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Elliott v. American States Insurance Co.

United States District Court, M.D. North Carolina

March 22, 2017




         This matter is before the Court on a Motion to Dismiss [Doc. #11] by Defendant American States Insurance Company (“American States”) in which it argues pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure that Plaintiff Loretta T. Elliott's Complaint fails to state a claim upon which relief can be granted. For the reasons explained below, the motion is granted.


         In evaluating a Rule 12(b)(6) motion, well-pled facts are accepted as true and construed in the light most favorable to Elliott. Nemet Chevrolet, Ltd. v., Inc., 591 F.3d 250, 255 (4th Cir. 2009). Elliott suffered serious, painful, and permanent bodily injuries as a result of a January 2013 vehicle accident in which a truck driven by Michael F. Jones collided with Elliott's vehicle. (Compl. ¶¶ 3, 4, 6 [Doc. #7].) Jones had primary liability coverage up to $30, 000.00 with State Farm. (Id. ¶ 8.) Elliott had underinsured motorist (“UIM”) coverage up to $100, 000.00 with American States. (Id.; id. Ex. A (American States Policy).) On July 8, 2014, Elliott submitted a settlement demand package to State Farm for $234, 847.00 after which it paid Elliott the policy limit of $30, 000.00. (Id. ¶¶ 9-11.)

         On July 25, 2014, Elliott submitted the same settlement package to American States and demanded that it pay $70, 000.00 in UIM coverage. (Id. ¶ 13.) In response, on August 28, 2014, American States refused to pay any amount of UIM coverage. (Id. ¶ 14.) Elliott then notified American States that, “As a result we feel compelled to institute litigation to recover amounts due under” her UIM coverage. (Id.) When American States did not respond, Elliott instituted an action on October 8, 2014 in Durham County Superior Court which she refers to as “the ‘Elliott v. Jones lawsuit'”. (Id. ¶ 15.) American States defended the suit as an unnamed party. (Id.)

         After the matter was referred to arbitration by Order of the Superior Court, an arbitration hearing was held and Elliott was awarded $90, 000.00 in actual damages plus prejudgment interest and costs as provided by law. (Id. ¶ 16.) A judgment was later entered in favor of Elliott against Jones in the amount of $60, 000.00, taking into account State Farm's $30, 000.00 payment on Jones' behalf, with interests and costs. (Id. ¶ 17; id. Ex. C (Mar. 1, 2016 Judgment).) Thereafter, Elliott recovered that award from American States as her UIM coverage. (See id. ¶¶ 18, 21.B.) Nevertheless, she has subsequently sued American States for unfair and deceptive trade practices.

         Elliott alleges that American States has violated North Carolina General Statute § 58-63-15(11), and each such violation constitutes an unfair and deceptive trade practice under North Carolina General Statutes Chapter 75. (Id. ¶¶ 21, 23.) Specifically, she alleges that American States violated North Carolina General Statute § 58-63-15(11)f when it “did not attempt in good faith to effectuate a prompt, fair and equitable settlement of [her] claims in which liability had become reasonably clear”. (Id. ¶ 21.A.) American States allegedly violated North Carolina General Statute § 58-63-15(11)g when it “compelled [her] to institute litigation to recover amounts due under the UIM provisions of her . . . insurance policy” by refusing to offer any amount of UIM payment until its token offers preceding arbitration that were “substantially less than the amount of UIM coverage ultimately recovered”. (Id. ¶ 21.B.) Finally, Elliott alleges that American States violated North Carolina General Statute § 58-63-15(11)h when it “attempted to settle [her] claim for an amount of UIM coverage less than the amount . . . a reasonable person would have believed Elliott was entitled to recover”. (Id. ¶ 21.C.) In response, American States argues that “Elliott has failed to plausibly state a[n Unfair and Deceptive Trade Practices] claim against [it] where [it] complied with the provisions of the Subject Policy by resolving [Elliott's] UIM claim through arbitration and paid [her] the Arbitration Award once entered”. (Br. in Supp. of Mot. to Dismiss (“Br. in Supp.”) at 3 [Doc. #12].)


         To survive a Rule 12(b)(6) motion, the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556); see also McCleary-Evans v. Md. Dep't of Transp., State Highway Admin., 780 F.3d 582, 585 (4th Cir. 2015) (noting that a complaint must “contain[] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face in the sense that the complaint's factual allegations must allow a court to draw the reasonable inference that the defendant is liable for the misconduct alleged”). When evaluating whether the complaint states a claim that is plausible on its face, the facts are construed in the light most favorable to the plaintiff and all reasonable inferences are drawn in her favor. U.S. ex rel. Oberg v. Pa. Higher Educ. Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014). Nevertheless, “labels and conclusions[, ]” “a formulaic recitation of the elements of a cause of action[, ]” and “naked assertions . . . without some further factual enhancement” are insufficient. Twombly, 550 U.S. at 557.


         The elements of a claim under North Carolina's Unfair and Deceptive Trade Practices Act (“UDTPA”), North Carolina General Statute § 75-1.1, are (1) an unfair or deceptive act or practice, (2) in or affecting commerce, (3) which proximately caused injury to the plaintiff. Gray v. N.C. Ins. Underwriting Ass'n, 529 S.E.2d 676, 681 ( N.C. 2000) (citing N.C. Gen. Stat. § 75-1.1(a)). “The determination of whether an act or practice is an unfair or deceptive practice that violates [the UDTPA] is a question of law for the court.” Id.

         Section 58-63-15(11) of the North Carolina General Statutes lists “Unfair Claim Settlement Practices” in the insurance industry that are actionable by the Commissioner of Insurance if they are committed or performed “with such frequency as to indicate a general business practice”. In addition, “the types of conduct listed in [this section] can be used to support a private cause of action pursuant to the UDTPA.” Federated Mut. Ins. Co. v. Williams Trull Co., Inc., 838 F.Supp.2d 370, 421 (M.D. N.C. 2011). A violation of § 58-63-15(11) “constitutes a violation of N.C. G.S. § 75-1.1, as a matter of law, without the necessity of an additional showing of frequency indicating a ‘general business practice'”. Gray, 529 S.E.2d at 683 (finding that a violation of subsection (f) of § 58-63-15(11) is an unfair and deceptive practice because “such conduct is inherently unfair, unscrupulous, immoral, and injurious to consumers”); see also Country Club of Johnston Cty., Inc. v. U.S. Fid. & Guar. Co., 563 S.E.2d 269, 279 ( N.C. Ct. App. 2002) (extending Gray to apply to all conduct described in § 58-63-15(11)).

         The parties do not dispute that the unfair claim settlement practices provisions of North Carolina law apply to underinsured motorist insurance. However, Elliott fails to acknowledge that her underinsured motorist coverage differs from primary liability insurance in that it is “derivative and conditional.” Brown v. Lumbermens Mut. Cas. Co., 204 S.E.2d 829, 834 ( N.C. 1974) (finding, under the terms of the applicable policy, unless the plaintiff is legally entitled to recover from the uninsured motorist, he is precluded from recovering against the defendant insurer). Under the terms of Elliott's policy, American States agreed to “pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury sustained by an insured and caused by an accident.” (Am. States Policy Pt. C2, “INSURING AGREEMENT”, at 9 (emphasis added).) The amount due under an underinsured motorist policy “is conclusively determined in litigation against the uninsured motorist”. Chew v. Progressive Universal Ins. Co., No. 5:09-CV-351-FL, 2010 WL 4338352, *10 (E.D. N.C. Oct. 25, 2010) (involving uninsured motorist coverage with the same policy language as Elliott's and citing Brown, 204 S.E.2d at 834 and McLaughlin v. Martin, 374 S.E.2d 455, 456 ( N.C. Ct. App. 1988)); see id. at *7 (analyzing a breach of contract claim and explaining that, although an investigation established the uninsured motorist's fault, the amount of damages was contested and, because those damages were “the measure of the uninsured motorist's liability, defendant was not liable under the contract to pay the claim until the extent of the uninsured motorist's liability for plaintiff's alleged [injuries] was established”).

         As in the instant case, in Bendrick v. State Farm Mutual Automobile Insurance Co., No. 3:11-CV-573-RJC-DCK, 2012 WL 1247158, *1 (W.D. N.C. ), adopted 2012 WL 1247178 (Apr. 13, 2012), the “crux” of the plaintiff's complaint was that she was compelled to arbitrate before the defendant insurer would tender the limits of its underinsured motorist coverage. In evaluating the insurer's motion to dismiss, the court found persuasive the insurer's argument that “it was not required to make any offers before or after the arbitration, since it had no duty to pay under its policy until such amounts were proven recoverable against [the tortfeasor].” Id. at ...

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