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LLC v. Certain Underwriter's At Lloyd's London Subscribing To Policy No. Hah15-0632

United States District Court, D. Nevada

April 23, 2019

MY LEFT FOOT CHILDREN'S THERAPY, LLC; JOHN GOTTLIEB AND ANN MARIE GOTTLIEB, Plaintiffs,
v.
CERTAIN UNDERWRITER'S AT LLOYD'S LONDON SUBSCRIBING TO POLICY NO. HAH15-0632, Defendant.

          ORDER

          MIRANDA M. DU, UNITED STATES DISTRICT JUDGE

         I. SUMMARY

         This is an insurance dispute related to coverage for Plaintiffs' defense in a qui tam action. Before the Court is Defendant Certain Underwriters at Lloyd's London Subscribing to Policy No. HAH15-0632's (“Underwriters” or “Defendant”) motion to dismiss (“Motion”) (ECF No. 105). The Court has reviewed Plaintiffs My Left Foot Children's Therapy, LLC (“MLF”); Jon Gottlieb; and Ann Marie Gottlieb's (collectively, “Plaintiffs”) response (ECF No. 106) as well as Defendant's reply (ECF No. 107).[1]

         For the following reasons, the Court denies Defendant's Motion except as to the portion of Plaintiffs' bad faith claim based on Defendant's conduct prior to June 1, 2018, which is dismissed.[2]

         II. BACKGROUND

         The following facts are taken from the First Amended Complaint (“FAC”) (ECF No. 100) unless otherwise indicated.

         Plaintiffs Jon Gottlieb and Ann Marie Gottlieb own MLF, a business that provides speech, physical, and occupational therapy services to children in the Las Vegas Valley. (Id. at 2.) Plaintiffs purchased an insurance policy (“Policy”) from Defendant for the period April 15, 2015, through April 15, 2016. (Id.) The Policy limits Defendant's liability to $2 million per claim and $4 million in the aggregate and carries a $2, 500 deductible. (Id.) An endorsement (“Billing Errors Endorsement”) to the Policy indemnifies Plaintiffs up to $25, 000 for losses related to qui tam suits alleging that Plaintiffs submitted false claims to government health benefit payers. (Id.) The Policy requires Defendant to defend Plaintiffs in connection with any qui tam suit, with defense limits of up to $2 million per claim and $4 million in the aggregate. (Id.)

         During the Policy period, Plaintiffs were named as defendants in a qui tam suit, Welch v. My Left Foot Children's Therapy, LLC, No. 2:14-cv-01786-MMD-GWF (“Qui Tam Action”). (Id.) Plaintiffs timely notified Defendant about the Qui Tam Action, but Defendant extended only $25, 000 of coverage. (Id.) Plaintiffs filed this action (ECF No. 1), and this Court eventually granted summary judgment in favor of Defendant, finding that the Billing Errors Endorsement limited Defendant's liability to $25, 000 in connection with its duty to defend Plaintiffs in the Qui Tam Action. (ECF No. 52 at 8.) Plaintiffs appealed, and the Ninth Circuit reversed, finding that the Policy provided up to $2 million per claim to defend the Qui Tam Action. (ECF No. 71 at 3-4.)

         Plaintiffs then filed the FAC asserting the following claims: (1) breach of contract; (2) violation of Unfair Claims Settlement Practices Act, NRS Ch. 686A; and (3) breach of the implied covenant of good faith and fair dealing. (ECF No. 100 at 6-10.) Plaintiffs seek to recover attorney's fees related to the Qui Tam Action; attorney's fees related to this action; lost profits; damages related to mental suffering and emotional distress; and punitive damages. (Id. at 10-11.)

         III. LEGAL STANDARD

         A court may dismiss a plaintiffs complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (internal citation omitted).

         In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, a district court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. Iqbal, 556 U.S. at 679. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. Id. at 678. Second, a district court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiffs complaint alleges facts that allow a court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 678. Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but not shown-that the pleader is entitled to relief. Id. at 679. When the claims in a complaint have not crossed the line from conceivable to plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570.

         A complaint must contain either direct or inferential allegations concerning “all the material elements necessary to sustain recovery under some viable legal theory.” Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1989)).

         IV. DISCUSSION

         Defendant moves to dismiss each of Plaintiffs' claims as well as certain of the remedies Plaintiffs seek. (See generally ECF No. 105.) The Court addresses Plaintiffs' claims before turning to the remedies.

         A. Breach of ...


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