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finding that Rule 9(b) did not apply to plaintiff's failure to conduct a reasonable investigation claim under TIC
Summary of this case from Anna T. v. Golden Rule Ins. Co.Opinion
CIVIL ACTION NO. 4:21-cv-01690
2022-04-27
Barbara PIAZZO, Plaintiff. v. ALLSTATE INDEMNITY COMPANY, Defendant.
John W. Stevenson, Jr., Stevenson Murray, Houston, TX, Philip F. Klosowsky, Klosowsky Law Offices, Sugar Land, TX, for Plaintiff. Michael Clifton Maus, Lisa Chastain & Associates, Houston, TX, Lee Kathryn Shuchart, Law Office of Amy L. Mitchell, Houston, TX, for Defendant.
John W. Stevenson, Jr., Stevenson Murray, Houston, TX, Philip F. Klosowsky, Klosowsky Law Offices, Sugar Land, TX, for Plaintiff.
Michael Clifton Maus, Lisa Chastain & Associates, Houston, TX, Lee Kathryn Shuchart, Law Office of Amy L. Mitchell, Houston, TX, for Defendant.
OPINION AND ORDER
ANDREW M. EDISON, UNITED STATES MAGISTRATE JUDGE
Pending before me is Defendant Allstate Indemnity Company's Partial Motion to Dismiss. See Dkt. 15. Having considered the briefing, the record, and the applicable law, the motion is GRANTED in part and DENIED in part. My reasoning follows.
BACKGROUND
Plaintiff Barbara Piazzo ("Piazzo") filed this lawsuit against her insurance company, Allstate Indemnity Company ("Allstate"), alleging that she has been improperly denied underinsured motorist benefits. According to the First Amended Complaint, Piazzo was stopped at a traffic light on December 20, 2013, when an underinsured motorist, Brett Brittain ("Brittain"), failed to control his vehicle and collided with Piazzo's automobile. As a result, Piazzo alleges that she suffered substantial personal injuries.
Brittain carried a liability policy providing for coverage of $50,000 per person. With Allstate's written consent, Piazzo settled with Brittain's automobile insurance carrier for $49,000.
On January 5, 2021, Piazzo made an offer to settle her underinsured motorist ("UIM") claim with Allstate for the $100,000 UIM policy limits provided by the Allstate policy. Piazzo claims that Allstate refused her offer. This lawsuit followed.
In her First Amended Complaint, Piazzo brings causes of action against Allstate for declaratory judgment, breach of contract, and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act ("DTPA"). In addition to seeking the UIM benefits available under the applicable Allstate policy, Piazzo seeks attorney's fees and prejudgment interest as allowed by law.
Allstate has filed a Partial Motion to Dismiss, asking that I get rid of Piazzo's (1) breach-of-contract claim; (2) extra-contractual claims; and (3) claim for attorney's fees under the Texas Declaratory Judgment Act.
LEGAL STANDARD
Allstate's Partial Motion to Dismiss is brought under Federal Rule of Civil Procedure 12(c). "The standard for deciding a Rule 12(c) motion is the same standard used for deciding motions to dismiss pursuant to Rule 12(b)(6)." Q Clothier New Orleans, L.L.C. v. Twin City Fire Ins. Co. , 29 F.4th 252, 256 (5th Cir. 2022). Under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "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." Id. Although a complaint "does not need detailed factual allegations," the "allegations must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. The allegations pleaded must show "more than a sheer possibility that a defendant has acted unlawfully." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. A court must accept "all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit , 369 F.3d 464, 467 (5th Cir. 2004) (quotation omitted). Because a complaint must be liberally construed in favor of the plaintiff, a motion to dismiss under Rule 12(b)(6) is generally viewed with disfavor and is rarely granted. See IberiaBank Corp. v. Ill. Union Ins. Co. , 953 F.3d 339, 345 (5th Cir. 2020).
ANALYSIS
A. BREACH OF CONTRACT
In seeking dismissal of Piazzo's breach-of-contract claim, Allstate argues that "there has been no breach of contract established at this point as [Piazzo] does not have a judgment against the tortfeasor or any agreement establishing liability." Dkt. 15 at 4. I agree.
The Texas Insurance Code requires that all personal automobile policies include UIM coverage unless the insured rejects it in writing. See TEX. INS. CODE § 1952.101(b), (c). The purpose of such coverage is to place the insured in the same position she would have occupied if the tortfeasor had carried adequate insurance. See Allstate Ins. Co. v. Irwin , 627 S.W.3d 263, 265 (Tex. 2021) ("Underinsured motorist coverage is insurance designed to fill the gap between the insured's damages from an accident and the other driver's ability to pay."). Although this seems straightforward, "presenting a claim to your insurance carrier for underinsured motorist benefits is not like other claims under an automobile liability insurance policy." Id. An insurer is only obligated to pay the insured what the insured is "legally entitled to recover" from the underinsured motorist. TEX. INS. CODE § 1952.101(a).
The Texas Supreme Court has held that an insurer has no obligation to pay under a UIM policy "until the insured obtains a judgment establishing the liability and underinsured status of the other motorist." Brainard v. Trinity Universal Ins. Co. , 216 S.W.3d 809, 818 (Tex. 2006). Without that judgment, "the insurer's contractual obligation to pay benefits simply does not arise," Banda v. Allstate Prop. & Cas. Ins. Co. , No. 4:19-CV-3418, 2020 WL 3972537, at *2 (S.D. Tex. July 14, 2020), and "[n]either requesting UIM benefits nor filing suit against the insurer" changes that result. Brainard , 216 S.W.3d at 818. Moreover, "neither a settlement nor an admission of liability from the tortfeasor establishes UIM coverage, because a jury could find that the other motorist was not at fault or award damages that do not exceed the tortfeasor's liability insurance." Id.
Piazzo's breach-of-contract claim must be dismissed because she has failed to plead the existence of a judgment establishing Brittain's liability and underinsured status. Without that allegation, the First Amended Complaint fails to establish that Allstate had an obligation to pay UIM benefits. See Ali v. Allstate Indem. Co. , No. 4:20-CV-02769, 2021 WL 3868306, at *2 (S.D. Tex. Aug. 9, 2021) (granting motion to dismiss breach-of-contract claim for failing to allege that a judgment had been rendered establishing the liability and underinsured status of another motorist); Banda , 2020 WL 3972537, at *2–3 (same); Martinez v. Allstate Fire & Cas. Ins. Co. , No. 5:19-CV-35-DAE, 2019 WL 5789988, at *5 (W.D. Tex. June 18, 2019) (same); Adedipe v. Safeco Ins. , No. 4:17-CV-347-ALM-CAN, 2017 WL 6811798, at *4 (E.D. Tex. Oct. 18, 2017) (same); Woods v. Argonaut Midwest Ins. Co. , No. 6:15-CV-139, 2016 WL 3653518, at *2 (E.D. Tex. Mar. 18, 2016) (same).
Although the breach-of-contract claim must be dismissed, Allstate concedes that Piazzo's declaratory judgment claim, as pled, survives. This is important because the same relief Piazzo seeks under her breach-of-contract claim is available as a result of her declaratory judgment action. Under Texas law, an insured can obtain the judgment needed to establish the negligence and underinsured status of the other motorist in two ways: (1) by filing suit against the other motorist and obtaining a judgment establishing liability and the resulting damages; or (2) by settling with the tortfeasor, as Piazzo did in this case, and then proceed to litigate UIM coverage with the insurer. See Brainard , 216 S.W.3d at 818. In this second situation, "the litigation between the insured and [her] carrier is on the UIM contract but not for its breach, which cannot occur until the underlying conditions precedent of liability and damages are established." Irwin , 627 S.W.3d at 267. The Texas Supreme Court has expressly held that an insurer's obligation to pay may be triggered by a declaratory judgment that the other motorist was at fault and underinsured. See id. ("[A] declaratory judgment action is the appropriate remedy for determining the underlying tort issues that control the validity of an insured's UIM claim against his insurer.").
B. EXTRA-CONTRACTUAL CLAIMS
Next, I turn to Piazzo's extra-contractual claims. In short, Piazzo alleges that although Allstate "had a duty to fully, fairly, and promptly evaluate and adjust" her claim, it failed "in good faith to effectuate a prompt, fair, and equitable settlement of the claim." Dkt. 13 at 4–5. Allstate asks that I dismiss the extra-contractual claims because the First Amended Complaint contains "nothing more than unsubstantiated, conclusory statements that are all too common in first-party bad faith litigation." Dkt. 15 at 5. On this point, I disagree with Allstate.
Under Texas law, "an insurer may be liable for common-law bad faith and for unfair settlement practices under Chapter 541 of the Insurance Code when it delays payment on a claim for UIM benefits until the insured has obtained legal determinations as to the liability and underinsured status of the third-party motorists." Burgess v. Allstate Fire & Cas. Ins. Co. , 641 S.W.3d 474, 483 (Tex. App.—Austin 2021, no pet. h.). See also State Farm Mut. Auto. Ass'n v. Cook , 591 S.W.3d 677, 683 (Tex. App.—San Antonio 2019, no pet.) ("[A]n insurer can act in bad faith by failing to reasonably investigate or delaying payment on a claim for uninsured motorist benefits until after the insured obtains a judgment establishing the liability and uninsured status of the other motorist."); Accardo v. Am. First Lloyds Ins. Co. , No. CIV.A. H-11-0008, 2012 WL 1576022, at *5 (S.D. Tex. May 3, 2012) ("When a reasonable investigation reveals overwhelming evidence of the UM/UIM's fault, the judicial determination that triggers the insurer's obligation to pay is no more than a formality. In such cases, an insurer may act in bad faith by delaying payment and insisting that the insured litigate liability and damages before paying benefits on a claim.").
Given this legal framework, I conclude, after reviewing the First Amended Complaint, that Piazzo's extra-contractual claims pass muster at this early pleading stage. The thrust of the First Amended Complaint is that Allstate forced Piazzo to file this lawsuit, unnecessarily consuming the parties’ and the Court's resources, even though Piazzo's attorneys submitted extensive documentation to Allstate establishing that: (1) Brittain's negligence was the sole cause of the collision; and (2) Piazzo's damages far exceed Brittain's available liability coverage. These allegations are plainly sufficient to satisfy Rule 8(a)(2)’s requirement that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2).
Allstate also argues that Piazzo has failed to meet the heightened pleading standard of Rule 9(b). This rule requires the complaint to lay out the "who, what, when, where, why, and how the false statements were made and to whom they were made." Askanase v. Fatjo , 130 F.3d 657, 676 (5th Cir. 1997). Rule 9(b) applies "to all cases where the gravamen of the claim is fraud even though the theory supporting the claim is not technically termed fraud." Frith v. Guardian Life Ins. Co. of Am. , 9 F. Supp. 2d 734, 742 (S.D. Tex. 1998) (quotation omitted). Allstate's argument does not sway me, as I do not construe Piazzo's claims brought under § 541.060 of the Texas Insurance Code or the DTPA to be predicated on misrepresentation and fraud. "Though some Chapter 541 claims are indeed predicated on misrepresentation and fraud, such as section 541.060(a)(1), which states that an insured or beneficiary may be liable for ‘misrepresenting to a claimant a material fact or policy provision relating to coverage at issue,’ other Chapter 541 claims do not require any fraudulent conduct." Home Run House, LLC v. Cincinnati Indem. Co. , No. 1-20-CV-827-LY, 2020 WL 8340388, at *5 (W.D. Tex. Dec. 4, 2020) (quotation omitted). Piazzo does not specify which subsection of § 541.060 she relies on, but it is clear to me that she is not alleging that Allstate engaged in any misrepresentation or fraud. The crux of the First Amended Complaint is that Allstate failed to conduct a reasonable investigation and settle Piazzo's claim in a fair manner. The provisions of § 541.060 which prohibit such conduct— § 541.060(a)(2)(A) (prohibits an insurer from failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement once the insurer's liability has become reasonably clear); § 541.060(a)(4)(A) (requires an insurer to affirm or deny coverage of a claim within a reasonable time); § 541.060(a)(7), (prohibits an insurer from refusing to pay a claim without conducting a reasonable investigation with respect to that claim)—do not rest on allegations of fraud. See id. (holding Rule 9(b) inapplicable to § 541.060(a)(7) claim); Tiras v. Encompass Home & Auto Ins. Co. , No. 4:10-CV-03266, 2011 WL 5827298, at *4 (S.D. Tex. Nov. 17, 2011) (holding Rule 9(b) inapplicable to § 541.060(a)(2)(A) claim). I thus find that Rule 9(b)’s heightened pleading standard is inapplicable here.
C. ATTORNEY'S FEES
As a final matter, Allstate contends that Piazzo's claim for attorney's fees under the Texas Declaratory Judgment Act should be jettisoned because "upon removal the state court declaratory judgment claims are converted and governed under the federal declaratory judgment act that does not provide for attorneys’ fees." Dkt. 15 at 5. Allstate is right.
The Texas Declaratory Judgment Act is a procedural mechanism that is inapplicable in federal court. See Utica Lloyd's of Tex. v. Mitchell , 138 F.3d 208, 210 (5th Cir. 1998). As a result, the Fifth Circuit has expressly held that "a party may not rely on the Texas [Declaratory Judgment Act] to authorize attorney's fees in a diversity case because the statute is not substantive law." Id. In a diversity case such as this one, any declaratory judgment action must be brought under the Federal Declaratory Judgment Act. See id. "When a declaratory judgment action filed in state court is removed to federal court, the federal court does not apply the Texas Declaratory Judgment Act." Collins v. Nat'l Football League , 566 F.Supp.3d 586, 602 (E.D. Tex. 2021) (quotation omitted). Instead, the "action is in effect converted into one brought under the federal Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202." Redwood Resort Props., LLC v. Holmes Co. Ltd. , No. 3:06-CV-1022-D, 2007 WL 1266060, at *4 (N.D. Tex. Apr. 30, 2007). Important to this discussion, the Federal Declaratory Judgment Act does not authorize a grant of attorney's fees to a prevailing party. See Mercantile Nat'l Bank v. Bradford Tr. Co. , 850 F.2d 215, 218 (5th Cir. 1988) (holding that the Federal Declaratory Judgment "does not by itself provide statutory authority to award attorney's fees that would not otherwise be available under state law in a diversity action").
The end result is this: there is no statutory basis for Piazzo to receive attorney's fees in the event she prevails on her declaratory judgment claim. At the same time, Piazzo still may recover attorney's fees in this action. She has alleged that she is entitled to attorney's fees in the event she prevails on her extra-contractual claims, and that issue remains open as this case progresses.
CONCLUSION
For the reasons explained above, Defendant Allstate Indemnity Company's Motion to Dismiss (Dkt. 15) is GRANTED in part and DENIED in part. To be more specific, Piazzo's breach-of-contract claim and her claim for attorneys’ fees under the Texas Declaratory Judgment Act are dismissed. Her extra-contractual claims, along with any claims for attorney's fees under those statutes, survive the pleading stage.