Opinion
Case No. 02-2278-JWL
October 9, 2002
MEMORANDUM AND ORDER
The matter is before the court on defendant American States Insurance Companies' ("American States") motion to dismiss Count II of plaintiff's complaint (Doc. 3) for failure to state a claim upon which relief can be granted. In Count II, plaintiff attempts to state a tort claim based upon defendant insurer's alleged negligent or bad faith breach of duties it owed to the insured plaintiff. Kansas law does not recognize any such cause of action. For this reason and those set forth below, defendant's motion is granted.
Defendant did not explicitly move to dismiss pursuant to Rule 12(b)(6). The court will analyze the motion under Rule 12(b)(6), however, in light of defendant's claim that plaintiff failed to state a claim "for which relief can be granted under the law of the State of Kansas".
On September 16, 2002, this court ordered plaintiff to show good cause why the court should not grant defendant's motion to dismiss due to plaintiff's failure to respond. (Doc. 9). Plaintiff responded to the show cause order by arguing that the delay was attributable to excusable neglect. (Doc. 10). American States' conceded that it suffered no prejudice and that plaintiff had established good-cause for its delay. Therefore, the court finds that plaintiff has stated good cause and will consider plaintiff's response to the motion to dismiss.
• Background
Plaintiff is an individual doing business as Shawnee Car Wash in Shawnee, Kansas. From August 23, 1997 through August 23, 1998, plaintiff's business was insured under defendant's commercial property and liability insurance policy no. 01-CC-292369-0.
On December 12, 1997, a patron of plaintiff's car wash business, Richard Moore, was allegedly injured when he slipped and fell at one of Mr. Schaal's business locations. Mr. Moore filed a petition against plaintiff for injuries arising out the accident in the Johnson County, Kansas District Court. On September 13, 1999, the state court entered a default judgment against Mr. Schaal. Plaintiff claims that he was unaware that Mr. Moore filed a petition until a Writ of Execution was delivered to him on June 16, 2000.
Prior to June 21, 2000, plaintiff filed a notice of claim with defendant and requested that American States provide a defense for the underlying lawsuit. On June 21, 2000, defendant's claims specialist refused to provide a defense and advised plaintiff to obtain independent counsel. Plaintiff settled the underlying lawsuit in March of 2001 for $67,500. In this action, plaintiff alleges that defendant wrongfully refused to defend and indemnify him in the underlying action. As a result, plaintiff alleges that he has incurred attorney fees, expenses and liabilities that defendant was contractually obligated to pay. In Count II of the complaint, plaintiff attempts to assert a tort claim against defendant for negligent or bad faith breach of the duties defendant allegedly owed to plaintiff.
• Standard
The court will dismiss a cause of action for failure to state a claim only when "it appears beyond a doubt that the plaintiff can prove no set of facts in support of his [or her] claims which would entitle him [or her] to relief," Poole v. County of Otero, 271 F.3d 955, 957 (10th Cir. 2001) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)), or when an issue of law is dispositive. Neitzke v. Williams, 490 U.S. 319, 326 (1989). The court accepts as true all well-pleaded facts, as distinguished from conclusory allegations, and all reasonable inferences from those facts are viewed in favor of the plaintiff. Smith v. Plati, 258 F.3d 1167, 1174 (10th Cir. 2001). The issue in resolving a motion such as this is "not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S.Ct. 992, 997 (quotation omitted).
• Analysis
In Count II, plaintiff alleges that defendant's refusal to defend the underlying action constitutes an independent tort. Defendant argues that Kansas law does not recognize the tort of bad faith. The court agrees with defendant.
The difference between a tort and contract action is that a breach of contract arises from a failure to perform a duty under or imposed by agreement; whereas, a tort arises from a failure to perform a duty imposed by law. Guarantee Abstract Title Co., Inc. v. Interstate Fire and Cas. Co., Inc. 232 Kan. 76, 79 (1982). Kansas law does impose upon insurers the duty to act in good faith and without negligence in defending and settling claims against the insured. Spencer v. Aetna Life Cas. Ins. Co., 227 Kan. 914, 922 (1980). Actions seeking to enforce these duties, however, are based on the contractual duty to defend and sound in contract. Glenn v. Fleming, 247 Kan. 296, 313 (1990). Thus, the duty to act in good faith and without negligence does not rise to the level of an independent tort. Spencer, 227 Kan. at 922.
Plaintiff argues that the Kansas Supreme Court's decision in Spencer can be distinguished because it "involved a first party claim arising out of a fire loss to a house covered by an insurance policy issued by the insurer," and "[p]laintiff in the instant case is asserting claims against the insurer arising out of the Moore Suit, a third-party claim." Plaintiff's argument is misplaced. While the claim in Spencer was based upon the insured's own loss (what plaintiff characterizes as a first-party claim), the Court noted that when an insurer defends and settles claims filed against the insured (what the plaintiff characterizes as a "third-party" claim), the failure to act in good faith and without negligence does not rise to the level of an independent tort. 227 Kan. at 922. The Kansas Supreme Court confirmed this rule in Interstate Fire and Cas. Co., Inc., 232 Kan. at 81 ("a claim that an insured acted negligently in performing its contractual duty to defend on behalf of the insured does not create a tort action or alter the measure of damages which may be recovered."). Accordingly, defendant's motion to dismiss under Rule 12(b)(6) is granted.
IT IS THEREFORE ORDERED that defendant's motion to dismiss Count II of plaintiff's complaint, (Doc. 3), is granted.
IT IS SO ORDERED this 9th day of October, 2002.