TNT Services Corporation, LLC v. Houston International Insurance Group, 3:16-cv-01505

TNT Services Corp. purchased a workers’ compensation and employer’s liability policy from Houston International/Imperium for 9/19/2013–9/19/2014; premium financed through First Funding Corp.
Two employee workers’ compensation claims arose that defendants refused to pay.
TNT alleges the policy covered the claims and that defendants acted in bad faith and breached the policy; it filed an amended complaint asserting (1) bad faith under 42 Pa. Cons. Stat. § 8371, (2) breach of contract, and (3) a declaratory judgment of coverage.
Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(6), arguing the policy had been validly cancelled before the injuries and thus no coverage or bad-faith basis existed.
The court ruled that, at the pleading stage, TNT sufficiently alleged a valid policy and facts supporting its claims and denied the motion to dismiss all three counts, reserving coverage and merits determinations for later stages (e.g., summary judgment).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Bad faith under § 8371	Insurer refused covered benefits and engaged in dilatory, abusive claims handling and misrepresentations	Policy had been validly cancelled before injuries, so no basis for bad faith	Denied dismissal: plaintiff adequately alleged policy in effect and bad-faith conduct; merits reserved for later
Breach of contract	Policy obligated insurer to indemnify TNT for the workers’ comp losses	No valid contract in effect at time of injuries due to proper cancellation	Denied dismissal: factual dispute about cancellation precludes dismissal
Declaratory judgment of coverage	Policy entitles TNT to coverage for the two claims	Policy not in effect, so declaratory relief improper	Denied dismissal: coverage question is factual and premature to decide now
Sufficiency of pleadings / 12(b)(6) standard	Complaint alleges enough facts to proceed to discovery on coverage, breach, and bad faith	Argues failure to state claims because policy was cancelled	Court applied Twombly/Iqbal standard but found allegations adequate to survive a 12(b)(6) motion

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim to survive dismissal)
Phillips v. Cty. of Allegheny, 515 F.3d 224 (3d Cir. 2008) (Twombly explained and applied in the Third Circuit)
Chamberlain v. Giampapa, 210 F.3d 154 (3d Cir. 2000) (Erie doctrine: apply Pennsylvania substantive law in diversity)
Morse v. Lower Merion Sch. Dist., 132 F.3d 902 (3d Cir. 1997) (court must accept complaint allegations as true on Rule 12(b)(6) motion)
In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997) (documents properly considered on a motion to dismiss)
Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192 (3d Cir. 1993) (same)