Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Spring Street Apts Waco, LLC v. Philadelphia Indemnity Insurance Company

United States District Court, W.D. Texas, Waco Division

April 6, 2017

SPRING STREET APTS WACO, LLC, Plaintiff,
v.
PHILADELPHIA INDEMNITY INSURANCE COMPANY and CRAWFORD & COMPANY, Defendants.

          ORDER

          JEFFREY C. MANSKE UNITED STATES MAGISTRATE JUDGE

         Before the Court is Crawford's Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 37. The parties have consented to the jurisdiction of the undersigned in accordance with the provisions of 28 U.S.C. § 626(c), Federal Rule of Civil Procedure 73, and the Local Rules of the United States District Court for the Western District of Texas. See ECF Nos. 15, 16 and 18.

         I. BACKGROUND

         This suit involves an insurance claim for damages to Plaintiff's property. Philadelphia Indemnity Insurance Company (“Philadelphia”) issued a Builder's Risk insurance policy to Spring Street Apartments Waco, LLC (“Plaintiff”) for Plaintiff's apartment complex known as The Hype Apartments (the “Property”), which includes coverage from May 7, 2013, to May 7, 2014 (the “Policy”). See Pl.'s Am. Compl. ¶¶ 7-8, ECF No. 29. On April 15, 2014, Plaintiff submitted a claim to Philadelphia for roof and water damage sustained on at least 25 buildings on the Property. Id. ¶¶ 10, 13. Plaintiff claims the damage resulted from severe weather, including damage sustained from winds and strong gusts, which occurred on March 28, 2014, and from a hailstorm that occurred on April 14, 2014. Id. ¶¶ 9-10.

         In response to Plaintiffs claim, Philadelphia engaged Crawford & Company (“Crawford”), a national claim adjusting firm, to investigate and adjust Plaintiffs reported loss. Id. ¶ 11. Based on the adjuster's inspection of the Property, Crawford retained engineers to further inspect the Property. See Id. ¶ 12. The engineers put forth their findings from the inspection in a report referred to as the “Donan Report.” Id. Plaintiff asserts that the Donan Report contained numerous deficiencies. Id. ¶¶ 13-17.[1]

         The parties attempted mediation in May 2015, but were unable to resolve their dispute. Counterclaim ¶¶ 119-20. Plaintiff filed suit in state court on June 30, 2016, and Philadelphia removed to this Court for diversity of citizenship pursuant to 28 U.S.C. § 1332(a). ECF No. 1. On January 5, 2017, Crawford filed a Motion to Dismiss Plaintiffs claims against it pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 37. Plaintiff responded. Crawford replied. For the reasons stated below, the Court construes Crawford's Motion as a Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c), grants Crawford's Motion, and dismisses all Plaintiffs claims as to Crawford.

         II. TIMELINESS OF CRAWFORD'S MOTION

         As an initial matter, Plaintiff asserts in its Response that Crawford's Motion to Dismiss should be denied as untimely. Pl.'s Resp. at 5. Crawford replies that its Motion to Dismiss is not untimely pursuant to Federal Rule of Civil Procedure 12(h)(2), which provides that a motion for “[f]ailure to state a claim upon which relief can be granted” may be raised by a motion under Rule 12(c). Def.'s Reply at 1-2 (citing Fed. R. Civ. P. 12(h)(2)). The undersigned agrees with Crawford.

         The Fifth Circuit addressed this precise issue in Jones v. Greninger:

Initially, we must address the validity of the procedure that the district court followed upon receiving the appellees' 12(b) motion. The district court treated the appellees' motion to dismiss for failure to state a claim, filed after the answer, as a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c). Because a rule 12(b) motion must be filed before responsive pleadings, the appellees' motion was untimely. Rule 12(c) motions, however, may be filed after the pleadings are closed. Such motions will be treated as a motion for judgment on the pleadings based on a failure to state a claim on which relief may be granted. Thus, the district court did not err when it construed the defendants' motion as one for judgment on the pleadings. See National Ass'n of Pharmaceutical Mfrs. v. Ayerst Laboratories, 850 F.2d 904, 909 n. 4 (2d Cir. 1988).

Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999).

         Here, Crawford filed its Motion to Dismiss after filing its answer. See ECF No. 37. Because 12(b) motions must be filed before responsive pleadings, Crawford's 12(b)(6) motion is untimely. See Jones, 188 F.3d at 324. However, because 12(c) motions may be filed after the pleadings are closed, untimely 12(b)(6) motions may be treated as motions for judgment on the pleadings. Id. Therefore, the undersigned construes Crawford's Motion as a Motion for Judgment pursuant to Federal Rule of Civil Procedure 12(c).

         III. LEGAL STANDARD

         A. Federal Rule of Civil Procedure 12(c)

         A claim may be dismissed for failure to state a claim upon which relief can be granted upon the filing of a motion for judgment on the pleadings. Fed.R.Civ.P. 12(c). “A motion for judgment on the pleadings under Rule 12(c) is subject to the same standard as a motion to dismiss under Rule 12(b)(6).” Ackerson v. Bean Dredging LLC, 589 F.3d 196, 209 (5th Cir. 2009). The “inquiry focuses on the allegations in the pleadings and not whether the plaintiff actually has sufficient evidence to succeed on the merits.” Id.

         All well-pleaded facts are viewed in the light most favorable to the plaintiff, but the plaintiff must allege facts that support the elements of the cause of action in order to make a valid claim. Hale v. King, 642 F.3d 492, 498 (5th Cir. 2011) (quoting City of Clinton v. Pilgrim's Pride Corp., 632 F.3d 148, 152-53 (5th Cir. 2010)). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it contains factual content that “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).

         As an initial matter, there is no dispute that the “wrongful conduct of an insurance adjuster can give rise to personal liability even if [it] is in a subordinate relationship with the insurance carrier.” Okenkpu v. Allstate Texas Lloyd's, No. CIV.A. H-11-2376, 2012 WL 1038678, at *7 (S.D. Tex. Mar. 27, 2012) (citing Gasch v. Hartford Accident and Indemnity Co., 491 F.3d 278, 282-83 (5th Cir. 2007) (holding that Texas law “clearly authorizes Article 21.21 [541.060] actions against insurance adjusters in their individual capacities.”). Rather, the issue before the Court is whether Plaintiff's Amended Complaint sufficiently pleads a reasonable factual basis for recovery against Crawford. In order to sufficiently plead a cause of action against an insurance adjuster, a plaintiff must allege “specific actionable conduct by the adjuster and distinguish claims against the adjuster from generic, conclusory, statute-tracking claims against the insurer.” Mt. Olive Missionary Baptist Church v. Underwriters at Lloyd's, London, No. CV H-16-234, 2016 WL 4494439, at *3 (S.D. Tex. Aug. 26, 2016) (citing Okenkpu, 2012 WL 1038678, at *7 (collecting cases)).

         B. Federal Rule of Civil Procedure 9(b)

         The Federal Rules of Civil Procedure dictate that “in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed.R.Civ.P. 9(b). Rule 9(b) “prevents nuisance suits and the filing of baseless claims as a pretext to gain access to a ‘fishing expedition.'” United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 191 (5th Cir. 2009). The goals of Rule 9(b) are to “provide[ ] defendants with fair notice of the plaintiffs' claims, protect[ ] defendants from harm to their reputation and goodwill, reduce[ ] the number of strike suits, and prevent[ ] plaintiffs from filing baseless claims then attempting to discover unknown wrongs.” Grubbs, 565 F.3d at 190 (citing Melder v. Morris, 27 F.3d 1097, 1100 (5th Cir. 1994)).

         A plaintiff pleading fraud must “specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Herrmann Holdings Ltd. v. Lucent Techs. Inc., 302 F.3d 552, 564- 65 (5th Cir. 2002); see Williams v. WMX Tech. Inc., 112 F.3d 175, 177 (5th Cir. 1997); see also United States ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450, 453 (5th Cir. 2005) (quoting United States, ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997) (Rule 9(b)'s particularity requirement generally means, “at a minimum . . . that a plaintiff set forth the ‘who, what, when, where, and how' of the alleged fraud.”).

         Furthermore, “claims alleging violations of the Texas Insurance Code and the DTPA and those asserting fraud, fraudulent inducement, fraudulent concealment, and negligent misrepresentation are subject to the requirements of Rule 9(b).” Frith v. Guardian Life Ins. Co. of Am., 9 F.Supp.2d 734, 742 (S.D. Tex. 1998); see Berry v. Indianapolis Life Ins. Co., No. 3:08-CV-0248-B, 2010 WL 3422873, at *14 (N.D. Tex. Aug. 26, 2010) (“[W]hen the parties have not urged a separate focus on the negligent misrepresentation claims, the Fifth Circuit has found negligent misrepresentation claims subject to Rule 9(b) in the same manner as fraud claims.”) (internal quotations and citations omitted).

         Additionally, courts are to read Rule 9(b)'s heightened pleading requirement in conjunction with Rule 8(a)'s insistence on “simple, concise, and direct” allegations. Williams, 112 F.3d at 178. However, this requirement “does not ‘reflect a subscription to fact pleading.'” Grubbs, 565 F.3d at 186. Failure to comply with Rule 9(b)'s requirements authorizes the Court to dismiss the pleadings as it would for failure to state a claim under Rule 12(b)(6). United States ex rel. Williams v. McKesson Corp., No. 3:12-CV-0371-B, 2014 WL 3353247, at *3 (N.D. Tex. July 9, 2014) (citing Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996)).

         IV. DISCUSSION

         Crawford moves to dismiss Plaintiff's claims of: (1) negligence; (2) breach of contract; (3) breach of good faith and fair dealing; (4) Deceptive Trade Practices Act (“DTPA”) violations; (5) Texas Insurance Code (“TIC”) and unfair insurance practices; and (6) common law negligent misrepresentation and fraud. See Def.'s Mot. Dismiss at 4-6, 13. Plaintiff does not contest and voluntarily agrees to dismiss its claims of: (1) negligence; (2) breach of contract; and (3) breach of good faith and fair dealing against Crawford. Pl.'s Resp. at 6 n. 2. Therefore, the Court will focus on the remaining claims in Crawford's Motion.

         A. Deceptive Trade Practices Act

         Plaintiff alleges that Crawford violated numerous DTPA provisions; specifically, §§ 17.46(b)(5); 17.46(b)(7); 17.46(b)(12); 17.46(b)(14); 17.46(b)(20); 17.46(b)(24); 17.50(a)(3); and 17.50(a)(4) of the Texas Business and Commerce Code. Pl.'s Am. Compl. ¶ 44. Crawford argues that Plaintiff's DTPA claims: (1) fail to state a claim pursuant to Rule 12(b)(6); (2) fail to meet the specificity requirement of rule 9(b); and (3) fail to allege detrimental reliance. See generally Def.'s Mot. Dismiss.

         1. Federal Rule of Civil Procedure 12(b)(6)

         Crawford asserts that Plaintiff's allegations: (1) fail to allege specific actionable conduct by the adjuster; (2) fail to provide an explanation of how Crawford's alleged conduct violated the DTPA or damaged Plaintiff; and (3) are nothing more than a mere formulaic recitation of DTPA provisions. Def.'s Mot. Dismiss at 6. The undersigned agrees.

         a. specific actionable conduct

         In order to sufficiently plead a cause of action against an insurance adjuster, a plaintiff must allege “specific actionable conduct by the adjuster and to distinguish claims against the adjuster from generic, conclusory, statute-tracking claims against the insurer.” Mt. Olive, 2016 WL 4494439, at *3 (internal citations omitted). Here, Plaintiff's factual allegations are not pleaded with enough specificity to distinguish particular facts from legal conclusions. For example:

         Plaintiff alleges:

it is entitled to recover under DTPA Sections 17.46(b)(12) and (20), as well as 17.50(a)(2) because Defendants breached an express warranty that damage caused by a severe wind event would be covered under the subject insurance policies.

         However, this allegation merely states a conclusion that the Policy expressly covered wind damage.

         To be actionable, Defendant's failure to disclose must have been “intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.” See DTPA § 17.46(b)(24) (Vernon Supp. 2001), cited in Texas v. Am. Blastfax, Inc., 164 F.Supp.2d 892, 901 (W.D. Tex. 2001). Plaintiff alleges:

Defendants' collective actions constitute violations of the Deceptive Trade Practices Act (“DTPA”), including but not limited to Sections 17.46(b)(12), 17.46(b)(14), 17.46(b)(20), 17.46(b)(24), and Section and 17.50(a)(4) of the Texas Business and Commerce Code.

Pl.'s Am. Compl. ¶ 44. Noticeably absent from Plaintiff's Amended Complaint is any specific discussion of the information Crawford failed to disclose. Not only did Plaintiff fail to specifically describe the information, Plaintiff failed to allege what it would have done had Defendant disclosed that information.

         Concerning Section 17.50(a)(3), Plaintiff alleges:

Defendants' actions, as described herein, were unconscionable in that they took advantage of Plaintiff's lack of knowledge, ability, and experience to a grossly unfair degree.

Pl.'s Am. Compl. ¶ 50. However, Plaintiff's allegations merely state a conclusion without identifying any specific acts by Crawford that took advantage of Plaintiff's knowledge, ability, or experience to an unfair degree.

         In addition, Plaintiff's allegations merely track the statutory language of sections 17.46(b)(5) and 17.46(b)(7) of the DTPA without alleging any case specific facts. Section 17.46(b)(5) prohibits “representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which the person does not.” Tex. Bus. & Com. Code Ann. § 17.46(b)(5) (West). Here, Plaintiff alleges that Defendants represented to Plaintiff that the Policy and Defendants' adjusting and investigat[ing] services had characteristics or benefits that they actually did not have, which entitles Plaintiff to recover under DTPA Section 17.46(b)(5). Pl.'s Am. Compl. ¶ 46.

         Section 17.46(b)(7) prohibits “representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.” Tex. Bus. & Com. Code Ann. § 17.46(b)(7) (West). Here, Plaintiff alleges that it is entitled to recover under DTPA Section 17.46(b)(7) because Defendants represented to Plaintiff that the Policy and Defendants' adjusting and investigat[ing] services were of a particular standard, quality, or grade when they were of another. Pl.'s Am. Compl. ¶ 47.

         Noticeably absent from Plaintiff's Amended Complaint is any specific description of conduct that Crawford allegedly engaged in. Specifically, Plaintiff's Amended Complaint is void of allegations as to specific miscalculations Crawford's agent made in his/her report, or what specific damages were not covered and why. The specific allegations mirror those against Philadelphia. Thus, the allegations specified against Crawford are insufficient for Plaintiff to state a cause of action.

         In sum, Plaintiff's sweeping allegations as to all “Defendants” fail to allege and distinguish specific conduct against Crawford, the insurance adjuster, from the insurer.[2] Because Plaintiff fails to allege specific actionable conduct by the adjuster, distinguishable from the claims against the insurer, it fails to state a claim upon which relief can be granted.

         b. proximate cause and damages

         Furthermore, Plaintiff fails to provide an explanation of how Crawford's alleged conduct violated the DTPA or caused Plaintiff damage. In order to state a valid claim under the DTPA, Plaintiff must show that: (1) it is a consumer under the DTPA with respect to its claim against Crawford; (2) Crawford committed a false, misleading, or deceptive act under § 17.46(b) of the DTPA, [3] breached an express or implied warranty, or engaged in an unconscionable action or course of action; and (3) these acts were the producing cause of Plaintiff's actual damages. Brittan Commc'ns Int'l Corp. v. Sw. Bell Tel. Co., 313 F.3d 899, 907 (5th Cir. 2002) (citing Brown v. Bank of Galveston, N.A., 963 S.W.2d 511, 513 (Tex. 1998)). Here, Plaintiff's Amended Complaint provides:

[a]s a direct and proximate cause of Defendants' collective acts and conduct, Plaintiff has been damaged in an amount in excess of the minimum jurisdictional limits of this Court, for which Plaintiff now sues . . . . All of the above- described acts, omissions, and failures of Defendants are a direct and proximate cause of Plaintiff's damages.

Pl.'s Am. Compl. ¶¶ 52-53 (emphasis added).

         Plaintiff's formulaic recitation of the statutory language and failure to distinguish particular facts from legal conclusions is insufficient to fulfill its obligations to provide grounds on which it is entitled to relief. See Twombly, 550 U.S. at 555 (“[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”); see also Papasan v. Allen, 478 U.S. 265, 286 (1986) (“[O]n a motion to dismiss, courts ‘are not bound to accept as true a legal conclusion couched as a factual allegation.'”). Thus, Plaintiff fails to allege any specific conduct to state a claim for DTPA violations against Crawford that is plausible on its face. Def.'s Mot. Dismiss at 7.

         2. Federal Rule of Civil Procedure 9(b).

         Even if Plaintiff pleaded sufficient facts to meet the pleading standard set forth in Iqbal and Twombly, Plaintiff's DTPA claims fail to meet the pleading standards required by Rule 9(b) of the Federal Rules of Civil Procedure. Claims made under the DTPA for misrepresentation are subject to the heightened pleading requirements of Rule 9(b). See Lone Star Ladies Inv. Club v. Schlotzsky's Inc., 238 F.3d 363, 368 (5th Cir. 2001) (“Rule 9(b) applies by its plain language to all averments of fraud, whether they are part of a claim of fraud or not.”); see also Frith, 9 F.Supp.2d at 742 (“Claims alleging violations of the Texas Insurance code and the DTPA and those asserting fraud, fraudulent inducement, fraudulent concealment, and negligent misrepresentation are subject to the requirements of Rule 9(b).”). “At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the representation and what he obtained thereby.” Turner v. AmericaHomeKey, Inc., No. 3:11-CV-0860-D, 2011 U.S. Dist. LEXIS 91173, 2011 WL 3606688, at *2 (N.D. Tex. Aug. 16, 2011).

         Crawford argues that Plaintiffs DTPA allegations against it fail to identify: (1) the content of any alleged misrepresentation by Crawford; (2) the time and place of any alleged misrepresentation; (3) who made the misrepresentation: (4) to whom the misrepresentation was made; and (5) what the maker of the misrepresentation allegedly obtained thereby. Def.'s Mot. Dismiss at 8. In response, Plaintiff points to paragraphs 11, 12, 29, 30, and 32 of its Amended Complaint to support its contention that its pleading sufficiently meets Rule 9(b)'s context-specific standard. Pl.'s Resp. at 7-8. Specifically, Plaintiff alleges in paragraph 11 that Crawford was assigned to adjust Plaintiffs claim and did adjust it by investigating, processing, evaluating, approving and/or denying, in whole or in part, the claim. Id. (citing Pl.'s Am. Compl. ΒΆ 11). Plaintiff also points to paragraphs 12, 29, 30, and 32 of its Amended Complaint. Pl.'s Resp. at 7-8. Plaintiff alleges that Crawford, while adjusting, improperly evaluated the extensive losses, completed a substandard inspection of the property, retained an inadequate engineer, failed to conduct a fair investigation, failed to properly request ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.