Griffith v. State Farm Fire & Cas. Co.

• Decision Date: 06 June 2012
• Docket Number: No. 2:12-cv-00239-DCN,2:12-cv-00239-DCN
• Parties: BRENT J. GRIFFITH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — District of South Carolina

BRENT J. GRIFFITH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERSSIMILARLY SITUATED, Plaintiff,

v.STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

No. 2:12-cv-00239-DCN

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION

Dated: June 6, 2012

ORDER

This matter is before the court on defendant's motion to dismiss the complaint. For the reasons set forth below, the court grants defendant's motion.

I. BACKGROUND

Plaintiff Brent J. Griffith (Griffith) filed this action in the Court of Common Pleas for the Ninth Judicial Circuit on December 22, 2011. On January 26, 2012, defendant State Farm Fire and Casualty Company (State Farm) filed a notice of removal in federal court, asserting jurisdiction based on diversity of citizenship and under the Class Action Fairness Act. On February 15, 2012, State Farm filed a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim.

In his complaint, Griffith alleges as follows: On May 11, 2008, Griffith's home on Wadmalaw Island, South Carolina suffered wind damage. Compl. ¶¶ 1, 5, 7. The home was insured against such damage by State Farm. Id. ¶ 6. Griffith filed a claim but the parties disagreed on the cost of repairs. Id. ¶ 7. Ultimately, on May 10, 2010, StateFarm paid Griffith $311,171.00 for his loss. Id. ¶ 11. Griffith then sought interest on his claim, which State Farm refused to pay. Id. ¶¶ 15.

Griffith's essential theory of liability is that his claim was a liquidated sum at the time of the loss that began to accrue interest on that date based on State Farm's failure to pay his claim within sixty days of his submission of a proof of loss. Id. ¶¶ 10, 12-14, 18. He brings this action individually and as a class action on behalf of

all persons in the State of South Carolina whose home is insured by Defendant and who submitted a claim for a covered property loss to Defendant and to whom Defendant failed to make payment for that loss within sixty days of the claim submission and to whom Defendant failed to pay interest on the loss amount when it ultimately paid the loss (the "Plaintiff Class").

Id. ¶ 18. Griffith alleges that State Farm has a policy, practice, or pattern of delaying payments and refusing to pay interest. Id. ¶¶ 16-17. Griffith specifically asserts causes of action for breach of contract, breach of contract accompanied by a fraudulent act, unjust enrichment and quantum meruit, bad faith refusal to pay, and declaratory judgment.

II. MOTION TO DISMISS STANDARD

The Federal Rules of Civil Procedure govern civil actions that are removed from a state court. See Fed. R. Civ. P. 81(c)(1). Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss for "failure to state a claim upon which relief can be granted." When considering a Rule 12(b)(6) motion to dismiss, the court must accept the plaintiff's factual allegations as true and draw all reasonable inferences in the plaintiff's favor. See E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435, 440 (4th Cir. 2011).

On a motion to dismiss, the court's task is limited to determining whether the complaint states a "plausible claim for relief." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The Supreme Court recently articulated a "two-pronged approach" to assessing the sufficiency of a complaint. See id. First, a complaint must contain factual allegations in addition to legal conclusions. Although Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief," "a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Second, "a complaint 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 (quoting Twombly, 550 U.S. at 570). This standard "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id. In other words, "Facts pled that are 'merely consistent with' liability are not sufficient." A Soc'y Without a Name v. Virginia, 655 F.3d 342, 346 (4th Cir. 2011) (quoting Iqbal, 556 U.S. at 678).

"[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Iqbal, 556 U.S. at 678. Thus, the court need not accept as true "legal conclusions drawn from the facts," "unwarranted inferences, unreasonable conclusions, or arguments." E. Shore Mkts., Inc. v. J.D. Assocs., Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). Ultimately, the court's task is not mechanical but "context-specific," requiring "the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.

III. DISCUSSION

The gravamen of Griffith's complaint is that State Farm owes interest on his claim for property damage accruing from the date of the loss. Griffith alleges that State Farm failed to pay his claim within sixty days of the date he filed the claim, which he contends amounts to a "breach" giving rise to an obligation to pay interest. But for there to be a breach, there must first be a duty or agreement, and Griffith's theory relies on the assumption that State Farm owes a duty to pay every covered claim within sixty days of the submission of the claim. To evince such a duty, Griffith looks to the South Carolina legal rate of interest statute and South Carolina case law.

State Farm responds that the insurance policy is silent as to payment of interest and that South Carolina law does not impose a duty on homeowners insurance companies to pay claims within sixty days; nor does it require homeowners insurers to pay interest from the date of loss when the claim is not paid within sixty days. State Farm submits that if no such duties exist, each of Griffith's claims fail as a matter of law.¹

A. The Insurance Policy

The natural starting point is the plain language of the policy. See Andy Warhol Found. for Visual Arts, Inc. v. Fed. Ins. Co., 189 F.3d 208, 215 (2d Cir. 1999) ("We start our analysis with the premise that an insurance policy, like any contract, must be construed to effectuate the intent of the parties as derived from the plain meaning of the policy's terms."). "Courts interpret insurance policy language in accordance with its plain, ordinary, and popular meaning . . . ." M & M Corp. of S.C. v. Auto-Owners Ins. Co., 701 S.E.2d 33, 35 (S.C. 2010).

Here, Griffith concedes that the insurance policy is silent as to payment of interest. Section I, Paragraph 8 of the insurance policy, entitled "CONDITIONS," is relevant to the issue of whether State Farm owes a duty to pay a claim within sixty days of its submission. This provision states:

Loss Payment. We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after we receive your proof of loss and:

a. reach agreement with you;

b. there is an entry of a final judgment; or

c. there is a filing of an appraisal award with us.

Def.'s Mot. Dismiss Ex. 2 at 25 (emphasis added). This provision establishes three, and only three, conditions precedent for State Farm to be required to pay a claim within sixty days of the submission of a proof of loss. The parties agree that none of the three conditions was met at the time Griffith submitted his claim; therefore, under the plain language of the policy, State Farm was neither obligated to make payment on Griffith's claim within sixty days nor to pay interest from the date of loss.

When the language of a contract is clear and unambiguous, courts are bound to interpret the existing contract language and are not authorized to make a new contract for the parties. See B.L.G. Enters., Inc. v. First Fin. Ins. Co., 491 S.E.2d 695, 697 (S.C. Ct. App. 1997). Within certain statutory parameters, insurers and insureds have the freedom to contract for the terms they want in a policy. See id. at 698 n.2. This court is limited to interpreting the contract to which both parties agreed, "regardless of its wisdom or folly, apparent unreasonableness, or failure to guard their rights carefully." C.A.N. Enters., Inc. v. S.C. Health & Human Serv. Fin. Comm'n, 373 S.E.2d 584, 586 (S.C. 1988). As a matter of law, the four corners of the policy do not support a theory of liability in which relief may be granted in favor of Griffith. See, e.g., Roche v. Liberty Mut. Managed Care, Inc., No. 07-331, 2008 WL 4378432, at *2 (S.D. Ill. Sept. 23, 2008) ("Only a duty imposed by the terms of a contract can give rise to a breach."). Therefore, absent a legal duty imposed by South Carolina law, Griffith's claims must be dismissed.

B. South Carolina Legal Rate of Interest Statute

To overcome the silence regarding payment of interest in the insurance policy, Griffith relies on South Carolina Code Ann. § 34-31-20(A) as providing the purported duty to pay interest on covered claims not paid within sixty days of a proof of loss. This statute, entitled "Legal rate of interest,"² provides:

In all cases of accounts stated and in all cases wherein any sum or sums of money shall be ascertained and, being due, shall draw interest according to law, the legal interest shall be at the rate of eight and three-fourths percent per annum.

S.C. Code Ann. § 34-31-20(A). Courts have construed § 34-31-20(A) as permitting an award of interest when a monetary obligation is a "sum certain" or "capable of being reduced to certainty," "accruing from the time a payment may be demanded either by the agreement of the parties or the operation of law." Austin v. Stokes-Craven Holding Corp., 691 S.E.2d 135, 154 (S.C. 2010); see also Historic Charleston Holdings, LLC v. Mallon, LLC, 673 S.E.2d 448, 457 (S.C. 2009) (same).

Griffith alleges that at the time his property was damaged, the obligation owed by State Farm to him was a sum certain. Compl. ¶¶ 13-14. Even though Griffith admits that the amount of his claim was in dispute, ...