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Fecteau v. Ean Holdings LLC

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

June 12, 2019




         The following matter is before the court on defendant EAN Holdings LLC (“EAN”), defendant Enterprise Leasing Company-Southeast LLC (“Enterprise Southeast”), and defendant ELCO Administrative Services's (“ELCO”) (collectively, “defendants”) motion to dismiss, ECF No. 17. For the reasons set forth below, the court grants the motion to dismiss as to the bad faith and breach of contract claims, denies without prejudice the motion to dismiss as to the negligence claim, and denies the motion to dismiss as to the declaratory judgment claim.

         I. BACKGROUND

         On January 6, 2017, plaintiff Kevin Fecteau (“Fecteau”) was a passenger in a rental car that was driven by Chelsey Stoll (“Stoll”). Stoll allegedly stole the rental car from defendants, which Fecteau says he did not know at the time. While Fecteau was in the car, Stoll engaged in a high-speed chase with police, and as a result, Fecteau was injured. Fecteau claims to be insured as a “guest” under defendants' liability and uninsured motorist (“UM”) insurance coverage, and he made a coverage demand to defendants. Defendants refused to extend any coverage to Fecteau. Fecteau then filed a personal injury suit against Stoll in state court, in which Stoll signed a confession of judgment. Fecteau provided the confession of judgment to defendants, and defendants have still refused to provide any coverage to Fecteau.

         Fecteau filed a lawsuit against defendants in the Court of Common Pleas for the County of Charleston, South Carolina on October 9, 2018. Fecteau alleged that defendants' refusal to extend coverage constituted bad faith, and he requested damages from defendants. On November 12, 2018, Enterprise Southeast removed the suit to federal court based on diversity jurisdiction. Then on November 20, 2018, Enterprise Southeast filed a motion to dismiss. ECF No. 6. Fecteau did not respond to the motion but instead filed a motion to remand on November 26, 2018 based on an amended complaint he had filed in state court. ECF No. 7. At the hearing on the motions, the court instructed Fecteau to file a second amended complaint. Fecteau did so on March 12, 2019. The second amended complaint brings claims for a declaratory judgment, negligence, bad faith, and breach of contract. Defendants filed a motion to dismiss on April 15, 2019, ECF No. 17, to which Fecteau responded on May 3, 2019, ECF No. 25. Defendants did not file a reply. The motion is ripe for review.

         II. STANDARD

         A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support his claim and would entitle him to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept all well-pleaded allegations as true and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir.1999); Mylan Labs., Inc., 7 F.3d at 1134. “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 Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.


         Defendants argue that Fecteau's second amended complaint must be dismissed because Fecteau's allegations are insufficient to state a claim for bad faith, negligence, and breach of contract. The court agrees that these three claims must be dismissed. However, defendants do not substantively argue for dismissal of the declaratory judgment claim. Defendants contend that “[a]lthough styled as separate claims, all the allegations in Plaintiff's [second amended complaint] sound in bad-faith and are based upon Defendants' refusal to extend financial responsibility to satisfy the confession of judgment or otherwise pay Plaintiff's claim for UM benefits.” ECF No. 17 at 3. Yet Fecteau's declaratory judgment claim does not mention bad faith. Instead, it seeks a declaration that defendants must provide UM coverage to Fecteau. Therefore, Fecteau's declaratory judgment claim survives.

         A. Bad Faith Claim

         Defendants first argue that Fecteau's bad faith claim should be dismissed because defendants did not enter into a contract of insurance with Stoll or Fecteau and because Fecteau does not allege sufficient facts regarding damages. “The elements of a bad faith refusal to pay action are: (1) the existence of a contract of insurance between the parties; (2) refusal by the insurer to pay benefits due under the contract; (3) resulting from the insurer's bad faith or unreasonable action; and (4) causing damage to the insured.” Snyder v. State Farm Mut. Auto. Ins. Co., 586 F.Supp.2d 453, 457 (D.S.C. 2008). Defendants explain that EAN and Enterprise Southeast are self-insured.[1] Pursuant to S.C. Code Ann. § 56-9-60(A), “[a] person or company who has more than twenty-five motor vehicles registered in his name may qualify as a self-insurer provided that the department is satisfied that the person or company is able to pay any judgments obtained against the person or company.” The Supreme Court of South Carolina first considered the obligations of a self-insurer in S. Home Ins. Co. v. Burdette's Leasing Serv., Inc., in which the court held that “[a] self-insurer substitutes for an insurance policy to the extent of the statutory policy requirements.” 234 S.E.2d 870, 872 (S.C. 1977). As such, “when one becomes a self-insurer under the Motor Vehicle Financial Responsibility Act, he must pay those claims which normally would arise under the terms of the Act and which are covered by the insurance policies described in the Act itself.” Id.

         South Carolina courts have subsequently held that a self-insurer is required to provide UM coverage pursuant to S.C. Code Ann. § 38-77-150.[2] Wright v. Smallwood, 419 S.E.2d 219, 221 (S.C. 1992); S.C. Elec. & Gas Co. v. Jeter, 343 S.E.2d 47, 49 (S.C. Ct. App. 1986). However, while self-insurers are required to provide this coverage, there appears to be no basis in South Carolina law for a plaintiff to pursue a bad-faith insurance action against a self-insurer when the self-insurer does not provide the coverage. While a self-insurer substitutes for an insurance policy, South Carolina law has not interpreted this substitution as creating an insurance contract, which is required by the first element of a bad faith claim.

         Fecteau relies on Auto Owners Ins. Co. v. Rollison, in which the Supreme Court of South Carolina held that the passenger in a car may be considered a “guest, ” and therefore an “insured, ” who is entitled to UM coverage pursuant to S.C. Code Ann. § 38-77-30(7), even when the driver and the passenger are not permissive users of the car. 663 S.E.2d 484, 490 (S.C. 2008). In Rollison, the plaintiff was injured in a single-vehicle accident while riding as a passenger in the car. Id. at 485. The car's driver was the grandson of the car owner/named insured, and the grandson did not have permission to drive the car when the accident occurred. At the conclusion of the bench trial, the circuit court held that because the grandson was not a permissive user of the car at the time of the accident, the car was deemed uninsured. Id. at 486. Moreover, the circuit court held that the plaintiff was not a “guest” and therefore not entitled to UM coverage because the plaintiff did not have permission from the named insured to be in the car. Id. at 486-87.

         On appeal, the Supreme Court of South Carolina reversed the circuit court. In doing so, the court first examined the language of S.C. Code Ann. 38-77-30(7), which defines “insured” in part as “a guest in the motor vehicle to which the [insurance] policy applies.” Id. at 488-89. The court then explained that “[b]ecause the Legislature did not include the consent language when it listed ‘guest' in the statute, we do not believe it intended to require a ‘guest' to obtain the consent of the named insured in order to be eligible for uninsured motorist coverage.” Id. at 489. The court then reasoned that “one who is a ‘guest' at the invitation of the driver has, by implication, the consent of the named insured. Presumptively then, a guest has the consent of the named insured unless he or she has knowledge to the contrary.” Id. Therefore, the crucial inquiry was whether the plaintiff had reason to know that he did not have consent from the named insured. This inquiry “is largely dependent upon the facts of circumstances of each case, particularly the relationships among the involved parties.” Id. at 490. The court concluded ...

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