Homeowners Claim And Breach Of Contract

Home owners claims are a frequent source of litigation.  Here is a case from the Northern District of Texas, Fort Worth Division, that has a little different twist to it.  The case is styled, Allen Ripley, et al v. State Farm Lloyds.

Ripley’s home was damaged by a hail storm and he was insured by State Farm.  A dispute arose about the damages and there was ultimately an appraisal award.  State Farm did not pay the full appraisal amount due to their assertion that part of the damages were not covered by the policy.  This lawsuit resulted with Ripley alleging breach of contract and various violations of the Texas Insurance Code.

State Farm filed a motion to dismiss for failure to state a claim.

Pursuant to Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.”  This gives the defendant fair notice of what the claim is and the grounds upon which it rests.  Although a complaint need not contain detailed factual allegations, the “showing” contemplated by Rule 8 requires a plaintiff to do more than simply allege legal conclusions or recite the elements of a cause of action.   Thus, while a court must accept all the factual allegations in the complaint as true, it need not credit bare legal conclusions that are unsupported by any factual underpinnings.

To allege a plausible right to relief, the facts pleaded must suggest liability; allegations that are merely consistent with unlawful conduct are insufficient.  Determining whether a complaint states a plausible claim for relief . . . is a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.

Rule 9(b) sets forth the heightened pleading standard imposed for fraud claims. “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”  Succinctly stated, Rule 9(b) requires a party to identify in its pleadings “the who, what, when, where, and how” of the events constituting the purported fraud.  Claims alleging violations of the Texas Insurance Code are subject to the requirements of Rule 9(b) even though such claims are not technically termed “fraud.”

State Farm’s motion is based on their assertion that Ripley’s pleadings do not satisfy the pleading requirements of Rules 8(a) and 9(b).

Ripley purports to state a claim for breach of contract.  This claim is premised on State Farm’s failure to pay the full amount of the appraisal award.  However, an insurer does not have a contractual obligation to pay appraisal awards unless the appraised damage is covered by the policy.  Appraisers’ authority is limited to assessing the amount of loss, not to construe the policy or decide whether the insurer should pay.  Further, Ripley fails to allege any facts regarding the damages assessed by the appraisal, such as whether all the damage was caused by the storm or how such damage is otherwise covered by the insurance policy.  Because Ripley fails to plead a basis for the appraised damage being covered by the policy, and because merely being subject to appraisal does not bring the damage under the policy’s coverage, the breach of contract claim fails.

Ripley also purports to state a claim for bad faith.  Instead of alleging facts regarding the purported bad faith, Ripley states legal conclusions.  Such pleading does not satisfy the Rule 8(a) standards.  The complaint never explains how or why the allegedly “material misrepresentations of fact and law” were fraudulent. In fact, Ripley has not alleged any misrepresentations regarding the policy at all.  Rather, at most, he complains of post-loss statements regarding coverage, which are not misrepresentations under the Insurance Code.  Consequently, the bad faith claim should be dismissed.

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