420 F.Supp.3d 1124
D. Nev.2019Background
- Plaintiff Melissa Alele was injured in an August 2016 automobile accident caused by another driver; she submitted an underinsured motorist (UIM) claim to her insurer, GEICO, which denied the claim.
- Alele sued in state court asserting three claims: (1) breach of contract, (2) violation of Nevada’s Unfair Claims Practices Act (NRS § 686A.310), and (3) breach of the covenant of good faith and fair dealing (bad faith).
- GEICO removed the case to federal court and moved to dismiss counts 2 and 3 for failure to state a claim under Fed. R. Civ. P. 12(b)(6).
- GEICO alternatively sought to sever and stay the extracontractual claims (counts 2 and 3) pending resolution of the breach-of-contract claim.
- The court found Alele’s complaint lacked factual specificity for the statutory unfair-claims claim and for the bad-faith claim (no allegation GEICO knew there was no reasonable basis to deny benefits) and dismissed counts 2 and 3 without prejudice.
- The court denied GEICO’s motion to bifurcate or stay discovery/trial, concluding claims and discovery are intertwined and bifurcation would be inefficient and duplicative.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Alele pleaded a violation of NRS § 686A.310 (Unfair Claims Practices) | Alele alleges GEICO violated § 686A.310 generally and seeks damages | GEICO argues complaint fails to identify which subsection or specific misconduct sufficient under Rule 8 | Dismissed count 2 without prejudice for lack of specific factual allegations |
| Whether Alele pleaded a bad-faith claim (breach of implied covenant of good faith and fair dealing) | Alele alleges GEICO denied UIM benefits "without proper cause" | GEICO contends an incorrect coverage determination is not tortious absent no reasonable basis; complaint lacks allegations GEICO knew denial had no reasonable basis | Dismissed count 3 without prejudice for failing to plead that GEICO lacked a reasonable basis or had actual/implied awareness of that fact |
| Whether extracontractual claims should be severed/stayed pending breach-of-contract resolution | Alele argues bifurcation/stay should be considered later and that joint adjudication is efficient | GEICO argues bad-faith claim may be duplicative and largely dependent on breach-of-contract outcome, so bifurcation/stay is warranted | Motion to sever/stay denied; court found discovery and trial bifurcation would be inefficient and unnecessary at this time |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard requires more than labels and conclusions)
- Ashcroft v. Iqbal, 556 U.S. 662 (two-step pleading analysis; legal conclusions not presumed true)
- A.C. Shaw Constr. v. Washoe Cty., 784 P.2d 9 (Nev. 1989) (Nevada recognizes implied covenant of good faith and fair dealing)
- Pioneer Chlor Alkali Co. v. National Union Fire Ins. Co., 863 F. Supp. 1237 (insurer breaches bad-faith duty when it refuses without proper cause to compensate a covered loss)
- Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542 (9th Cir. 1990) (court limited to face of the complaint when ruling on a motion to dismiss)