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Mid-State Automotive, Inc. v. Harco National Insurance Co.

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

November 18, 2019

MID-STATE AUTOMOTIVE, INC., et al., Plaintiffs,
v.
HARCO NATIONAL INSURANCE CO. Defendant.

          MEMORANDUM OPINION AND ORDER

          JOSEPH R. GOODWIN, UNITED STATES DISTRICT JUDGE

         Pending before the court is Defendant Harco National Insurance Company's Motion to Dismiss Counts II and III [ECF No. 7]. For the reasons that follow, the Motion is GRANTED in part and DENIED in part.

         I. Introduction

         Mid-State Automotive, Inc., Rodney LeRose II, Jonathan LeRose, Mid-State Properties, LLC, and Mid-State Ford, LLC (“Plaintiffs”) brought the current action against Defendant Harco National Insurance Co. (“Harco”). Plaintiffs obtained insurance coverage from Harco for their businesses. Compl. [ECF No. 1]. On June 9, 2017, a fire devastated the building and business personal property owned by Plaintiffs. Id. at ¶ 12. Plaintiffs presented claims to their insurer, Harco, for the substantial damages to their building, business personal property, lost business income, and increased expenses as a result of the fire. Id. at ¶ 13. Harco accused Plaintiffs of arson and refused to pay the benefits to which they were entitled under their insurance policy. Id. at ¶¶ 15-16. Plaintiffs then hired counsel. Id. at ¶17.

         Plaintiffs' counsel asked Harco to pay the value of the damage to the business personal property and to pay the policy limit for damage to the building. Id. at ¶¶ 20, 22. After months of negotiations, Plaintiffs and Harco resolved the claim for damages to business personal property. Id. at ¶ 25. After continued requests by Plaintiffs and delays by Harco, Harco tendered the policy limit for damages to the building caused by the fire almost two years later on April 3, 2019. Id. at ¶¶ 21-26.

         On May 24, 2019, Plaintiffs initiated the instant action against Defendant alleging a breach of contract claim in Count I, a Hayseeds damages claim in Count II, a breach of the implied covenant of good faith and fair dealing in Count III, and an unfair claims settlement practices claim in Count IV. On August 2, 2019, Defendant Harco moved to dismiss Counts II and III for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

         II. Legal Standard

         Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). “When ruling on a motion to dismiss, courts must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in favor of the plaintiff.” Farnsworth v. Loved Ones in Home Care, LLC, No. 2:18-CV-01334, 2019 WL 956806, at *1 (S.D. W.Va. Feb. 27, 2019). To survive a motion to dismiss, the plaintiff's factual allegations, taken as true, must “state a claim to relief that is plausible on its face.” Robertson v. Sea Pines Real Estate Co., 679 F.3d 278, 288 (4th Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Although “the complaint must contain sufficient facts to state a claim that is plausible on its face, it nevertheless need only give the defendant fair notice of what the claim is and the grounds on which it rests.” Ha l v. DIRECTV, LLC, 846 F.3d 757, 777 (4th Cir. 2017). “[A] complaint is to be construed liberally so as to do substantial justice.” Id.

         III. Discussion

         a) Count II: Substantially Prevailing Damages

         Harco moves to dismiss Count II of Plaintiffs' Complaint asking for Hayseeds damages. In West Virginia, “a first-party insured may bring a bad faith claim against an insurer, once the underlying claim has been resolved.” Slampak v. Nationwide Ins. Co. of Am., No. 5:18CV154, 2019 WL 3304814, at *6 (N.D. W.Va. July 23, 2019). “Such a claim typically arises from the insurer's duty to settle with its insured on a claim for which the insured was legally entitled to recover.” Id. (internal quotes removed). However, it is “of little importance whether an insurer contests an insured's claim in good or bad faith.”[1] Hayseeds, Inc. v. State Farm Fire & Cas., 352 S.E.2d 73, 79 (W.Va. 1986). “In either case, the insured is out his consequential damages and attorney's fees.” Id.

         In the seminal Hayseeds case, the West Virginia Supreme Court of Appeals held that when a policyholder “substantially prevails in a property damage suit against an insurer, ” the policyholder is entitled to reasonable attorney's fees in vindicating the claim, damages for economic loss caused by the delay in settlement, and aggravation and inconvenience. 352 S.E.2d 73, 80 (W.Va. 1986). In Jordan v. Nat'l Grange Mut. Ins. Co., the Court explained “that an insured ‘substantially prevails' in a property damage action against his or her insurer when the action is settled for an amount equal to or approximating the amount claimed by the insured immediately prior to the commencement of the action, as well as when the action is concluded by a jury verdict for such an amount.” 393 S.E.2d 647, 652 ( W.Va. 1990) (emphasis added). The insured can recover reasonable attorney's fees “as long as the attorney's services were necessary to obtain payment of the insurance proceeds.” Id. “To hold otherwise would be unfair to the insured, who originally purchased the insurance policy to be protected from incurring attorney's fees and expenses arising from litigation.” Hayseeds, 352 S.E.2d at 79.

         Here, Plaintiffs submitted a claim under their insurance policy issued by Harco for damages to their building and business personal property from the June 9, 2017 fire. Harco accused Plaintiffs of arson and refused to pay. As a result, Plaintiffs hired counsel to recover their benefits. After months of negotiations and delays from Harco, Harco agreed to pay the policy limit for damages to the building and resolved the business personal property claim. Thus, Plaintiffs have stated sufficient facts at this stage showing they substantially prevailed when Harco tendered the full policy limit for the damage to their business prior to the commencement of this action. See Jordan, 393 S.E.2d at 652. Plaintiffs have also shown that an “attorney's services were necessary to obtain payment of the insurance proceeds.” See id.

         Harco argues this claim should be dismissed because the matter was settled before a lawsuit was initiated. However, the West Virginia Supreme Court of Appeals has stated that a plaintiff “substantially prevails in a property damage action” when the action is settled “prior to the commencement of the action.” See id. In addition, Defendant Harco has not cited any cases stating a Hayseeds claim ...


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