United States District Court, N.D. West Virginia
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART MERITAIN'S MOTION TO DISMISS [DKT. NO.
M. KEELEY UNITED STATES DISTRICT JUDGE.
October 12, 2017, the plaintiffs, Timothy and Mary Shaffer
(collectively, “the Shaffers”), filed a complaint
in the Circuit Court of Monongalia County, West Virginia,
against the defendants, National Health Insurance Company
(“National”) and Meritain Health, Inc.
(“Meritain”) (Dkt. No. 1-3). After the defendants
removed the case to this Court (Dkt. Nos. 1; 4), Meritain
moved to dismiss the Shaffers' complaint. For the reasons
stated on the record during the scheduling conference, and
for the following reasons, the Court GRANTS in
part and DENIES in part the motion
(Dkt. No. 12).
Court's recitation of the facts is taken from the
complaint and construed in the light most favorable to the
Shaffers. See De'Lonta v. Johnson, 708 F.3d 520,
524 (4th Cir. 2013). National provides health insurance to
individuals in West Virginia, and Meritain acts as “the
administrator of and agent for the health insurance
policies” issued by National (Dkt. No. 1-3 at 1, 6). On
May 29, 2015, Mr. Shaffer was laid off from his job at a coal
mine. Although eligible for COBRA benefits, the Shaffers
could not afford the premiums. Instead, on July 1, 2015, they
purchased health insurance policies from National and paid
their premiums in a timely manner. Id. at 2.
January 2016, Mr. Shaffer underwent treatment for cancer and
incurred substantial medical bills. Mrs. Shaffer also
incurred medical expenses. Rather than approve and pay the
Shaffers' bills, National and Meritain repeatedly denied
payment, often alleging that they needed additional
information from medical providers. Id. at 3. But
the explanations of benefits and letters sent to the Shaffers
failed to specify what information was missing, and the
defendants never provided reasonable explanations for their
failure to pay the claims. Id. at 3-5.
Shaffers' medical providers supplied the defendants with
any reasonable information requested. At one point, when Mrs.
Shaffer spoke to the defendants, she was advised that they
needed pharmaceutical records. Mrs. Shaffer provided the
requested records, but the defendants still failed to pay the
claims. Id. at 3-4. Due to the defendants'
failure to promptly investigate and pay the Shaffers'
medical bills, medical providers have made collection demands
on the Shaffers, and the Shaffers have been forced to make
payment arrangements. Id. at 5. Given the financial
strain caused by Mr. Shaffer's unemployment, the
defendants' failure to pay has caused the Shaffers
substantial and severe distress. Id.
Meritain's role as third-party administrator, the
Shaffers allege that it “knew, understood, implemented
and condoned the misconduct of National in failing to pay the
plaintiffs' medical providers for many of the services
they rendered to the plaintiffs even though it was well aware
of the fact that it was delaying and/or denying payment for
services covered by the health insurance policies.”
Id. at 6. The Shaffers further allege that they
“have been treated with continual delays and/or
denials” as “part of a pattern and practice of
the defendants designed to delay or deny valid health
insurance in this and, on information and belief,  in other
cases.” Id. They make the following claims: 1)
breach of contract, 2) Unfair Trade Practices Act/common law
bad faith, and 3) conspiracy/aiding and abetting.
Id. at 8-13.
STANDARD OF REVIEW
Civ. P. 12(b)(6) allows a defendant to move for dismissal on
the grounds that a complaint does not “state a claim
upon which relief can be granted.” When reviewing the
sufficiency of a complaint, a district court “must
accept as true all of the factual allegations contained in
the complaint.” Anderson v. Sara Lee Corp.,
508 F.3d 181, 188 (4th Cir. 2007) (quoting Erickson v.
Pardus, 551 U.S. 89, 94 (2007)). “While a
complaint . . . does not need detailed factual allegations, 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.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal citation omitted). A court is “not bound to
accept as true a legal conclusion couched as a factual
allegation.” Papasan v. Allain, 478 U.S. 265,
286 (1986). In order to be sufficient, “a complaint
must contain ‘enough facts to state a claim to relief
that is plausible on its face.'” Anderson,
508 F.3d at 188 n.7 (quoting Twombly, 550 U.S. at
547). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). A motion to dismiss
“does not resolve contests surrounding the facts, the
merits of a claim, or the applicability of defenses.”
Republican Party of N.C. v. Martin, 980 F.2d 943,
952 (4th Cir. 1992).
deciding a motion to dismiss, the Court “may also
consider documents attached to the motion to dismiss, so long
as they are integral to the complaint and authentic.”
Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176,
180 (4th Cir. 2009). The Court has considered the following
documents, which Meritain attached to its motion to dismiss:
the National health insurance policy, the Administrative
Services Agreement (“ASA”) between National and
Meritain, and an ASA amendment (Dkt. Nos. 12-1; 12-2; 12-3).
federal court exercising diversity jurisdiction is obliged to
apply the substantive law of the state in which it
sits.” Volvo Const. Equip. N. Am. v. CLM Equip.
Co., Inc., 386 F.3d 581, 599-600 (4th Cir. 2004) (citing
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79 (1938)).
The Court must apply West Virginia law. See Beckley
Mech., Inc. v. Erie Ins. & Cas. Co., 374 Fed.Appx.
381, 383 n.1 (4th Cir. 2010) (unpublished decision) (citing
Erie, 304 U.S. 64).
Count One - Breach of Contract
regard to Count One, Meritain contends that it cannot be
liable for breach of contract because it is not a party to
the insurance policies issued by National (Dkt. No. 13 at
4-5). Indeed, “[i]t is well-settled that ‘[a]
non-party to a contract cannot be sued for breach of that
contract.'” Ohio Valley Health Servs. &
Educ. Corp. v. Riley, 149 F.Supp.3d 709, 715 (N.D.W.Va.
2015) (quoting A. Hak Indus. Servs. BV v. TechCorr USA,
LLC, 2014 WL 7243191, at *12 (N.D.W.Va. Dec. 19, 2014)).
Moreover, “[t]he Shaffers recognize that Meritain is
not liable for breach of contract” (Dkt. No. 21 at 2,
8). The Court thus GRANTS Meritain's
motion to dismiss Count One.
Count Two - Bad Faith
pleaded as one claim, Count Two actually raises different
theories of common law bad faith and statutory bad faith.
Meritain argues that each is defective. As discussed below,
the Shaffers have not pleaded a viable common law bad faith
claim against Meritain but have stated a claim for statutory
Common Law Bad Faith
to Meritain, because it is not a party to the Shaffers'
insurance contracts, it cannot be liable for common law bad
faith (Dkt. No. 13 at 5-6). This contention is well-founded.
There is undoubtedly “a common law duty of good faith
and fair dealing running from an insurer to its
insured.” Elmore v. State Farm Mut. Auto. Ins.
Co., 504 S.E.2d 893, 896 ( W.Va. 1998) (citing
Hayseeds, Inc. v. State Farm Fire & Cas., 352
S.E.2d 73 (1986)). In Elmore, however, the Supreme
Court of Appeals rejected the possibility that a third party
to an insurance contract can maintain a common law bad faith
claim against an insurer:
[T]he common law duty of good faith and fair dealing in
insurance cases under [West Virginia] law runs between
insurers and insureds and is based on the existence of a
contractual relationship. In the absence of such a
relationship there is simply nothing to support a common law
duty of good faith and fair dealing on the part of insurance
carriers toward third-party claimants.
Id. at 897. In Grubbs v. Westfield Insurance
Co., this Court applied the holding in Elmore
to a common law bad faith claim by a policyholder against an
insurer's adjuster. 430 F.Supp.2d 563, 567 (N.D.W.Va.
2006). The Court reasoned that insurance agents and adjusters
have no contractual relationship with the insured, and thus
owe no common law duty of good faith and fair dealing to an
insured. Id. at 567-68.
Shaffers concede (Dkt. No. 21 at 8), the principles of
Elmore and Grubbs dictate the same result
in this case. Meritain allegedly acted as National's
administrator and agent with regard to the policies (Dkt. No.
1-3 at 1, 6), but the Shaffers have not alleged a contractual
relationship with Meritain that would impose a common law
duty of good faith and fair dealing. See Elmore, 504
S.E.2d at 897; Grubbs, 430 F.Supp.2d at 567. They
thus cannot maintain a claim for common law bad ...