271 A.3d 591
R.I.2022Background
- On February 21, 2015, the Houles’ roof collapsed from ice/snow; they notified Liberty Mutual, which produced a repair estimate of $18,349.66; the Houles’ proof-of-loss estimated $193,280.40; an engineer/contractor estimate was $53,615.26.
- Plaintiffs invoked the policy’s appraisal clause on June 20, 2016; appraisers selected but could not agree on an umpire; plaintiffs sued in October 2016 to appoint an umpire; the parties later agreed on an umpire and an appraisal panel awarded $81,641 on March 9, 2018.
- On August 7, 2019, the Houles filed a second amended complaint alleging Liberty breached the policy by failing to perform a full and complete investigation and acted in bad faith (alleging use of an unlicensed engineer and contractor, and an insufficient investigation).
- Liberty moved for judgment on the pleadings (Rule 12(c)), arguing plaintiffs failed to plead a policy breach or damages and that the appraisal process fully adjudicated the claim.
- The Superior Court granted judgment on the pleadings, dismissing both breach and bad-faith claims; plaintiffs appealed.
- The Rhode Island Supreme Court vacated the Superior Court’s order, holding the pleadings — viewed favorably to plaintiffs — could support breach-of-contract and implied-covenant claims and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether allegations that Liberty failed to perform a full and complete investigation state a breach of contract / implied covenant claim | Houle: policy imposes (express and implied) duties to investigate fully; complaint alleges specific facts (insufficient estimate, use of unlicensed engineer/contractor) | Liberty: pleadings do not identify any specific policy provision breached and lack facts showing damages; appraisal settled the dispute | The Supreme Court: pleadings sufficiently alleged a breach of contract/implied-covenant claim at the 12(c) stage; factual disputes remain for trial |
| Whether the appraisal award precludes plaintiffs’ breach claim as a final adjudication | Houle: appraisal fixed amount of loss only and did not resolve investigation or breach issues | Liberty: appraisal process was final and forecloses further contract claims about the same loss | The Supreme Court: appraisal did not bar the pleadings-based breach claim at the pleading stage; the motion justice erred to rely on appraisal as dispositive here |
| Whether a bad-faith claim can proceed absent an established breach of contract | Houle: bad faith can stem from breach of the implied covenant and insurer conduct alleged | Liberty: bad-faith claims cannot stand without an underlying breach of contract | The Supreme Court: because plaintiffs adequately pleaded a breach/implied-covenant claim, the bad-faith claim cannot be dismissed at this stage; resolution depends on factual proof |
Key Cases Cited
- Derderian v. Essex Ins. Co., 44 A.3d 122 (R.I. 2012) (insurance-policy terms are interpreted under contract principles)
- McNulty v. Chip, 116 A.3d 173 (R.I. 2015) (every contract contains an implied covenant of good faith and fair dealing; breach of implied covenant is tied to contract claim)
- Skaling v. Aetna Ins. Co., 799 A.2d 997 (R.I. 2002) (insurers have implied obligations to promptly and fully investigate claims)
- Chase v. Nationwide Mut. Fire Ins. Co., 160 A.3d 970 (R.I. 2017) (pleadings that are overly broad/undetailed may fail on a Rule 12(c) motion)
- Premier Home Restoration, LLC v. Fed. Nat’l Mortg. Ass’n, 245 A.3d 745 (R.I. 2021) (standard for Rule 12(c) review mirrors Rule 12(b)(6))
- Nugent v. State Pub. Defender’s Office, 184 A.3d 703 (R.I. 2018) (Rule 12(c) may dispose of cases where material facts are undisputed and only questions of law remain)
- Women’s Dev. Corp. v. City of Central Falls, 764 A.2d 151 (R.I. 2001) (whether a party substantially performed or materially breached is usually a question of fact)
- Dovenmuehle Mortg., Inc. v. Antonelli, 790 A.2d 1113 (R.I. 2002) (discussing implied covenant of good faith and fair dealing)