EDWARDS v. ALLSTATE PROP. CASUALTY INS. CO

STANWOOD DUVAL, District Judge

Before the Court is Defendant Allstate Property and Casualty Insurance Company's Motion To Dismiss Plaintiff's Class Action Petition (Rec.Doc.2). The plaintiff filed an opposition. The Court heard oral argument on this motion on November 10, 2004. After considering the petition, the memorandum, the relevant law, the Court GRANTS defendant's Motion to Dismiss allowing the plaintiff leave to amend her petition.

BACKGROUND

On July 16, 2004, plaintiff filed a class action petition for damages in Civil District Court for the Parish of Orleans, against Allstate Property and Casualty Insurance Company ("Allstate), a foreign insurance company, and James White, a Louisiana resident, who is an employee and/or agent of Allstate. Plaintiff alleges that defendants purposefully engage in a corporate scheme which includes withholding payment of general contractors' overhead and profit or not paying the proper amount of contractors' overhead and profit from homeowner dwelling claims. Plaintiff alleges these payments are to be calculated in the Actual Cash Value amount paid by way of indemnity to policyholders. Plaintiff alleged breach of contract claims, bad faith claims under La.Rev.Stat. 22:1220 and 22:658 and other applicable provisions of the Louisiana Civil Code, and finally, fraud and deceit claims against Allstate. Plaintiff's Breach of Contract claim includes the following:

Allstate . . . under-adjusted thousands of such claims, including the claim of Mary Edwards, knowing that these policy holders were entitled to additional payments to compensate for contractors' overhead and profit which would necessarily be incurred by these insureds in attempting to place their structures in pre-loss condition.

Allstate has known for many years that inclusion of a figure for contractors' overhead and profit is a necessary element in the fair calculation of the actual cash value amount paid by way of indemnity to its policy holders.

On or about August 27, 2002, Mary Edwards' home was damaged by a named peril and thus Allstate was, pursuant to the applicable policy of insurance, contractually required to fully and fairly indemnify Mary Edwards for all damages occasioned thereby.

Plaintiff's bad faith claims include the following:

Allstate's corporate silence in face of a clear duty to make full disclosure of all applicable policy benefits and its refusal to pay the overhead and profit portions of Louisiana property owners' claims represents bad faith as defined by the Insurance Code, including without limitation, La.Rev.Stat. 22:1220 and 22:658.

Plaintiff's fraud and deceit claim against Allstate includes the following:

Throughout the course of Allstate's handling of Mary Edwards' claim through its employee and/or agent . . . Allstate . . . failed to inform her that, according to wholly accepted industry standards, she was clearly entitled to compensation for contractors' overhead and profit. Consequently, Allstate . . . fraudulently withheld from Mary Edwards important information pertinent to her claim.

Allstate removed this action on August 24, 2004, based on diversity jurisdiction, stating that James White was fraudulently joined and that the amount in controversy exceeded $75,000. On August 31, 2004, defendant Allstate filed this instant Motion to Dismiss Plaintiff's Class Action Petition under Rule 12(b).

LEGAL STANDARD

When a defendant attacks the complaint because it fails to state a legally cognizable claim, Rule 12(b)(6) provides the appropriate challenge. The test for determining the sufficiency of a complaint under Rule 12(b)(6) is that "`a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977) (per curiam) ( citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). The Fifth Circuit explained:

Subsumed within the rigorous standard of the Conley test is the requirement that the plaintiff's complaint be stated with enough clarity to enable a court or an opposing party to determine whether a claim is sufficiently alleged. Elliott v. Foufas, 867 F.2d 877, 880 (5th Cir. 1989). Further, "the plaintiff's complaint is to be construed in a light most favorable to plaintiff, and the allegations contained therein are to be taken as true." Oppenheimer v. Prudential Securities, Inc. 94 F.3d 189, 194 (5th Cir. 1996). This is consistent with the well-established policy that the plaintiff be given every opportunity to state a claim. Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977) (per curiam). In other words, a motion to dismiss an action for failure to state a claim "admits the facts alleged in the complaint, but challenges plaintiff's rights to relief based upon those facts." Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1137 (5 ^th Cir. 1992). Finally, when considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, the district court must examine the complaint to determine whether the allegations provide relief on any possible theory. Cinel v. Connick, 15 F.3d 1338, 1341 (5th Cir. 1994).

Rule 8(a) of the Federal Rules of Civil Procedure requires that a pleading which sets forth a claim for relief shall contain a short and plain statement of the claim showing that the plaintiff is entitled to relief. "Pursuant to Rule 8(a), a complaint will be deemed inadequate only it if fails to (1) provide notice of circumstances which give rise to the claim, or (2) set forth sufficient information to outline the elements of the claim or permit inferences to be drawn that these elements exist." Beanal v. Freeport-McMoran, Inc., 197 F.3d 161, 164 (5th Cir. 1999) ( citing General Star Indemnity, Co. v. Vesta Fire Ins., Corp., 173 F.3d 946, 950 (5th Cir. 1999). A complaint that gives a "bare bones" allegation that a wrong occurred and does not plead any of the facts giving rise to the injury, does not provide adequate notice. Beanal, 197 F.3d at 164 ( citing Walker v. South Cent. Bell Tel. Co., 904 F.2d 275, 277 (5th Cir. 1990).

Plaintiff's petition makes conclusory and expansive allegations that a contractors' overhead and profit costs are paid whenever damages occur on insured structures of dwellings. (Petition ¶ 5, 13-14). However, plaintiff conceded in oral argument and stated specifically in the Opposition to Defendant's Motion to Dismiss the following:

Plaintiff asserts that O P is owed to the insured when the services of a general contractor are reasonably likely to be utilized in repairing or replacing a property loss, regardless of whether payment is being made for ACV or RCV. Under these circumstances, OP is a necessary element of compensation in paying the claim, and it is a paid-for benefit owed to the insured.

In the petition, plaintiff fails to identify or even allege any facts or circumstances that would demonstrate the need for a general contractor's overhead and profit costs on Mary Edwards' specific claim. The Court notes that absent from the petition is a single fact alleged that would give rise to any need for general contractors' overhead and profit. There are no allegations for the type of damage that was suffered or the nature or complexity of required repairs. The facts or the circumstances which are necessary to give rise to the claim that a general contractor was necessary due to the specific damages to Mary Edwards' home are not adequately alleged. Furthermore, to support plaintiff's breach of contract claims, plaintiffs rely upon cases which hold that there are certain types of property damage claims which will require the services of a general contractor. Thus, the cases upon which plaintiff relies do not insure the payment of profit and overhead costs without certain circumstances involved.

Plaintiff also alleges claims for bad faith under La.R.S. 22:1220 and 22:658. The penalties authorized by these statutes "do not stand alone," but depend upon a "valid underlying claim." Phillips v. Patterson Ins. Co., 813 So.2d 1191, 1195 (La.App. 3rd Cir. 2002). See also, Clausen v. Fid. Deposit Co. of Md., 660 So.2d 83, 85 (La.App. 1st Cir. 1995) ("[A] plaintiff attempting to base her theory of recovery against an insurer on these statutes must first have a valid, underlying, substantive claim upon which insurance coverage is based."), writ denied, 666 So.2d 320 (La. 1996). At this point because Mary Edwards has no underlying breach of contract on her insurance policy, she has no claim for penalties under La.R.S. 12:220 and 22:658. Finally, plaintiff's fraud and deceit claims against Allstate should be dismissed. Plaintiff alleges that Allstate is allegedly liable for fraud because it failed to inform her that "according to wholly accepted industry standards, she was clearly entitled to compensation for contractors' overhead and profit. Consequently, Allstate . . . fraudulently withheld from Mary Edwards important information pertinent to her claim." (Petition ¶ 31). There are two reasons why the Court dismisses plaintiff's fraud claims against Allstate. First, with there being no underlying claim for a breach of contract claim, there can be no claim for fraud/deceit. Second, because there is no Louisiana statute or case law which holds that a general contractor's profit and overhead costs are to be paid in the Actual Cash Value payment, it is difficult for the Court to conceive at this point that Allstate had the requisite intent to deceive plaintiff, Mary Edwards. The elements of Louisiana delictual fraud are (a) misrepresentation of a material fact, (b) made with the intent to deceive, and (c) causing justifiable reliance with resultant injury. Guidry v. U.S. Tobacco Co., Inc. 188 F.3d 619, 626-27 (5th Cir. 1999). Under the facts alleged in the petition and under the law in Louisiana, there is not enough evidence to support there was a misrepresentation of a material fact to support a fraud claim.

CONCLUSION

For the reasons stated, plaintiff's claims are dismissed without prejudice. Fed.R.Civ.Proc. 12(b)(6). Plaintiff is granted leave to amend her complaint in order to more specifically allege facts that would support a possible claim against defendant for a general contractor's profit and overhead costs in the payment of Actual Cash Value. "If a complaint is ambiguous or does not contain sufficient information to allow a responsive pleading to be framed, the proper remedy is a motion for a more definite statement under Rule 12(e)." Beanal, 197 F.3d at 164. See 5 WRIGHT MILLER, FED. PRACTICE PROCEDURE: Civil § 1356 at 590-591. Plaintiff should amend the petition so that it sets forth the following: (1) that a general contractor was necessary; (2) specific reasons as to why a general contractor was necessary, such as, detailing the repairs that require the use of a general contractor; (3) specific allegations as to the general contractor used in Mary Edwards' situation; (3) whether Mary Edwards attempted to utilize or utilized a general contractor; (4) that payment was not tendered for the overhead and profit costs of a general contractor; (5) statutory claims for bad faith and fraud/deceit claims in light of this opinion. That the Court is allowing plaintiff to amend her complaint does not necessarily insure the viability of her claims under the law in Louisiana.

Accordingly,

IT IS ORDERED that Defendant Allstate Property And Casualty Insurance Company's Motion To Dismiss Plaintiff's Class Action Petition (Rec.Doc.2) is GRANTED. IT IS FURTHER ORDERED that Plaintiff Mary Edwards' claims for breach of contract, bad faith claims under La.Rev.Stat. 22:1220 and 22:658 and other applicable provisions of the Louisiana Civil Code, and fraud/deceit claims are DISMISSED WITHOUT PREJUDICE with leave to amend her complaint.