Bills v. Am. Family Mut. Ins. Co.
Decision Date | 17 August 2021 |
Docket Number | C21-33-LTS-KEM |
Citation | 555 F.Supp.3d 618 |
Parties | Michael F. BILLS and Sandra K. Bills, Plaintiffs, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, S.I., Defendant. |
Court | U.S. District Court — Northern District of Iowa |
John George Daufeldt, John C. Wagner, John C. Wagner Law Office PC, Amana, IA, for Plaintiffs.
Benjamin M. Weston, Alexandra Galbraith, Lederer Weston & Craig PLC, West Des Moines, IA, James P. Craig, Lederer Weston & Craig PLC, Cedar Rapids, IA, for Defendant.
This matter is before me on a partial motion (Doc. 23) to dismiss filed by defendant American Family Mutual Insurance Company, S.I. (American Family), which seeks dismissal of Counts II and III of the amended complaint (Doc. 21).1 Plaintiffs Michael Bills and Sandra Bills (the Bills) have filed a resistance (Doc. 30) and American Family has filed a reply (Doc. 33). Oral argument is not necessary. See Local Rule 7(c).
The Federal Rules of Civil Procedure authorize a pre-answer motion to dismiss for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The Supreme Court has provided the following guidance in considering whether a pleading properly states a claim:
Ashcroft v. Iqbal , 556 U.S. 662, 677-78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
Courts assess "plausibility" by " ‘draw[ing] on [their own] judicial experience and common sense.’ " Whitney v. Guys, Inc. , 700 F.3d 1118, 1128 (8th Cir. 2012) (quoting Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ). Also, courts " ‘review the plausibility of the plaintiff's claim as a whole, not the plausibility of each individual allegation.’ " Id. (quoting Zoltek Corp. v. Structural Polymer Grp. , 592 F.3d 893, 896 n.4 (8th Cir. 2010) ). While factual "plausibility" is typically the focus of a Rule 12(b)(6) motion to dismiss, federal courts may dismiss a claim that lacks a cognizable legal theory. See, e.g., Somers v. Apple, Inc. , 729 F.3d 953, 959 (9th Cir. 2013) ; Ball v. Famiglio , 726 F.3d 448, 469 (3d Cir. 2013) ; Commonwealth Prop. Advocates, L.L.C. v. Mortg. Elec. Registration Sys., Inc. , 680 F.3d 1194, 1202 (10th Cir. 2011) ; accord Target Training Intern., Ltd. v. Lee , 1 F. Supp. 3d 927 (N.D. Iowa 2014).
In considering a Rule 12(b)(6) motion to dismiss, ordinarily the court "cannot consider matters outside the pleadings without converting the motion into a motion for summary judgment." McMahon v. Transamerica Life Ins. , No. C17-149-LTS, 2018 WL 3381406, at *2 n.2 (N.D. Iowa July 11, 2018) ; see Fed. R. Civ. P. 12(b)(6). On the other hand, when a copy of a "written instrument" is attached to a pleading, it is considered "a part of the pleading for all purposes," pursuant to Federal Rule of Civil Procedure 10(c). Thus, when the pleadings necessarily embrace certain documents, I may consider those documents without turning a motion to dismiss into a motion for summary judgment. Id.
When a complaint does not state a claim for relief that is plausible on its face, the court must consider whether it is appropriate to grant the pleader an opportunity to replead. The rules of procedure permit a party to respond to a motion to dismiss by amending the challenged pleading "as a matter of course" within 21 days. See Fed. R. Civ. P. 15(a)(1)(B). Thus, when a motion to dismiss highlights deficiencies in a pleading that can be cured by amendment, the pleader has an automatic opportunity to do so. When the pleader fails to take advantage of this opportunity, the question of whether to permit an amendment depends on considerations that include:
whether the pleader chose to stand on its original pleadings in the face of a motion to dismiss that identified the very deficiency upon which the court dismissed the complaint; reluctance to allow a pleader to change legal theories after a prior dismissal; whether the post-dismissal amendment suffers from the same legal or other deficiencies as the dismissed pleading; and whether the post-dismissal amendment is otherwise futile.
Meighan v. TransGuard Ins. Co. of Am. , 978 F. Supp. 2d 974, 982 (N.D. Iowa 2013).
The amended complaint asserts four causes of action:
Doc. 21. American Family moves to dismiss Counts II and III. It argues that I must apply Iowa's choice of law rules for contracts and that, under that test, Missouri law applies. American Family argues that Missouri law does not recognize a claim for first party bad faith by an insured against an insurer. And without a bad faith claim, American Family argues that punitive damages are not available. In the alternative, American Family argues that the Bills’ allegations fail to state a claim for punitive damages.
The Bills argue that I must apply Iowa's choice of law rules for torts and that, under that test, Iowa law applies. They contend that under Iowa law, Counts II and III state viable claims. In response, American Family argues that even under Iowa's choice of law rules for torts, Missouri law applies.
"Federal courts sitting in diversity apply the choice-of-law rules of the forum state." Cicle v. Chase Bank USA , 583 F.3d 549, 553 (8th Cir. 2009) (citing Prudential Ins. Co. of Am. v. Kamrath , 475 F.3d 920, 924 (8th Cir. 2007) ). "Before applying the forum state's choice-of-law rules, however, a trial court must first determine whether a conflict exists." Prudential Ins. Co. , 475 F.3d at 924. American Family argues there is a conflict between Missouri and Iowa law regarding recognition of a first party claim for bad faith denial of insurance benefits. Missouri law does not recognize such a claim. See Overcast v. Billings Mutual Ins. Co. , 11 S.W.3d 62, 69 (Mo. 2000) (en banc) (); Harris v. Auto-Owners Ins. Co. , Case No. 21-cv-03159, 2021 WL 2954407, at *2-3 (W.D. Mo. July 14, 2021) ( ). Iowa law does recognize such a claim. See Rodda v. Vermeer Mfg. , 734 N.W.2d 480, 483 (Iowa 2007) (). I agree with American Family that there is a conflict between Missouri and Iowa law. As such, I will apply the forum state's (Iowa's) choice of law rules.
The parties dispute whether I should apply Iowa's choice of law rules for contracts or Iowa's choice of law rules for torts. The Bills argue that bad faith failure to pay is a tort-based cause of action. American Family argues that a bad faith claim is a claim "on the policy" such that the choice of law rules for contracts apply. See Stahl v. Preston Mut. Ins. Ass'n , 517 N.W.2d 201, 204 (Iowa 1994) (). As noted above, however, American Family also argues that even under a tort-based approach, Missouri law applies.
A first party bad faith claim is a tort under Iowa law. See Dolan v. Aid Ins. Co. , 431 N.W.2d 790, 794 (Iowa 1988) (). In Thornton v. Amer. Interstate Ins. Co. , 897 N.W.2d 445 (Iowa 2017) ( Thornton I ), the Iowa Supreme Court stated:
In [ Dolan ], we recognized a common law action in tort for bad faith against a first-party insurer because "traditional damages for breach of contract will not always adequately compensate an insured for an insurer's bad faith conduct." ... We concluded allowing a remedy in tort was "justified by the nature of the contractual relationship between the insurer and insured."
Id. at 462 (citations omitted). Because first-party bad faith is a tort claim under Iowa law, punitive damages are available (as the Bills seek in Count III). See Dolan , 431 N.W.2d at 794 ; see also Thornton v. Amer. Interstate Ins. Co. , 940 N.W.2d 1, 42 (Iowa 2020) ( Thornton II ) (...
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