United States District Court, W.D. North Carolina, Statesville Division
RICHARD L. VOORHEES UNITED STATES DISTRICT JUDGE
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.
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
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
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).
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).
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,
STANDARD OF REVIEW
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.
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.
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.
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).
FACTUAL ALLEGATIONS IN THE AMENDED COMPLAINT
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).
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).
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.
The Policy read, in relevant part:
SECTION 1 - COVERAGE
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 . . .
SECTION 111 - COVERED AUTOS . . .
2. NON-OWNED “AUTOS”
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
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)).
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).
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.
First Claim for Relief: Breach of Contract
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