Bierman Family Farm, LLC v. United Farm Family Insurance Co.
265 F. Supp. 3d 633
D. Maryland2017Background
- Bierman Family Farm et al. (Plaintiffs) sued United Farm Family Insurance (Defendant) after a fire at a storage building; Plaintiffs alleged breach of contract for underpayment under Policy No. 1913G1126 and sought $220,000 plus declaratory relief for bad faith.
- Policy provided $200,000 coverage for the building plus up to 5% (~$10,000) each for debris removal and law/ordinance; Defendant paid $105,000 (50% reduction) invoking a Vacancy/Unoccupancy clause.
- Plaintiffs’ complaint asserts a single count of breach of contract and includes an allegation that Defendant acted in bad faith by improperly applying the 50% vacancy penalty.
- Defendant moved to dismiss the bad-faith allegation for failure to state a claim and for failure to exhaust administrative remedies under Maryland law; the motion was filed after pleadings and treated as a Rule 12(c) motion.
- The magistrate judge found Plaintiffs did not plead exhaustion of the Maryland Insurance Administration remedies, did not allege facts beyond a contract-coverage dispute to support bad faith, and thus dismissed the bad-faith claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of motion to dismiss (timing) | Motion was untimely and should have been raised before Answer | Motion can be treated as Rule 12(c) judgment on the pleadings | Court construed motion as Rule 12(c) and considered it |
| Administrative exhaustion under Md. law | Bad-faith claim is declaratory only, so §27-1001 exhaustion inapplicable | Md. law requires filing with Maryland Insurance Administration before suit on bad faith absent narrow exceptions | Court held Plaintiffs failed to exhaust and did not plead an exception, so requirement applies |
| Viability of bad-faith tort based on coverage dispute | Claim seeks declaratory relief for bad faith separate from contract damages | Denial was a coverage/contract dispute; Maryland law limits remedy to contract breach absent additional tortious conduct | Court held bad-faith tort not pleaded plausibly; coverage dispute gives rise to breach claim only |
| Damages beyond contract / punitive damages | Plaintiffs seek damages in excess of policy limits and declaratory relief | Punitive damages not available for pure contract breach; bad faith claim not established | Court noted Plaintiffs sought damages exceeding policy benefits and dismissed bad-faith allegations; punitive damages unavailable in pure contract actions |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible to survive dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (court need not accept legal conclusions as facts)
- McBurney v. Cuccinelli, 616 F.3d 393 (Rule 12(b)(6) motion tests sufficiency of complaint)
- Edwards v. City of Goldsboro, 178 F.3d 231 (untimely Rule 12(b)(6) motion may be viewed as Rule 12(c) motion)
- Jones v. Hyatt Ins. Agency, Inc., 356 Md. 639 (coverage disputes generally resolved as contract claims)
- Mesmer v. Maryland Auto. Ins. Fund, 353 Md. 241 (duties to defend/indemnify are contractual)
- Schaefer v. Miller, 322 Md. 297 (punitive damages prohibited in pure contract actions)