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Rathnayake v. Farmers Insurance Exchange

United States District Court, D. Nevada

August 11, 2014

Gowry Rathnayake, Plaintiff,
Farmers Insurance Exchange, Defendant.

Order Granting Defendant's Motion for Judgment on the Pleadings [Doc. 24]

JENNIFER A. DORSEY, District Judge.

Plaintiff Gowry Rathnayake is a Farmers-insured motorist who claims her insurer violated NRS 690B.031 by failing to give her a policy-premium discount for her car's supplemental safety features. Doc. 1 at 22. Based entirely on this alleged statutory violation, she sues individually and as representative of a putative class and asserts claims for (1) negligence per se for violations of NRS 690B.031, (2) breach of contract, (3) tortious breach of contract, (4) violation of Nevada's Deceptive Trade Practices Act, NRS 598.0293(3), (5) reformation, (6) unjust enrichment, and (7) declaratory relief. Id. at 25-30.

Farmers moves for judgment on the pleadings on all claims, arguing that since each of plaintiff's claims hinges on the ability to enforce a statute enforceable exclusively by Nevada's Insurance Commissioner, her remedies are purely administrative, and she lacks the right to bring a lawsuit for this alleged violation. Plaintiff argues that her claims are being mischaracterized: they sound in bad faith, and the Nevada Supreme Court recognized in Allstate Insurance Co. v. Thorpe , [1] that Nevada's statutory insurance scheme "does not foreclose actions for tortious and contractual bad faith against first party insurers."

If it were plaintiff's intent-as now contended-to plead bad faith claims, she failed to include any in her complaint; all of her existing claims, regardless of their labels, seek private enforcement of NRS 690B.031-a responsibility vested exclusively in the Nevada Division of Insurance (NDOI). As alleged, plaintiff's claims fail to state a cognizable claim for relief and must be dismissed. To the extent she can plead a viable bad faith claim arising from her insurer's conduct, she may seek leave to amend her complaint.


A. Motion for Judgment on the Pleadings

Federal Rule of Civil Procedure 12(c) provides that "[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings."[2] Motions for judgment on the pleadings are treated in the same manner as motions to dismiss for failure to state a claim under which relief can be granted under Rule 12(b)(6).[3] In both instances, the complaint's well-pled allegations are taken as true, and are subject to dismissal when they do not create a plausible claim of relief.[4]

B. Plaintiff's Complaint States No Viable Claim.

All of plaintiff's claims are founded on a single factual theory: NRS 690B.031[5] requires insurers in this state to provide a discount to policy holders who drive vehicles containing safety features in addition to certain airbags and seat belts. Doc. 1 at 22. Farmers allegedly violated NRS 690B.031 by failing to give plaintiff and all similarly situated policy holders that required discount.

Defendant argues that plaintiff is seeking to assert a private right of action for Farmers' alleged violation of NRS 690B.031, and under the dispositive precedent of Thorpe, no such right exists; plaintiff's remedy for this alleged violation is an administrative one that must be sought from the NDOI. Doc. 24. Plaintiff does not dispute that the NDOI is vested with the exclusive original jurisdiction over claims for violation of NRS 690B.031. Instead she argues that Farmers is mischaracterizing her claims; they are "grounded in bad faith, " and Thorpe recognizes that Nevada's insurance scheme does not preclude claims for tortious bad faith. Doc. 30 at 13. Thus, plaintiff does not deny that no private right of action exists for the enforcement of NRS 690B.031; she contends she is "asserting a claim against her insurer for breach of its fiduciary-like duties to treat her, as its insured, in good faith by failing to include the required discounts in her policy, " claims "rooted in traditional contract and bad faith insurance laws" and that "are not subject to the exclusive jurisdiction" of the NDOI. Doc. 30 at 3-4.

The crux of this dispute is whether plaintiff's claims fall outside the NDOI's exclusive jurisdiction because they do not seek to enforce NRS 690B.031's discount provision and are, as plaintiff contends, really just bad faith claims. In Thorpe, the Nevada Supreme Court noted in general that "the Nevada Insurance Commissioner has express authority to enforce the provisions of the Nevada Insurance Code, " in any matter in which "a party seeks to ensure compliance" with the same.[6] If a dispute falls within the Commissioner's jurisdiction, parties are required to bring their disputes to the Commissioner in the first instance, and the courts retain a limited right of judicial review of the Commissioner's ultimate decision under Nevada's Administrative Procedures Act.[7] If a party fails to first exhaust review before the Commissioner, the dispute is not ripe for judicial review.[8] But the Thorpe court carved out a limited category of claims not subject to this administrative exhaustion requirement: "actions for tortious and contractual bad faith against first-party insurers."[9] It is this language on which plaintiff now hangs her hat, [10] and she argues that her case is "essentially" a bad faith claim, because she and all similarly situated policy holders stand in a first-party relationship with Farmers, who owes them a fiduciary-like duty.

1. Plaintiff has not alleged a bad faith claim.

The central problem with plaintiff's argument, as tacitly conceded at oral argument, is that plaintiff has not pled a bad faith claim. Nevada first recognized a cause of action for an insurer's tortious breach of the implied covenant of good faith and fair dealing in United States Fidelity & Guaranty Co. v. Peterson. [11] Common law, "not the insurance contract, imposes this covenant on insurers, " and "[a] violation of the covenant gives rise to a bad-faith tort claim."[12]

Nothing in plaintiff's complaint suggests that any stated claim is founded upon a bad faith theory. She has not alleged any fiduciary-like or special relationship, no implied covenant of good faith and fair dealing in her contract, and no breach of that covenant.[13] See generally Doc. 1-1. Indeed, the phrase "bad faith" is nowhere to be found. If it was her intention to plead a bad faith case-as she now contends-she utterly failed to do so. All of the claims as they are currently phrased seek to enforce NRS 690B.031, which no party ...

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