Opinion
Civil Action No. 03-6805.
July 12, 2004
MEMORANDUM
Plaintiffs Frank LaSalandra and Chiara LaSalandra filed a complaint against defendant Pennsylvania General Insurance Company, Inc. alleging breach of contract and bad faith. Plaintiffs, residents of the state of New Jersey, purchased a homeowner's insurance policy from defendant, a Massachusetts corporation. While the insurance policy was in force, plaintiffs' allege their home was damaged as a result of ice, snow and wind. Plaintiffs assert that they provided prompt notice to defendant regarding their property loss, made their home available for inspection and otherwise complied with the terms and conditions required by defendant's policy. Plaintiffs further allege that defendant contends any damages to their house were not a result of ice and snow and were not covered by the insurance policy. They assert that defendant failed to conduct a complete investigation of their claim and misapplied provisions of the homeowner's policy in denying coverage the policy purported to provide. Now before me is defendant's motion to dismiss Count II of plaintiffs' complaint, alleging that plaintiffs' bad faith claim is not viable under New Jersey law.
A Rule 12(b)(6) motion to dismiss examines the sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45 (1957). In determining the sufficiency of the complaint I must accept all of plaintiffs' well-pleaded factual allegations as true and draw all reasonable inferences therefrom. Graves v. Lowery, 117 F.3d 723, 726 (3d Cir. 1997).
The Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he bases his claim. To the contrary, all the Rules require is "a short and plain statement of the claim" that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.Id., quoting Conley, 355 U.S. at 47. I should not inquire as to whether plaintiffs will ultimately prevail, but only whether they are entitled to offer evidence to support their claims. See Oatway v. Am. Int'l Group, Inc., 325 F.3d 184, 187 (3d Cir. 2003). "Thus, [I will] not grant a motion to dismiss 'unless it appears beyond a doubt that [plaintiffs] can prove no set of facts in support of [their] claim which would entitle [them] to relief.'" Graves, 117 F.3d at 726, quoting, Conley, 355 U.S. at 45-46.
Accepting all the plaintiffs well-pleaded factual allegations as true and drawing all reasonable inferences therefrom, I find they have pled sufficient facts to withstand a motion to dismiss Count II of their complaint alleging bad faith in violation of the statutory, regulatory and case law of New Jersey. New Jersey does not have a bad faith statute, but New Jersey Courts imply a duty of good faith and fair dealing in all contracts. See, e.g. Paul Revere Life Ins. Co. v. Patniak, No. 02-3243, 2004 U.S. Dist. LEXIS 7668, at *6 (D.N.J. April 1, 2004). Further, "[t]he New Jersey Supreme Court has recognized a cause of action for an insurance company's 'bad faith' failure to pay an insured's claim." Tarsio v. Provident Ins. Co., 108 F. Supp.2d 397, 400 (D.N.J. 2000). To establish bad faith, "a plaintiff must show the absence of a reasonable basis for denying benefits of the policy." Pickett v. Lloyd's, 621 A.2d 445, 453 (1993) (citation omitted). The plaintiff "must then prove that the defendant knew or recklessly disregarded the lack of a reasonable basis for denying the claim." Tarsio v. Provident Ins. Co., 108 F. Supp.2d 397, 400-01 (D.N.J. 2000),citing Pickett 621 A.2d at 453. In other words, "an insurance company does not act in 'bad faith' if the plaintiff's insurance claim was 'fairly debatable.'" Tarsio, 108 F. Supp.2d at 401.
N.J. Stat. Ann. § 17:29 B-4(9) identifies unfair claim settlement practices by insurers including:
(a) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; . . .
(d) Refusing to pay claims without conducting a reasonable investigation based upon all available information;
(e) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
(f) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
(g) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds; . . .
(n) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement;
The statute sets forth a standard of conduct for the settlement of claims by insurers and an insurer's non-compliance with this standard is evidence of bad faith. Miglicio v. HCM Claim Mgmt. Corp., 672 A.2d 266, 271 (N.J.Super. 1995).
Plaintiffs' allegations in Count II of the complaint include claims that defendant undertook many of the practices deemed unfair in § 17:29 B-4(9). Plaintiffs allege, in part, that defendants acted in bad faith by "falsely representing that the policy of insurance issued by Defendant did not provide for a complete and unqualified appraisal of Plaintiffs' loss;" "failing to complete a prompt and thorough investigation of plaintiffs' claim . . .;" "conducting an unfair and unreasonable investigation of plaintiffs' claim; . . ." and "unnecessarily and unreasonably compelling Plaintiffs to institute this lawsuit to obtain policy benefits. . . ." (Pls.' Am. Compl. ¶ 14). Under Federal Rule of Civil Procedure 8(a)(2)'s notice pleading requirement, a plaintiff must simply plead sufficient facts to "give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests."Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002), citing Conley v. Gibson, 355 U.S. 41, 47 (1957). Plaintiffs' allegations in Count II of the complaint are sufficient to give defendant fair notice of the grounds for their bad faith claim as they allege the absence of a reasonable basis for denying insurance coverage.
In support of its argument that plaintiffs' claim was "fairly debatable," defendant cites to a letter from Edward Ramos of New Jersey Skylands Insurance Companies which notes that plaintiffs' property was inspected by Dave Sorace of Contemporary Adjustment Company and David Yelner, an engineering consultant. Defendant asserts that dismissal of the bad faith claim is proper because "[w]hen the results of two separate investigations support denial of a claim, logic and equity dictate that the claim must be rendered 'fairly debatable' at the very least." (D's Mem. of Law in Suppt. of Mot. to Dis. at 3). Defendant cites to no cases where a court has dismissed a claim because investigations by two individuals were sufficient to render an insurance claim fairly debatable. Under the liberal pleading requirements of Rule 8(a), where plaintiffs have alleged defendant's investigation of their claim was "unfair and unreasonable" it does not appear "clear that no relief could be granted under any set of facts that could be proved consistent with the [plaintiff's] allegations."Swierkiewicz, 534 U.S. at 514, citing Hishon v. King Spaulding, 467 U.S. 69, 73 (1984). Plaintiffs should be entitled to offer evidence to support their claim that defendant's denial of insurance coverage was made in bad faith because there was no fairly debatable reason for its limitation of coverage for plaintiffs' claims of damage due to wind, snow and ice.