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Clifford v. Geico Casualty Co.

United States District Court, D. Nevada

December 20, 2019



          Kent J. Dawson United States District Judge

         Before the Court is Defendant Geico Casualty Company's Motion to Dismiss, or in the Alternative, to Strike and to Sever/Bifurcate and Stay Claims for Bad Faith (docketed at ECF Nos. 5, 6, and 7). Plaintiff, Michelle Clifford, filed one response to Geico's three motions (docketed at ECF Nos. 10, 12), and Geico replied (ECF No. 13).

         Michelle Clifford has sued her own insurer, Geico Casualty Company, for breach of contract, unfair claims practices, bad faith, and declaratory relief. Clifford's claims arise out of injuries she suffered in an accident with a third-party driver in August of 2015. Apparently, Clifford's medical bills and other damages exceeded the adverse driver's coverage, which prompted Clifford to make a claim against her own uninsured/underinsured motorist (UIM) coverage with Geico. Clifford claims she has UIM coverage under two separate Geico policies: her own policy and her mother's policy. Together, Clifford believes the policies stack for $115, 000 in total UIM coverage.

         Geico moves to dismiss Clifford's bad faith, unfair claims practices, and declaratory relief claims. It does not challenge her breach of contract claim. Geico argues that Clifford failed to allege sufficient facts to support her extracontractual claims and that Clifford's declaratory relief claim is redundant. Geico is correct. The key to insurer bad faith is the reasonableness of the insurer's denial or delay. Clifford's complaint lacks specific allegations of fact to support her assertion that Geico's delay or denial of her UIM benefits was unreasonable. She also fails to allege any facts that Geico was aware of or recklessly disregarded the fact that its coverage decisions were unreasonable. Thus, Clifford's bad faith and unfair claims practices claims are dismissed. Likewise, Clifford's declaratory relief claim fails because the declaration she seeks will necessarily be subsumed into her breach of contract claim. Accordingly, the Court grants Geico's motion to dismiss and need not reach its alternative motions.

         I. Background

         On August 4, 2015, Michelle Clifford was injured in a car accident. Compl. at 2. Clifford reported the accident to Geico, her insurer, that same day and then began medical treatment. Id. Clifford was not at fault in the accident. Id. According to Clifford, her medical bills and other damages exceed $50, 000. Id. At some point, Clifford settled with the adverse driver for the limits of his policy, $15, 000. That settlement did not cover all of Clifford's damages. So, Clifford submitted claims against two Geico policies that she believes provide her UIM coverage. Clifford first claimed coverage under her individual Geico policy. That policy carries $15, 000 in UIM coverage. Id. at 2-3. Nine months later, Clifford claimed coverage under her mother, Holly Clifford's policy, which carried $100, 000 in UIM coverage. Id. at 3.

         Clifford's two claims sparked a flurry of communications between she and Geico over the next two years. In May of 2017, Geico responded to Clifford's claims and offered her $9, 650 above the third-party limits. Id. at 3-4. Clifford rejected the offer as she claimed over $50, 000 in medical bills and damages. Id. Three months later, Geico increased its offer to $21, 000 above the third-party limits. Id. at 4. Again, Clifford declined, citing the balance of her outstanding medical bills. In January of 2018, Geico increased its valuation to $24, 000 above third-party limits. Id. Clifford simultaneously declined that offer and asked Geico to disclose what bills and property damage the insurer was relying upon to evaluate her claim. Id. In response, Geico increased its offer to $60, 000 over third-party limits but did not disclose what evidence it based its valuation on. Id. at 5. The parties continued to communicate through October of 2018, and Geico's apparent final offer was $62, 000 over third-party limits. Id. at 6. According to Clifford, Geico still has not disclosed what evidence it considered in valuing her claim.

         At some point during the parties' back-and-forth, Geico authorized its “special investigations unit” to investigate Clifford's claims. Id. at 7. According to Clifford, the special investigations unit investigates fraud in the claims process. That investigation examined Clifford's pending claim, her medical history, her social media accounts, her finances, and her background. Id.

         Despite the parties' sustained communication and Geico's investigation, they did not reach an agreement on the valuation of Clifford's claim. That prompted Clifford to file her first complaint on March 28, 2019, in the Eighth Judicial District Court in Las Vegas. Pet. for Removal, ECF No. 1-B. Clifford amended her complaint three weeks later. ECF No. 1-A. Geico then removed the action to this Court and moves to dismiss.

         II. Legal Standard

         The Court may dismiss a plaintiff's complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A properly pleaded 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 Atlantic 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) (citations omitted). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter to ‘state a claim for relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (citation omitted).

         In Iqbal, the Supreme Court clarified a two-step approach district courts are to apply when considering motions to dismiss. First, the Court accepts as true all well-pleaded factual allegations in the complaint. Legal conclusions or mere recitals of the elements of a cause of action, on the other hand, do not receive the assumption of truth. Id. at 678. Second, the Court considers whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when the complaint alleges facts that allow the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 678. Further, where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has “alleged-but it has not show[n]-that the pleader is entitled to relief.” Id. at 679 (internal quotation marks omitted). Thus, 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.

         Moreover, “[a]ll allegations of material fact in the complaint are taken as true and construed in the light most favorable to the non-moving party.” In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996) (citation omitted).

         III. Analysis

         Geico now moves to dismiss each of Clifford's extracontractual claims. It also asks the Court to decide as a matter of law that the Cliffords' two Geico policies cannot be stacked. Before the Court reaches the merits of Geico's motion to dismiss, it must first determine whether to evaluate Geico's motion as a motion to dismiss or as a motion for summary judgment. Clifford urges the Court to treat the motion as a motion for summary judgment because Geico produced Clifford's insurance policy in its motion to dismiss. That extrinsic evidence, Clifford argues, necessarily converts the motion into a motion for summary judgment. As a result, Clifford asks the Court for time to discover and produce evidence to show a genuine issue of material fact.

         At the motion to dismiss stage, the Court only considers the well-pleaded allegations in the plaintiff's complaint. Twombly, 550 U.S. at 555. Typically, when a party submits evidence outside the pleadings in a motion to dismiss, the Court converts the motion to a motion for summary judgment and imposes Rule 56's standard. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). There are exceptions to that rule, however. Relevant here is the doctrine of incorporation by reference. Incorporation allows the Court to “treat certain documents as though they are part of the complaint itself.” Id. at 1002. By incorporating the extrinsic document into the complaint, the Court avoids converting the motion into a motion for summary judgment. In a contract dispute like this one, incorporation prevents a plaintiff from including in their complaint only the contractual provisions that strengthen their allegations, while omitting other provisions ‚Äúthat ...

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