Bailey v. Certain Interested Underwriters at Lloyd's London

• Decision Date: 17 May 2023
• Docket Number: 4:21-CV-159-D
• Parties: MICHAEL A. BAILEY, and CHRISTIE B. BAILEY, Plaintiffs, v. CERTAIN INTERESTED UNDERWRITERS AT LLOYD'S LONDON SUBSCRIBING TO POLICY NO. BWD652420, Defendants.
• Court: U.S. District Court — Eastern District of North Carolina

1

MICHAEL A. BAILEY, and CHRISTIE B. BAILEY, Plaintiffs, v. CERTAIN INTERESTED UNDERWRITERS AT LLOYD'S LONDON SUBSCRIBING TO POLICY NO. BWD652420, Defendants.

No. 4:21-CV-159-D

United States District Court, E.D. North Carolina, Eastern Division

May 17, 2023

ORDER

JAMIES C. DEVER III UNITED STATES DISTRICT JUDGE

On September 8, 2021, Michael A. Bailey and Christie B. Bailey (“plaintiffs” or “the Baileys”) filed a complaint in Carteret County Superior Court alleging breach of contract and related claims under North Carolina law against Certain Underwriters at Lloyd's London Subscribing to Policy No. B WD652420 (“defendants”) [D.E. 1 -1 ]. On October 22,2021 defendants removed the action to this court [D.E. 1]. On October 29,2021, defendants filed an unopposed motion to stay pending the conclusion of an appraisal process of the Baileys' insurance claim [D.E. 6]. On November 1,2021 the court granted the motion to stay [D.E. 7].

On July 12, 2022, after the appraisal, the Baileys moved for leave to file an amended complaint and lift the court's stay [D.E 11]. On August 9, 2022, the court granted the Baileys' motion and lifted the stay [D.E. 14]. On August 22,2022, the Baileys filed an amended complaint alleging breach of contract, bad faith, violations of the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”), and negligence [D.E. 15]. On September 6,2022, defendants moved to dismiss the amended complaint for failure to state a claim upon which relief can be granted [D.E. 16] and filed a memorandum in support [D.E. 17]. See Fed.R.Civ.P. 12(b)(6). On October 17, 2022, the Baileys filed a memorandum in opposition [D.E. 21 ]. On October 31,2022, the defendants replied [D.E. 22]. As explained below, the court grants defendants' motion to dismiss and dismisses with prejudice the amended complaint

I.

In August 2018, the Baileys bought an oceanfront home with customized furnishings, tile decking, and a top-floor observation room in Carteret County, North Carolina for personal use and to rent as a vacation property. See Am. Compl. [D.E. 15] ¶ 7. When the Baileys purchased the property, they obtained an insurance policy, number BWD65240, with effective dates from August 15,2018, to August 15,2019. See Id. at ¶ 11. The policy had four areas of coverage, “Dwelling” or “A”; “Other Structures” or “B”; “Personal Property” or “C”; and “Loss of Use/Rents” or “D.” See Id. at ¶ 13. At all relevant times, the Baileys had fully paid and were current on all relevant premiums. See Id. at ¶ 16.

In September 2018, Hurricane Florence produced high sustained winds and gusts of over 100 miles per hour and heavy rainfall in Carteret County. See id. at ¶ 17. The hurricane substantially damaged the Baileys' property, including interior damage, water damage, electrical damage, floor damage, and other related damage to the property and the items within the residence. See id. On September 18,2018, the Baileys discovered the damage to the property and notified defendants. See jd, at ¶¶ 21-22.

On October 5,2018, defendants' field adjuster met with the Baileys. See Id. at ¶ 22. During this meeting, the adjustor visually inspected the property and concluded that the damage to the property was relatively minor. See id. at ¶¶ 27-30. After this meeting, the Baileys undertook repairs that cost approximately $170,000. See id. at ¶ 31.

The repairs were insufficient. See Id. The Baileys had to stop renting the property following the repairs when tenants complained of significant water intrusion when it rained. See Id. at ¶ 32. The Baileys hired several experts who, after reassessing the property, noted that Hurricane Florence had led to structural shifts in the property which let excess water into the residence. See Id. at ¶ 35. The Baileys contend that the defendants' adjustor inadequately assessed the storm damage and falsely represented to the Baileys the extent of the damages. See Id. at ¶ 44. The newly discovered damages led to significantly more expensive replacement and repair and forced the Baileys not to rent the property. See Id. at ¶¶ 40-43,46,55. Although the defendants continued to make adjusted payments during the Baileys' reassessment of the damage, the Baileys continued to dispute the defendants' evaluation of the damage to the property and loss of rent. See Id. at ¶¶ 43,47,57.

On April 27,2021, pursuant to the insurance policy, the parties entered into an agreement to reassess the damage to the property and defendants' initial payout. See id. at¶ 58. On November 10,2021, the appraisal panel entered an award of $1,002,114 to the Baileys, a significantly higher payout than the original. See id. at ¶ 60. The defendants have paid the Baileys the $1,002,114 award entered by the appraisal panel. See [D.E. 17] 3. The Baileys do not dispute this contention.

II.

Defendants move to dismiss the complaint under Rule 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the complaint's legal and factual sufficiency. See Ashcroft v. Iqbal, 556 U.S. 662,677-80 (2009); Bell Afl. Corp, v, Twombly, 550 U.S. 544,554-63 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010), affd, 566 U.S. 30 (2012); Giarratano v. Johnson. 521 F.3d 298, 302 (4th Cir. 2008). To withstand a Rule 12(b)(6) motion, a pleading “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quotation omitted); see Twombly, 550 U.S. at 570; Giairatano, 521 F.3d at 302. In considering the motion, the court must construe the facts and reasonable inferences “in the light most favorable to the [nonmoving party].” Massey v. Ojaniit, 759 F.3d 343,352 (4th Cir. 2014) (quotation omitted); see Clatterbuck v. City of Charlottesville, 708 F.3d 549,557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of Gilbert, 576 U.S. 155(2015). A court need not accept as true a complaint's legal conclusions, “unwarranted inferences, unreasonable conclusions, or arguments.” Giarratano, 521 F.3d at 302 (quotation omitted); see Iqbal, 556 U.S. at 678-79. Rather, a plaintiff's factual allegations must “nudge[ ] [his] claims,” Twombly, 550 U.S. at 570, beyond the realm of “mere possibility” into “plausibility.” Iqbal, 556 U.S. at 678-79.

When evaluating a motion to dismiss, a court considers the pleadings and any materials “attached or incorporated into the complaint.” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435,448 (4th Cir. 2011); see Fed.R.Civ.P. 10(c); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159,166 (4th Cir. 2016); Thompson v. Greene, 427 F.3d 263,268 (4th Cir. 2005). A court may consider an insurance policy attached to an amended complaint to be part of the complaint. See Fayetteville Invs. v. Com. Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991) (“exhibits to the complaint are a part of the complaint which was subject to the motion to dismiss under Rule 12(b)(6)”). A court may also consider a document submitted by a moving party if it is “integral to the complaint and there is no dispute about the document's authenticity.” Goines, 822 F.3d at 166. Additionally, a court may take judicial notice of public records without converting the motion to dismiss into a motion for summary judgment. See, e.g.. Fed.R.Evid. 201; Tellabs, Inc, v. Makor Issues & Rts. . Ltd., 551 U.S. 308,322 (2007); Philips v. Pitt Cnty. Mem'l Hosp., 572 F.3d 176,180 (4th Cir. 2009).

A.

The Baileys allege that defendants “breached [the insurance contract] by failing to provide the benefits, coverage, and payments due thereunder to Plaintiffs.” Am. Compl. ¶ 65. The Baileys also allege that defendants breached the contract by failing to provide timely payments under the policy and by “misrepresenting the scope of the damage to the Property” and “wrongfully delaying the claim investigation process[.]” [D.E. 21] 9. Defendants respond that the contract forecloses the Baileys' breach of contract claim. See [D.E. 17] 5.

A breach of contract claim involves two elements: (1) the existence of a valid contract and (2) breach of the terms of that contract. See McLamb v, T.P., Inc., 173 N.C.App. 586, 588, 619 S.E.2d 577,580 (2005); Poor v. Hill, 138 N.C.App. 19,26,530 S.E.2d 838,843 (2000). A breach of a contract occurs where there is “[n]on-performance[,]... unless the person charged... shows some valid reason which may excuse the non-performance; and the burden of doing so rests upon him.” Cater v. Barker, 172 N.C.App. 441,447,617 S.E.2d 113,117 (2005) (quotation omitted), affd, 360 N.C. 357, 625 S.E.2d 778 (2006); see Abbington SPE, LLC v, U.S. Bank, Nat'l Ass'n, 352 F.Supp.3d 508, 517 (E.D. N.C. 2016), affd, 698 Fed.Appx. 750 (4th Cir. 2017) (per curiam) (unpublished). An insurance policy is a contract, and the policy's provisions govern the rights and duties of the contracting parties. See Gaston Cnty. Dyeing Mach. Co. v. Northfield Ins. Co., 351 N.C. 293,299,524 S.E.2d 558,563 (2000); C.D. Spangler Constr. Co. v. Indus. Crankshaft & Eng'g Co,, 326 N.C. 133,142,388 S.E.2d 557,562 (1990). The insured party “has the burden of bringing itself within the insuring language of the policy.” Nelson v. Hartford Underwriters Ins. Co., 177 N.C.App. 595,606,630 S.E.2d 221,229 (2006) (quotation omitted).

The plain language of the contract defeats the Baileys' breach of contract claim regarding payments. The contract states that defendants will pay within 60 days after the amount is finally determined. [D.E. 15-2] 22. The amount is determined by “proof of loss” and: “1. Reaching an agreement with you; 2.... [E]ntry of a final judgment; or 3. [The] filing ofan appraisal award with us.” Id. (emphasis added). Defendants' duty under the contract to make additional loss payments (i.e., the amount...