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Jordan v. Allstate Insurance Co.

United States District Court, D. South Carolina, Florence Division

August 16, 2016

Casey Lynn Jordan, Plaintiff,
v.
Allstate Insurance Company, Defendant.

          ORDER

          R. Bryan Harwell United States District Judge

         Plaintiff Casey Lynn Jordan filed this first-party insurance bad faith action against her insurer Defendant Allstate Insurance Company. The matter is before the Court for resolution of three pending motions: a motion for a protective order filed by Plaintiff, a motion in limine to exclude evidence filed by Plaintiff, and a motion for summary judgment filed by Allstate. The Court held a hearing on May 27, 2016, and took all motions under advisement. For the reasons explained below, the Court grants Allstate’s motion for summary judgment, dismisses this case with prejudice, and denies Plaintiff’s motions as moot.

         Summary Judgment Standard

         Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Reyazuddin v. Montgomery Cty., Md., 789 F.3d 407, 413 (4th Cir. 2015); see Fed. R. Civ. P. 56(a) (“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”). “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by: (A) citing to particular parts of materials in the record . . .; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1). The facts and inferences to be drawn from the evidence must be viewed in the light most favorable to the non-moving party, Reyazuddin, 789 F.3d at 413, but the Court “cannot weigh the evidence or make credibility determinations.” Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 569 (4th Cir. 2015).

         Moreover, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “A dispute of material fact is ‘genuine’ if sufficient evidence favoring the non-moving party exists for the trier of fact to return a verdict for that party.” Seastrunk v. United States, 25 F.Supp.3d 812, 814 (D.S.C. 2014). A fact is “material” if proof of its existence or nonexistence would affect disposition of the case under the applicable law. Anderson, 477 U.S. at 248.

         At the summary judgment stage, “the moving party must demonstrate the absence of a genuine issue of material fact. Once the moving party has met his burden, the nonmoving party must come forward with some evidence beyond the mere allegations contained in the pleadings to show that there is a genuine issue for trial.” Baber v. Hosp. Corp. of Am., 977 F.2d 872, 874-75 (4th Cir. 1992) (internal citation omitted). Summary judgment is not warranted unless, “from the totality of the evidence, including pleadings, depositions, answers to interrogatories, and affidavits, the [C]ourt believes no genuine issue of material fact exists for trial and the moving party is entitled to judgment as a matter of law.” Whiteman v. Chesapeake Appalachia, L.L.C., 729 F.3d 381, 385 (4th Cir. 2013); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

         Background

         On June 4, 2010, Plaintiff suffered a left shoulder injury in an automobile accident when her car was struck by a vehicle operated by Carlos Vincent Chinn, the at-fault driver.[1] See Complaint, ECF No. 1-1, at ¶¶ 4-9. At the time of the accident, Chinn maintained an insurance policy through United Auto Insurance Company with $25, 000 in liability coverage, and Plaintiff maintained an insurance policy through Allstate with a total of $50, 000 in underinsured motorist (UIM) coverage. Id. at ¶¶ 10-11.

         In May 2013, Plaintiff filed the underlying tort action in state court and served Allstate with a copy of the pleadings. Id. at ¶ 12. In December 2013, United tendered the $25, 000 liability limits in exchange for a covenant not to execute. Id. at ¶ 14. Pursuant to section 38-77-160 of the South Carolina Code, [2] Plaintiff continued in the underlying action to recover UIM benefits claiming her damages exceeded $25, 000, and Allstate assumed control of the defense of the action. Id. at ¶¶ 13-14.

         On January 3, 2014, Plaintiff sent Allstate written correspondence demanding that it settle her claim by tendering the entire $50, 000 in UIM coverage. Id. at ¶ 16. This correspondence (1) noted the case was one of clear liability and that Plaintiff had suffered special damages totaling $33, 457.38 ($29, 785.38 in medical bills and $3, 672 in lost wages); (2) required that Allstate notify Plaintiff in writing if it refused her demand; (3) notified Allstate that it owed Plaintiff duties of good faith and fair dealing, and that if Allstate refused her demand, she required documentation of its internal evaluation of her claim; and (4) requested a response to her demand by January 17, 2014. Id. at ¶¶ 16-18.

         On January 15, 2014, Allstate’s attorney contacted Plaintiff and asked if Allstate could proceed with the deposition of Dr. Earl B. McFadden (Plaintiff’s orthopaedic surgeon) before having to respond to Plaintiff’s settlement demand. Id. at ¶ 19. Plaintiff consented to this request. Id. On February 27, 2014, Allstate took Dr. McFadden’s deposition and asked him about Plaintiff’s alleged shoulder injury. Id. at ¶ 21. During the deposition, an issue arose regarding whether the shoulder injury resulted from the accident, so Dr. McFadden asked the parties to obtain the MRI of Plaintiff’s left shoulder that had been taken shortly after the accident. Id. at ¶ 21.

         Plaintiff obtained the MRI and provided it to Dr. McFadden, who then provided a written opinion stating the accident had proximately caused Plaintiff’s shoulder injury. Id. at ¶ 23. On April 1, 2014, in light of Dr. McFadden’s opinion, Plaintiff sent Allstate correspondence renewing all previous demands from her January 3 correspondence and noting her settlement demand ($50, 000) “was slightly more than 2.5 times the specials in the case, a very reasonable figure given that the specific facts of her case . . . made for a strong punitive damages argument.” Id. at ¶ 24. The April 1 correspondence noted mediation was upcoming and demanded that Allstate tender the full UIM benefits no later than April 15, 2014. Id.

         On April 11, 2014, Allstate sent Plaintiff an email stating its “‘adjuster ha[d] been out of the office’” and requesting a ten-day extension to respond to the April 1 demand. Id. at ¶ 25. Plaintiff consented to the extension. Id.

         On April 23, 2014, Allstate sent Plaintiff an email responding to her April 1 demand and offering $15, 000 of UIM benefits. Id. at ¶ 26. On April 25, 2014, Plaintiff refused Allstate’s offer via written correspondence, noting the $15, 000 offer indicated Allstate valued Plaintiff’s total claim as being worth $40, 000 (the $25, 000 credit Allstate would receive from Chinn’s liability coverage plus Allstate’s $15, 000 offer of UIM benefits). Id. at ¶ 27. Plaintiff pointed out that she had provided Allstate documentation supporting her special damages of $33, 457.38 and that those damages did not factor in her pain and suffering, stress and anxiety, other non-liquidated damages, and the punitive damages to which she was very likely entitled. Id. Plaintiff accused Allstate of offering significantly below its true evaluation of her claim and put Allstate on notice that its refusal to make a good faith offer would now result in prejudice to Plaintiff, who would have to incur the cost of mediation and preparation for trial (including depositions of Dr. McFadden and an eyewitness). Id. at ¶¶ 27-28.

         On May 13, 2014, the parties mediated the case. ECF No. 53-3. The parties reached an impasse at mediation when Allstate’s final offer of UIM coverage was $23, 000 and Plaintiff’s “bottom line” demand was $45, 000 of the available $50, 000 in UIM coverage.[3] Id. Thereafter, the case proceeded to trial in May 2014 and the jury awarded Plaintiff total damages of $62, 500 ($55, 000 in actual damages plus $7, 500 in punitive damages). Compl. at ¶¶ 29. Allstate promptly paid Plaintiff the amount owed in UIM benefits-$37, 500 (the amount of UIM benefits due after Chinn’s tendered limits of $25, 000 were subtracted from the $62, 500 verdict). ECF No. 53-1 at 3. Therefore, the verdict did not exhaust the UIM coverage.

         In June 2014, Plaintiff filed the current lawsuit in state court, alleging six causes of action: (1) breach of contract, (2) bad faith refusal to pay benefits, (3) bad faith in handling/adjusting a claim for insurance benefits, (4) negligent misrepresentation, (5) fraudulent misrepresentation, and (6) violation of the South Carolina Unfair Trade Practices Act.[4] Compl. at ¶¶ 31-67. In July 2014, Allstate removed the action to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332. ECF No. 1. Plaintiff filed a motion for a protective order and a related motion in limine to exclude evidence. ECF No. 45. Allstate filed a motion for summary judgment. ECF No. 53. The Court held a hearing on May 27, 2016, and took all motions under advisement. ECF Nos. 60 & 62.

         Discussion

         I. Allstate’s Motion for Summary Judgment

         Allstate has moved for summary judgment as to all six of Plaintiff’s causes of action. See ECF No. 53-1. At the hearing in this matter, Plaintiff withdrew and abandoned her claims for negligent misrepresentation, fraudulent misrepresentation, and unfair trade practices. See ECF No. 62. Accordingly, she is proceeding solely on her three remaining causes of action: (1) breach of contract, (2) bad faith refusal to pay benefits, and (3) bad faith in handling/adjusting a claim for insurance benefits. See Compl. at ¶¶ 31-47. The Court first addresses Plaintiff’s bad faith claims.

         Under South Carolina law, an insurer that unreasonably refuses to settle a claim with an insured within policy limits is subject to liability in tort. Nichols v. State Farm Mut. Auto. Ins. Co., 279 S.C. 336, 339, 306 S.E.2d 616, 618 (1983) (citing Tyger River Pine Co. v. Maryland Cas. Co., 170 S.C. 286, 170 S.E. 346 (1933)). “[I]f an insured can demonstrate bad faith or unreasonable action by the insurer in processing a claim under their mutually binding insurance contract, he can recover consequential damages in a tort action.” Id. at 336, 340, 306 S.E.2d at 619. Because a bad faith action lies in tort and not in contract, a bad faith claim may exist even in the absence of any violation of an insurance contract provision. Tadlock Painting Co. v. Maryland Cas. Co., 322 S.C. 498, 503, 473 S.E.2d 52, 55 (1996).

The elements of a cause of action for bad faith refusal to pay first party benefits under a contract of insurance are: (1) the existence of a mutually binding contract of insurance between the plaintiff and the defendant; (2) refusal by the insurer to pay benefits due under the contract; (3) resulting from the insurer’s bad faith or unreasonable action in breach of an implied covenant of good faith and fair dealing arising on the contract; (4) causing damage to the insured.

Crossley v. State Farm Mut. Auto. Ins. Co., 307 S.C. 354, 359, 415 S.E.2d 393, 396-97 (1992).

         In the present case, it is undisputed that Plaintiff and Allstate had a mutually binding insurance contract for UIM coverage, and that Allstate refused to pay Plaintiff the full $50, 000 UIM benefits available under the contract. Thus, the Court need only consider the final two elements of Plaintiff’s bad faith claims: (1) whether Allstate’s refusal to pay the entire $50, 000 in UIM benefits was the result of bad faith or unreasonable action on Allstate’s part; and (2) whether Allstate’s alleged bad faith caused damage to Plaintiff. As the Court will explain, Plaintiff cannot establish that her damages were proximately caused by Allstate’s alleged bad faith, and Allstate is entitled to summary judgment on this basis.

         Initially, the Court notes Plaintiff’s complaint alleges two separate causes of action for bad faith, one for “bad faith refusal to pay benefits” and the other for “bad faith in handling/adjusting a claim for insurance benefits.” See Compl. at ¶¶ 36-47. Plaintiff explains in her response in opposition to Allstate’s motion for summary judgment that she “has specifically pled that Allstate handled and adjusted her claim in bad faith outside of the payment of any benefits, as evidenced by her complaint containing a completely separate cause of action for such conduct.”[5] ECF No. 56 at 5 (italicized emphasis added).

         Allstate contends the processing of a claim for benefits necessarily relates to a refusal to pay benefits, and that as a matter of law, it did not act in bad faith in either refusing to pay UIM benefits or processing Plaintiff’s claim. Allstate cites the elements of a cause of action for bad faith refusal to pay first party benefits under a contract of insurance set forth in Crossley, supra, and Allstate asserts, “This often-cited precedent makes it crystal clear that the bad faith ‘handling’ of the claim is but one element of the cause of action resulting in the ‘refusal by the insurer to pay benefits due under the contract.’ Plaintiff’s effort to dissect the ‘handling’ aspect of the claim and create some separate and distinct cause of action based thereon is contrary to applicable law.” Def.’s Reply, ECF No. 58 at 3.

         In Tadlock, the South Carolina Supreme Court quoted its holding in Nichols “‘that if an insured can demonstrate bad faith or unreasonable action by the insurer in processing a claim under their mutually binding insurance contract, he can recover consequential damages in a tort action.’” Tadlock, 322 S.C. at 500, 473 S.E.2d at 53 (quoting Nichols, 279 ...


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