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Bare v. Innovative Aftermarket Systems, LP

United States District Court, S.D. West Virginia, Charleston Division

May 5, 2017

JUSTIN BARE, Plaintiff,



         Before the Court is Defendant Innovative Aftermarket Systems, LP's (“Innovative”) Motion to Dismiss. (ECF No. 6.) For reasons discussed below, the Court GRANTS the motion.

         I. BACKGROUND

         This action arises out of a complaint brought by Plaintiff in the Circuit Court of Logan County, West Virginia. (ECF No. 1-1 at 1-8.) According to the First Amended Class Action Complaint (the “Complaint”), Plaintiff purchased a vehicle from a Kentucky automobile dealer on April 14, 2012. (Id. at 2 ¶ 4.) “As part of the sale, Plaintiff also purchased a ‘Protection Plus' policy from [Innovative] for $299.00.” (Id. ¶ 5.) This “Protection Plus” policy allegedly “guaranteed that the anti-theft system [‘the product'] installed on the vehicle would be an effective deterrent to vehicle theft.”[1] (Id. ¶ 6.) In the event that the product did not deter theft and the vehicle was “not recovered within 30 days or recovered and declared a total loss as the result of the theft, ” then Innovative would pay Plaintiff a sum of $2, 500. (Id. ¶ 7.) Plaintiff states that his vehicle was stolen on December 7, 2014, and his automobile insurer allegedly issued him a settlement check on April 24, 2015, for $15, 239.61 after declaring the vehicle a total loss. (Id. ¶¶ 8-9.) Plaintiff asserts that he made a claim under the “Protection Plus” policy on December 15, 2015, and that Innovative denied the claim as untimely based on the policy's filing requirements. (Id. ¶¶ 10-11.)

         Based on these alleged facts, Plaintiff contends that Innovative's actions and its product's policy generate the following causes of action: (1) unlawful sale of insurance in violation of West Virginia insurance law and the West Virginia Consumer Credit and Protection Act (“WVCCPA”), (2) common law breach of contract, (3) violations of the West Virginia Unfair Trade Practices Act (“WVUTPA”), and (4) common law bad faith. (Id. at 3-6 ¶¶ 17-37.) Plaintiff seeks the following remedies on behalf of a similarly situated class of plaintiffs: actual, compensatory, and punitive damages, a refund of premiums paid, a civil penalty for statutory violations, attorneys' fees and costs, pre- and post-judgment interest, and any other just relief. (Id. at 7 ¶¶ 2-9.)

         Plaintiff filed the Complaint in the Circuit Court of Logan County, and Innovative removed the case to this Court on November 17, 2016, pursuant to 28 U.S.C. § 1332(a), (d). (ECF No. 1 at 1; see also Id. at 4-8 ¶¶ 17-28.) Innovative filed its Motion to Dismiss on December 9, 2016. (ECF No. 6.) The motion argues that all of Plaintiff's claims should be dismissed because they all hinge upon the product being insurance, which Innovative contends it is not. (Id. at 3.) Plaintiff responded to Innovative's motion on December 22, 2016, (ECF No. 8), and Innovative filed its reply on January 6, 2017, (ECF No. 12). The Court stayed discovery in this case for a three-month period beginning on February 6, 2017. (ECF No. 17.) The Motion to Dismiss is fully briefed and ripe for adjudication.


         A motion to dismiss for failure to state a claim upon which relief may be granted tests the legal sufficiency of a civil complaint. Fed.R.Civ.P. 12(b)(6). A plaintiff must allege sufficient facts, which, if proven, would entitle him to relief under a cognizable legal claim. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-55 (2007). A case should be dismissed if, viewing the well-pleaded factual allegations in the complaint as true and in the light most favorable to the plaintiff, the complaint does not contain “enough facts to state a claim to relief that is plausible on its face.” Id. at 570. In applying this standard, a court must utilize a two-pronged approach. First, it must separate the legal conclusions in the complaint from the factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Second, assuming the truth of only the factual allegations, the court must determine whether the plaintiff's complaint permits a reasonable inference that “the defendant is liable for the misconduct alleged.” Id. Well-pleaded factual allegations are required; labels, conclusions, and a “formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555; see also King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) (“Bare legal conclusions ‘are not entitled to the assumption of truth' and are insufficient to state a claim.” (quoting Iqbal, 556 U.S. at 679)). A plaintiff's “[f]actual allegations must be enough to raise a right to relief above the speculative level, ” thereby “nudg[ing] [the] claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 555, 570.


         Innovative's first argument in its Motion to Dismiss relies on the premise that the theft-prevention product's accompanying policy is not insurance, which would preclude all of Plaintiff's claims. (See ECF No. 7 at 8.) Innovative states that the West Virginia Insurance Code, the basis for Count I of the Complaint, does not apply to warranties as they are defined in West Virginia Code § 33-4-2(b)(5). (Id. at 4.) Because the product and its accompanying policy fall within a statutory exception to state insurance law, Innovative avers, the company was not required to have any insurance license. (See Id. at 5-8.) Innovative argues that this finding also prevents Plaintiff's other three claims from being legally cognizable because Count II, “premised upon an administrative code provision found in the Insurance Commissioner regulations title, ” applies only to insurers; Count III, “premised upon the Unfair Trade Practices article of insurance code, ” applies only to the sale of insurance; and “Count IV again refers to [Plaintiff] as an insured and refers to West Virginia insurance law.” (Id. at 8.) Alternatively, Innovative attacks all four counts substantively. (See Id. at 8-11.)

         Plaintiff responds that Innovative did not establish as a matter of law that the product's accompanying policy is not insurance. (See ECF No. 8 at 8 (citing W.Va. Code § 33-1-1).) After attempting to distinguish the policy at issue in this case from several in cases cited in Innovative's memorandum of law, Plaintiff concludes that the “aspect of [Innovative]'s motion to dismiss dependent on accepting its characterization of the policy as a warranty should be denied.” (Id. at 17.) Plaintiff further argues that each of the claims is adequately pled. (See Id. at 17-24.)

         Innovative reiterates in its reply that West Virginia adopted a statute in 2000 defining and exempting warranties from the definition of “insurance.” (ECF No. 12 at 4 (citing W.Va. Code § 33-4-2(a)(4)).) It contends that the Safe-Guard Products International, LLC case that Plaintiff relies on is inapposite to the product and policy at issue in this case. (See Id. at 5-6.) Innovative further argues that the Riffe case decided by the West Virginia Supreme Court of Appeals and relied upon by Plaintiff does not affect the application of the “warranty-exemption statute, ” which was passed after the Riffe decision. (See Id. at 6-7.) Innovative asserts that the federal cases cited by Plaintiff in support of his argument are easily distinguished. (See Id. at 8-9.)

         A. The “Protection Plus” Policy is Not Insurance[2]

         The State of West Virginia has codified the definition of “insurance” to mean “a contract whereby one undertakes to indemnify another or to pay a specified amount upon determinable contingencies.” W.Va. Code § 33-1-1. “Generally, an insurance policy sets forth an agreement between parties whereby the insured agrees to pay a specified premium, and, in exchange, the insurer agrees to indemnify the insured against the type of losses contemplated within the terms of the policy yet unknowable at its issuance.” McDaniel v. Kleiss, 503 S.E.2d 840, 846 ( W.Va. 1998) (citations omitted). These policies are typically “issued by third parties and are based on a theory of distributing a particular risk among many customers.” Riffe v. Home Finders Assocs., Inc., 517 S.E.2d 313, 318 ( W.Va. 1999) (quoting Griffin Sys., Inc. v. Washburn, 505 N.E.2d 1121, 1124 (Ill.App.Ct. 1987)). See also 1 Eric Mills Holmes & Mark S. Rhodes, Appleman on Insurance § 1.3 (2d ed. 1996) (“In the insurance contract, the risk of an actual loss is distributed (socialized) among a large group of persons exposed to a comparable risk of loss.”). For the purposes of determining whether a particular policy is one for insurance, courts must look to the substance of the agreement because “[p]olicy means the contract effecting insurance, or the certificate thereof, by whatever name called . . . .” Riffe, 517 S.E.2d at 317 (emphasis in original) (quoting W.Va. Code § 33-1-16).

         Chapter 33 of the State's code, which is dedicated to insurance law, specifically exempts warranties from the chapter's reach. W.Va. Code § 33-4-2(a)(4). That same section defines “warranty” in the following manner:

“Warranty” means in relation to a product or service an undertaking that guarantees indemnity for defective parts, mechanical or electrical breakdown, labor costs or other remedial measures, such as repair or replacement of the product or repetition of services and that is made solely by the manufacturer, importer or seller of the product or services made without payment of additional consideration, not negotiated or separated from the sale of the product or service and incidental to the sale of the product or service.

§ 33-4-2(b)(5). Commentators have noted that, generally, “a warranty is not an insurance contract in that the former only promises indemnity against defects in the article sold, while the latter indemnifies against loss or damage resulting from perils outside of and unrelated to defects in the article itself.” 1 Eric Mills Holmes & Mark S. Rhodes, Appleman on Insurance § 1.3 (2d ed.

         1996) (citations omitted) (noting that a warranty “may be so drafted, however, as to contain an agreement to indemnify from peril outside of and unrelated to inherent weaknesses in the goods themselves and ...

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