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Modern Automotive Network, LLC v. Eastern Alliance Insurance Co.

United States District Court, M.D. North Carolina

March 26, 2018




         This matter is before the Court on Defendant's Motion to Dismiss Plaintiff's Complaint. (ECF No. 9.) Plaintiff, Modern Automotive Network, LLC, initiated this action on January 20, 2017, in the Superior Court of Forsyth County, North Carolina, alleging state-law claims of breach of contract, negligent claims handling, and two claims of unfair and deceptive trade practices. (ECF No. 4.) Defendants, Eastern Alliance Insurance Group (“EAIG”), Eastern Alliance Insurance Company (“EAIC”), Eastern Advantage Assurance Company (“EAAC”), and Allied Eastern Indemnity Company (“AEIC”), removed the action to this Court. (ECF No. 1.) The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1332. (Id. ¶ 3.) For the reasons stated below, the motion to dismiss presently before the Court will be granted in part and denied in part.

         I. BACKGROUND

         This action concerns an insurance dispute arising out of two agreements between these parties.[1] (See generally ECF No. 4.) Defendants, whom Plaintiff discusses collectively as a single entity in the Complaint, issued Plaintiff “a Workers Compensation and Employers Liability Insurance Policy” (the “Policy”); and the parties “entered into a Deductible Reimbursement and Security Agreement Workers' Compensation Large Deductible Plan” (the “Deductible Agreement”). (Id. ¶¶ 7, 8.) The Policy “had a deductible of $250, 000 per accident and [a] $425, 000 annual aggregate.” (Id. ¶ 9.) “To insure that [Plaintiff] could pay for the high deductible, ” Plaintiff provided Defendants with “an Irrevocable Standby Letter of Credit . . . in the amount of $225, 000 for the benefit of” EAIC, AEIC, and EAAC. (Id. ¶ 10.) During all times relevant to this dispute, Defendants were “responsible for adjusting [Plaintiff's] workers' compensation claims.” (Id. ¶ 11.)

         Plaintiff alleges that Defendants mishandled claims made by three of Plaintiff's employees: Mr. G, Mr. H, and Mr. S.[2] (Id. ¶¶ 20-79.) Mr. G was injured in April 2015, and brought a claim that Defendants settled. (Id. ¶¶ 20-22.) Prior to settlement, Plaintiff instructed [Defendants] to obtain a “release and resignation” as part of the settlement, but Defendants failed to do so. (Id. ¶¶ 23, 27.) Defendants also failed to discuss “the specific terms or figures of proposed settlements” with Plaintiff prior to settling, and after settlement, Defendants failed to inform Plaintiff “that the case had settled or the terms of the settlement.” (Id. ¶¶ 24, 25.) Further, Defendants have refused to provide its file and Plaintiff's file to Plaintiff on Mr. G's claim. (Id. ¶ 30.) Plaintiff alleges that it “bears a heightened risk of future claims from Mr. G” because of “Mr. G's age and health.” (Id. ¶ 29.)

         Mr. H was injured in October 2015. (Id. ¶ 31.) After this injury, Plaintiff communicated to Defendants that Plaintiff “was not interested in settling Mr. H's claim.” (Id. ¶ 33.) Defendants' adjuster on Mr. H's claim, Jeff Berger (“Mr. Berger”), nevertheless suggested Plaintiff settle the claim for an amount between $200, 000 and $225, 000. (Id. ¶¶ 34, 35.) Plaintiff's counsel “expressly stated that [Plaintiff] would not be interested in a settlement of that amount” and further “stated that [Plaintiff] would only be interested in a settlement of well below $200, 000 for Mr. H's claim, in the range of $75, 000.” (Id. ¶ 36.) Mr. Berger subsequently informed Plaintiff that he had settled Mr. H's claim for $200, 000, over Plaintiff's objections. (Id. ¶¶ 41, 45.) Plaintiff contends that Defendants' “settling Mr. H's claim for $200, 000 was an excessive payment, against [Plaintiff's] instructions and interests, and was solely for the benefit of [Defendants] at the expense of [Plaintiff].” (Id. ¶ 43.) Defendants and their attorneys have refused to provide Plaintiff with Plaintiff's files regarding Mr. H's claim, and Plaintiff alleges that Defendants have instructed their attorneys to not communicate with Plaintiff about Mr. H's case. (Id. ¶¶ 47, 50-54.)

         Mr. S was injured in February 2015 and was subsequently treated for his injuries. (Id. ¶ 58.) Later, Defendants informed Plaintiff that Defendants had reached a settlement with Mr. S, “for $11, 699 of money in addition to the amounts paid for treatments to date, ” pending the approval of the North Carolina Industrial Commission (“Industrial Commission”). (Id. ¶¶ 58, 59.) As part of the settlement, Defendants' counsel told Plaintiff that there was “a side deal whereby Mr. S would pay back to [Plaintiff] the $11, 699 of additional money that [Plaintiff] was to advance after the Industrial Commission approved the settlement.” (Id. ¶ 59.) Defendants later informed Plaintiff that the “side deal” did not “work out” because “Mr. S's attorney did not understand the side deal or had backed out of the side deal, and that therefore [Defendants] had reached a resolution whereby [Plaintiff] and/or [Defendants] would pay $5, 849.50 of additional money to Mr. S.” (Id. ¶¶ 64-67.) Defendants have charged or intend to charge Plaintiff “for the $5, 849.50 that is a result of the failed side deal.” (Id. ¶ 68.) Defendants and their attorneys have refused to provide Plaintiff with Plaintiff's files regarding Mr. S's claim, and Plaintiff alleges that Defendants have instructed their attorneys to not communicate with Plaintiff about Mr. S's case. (Id. ¶¶ 71-76.)

         In September 2016, Plaintiff's counsel “wrote to [Defendants] . . . instruct[ing] [Defendants] that [a] payment [owed] of $200, 000 was disputed and that [Defendants were] not to make a claim on the Letter of Credit.” (Id. ¶ 77.) Defendants nevertheless “made a claim on the Letter of Credit on December 29, 2016 in the amount of $202, 374.80, plus a draw fee of $535.94.” (Id. ¶ 79.) Plaintiff brought suit in January 2017, (ECF No. 4), and following removal, Defendants have filed a motion to dismiss the Complaint, (ECF No. 9).


         A motion made under Rule 12(b)(6) challenges the legal sufficiency of the facts in the complaint, specifically whether the Complaint satisfies the pleading standard under Rule 8(a)(2). Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). Rule 8(a)(2) requires a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). While a complaint need not contain detailed factual allegations, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. In other words, “a 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 Twombly, 550 U.S. at 570). A claim is plausible when the complaint alleges sufficient facts to allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Johnson v. Am. Towers, LLC, 781 F.3d 693, 709 (4th Cir. 2015) (quoting Iqbal, 556 U.S. at 678).

         When considering a motion to dismiss, “a [district] court evaluates the complaint in its entirety, as well as documents attached [to] or incorporated into the complaint.” E.I. du Pont de Nemours and Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011). A district court evaluating a motion brought under Rule 12(b)(6) can also “consider a document submitted by the movant that was not attached to or expressly incorporated in a complaint, so long as the document was integral to the complaint and there is no dispute about the document's authenticity.” Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 166 (4th Cir. 2016). Going “beyond these documents on a Rule 12(b)(6) motion . . . converts the motion into one for summary judgment, ” and “[s]uch conversion is not appropriate where the parties have not had an opportunity for reasonable discovery.” E.I. du Pont de Nemours and Co., 637 F.3d at 448.


         Defendants make four arguments in their motion. First, Defendants argue that: “Plaintiff has failed to state a plausible claim for any relief against EAIG, EAAC, or AEIC.” (ECF No. 9 ¶ 5.) Second, Defendants contend that: “Plaintiff has failed to state a plausible claim for negligent claims handling because such claim is barred by the economic loss rule.” (Id. ¶ 6.) Third, Defendants state that: “Plaintiff has failed to state a plausible claim under the UDTPA, whether based on alleged violations of § 58-63-15(11) or general allegations of unfair or deceptive practices.” (Id. ¶ 7.) Fourth, according to Defendants: “Plaintiff's claims based on EAIC's alleged handling of Mr. G's claim, to the extent such claims are based on a ‘heightened risk' of ‘future' damages, are not ripe or are legally insufficient and, therefore, should be dismissed.” (Id. ¶ 8.)

         A. Whether Plaintiff Has Stated a Plausible Claim Against EAIG, EAAC, or AEIC

         The Court first turns to Defendants' argument that Plaintiff cannot state a claim for relief against EAIG, EAAC, or AEIC. Defendants, in their supporting brief, state that: “Plaintiff cannot state any plausible claim against EAIG because EAIG is not a legal entity, but a fictitious name under which EAIC, EAAC, and AEIC conduct business. This Court may properly take judicial notice of EAIG's fictitious name status, which is a matter of public record.” (ECF No. 10 at 11 (citation omitted).) Additionally, Defendants contend that: “Plaintiff cannot state a plausible claim against EAIG, EAAC, and AEIC for breach of contract. . . . Neither EAIG, EAAC, nor AEIC is a party to the Policy.” (Id.) Defendants also argue that: “To the extent that Plaintiff's contract claim can be reasonably construed as arising under the Deductible Agreement, Plaintiff still fails to state a plausible claim against EAIG, EAAC, and AEIC. Although all Defendants are identified as parties to the Deductible Agreement, the purpose of the Deductible Agreement was to evidence and secure Plaintiff's obligation under the Policy to reimburse EAIC for amounts paid by EAIC, up to the deductible amount, pursuant to the Endorsement to the Policy.” (Id. at 11-12 (emphasis removed).) “Indeed, ” Defendants state, “it was EAIC that drew on the [Letter of Credit] for reimbursement of the amount paid to settle Mr. H's claim . . . and it is this draw by EAIC that Plaintiff alleges was a breach of contract.” (Id. at 12 (citation omitted).)

         Plaintiff responds by contending that “[a]t this pleading phase, it is proper for [Plaintiff] to maintain claims against all named defendants.” (ECF No. 16 at 3.) Plaintiff argues: “The Policy in many places purports to be in the name of EAIG, not EAIC, ” and that the Deductible Agreement “is expressly between [Plaintiff] and ‘Eastern Alliance Insurance Group and its member companies.'” (Id.) Plaintiff ...

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