Family Christian World, Inc. v. Phila. Indem. Ins. Co.

Decision Date21 October 2015
Docket NumberCause No.: 2:15-CV-102
CourtU.S. District Court — Northern District of Indiana

This matter is before the court on the "Combined Motion to Dismiss, or in the Alternative to Strike, Pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(f)" filed by Defendant Illinois Claims Service, Ltd. ("ICS") (DE 19). Plaintiff Family Christian World, Inc., a/k/a Family Christian Center ("Family Christian") filed a response in opposition (DE 24) and ICS filed a reply (DE 27). For the reasons discussed below, the motion to dismiss is GRANTED and the motion to strike is MOOT. All claims asserted against Defendant ICS are dismissed with prejudice. All claims asserted against Defendants Philadelphia Indemnity Insurance Company and Philadelphia Insurance Company (collectively "Philadelphia Indemnity") are unaffected by this Opinion and Order and remain pending.


Family Christian filed this lawsuit in state court on January 28, 2015, and ICS removed it to this court on March 18, 2015, on the basis of diversity jurisdiction. Family Christian owns real property located at 340 45th Avenue in Munster, Indiana. Compl. (DE 6), p. 2. PhiladelphiaIndemnity issued an insurance policy covering the property and ICS served as administrator of the policy. Id. On January 28, 2013, the property was damaged by flooding. Id. Family Christian filed a property damage claim with Philadelphia Indemnity to cover the cost of repairs to the building and Philadelphia Indemnity, using ICS as its third-party agent, began an investigation into the claim on January 29, 2013. Id., p. 3. On November 13, 2014, ICS sent a reservation of rights letter to Family Christian, stating that ". . . Philadelphia Insurance Companies cannot verify that the alleged damages occurred or coverage exists[.]" and that Philadelphia Indemnity and ICS would "continue[] to investigate this claim under a Reservation of Rights . . . ." Defendant's Memorandum in Support of Motion to Dismiss (DE 20), Exh. 20-7, pp. 45-47. In that letter, ICS claimed that Family Christian failed to provide proof of the damage to the building and so ICS could not conclude its investigation, confirm that the damage was incurred, or determine whether Family Christian's claims were covered under the policy. Id., p. 47. Family Christian contends that "Chris McCormick, . . . employed by ICS, investigated the claim and photo-documented the damage to the property." Complaint, p. 3. Family Christian also alleges that "[t]he Defendants subsequently lost or destroyed the photographs that documented the damage to the property." Id. In any event, Family Christian's claim was not paid.

Family Christian filed this lawsuit containing two counts against the Defendants. Count I of the Plaintiff's Complaint is titled "Declaratory Judgment [and] Breach of Contract." Id., p. 4. Family Christian alleges in Count I that "[t]his is a count for declaratory judgment under Ind. Code § 34-14-1, et seq., for the purpose of seeking an order from this Court declaring that the Defendants are obligated to indemnify Family Christian under the Policy to pay Family Christian for the sum Family Christian has incurred to repair the damage to the covered property." Id. Alsoin Count I, Family Christian alleges that "[b]ecause [Philadelphia Indemnity] and their agent, ICS, have failed to indemnify Family Christian for the damage to the covered property, they have breached their agreement with Family Christian." Id. Count II of the Complaint states a claim for bad faith, alleging that the defendants "breached their duties of good faith and fair dealing, and further acted in bad faith and in ill will . . ." in handling Family Christian's claim. Id., p. 5. Family Christian seeks compensatory damages, punitive damages, costs, and attorney's fees. Id., p. 6. Additional facts will be discussed below as they become relevant to the court's analysis.

In its motion to dismiss or to strike, ICS claims that Count I of the complaint should be dismissed because "ICS was not a party to the insurance contract." Defendant's Memorandum, p. 4. ICS contends that since it was not a party to the contract, and acted solely as a third-party administrator, it cannot be held liable for breach of that contract, nor is it a proper party for a declaratory judgment action based on that contract. Id., pp. 4-5. As a result, ICS argues that Count I should be dismissed pursuant to Rule 12(b)(6) because it fails to state a valid claim for relief. Id., pp. 6-7. ICS includes a companion argument, claiming that Count I "improperly intertwines a cause of action for breach of contract with a declaratory judgment claim, and renders the claim incoherent and confusing." Id., p. 7. ICS argues that "Count II for bad faith should also be dismissed because the allegations supporting the claim are conclusory and fail to set forth enough facts to state a claim to relief that is plausible on its face." Id., p. 2. Finally, ICS argues that if the court does not dismiss Count I, it should nonetheless strike Family Christian's request for attorney's fees contained in that Count. Id., p. 10. ICS claims that neither Indiana contract law nor the "federal statutes authorizing declaratory judgment claims" allow for recovery of attorney's fees. Id. (citations omitted).

I. Fed.R.Civ.P. 12(b)(6).

Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint that has fails to "state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). When deciding a motion to dismiss under Rule 12(b)(6), the court accepts as true all factual allegations in the complaint and draws all inferences in favor of the plaintiff. Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008). The 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 Bell Atlantic Corp. v. Twombly, the Supreme Court explained that the complaint must allege facts that are "enough to raise a right to relief above the speculative level." Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Stated differently, the complaint must include "enough facts to state a claim to relief that is plausible on its face." Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (internal citation and quotation marks omitted). To be facially plausible, the complaint must allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556).

II. Fed.R.Civ.P. 12(f).

Federal Rule 12(f) states, in its entirety, as follows:

Motion to Strike. The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act:
(1) on its own; or
(2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading.

Motions to strike are generally disfavored; however, "where . . . motions to strike remove unnecessary clutter from the case, they serve to expedite, not delay." Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989). Motions asserted under Rule 12(f) are "ordinarily not granted unless the language in the pleading at issue has no possible relation to the controversy and is clearly prejudicial." Hofmann v. Aspen Dental Mgmt., Inc., 2011 WL 3902773, at *3 (S.D.Ind. Sept. 6, 2011) (quoting Baker v. Westinghouse Elec. Corp., 830 F.Supp. 1161, 1168 (S.D.Ind. 1993)).

I. Breach of Contract Claim.

ICS argues that since it was not a party to the insurance contract between Family Christian and Philadelphia Indemnity, it cannot be sued for breach of contract. ICS states that "[i]t is fundamental that in order for a party to be held liable under a contract, they must be a party to that contract." Defendant's Memorandum, p. 4 (citing Rodriguez v. Tech Credit Union Corp., 824 N.E.2d 442, 447 (Ind. App. 2005)). ICS states that it is not liable to Family Christian because the insurance policy at issue in this case "was issued by Philadelphia to Family Christian and therefore Philadelphia and Family Christian are the only parties to that insurance contract. Paint Shuttle Inc. v. Continental Cas. Co., 733 N.E.2d 513, 523 (Ind. App. 2000) ('An insurance policy is a contract between the insurer and the insured.'); . . . ICS is merely a third-party administrator for the Policy and is not a party thereto. . . . As such, ICS cannot be held liable under the Policy and is not properly the subject of a declaratory judgment action predicated upon the Policy." Id., pp. 4-5. ICS argues that "[t]here is a wealth of case law holding that a third-partyadministrator cannot be held liable for a breach of the terms of an insurance policy." Id., p. 5 (citing Sieveking v. Reliastar Life Ins. Co., 2009 LEXIS 52763 (S.D. Ind. June 23, 2009) and Heavilin v. Madison Nat'l Life Ins. Co., 2012 LEXIS 176446 (N.D. Ind. Dec. 12, 2012)). ICS also cites cases it claims supports its contention that ICS is not a proper party to a declaratory judgment action because of its status as a third-party administrator. See Defendant's Memorandum, pp. 5-6 (citing Wells Fargo Bank, N.A. v. Tippecanoe Assocs. LLC, 923 N.E.2d 423 (Ind. App. 2010) (third-party administrator was merely a "mouthpiece" for lender, not a party to the contract)). Therefore, argues ICS, it cannot be sued by Family Christian for breach of contract or in a declaratory judgment action.

In its response brief, Family Christian argues that ICS is a proper party defendant in this case because ICS "has...

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