Halmon v. American Intern. Group, Inc. Ins. Co.
| Decision Date | 05 December 2007 |
| Docket Number | C.A. No. 2:07-1215-PMD. |
| Citation | 586 F.Supp.2d 401 |
| Parties | McCray HALMON, Plaintiff, v. AMERICAN INTERNATIONAL GROUP, INC. INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of South Carolina |
Laree Anne Hensley, Laree A. Henlsey Law Office, Charleston, SC, for Plaintiff.
Russell Grainger Hines, Stephen L. Brown, Young Clement Rivers and Tisdale, Charleston, SC, for Defendant.
This matter is before the court on Defendant American International Group, Inc. Insurance Company's ("AIG") Motion to Dismiss all of Plaintiff McCray Halmon's ("Halmon") claims pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth herein, Defendant's Motion to Dismiss is granted.
On October 24, 2006, Plaintiff was involved in an automobile collision while driving on Dorchester Road. The driver of the other automobile was one Juteara T. Washington ("Washington"). Plaintiff suffered extensive damage to his automobile, and also suffered personal injuries which required substantial medical care.
Plaintiff retained an automobile insurance policy through the Defendant, which included a provision for underinsured motorist ("UIM") coverage. Washington was insured through GEICO, and her policy had a $15,000 maximum payment.
Plaintiff entered into a Covenant Not to Execute with GEICO, in which Plaintiff agreed not bring legal action against GECO and GEICO agreed to tender the policy limit of $15,000 to Plaintiff. However, this amount was not sufficient to cover Plaintiff's losses from the collision. Plaintiff alleges that he has suffered $40,000 in damages, in excess of the $15,000 paid by GEICO, as a result of automobile damage, medical bills, and lost wages.
Plaintiff then filed a claim with Defendant in order to get the UIM benefits he believed he was owed. Defendant, citing Plaintiff's alleged failure to follow proper procedures for claiming UIM benefits, refused to pay Plaintiff the benefits sought. On August 7, 2007, Plaintiff filed a Complaint in state court against Defendant, alleging bad faith, outrage, breach of contract accompanied by a fraudulent act, breach of contract, and improper claims practices. Defendant removed this case to federal court on diversity grounds on September 6.
Separately, Plaintiff filed an action against Washington in state court on August 7, the same day he filed his action against Defendant. On August 27, copies of the pleadings of that case were served upon the Defendant through the South Carolina Department of Insurance.
Defendant filed the present Motion to Dismiss on September 11. Plaintiff filed a Return on October 12, to which Defendant filed a Reply on October 22.
A Rule 12(b)(6) motion should be granted only if, after accepting all well-pleaded allegations in the complaint as true, it appears certain that Plaintiff cannot prove any set of facts in support of its claims that entitles it to relief. Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). The complaint should not be dismissed unless it is certain that the plaintiff is not entitled to relief under any legal theory that might plausibly be suggested by the facts alleged. Mylan Labs. Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993). Further, "[u]nder the liberal rules of federal pleading, a complaint should survive a motion to dismiss if it sets out facts sufficient for the court to infer that all the required elements of the cause of action are present." Wolman v. Tose, 467 F.2d 29, 33 n. 5 (4th Cir.1972). If, on a motion to dismiss for failure to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56. Fed. R.Civ.P. 12(b).
Plaintiff alleges that Defendant wrongfully denied payment of UIM benefits, to which he claims he was entitled under his insurance policy. (Return at 5.) Plaintiff claims that this gives rise to both contract and tort causes of action. Defendant claims that it was well within its rights under state law to deny Plaintiff's claim, and did not act in bad faith. (Mot. to Dismiss at 2.)
The statutory provision in question is S.C.Code Ann. § 38-77-160, which makes it mandatory for South Carolina insurers to offer UIM coverage, and also establishes guidelines for the payment of UIM benefits. The paragraph relevant to this action reads:
No action may be brought under the underinsured motorist provision unless copies of the pleadings in the action establishing liability are served in the manner provided by law upon the insurer writing the underinsured motorist provision. The insurer has the right to appear and defend in the name of the underinsured motorist in any action which may affect its liability and has thirty days after service of process on it in which to appear. The evidence of service upon the insurer may not be made a part of the record. In the event the automobile insurance insurer for the putative at-fault insured chooses to settle in part the claims against its insured by payment of its applicable liability limits on behalf of its insured, the underinsured motorist insurer may assume control of the defense of action for its own benefit. No underinsured motorist policy may contain a clause requiring the insurer's consent to settlement with the at-fault party.
S.C.Code Ann. § 38-77-160 (2006).
Defendant asserts that since Plaintiff never brought an action against Washington, there is no "action establishing liability" as required by statute. (Mot. to Dismiss at 3-4.) Defendant also asserts that it was never given an opportunity to "defend in the name of the underinsured motorist in any action which may affect its liability" as provided for in the statute. Id. Consequently, Defendant asserts that all of Plaintiff's claims were brought prematurely, and should be dismissed.
Two of Plaintiff's causes of action alleged in the Complaint, breach of contract and breach of contract accompanied by a fraudulent act, sound in contract.
"Recovery under the uninsured endorsement is subject to the condition that the insured establish legal liability on the part of the uninsured motorist." Lawson v. Porter, 256 S.C. 65, 68, 180 S.E.2d 643, 644 (1971). The statute is also clear on this point, saying that "[n]o action may be brought under the underinsured motorist provision unless copies of the pleadings in the action establishing liability are served in the manner provided by law upon the insurer writing the underinsured motorist provision." S.C.Code Ann. § 38-77-160 (2006) (emphasis added).
It is clear that the law governing insurance contracts like the one in question safeguards the insurer's right to defend its interests in any action establishing liability. To this end, which party is at-fault must be established in a court of law before insurers are contractually required to disburse UIM benefits. This is a prerequisite to the insurer's performance of the insurance contract provision in question. Since Plaintiff has not yet established that Washington was the at-fault driver in the state court proceeding, Defendant cannot have breached its contract with Plaintiff by refusing to disburse UIM benefits.
Accordingly, Plaintiff's two contract causes of action are dismissed.
However, the law is less clear regarding Plaintiff's tort claims. Plaintiff has alleged that Defendant acted in bad faith in refusing to pay UIM benefits. "[I]f an insured can demonstrate bad faith or unreasonable action by the insurer in processing a claim under their mutually binding insurance contract, he can recover consequential damages in a tort action." Nichols v. State Farm Mitt. Auto. Ins. Co., 279 S.C. 336, 340, 306 S.E.2d 616, 619 (1983). Furthermore, a bad faith claim may exist even in the absence of any violation of an insurance contract provision, as "the benefits due an insured are not limited solely by those expressly set out in the contract." Tadlock Painting Co. v. Maryland Cas. Co., 322 S.C. 498, 503, 473 S.E.2d 52, 55 (1996).
There are two cases of particular relevance to the present action. The first case, Williams v. Selective Insurance Co. of the Southeast, involved virtually identical facts to the present matter. 315 S.C. 532, 446 S.E.2d 402 (1994). That case involved a motorist, Williams, involved in a collision in which she was not at fault. The at-fault motorist was underinsured. Williams settled her claim with the at-fault motorist, and then sought to claim UIM benefits from her insurance carrier, Selective. When Selective refused to pay these benefits, Williams sued, alleging both breach of contract and bad faith refusal to pay UIM benefits. Selective moved to dismiss, claiming that Williams had not satisfied the requirements of § 38-77-160. The trial court dismissed the case, and the case was appealed.
The South Carolina Supreme Court upheld the trial court's dismissal of the case, reasoning:
We note that the intent of § 38-77-160 is to protect an insurance carrier's right to contest its liability for underinsured benefits. An insured must therefore preserve the right of action against an at-fault driver so long as the underinsured carrier has not agreed to the amount and payment of underinsured motorist benefits. In the event the insured chooses to settle with the at-fault party's liability carrier, the underinsured carrier has the option to assume control of the defense of the action as provided in § 38-77-160. In this case, Williams's failure to pursue an action against the at-fault driver resulted in a total waiver of Insurer's right to defend. The purpose of § 38-77-160 is to avoid such a result.
Id. at 534-35, 446 S.E.2d at 404. However, one crucial distinction between Williams and the present case is that in Williams, the...
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