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Slampak v. Nationwide Insurance Company of America

United States District Court, N.D. West Virginia

July 23, 2019

PHILLIP SLAMPAK and JANIE SLAMPAK, Plaintiffs,
v.
NATIONWIDE INSURANCE COMPANY OF AMERICA, Defendant.

          MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S PARTIAL MOTION TO DISMISS PLAINTIFFS' COMPLAINT

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE.

         I. Background

         The plaintiffs, Philip and Janie Slampak (“Mr. and Mrs. Slampak”), filed a complaint in the Circuit Court for Wetzel County, West Virginia. ECF No. 1-1. The defendant, Nationwide Insurance Company of America (“Nationwide”), removed the civil action to the United States District Court for the Northern District of West Virginia on September 14, 2018. ECF No. 1. The complaint alleges that David Michael Kestner (“Mr. Kestner”) operated an automobile recklessly and negligently, causing a rear-end collision with Mr. Slampak's vehicle, and permanent injuries and damages to Mr. and Mrs. Slampak (Count I). Id. at 8-10. Plaintiffs further allege that Mr. Slampak was insured under an automobile insurance policy or contract that was purchased from defendant Nationwide prior to the automobile accident, and that defendant Nationwide is liable to plaintiffs under the policy or contract for the bodily injuries and damages arising from the automobile accident pursuant to the terms and coverage limits of the policy or contract (Count II). Id. at 11-14. Plaintiffs assert various injuries caused by Mr. Kestner (Count III). Id. at 14-15. Plaintiffs also assert common law misconduct due to defendant Nationwide's unreasonable delay, wrongful denial of liability, and wrongful withholding of payment for Mr. Slampak's claim for underinsured motorists bodily injury insurance benefits covered under the insurance policy by defendant Nationwide (Count IV). Id. at 15-16. Plaintiffs further allege that defendant Nationwide violated the West Virginia Unfair Trade Practices Act (“UTPA”) (Count V), and that defendant Nationwide breached the implied covenant of good faith and fair dealing (Count VI). Id. at 16-27. Plaintiffs also assert a separate count for punitive damages (Count VII). Id. at 22-23. Lastly, plaintiffs allege that Mr. Slampak was forced to hire counsel in order to establish the full amount of his damages and reach the eventual policy limits settlement after defendant Nationwide refused and failed to pay Mr. Slampak's first-party claim under his Nationwide automobile insurance policy. Id. at 23. Plaintiffs state that they substantially prevailed against defendant Nationwide since the eventual policy limits settlement was substantially more than what defendant Nationwide offered for first-party underinsured automobile insurance benefits under the terms and conditions of the Nationwide automobile insurance policy (Count VIII). Id. at 23-24. Therefore, plaintiffs contend that defendant Nationwide directly and proximately caused damages and injury due to its wrongful failure to make prompt, fair, and equitable settlement of this first-party claim. Id. at 24. Mrs. Slampak alleges that due to defendant Nationwide's actions, she “has lost the consortium, society and services of her husband.” Id. at 25. Plaintiffs seek compensatory damages, punitive damages, attorneys' fees and expenses in reaching settlement with defendant Nationwide, and any other attorneys' fees, pre-judgment interest, post-judgment interest, costs, and any other appropriate relief. Id. at 25-26.

         Defendant Nationwide filed a motion to partially dismiss plaintiffs' complaint to limit plaintiffs' claims to common law bad faith (Count IV), and violations of the UTPA (Count V), and, therefore, to dismiss the other Counts. ECF No. 3. In the motion, defendant Nationwide first asserts that plaintiffs settled and released their bodily injury claims arising from plaintiffs' contractual relationship with defendant Nationwide and only preserved allegations of breach of the UTPA and common law bad faith. ECF No. 4 at 6. Therefore, defendant Nationwide asserts that Counts I through III should be dismissed. Id. Second, defendant Nationwide contends that the plaintiffs have released their claim for Hayseeds[1] damages against defendant Nationwide or, in the alternative, the plaintiffs are banned by the doctrine of claim preclusion or issue preclusion, or both, from requesting such damages. Id. Specifically, defendant Nationwide notes that Hayseeds damages arise from a contract and since the plaintiffs' allegations are based on defendant Nationwide's alleged breach of its contractual duties by failing to promptly pay for their injuries, the release prevents the plaintiffs from collecting on Counts I through III. Id. at 6-7. Alternatively, defendant Nationwide indicates that the three factors for claim preclusion apply here since: (1) both the civil action and the prior state court action involve the same parties; (2) the Circuit Court of Wetzel County, West Virginia dismissed their complaint after settlement; and (3) before settlement and dismissal of the prior state court action, plaintiffs pursued attorneys' fees related to their efforts to recover money under their policy. Id. Similarly, defendant Nationwide contends that issue preclusion would also apply here since: (1) the plaintiffs filed a prior state court action against the defendant, which alleged several of the same allegations asserted in this case; (2) the plaintiffs specifically requested attorneys' fees in the previous civil action; and (3) the plaintiffs released their claims in the prior state court action and only preserved certain claims. Id. at 8-9. Third, defendant Nationwide states that under West Virginia law, there is no independent claim for breach of the implied covenant of good faith and fair dealing. Id. at 9 (citing Highmark W.Va., Inc. v. Jamie, 655 S.E.2d 509, 514 ( W.Va. 2007)). Fourth, defendant Nationwide contends that West Virginia law does not recognize an independent claim for punitive damages, and therefore Count VII fails to state a claim upon which relief can be granted. Id. at 10 (citing Susko v. Cox Enters., Inc., No. 5:07-cv-144, 2008 WL 4279673 *4 (N.D. W.Va. Sept. 16, 2008) (Stamp, J.)).

         The plaintiffs filed a response in opposition to defendant Nationwide's motion to partially dismiss plaintiffs' complaint. ECF No. 6. First, the plaintiffs assert that the plain language of the release preserves all claims other than bodily injury claims against defendant Nationwide. Id. at 1. Second, the plaintiffs contend that defendant Nationwide has not provided any basis in the language of the policy that damages for attorneys' fees, annoyance and inconvenience and/or Hayseeds damages were contemplated in the settlement agreement and were expressly excluded from the release and dismissal order. Id. at 3. Third, the plaintiffs assert that claim preclusion does not apply since the law requires substantially different evidence to support a claim for personal injury under a motorist policy than it requires to support a claim for extra contractual damages. Id. at 4 (“One case evaluates whether the insured substantially prevails, while the other case evaluates liability and damages arising from an underinsured loss under a contract of automobile insurance. The underlying tort suit and the instant derivative suit require substantially different evidence to sustain them.”). Fourth, plaintiffs state that there is no statutory or common law requirement that Hayseeds claims must be brought in the same civil action as the underlying suit against a carrier; rather, the plaintiffs contend that it is well settled that “[a] cause of action for insurance bad faith may arise even if there has been a settlement and release of the underlying case against the tortfeasor so long as the release does not cover the insurer and the insurer is, or should be, aware of the possibility of a bad faith action at the time it agrees to the settlement.” Id. at 4-5 (citing Poling v. Motorists Mut. Ins. Co., Syl. Pt. 2, 192 W.Va. 46, 47, 450 S.E.2d 635, 636 (1994)). Fifth, the plaintiffs assert that they are permitted to allege a breach of the covenant of good faith and fair dealing since they are not seeking duplicative damages, but are seeking such damages in the alternative. Id. at 5-6. Fifth, the plaintiffs request leave of court to amend any and all inartful pleading with respect to the claim of punitive damages, indicating that they only seek punitive damages as a remedy rather than as an independent cause of action. Id.

         Defendant Nationwide filed a reply in support of its motion to partially dismiss plaintiffs' complaint. ECF No. 7. First defendant Nationwide asserts that the plaintiffs failed to address why they are not barred from re-pursuing their claims with respect to bodily injury claims that were alleged and released in the prior state court action. Id. at 2. Second, defendant Nationwide contends that the plaintiffs released their Hayseeds damages when they released their underinsured motorist coverage claim since “a claim for Hayseeds relies upon a finding that the insured substantially prevailed against the insurer concerning a coverage dispute under the insurance contract.” Id. at 3. Third, defendant Nationwide states that the plaintiffs are claim precluded from asserting Count VI since the Hayseeds claim relies on the same evidence as their underinsured motorist coverage claim, because the Hayseeds claim depends on whether the plaintiffs substantially prevailed with respect to the insurance claim dispute. Id. at 5-6. Fourth, defendant Nationwide contends that there is no independent cause of action for breach of the implied covenant of good faith and fair dealing, and that such a covenant arises from a contract. Id. at 6. Moreover, defendant Nationwide states that even if there was an independent cause of action, the plaintiffs already released their state court claims and the Circuit Court of Wetzel County, West Virginia already dismissed the plaintiffs' complaint in the prior state court action with prejudice. Id. Lastly, defendant Nationwide requests the Court to dismiss Count VII because “[p]laintiffs agree that West Virginia law does not permit a plaintiff to bring an independent cause of action for punitive damages.” Id. at 7.

         For the reasons stated below, this Court grants defendant Nationwide's motion for partial dismissal with respect to Counts I through III of the complaint, grants as framed the defendant's motion with respect to the punitive damages claim (Count VII), and grants the defendant's motion with respect to the implied covenant of good faith and fair dealing claim (Count VI). This Court denies the defendant's motion with respect to the plaintiffs' Hayseeds claim (Count VIII). Therefore, plaintiffs' claims based on common law misconduct (Count IV), the UTPA (Count V), and Hayseeds (Count VIII) remain.

         II. Applicable Law

         In assessing a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court must accept all well-pled facts contained in the complaint as true. Nemet Chevrolet, Ltd v. Consumeraffairs.com, Inc, 591 F.3d 250, 255 (4th Cir. 2009). However, “legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement fail to constitute well-pled facts for Rule 12(b)(6) purposes.” Id. (citing Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). This Court also declines to consider “unwarranted inferences, unreasonable conclusions, or arguments.” Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009).

         The purpose of a motion under Rule 12(b)(6) is to test the formal sufficiency of the statement of the claim for relief; it is not a procedure for resolving a contest about the facts or the merits of the case. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (3d ed. 1998). The Rule 12(b)(6) motion also must be distinguished from a motion for summary judgment under Federal Rule of Civil Procedure 56, which goes to the merits of the claim and is designed to test whether there is a genuine issue of material fact. Id. For purposes of the motion to dismiss, the complaint is construed in the light most favorable to the party making the claim and essentially the court's inquiry is directed to whether the allegations constitute a statement of a claim under Federal Rule of Civil Procedure 8(a). Id. § 1357.

         A complaint should be dismissed “if it does not allege ‘enough facts to state a claim to relief that is plausible on is face.'” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Facial plausibility is established once the factual content of a complaint ‘allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Nemet Chevrolet, 591 F.3d at 256 (quoting Iqbal, 129 S.Ct. at 1949). Detailed factual allegations are not required, but the facts alleged must be sufficient “to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.

         III. Discussion

         As stated above, this Court grants the defendant's motion for partial dismissal with respect to Counts I through III of the complaint, grants as framed the defendant's motion with respect to the punitive damages claim (Count VII), and grants the defendant's motion with respect to the implied covenant of good faith and fair dealing claim (Count VI). This Court denies the defendant's motion with respect to the plaintiffs' Hayseeds claim (Count VIII). Therefore, the plaintiffs' claims based on common law misconduct (Count IV), the UTPA (Count V), and Hayseeds (Count VIII) remain.

         A. Counts I through III

         The complaint alleges that Mr. Kestner operated a vehicle recklessly and negligently, causing a rear-end collision with Mr. Slampak's automobile, and permanent injuries and damages to Mr. and Mrs. Slampak (Count I). ECF No. 1-1 at 8-10. Plaintiffs further allege that Mr. Slampak was insured under an automobile insurance policy or contract that was purchased from defendant Nationwide prior to the automobile accident, and that defendant Nationwide is liable to plaintiffs under the policy or contract for the bodily injuries and damages arising from the automobile accident pursuant to the terms and coverage limits of the policy or contract (Count II). Id. at 11-14. Plaintiffs then assert various injuries caused by Mr. Kestner (Count III). Id. at 14-15. Defendant Nationwide states that the plaintiffs settled and released their bodily injury claims arising from the plaintiffs' contractual relationship with Nationwide. ECF No. 4 at 6.

The Release states:
. . . the undersigned, does hereby release and forever discharge Nationwide Mutual Insurance Company, its heirs and assigns . . . from any and all liability, claims, actions, causes of action, whatsoever, which the Releasor now has or which may hereafter accrue, on account of or in any way growing out of bodily injuries and damages, having already resulted or to result at any time in the future, whether or not they are in the contemplation of the parties at the present time or whether or not they arise following the execution of this Release, as a result of, due to, arising from, by reason of, or in any way ...

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