Ted F. Cash (“plaintiff’) appeals the granting by the trial court of motions by State Farm Mutual Automobile Insurance Company (“State Farm”) to dismiss for failure to state a claim for which relief may be granted and for judgment on the pleadings, pursuant
Plaintiff’s pleadings indicate that he was driving his 1969 GMC truck on 26 December 1993 when he backed into a 1978 Chevrolet Camaro (“Camaro”). Plaintiff alleges that he was traveling at approximately one mile per hour and the Camaro was oсcupied by the driver Dameion Poston, and two other occupants, Darrell Jackson and Deron Thompson. Plaintiff, who is a medical doctor, determined that no one involved suffered any apparent injury at the time of the accident. Additionally, all occupants of the Camaro declined medical assistance at the scene.
Following the accident, claims were made for personal injuries by Poston, Jackson and Thompson, and in addition, a claim for personal injuries and property damage was made by a fourth individuаl, Arthur Poston, Jr., the owner of the Camaro. Plaintiff informed his car insurance carrier, State Farm, that there were more claims for per sonal injuries than there were occupants of the vehicles and that it appeared that these were fraudulent claims which should be denied. Despite plaintiffs contentions, State Farm paid the claims within the confines of the limits of the policy issued to plaintiff. Dameion Poston, Darrell Jackson and Deron Thompson were paid the sum of $250.00 for their personal injuries and Arthur Poston, Jr., was paid the sum of $350.00 for his personal injuries. Plaintiff alleges claimants were also paid certain medical and other expenses despite his objection, and that as a result of settlement of these fraudulent claims, plaintiff’s insurance premiums with State Farm increased by fifty-three percent (53%).
The record reveals that plaintiff filed suit against State Farm in 1996, but it was dismissed pursuant to Notice of Voluntary Dismissal without prejudice pursuant to Rule 41(c) of the North Carolina Rules of Civil Procedure. He brought the present action against State Farm in August 1998 with claims for (1) breach of contract of insurance, (2) constructive fraud in the form of a breach of fiduciary duty, (3) unfair methods of competition or unfair and deceptive acts or practices, and (4) tortious breach of the insurance contract, specifically the implied duties of good faith and fair dealing. Plaintiff asked for relief in the form of compensatory and punitive damages. State Farm made a motion to dismiss and the trial court granted it under North Carolina Rule of Civil Procedure 12(b)(6) as to plaintiffs claims for unfair methods of competition or unfair and decеptive acts or practices, and tortious breach of the insurance contract. After filing its answer, State Farm made a motion for judgment on the pleadings. The trial court allowed State Farm’s motion based on Rule 12(c) of the North Carolina Rules of Civil Procedure, dismissing all other claims of plaintiff with prejudice.
Plaintiff first contends that the trial court erred in granting State Farm’s Rule 12(b)(6) motion on its claims for unfair and deceptive acts or practices and tortious breach of the insurance contract. In the determination whether a comрlaint is sufficient to survive a motion to dismiss under N.C. Gen. Stat. § 1A-1, Rule 12(b)(6), the question presented is whether the “allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory.. ..”
Harris v. NCNB,
In plaintiffs claim for unfair and deceptive practices and acts, he asserts that State Farm violated N.C. Gen. Stat. § 58-63-15 by settling fraudulent claims after advertising
at State Farm, we pay what we owe to settle a claim, but we don’t want to pay for fraudulent losses. If we all do our part to help fight insurance fraud, the result will be more reasonable premiums for everyone.
N.C. Gen. Stat. § 58-63-15 provides that unfair methods of competition and unfair and deceptive acts or practices in the business of insurance include:
(1) Misrepresentations and Fаlse Advertising of Policy Contracts. — Making, issuing, circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby....
(2) False Information and Advertising Generally.- — Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine or other publication, or in the form оf a notice, circular, pamphlet, letter or poster, or over any radio station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.
N.C. Gen. Stat. § 58-63-15(1), (2) (1999). In the present case, State Farm’s alleged statement does not indicate that it will not pay fraudulent claims, only that it wishes not to do so. Plaintiff does not allege in his рleadings that State Farm does, in fact, wish to pay fraudulent claims. Therefore, the complaint does not state facts sufficient to give rise to a cause of action under this section.
Plaintiff also argues that State Farm also breached N.C. Gen. Stat. § 58-63-15(11)(a), (b), and (c), which provide that “[u]nfair [c]laim [settlement [practices” occur when, as a general business practice, an insurer:
a. Misrepresents] pertinent facts or insurance policy provisions relating to coverages at issue;
b. Fail[s] to acknowledge and act reasоnably promptly upon communications with respect to claims arising under insurance policies;
c. Fail[s] to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies[.]
N.C. Gen. Stat. § 58-63-15(11)(a)-(c) (1999). N.C. Gen. Stat. § 58-63-15 specifically states that it does not “of itself create any cause of action in favor of any person other than the [Insurance] Commissioner.” N.C. Gen. Stat. § 58-63-15(11). However, “a remedy ‘ “in the nature of a private action’ ” for the conduct described by and in [N.C. Gen. Stat.] § 58-63-15(11)” is created by N.C. Gen. Stat. § 75-1.1.
Murray v. Nationwide Mutual Ins. Co.,
In the present case, plaintiff has made no allegation that State Farm engages in the “general business practice” of “ [misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.” N.C. Gen. Stat. § 58-63-15(11)(a). Thus, he fails to state facts sufficient to make a claim based on conduct in violation of
N.C. Gen. Stat. § 58-63-15(11)(a). Therefore, our review is limited to whether plaintiff hаs alleged
The pleading in the present case alleges in pertinent part, on the issues of State Farm’s promptness in acting on plaintiffs communication and promptness in investigation:
24. That, upon information and belief, after Plaintiffs automobile accident or collision on December 26, 1993, claims for personal injury were submitted to Defendant for alleged personal injuries sustained in the collision on December 26, 1993, herein-before described, by not only the driver of the described Camaro, Dameion Poston, and the other two occupants, Darrell Jackson and Deron Thompson, all three of whom were occupants of said Camaro at the time of the collision, but also a claim for personal iryury from Arthur Poston, Jr., who was the owner of said Camaro but was not an occupant of said Camaro at the time of the collision alleged herein.
25. That Plaintiff demanded of Defendant that it deny and defend against said claims and Plaintiff insured [sic] that Defendant had full knowledge of Plaintiffs observations and opinions as well as those of the investigating officer.
26. That Defendant owed Plaintiff a contractual, a fiduciary and a statutory duty to act in good faith in it’s [sic] investigation, evaluation and determination as to whether to settle or defend against the above-referenced claims for personal injury against Plaintiff, Defendant’s insured.
27. That in the exercise of a good faith effort to fulfill the aforesaid duties owed to the Plaintiff, Defendant knew or should have known that aforesaid claims for personal injury were false and fraudulent and that settlement or payment of said claims was contrary to the public policy of the State of North Carolina in that such settlement or payment of false and fraudulent claims promoted, encouraged or acquiesced in criminal conduct on the рart of the claimants; further said settlement or payment of the false and fraudulent claims was contrary to Defendant’s own advertising campaign and contrary to it’s [sic] contractual and fiduciary and statutory duties owed Plaintiff.
28. That, upon information and belief, Defendant, nevertheless, thereafter settled with and paid claimants Dameion Poston, Darrell Jackson, and Deron Thompson . . . [and] Arthur Poston, Jr. ... .
29. That not only did Defendant fail to act in good faith but in fact acted in bad faith by its failure to make adequate investigation and evaluation of the fаlse and fraudulent claims and by its failure to honor its duty to defend against the false and fraudulent claims in that Defendant was motivated by considerations of its own pecuniary gain....
While plaintiff alleges that State Farm’s investigation was not adequate in that it should have revealed that the claims in question were false and fraudulent, nowhere does plaintiff allege that State Farm failed to “acknowledge and act reasonably promptly upon communications with respect to claims arising under” plaintiff’s policy, or failed to “adopt and implement reasonable standards for the prompt investigation of claims arising undеr” plaintiff’s policy. N.C. Gen. Stat. § 58-63-15(11)(b), (c) (emphasis added). Again, plaintiff has failed to state facts sufficient to make claims under N.C. Gen. Stat. § 58-63-15(11)(b) and (c). Accordingly, plaintiff’s first assignment of error is overruled.
Next, plaintiff asserts that it was error to dismiss his claims for tortious breach of the insurance contract and punitive damages for failure to state a claim for which relief may be granted. State Farm argues that plaintiff brought a prior suit similar to the one at bar, which was dismissed pursuant to Rule 41(c) of the North Carolina Rules of Civil Procedure, except that the tortious brеach of contract claim was not included in the former suit; therefore, Rule 41(c) did not preserve this claim and because it was brought beyond
Our review of the amended record reveals that the prior suit did not contain a tortious breach of contract claim. However, the trial court stated that this issue was ruled on only after reviewing the complaint, its amendment, and applicable law. Plaintiff’s complaint nowhere indicates that the tortious breach of contract action was not brought in the prior action. Matters outside the complaint are only considered in a 12(b)(6) motion if the motion has been converted into a motion for summary judgment:
If, on a [12(b)(6)] motion ... to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present аll material made pertinent to such a motion by Rule 56.
N.C. Gen. Stat. § 1A-1, Rule 12(b) (1990). The order appealed from does not indicate that this motion was converted into a Rule 56 motion, therefore our review is limited to the same standard as the trial court. Because the statute of limitations defense is outside our purview, we shall determine if plaintiff has stated a claim for which relief may be granted under Rule 12(b)(6).
Tortious breach of contract has been recognized as a cause of action in North Carolina.
Olive v. Great American Ins. Co.,
It is well-settled that punitive damages arе generally not allowed for a breach of contract with the exception of breach of contract to marry. Punitive damages are not allowed even when the breach is wilful, malicious or oppressive. However, “when the breach of contract also constitutes or is accompanied by an identifiable tortious act, the tort committed may be grounds for recovery of punitive damages.” Mere allegations of an identifiable tort are “insufficient alone to support a claim for punitive damages.” Furthermore, in order to sustain a claim for punitive damages, there must be an identifiable tort which is accompanied by or partakes of some element of aggravation.
Shore v. Farmer,
“Aggravation includes ‘fraud, malice, such a degree of negligence as indicаtes a reckless indifference to consequences, oppression, insult, rudeness, caprice, [and] willfulness.’ ”
Taha v. Thompson,
Based on the foregoing, we hold that plaintiff has failed to state facts indicating that State Farm’s settlement with claimants rose to the level of aggravation defined in
Taha v. Thompson.
Plaintiff has also failed to allege facts indicating an intentional wrong by State Farm. Punitive damages are only awarded ás punishment for intentional wrongful conduct.
Transportation Co. v. Brotherhood,
Plaintiff next assigns error to the dismissal of his breach of contract and constructive fraud claims. Plaintiff argues that because the trial court considered these claims in State Farm’s 12(b)(6) motion and did not thereupon dismiss them, they should have survived State Farm’s 12(c) motion. As we have recognized, a complaint is subject to dismissal under Rule 12(b)(6) “if no law exists to support the claim
made, if sufficient facts to make out a good claim are absent, or if facts are disclosed which will necessarily defeat the claim.”
Burgess v. Your House of Raleigh,
Next, plaintiff contends the trial court incorrectly dismissed his claim for breach of contract under Rule 12(c) of the North Carolina Rules of Civil Procedure.
Judgment on the pleadings, pursuant to Rule 12(c), is appropriate “ ‘when all the material allegations of fact are admitted in the pleadings and only questions of law remain.’ ” [Town of Bladenboro v. McKeithan,44 N.C. App. 459 , 460,261 S.E.2d 260 , 261] (quoting Ragsdale [v. Kennedy], 286 N.C. [130,] 136-37, 209 S.E.2d [494,] 499 [(1974)).] The trial court must “ ‘view the facts and permissible inferences in the light most favorable to the non-moving party[],’ ” taking all well-pleadеd factual allegations in the non-moving party’s pleadings as true. Id. at 461,261 S.E.2d at 262 (quoting Ragsdale,286 N.C. at 136-37 ,209 S.E.2d at 499 .
When ruling on a motion for judgment on the pleadings, the trial court “is to consider only the pleadings and any attached exhibits, which become part of the pleadings.” Minor v. Minor,70 N.C. App. 76 , 78,318 S.E.2d 865 , 867, disc. review denied,312 N.C. 495 ,322 S.E.2d 558 (1984).
Terrell v. Lawyers Mut. Liab. Ins. Co.,
Plaintiff alleges that the breach of contract occurred when the settlement of claims was made by State Farm absent good faith. State Farm argues that settlement of the claims, if the claims were fraudulent, may have been a bad judgment, but such conduct did not rise to the level of bad faith.
The insurance policy in the present case provides that State Farm may “settle or defend” any claim or suit as it considers
We have found no case in this state which considers the issue of whether an insurance company can be held liable for settling a claim where the insured notified his insurer that the claim was fraudulent. In a similar case from Ohio,
Marginian v. Allstate Insurance Co.,
Many jurisdictions mandate that a liability insurer must consider the insured’s interests in accepting or rejecting a compromise offer, 7A Am. Jur. 2d Automobile Insurance § 374 (1990). Similarly, our Supreme Court has stated:
The law imposes on the insurer the duty of carrying out in good faith its contract of insurance. The policy provision giving the insurer the right to effectuate settlement was put in for the protection of the insured as well as the insurer. It is a matter of common knowledge that fair and reasonable settlements can generally be made at much less than the financial burden imposed in litigating claims. It is for this reason that courts have consistently held that an insurer owes a duty to its insured to act diligently and in good faith in effecting sеttlements within policy limits, and if necessary to accomplish that purpose, to pay the full amount of the policy. Liability has been repeatedly imposed upon insurance companies because of their failure to act diligently and in good faith in effectuating settlements with claimants.
Alford,
Based on the foregoing, it is evident that State Farm owed the duty of good faith in carrying out its contract of insurance. The affidavit with attached exhibits of State Farm’s claims superintendent were part of State Farm’s pleadings and indicate in pertinent part that: (1) an investigation was conducted by State Farm, and revealed that the investigating officer did not remember how many occupants were in the Camarо and this was not indicated on the accident report; (2)
The standard automobile liability insurance policy provides that the insurer may, in its discretion, settle any claim against the insured for which it would be liable under the terms of the policy. When exercised in good faith these provisions arе valid and binding on the insured. However, it is now settled law in this State that the exercise of this privilege by the insurer will not bar the right of the insured, or anyone covered by his policy, to sue the relea-sor for his damages where he has neither ratified nor consented to such settlement.
Bradford v. Kelly,
Lastly, plaintiff assigns error to the trial court’s dismissal of its claim for constructive fraud pursuant to Rule 12(c) of the North Carolina Rules of Civil Procedure. The Nоrth Carolina Supreme Court has summarized the law pertaining to constructive fraud as follows:
Constructive fraud arises where a confidential or fiduciary relationship exists, and its proof is less “exacting” than that required for actual fraud. Terry v. Terry,302 N.C. 77 , 83,273 S.E.2d 674 , 677 (1981). When a fiduciary relationship exists between parties to a transaction, equity raises a presumption of fraud when the superior party obtains a possible benefit. “This presumption arises not so much because [the fiduciary] has committed a fraud, but [because] he may have done so.” Atkins v. Withers,94 N.C. 581 , 590 (1886). The superior party may rebut the presumption by showing, for example, “that the confidence reposed in him was not abused, but that the other party acted on independent advice.” 37 Am. Jur. 2d Fraud and Deceit § 442, at 603. Once rebutted, the presumption evaporates, and the accusing party must shoulder the burden of producing actual evidence of fraud.
In stating a cause of action for constructive fraud, the plaintiff must allege facts and circumstances “(1) which created the relation of trust and confidence, and (2) led up to and surrounded the consummation of the transaction in which defendant is alleged to have taken advantage of his positionof trust to the hurt of plaintiff.” Rhodes v. Jones, 232 N.C. 547 , 549,61 S.E.2d 725 , 726 (1950).
Watts v. Cumberland County Hosp. System,
Affirmed.