Richelson v. Liberty Ins. Corp.

• Decision Date: 11 December 2018
• Docket Number: CASE NO. 1:18 CV 1801
• Parties: Murray Richelson, Plaintiff, v. Liberty Insurance Corporation, Defendant.
• Court: U.S. District Court — Northern District of Ohio

Murray Richelson, Plaintiff, v. Liberty Insurance Corporation, Defendant.

CASE NO. 1:18 CV 1801

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

December 11, 2018

JUDGE PATRICIA A. GAUGHAN

Memorandum of Opinion and Order

Introduction

This matter is before the Court upon defendant's Motion to Dismiss (Doc. 8) This case involves the interpretation of a homeowner insurance policy. For the following reasons, the motion is GRANTED.

Facts

Plaintiff Murray Richelson filed this Class Action Complaint in the Lake County Court of Common Pleas against defendant Liberty Mutual Insurance Company (hereafter, defendant or Liberty).¹ A First Amended Class Action Complaint was thereafter filed.Defendant then removed the case to this Court on the basis of the Class Action Fairness Act.

The First Amended Complaint alleges the following. Plaintiff owns a residential home in Wickliffe, Ohio. On October 24, 2017, he suffered property damage to the roof, living room, office, and a bathroom during a windstorm. At the time of the loss, the home was insured by defendant. Under the policy², there was indemnity coverage for physical damage to the home caused by perils other than those specifically excluded. Plaintiff submitted a claim to defendant and requested payment for the damage. Defendant confirmed that the home had sustained damage due to a covered peril and that it had an obligation and duty to pay plaintiff for the actual cash value of the damaged portions of the home pursuant to the terms of the insurance policy. On November 11, 2017, an adjuster submitted a final estimate for repair of the damage. The adjuster's estimate found that plaintiff had suffered loss and damage to the home in the amount of $11,011.19. The adjuster calculated actual cash value (ACV) as repair or replacement cost of the damaged part of the property less depreciation. After subtracting a $1000 deductible, defendant made a net ACV payment of $4,356.75³ to plaintiff. The policy contains a ROOF ACTUAL CASH VALUE endorsement (Roof ACV endorsement) that limits coverage for roof damage so that the insured only receives the depreciated value of the damaged roof rather than the replacement cost. Defendant estimated the cost of roof repairs as $8,960.00, but applied depreciation of $4,609.42. As a result, plaintiff claims he was only paid $4,350.58 for the roof damage. The entire amount of the depreciation was treated as unrecoverable. This meant that even when the work is completed for the full estimated cost,plaintiff is personally suffering the cost of those repairs.

Plaintiff also alleges he received less than half the cost of the roof repairs because of the Roof ACV endorsement that defendant falsely characterized as "ADDITIONAL COVERAGE" in the Policy Declarations page, when in fact it substantially diminished coverage. The endorsement reduces coverage by excluding parts of the roof such as the surfacing, vents, and flashing materials, from full replacement cost. Nothing about the endorsement added coverage, but took it away.

The First Amended Complaint alleges that plaintiff seeks to represent two classes: the Additional Coverage Class (generally, people having a Roof Actual Cash Value endorsement on their Liberty homeowner policy, covering a structure located in Ohio, who suffered a loss for which they were paid ACV instead of replacement value for the period commencing 8 years prior to the filing of this case to the date of trial) and the ACV Deductible Class (generally, people who suffered a loss under their Buildings Coverage A or B for which they were paid ACV and from which a deductible was subtracted for the same period described in the other class).

The First Amended Complaint sets forth three claims. Count One alleges breach of contract by defendant's promise of "additional coverage," but actually delivering reduced coverage. Count Two alleges fraud based on defendant's misrepresentation that it was delivering "additional coverage" while actually intending to deliver a policy with less coverage. Count Three alleges breach of contract by defendant's subtraction of the deductible from ACV payment made.

This matter is now before the Court upon defendant's Motion to Dismiss.

Standard of Review

"Dismissal is appropriate when a plaintiff fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). We assume the factual allegations in the complaint are true and construe the complaint in the light most favorable to the plaintiff." Comtide Holdings, LLC v. Booth Creek Management Corp., 2009 WL 1884445 (6^th Cir. July 2, 2009) (citing Bassett v. Nat'l Collegiate Athletic Ass'n, 528 F.3d 426, 430 (6th Cir.2008) ). In construing the complaint in the light most favorable to the non-moving party, "the court does not accept the bare assertion of legal conclusions as enough, nor does it accept as true unwarranted factual inferences." Gritton v. Disponett, 2009 WL 1505256 (6^th Cir. May 27, 2009) (citing In re Sofamor Danek Group, Inc., 123 F.3d 394, 400 (6th Cir.1997). As outlined by the Sixth Circuit:

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." "Specific facts are not necessary; the statement need only give the defendant fair notice of what the ... claim is and the grounds upon which it rests."Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). However, "[f]actual allegations must be enough to raise a right to relief above the speculative level" and to "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 555, 570. A plaintiff must "plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir.2012). Thus, Twombly and Iqbal require that the complaint contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face based on factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Twombly, 550 U.S. at 570; Iqbal, 556 U.S. at 678. The complaint must contain "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."

Twombly, 550 U.S. at 555.

Discussion

Defendant moves to dismiss the First Amended Complaint on the basis that the fraud count fails to state a claim because the alleged fraudulent omission was disclosed in the policy, and the breach of contract counts fail because, under Ohio law ⁴, the Roof ACV endorsement is part of the policy and the endorsement required defendant to adjust plaintiff's loss in the manner that it did.

(1) Fraud (Count Two) and Breach of Contract (Count One)

Defendant moves to dismiss the fraud (Count Two) and breach of contract (Count One) claims which are both based on the "additional coverage" language. The parties address the claims together. Plaintiff argues that defendant committed fraud by portraying the Roof ACV endorsement as "additional coverage" in the Policy Declarations even though it actually diminished the coverage. Plaintiff maintains that the Roof ACV endorsement, which removes the roof from replacement cost coverage when the loss is caused by wind or hail⁵, is inconsistent with the representation that he was being provided "additional coverage." Likewise, defendant breached the contract by failing to pay replacement cost for the roof when it had promised "additional coverage" by the endorsement.

Defendant maintains that plaintiff cannot state a claim for fraud because the alleged misrepresentation is belied by the plain language on the face of the policy documents attachedto the pleading. Nor did it breach the contract because it provided exactly what is spelled out in the policy in exchange for a premium credit. In fact, the First Amended Complaint alleges that defendant settled the loss pursuant to the terms of the Roof ACV endorsement.

To establish fraud under Ohio law, a plaintiff must show: "(a) a representation or, where there is a duty to disclose, concealment of a fact, (b) which is material to the transaction at hand, (c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred, (d) with the intent of misleading another into relying upon it, (e) justifiable reliance upon the representation or concealment, and (f) a resulting injury proximately caused by the reliance." Bd. of Trustees of IBEW Fund Local No. 82 Pension Fund v. Bright Street, LLC, 2018 WL 4560828 (S.D. Ohio Sept. 21, 2018(citing Burr v. Bd. of Cty. Commrs. of Stark Cty., 23 Ohio St.3d (1986)). To establish a breach of contract under Ohio law, a plaintiff must show that "a contract existed, the plaintiff performed, the defendant breached, and the plaintiff suffered damages." Pavlovich v. Nat'l City Bank, 435 F.3d 560 (6th Cir. 2006).

Defendant argues that plaintiff's fraud claim is based on his admission that he did not read the policy because the Policy Declarations listed the endorsement as "Additional Coverage." Indeed, the First Amended Complaint alleges in pertinent part:

19. Because of Liberty's promises to Richelson in his Policy Declarations that this Roof ACV Endorsement was an "Additional Coverage" Richelson was misled into not inquiring further and rejecting the diminished coverage endorsement.

20. Because Liberty misrepresented the Roof ACV Loss Settlement endorsement as an "Additional Coverage" Richelson relied on these false and/or willfully misleading representations, did not inquire further, and was unaware that the endorsement actually reduced coverage, to wit: excluded parts of the roof such as surfacing, vents, and flashing materials, from full replacement cost.

23. Richelson

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