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concluding plaintiffs failed to state cause of action under UTPCPL, even though plaintiffs alleged that insurer misrepresented that "medical bill payment benefits were available for injuries resulting from a motor vehicle accident," because "[u]se of the word ‘misrepresented’ notwithstanding, the well-pled allegations in the amended complaint suggest that the issue here is [the insurer's] defective handling of the [plaintiffs’] claim, not malfeasance in the formation of the insurance contract"
Summary of this case from Holovich v. Progressive Specialty Ins. Co.Opinion
Civil Action No. 18-cv-645
11-29-2018
STEPHEN A. NEUSTEIN and ARLENE NEUSTEIN, his wife, Plaintiffs, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, also known as GEICO, also known as GEICO GENERAL INSURANCE COMPANY, Defendant.
Magistrate Judge Robert C. Mitchell/District Judge Arthur J. Schwab REPORT AND RECOMMENDATION ROBERT C. MITCHELL, United States Magistrate Judge.
I. RECOMMENDATION
Presently pending before the Court is a Motion to Dismiss Count III of the Amended Complaint (ECF No. 11), with brief in support (ECF No. 12), filed by the Government Employees Insurance Company, hereinafter referred to as GEICO. Plaintiffs Stephen and Arlene Neustein, collectively, the Neusteins, have filed a brief in opposition. (ECF No. 14). For the reasons that follow, it is respectfully recommended that GEICO's motion be granted and that Count III of the amended complaint be dismissed.
II. REPORT
a. Factual and Procedural History
On April 19, 2010, the vehicle Stephen Neustein was driving was rear-ended on an interstate highway near Baltimore, Maryland (ECF No. 9 at ¶¶ 3-5). As a result of the collision, Neustein suffered various bodily injuries, which required surgery, rehabilitation and other ongoing medical care (Id. at ¶ 9, 10).
The third-party tortfeasor was underinsured (Id. at ¶ 20). At the time of the collision, the Neusteins' vehicle was covered by a policy issued through GEICO (Id. at ¶ 13). The policy included a full tort election and provided first-party medical benefits, as well as underinsured motorist coverage (Id. at ¶¶ 13-14, 21). A lawsuit against the third-party tortfeasor was settled for $20,000 (Id. at ¶ 7). GEICO agreed to the resolution of the suit; however, it has refused "to pay for or consider damages for any injuries from the aforesaid accident pursuant to [the Neusteins'] underinsured motorist coverage based on any period beyond sixteen (16) months following the aforesaid accident" (Id. at ¶¶ 15, 17, 19, 22-23).
The Neusteins initiated this action by filing a writ of summons against GEICO in the Allegheny County Court of Common Pleas (ECF No. 12, pg. 1). On May 11, 2018, the Neusteins filed a complaint raising claims of breach of contract (Count I); statutory bad faith, 42 Pa.C.S. § 8371 (Count II); and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-1, et seq. (Count III). GEICO timely removed the action to this Court on the basis of diversity of citizenship (ECF No. 1). On May 24, 2018, GEICO filed a motion to dismiss (ECF No. 3) and brief in support thereof (ECF No. 4). In response, the Neusteins filed an amended complaint (ECF No. 9), and GEICO's first motion was denied as moot. On July 2, 2018, GEICO file the instant motion to dismiss Count III of the amended complaint (ECF No. 11). The motion has been fully briefed and is ripe for disposition. This Court has jurisdiction pursuant to 28 U.S.C. § 1332.
b. Standard of Review
A defendant moving to dismiss under Fed. R. Civ. P. 12(b)(6) bears the burden of proving that the plaintiff has failed to state a claim for relief. See Fed. R. Civ. P. 12(b)(6); see also, e.g., Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). The United States Supreme Court opinions in Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (2007) and, more recently, in Ashcroft v. Iqbal, 556 U.S. 662 (2009), have shifted pleading standards from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss. With the Supreme Court instruction in mind, the Court of Appeals for the Third Circuit has outlined a two-part analysis that courts should utilize when deciding a motion to dismiss for failure to state a claim. First, the factual and legal elements of a claim should be separated. In other words, while courts must accept all of the complaint's well-pleaded facts as true, they may disregard any legal conclusions. Second, courts then decide whether the facts alleged in the complaint are sufficient to demonstrate that the plaintiff has a "plausible claim for relief." Iqbal, 129 S.Ct. at 1950. That is, a complaint must do more than allege the entitlement to relief; its facts must show such an entitlement. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009).
c. Discussion
In Count III of the amended complaint, the Neusteins purport to raise a claim under the UTPCPL. In response, GEICO argues that this claim must be dismissed because the UTPCPL applies "only to conduct related to the sale of an insurance policy, not to the handling of insurance claims," and, even if there is a private cause of action for such claims under the UTPCPL, an insured seeking to recover under the statute must show misfeasance or malfeasance, which has not been pled here (ECF No. 11, at ¶¶ 17-19).
The Pennsylvania legislature enacted the UTPCPL to protect consumers "from fraud and unfair or deceptive business practices." Com. ex rel. Corbett v. Peoples Benefit Servs., Inc., 923 A.2d 1230, 1236 (Pa. Cmwlth. 2007) (citing Commonwealth by Creamer v. Monumental Properties, Inc., 329 A.2d 812 (Pa. 1974)). The Pennsylvania courts distinguish UTPCPL claims from claims brought under section 8371: "[t]he insurance bad faith statute applies to post-contract formation conduct. The UTPCPL, on the other hand, applies to conduct surrounding the insurer's pre-formation conduct. The UTPCPL applies to the sale of an insurance policy. It does not apply to the handling of insurance claims. Rather, § 8371 provides the exclusive statutory remedy applicable to claims handling." Kelly v. Progressive Advanced Ins. Co., 159 F. Supp. 3d 562, 564-65 (E.D. Pa. 2016) (quoting Gibson v. Progressive Specialty Ins. Co., 2015 WL 2337294, at *4 (E.D.Pa. May 13, 2015)). Moreover, "[i]n Pennsylvania, only malfeasance, the improper performance of a contractual obligation, raises a cause of action under the [UTPCPL] and an insurer's mere refusal to pay a claim which constitutes nonfeasance, the failure to perform a contractual duty, is not actionable." Horowitz v. Fed. Kemper Life Assur. Co., 57 F.3d 300, 307 (3d Cir. 1995) (citing Gordon v. Pa. Blue Shield, 548 A.2d 600, 604 (Pa. Super. 1988)).
The first three paragraphs of Neusteins' UTPCPL claim take issue with GEICO's conduct post-contract, specifically its claims handling and alleged failure to pay benefits under the policy (ECF No. 9, at ¶ 34-36). These arguments fall outside the purview of the UTPCPL.
In paragraph 37 of the amended complaint, the Neusteins allege that "GEICO misrepresented to Plaintiffs that medical bill payment benefits were available for injuries resulting from a motor vehicle accident, including, without limitation, underinsured motorist benefits [] due to injuries sustained in an automobile accident" (ECF No. 9, ¶ 37). Use of the word "misrepresented" notwithstanding, the well-pled allegations in the amended complaint suggest that the issue here is GEICO's defective handling of the Neusteins' claim, not malfeasance in the formation of the insurance contract. Accordingly, Count III fails to state a cause of action upon which relief can be granted.
d. Conclusion
For the reasons set forth in this Report and Recommendation, it is respectfully recommended that the Defendants' motion to dismiss be granted (ECF No. 11), and that Count III of the amended complaint (ECF No. 9) be dismissed.
In accordance with Magistrate Judge's Act, 28 U.S.C. § 636(b)(1)(B) and (C), and Rule 72(D)(2) of the Local Rules pertaining to Magistrate Judges, the parties are permitted until December 13, 2018 to file written objections to this Report and Recommendation. Failure to do so may waive the right to appeal. Any party opposing written objections shall have fourteen days after the service of such objections to respond thereto.
DATED this 29th day of November, 2018.
BY THE COURT:
s/Robert C. Mitchell
ROBERT C. MITCHELL
United States Magistrate Judge