Lombardo v. State Farm Mut. Auto. Ins. Co., Civ. A. No. 91-0793.

Decision Date27 February 1992
Docket NumberCiv. A. No. 91-0793.
Citation800 F. Supp. 208
PartiesAnna LOMBARDO, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.
CourtU.S. District Court — Eastern District of Pennsylvania

COPYRIGHT MATERIAL OMITTED

Marla Welker, Mychak, Geckle & Welker, P.C., Philadelphia, Pa., for plaintiff.

John W. Ashley, Allentown, Pa., for defendant.

MEMORANDUM AND ORDER

HUYETT, District Judge.

This is an automobile insurance case in which defendant has moved for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). Plaintiff has responded. Following an order for additional briefing, defendant filed a second motion to dismiss, to which plaintiff responded, but defendant was vague about the procedural grounds for this second motion. For the reasons given below, I will treat the second motion as part of the first, and treat both motions as a 12(b)(6) motion. I will dismiss the complaint without prejudice and with leave to amend in accordance with this memorandum and order.

(I)

On July 26, 1987, while riding as a passenger in a car, plaintiff Anna Lombardo was injured in a "hit and run" car accident. Defendant State Farm Mutual Automobile Insurance Company ("State Farm") insured the driver of the car carrying plaintiff. Plaintiff made a timely claim for uninsured motorist benefits under the policy and defendant offered to settle the claim for an amount plaintiff rejected as insufficient. Plaintiff asserts that this low offer and other aspects of defendant's conduct amounts to bad faith insurance practices, and has filed suit for damages under the contract and extraordinary damages as a result of defendant's allegedly bad faith conduct. Plaintiff's cause of action for bad faith was created by 42 Pa.C.S.A. § 8371 which became effective on July 1, 1990. As will be discussed more fully below, this statute cannot be applied retroactively and the timing of events therefore becomes crucial to the resolution of this case.

Plaintiff alleges that defendant handled her claim in bad faith by offering to settle the claim for too little money. Plaintiff claims that when defendant made this offer, defendant's employee acknowledged that defendant was making the offer with the knowledge that there was no cause of action for bad faith insurance practices in Pennsylvania. Plaintiff also alleges that defendant's employee made inappropriate personal comments about Ms. Lombardo.

Each party appointed an arbitrator in accordance with the arbitration provisions of the insurance contract, but they could not agree on a third, neutral arbitrator. Plaintiff notified defendant that she was going to forego the arbitration proceedings and file a suit directly against defendant. Plaintiff's grounds for circumventing the arbitration clause and taking her claim straight to court was the Pennsylvania Superior Court decision in Johnson v. Pennsylvania National Insurance Companies, 384 Pa.Super. 92, 557 A.2d 789 (1989). Plaintiff claims that after she notified defendant of her plans, defendant obtained an ex parte order from the Court of Common Pleas appointing an arbitrator beneficial to defendant. Plaintiff claims that defendant acted in bad faith in these state court proceedings.

The Court of Common Pleas entered the order enjoining plaintiff from filing suit and appointing an arbitrator. Plaintiff appealed and the Superior Court vacated the order and remanded the case to the trial court. Defendant did not pursue its state case and plaintiff then filed this action in February, 1991. Since obtaining the Court of Common Pleas order, defendant apparently has taken no action except to defend the appeal, defend this lawsuit, and maintain that its initial settlement offer was valid. Plaintiff has not made any specific allegations that defendant has taken any action after July 1, 1990 that would constitute an act of bad faith.

(II)

Plaintiff's complaint is somewhat unclear, but it appears to state three claims for relief: (1) bad faith, (2) damages pursuant to 42 Pa.C.S.A. § 8371, and (3) "deceptive, unfair, fraudulent" acts in violation of the Unfair Insurance Practices Act ("UIPA"), 40 P.S. § 1171.1 et seq.1 Defendant filed an answer denying plaintiff's claims. In its motion, defendant presents four reasons why the complaint should be dismissed. First, defendant maintains that plaintiff is not entitled to relief under the Unfair Insurance Practices Act, 40 P.S. § 1171.1 et seq. Second, defendant claims plaintiff is not entitled to pursue any claims for bad faith conduct or punitive damages. Third, defendant argues that 42 Pa.C.S.A. § 8371 is not applicable to this case because it cannot be applied retroactively. Finally, defendant argues in the alternative that the maximum amount recoverable under the contract is $15,000. Since the breach of contract claim will be dismissed, this fourth argument need not be addressed. Plaintiff argues that the Court should decide in her favor on defendant's first three arguments.

(III)

Rule 12(c) of the Federal Rules of Civil Procedure provides in relevant part that "after the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings."2 Rule 12(c) may be used as a vehicle for raising various 12(b) defenses after the pleadings are closed. 5A Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure § 1367, 514 (1990). The arguments defendant raises in its two motions to dismiss are essentially arguments that plaintiff has failed to state a cause of action upon which relief can be granted. "Although few federal courts have spoken to this point, presumably the court will apply the same standards for granting the appropriate relief as it would have employed had the motion been brought under Rules 12(b)(1), (6) or (7) or under Rule 12(f). Id. at 515; Ad-Hoc Committee of the Baruch Black and Hispanic Alumni Assoc. v. Bernard M. Baruch College, 835 F.2d 980, 982 (2nd Cir. 1987) (12(b)(6) standards applicable to 12(c) motion); Slotnick v. Garfinkle, 632 F.2d 163, 165 (1st Cir.1980) (12(c) motion properly treated as a 12(b)(6) motion). Accordingly, I will treat defendant's motion as one for dismissal under Rule 12(b)(6).

The Third Circuit has articulated the 12(b)(6) standard as follows: "the court is reviewing the dismissal of the complaint for failure to state a claim on which relief can be granted. Rule 12(b)(6), Fed.R.Civ.P. The applicable standard of review requires the court to accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the nonmoving party." Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3rd Cir.1989).

(IV)

In her complaint, plaintiff does not clearly state her causes of action, but appears to make the three claims for relief noted above. In deciding the motion to dismiss, the Court must accept as true the facts stated in the complaint and all reasonable inferences — favorable to the non-movant — that can be drawn from those facts.

Read in a permissive light, the complaint contains legal theories and allegations of fact that could be read as giving rise to six possible causes of action: (1) breach of contract, (2) violation of the Unfair Insurance Practices Act ("UIPA"), 40 P.S. § 1171.1 et seq., (3) common law deceit, (4) violation of the Unfair Trade Practices and Consumer Protection Law ("CPL"), 73 P.S. § 201-1 et seq., (5) breach of the Dercoli duty of good faith and fair dealing, and (6) violation of 42 Pa.C.S.A. § 8371. An examination of each of these possible theories of recovery shows that plaintiff has failed to state a claim upon which relief may be granted with regard to the first five, however, the sixth theory may possibly provide grounds for relief. The complaint must therefore be dismissed with leave to amend as to the section 8371 claim for relief. Since I do not have jurisdiction to hear the breach of contract claim, I need not reach defendant's argument that its liability under the insurance contract should be limited to $15,000.

A) Breach of Contract

Plaintiff's decision to abandon the arbitration process and proceed directly to litigation was based on the opinion of the Pennsylvania Superior Court in Johnson v. Pennsylvania Nat'l Ins. Co., 384 Pa.Super. 92, 557 A.2d 789 (1989). The Superior Court ruled that a injured passenger in the insured's car was not bound by the arbitration clause of the policy when making a claim for underinsured or uninsured benefits. Subsequently, however, the Pennsylvania Supreme Court overruled the Superior Court. Johnson v. Pennsylvania Nat'l Ins. Companies, 527 Pa. 504, 594 A.2d 296 (1991). The Supreme Court ruled that an injured passenger in the insured's car is bound by the arbitration clause of the insurance contract because she is a third-party beneficiary of the insurance contract. The facts in Johnson are almost identical to those in plaintiff's case. Accordingly, plaintiff is bound by the arbitration clause in the insurance contract between defendant and its insured. To the extent that the complaint states breach of contract as one of plaintiff's claims for relief, it must be dismissed.

B) Unfair Insurance Practices Act

It is well settled that the UIPA does not provide a private right of action. Liberty Mutual Ins. Co. v. Paper Mfg. Co., 753 F.Supp. 156, 159 (E.D.Pa.1990). Therefore, to the extent the complaint relies on the UIPA as grounds for relief, plaintiff fails to state a claim upon which relief can be granted. Plaintiff asserts that she cites the UIPA in her complaint merely as a standard of conduct against which defendant's allegedly bad faith conduct can be measured. The Pennsylvania Superior Court dismissed a similar argument in Gordon v. Pennsylvania Blue Shield, 378 Pa.Super. 256, 548 A.2d 600 (1988), when the plaintiff in that case tried to present a UIPA violation as grounds for a CPL cause of action. The Superior Court stated that to...

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