ALLIED DENTAL GROUP, LTD v. STATE FARM FIRE AND CASUALTY COMPANY
2:12-cv-01637
W.D. Pa.Sep 27, 2013Background
- Allied Dental Group purchased a business insurance policy from State Farm in 2006; the policy included Coverage B (business personal property) and Coverage C (business income).
- A September 14, 2010 fire severely damaged Allied’s leased office; Allied claimed approximately $609,022 in personal property loss but State Farm paid about $292,000 under Coverage B.
- Allied sued removed to federal court asserting negligence (added in amended complaint), breach of contract, and bad faith; State Farm moved to dismiss the negligence and bad faith counts and to strike certain allegations.
- The negligence claim alleges State Farm and its agents failed to properly evaluate and recommend adequate coverage, including misuse of estimation systems and insufficient employee training.
- The bad-faith claim alleges an inadequate investigation and unreasonable delay (including refusal to meet with Allied’s accountants, reliance on an unfamiliar accountant’s opinions, failure to retain counsel, and a 13-month delay in payment).
- State Farm sought to strike allegations concerning accounting and legal fees as unrecoverable under the policy; Allied contends such expenses may be recoverable under the policy’s Medical Office Option Package.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Relation-back of negligence claim under Fed. R. Civ. P. 15(c) | Negligence arises from same conduct alleged in original complaint; original allegations provided notice of agent failures and lack of inspection | Negligence was first asserted in amended complaint after statute of limitations expired and thus is time-barred | Denied dismissal; negligence claim relates back because original factual averments put defendant on notice of negligent conduct (Rule 15(c) satisfied) |
| Sufficiency of bad-faith claim under Pennsylvania law | Allegations of inadequate investigation, unreasonable reliance on an unfamiliar accountant, refusal to meet, failure to retain counsel, and 13-month delay plead plausible bad faith | Facts are insufficiently particular to state a plausible bad-faith claim | Denied dismissal; allegations sufficiently specific to support a plausible bad-faith claim (failure to investigate and delay) |
| Motion to strike allegations about accounting and legal fees | Such fees may be recoverable under the policy’s Medical Office Option Package and related provisions; premature to strike | Those fees are not recoverable under the Policy or statute and should be stricken as immaterial/prejudicial | Denied motion to strike; allegations are related to the controversy and recoverability is premature |
| Standard for striking portions of complaint | (implicit) Strike only if allegations have no relation to controversy or cause prejudice/confusion | (implicit) Paragraphs at issue are immaterial and prejudicial | Court applied Rule 12(f) standard and refused to strike the cited paragraphs |
Key Cases Cited
- Bensel v. Allied Pilots Ass'n, 387 F.3d 298 (3d Cir. 2004) (relation-back analysis under Rule 15 considers whether original pleading gave notice of the claim)
- W.V. Realty Inc. v. Northern Ins. Co. of N.Y., 334 F.3d 306 (3d Cir.) (2003) (elements of a Pennsylvania bad-faith claim)
- Greene v. United Svcs. Auto. Ass'n, 936 A.2d 1178 (Pa. Super. 2007) (bad-faith can arise from inadequate investigation or delay)
- Kosierowski v. Allstate Ins. Co., 51 F. Supp. 2d 583 (E.D. Pa. 1999) (delay is a relevant factor in bad-faith analysis)
- Henderson v. Nationwide Mut. Ins. Co., 169 F. Supp. 2d 365 (E.D. Pa. 2001) (denying motion to dismiss bad-faith claim where factual assertions of unreasonable investigation were alleged)
- Medevac MidAtlantic v. Keystone Mercy Health Plan, 817 F. Supp. 2d 515 (E.D. Pa. 2011) (motion to strike under Rule 12(f) should be granted only where allegations have no possible relation to controversy)