Opinion
Case No. 4:19-cv-02132-HNJ
2020-07-08
Steve NORMAN and Jimmie Norman, Plaintiffs v. LIBERTY MUTUAL FIRE INSURANCE COMPANY and ProFire, Defendants
F. Michael Haney, Robert D. McWhorter, Jr, Inzer Haney McWhorter & Haney PA, Gadsden, AL, for Plaintiffs. Frederick Todd Weston, Priscilla Katherine Williams, Christian & Small, LLP, Birmingham, AL, for Defendants.
F. Michael Haney, Robert D. McWhorter, Jr, Inzer Haney McWhorter & Haney PA, Gadsden, AL, for Plaintiffs.
Frederick Todd Weston, Priscilla Katherine Williams, Christian & Small, LLP, Birmingham, AL, for Defendants.
MEMORANDUM OPINION AND ORDER
HERMAN N. JOHNSON, JR., UNITED STATES MAGISTRATE JUDGE Plaintiffs, Steve Norman and Jimmie Norman, filed a Complaint in the Circuit Court of Etowah County, Alabama, alleging the following claims: (1) breach of contract against Liberty Mutual Insurance Company; (2) negligence and/or wantonness against Liberty Mutual Insurance Company; (3) fraud against Liberty Mutual Insurance Company and ProFire; (4) negligence and/or wantonness against ProFire; and (5) combining and concurring negligence against Liberty Mutual Insurance Company and ProFire. (Doc. 1-1). On December 30, 2019, Liberty Mutual Insurance Company removed the case to this court based upon diversity jurisdiction pursuant to 28 U.S.C. § 1332(a), and ProFire consented to the removal. (Docs. 1, 16). On March 31, 2020, the court substituted Liberty Mutual Fire Insurance Company as the proper Defendant, in place of Liberty Mutual Insurance Company. (Doc. 32). The court will hereafter refer to Liberty Mutual Fire Insurance Company as "Liberty Mutual." This memorandum opinion addresses Liberty Mutual's Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 31).
Plaintiffs are citizens of Alabama; Liberty Mutual is a citizen of Wisconsin and Massachusetts; and ProFire is a citizen of Florida and Georgia. (Doc. 1, ¶¶ 4-6). Thus, complete diversity of citizenship exists. Plaintiffs' Complaint demanded an unspecified sum in damages, but other documents demonstrated that the amount in controversy exceeded $75,000. (See id. ¶¶ 8-13; see also Doc. 26, at 4-6 (finding the pleadings satisfied the jurisdictional requirements of 28 U.S.C. § 1332(a) )). On March 16, 2020, this court held, over Plaintiffs' challenge, that ProFire properly consented to the removal. (Doc. 26).
ProFire answered the Complaint rather than filing a motion to dismiss. (Doc. 29).
As discussed below, Plaintiffs have failed to state viable claims against Liberty Mutual for breach of contract, negligence, or fraud. Accordingly, the court will grant Liberty Mutual's Motion to Dismiss.
The parties consented to the exercise of plenary jurisdiction by a United States Magistrate Judge. (Doc. 24).
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss a complaint if it fails to state a claim for which relief may be granted. In Ashcroft v. Iqbal , 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), the Court revisited the applicable standard governing Rule 12(b)(6) motions to dismiss. First, courts must take note of the elements a plaintiff must plead to state the applicable claims at issue. Id. at 675, 129 S.Ct. 1937.
After establishing the elements of the claim at issue, the court identifies all well-pleaded, non-conclusory factual allegations in the complaint and assumes their veracity. Id. at 679, 129 S.Ct. 1937. Well-pleaded factual allegations do not encompass mere "labels and conclusions," legal conclusions, conclusory statements, or formulaic recitations and threadbare recitals of the elements of a cause of action. Id. at 678, 129 S.Ct. 1937 (citations omitted). In evaluating the sufficiency of a plaintiff's pleadings, the court may draw reasonable inferences in plaintiff's favor. Aldana v. Del Monte Fresh Produce, N.A., Inc. , 416 F.3d 1242, 1248 (11th Cir. 2005).
Third, a court assesses the complaint's well-pleaded allegations to determine if they state a plausible cause of action based upon the identified claim's elements. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Plausibility ensues "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged," and the analysis involves a context-specific task requiring a court "to draw on its judicial experience and common sense." Id. at 678, 679, 129 S.Ct. 1937 (citations omitted). The plausibility standard does not equate to a "probability requirement," yet it requires more than a "mere possibility of misconduct" or factual statements that are "merely consistent with a defendant's liability." Id. at 678, 679, 129 S.Ct. 1937 (citations omitted).
ALLEGATIONS OF PLAINTIFFS' COMPLAINT AND OTHER RELEVANT BACKGROUND
Fire destroyed Plaintiffs' home in July 2015. (Doc. 1-1, at 8 (Factual Background), ¶ 1). Liberty Mutual provided coverage for the fire losses through a homeowner's insurance policy. As part of that coverage, Liberty Mutual engaged ProFire to rebuild Plaintiffs' home. (Id. ¶¶ 2-3). ProFire rebuilt the home using the original foundation and other "salvaged" materials, and it issued a three-year express warranty for its work. (Id. ¶¶ 4-5). During the warranty term, Plaintiffs repeatedly notified Liberty Mutual of "problems with their home," and Liberty Mutual represented it would engage a third-party contractor to address those problems. (Id. ¶ 5).
The Complaint does not provide any details regarding the terms of Plaintiffs' policy with Liberty Mutual, the terms of the three-year warranty, the nature or extent of the alleged construction deficiencies, or the status of Liberty Mutual's promise to engage a third-party contractor. However, other documents provide some additional information regarding the policy and the warranty.
Liberty Mutual attached a copy of Plaintiffs' homeowners' policy to the Notice of Removal. The policy provides coverage for dwellings and other structures
at replacement cost without deduction for depreciation, subject to the following:
(1) If, at the time of loss, the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately before the loss, we will pay the cost to repair or replace, after application of deductible and without deduction for depreciation, but not more than the least of the following amounts:
(a) The limit of liability under this policy that applies to the building;
(b) The replacement cost of that part of the building damaged for like construction and use on the same premises; or
(c) The necessary amount actually spent to repair or replace the damaged building.
(2) If, at the time of loss, the amount of insurance in this policy on the damaged building is less than 80% of the full replacement cost of the building immediately before the loss, we will pay the greater of the following amounts, but not more than the limit of liability under this policy that applies to the building:
(a) The actual cash value of that part of the building damaged; or
(b) That proportion of the cost to repair or replace, after application of deductible and without deduction for depreciation, that part of the building damaged, which the total amount of
insurance in this policy on the damaged building bears to 80% of the replacement cost of the building.
(Doc. 1-2, at 24).
Liberty Mutual attached a copy of the document Plaintiffs referred to as the "express warranty" to its Motion to Dismiss. That document, which actually bears the title "Completion Guarantee Certificate," states:
COMPLETION
This is to acknowledge that the insurance damage repairs have been completed in a satisfactory manner at the property stated below: [Plaintiffs' home address redacted].
GUARANTEE
ProFire guarantees the work performed on the above stated property for a period of three (3) years with a material guarantee of three (3) year[s]. Any additional material guarantee will revert back to the manufacturer's warranty. This is in accordance to the work authorization. Any variations from the estimate will be considered a change order and is [sic ] also covered by a three (3) year warranty. This guarantee will take effect from the completion date as stated below. This warranty is non-transferable and for the sole use of the homeowner as signed below.
(Doc. 31-1, at 2). The Certificate stated the Completion Date as December 30, 2015. A representative of ProFire signed the Certificate on December 30, 2015, and Steve Norman signed as the homeowner on January 4, 2016. (Id. ).
A court may consider documents attached to the complaint and documents filed in conjunction with a motion to dismiss without converting the motion to a summary judgment motion, if those documents are central to the complaint and not in dispute. See Horne v. Potter , 392 F. App'x 800, 802 (11th Cir. 2010) (citing Day v. Taylor , 400 F.3d 1272, 1276 (11th Cir. 2005) ); Harris v. Ivax Corp. , 182 F.3d 799, 802 n.2 (11th Cir. 1999). Plaintiffs referred to the policy and the Completion Guarantee Certificate in their Complaint, and they have not disputed the contents of either of those documents. Thus, the court will consider the policy provisions and the language of the Completion Guarantee Certificate.
Returning to the Complaint itself, Plaintiffs first allege Liberty Mutual breached its contract of insurance with them because it failed to pay for their fire losses and/or failed to repair or replace their home, causing damages "in that their home has not been repaired or replaced." (Doc. 1-1, at 9 (Count One)).
Second, Plaintiffs allege Liberty Mutual negligently and/or wantonly engaged Profire to rebuild their home, causing the home to suffer defects and lose value, and causing Plaintiffs to suffer mental anguish and emotional distress. (Id. (Count Two)).
Third, Plaintiffs allege Liberty Mutual and ProFire misrepresented they would guarantee the work and materials for three years if Plaintiffs agreed to allow ProFire to perform the reconstruction. Plaintiffs allegedly relied on that misrepresentation by allowing ProFire to perform the reconstruction, and they allegedly suffered damages because Defendants failed to properly perform the repairs, or properly correct the construction deficiencies, causing home defects, loss of the home's value, mental anguish, and emotional distress. (Id. at 9-10 (Count Three)).
Fourth, Plaintiffs allege ProFire negligently and/or wantonly failed to perform work on their home, causing defects in the home, mental anguish, and emotional distress. (Id. at 10 (Count Four)).
Fifth, Plaintiffs allege Defendants' negligence and/or wantonness combined and concurred, causing a reduction in their property value, mental anguish, and emotional distress. (Id. (Count Five)). As relief for their claims, Plaintiffs request an unspecified amount of compensatory and punitive damages. (Id. at 9-11).
DISCUSSION
I. Plaintiffs Do Not Allege a Plausible Breach of Contract Claim Against Liberty Mutual
Pursuant to Alabama statute, "[e]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended or modified by any rider, endorsement or application which is a part of the policy." Ala. Code § 27-14-17(a). "Insurance contracts, like other contracts, are construed so as to give effect to the intention of the parties, and, to determine this intent, a court must examine more than an isolated sentence or term; it must read each phrase in the context of all other provisions." Attorneys Ins. Mut. of Alabama, Inc. v. Smith, Blocker & Lowther, P.C. , 703 So. 2d 866, 870 (Ala. 1996) (citation omitted). When its intention is clear and unambiguous, the court shall enforce an insurance policy as written. Sentinel Ins. Co. v. Alabama Mun. Ins. Corp. , 188 So. 3d 640, 644 (Ala. 2015) (citation omitted). Furthermore, "[i]f the terms of an insurance policy are plain and unambiguous, the interpretation of the contract and its legal effect are questions of law." Id. (citing Nationwide Ins. Co. v. Rhodes , 870 So.2d 695, 697 (Ala. 2003) ).
To state a viable breach of contract claim, Plaintiffs must allege: "(1) the existence of a valid contract binding the parties; (2) the plaintiff's performance under the contract; (3) the defendant's nonperformance; and (4) damages." Capmark Bank v. RGR, LLC , 81 So. 3d 1258, 1267 (Ala. 2011) (citation omitted). Plaintiffs allege Liberty Mutual "breached its contract of insurance in that it failed to pay for Plaintiffs['] loss and/or to repair or replace the Plaintiffs' home," and that Liberty Mutual's breach caused them damages because "their home has not been repaired or replaced." (Doc. 1-1, at 9 (Count One)). Liberty Mutual argues Plaintiffs failed to "allege how Liberty [Mutual] breached its insurance policy, what specific provisions of the policy are at issue, or how Liberty [Mutual]'s actions somehow violated these unspecified provisions." (Doc. 31, at 6).
The crux of the challenge at bar involves the issue whether Liberty Mutual failed to perform its obligations under the insurance policy. As reviewed in the Background, Liberty Mutual's primary obligation required it to pay to repair or replace covered damage to Plaintiffs' dwelling. As Plaintiffs' own Complaint portrays, Liberty Mutual performed this obligation, as it "engaged" ProFire to "rebuild" Plaintiffs' home, and ProFire "undertook to rebuild" the home (albeit in an allegedly faulty manner). (Doc. 1-1, at 8 (Factual Background), ¶¶3-4).
To be sure, Plaintiffs allege that Liberty Mutual "failed to pay for Plaintiffs['] loss." (Doc. 1-1 at 9 (Count One)). Yet, given the undisputed fact that Liberty Mutual paid ProFire for the work rebuilding Plaintiffs' home, Plaintiffs' averment that Liberty Mutual failed to pay for the loss amounts to the contention that Liberty Mutual paid for an inadequate repair or replacement of the dwelling. Plaintiffs admit as much in their response to the Motion to Dismiss, asserting that Liberty Mutual violated the policy provision requiring it to settle property losses for dwellings and other buildings "at replacement cost." (See Doc. 37, at 2; Doc. 1-2, at 24). Plaintiffs elaborated upon their contention:
Liberty [Mutual] claimed to have engaged ProFire to replace (not repair) the Normans' home. As was later discovered[,] ProFire did not replace the home, but used materials salvaged from the burned structure in the new dwelling
that was constructed. Accordingly, Liberty [Mutual] breached its contract in that it did not in fact pay to replace the home.
(Doc. 37, at 2).
The insurance policy did not require Liberty Mutual to repair or replace Plaintiffs' home, or to assure that its payment resulted in an adequate repair or replacement. Rather, it obligated Liberty Mutual to pay to repair or replace the home. As recounted previously, Liberty Mutual performed its obligation by paying ProFire to "rebuild" the home. That ProFire may have failed its duties in rebuilding Plaintiffs' home does not detract from the finding that Liberty Mutual performed its obligation to pay to repair or replace the home.
As for Plaintiffs' related assertion that the policy requires Liberty Mutual to cover their losses "at replacement cost," the policy elaborates that Liberty Mutual may pay to either repair or replace the structure. (See Doc. 1-2, at 24). The term "replacement cost" refers generally to the measure of compensation afforded under an insurance policy, not a requirement that Liberty Mutual replace, rather than repair, every insured structure that suffers damage.
See Allan D. Windt, 3 Insurance Claims and Disputes § 11:35 (6th ed. April 2020 Update) :
Insurance policies afford either replacement cost coverage or actual cash value coverage when an insured has incurred a property damage loss. Actual cash value is the value of the property in its depreciated condition. If the policy affords replacement cost coverage, the insured will, typically, be entitled to a payment representing the actual cash value of the loss and, if and when the insured replaces/repairs the property, an additional payment representing the cost of the replacement/repair to the extent that such cost exceeded the actual cash value payment.
The inquiry does not end here, however, as Plaintiffs aver facts evincing additional contractual promises (which, as reviewed later, have a bearing on other claims raised in the Complaint). See Williams v. Capital One Bank (USA) N.A. , 785 F. App'x 741, 746 (11th Cir. 2019) ("When ruling on a motion to dismiss, ‘courts must consider the complaint in its entirety ....’ ") (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) ); Johnson v. City of Shelby, Miss. , 574 U.S. 10, 11, 135 S.Ct. 346, 190 L.Ed.2d 309 (2014) (per curiam) ("Federal pleading rules ... do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.") (citations omitted). In particular, Plaintiffs aver that Liberty Mutual guaranteed ProFire's work and materials for three years; after ProFire performed its rebuild, Plaintiffs repeatedly notified Liberty Mutual of "problems with their home"; and Liberty Mutual represented it would engage a third-party contractor to address those problems. (Doc. 1-1, at 8 (Factual Background), ¶5).
Regarding the alleged guarantee and presumably attendant notifications thereto (and perhaps the representation to engage a third-party contractor), such averments undoubtedly incite the question whether Plaintiffs and Liberty Mutual effected a guarantee contract separate from the insurance contract. See Rattan v. United Servs. Auto. Ass'n , 84 Cal. App. 4th 715, 722, 101 Cal.Rptr.2d 6 (2000) (Beyond the insurance policy, the insurer entered into three other contracts with the insureds to guarantee the work of its preferred contractors by curing defects in their workmanship). Nevertheless, the alleged guarantee does not constitute a valid contract because it violates Alabama's Statute of Frauds in two ways. Pursuant to the Statute of Frauds, Alabama Code § 8–9–2(1) renders void "[e]very agreement which, by its terms, is not to be performed within one year from the making thereof," unless it, "or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party to be charged therewith." " ‘The one-year provision of the Statute of Frauds applies to any agreement which by its terms cannot be performed within one year. ’ " Alabama Agr. & Mech. Univ. v. Jones , 895 So. 2d 867, 871 (Ala. 2004) (citation omitted, emphasis in original). This provision clearly applies to Liberty Mutual's alleged guarantee because it constitutes a three-year agreement, and there exists no evidence the Plaintiffs memorialized the guarantee in writing.
In the second applicable provision of the Statute of Frauds, Alabama Code § 8-9-2(3) renders void "[e]very special promise to answer for the debt, default or miscarriage of another, unless it, "or some note or memorandum thereof expressing the consideration is in writing and subscribed by the party to be charged therewith." See Parker v. Williams , 977 So. 2d 476, 480-81 (Ala. 2007) ("[N]o matter how compelling [defendant's] purported promise [to pay the debt of another] may have been on [an] audiotape, the oral promise would be irrelevant because § 8-9-2(3), Ala. Code 1975, requires such a guaranty to be in writing.") Here, Plaintiffs did not reduce to writing Liberty Mutual's alleged guarantee to cure the workmanship of ProFire, and therefore, no valid contract exists on this basis. Plaintiffs' averment that Liberty Mutual agreed to requisition a third-party contractor to ameliorate ProFire's workmanship appears to be an undertaking pursuant to the alleged guarantee. In that guise, the allegation falters based upon the foregoing analysis. However, the alleged promise to requisition a third-party contractor may constitute a contract separate from the alleged guarantee, and Liberty Mutual's alleged failure to follow through may portray a breach of contract.
The terms "default" and "miscarriage" encompass tortious conduct:
Under the words of the guaranty clause of [the Statute of Frauds] -- "debt, default, or miscarriages" -- all forms of liability are included.
It has been settled from an early date that the terms "default or miscarriage" and "misdoing," used in some of the statutes, include a liability for a tort and are not to be restricted to defaults or miscarriages arising out of contracts.
One exception to the Statute of Frauds vis-à-vis its prohibition of parol contracts that exceed one year may be applicable:
The claimed exception is that the Statute of Frauds voids only executory contracts, not executed contracts. Fowler v. Oliver , 540 So. 2d 54, 55 (Ala. 1989) ; Scott v. Southern Coach & Body Co. , 280 Ala. 670, 673, 197 So. 2d 775, 776 (1967). A contract is executory if neither party has fully performed his obligation to the other party. South Carolina Cotton Growers' Co-op. Ass'n v. Weil , 220 Ala. 568, 126 So. 637 (1929). "[T]he partial performance of a contract, void under the statute of frauds, does not take it from under the influence of the statute, so as to permit a recovery under the contract for any part of the contract remaining executory." Farrow v. Burns , 18 Ala. App. 350, 351, 92 So. 236, 237 (1921) (citing Conoly v. Harrell , [182 Ala. 243, 62 So. 511 (1913) ] and Scoggin v. Blackwell , [36 Ala. 351 (1860) ] ). A contract is executed, and not voided by the Statute of Frauds, if the plaintiff has fully performed his obligation to the defendant and sues the defendant to obtain the defendant's performance or the completion of the defendant's performance. Leisure American Resorts, Inc. v. Knutilla , 547 So.2d 424 (Ala. 1989) ; Fowler v. Oliver, supra ; and Scott v. Southern Coach & Body Co., supra.
Ex parte Ramsay , 829 So. 2d 146, 155 (Ala. 2002) (emphasis in original). In the dispute at bar, Plaintiffs may contend that they fully performed their obligation under the guarantee contract by accepting ProFire's services, and thus, they have effected an executed contract. However, the Alabama Supreme Court "has not extended the executed-contract exception to the Statute of Frauds to situations involving a guaranty." Parker v. Williams , 977 So. 2d 476, 480 (Ala. 2007) (citation omitted).
Nevertheless, such a construal of the averment still does not evince a plausible claim because there exist no well-pleaded facts regarding the consideration for the ostensible contract. A valid contract requires " ‘an offer and an acceptance, consideration, and mutual assent to terms essential to the formation of a contract.’ " Jones v. The Vill. at Lake Martin, LLC , 256 So. 3d 119, 122 (Ala. Civ. App. 2018) (quoting, inter alia, Avis Rent A Car Sys., Inc. v. Heilman , 876 So.2d 1111, 1118 (Ala. 2003) ). Consideration for a contract manifests as follows:
A test of good consideration for a contract is whether the promisee at the instance of the promisor has done, forborne or undertaken to do anything real, or whether he has suffered any detriment, or whether in return for the promise he has done something he was not bound to do, or has promised to do some act or to abstain from doing something.
* * *
To constitute consideration for a promise, there must have been an act, a forbearance, a detriment, or a destruction of a legal right, or a return promise, bargained for and given in exchange for the promise.
Family Sec. Credit Union v. Etheredge , 238 So. 3d 35, 40 (Ala. 2017) (citations, quotation marks, and internal alterations omitted). If Liberty Mutual's alleged promise to requisition a third-party contractor amounts to an allegation of a separate contract, the Complaint does not mention any act, forbearance, detriment, etc., that Plaintiffs undertook to secure the validity of such a contract. Therefore, any breach-of-contract claim emanating from the allegations falters as well.
Finally, the alleged guarantee and promise to requisition a third-party contractor do not give rise to a claim for promissory estoppel. Alabama law follows the definition of promissory estoppel as set forth in the Restatement of Contracts: " ‘A promise which the promisor should reasonably expect to induce action or forbearance of definite and substantial character and which does so is binding if injustice can be avoided only by enforcement thereof.’ " Bush v. Bush , 278 Ala. 244, 177 So. 2d 568, 570 (1964) (quoting Restatement (First) of Contracts § 90 ). "[T]he gravamen of the claim of promissory estoppel [in Alabama] is detrimental reliance." Wyatt v. BellSouth, Inc. , 18 F. Supp. 2d 1324, 1326 (M.D. Ala. 1998) ; see also Bush , 177 So. 2d at 570 (Promissory estoppel operates as a "doctrine of action in reliance.").
As for the guarantee, its prohibition under the Statute of Frauds forecloses reliance upon it for estoppel purposes. See Branch Banking & Tr. Co. v. Nichols , 184 So. 3d 337, 347-48 (Ala. 2015), as modified on denial of rehg (July 10, 2015) (as a matter of law, promissory estoppel cannot be used to enforce an oral agreement void under the Statute of Frauds). And as for the alleged promise to requisition a third-party contractor, Plaintiffs have not alleged any "action or forbearance of definite and substantial character," and thus they have failed to aver a plausible promissory estoppel claim on this basis.
In summary, Plaintiffs did not plead a viable breach of contract claim. Accordingly, the court will grant Liberty Mutual's motion to dismiss Plaintiffs' breach of contract claim against it.
II. Plaintiffs Do Not Allege Viable Negligence or Wantonness Claims Against Liberty Mutual
To state a viable claim for negligence under Alabama law, Plaintiffs must allege "a duty, a breach of that duty, causation, and damage." Aliant Bank, a Div. of USAmeribank v. Four Star Investments, Inc. , 244 So. 3d 896, 907 (Ala. 2017) (citing Armstrong Bus. Servs., Inc. v. AmSouth Bank , 817 So. 2d 665, 679 (Ala. 2001) (in turn citing AALAR, Ltd. v. Francis , 716 So. 2d 1141, 1144 (Ala. 1998) )). To state a viable claim for wantonness, Plaintiffs must allege " ‘[c]onduct which is carried on with a reckless or conscious disregard of the rights or safety of others.’ " Crouch v. N. Alabama Sand & Gravel, LLC , 177 So. 3d 200, 207 (Ala. 2015) (alteration in original) (quoting Ala. Code § 6-11-20(b)(3) ).
Plaintiffs assert negligence and wantonness in Counts Two and Five of their Complaint. Count Two alleges simply that Liberty Mutual "negligently and/or wantonly engaged ProFire to rebuild the Plaintiffs' home," resulting in home defects, reduction of the home's value, mental anguish, and emotional distress. (Doc. 1-1, at 9 (Count Two)). Count Five alleges that Liberty Mutual's negligence and/or wantonness "combined and concurred" with that of ProFire to cause Plaintiffs' damages. (Id. at 10 (Count Five)).
The viability of Plaintiffs' negligence claim rests upon whether Liberty Mutual sustained a duty to Plaintiffs. "The existence of a duty to the plaintiff is fundamental to a negligence claim." Dickinson v. Land Developers Const. Co. , 882 So. 2d 291, 302 (Ala. 2003) (citations omitted); see also Ally Windsor Howell, 1 Ala. Pers. Inj. & Torts § 1:2 (2019 ed.) ("The allegedly negligent party must owe a duty to [the] injured party to either perform an act with the applicable standard of care or to refrain from acting in a particular manner. Without a duty, there is no cause of action."). "A legal duty to exercise care ... arises where the parties are bound by contract, ... or where the obligations are expressly or impliedly imposed by statute, municipal ordinance, or by administrative rules or regulations, or by judicial decisions." King v. National Spa & Pool Institute , 570 So. 2d 612, 614 (Ala. 1990) (citations and internal quotation marks omitted). "The determination whether a duty exists is generally a question of law for the court to decide." Aliant Bank, a Div. of USAmeribank v. Four Star Investments, Inc. , 244 So. 3d 896, 908 (Ala. 2017) (citation omitted).
As an initial matter, Liberty Mutual did not violate any tort duties arising under its contract with Plaintiffs. Several decisions elucidate the standard for discerning such violations:
The court must acknowledge that Alabama case law has not always carefully drawn the distinction between tort-based actions and those sounding in breach of contract. The seminal case squarely addressing the distinction is
Hamner v. Mutual of Omaha Insurance Co. , 49 Ala. App. 214, 270 So.2d 87 (Ala. Civ. App. 1972), which provided the following explanation:
if there is a failure or refusal to perform a promise the action is in contract; if there is a negligent performance of a contractual duty or the negligent breach of a duty implied by law, such duty being not expressed in the contract, but arising by implication of law from the relation of the parties created by the contract, the action may be either in contract or tort. In the latter instance, whether the action declared is in tort or contract must be determined from the gist or gravamen of the complaint. Basically, the line of division between the actions of contract and tort in such instances is that of nonfeasance and misfeasance. If there is a defective performance there is a breach of contract and may also be a tort.
Id. at 90.
Citizens Bank & Tr. v. LPS Nat. Flood, LLC , 51 F. Supp. 3d 1157, 1170 (N.D. Ala. 2014) ; see also Madison Cty. v. Evanston Ins. Co. , 340 F. Supp. 3d 1232, 1276 (N.D. Ala. 2018), as amended (Nov. 2, 2018) (same); Killough v. Monkress , No. 5:17-CV-00247-AKK, 2018 WL 3641859, at *10 (N.D. Ala. Aug. 1, 2018) (same); Ex parte Certain Underwriters at Lloyd's of London , 815 So. 2d 558, 562-63 (Ala. 2001) (same); Brown-Marx Assocs., Ltd. v. Emigrant Sav. Bank , 703 F.2d 1361, 1371 (11th Cir. 1983) ("It is possible for a tort to arise in Alabama out of a breach of a duty implied by or arising out of a contract, but the Alabama Supreme Court has stated that an ordinary breach of contract will not give rise to a tort.") (citation and footnote omitted).
In the dispute at bar, Liberty Mutual's duty to pay to repair or replace Plaintiffs' home represents the only contractual duty that may give rise to a negligence claim. However, Plaintiffs have not averred plausible facts depicting Liberty Mutual negligently performed its duty to pay to repair or replace Plaintiffs' home. Plaintiffs' negligence allegations contend Liberty Mutual "engaged" ProFire to rebuild Plaintiffs' home, yet this allegation alone does not illustrate Liberty Mutual negligently performed its contractual obligation to pay for the rebuild.
To the extent Plaintiffs' negligence causes of action rest upon a contention that Liberty Mutual breached a duty to properly investigate and adjust their insurance claim, "the Alabama Supreme Court ‘has consistently refused to recognize a cause of action for the negligent handling of insurance claims, and it will not recognize a cause of action for alleged wanton handling of insurance claims.’ " Hillery v. Allstate Indem. Co. , 705 F. Supp. 2d 1343, 1367 (S.D. Ala. 2010) (quoting Kervin v. Southern Guar. Ins. Co. , 667 So. 2d 704, 706 (Ala. 1995) ). The Alabama courts consider such claims superfluous to claims for breach of contract and bad faith. See St. John's Deliverance Temple v. Frontier Adjusters , No. CA 11-0624-KD-C, 2012 WL 629056, at *10 (S.D. Ala. Feb. 27, 2012) (citing Chavers v. National Sec. Fire & Cas. Co. , 405 So. 2d 1, 4-7 (Ala. 1981) ) ("This refusal to recognize causes of action for the negligent and wanton handling/adjusting of insurance claims has evolved principally because of the recognition that the insured is not left without a remedy inasmuch as the insurer can still be sued for breach of contract and, as well, for the tort of bad faith."), report and recommendation adopted , No. CIV.A. 11-0624-KD-C, 2012 WL 750903 (S.D. Ala. Mar. 8, 2012).
Furthermore, Liberty Mutual does not sustain a duty of care to Plaintiffs regarding the rebuild to the extent its "engagement" with ProFire constituted a recommendation or referral of a preferred contractor. A state appellate court aptly summarized the legal principles and concern in this context:
Generally, one not a party to a contract cannot be liable for its violation.
Gorab v. Equity General Agents, Inc. , 661 P. 2d 1196, 1198 (Colo. App. 1983). Here, it is undisputed that it was plaintiffs who ultimately decided to retain ICA, and that defendant has never been a party to that contract. It is also undisputed that plaintiffs' insurance policy contained no provision requiring defendant to supervise or monitor independent contractors, and plaintiffs submitted nothing to suggest that defendant represented to them that it would provide this service.
Although Colorado appellate courts have not specifically addressed whether an insurer's duty of good faith and fair dealing requires it to ensure that any contractor it recommends for repair or remediation work will perform satisfactorily, courts in other jurisdictions have, in analogous circumstances, declined to recognize a tort remedy for an insured who is dissatisfied with a contractor's performance, but who (like plaintiffs) otherwise has received the financial benefits of his or her policy. See Moncada v. Allstate Ins. Co. , 471 F. Supp. 2d 987, 998 (N.D. Cal. 2006) (applying California law; even where insurer acted as intermediary between insured and contractor insurer assigned to the job through preferred vendor program, insurer not liable for contractor's performance); Rattan v. United Servs. Auto. Ass'n , 84 Cal. App. 4th 715, 101 Cal. Rptr. 2d 6, 11-12 (2000) ; Mitchell v. State Farm Fire & Cas. Co. , 642 So. 2d 462, 465 (Ala. 1994) ; Mitts v. H.I.P. , 104 A.D.2d 318, 478 N.Y.S. 2d 910, 911 (1984) (health insurance provider not liable for malpractice of medical groups or physicians participating in insurance plan as independent contractors); cf. Melichar v. State Farm Fire & Cas. Co. , 143 Idaho 716, 152 P.3d 587, 593 (2007) (insurer could not be held liable for breach of implied warranty of workmanlike performance for actions of independent contractor it had recommended to homeowner to remediate mold damage).
Under this authority, when an insured selects and retains an independent contractor, even upon the recommendation of his or her insurer, the insured has primary responsibility for supervising the contractor, absent any representation that the insurer would assume that duty. See Mitchell , 642 So. 2d at 464-65. Further, when an independent contractor's negligence causes damage beyond the initial loss, the insured's proper remedy is to recover from that contractor. See Moncada , 471 F. Supp. 2d at 998 ; Melichar , 152 P.3d at 593. We agree with this reasoning. To hold otherwise would effectively render an insurer the liability carrier for any independent contractor performing work for its insured. See Rattan , 101 Cal. Rptr. 2d at 11.
Dunn v. Am. Family Ins. , 251 P.3d 1232, 1236 (Colo. App. 2010).
As reflected in Dunn , it relied upon an Alabama Supreme Court case, Mitchell v. State Farm Fire & Cas. Co. , 642 So.2d 462 (Ala. 1994), for its exposition. Although the Mitchell decision found that an insurer did not sustain a duty under an insurance policy to supervise a contractor's performance, id. at 465, the same finding adheres when the insured has not portrayed the existence of such a duty originating in other sources. Therefore, Plaintiffs cannot sustain their negligence claims on the theory that Liberty Mutual referred or recommended ProFire to rebuild the home.
However, the foregoing analysis portrays that Liberty Mutual may incur a duty if its engagement of ProFire involved supervision of the contractor's rebuild. Plaintiffs latched onto this theory for their negligence claims, albeit in their response to Liberty Mutual's Motion to Dismiss:
Although Liberty [Mutual] had no duty under its policy to be involved in the construction of a replacement home for
the Normans, it voluntarily chose to do so. A duty to exercise reasonable care in the undertaking arises when a person volunteers to act in behalf of another. E.g. Palomar Ins. Co. v. Guthrie , 583 So. 2d 1304 (Ala. 1991). The Normans respectfully submit that they are entitled to pursue negligence claims against Liberty [Mutual] arising out of the engagement, management, instruction or supervision of its chosen contractor and the construction itself.
(Doc. 37, at 2-3).
Plaintiffs do not err in their allusion to the voluntary undertaking doctrine, as "a duty can arise when that person volunteers to act on behalf of another." Palomar Ins. Corp. v. Guthrie , 583 So. 2d 1304, 1306 (Ala. 1991) (citations omitted). "This principle of law applies to insurance agents and insurance companies." Id. (citing Barnes v. Liberty Mutual Insurance Co. , 472 So. 2d 1041, 1042 (Ala. 1985) ("a worker's compensation carrier may be liable when it voluntarily undertakes to inspect an employer's premises for safety"); United States Fidelity & Guar. Co. v. Jones , 356 So. 2d 596, 597-98 (Ala. 1978) (same); Waldon v. Commercial Bank , 50 Ala.App. 567, 281 So. 2d 279 (1973) (insurer may be liable when it undertakes to procure insurance)); see also Somnus Mattress Corp. v. Hilson , 280 So. 3d 373, 382 (Ala. 2018) ("There is no dispute that the general notion of voluntary assumption of a duty can be applied to insurance companies and agents," yet the court declined to extend the notion to a "duty to advise a client regarding the adequacy of the client's insurance coverage."); Smith v. State Farm Fire & Cas. Co. , No. 7:16-CV-00572-LSC, 2016 WL 3144082, at *2 (N.D. Ala. June 6, 2016) (allegations that insurer represented it would pay contractor for repair of insured's home depicted voluntary undertaking of duty sufficient for contractor's negligence claim to withstand Rule 12(b)(6) dismissal).
However, Plaintiffs still falter in their attempt to apply the voluntary undertaking doctrine to their negligence claims. Even if the court construes Plaintiffs' Complaint to allege that Liberty Mutual assumed the duty to manage or supervise ProFire and the rebuild of Plaintiffs' home, Plaintiffs have not provided any indication as to how Liberty Mutual breached the standard of care emanating from that supposed duty, or even how a supposed breach caused the alleged defects rather than ProFire's remediation. In essence, Plaintiffs' theory as to the voluntary undertaking of a duty merely places Liberty Mutual in the shoes of the Plaintiffs, not ProFire. See Dunn , 251 P.3d at 1236 ("[W]hen an insured selects and retains an independent contractor, even upon the recommendation of his or her insurer, the insured has primary responsibility for supervising the contractor, absent any representation that the insurer would assume that duty.") (citing Mitchell , 642 So. 2d at 464-65 ). In that guise, the court cannot impute ProFire's alleged negligence to Liberty Mutual, just as one could not impute ProFire's transgressions to Plaintiffs if they had retained supervision over the rebuild project. Plaintiffs lodged a passing request in their brief: "should this Court determine that any of the counts [of Plaintiffs' Complaint] are inartfully pled, [Plaintiffs] request leave of this Court to amend." (Doc. 37, at 1). But that request "possessed no legal effect." Newton v. Duke Energy Fla., LLC , 895 F.3d 1270, 1277 (11th Cir. 2018). The Eleventh Circuit has repeatedly held that, " ‘[w]here a request for leave to file an amended complaint simply is imbedded within an opposition memorandum, the issue has not been raised properly.’ " Id. (quoting Cita Tr. Co. AG v. Fifth Third Bank , 879 F.3d 1151, 1157 (11th Cir. 2018) (in turn quoting Rosenberg v. Gould , 554 F.3d 962, 967 (11th Cir. 2009) )). Moreover, a plaintiff seeking to amend its complaint "must ‘set forth the substance of the proposed amendment or attach a copy of the proposed amendment to its motion.’ " Newton , 895 F.3d at 1277 (quoting Cita Tr. , 879 F.3d at 1157 (in turn quoting Long v. Satz , 181 F.3d 1275, 1279 (11th Cir. 1999) )). Plaintiffs took neither of those actions.
As an important distinction, Plaintiffs' contentions regarding the voluntary undertaking of a duty does not incite the query whether Liberty Mutual committed negligence via vicarious liability vis-à-vis ProFire:
The test for determining whether a person is an agent or employee of another, rather than an independent contractor, is whether that other person has reserved the right of control over the means and method by which the person's work will be performed, whether or not the right of control is actually exercised. Alabama Power Co. v. Beam , 472 So. 2d 619 (Ala. 1985). Vicarious liability arises from the right of supervision and control over the manner of the alleged agent's performance. Kennedy v. Western Sizzlin Corp. , 857 So. 2d 71 (Ala. 2003). Generally, one is liable for the actions of an agent but is not liable for the actions of an independent contractor. Gonzalez, LLC v. DiVincenti , 844 So.2d 1196 (Ala. 2002).
Lifestar Response of Alabama, Inc. v. Admiral Ins. Co. , 17 So. 3d 200, 213 (Ala. 2009) ; see also J. Stephen Berry & Shari Klevens, Extracontractual Liability Arising from Professionals Retained by Insurers First-Party Claims , 41-SPG Brief 38, 42 (Spring 2012) ("An insurer undoubtedly faces the most potential liability when it elects to undertake repairs itself. Courts often look to the extent of the insurer's control over the contractor to determine vicarious liability. This analysis cuts against the insurer most where it has elected to hire and supervise its own contractors."). Plaintiffs have not alleged any well-pleaded facts evincing Liberty Mutual is subject to vicarious liability for ProFire's rebuild.
Therefore, if Plaintiffs desire to proceed with their negligence claims against Liberty Mutual pursuant to the standards discussed herein, then it must properly seek leave of court pursuant to Federal Rule of Civil Procedure 15. Plaintiffs should be mindful of its obligations to pursue plausible claims in any putative amended complaint, including presenting well-pleaded averments portraying the nature of Liberty Mutual's alleged supervision and management of ProFire in the rebuilding of Plaintiffs' home, as well as how Liberty Mutual breached the standard of care arising from that alleged supervision along with the other elements of a negligence claim.
As for the wantonness claim, Plaintiffs have not averred any facts illustrating that Liberty Mutual manifested a reckless or conscious disregard of Plaintiffs' rights. Therefore, Plaintiffs' wantonness claims merit dismissal pursuant to Rule 12(b)(6)'s plausibility standard.
Based on the foregoing analyses, the court dismisses the negligence and/or wantonness claims against Liberty Mutual.
III. Plaintiffs Do Not Allege a Viable Fraud Claim Against Liberty Mutual
Under Alabama law, "misrepresentations of a material fact made willfully to deceive, or recklessly without knowledge, and acted upon by the opposite party, or if made by mistake and innocently and acted on by the opposite party, constitute legal fraud." Ala. Code § 6-5-101. Regardless whether the individual rendered the representation willfully, recklessly, or mistakenly, Plaintiffs must allege the following elements for its fraud claim: Liberty Mutual made a false representation regarding a material fact; they relied upon the false representation; and they suffered actual injury as a result of that reliance. Aliant Bank, a Div. of USAmeribank v. Four Star Investments, Inc. , 244 So. 3d 896, 928 (Ala. 2017) (citing Boswell v. Liberty Nat'l Life Ins. Co. , 643 So.2d 580, 581 (Ala. 1994) ).
To support their fraud claim, Plaintiffs allege that, "[d]uring the three year warranty period Liberty [Mutual] represented that a third party contractor would be engaged to deal with Plaintiff's [sic ] problems." (Doc. 1-1, at 8, ¶ 5). They also state:
2. Defendants Liberty Mutual and Profire represented to the Plaintiffs that if Plaintiffs would agree to construction by Profire of their home, that the work and materials would be guaranteed for three (3) years.
3. Plaintiffs relied upon the representations of the Defendants and allowed them to reconstruct Plaintiffs' home.
4. The representations made by the Defendants were false and the Defendants knew that they were false or such representations were recklessly made in that they failed and refused to correct, repair and remedy deficiencies and faults in the construction of the Plaintiffs' home.
5. As a proximate consequence of the Defendant's [sic ] said fraud or misrepresentation, the Plaintiffs' home is defective and of substantially less value than if repaired or replaced in a good workmanlike manner and the Plaintiffs have been caused to suffer mental anguish and emotional distress.
(Doc. 1-1, at 9-10 (Count Three, ¶¶ 2-5)). Therefore, Plaintiffs identify the substance of the alleged misrepresentations as follows: Liberty Mutual stated it would guarantee ProFire's work for three years if Plaintiffs chose ProFire to perform the work, and it would engage a third-party contractor to address Plaintiffs' construction problems.
Plaintiffs cannot sustain a fraud claim based upon the alleged guarantee. As determined previously, the alleged guarantee constituted an invalid contract pursuant to the Statute of Frauds. That finding proves dispositive as to a fraud claim based upon that alleged promise: "where ... an element of a tort claim turns on the existence of an alleged agreement that cannot, consistent with the Statute of Frauds, be proved to support a breach-of-contract claim, the Statute of Frauds also bars proof of that agreement to support the tort claim." Holman v. Childersburg Bancorporation, Inc. , 852 So. 2d 691, 701 (Ala. 2002) ; see also Cox Nuclear Pharmacy, Inc. v. CTI, Inc. , 478 F.3d 1303, 1310 (11th Cir. 2007) (under Alabama law, a tort claim may not turn on a provision that is part of a contract voided by the Statute of Frauds); Bruce v. Cole , 854 So. 2d 47, 58 (Ala. 2003) ("[A]n oral promise that is void by operation of the Statute of Frauds will not support an action against the promisor for promissory fraud").
Furthermore, neither of Plaintiffs' alleged bases for fraud – the guarantee and the agreement to requisition a third-party contractor – satisfies the heightened pleading requirement. Federal Rule of Civil Procedure 9(b) requires plaintiffs to "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). In the Eleventh Circuit, a plaintiff satisfies that requirement by including:
"(1) the precise statements, documents, or misrepresentations made; (2) the time, place and person responsible for the statement; (3) the content and manner in which these statements misled [him]; and (4) what the defendants gained by the alleged fraud." Am. Dental Ass'n v. Cigna Corp. , 605 F.3d 1283, 1291 (11th Cir. 2010) (quotation marks omitted). A bare allegation of reliance on alleged misrepresentations, bereft of any additional detail, will not suffice under Rule 9(b). See 5A Charles A. Wright, Arthur R. Miller, & A. Benjamin Spencer, Federal Practice & Procedure
§ 1297, at 46 (4th ed. 2018) ("[S]imply alleg[ing] the technical elements of fraud without providing ... underlying supporting details will not satisfy the rule's pleading-with-particularity requirement.").
Wilding v. DNC Servs. Corp. , 941 F.3d 1116, 1128 (11th Cir. 2019), cert. denied , No. 19-1185, ––– U.S. ––––, 140 S.Ct. 2828, 207 L.Ed.2d 159, (U.S. June 1, 2020) (alterations in original).
Although Plaintiffs identified the guarantee and the assertion of securing a third-party contractor as the alleged misrepresentations, Plaintiffs did not identify who made those statements, or when or where the person made them. Plaintiffs also did not describe how the statements misled them, and they did not identify what Liberty Mutual allegedly gained by the fraud. Accordingly, Plaintiffs' fraud claim against Liberty Mutual fails to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b).
Plaintiffs would not benefit from the ability to file an Amended Complaint as to the third-party contractor allegation because they acknowledge they cannot, consistent with Federal Rule of Civil Procedure 11, assert any additional factual allegations. (Doc. 37, at 3 ("The Normans cannot in compliance with FRCP 11, make allegations on their suspicion that Liberty [Mutual] dealt regularly with ProFire and was able to get a cheap price for the shoddy work Profire performed.")). They request the opportunity to develop their allegations through discovery, but Rule 9(b) does not permit such an endeavor. See Cajun Steamer Ventures, LLC v. Thompson , 402 F. Supp. 3d 1328, 1344 (N.D. Ala. 2019) (quoting Durham v. Bus. Mgmt. Assocs. , 847 F.2d 1505, 1511 (11th Cir. 1988) (in turn quoting Seville Indus. Mach. Corp. v. Southmost Mach. Corp. , 742 F.2d 786, 791 (3rd Cir. 1984), cert. denied , 469 U.S. 1211, 105 S.Ct. 1179, 84 L.Ed.2d 327 (1985) )) ("While the court notes the difficulty of uncovering fraud at this stage, Rule 9 exists to ‘alert defendants to the "precise misconduct with which they are charged" and [to] protect[ ] defendants "against spurious charges of immoral and fraudulent behavior." ’ ") (alterations in original); Control & Power, Inc. v. Cumberland Valve & Co. , No. CV-07-BE-2349-S, 2008 WL 11377713, at *2 (N.D. Ala. Apr. 29, 2008) (" Rule 9(b) is a pleading requirement that must be met before discovery, and Plaintiff has failed to satisfy it.") (underlining in original). Accordingly, the court will dismiss Plaintiffs' fraud claim for failure to state a claim upon which relief can be granted.
Rule 11(b) states that when an attorney signs a written pleading, he certifies, among other things, that "the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery." Fed. R. Civ. P. 11(b)(3).
CONCLUSION AND ORDER
As resolved, Plaintiffs failed to state viable claims against Liberty Mutual for breach of contract, negligence/wantonness, and breach of contract. Therefore, the court GRANTS Liberty Mutual's Motion to Dismiss, and DISMISSES all claims against Liberty Mutual.
For clarity, the court dismisses Counts One and Two, which only asserted claims against Liberty Mutual, in their entirety. The court dismisses Counts Three and Five only insofar as they asserted claims against Liberty Mutual. All of Plaintiffs' claims against ProFire remain pending.
DONE and ORDERED this 8th day of July, 2020.
9 Williston on Contracts § 22:27 (4th ed. May 2020 Update).
In a similar vein:
Now the word "miscarriage" has not the same meaning as the word "debt" or "default"; it seems to me to comprehend that species of wrongful act, for the consequences of which the law would make the party civilly responsible. * * *
I think the term miscarriage is more properly applicable to a ground of action founded upon a tort than to one founded upon a contract: for in the latter case the ground of action is, that the party has not performed what he agreed to perform; not that he has misconducted himself in some matter for which by law he is liable. And I think, that both the words miscarriage and default apply to a promise to answer for another with respect to the non-performance of a duty, though not founded upon a contract.
Kirkham v. Marter , 106 Eng. Rep. 490 (1819).