Flynn v. State Farm Fire and Cas. Ins. Co. (Texas)

• Decision Date: 18 February 2009
• Docket Number: No. EP-08-CV-305-PRM.,EP-08-CV-305-PRM.
• Citation: 605 F.Supp.2d 811
• Parties: Curtis FLYNN, et al., Plaintiffs, v. STATE FARM FIRE AND CASUALTY INSURANCE COMPANY (TEXAS), et al., Defendants.
• Court: U.S. District Court — Western District of Texas

Page 811

605 F.Supp.2d 811

Curtis FLYNN, et al., Plaintiffs, v. STATE FARM FIRE AND CASUALTY INSURANCE COMPANY (TEXAS), et al., Defendants.

No. EP-08-CV-305-PRM.

United States District Court, W.D. Texas, El Paso Division.

February 18, 2009.

Arthur Robert Piacenti, Jeffrey T. Lucky, Lucky, Enriquez, Piacenti & Smigiel, P.C., El Paso, TX, for Plaintiffs.

Ruben S. Robles, Robles, Bracken & Hughes, El Paso, TX, for Defendants.

ORDER ADOPTING THE REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE

PHILIP R. MARTINEZ, District Judge.

On this day, the Court considered Defendants' "Motion to Dismiss for Failure to State a Claim upon which Relief may be Granted" ("Motion"), filed on August 18 2008; Plaintiffs' "Response to Defendant State Farm Fire and Casualty Company's Motion to Dismiss for Failure to State a Claim upon which Relief may be Granted" ("Response"), filed on September 2, 2008; Defendants' "Reply to Plaintiffs' Response to Motion to Dismiss for Failure to State a Claim upon which Relief may be Granted" ("Reply"), filed on September 5, 2008; Plaintiffs' "Sur-Reply in Regard to Defendant's [sic] Motion to Dismiss for Failure to State a Claim upon which Relief may be Granted" ("Sur-Reply"), filed on September 9, 2008; the "Report and Recommendation of the Magistrate Judge" ("R & R"), entered on January 12, 2009; and Plaintiffs' "Objections to Magistrate Judge's Report and Recommendation Regarding Defendant's [sic] Motion to Dismiss for Failure to State a Claim upon which Relief may be Granted" ("Objections"), filed on January 28, 2009. After due consideration, the Court is of the opinion that it should adopt the R & R and grant Defendants' Motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

In late 2006 or early 2007, Plaintiffs Curtis and Lidia Flynn, both residents of El Paso, Texas, purchased a single-family residence from their son, Plaintiff John Flynn, located in Calvert City, Kentucky. Pls.' Orig. Pet. 2, 6. Around that same time, Plaintiffs Curtis and Lidia Flynn purchased an insurance policy from Defendants through their agent located in Paducah, Kentucky for the Calvert City residence. Id. at 6-7. Plaintiffs claim that they informed Defendants' agent that Plaintiff John Flynn would remain in the residence after the purchase. Id. at 7.

Prior to purchasing their policy, Plaintiffs allege that Defendants neither advised them that the policy would not cover Plaintiff John Flynn in full while he resided at the home, nor did Defendants advise them that they needed "to buy additional endorsements or riders to the policy for any purpose." Id. Defendants subsequently issued Plaintiffs John and Lidia Flynn a $90,000 policy which insured against, among other things, loss against theft and coverage for their personal property and that of Plaintiff John Flynn. Id.

On or about July 11, 2007, Plaintiff John Flynn "returned home from a vacation trip to discover that the home in Calvert City had been burglarized and that substantial property owned by the [Plaintiffs] had been stolen." Id. at 8. Plaintiff John Flynn notified the police of the burglary, and on July 12, 2007, informed Defendants of the same. Id. During the month following the burglary, Plaintiffs state that they responded to all requests from Defendants for information pertaining to the claims process. Id.

On or about August 1, 2007, Plaintiffs claim that they received notice from Defendants that there was a question as to whether the policy obligated Defendants to make payment for Plaintiffs' loss, and as to whether Plaintiffs had engaged in concealment or fraud in submitting their claim. Id. at 8-9. Plaintiffs also claim that Defendants questioned whether the insurance policy even covered Plaintiff John Flynn, despite a portion of its language which read "insured means you and, if residents . . . your relatives." Id. at 9.

Plaintiffs claim that they sent a letter to Defendants requesting information regarding their alleged material misrepresentations, as well as information that stated that the policy did not cover Plaintiff John Flynn. Id. Plaintiffs state that Defendants never responded to this inquiry. Id. Instead, Plaintiffs claim that Defendants directed a Kentucky attorney to demand that they produce a large volume of records and information, and that Plaintiffs Curtis and Lidia Flynn travel to Kentucky from Texas for an examination under oath. Id. at 10. Plaintiffs claim that the Kentucky attorney also requested the examination of Plaintiff John Flynn. Id. Plaintiffs state that they made all requested documents available to Defendants, but since that time, Defendants have not informed them of any change in the status of their claim. Id. at 11.

Plaintiffs state that the amount of the loss that they sustained as a result of the theft was approximately $29,490.44. Id. at 11-12. Plaintiffs claim that "[d]espite the fact that all conditions precedent to [their] recovery have been performed or have occurred, [Defendants] have failed and refused to pay [them] in accordance with their obligations under contract and all applicable statutes and common law standards." Id. at 12. Plaintiffs also claim that Defendants "have failed to timely notify the insureds [sic] of any specific basis for their continued and repeated refusal to make a prompt determination of the validity of the claim or to pay the claim." Id.

On July 8, 2008, Plaintiffs filed suit against Defendants in the County Court at Law Number Six in El Paso County, Texas. Id. at 1. Therein, Plaintiffs alleged the following causes of actions against Defendants: (1) breach of contract; (2) breach of duty of good faith and fair dealing; (3) violation of the insurance code (deceptive trade and unfair claims practices); (4) violation of the insurance code (unreasonable delay); (5) violation of the deceptive trade practices act; and (6) negligence and gross negligence. Id. at 14-20. On August 7, 2008, Defendants removed this action to this Court premised on diversity of citizenship. Not. of Removal 1.

On August 18, 2008, Defendants filed their Motion, arguing that the Court should dismiss Plaintiffs' claim for negligence and gross negligence pursuant to Federal Rule of Civil Procedure 12(b)(6). Mot. 1. Specifically, Defendants argue that Texas courts "do not recognize a cause of action for negligent claims handling." Id. at 2. On October 14, 2008, the Court referred this Motion to a Magistrate Judge for an R & R. Docket No. 13. On January 12, 2009, the Magistrate Judge issued his R & R, recommending that the Court grant Defendants' Motion and dismiss Plaintiffs' negligence and gross negligence claims. R & R 818. On January 28, 2009, Plaintiffs filed their objections to the R & R. Docket No. 21.

II. LEGAL STANDARD

A. District Court Review of a Magistrate Judge's Report and Recommendation

Pursuant to 28 U.S.C. § 636(b)(1)(B), a district court, on its own motion, may refer a pending matter to a United States Magistrate Judge for the preparation of a Report and Recommendation. Any party may contest the Report and Recommendation by filing written objections within ten days after being served with a copy of the Report and Recommendation. 28 U.S.C. § 636(b)(1)(C). The objections must specifically identify those findings or recommendations which the party wishes to have the district court consider. Thomas v. Arn, 474 U.S. 140, 151, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985). A district court need not consider "[f]rivolous, conclusive, or general objections." Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir.1987) (quoting Nettles v. Wainwright, 677 F.2d 404, 410 n. 8 (5th Cir.1982)).

A district court must then make a de novo determination with respect to the challenged portions of the Report and Recommendation, which it may accept, reject, or modify, in whole or in part. 28 U.S.C. § 636(b)(1)(C). A party's failure to file written objections to the Report and Recommendation within ten days, except for plain error, shall bar that party from de novo review by a district court. Douglass v. United Serv. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir.1996) (en banc). Since Plaintiffs have timely filed their objections, the Court will review the challenged portions of the Magistrate Judge's Report and Recommendation de novo.

B. Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of an action for "failure to state a claim upon which relief can be granted." FED.R.CIV.P. 12(b)(6) ("Rule 12(b)(6)"). However, "[a] motion to dismiss under Rule 12(b)(6) is `viewed with disfavor and is rarely granted.'" Priester v. Lowndes County, 354 F.3d 414, 418 (5th Cir.2004) (quoting Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997)).

In resolving a Rule 12(b)(6) motion, a court must determine "whether in the light most favorable to the plaintiff and with every doubt resolved on his behalf, the complaint states any valid claim for relief." Gregson v. Zurich Am. Ins. Co., 322 F.3d 883, 885 (5th Cir.2003) (citation omitted). The complaint "`does not need detailed factual allegations,' but must provide the plaintiff's grounds for entitlement to relief—including factual allegations that when assumed to be true `raise a right to relief above the speculative level.'" Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965-65, 167 L.Ed.2d 929 (2007)).

C. Erie Guess

When a party institutes a lawsuit, the law of the state in which the party brings the suit shall govern, unless the Constitution or an act of Congress otherwise governs said suit. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ("Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state."); see also Hyde v. Hoffmann-LaRoche, Inc., 511 F.3d 506, 510 (5th Cir.2007) (In a diversity action, "a federal court must apply federal procedural rules...