Veyhl v. State Farm Fire & Cas. Co.

• Decision Date: 22 December 2021
• Docket Number: Civil 21-cv-10112 (KSH) (CLW)
• Court: U.S. District Court — District of New Jersey
• Parties: ERICH VEYHL, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

ERICH VEYHL, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

Civil No. 21-cv-10112 (KSH) (CLW)

United States District Court, D. New Jersey

December 22, 2021

NOT FOR PUBLICATION

OPINION

Katharine S. Hayden, U.S.D.J.

I. Introduction

In this insurance coverage dispute, plaintiff Erich Veyhl alleges that defendant State Farm Fire and Casualty Company failed to timely provide full coverage for his property damage claim in violation of his homeowners insurance policy. State Farm has moved under Rule 12(b)(6) for partial dismissal of the complaint, arguing that plaintiff's bad faith, breach of fiduciary duty, and consumer fraud claims, along with his demands for punitive damages and attorneys' fees, should be dismissed. The motion is fully briefed, and the Court decides it without oral argument.

II. Background

According to the allegations in the complaint, plaintiff is a Massachusetts resident who owns real property in Paramus, New Jersey (the “premises”) and rents it to tenants. (D.E. 1-4, Compl. ¶¶ 1-2.) State Farm issued him a homeowners insurance policy for the premises that “provides coverage for the replacement cost of the dwelling, and dwelling extension, personal property, contents of the dwelling, fair rental value of all loss of rents and other coverages” specified in the policy. (Id. ¶¶ 7-8.)

On or about February 1, 2019, the premises became vacant and available for rent. (Id. ¶ 9.) Approximately two weeks later, plaintiff's real estate agent was showing the premises to a prospective tenant and discovered severe water damage. (Id. ¶¶ 10-11.) Plaintiff immediately placed a claim with State Farm and provided notice of the loss, and State Farm sent its adjuster to “respond to the loss, remediate the damage, and restore the [p]remises.” (Id. ¶¶ 14, 18.)

State Farm represented that it would provide full coverage for the loss, and has paid plaintiff a total of $345, 969.69 to reconstruct the premises. (Id. ¶¶ 16, 19.) However, it has not provided coverage/full reimbursement for certain “covered items” totaling $91, 167.84. (Id. ¶¶ 17, 20.) Plaintiff alleges that he relied on State Farm's representation that it would “properly and timely pay” to restore the premises, and that its bad faith conduct has denied him the ability to properly and timely reconstruct the premises and make it habitable. (Id. ¶¶ 21-24.)

Plaintiff filed a complaint in Bergen County on March 25, 2021 seeking declaratory judgment (Count I) and alleging causes of action for breach of contract (Count II), breach of the implied covenant of good faith and fair dealing/bad faith (Count III), breach of fiduciary duty (Count IV), and violation of the New Jersey Consumer Fraud Act (the “CFA”) (Count V). (See id. ¶¶ 27-54.) State Farm removed the case to this Court on April 23, 2021, relying on diversity jurisdiction. (See D.E. 1.)

State Farm has now moved under Rule 12(b)(6) (D.E. 4) to dismiss Counts III, IV, and V of the complaint and plaintiff's demands for punitive damages and attorneys' fees, arguing that: (i) plaintiff's implied covenant/bad faith and fiduciary duty claims are both duplicative of his breach of contract claim and factually deficient; and (ii) the CFA is inapplicable to plaintiff's claims and, even if it were to apply, his allegations fail to satisfy Rule 9(b)'s heightened pleading requirements. (D.E. 4-2, Mov. Br.; D.E. 12, Reply Br.) Plaintiff opposes, arguing that he has alleged viable implied covenant/bad faith, fiduciary duty, and CFA claims, and that he is entitled to a jury determination on the availability of punitive damages and attorneys' fees. (D.E. 6, Opp. Br.)

III. Discussion

A. Standard of Review

In deciding a motion to dismiss under Rule 12(b)(6), the Court must accept as true all allegations in the complaint, as well as all reasonable inferences that can be drawn therefrom. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The factual allegations in the complaint must be viewed in the light most favorable to the plaintiff. See Phillips v. County of Alleghany, 515 F.3d 224, 231 (3d Cir. 2008). To survive a motion to dismiss, a plaintiff must “plead more than the possibility of relief.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). The Court will “disregard legal conclusions and ‘recitals of the elements of a cause of action, supported by mere conclusory statements.'” Santiago v. Warminster Twp., 629 F.3d 121, 128 (3d Cir. 2010) (quoting Iqbal, 556 U.S. at 678).

B. Breach of the Implied Covenant of Good Faith and Fair Dealing/Bad Faith

The Court turns first to plaintiff's claim for breach of the implied covenant of good faith and fair dealing/bad faith. As a general matter, “[e]very contract is deemed to contain” an implied covenant of good faith and fair dealing. Durr Mech. Constr., Inc. v. PSEG Fossil, LLC, 516 F.Supp.3d 407, 417 (D.N.J. 2021). To adequately plead a breach of the covenant under New Jersey law, a plaintiff must allege that: “(1) the defendant act[ed] in bad faith or with a malicious motive, (2) to deny the plaintiff some benefit of the bargain originally intended by the parties, even if that benefit was not an express provision of the contract.” Red Hawk Fire & Sec., LLC v. Siemens Indus. Inc., 449 F.Supp.3d 449, 463 (D.N.J. 2020) (internal citations and quotations omitted). A plaintiff may be entitled to relief “if its reasonable expectations are destroyed when a defendant acts with ill motives and without any legitimate purpose” or “if it relies to its detriment on a defendant's intentional misleading assertions.” Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 226 (2005).

Where, as here, an insurance contract is at issue, a claim for breach of the implied covenant of good faith and fair dealing is “tantamount” to a claim for “bad faith.” See Laing v. Am. Strategic Ins. Corp., 2014 WL 4953250, at *2 (D.N.J. Oct. 1, 2014) (Shipp, J.); see also Pickett v. Lloyd's, 131 N.J. 457, 469 (1993) (recognizing that “[m]ost jurisdictions have characterized a cause of action for bad-faith failure to pay an insured's claim as a tort that arises out of the implied duty of an insurance company to deal fairly and act in good faith in processing the claims of its policyholder”). To establish “bad faith, ” the plaintiff must demonstrate “the absence of a reasonable basis for denying benefits of the policy.” Tarsio v. Provident Ins. Co., 108 F.Supp.2d 397, 400 (D.N.J. 2000) (quoting Pickett, 131 N.J. at 473). If the plaintiff “demonstrates the absence of a reasonable basis, he must then prove that the defendant knew or recklessly disregarded the lack of a reasonable basis for denying the claim.” Id. at 400-01. Allegations parroting the elements of a “bad faith” cause of action, without more, are subject to dismissal on a Rule 12(b)(6) motion. See, e.g., Raritan Bay Fed. Credit Union v. Cumis Ins. Soc., Inc., 2009 WL 2223049, at *3 (D.N.J. July 23, 2009) (Wolfson, J.) (“[T]he mere allegation that [insurer's] denial of coverage inferentially establishes bad faith relies on the very speculation that Twombly forbids.”); Yapak, LLC v. Massachusetts Bay Ins. Co., 2009 WL 3366464, at *2 (D.N.J. Oct. 16, 2009) (Thompson, J.) (dismissing breach of implied covenant/bad faith claim where bare allegation of “willful, wanton, and malicious” failure of insurer to make payments did not “support an inference that Plaintiff's claim for breach of the duty of good faith and fair dealing [was] a plausible one”).

Here, regardless of which standard the Court applies, plaintiff has not provided sufficient factual allegations to suggest that State Farm had an “ill motive” or lacked a “reasonable basis” to deny coverage. In support of his cause of action, plaintiff points to several “failures” and “refusals” on the part of State Farm-i.e., that it failed to provide him with periodic status reports, refused his request for an independent senior management review, and failed to pay the replacement costs for materials and labor-and further alleges that it “has generally acted in bad faith with this claim.” (Compl. ¶¶ 43-46.) But these facts only support an inference that State Farm failed to take actions in furtherance of its obligations under the policy-they do not suggest, as is required to survive a 12(b)(6) motion, that it had any “ill motive to frustrate” plaintiff's ability to reconstruct the premises or otherwise acted in bad faith. Durr Mech. Constr., Inc., 516 F.Supp.3d at 417. Plaintiff's “brief . . . does little to clarify the basis of [his] claim, ” G & S Beshay Trading Co., LLC v. 7-Eleven, Inc., 2018 WL 10602188, at *5 (D.N.J. Dec. 18, 2018) (Salas, J.), and the Court declines to “infer reckless indifference” from a mere denial of coverage, Raritan Bay, 2009 WL 2223049, at *3. Accordingly, the complaint falls short of pleading a viable implied covenant/bad faith claim.

Even if plaintiff had adequately pled an implied covenant/bad faith cause of action, his claim would be dismissed as duplicative of his breach of contract action. It is well settled that “[w]here a party has breached a specific term of a contract, that party cannot be found separately liable for breaching the implied covenant of good faith and fair dealing ‘when the two asserted breaches basically rest on the same conduct.'” Spellman v. Express Dynamics LLC, 150 F.Supp.3d 378, 389 (D.N.J. 2015) (quoting Wade v. Kessler Inst., 172 N.J. 327, 344 (2002)). In other words, a “plaintiff cannot maintain a breach of the implied covenant of good faith and fair dealing claim that is duplicative of its breach of contract claim.” Red Hawk, 449 F.Supp.3d at 463. Where breach of the implied covenant of good faith and fair dealing claims lack a distinct...