Clark v. State Farm Mutual Automobile Insurance
131 A.3d 806
| Del. | 2016Background
- Plaintiffs Rebecca Clark and James Smith (State Farm policyholders) submitted PIP claims that were paid more than 30 days after written requests; State Farm paid the statutory interest required by 21 Del. C. § 2118B(c).
- Plaintiffs originally alleged State Farm deducted statutory interest from policy limits; that theory failed and was abandoned.
- Plaintiffs sought leave to file an amended complaint limited to a declaratory judgment that State Farm must always pay or deny PIP claims within 30 days (i.e., mandatory, inflexible 30‑day rule).
- Superior Court denied leave to amend as futile (no justiciable controversy; statutory interest paid and no individualized injury) and later granted summary judgment for State Farm.
- On appeal, plaintiffs argued § 2118B(c) requires invariable 30‑day processing and that a class remedy is appropriate; the Supreme Court affirmed on futility/interpretation grounds.
- Court held § 2118B(c) itself prescribes the remedy (escalating interest) and does not empower courts to craft industry‑wide mandatory processing rules; enforcement and pattern investigations fall to the Insurance Commissioner.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave to amend to add declaratory relief ordering mandatory 30‑day processing was permissible | Plaintiffs: § 2118B(c) creates a right to have every PIP claim paid/denied within 30 days; declaratory relief is appropriate to protect class members | State Farm: Plaintiffs suffered no cognizable injury (statutory interest paid); claim is unripe/moot and amendment would be futile | Denied: Amendment futile because § 2118B(c) contemplates delays with prescribed interest remedy; no justiciable controversy based on plaintiffs' facts |
| Whether § 2118B(c) permits courts to order specific performance (mandatory injunction) of 30‑day processing | Plaintiffs: Court should enforce the deadline across the class rather than let insurer pay the ‘‘penalty’’ interest | State Farm: Statute provides its own remedy; courts should not invent industry‑wide operational rules; Commissioner enforces the Code | Held: Statute’s remedy (interest) displaces judicially fashioned specific‑performance relief; courts should not assume regulator role |
| Whether the case is moot or capable of repetition yet evading review for class purposes | Plaintiffs: Ongoing practice of delay makes dispute recurring and class action viable | State Farm: Named plaintiffs received full benefits and interest; no imminent injury; no proof of a routine policy of delay | Held: While recurring conduct can permit review, plaintiffs failed to show individualized or classwide injury beyond statutory interest; amendment still futile |
| Whether private declaratory relief is an appropriate enforcement mechanism versus administrative enforcement | Plaintiffs: Private declaratory judgment is a legitimate remedy alongside statutory remedies | State Farm: Enforcement belongs to Insurance Commissioner; statute contemplates administrative enforcement | Held: Courts should not substitute for Commissioner; plaintiffs may pursue administrative or legislative avenues; judicial declaratory relief here inappropriate |
Key Cases Cited
- Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162 (Del. 2011) (leave to amend may be denied as futile when amended complaint would be subject to dismissal)
- Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (specific performance requires clear and convincing showing and absence of adequate legal remedy)
- State Farm Mut. Auto. Ins. Co. v. Davis, 80 A.3d 628 (Del. 2013) (discusses statutory interest under § 2118B and its characterization in prior dicta)
- Fed. Election Comm’n v. Wisc. Right to Life, 551 U.S. 449 (2007) (application of "capable of repetition, yet evading review" doctrine)
- Pierce v. Int’l Ins. Co. of Ill., 671 A.2d 1361 (Del. 1996) (bad faith delay in payment can support damages beyond policy benefits)
- Clausen v. Nat’l Grange Mut. Ins. Co., 730 A.2d 133 (Del. Super. 1997) (insurance bad‑faith can give rise to additional remedies beyond policy benefits)
- Honeywell Int’l Inc. v. Air Prods. & Chems., Inc., 872 A.2d 944 (Del. 2005) (injunctive relief and specific performance standards)
- Francis v. Medill, 141 A. 697 (Del. 1928) (where contract specifies a penalty, specific performance is typically not available)