Aldridge v. Travelers Home And Marine Insurance Company

REPLY BRIEF re MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM In Counts VIII and IX of Plaintiffs' Second Amended Complaint

N.D. Ga.July 28, 2016

1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION A. DENISE ALDRIDGE and CYRUS ALDRIDGE through his next friend A. Denise Aldridge, ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiff, vs. CIVIL ACTION NO: 1:16-cv- 01247-SCJ TRAVELERS HOME AND MARINE INSURANCE COMPANY and WELLS FARGO, N.A., Defendant. TRAVELERS HOME AND ) MARINE INSURANCE ) COMPANY, ) Plaintiff in Counterclaim, ) ) vs. ) ) A. DENISE ALDRIDGE AND ) WELLS FARGO, N.A. ) ) Defendants in Counterclaim. ) TRAVELERS’ REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS COUNTS VIII AND IX OF PLAINTIFFS’ SECOND AMENDED COMPLAINT COMES NOW Travelers Home and Marine Insurance Company (“Travelers”), Defendant and Plaintiff in Counterclaim in the above-styled action, Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 1 of 11 2 and files this Reply Brief in Support of its Motion to Dismiss Counts VIII and IX of the Plaintiffs’ Second Amended Complaint, as substituted [Doc. 16-1]. As a preliminary matter, however, Travelers notes that the Plaintiffs have filed a Third Amended Complaint [Doc. 30]. The Third Amended Complaint contains negligence and fraud claims (Counts XI and XII) which are substantially similar to Counts VIII and IX of the Second Amended Complaint which are the subject of this Motion. In any event, Travelers will be filing a Motion to Dismiss the Third Amended Complaint in its entirety contemporaneously with, or shortly after, filing this Reply Brief. Thus, Travelers submits that the instant Motion to Dismiss Counts XIII and IX of the Second Amended Complaint is not rendered moot by the filing of the Third Amended Complaint. In further support of its Motion to Dismiss Counts XIII and IX of the Second Amended Complaint, and in reply to Plaintiffs’ Response Brief [Doc. 29], Travelers shows this Honorable Court the following: A. Travelers Does Not Owe the Plaintiffs Any Duties Independent of the Contractual Duties Owed Under the Policy As Travelers discussed at length in its Brief in Support of its Motion to Dismiss (“Brief in Support”), and as the Plaintiffs acknowledge in their Response Brief, a mere breach of contract does authorize the aggrieved party to proceed in tort against the breaching party. Armstead v. Allstate Prop. & Cas. Ins. Co., 2014 WL 6810727, at *9 (N.D. Ga. 2014); Tate v. Aetna Cas. & Surety Co., 149 Ga. App. 123, 253 S.E.2d 775 (1979); Leonard v. Firemen’s Ins. Co., 100 Ga. App. Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 2 of 11 3 434, 111 S.E.2d 773 (1959). Furthermore, while it may be “axiomatic that a single act or course of conduct may constitute not only a breach of contract but an independent tort as well,” that is only the case where a tort duty arises between the parties independent of the contact at issue. Sheppard v. Yara Eng'g Corp., 248 Ga. 147, 148-149, 281 S.E.2d 586, 587 (1981). Here, there is no such duty owed by Travelers to the Plaintiffs which can support the Plaintiffs claims in Counts XIII and IX of the Second Amended Complaint. The Plaintiffs incorrectly attempt to establish the existence of an independent tort duty by citing to third-party liability cases which have no applicability here. See Plaintiffs Response Brief at p.8-9. In those cases, it was held that the special relationship created by an insurer’s duty to defend or settle cases against its insured under a liability policy (i.e., the unique obligation of having to provide a defense or settle a case when its insured is sued) supported the imposition of an independent duty on the insurer outside of the contract. U.S. Fid. & Guar. Co. v. Evans, 116 Ga. App. 93, 95, 156 S.E.2d 809, 811, aff'd, 223 Ga. 789, 158 S.E.2d 243 (1967) (finding that an insurer may be negligent for failing to settle a case brought against its insured); Delancy v. St. Paul Fire Marine Ins. Co., 947 F.2d 1536, 1545-47 (11th Cir. 1991) (discussing how the case is a “duty to settle” case); Dumas v. ACCC Insurance Co., 349 Fed. App’x. 489 (11th Cir. 2009) (involving third-party liability claims and citing Delancy in dicta). In Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 3 of 11 4 discussing the basis for an independent tort duty being imposed on an insurer, the Georgia Court of Appeals poignantly noted in Evans the following: With respect to the decision whether to settle or try the case, the insurer, acting through its representatives, must use such care as would have been used by an ordinarily prudent insurer with no policy limit applicable to the claim. The insurer is negligent in failing to settle if, but only if, such ordinarily prudent insurer would consider that choosing to try the case (rather than to settle on the terms by which the claim could be settled) would be taking an unreasonable risk-that is, trial would involve chances of unfavorable results out of reasonable proportion to the chances of favorable results. Evans, 116 Ga. App. at 94-95 (emphasis supplied). This type of analysis is simply inapplicable to the instant case where the sole issue is whether Travelers breached its duty to pay under the policy. The relationship between Travelers and the Plaintiffs is merely contractual, and does not involve the special obligation or duty of defending or settling lawsuits brought against the insured. Indeed, as this Court has previously acknowledged: “to the extent [an insured] allege[s] negligence outside of the settlement context, such allegations are not supported by an independent duty in tort under Georgia law.” Camacho v. Nationwide Mut. Ins. Co., 13 F. Supp. 3d 1343, 1363 (N.D. Ga. 2014); see also Arrow Exter., Inc. v. Zurich Am. Ins. Co., 136 F.Supp.2d 1340 (N.D. Ga. 2001) (finding that the “incompetency of adjusters and processors does not fall within the special exception” allowing for tort claims based on the breach of a contract) (citing Tate, 149 Ga. App. 123). Accordingly, the cases cited by the Plaintiffs do not support Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 4 of 11 5 the imposition of an independent tort duty on Travelers sufficient to bring any extra-contractual claims against Travelers. Implicitly acknowledging this fact, the Plaintiffs also attempt to rely on a different group of inapplicable cases to establish a basis for an independent tort duty. See Response Brief at p. 10. The Plaintiffs cite to Travelers Insurance Company v. King and McGowan v. Progressive Preferred Ins. Co. as cases which purportedly address independent duties of insurers in the first-party context. 160 Ga. App. 473, 287 S.E.2d 381 (1981); 281 Ga. 169, 637 S.E.2d 27 (2006). The McGowan case is totally inapplicable here as it involved the narrow issue of whether the successful use of an appraisal provision in an insurance policy rendered certain claims, including a fraud claim, moot. McGowan, 281 Ga. at 170 (“we granted certiorari to determine whether the Court of Appeals correctly held that invocation of the appraisal clause in this case mooted Walker's fraud, breach of contract, and RICO claims.”). Notably absent from the opinion is any discussion by the court addressing the viability of those claims separate from the narrow issue of whether the use of the appraisal provision rendered them moot. In other words, whether an independent duty existed to support the fraud claim was not at issue nor even referenced, and therefore, the McGowan case is not controlling. The King case is also inapplicable as the issue before the court there was the insurer’s tortious interference with the insured’s vested property right in a check Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 5 of 11 6 made payable to the insured. King, 160 Ga. App. at 475-76. Specifically, in King, the insured alleged that the insurer negligently failed to notify him that a check it sent to him had been cancelled. Id. The court found that the insured could maintain a tort claim against the insurer because the insurer had a duty independent of the insurance contract to notify the insured of the cancellation. Id. However, most importantly, the court found that the duty arose out of the insurer’s interference with the insured’s property right in the check, not out the insurer- insured relationship between the parties as set forth in the policy. Id. (“such acts of negligence by [the insurer] did not relate to [the insurer]'s failure to perform its duty to pay a valid claim under the insurance contract. Instead, such negligent conduct constituted a direct invasion of [the insured]'s legal rights in the first check.”). Conversely, the Plaintiffs here simply assert that an independent tort duty arose out of “[t]he relationship between Travelers (as insurer) and Ms. Aldridge (as the insured) . . . .”. [Doc. 16-1] at ¶ 268. King, however, does not hold that the mere relationship of insurer-insured creates an independent duty on the insurer outside of its contractual obligations. It is therefore inapposite. Moreover, although the Second Amended Complaint generally (but, not the Negligence and Fraud claims specifically) allege that Travelers should have issued checks for payment under the policy solely to Ms. Aldridge (i.e., not as a joint payee with Wells Fargo), such allegations do not bring the instant case within the Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 6 of 11 7 holding of King. See e.g., Second Amended Complaint [Doc. 16-1] at ¶ 247. Here, the dispute regarding the checks sent to Plaintiff Ms. Aldridge arises out of whether, under the terms of the policy, those checks should have also included Wells Fargo as a payee. Therefore, that dispute relates to Travelers contractual duties under the policy, and cannot support the Plaintiffs’ tort claims. King, on the other hand, related to the duty to notify the insured of the cancelled check. That duty arose, not from the terms of the insurance policy, but instead out of the insurer’s obligation to not interfere with the insured’s vested rights in the already issued first check. King, 160 Ga. App. at 475-76. King is, therefore, factually distinguishable-on the pivotal issue of the genesis of the duty owed to the insured-and is thus inapplicable. In sum, in the first-party property context (which is the context here) Georgia law is clear that an insurer’s duty to its insured is contractual. Armstead v. Allstate Prop. & Cas. Ins. Co., 2014 WL 6810727, at *9 (N.D. Ga. 2014); Tate v. Aetna Cas. & Surety Co., 149 Ga. App. 123, 253 S.E.2d 775 (1979); Leonard v. Firemen’s Ins. Co., 100 Ga. App. 434, 111 S.E.2d 773 (1959). The cases cited by the Plaintiffs which purportedly support their allegation that the relationship between Travelers and the Plaintiffs created an independent tort duty are inapplicable to this case and do not support that claim. Therefore, the Plaintiffs Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 7 of 11 8 tort claims, Counts XIII and IX of the Second Amended Complaint, must be DISMISSED.1 B. The Plaintiffs’ Negligence and Fraud Claims Arise Out of Travelers’ Investigating and Adjusting the Plaintiffs’ Insurance Claim. As discussed in Travelers’ Brief in Support, this Court has previously held that allegedly tortious behavior which arises out of “the manner in which [an insurer] processed [an insured’s] claim for coverage under the policy,” does not support a tort claim for extra-contractual damages. Armstead v. Allstate Prop. & Cas. Ins. Co., 2014 WL 6810727, at *11 (N.D. Ga. 2014). In their Response Brief, the Plaintiffs attempt to skirt this holding by rather absurdly claiming that the allegations supporting their negligence and fraud claims do not arise out of Travelers handling (investigation and adjustment) of the Plaintiffs insurance claim. Response Brief at p. 14. Plaintiffs identify the following actions which supposedly do not arise out of Travelers’ handling of the insurance claim:  instead of acknowledging its erroneous reading of the policy, Travelers tried to cover it up;  Travelers misled Ms. Aldridge about the identity, intended activities and purposes of various vendors;  Travelers told Mr. Aldridge that it was “assessing the damages” to allow repairs to commence when it was actually conducting an 1 To the extent that Section E. of the Plaintiffs’ Response Brief attempts to set out a claim for Negligent Infliction of Emotional Distress, Travelers hereby objects to the same as having not been stated in the Second Amended Complaint. See Fed. R. Civ. Pro 8. To the extent that the Plaintiffs’ claim their negligence claim in the Second Amended Complaint includes a claim for Negligent Infliction of Emotional Distress, Travelers states that any such claim should be dismissed as a matter of law for the reasons discussed in Travelers’ Brief in Support and stated herein. Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 8 of 11 9 unauthorized re-investigation in an effort to find new ways to deny and/or limit coverage;  that Travelers misrepresented the findings set forth in the SEA Report. Response Brief at p. 14. Even if these allegations are taken as true, they each clearly arise out of Travelers handling of the insurance claim, and thus cannot serve as a basis for a tort claim against Travelers. Armstead, 2014 WL 6810727, at *11 (N.D. Ga. 2014). The first activity mentioned by the Plaintiffs obviously relates to Travelers handling of the claim as it involves the application of certain policy provisions to the claimed loss. The second activity clearly relates to the handling of the claim as the vendors referenced by the Plaintiffs were retained to investigate the Plaintiffs claimed loss. The same applies for the third and fourth activities mentioned by the Plaintiffs, as they each relate to investigation, and reporting on the investigation, of the Plaintiffs’ claimed loss. Frankly, it is indisputable that the actions which form the basis of the Plaintiffs’ tort claims arise out of Travelers handling of the insurance claim. Therefore, the Plaintiffs tort claims, Counts XIII and IX of the Second Amended Complaint, must be DISMISSED. Armstead, 2014 WL 6810727, at *11 (N.D. Ga. 2014). C. CONCLUSION For the reasons stated above and the reasons addressed in Travelers’ Brief in Support, Travelers respectfully requests that this Court DISMISS Count VIII and Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 9 of 11 10 Count IX of the Plaintiffs’ Second Amended Complaint, as substituted as Counts XI and XII of Plaintiffs’ Third Amended Complaint. [Doc. 16-1]. Respectfully submitted this 28th day of July, 2016. DREW ECKL & FARNHAM, LLP /s/ Karen K. Karabinos Karen K. Karabinos Georgia Bar No. 423906 /s/ W. Maxwell Compton W. Maxwell Compton Georgia Bar No. 380092 880 W. Peachtree Street Atlanta, GA 30357 Phone: (404) 885-1400 Fax: (404) 876-0992 Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 10 of 11 CERTIFICATE OF SERVICE I HEREBY CERTIFY that I have this day electronically filed TRAVELERS’ REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS COUNTS VIII AND IX OF PLAINTIFFS’ SECOND AMENDED COMPLAINT with the Clerk of Court using the CM/ECF system which will automatically send email notification of such filing to the following counsel of record: Counsel for Plaintiffs Susan Atkinson Atkinson & Associates, LLC 144 Vidal Boulevard Decatur, GA 30030 Counsel for Wells Fargo Dylan W. Howard Daniel P. Moore BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, P.C Monarch Plaza, Suite 1600 3414 Peachtree Road, N.E. This 28th day of July, 2016. /s/ Karen K. Karabinos Karen K. Karabinos Georgia Bar. No. 423906 Counsel for Travelers 880 W. Peachtree Street P.O. Box 7600 Atlanta, GA 30357 (404) 885-1400 Counsel for Defendant certifies that this pleading complies with Local Rule 5.1. The type is Times New Roman, 14 point. 6579145/1 05657-089488 Case 1:16-cv-01247-SCJ Document 31 Filed 07/28/16 Page 11 of 11