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New Hickory Pizza, Inc. v. TIG Insurance Co.

United States District Court, W.D. North Carolina, Statesville Division

August 31, 2017




         THIS MATTER IS BEFORE THE COURT on Defendant TIG Insurance Company's “Motion to Dismiss the Amended Complaint.” (Doc. 13). Plaintiff responded in opposition (Doc. 14) and Defendant replied (Doc. 17). The matter is ripe for decision. For the reasons that follow, the Motion to Dismiss the Amended Complaint (Doc. 13) is GRANTED IN PART AND DENIED IN PART.


         This action arises from an insurance coverage dispute related to underlying State court tort actions (“Underlying Tort Actions”). Plaintiff brought the action presently before this Court on August 12, 2016, in the General Court of Justice, Superior Court Division for the County of Catawba, State of North Carolina, against Defendant and against America[n] Safety Indemnity Company, America[n] Safety Claims Services, Inc., and Riverstone Claims Management, LLC. (Doc. 1-1 at 6). Only Defendant TIG Insurance Company remains a defendant.[1]

         The State court complaint (now removed to this Court) alleged that Plaintiff New Hickory Pizza and its employee, Brandon Manuel Vazquez, had been sued in the Underlying Tort Actions for death and serious injuries resulting from an automobile accident involving Vazquez while he was driving for New Hickory Pizza. (Doc. 1-1 at 7 (Original Compl. ¶ 9); see Doc. 12 at 2 (Am. Compl. ¶ 6), Docs. 12-2, 12-3 (Underlying Tort Actions)). Following settlement of the Underlying Tort Actions, Plaintiff brought this action in State court, asserting Defendant refused to defend and indemnify Plaintiff in the Underlying Tort Actions (“Original Complaint”). (Docs. 1 at 1, 1-1 at 7-8).

         On September 14, 2016, Defendant TIG Insurance Company (“Defendant”) removed Plaintiff's action to this Court based upon the parties' diversity of citizenship. (Doc. 1 at 1-3). Plaintiff did not contest the removal and Defendant moved to dismiss the Original Complaint pursuant to Fed.R.Civ.P. 12(b)(6). (Doc. 5). Plaintiff filed a memorandum in opposition to the motion to dismiss as well as a Motion to Amend its Complaint and a proposed Amended Complaint. (Docs. 6, 7, 7-1).

         On November 21, 2016, the Court granted the Motion to Amend as a matter of course pursuant to Fed.R.Civ.P. 15(a)(1) and denied Defendant's original Motion to Dismiss (Doc. 5) without prejudice as administratively moot. (Doc. 11 at 1-2). The next day Plaintiff filed an Amended Complaint asserting, in three Claims for Relief, the following: (1) Breach of Contract; (2) Breach of Duty of Good Faith and Fair Dealing/Unfair and Deceptive Trade Practices; and (3) Punitive Damages. (Doc. 12 at 4-8). Defendant now moves pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss with prejudice the Claims for Relief and the Amended Complaint itself. (Doc. 13 at 3).

         Plaintiff is alleged to be a North Carolina corporation with its principal place of business in Catawba County, North Carolina. (Doc. 1 at 1; Doc. 1-1 at 6). Defendant is alleged to be a California corporation with its principal place of business in New Hampshire. (Doc. 1 at 1; Doc. 1-1 at 7). The amount in controversy is more than $75, 000. Plaintiff alleges, among other things, a breach of contract cause of action in which Defendant is alleged to have failed to indemnify Plaintiff for a $200, 000 payment Plaintiff made in settlement of the Underlying Tort Actions. (Doc. 1 at 3; Doc. 1-1 at 9). The State court action was timely removed to this Court. (See Docs. 1, 1-1). The Court, therefore, has jurisdiction pursuant to 28 U.S.C. §§ 1332, 1441, and 1446.


         Rule 12(b)(6) provides for the dismissal of a cause of action based upon a plaintiff's “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In alleging fraud, a party must state with particularity the circumstances constituting fraud. Malice, intent, knowledge and other conditions of a person's mind may be alleged generally. Fed.R.Civ.P. 9(b).

         In evaluating a motion to dismiss, a court must construe the complaint's factual allegations “in the light most favorable to the plaintiff” and “must accept as true all well-pleaded allegations.” Randall v. United States, 30 F.3d 518, 522 (4th Cir. 1994). A court, however, “need not accept the legal conclusions drawn from the facts, ” nor “accept as true unwarranted inferences, unreasonable conclusions, or arguments.” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (quotation marks omitted); Randall, 30 F.3d at 522.

         While Fed.R.Civ.P. 8(a)(2) does not require “detailed factual allegations, ” a complaint must offer more than “naked assertion[s]” and unadorned “labels and conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In order to survive a Rule 12(b)(6) motion to dismiss, the facts alleged must be sufficient to “raise a right to relief above the speculative level” and “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). Under Iqbal, the Court performs a two-step analysis. First, it separates factual allegations from allegations not entitled to the assumption of truth. Second, it determines whether the factual allegations, which are accepted as true, “plausibly suggest an entitlement to relief.” 556 U.S. at 681. Requiring plausibility “does not impose a probability requirement at the pleading stage, ” Twombly, 550 U.S. at 556, but does demand more than a “sheer possibility that a defendant has acted unlawfully, ” Iqbal, 556 U.S. at 678. Ultimately, a claim is facially plausible when the factual content allows for the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 678.

         If, on a motion under Rule 12(b)(6), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Fed.R.Civ.P. 56. In such cases, all parties must be given a reasonable opportunity to present all the material that is pertinent to the motion. Fed.R.Civ.P. 12(d).


         The Amended Complaint names TIG Insurance Company as the sole Defendant. (Doc. 12 at 1 (“Am. Compl.”)). The relevant well-pleaded allegations, taken as true for purposes of Rule 12(b)(6), are as follows:

Defendant, by and through the America[n] Safety Indemnity Company (“ASIC”), issued a Commercial Auto Liability Excess Policy to Plaintiff that at all times relevant was in full force and effect (the “Policy”). (Am. Compl. ¶ 3). The Policy included an endorsement providing coverage for loss incurred by Plaintiff arising from employee operation of automobiles not owned by Plaintiff, subject to specified restrictions. (Am. Compl. ¶ 10). Plaintiff was sued in the Underlying Tort Actions by Elaine Marie Debenport and by Sharon Sanford Perkins, the latter as Administratrix of the Estate of Daniel Edward Sanford. Debenport and Sanford alleged negligence on behalf of New Hickory Pizza and its employee, Brandon Manuel Vazquez, in an automobile accident which resulted in the death of Daniel Sanford and the severe injury of Elaine Debenport. (Am. Compl. ¶ 6). Copies of the Underlying Tort Actions were forwarded to ASIC. (Am. Compl. ¶ 7).

         Plaintiff made demand on ASIC for defense and indemnification of the Underlying Tort Actions. American Claims Services, Inc., acting as an agent for and/or on behalf of ASIC, sent a denial letter to Plaintiff, citing the basis of denial being the failure of Manuel Vazquez (“Vazquez”) to meet “the minimum driving requirements as identified” in the Special Restrictions for the Operation of Automobiles Endorsement (Form CA AS 0111 0412) (“Special Restrictions”) and stating that “there is no coverage for this loss under the policy issued by ASIC.” (Am. Compl. ¶ 8).

         Plaintiff renewed its request for defense and indemnification. ASIC, through its agent Riverstone Claims Management, sent a second letter to Plaintiff stating that “as a condition of insurance, the Named Insured agrees that no driver will be allowed to operate an automobile on behalf of the Named Insured if said driver has been driving for less than two years. As such, the above endorsement applies and we must respectfully deny coverage of this claim.” (Am. Compl. ¶ 9).

The Policy read, in relevant part:
A. INSURING AGREEMENT - EXCESS LIABILITY INDEMNITY To pay on behalf of the “insured” the amount of “loss” which is in excess of the applicable limits of liability of the underlying insurance . . .
Only those “autos” you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes “autos” owned by your employees . . . or members of their household but only while used in your business affairs. . . .
5. OTHER CONSIDERATIONS: The Named insured agrees that no driver or prospective driver will be allowed to operate an automobile on behalf of the Named Insured if the said driver or prospective driver does not comply with the following:
Driver must be at least 18 years of age with a minimum of two years U.S. driving experience and hold a valid driver's license for the residing state.

(Am. Compl. ¶ 10 (citing CA AS 0103 0109 (“Commercial Auto Liability Excess Coverage Form”) and CA AS 0111 0412 (“Special Restrictions for the Operation of Automobiles”)) (emphasis added); see Doc. 12-1 (entire Policy)).

         At the time of the accident, Vazquez: (1) did have a valid North Carolina driver's license; (2) was nineteen years of age; (3) had been driving automobiles in the United States for over two years, (4) was an employee of Plaintiff; and (5) was operating a motor vehicle owned by his parent and did so on behalf of Plaintiff's business. (Am. Compl. ¶¶ 11-12, 15). The Underlying Tort Actions were settled by way of exhaustion of all underlying liability policies as well as a payment by Plaintiff in the amount of $200, 000. (Am. Compl. ¶ 13). Plaintiff further alleges that it complied with all of the terms and conditions of the Policy. (Am. Compl. ¶ 14). Defendant, without adequately inquiring into whether Vazquez met the requirements set out in the Policy, denied Plaintiff's claim and refused to indemnify Plaintiff. (Am. Compl. ¶ 16).

         IV. ANALYSIS

         Plaintiff asserts three claims for relief: (1) Breach of Contract; (2) Breach of Duty of Good Faith and Fair Dealing/Unfair and Deceptive Trade Practices; and (3) Punitive Damages. (Doc. 12 at 4-8). Defendant seeks dismissal of all counts on the grounds that: (1) Plaintiff has admitted facts demonstrating that there could have been no breach of contract; (2) Plaintiff failed to allege sufficient facts to support a claim for common law bad faith or violation of the North Carolina Unfair and Deceptive Trade Practices Act; and (3) “Punitive Damages” is not a separate stand-alone claim under North Carolina law. (Doc. 13-1 at 2). The Court will consider each claim in turn.

         A. First Claim for Relief: Breach of Contract

         In North Carolina, “[t]he elements of a breach of contract claim are (1) existence of a valid contract, and (2) breach of the terms of that contract.” Poor v. Hill, 530 S.E.2d 838, 843 (2000). Plaintiff alleges that it entered into an excess coverage contract with Defendant (the “Policy”). ...

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