United States District Court, D. Nevada
TIMOTHY KORHONEN, individually; JOSEPH ODDO, JR., individually, Plaintiffs,
SENTINEL INSURANCE, LTD.; DOES I-X, and ROE CORPORATIONS I-X, inclusive, Defendants.
ROBERT C. JONES, District Judge.
This dispute arises from Defendant Sentinel's allegedly wrongful denial of Plaintiffs' insurance claims. Sentinel has moved to dismiss each of Plaintiffs' extra-contractual claims. (Partial Mot. Dismiss, ECF No. 10). For the reasons stated herein, the Court grants the partial motion to dismiss. Plaintiffs are, however, granted leave to amend, within fourteen (14) days of the entry of this Order into the electronic docket, to cure, if possible, the deficiencies described below.
I. FACTS AND PROCEDURAL HISTORY
As alleged in the first amended complaint (the "FAC"), Plaintiffs Korhonen and Oddo (collectively "Plaintiffs") were insured under an automobile insurance policy issued by Defendant Sentinel. (FAC, ECF No. 9, at ¶ 13). The policy included an underinsured motorist benefit. ( Id. ). On April 29, 2011, Plaintiffs were involved in an automobile accident, ( Id.¶ ¶ 7-8). Plaintiffs allege that they were injured as a result of the accident, and that the liability insurance carried by the other driver was insufficient to compensate them for their injuries. ( See id. ¶¶ 14-15). Following the accident, Plaintiffs allegedly demanded an uninsured/underinsured policy limit payment from Sentinel. ( Id. ). Sentinel refused, and Plaintiffs filed the instant action, alleging that Sentinel's "refusal to make adequate payment to Plaintiffs was an unlawful attempt to force Plaintiffs to accept less money than the amount due under the Policy." ( Id. ¶ 17). Specifically, Plaintiffs asserted claims for (1) breach of contract; (2) contractual breach of the implied covenant of good faith and fair dealing; (3) tortious breach of the implied covenant of good faith and fair dealing; (4) bad faith; and (5) unfair trade practices. ( Id. ¶¶ 23-51). On April 3, 2013, Sentinel removed the action to this Court, (ECF No. 1), and it now moves to dismiss each of Plaintiffs' extra-contractual claims (claims 2-5), (ECF No. 10).
II. LEGAL STANDARDS
When considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court must accept as true all factual allegations in the complaint as well as all reasonable inferences that may be drawn from such allegations. LSO, Ltd. v. Stroh, 205 F.3d 1146, 1150 n.2 (9th Cir. 2000). Such allegations must be construed in the light most favorable to the nonmoving party. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). In general, the court should look only to the contents of the complaint during its review of a Rule 12(b)(6) motion to dismiss. However, the court may consider documents attached to the complaint or referred to in the complaint whose authenticity no party questions. Id .; see Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987).
The analysis and purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997) (quotations omitted). To avoid a Rule 12(b)(6) dismissal, a complaint does not need detailed factual allegations; rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Clemens v. Daimler Chrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007)); Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (stating that a "claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged"). Even though a complaint does not need "detailed factual allegations" to pass Rule 12(b)(6) muster, the factual allegations "must be enough to raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555, 127 S.Ct. at 1965. "A pleading that offers labels and conclusions' or a formulaic recitation of the elements of a cause of action will not do." Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. "Nor does a complaint suffice if it tenders naked assertion[s]' devoid of further factual enhancements.'" Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. at 1966).
If the court grants a motion to dismiss a complaint, it must then decide whether to grant leave to amend. The court should "freely give" leave to amend when there is no "undue delay, bad faith or dilatory motive on the part of the movant... undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment." Fed.R.Civ.P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962). Generally, leave to amend is denied only when it is clear that the deficiencies of the complaint cannot be cured by amendment. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).
Plaintiffs have failed to plead facts sufficient to support any of their extra-contractual claims. The facts alleged in the FAC establish, at most, a dispute over contractual benefits. Therefore, the Court must dismiss claims 2-5.
a. Contractual Breach of the Covenant of Good Faith and Fair Dealing (Claim 2)
To state a claim for contractual breach of the implied covenant of good faith and fair dealing, Plaintiffs must allege (1) that Defendant literally complied with the express terms of the contract; and (2) that Defendant nonetheless violated the contract's "intention and spirit." Hilton Hotels Corp. v. Butch Lewis Prods., Inc., 808 P.2d 919, 922-23 & n. 6 (Nev. 1991). Here, Plaintiffs allege an outright breach of contract. ( See FAC, ECF No. 9, at ¶ 15). Because Plaintiffs affirmatively allege only that Sentinel failed to comply with terms of the contract, no claim for breach of the implied covenant of good faith and fair dealing lies. See Hilton Hotels, 808 P.2d at 922-23 (Nev. 1991); see also Kennedy v. Carriage Cemetery Servs., Inc., 727 F.Supp.2d 925, 931 (D. Nev. 2010) (holding that if the pleadings merely allege facts establishing a violation of the express terms of a contract, a claim for beach of the contractual covenant of good faith is duplicative of a breach of contract claim); Romm v. Hartford Ins. Co. of the Midwest, No. 2:12-CV-01412-RCJ-PAL, 2012 WL 4747137, at *4 (D. Nev. Oct. 2, 2012) (dismissing, with leave to amend, a claim for beach of the implied covenant of good faith and fair dealing because the insured alleged an outright breach and not that the insurer complied with the literal terms of the policy while deliberately depriving the insured of the benefits thereof). Although a party may plead alternative, inconsistent theories, Plaintiffs have plainly failed to allege, as an alternative theory, that Sentinel complied with the literal terms of the policy while deliberately depriving Plaintiffs of its benefits. Therefore, the Court must dismiss claim 2.
b. Tortious Breach of the Implied Covenant (Claim 3)
Plaintiffs contend that they have adequately pled a claim for tortious breach of the implied covenant of good faith. They have not. Under Nevada law, an action in tort for breach of the covenant of good faith and fair dealing arises where there is a special relationship between the parties to a contract, such as the relationship between an insurer and an insured. Ins. Co. of the West v. Gibson Tile Co., Inc., 134 P.3d 698, 702 (Nev. 2006). An insurer breaches the duty of good faith when it refuses "without proper cause to compensate its insured for a loss covered by the policy." U.S. Fid. & Guar. Co. v. Peterson, 540 P.2d 1070, 1071 (Nev. 1975). An insurer is without proper cause to deny a claim when it has an actual or implied' awareness that no reasonable basis exist [ sic ] to deny the claim." Pioneer Chlor Alkali Co., Inc. v. Nat'l Union Fire Ins. Co., 863 F.Supp. 1237, 1242 (D. Nev. 1994)(citing Am. Excess Ins. Co. ...