March 30, 2022
Supreme Court
No. 2021-30-Appeal. (PC 16-4707)
Daniel Houle et al. :
v. :
Liberty Insurance Corporation, : Alias, A/K/A Liberty Mutual Group, A/K/A Liberty Mutual, A/K/A Liberty Mutual Insurance.
NOTICE: This opinion is subject to formal revision before publication in the Rhode Island Reporter. Readers are requested to notify the Opinion Analyst, Supreme Court of Rhode Island, 250 Benefit Street, Providence, Rhode Island 02903, at Telephone 222-3258 or Email opinionanalyst@courts.ri.gov of any typographical or other formal errors in order that corrections may be made before the opinion is published. Supreme Court
Liberty Insurance Corporation, : Alias, A/K/A Liberty Mutual Group, A/K/A Liberty Mutual, A/K/A Liberty Mutual Insurance.
Present: Suttell, C.J., Goldberg, Robinson, Lynch Prata, and Long, JJ.
OPINION
Justice Lynch Prata, for the Court. This case came before the Supreme
Court on March 1, 2022, pursuant to an order directing the parties to appear and
show cause why the issues raised in this appeal should not be summarily decided.
The plaintiffs, Daniel Houle and Karen Houle (plaintiffs or the Houles), appeal from
a decision and order of the Superior Court granting the motion for judgment on the
pleadings by the defendant, Liberty Mutual Insurance Corporation, alias, a/k/a
Liberty Mutual Group, a/k/a Liberty Mutual, a/k/a Liberty Mutual Insurance
(defendant or Liberty Mutual). 1 After considering the parties’ written and oral
1 It appears from the record of the case that the name of the defendant entity is “Liberty Mutual Insurance Company.”
-1- submissions and reviewing the record, we are satisfied that cause has not been shown
and that this appeal may be decided at this time. For the reasons set forth herein, we
vacate the order of the Superior Court.
Facts and Travel
On February 21, 2015, the roof at plaintiffs’ home located at 520 Snake Hill
Road in North Scituate, Rhode Island (the property), collapsed due to accumulating
ice and snow. The property was insured through a “Libertyguard Deluxe
Homeowners Policy” issued by Liberty Mutual (the policy or the Libertyguard
Deluxe policy). The plaintiffs timely notified Liberty Mutual about the loss, and an
adjuster from Liberty Mutual was assigned to investigate. The adjuster submitted a
repair estimate of $18,349.66. Thereafter, the Houles submitted proof-of-loss
documents estimating that the cost of repair would amount to $193,280.40. The
defendant then enlisted the services of an engineering firm and a construction
company to draw plans and estimate the cost of repairs. The estimate was
$53,615.26.
On June 20, 2016, the Houles informed Liberty Mutual that they were electing
to invoke the appraisal provision of the Libertyguard Deluxe policy, which provides,
in pertinent part, that:
“If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two
-2- appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the ‘residence premises’ is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.”
Both parties selected their appraiser, but the appraisers could not agree on an umpire.
The Houles filed the instant action in Superior Court on October 7, 2016,
seeking “relief in the form of a judgment naming an independent and qualified
umpire to set the amount of loss for insurance coverage[.]” Liberty Mutual filed an
answer and counterclaim, as well as an objection to plaintiffs’ request for declaratory
relief and cross-motion for declaratory judgment. On December 6, 2016, the various
matters were heard before a Superior Court justice. On December 30, 2016, an order
entered by agreement, stating that the parties had agreed upon the selection of an
umpire. The appraisal hearing went forward on March 9, 2018, and plaintiffs were
awarded $81,641 by the appraisal panel.
On August 7, 2019, plaintiffs filed a second amended complaint, alleging that
Liberty Mutual had breached the terms of the Libertyguard Deluxe policy “by not
performing a full and complete investigation.” The plaintiffs also alleged that
defendant “acted in bad faith in the handling of” their claim. On November 25,
2019, defendant filed a motion for judgment on the pleadings, arguing that plaintiffs’
-3- claims failed as a matter of law because plaintiffs had failed to allege facts that could
prove that Liberty Mutual breached the policy and/or acted in bad faith. The Houles
objected to the motion, maintaining that, as pled in the second amended complaint,
defendant’s alleged failure to “provide a full and complete investigation of the
Houles’ loss” constituted a prima facie case for breach of contract and bad faith.
A hearing was held on defendant’s motion on February 26, 2020, at the
conclusion of which the motion justice issued a decision dismissing plaintiffs’
complaint. The motion justice found that plaintiffs failed to “set forth sufficient facts
relating to the allegedly deficient investigation and how [it] was a breach of contract
and led to damages” and did not identify “any part of the policy that’s been breached
by * * * Liberty Mutual.” She noted that plaintiffs’ amount-of-loss “claim went
through the full appraisal process[,]” and was “fully and finally adjudicated by” that
process. Because the motion justice found that plaintiffs could not maintain an
action for breach of contract against defendant, she also dismissed their bad-faith
claim because she found “that bad faith claims cannot be sustained without a breach
of contract claim[.]”2
2 In her bench decision, the motion justice also addressed Liberty Mutual’s counterclaim against plaintiffs, which sought a declaratory judgment that “Liberty Mutual has fully complied with all obligations under the [p]olicy and has not committed a breach of the [p]olicy.” The motion justice declined to render a declaratory judgment on the counterclaim; on March 13, 2020, the parties stipulated in the Superior Court that all claims against plaintiffs were dismissed, thereby resolving defendant’s counterclaim.
-4- An order consistent with the motion justice’s bench decision entered, granting
defendant’s motion for judgment on the pleadings. The Superior Court granted
defendant’s motion for entry of judgment, and plaintiffs filed a timely notice of
appeal.
Standard of Review
Pursuant to Rule 12(c) of the Superior Court Rules of Civil Procedure, a
hearing justice may “dispos[e] of a case early in the litigation process when the
material facts are not in dispute after the pleadings have been closed and only
questions of law remain to be decided.” Premier Home Restoration, LLC v. Federal
National Mortgage Association, 245 A.3d 745, 748 (R.I. 2021) (quoting Nugent v.
State Public Defender’s Office, 184 A.3d 703, 706 (R.I. 2018)). “When reviewing
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March 30, 2022
Supreme Court
No. 2021-30-Appeal. (PC 16-4707)
Daniel Houle et al. :
v. :
Liberty Insurance Corporation, : Alias, A/K/A Liberty Mutual Group, A/K/A Liberty Mutual, A/K/A Liberty Mutual Insurance.
NOTICE: This opinion is subject to formal revision before publication in the Rhode Island Reporter. Readers are requested to notify the Opinion Analyst, Supreme Court of Rhode Island, 250 Benefit Street, Providence, Rhode Island 02903, at Telephone 222-3258 or Email opinionanalyst@courts.ri.gov of any typographical or other formal errors in order that corrections may be made before the opinion is published. Supreme Court
Liberty Insurance Corporation, : Alias, A/K/A Liberty Mutual Group, A/K/A Liberty Mutual, A/K/A Liberty Mutual Insurance.
Present: Suttell, C.J., Goldberg, Robinson, Lynch Prata, and Long, JJ.
OPINION
Justice Lynch Prata, for the Court. This case came before the Supreme
Court on March 1, 2022, pursuant to an order directing the parties to appear and
show cause why the issues raised in this appeal should not be summarily decided.
The plaintiffs, Daniel Houle and Karen Houle (plaintiffs or the Houles), appeal from
a decision and order of the Superior Court granting the motion for judgment on the
pleadings by the defendant, Liberty Mutual Insurance Corporation, alias, a/k/a
Liberty Mutual Group, a/k/a Liberty Mutual, a/k/a Liberty Mutual Insurance
(defendant or Liberty Mutual). 1 After considering the parties’ written and oral
1 It appears from the record of the case that the name of the defendant entity is “Liberty Mutual Insurance Company.”
-1- submissions and reviewing the record, we are satisfied that cause has not been shown
and that this appeal may be decided at this time. For the reasons set forth herein, we
vacate the order of the Superior Court.
Facts and Travel
On February 21, 2015, the roof at plaintiffs’ home located at 520 Snake Hill
Road in North Scituate, Rhode Island (the property), collapsed due to accumulating
ice and snow. The property was insured through a “Libertyguard Deluxe
Homeowners Policy” issued by Liberty Mutual (the policy or the Libertyguard
Deluxe policy). The plaintiffs timely notified Liberty Mutual about the loss, and an
adjuster from Liberty Mutual was assigned to investigate. The adjuster submitted a
repair estimate of $18,349.66. Thereafter, the Houles submitted proof-of-loss
documents estimating that the cost of repair would amount to $193,280.40. The
defendant then enlisted the services of an engineering firm and a construction
company to draw plans and estimate the cost of repairs. The estimate was
$53,615.26.
On June 20, 2016, the Houles informed Liberty Mutual that they were electing
to invoke the appraisal provision of the Libertyguard Deluxe policy, which provides,
in pertinent part, that:
“If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two
-2- appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the ‘residence premises’ is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.”
Both parties selected their appraiser, but the appraisers could not agree on an umpire.
The Houles filed the instant action in Superior Court on October 7, 2016,
seeking “relief in the form of a judgment naming an independent and qualified
umpire to set the amount of loss for insurance coverage[.]” Liberty Mutual filed an
answer and counterclaim, as well as an objection to plaintiffs’ request for declaratory
relief and cross-motion for declaratory judgment. On December 6, 2016, the various
matters were heard before a Superior Court justice. On December 30, 2016, an order
entered by agreement, stating that the parties had agreed upon the selection of an
umpire. The appraisal hearing went forward on March 9, 2018, and plaintiffs were
awarded $81,641 by the appraisal panel.
On August 7, 2019, plaintiffs filed a second amended complaint, alleging that
Liberty Mutual had breached the terms of the Libertyguard Deluxe policy “by not
performing a full and complete investigation.” The plaintiffs also alleged that
defendant “acted in bad faith in the handling of” their claim. On November 25,
2019, defendant filed a motion for judgment on the pleadings, arguing that plaintiffs’
-3- claims failed as a matter of law because plaintiffs had failed to allege facts that could
prove that Liberty Mutual breached the policy and/or acted in bad faith. The Houles
objected to the motion, maintaining that, as pled in the second amended complaint,
defendant’s alleged failure to “provide a full and complete investigation of the
Houles’ loss” constituted a prima facie case for breach of contract and bad faith.
A hearing was held on defendant’s motion on February 26, 2020, at the
conclusion of which the motion justice issued a decision dismissing plaintiffs’
complaint. The motion justice found that plaintiffs failed to “set forth sufficient facts
relating to the allegedly deficient investigation and how [it] was a breach of contract
and led to damages” and did not identify “any part of the policy that’s been breached
by * * * Liberty Mutual.” She noted that plaintiffs’ amount-of-loss “claim went
through the full appraisal process[,]” and was “fully and finally adjudicated by” that
process. Because the motion justice found that plaintiffs could not maintain an
action for breach of contract against defendant, she also dismissed their bad-faith
claim because she found “that bad faith claims cannot be sustained without a breach
of contract claim[.]”2
2 In her bench decision, the motion justice also addressed Liberty Mutual’s counterclaim against plaintiffs, which sought a declaratory judgment that “Liberty Mutual has fully complied with all obligations under the [p]olicy and has not committed a breach of the [p]olicy.” The motion justice declined to render a declaratory judgment on the counterclaim; on March 13, 2020, the parties stipulated in the Superior Court that all claims against plaintiffs were dismissed, thereby resolving defendant’s counterclaim.
-4- An order consistent with the motion justice’s bench decision entered, granting
defendant’s motion for judgment on the pleadings. The Superior Court granted
defendant’s motion for entry of judgment, and plaintiffs filed a timely notice of
appeal.
Standard of Review
Pursuant to Rule 12(c) of the Superior Court Rules of Civil Procedure, a
hearing justice may “dispos[e] of a case early in the litigation process when the
material facts are not in dispute after the pleadings have been closed and only
questions of law remain to be decided.” Premier Home Restoration, LLC v. Federal
National Mortgage Association, 245 A.3d 745, 748 (R.I. 2021) (quoting Nugent v.
State Public Defender’s Office, 184 A.3d 703, 706 (R.I. 2018)). “When reviewing
the decision of a hearing justice on a motion for judgment on the pleadings pursuant
to [R]ule 12(c), we utilize the Rule 12(b)(6) motion-to-dismiss test.” Nugent, 184
A.3d at 706. As such, “a judgment on the pleadings ‘may be granted only when it
is established beyond a reasonable doubt that a party would not be entitled to relief
from the defendant under any set of conceivable facts that could be proven in support
of its claim.’” Premier Home Restoration, LLC, 245 A.3d at 748 (quoting Nugent,
184 A.3d at 706-07).
-5- Discussion
On appeal, plaintiffs argue that the motion justice erred in granting judgment
on the pleadings in favor of Liberty Mutual because, they contend, the pleadings
established the facts necessary to support claims for breach of contract and bad faith.
Specifically, plaintiffs maintain that, pursuant to the Libertyguard Deluxe policy,
“Liberty Mutual had an inherent contractual obligation to perform a full and
complete investigation of the loss[,]” which it failed to do.
It is well established that the terms of an insurance policy are interpreted “in
accordance [with] the rules of construction that govern contracts.” Derderian v.
Essex Insurance Co., 44 A.3d 122, 127 (R.I. 2012). “[W]hether a party has
substantially performed or materially breached its contractual obligations is usually
a question of fact to be decided by the jury.” Women’s Development Corporation v.
City of Central Falls, 764 A.2d 151, 158 (R.I. 2001). Moreover, as this Court has
explained many times, “virtually every contract contains an implied covenant of
good faith and fair dealing between the parties[,]” McNulty v. Chip, 116 A.3d 173,
185 (R.I. 2015) (brackets omitted) (quoting Dovenmuehle Mortgage, Inc. v.
Antonelli, 790 A.2d 1113, 1115 (R.I. 2002)), which “ensures that ‘contractual
objectives may be achieved[.]’” Id. (quoting Ide Farm & Stable, Inc. v. Cardi, 110
R.I. 735, 739, 297 A.2d 643, 645 (1972)).
-6- In the case at bar, the motion justice granted defendant’s motion for judgment
on the pleadings because she found that “[p]laintiff[s have] not identified any part
of the policy that[ has] been breached by * * * Liberty Mutual.” She acknowledged
the contention “that there is an implicit requirement [in the contract] that the
insurance company * * * do things correctly and * * * not do a shoddy or an
insufficient job at the investigation[,]” but still found that plaintiffs’ breach-of-
contract claim failed because the complaint did not plead that defendant’s conduct
caused damages to plaintiffs and “plaintiffs’ claim * * * was fully and finally
adjudicated by the appraisal process.”
After reviewing the record before us, we are of the opinion that the motion
justice erred in granting judgment on the pleadings in favor of defendant. The factual
allegations contained in the pleadings, when viewed in the light most favorable to
the nonmoving plaintiffs, do not allow for the Superior Court to conclude beyond a
reasonable doubt that plaintiffs would be unable to prove facts at trial that constitute
a claim for breach of contract. Cf. Chase v. Nationwide Mutual Fire Insurance
Company, 160 A.3d 970, 974-75 (R.I. 2017) (holding that a plaintiff’s allegation that
its insurer “engaged in a pattern of dilatory conduct thereby refusing to fulfill its
obligations under the [p]olicy” was too “broad and undetailed” to withstand
judgment on the pleadings and allow plaintiff’s breach-of-contract and estoppel
arguments to proceed). The Houles alleged, in their second amended complaint, that
-7- Liberty Mutual breached the contract by not performing a full and complete
investigation of the loss. The allegation was supported by additional averments in
the complaint, including that defendant “prepar[ed] an estimate in March of 2015
without performing a full and complete investigation, hir[ed] an unlicensed engineer
to prepare a remediation plan and to draw engineering documents, and enlist[ed] the
services of an unlicensed contractor to prepare an estimate.”
The linchpin of the motion justice’s decision was plaintiffs’ purported failure
to point out specific language in the policy that detailed defendant’s contractual
duties related to investigating a loss. However, this conclusion plainly overlooks the
implied covenant of good faith and fair dealing that is inherent in every insurance
contract. See Skaling v. Aetna Insurance Company, 799 A.2d 997, 1010, 1011 (R.I.
2002) (recognizing that insurers are obligated to deal with their insureds “consistent
with [the] implied in law obligations of good faith and fair dealing” and that
“[i]nsurers doing business in Rhode Island have an implied obligation to promptly
and fully respond to their insured, to investigate a claim and to subject that claim to
appropriate review”). It cannot be said that the allegations as pled, and under any
set of facts that may be proven at trial, would not support a claim for breach of
contract or breach of the implied covenant of good faith and fair dealing. See
McNulty, 116 A.3d at 185 (making clear that a claim for breach of the implied
-8- covenant of good faith and fair dealing is not an independent cause of action that
must be pled separate and apart from a claim for breach of contract).
Conclusion
For the foregoing reasons, we conclude that the grant of judgment on the
pleadings for the defendant was erroneous. The order of the Superior Court granting
defendant’s motion is vacated, and the papers in this case may be remanded to the
Superior Court for further proceedings.
-9- STATE OF RHODE ISLAND SUPREME COURT – CLERK’S OFFICE Licht Judicial Complex 250 Benefit Street Providence, RI 02903
OPINION COVER SHEET
Daniel Houle et al. v. Liberty Insurance Corporation, Title of Case Alias, A/K/A Liberty Mutual Group, A/K/A Liberty Mutual, A/K/A Liberty Mutual Insurance. No. 2021-30-Appeal. Case Number (PC 16-4707)
Date Opinion Filed March 30, 2022
Suttell, C.J., Goldberg, Robinson, Lynch Prata, and Justices Long, JJ.
Written By Associate Justice Erin Lynch Prata
Source of Appeal Providence County Superior Court
Judicial Officer from Lower Court Associate Justice Melissa E. Darigan
For Plaintiffs:
Tanis G. Caine, Esq. Attorney(s) on Appeal Kevin M. Daley, Esq. For Defendant:
Christopher M. Reilly, Esq.
SU-CMS-02A (revised June 2020)