” and cite to subsections of Chapter 686A of the Nevada Administrative 28 Code. (ECF No. 24 ¶ 54); see also infra section III.C. They do not point to any “actual 1 provision of the insurance policy upon which a breach of contract claim” can be based. 2 (ECF No. 27 at 5). Plaintiffs’ breach of contract claim is DISMISSED without prejudice and 3 with leave to amend. 4 B. Breaches of the Implied Covenant of Good Faith and Fair Dealing 5 The implied covenant of good faith and fair dealing arises out of every contractual 6 relationship and “prohibits arbitrary or unfair acts by one party that work to the disadvantage 7 of the other.” Nelson v. Heer, 163 P.3d 420, 427 (Nev. 2007). Alongside this contractual 8 relationship is a special relationship between an insurer and its insured—akin to a fiduciary 9 relationship—which can create tort liability. Allstate Ins. Co. v. Miller, 212 P.3d 318 , 325– 10 26 (Nev. 2009). 11 A contractual breach arises when “terms of a contract are literally complied with but 12 one party . . . deliberately countervenes the intention and spirit of the contract.” Hilton 13 Hotels Corp. v. Butch Lewis Productions, Inc., 808 P.2d 919 , 922–23 (Nev. 1991). In other 14 words, a contractual breach of the implied covenant cannot rest on the same conduct as a 15 breach of contract. Jimenez v. GEICO Gen. Ins. Co., 448 F. Supp. 3d 1108 , 1113 (D. Nev. 16 2020). The two claims can be alternative theories of liability but “all elements of each cause 17 of action must be properly pleaded.” Id. (citation omitted). Plaintiffs have made no 18 allegations that support a contractual breach of the implied covenant. In fact, in pleading the 19 claim, they allege that Standard “failed to honor the UIM insurance contract.” (ECF No. 24 20 ¶ 67); accord McKinnon v. Hartford Ins. Co. of the Midwest, No. 2:12-cv-1809-RCJ-CWH, [21] 2013 WL 1088702 , at *5 (D. Nev. Mar. 14, 2013) (dismissing a contractual breach of the 22 implied covenant claim). 23 As to a tortious “bad faith” breach, the insured must plausibly allege that “the insurer 24 had no reasonable basis for disputing coverage, and that the insurer knew or recklessly 25 disregarded the fact that there was no reasonable basis for disputing coverage.” Powers v. 26 United Services Auto. Ass’n, 962 P.2d 596, 604 (Nev. 1998) opinion modified on denial of 27 reh’g, 979 P.2d 1286 (1999). That is, bad faith requires an insurer’s denial of benefits to be 28 both objectively and subjectively unreasonable. Rivas v. Gov’t Employees Ins. Co., No. 1 2:20-cv-306-JCM-NJK, 2020 WL 3128596 , at *2 (D. Nev. June 12, 2020). And an insurer’s 2 honest mistake, bad judgment, or negligence is not enough. See Miller, 212 P.3d at 330 . 3 Again, the gravamen of the complaint is that Standard gave plaintiffs a lowball final 4 settlement offer. (ECF No. 24 ¶¶ 25–35). But an allegation that an insurer failed to pay or 5 reasonable settle a claim within the policy limits cannot support a bad faith claim. 6 Schumacher v. State Farm Fire & Cas. Co., 467 F. Supp. 2d 1090, 1096 (D. Nev. 2006) 7 (“State Farm did not deny the claim, it just paid a different value than Schumacher requested. 8 Under the reasoning of Pioneer, this makes the complaint more of one based upon statutory 9 violations of NRS 686A.310 than it does a bad faith action.”); Kuloloia v. Ohio Security 10 Insurance Co., No. 2:18-cv-405-JCM-PAL, ECF No. 25 at 4. 11 Or as Standard correctly puts it: “There is absolutely no explanation provided as to 12 why [its] counteroffers were unreasonable given the amount of medical treatment and the 13 prior payments [p]laintiffs received from the tortfeasor’s insurance policy.” (ECF No. 27 at 14 10). Plaintiffs’ contractual and tortious breaches of the implied covenant claims are 15 DISMISSED without prejudice and with leave to amend. 16 C. Violations of Nevada’s Unfair Claims Practices Act 17 To start, the complaint is littered with references to Chapter 686A of the Nevada 18 Administrative Code. (ECF No. 24 ¶¶ 33–34, 54, 67, 84).1 Because the Nevada Department 19 of Insurance has exclusive jurisdiction over these regulations and plaintiffs have not pled that 20 they exhausted their administrative remedies, there is no claim for which relief can be 21 granted under these regulations. Accord First Nat. Bank of Ely v. Progressive Cas. Ins. Co., 22 No. 3:11-cv-00859-RCJ-WGC, 2012 WL 5944847 , at *6 (D. Nev. Nov. 27, 2012). Plaintiffs 23 do not dispute this in their opposition. (ECF No. 30). [24] 1 Plaintiffs explain these references as follows: “[T]he First Amended Complaint was 25 plead sufficiently as it relates to Plaintiffs’ bad faith claims. However, Defendant complained that NRS 686A.310 was not referenced . . . enough. Therefore, and just to be sure, Plaintiffs 26 included more references to NRS 686A.310 in its Second Amended Complaint. Nevada is a notice-pleading state and Defendants are certainly on notice that Plaintiffs are alleging that 27 Defendants did not live up to \their duty of care as set forth in NRS Chapter 686A and NAC Chapter 686A.” (ECF No. 30 at 3). While Nevada may be a notice pleading jurisdiction, 28 this case is in federal court where the days of notice pleading are long gone. See supra section II (discussing the Twombly-Iqbal pleading standard). 1 Aside from references to unenforceable insurance regulations, the rest of the fourth 2 claim—and most of the complaint—is “nothing more than the language of” Nevada’s Unfair 3 Claims Practices Act. Chang v. CSAA Gen. Ins. Co., No. 2:14-cv-1411-GMN-CWH, 2015 4 WL 1443175 , at *2 (D. Nev. Mar. 30, 2015); see (ECF No. 24 ¶¶ 54, 67, 84). These “type of 5 cut-and-paste” recitations of elements and statutes are “precisely what the Supreme Court 6 held to be insufficient in Iqbal and Twombly.” Chang, 2015 WL 1443175 , at *2. Missing 7 are plausible allegations of what exact conduct by Standard—other than offering a lower 8 settlement amount—was an unfair claims practice. (ECF No. 27 at 8).2 Plaintiffs’ claims 9 under Nevada’s Unfair Claims Practices Act are DISMISSED without prejudice and with 10 leave to amend. 11 D. Declaratory Relief 12 Declaratory relief is a remedy and not a standalone claim. Antaredjo v. Nationstar 13 Mortg., No. 2:13-cv-1532-JCM-CWH, 2014 WL 298810 , at *3 (D. Nev. Jan. 27, 2014). 14 This claim is thus DISMISSED with prejudice. But this dismissal does not preclude 15 plaintiffs from seeking declaratory relief as a remedy for their remaining substantive claims. 16 IV. CONCLUSION 17 Accordingly, 18 IT IS HEREBY ORDERED, ADJUDGED, and DECREED that Standard’s motion to 19 dismiss (ECF No. 27) be, and the same hereby is, GRANTED. 20 … 21 … 22 … 23 … 24 … [25] 2 Plaintiffs have the same pleading problems as the plaintiff in Kuloloia: “Plaintiff 26 argues that inherent in the factual allegation that Ohio Security offered $80,000 in settlement is the allegation that Ohio Security had no reason or explanation to justify such offer, that 27 Ohio Security failed to investigate the claim, and that Ohio Security therefore violated NRS § 686A.310. The court will not divine such inferences from the mere discrepancy of 28 plaintiff’s financial demands and Ohio Security’s settlement offer.” Kuloloia, ECF No. 25 at 5 (internal citations omitted). 2 IT IS FURTHER ORDERED that plaintiffs may file a third amended complaint within 21 days of this order. Failure to do so with result in dismissal of this case with prejudice. 5 DATED May 17, 2021. 6 NEAL © Malar 4 UNITED STATES DISTRICT JUDGE [28] es C. Mahan District Judge _7-