Lessard v. Vermont Mutual Ins. Co. 12-CV-236-SM 2/27/13 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Ann & Richard Lessard. Plaintiffs
v. Case No. 12-cv-236-SM Opinion No. 2013 DNH 026 Vermont Mutual Insurance Co., Defendant
O R D E R
Ann and Richard Lessard bring this action against Vermont
Mutual Insurance Company, asserting that it wrongfully denied the
Lessards' claim under a personal liability umbrella policy. In
their amended complaint, the Lessards advance two claims: breach
of contract (count one) and breach of the implied covenant of
good faith and fair dealing (count two). Vermont Mutual moves to
dismiss count two, saying it fails to state a viable cause of
action under New Hampshire common law. The Lessards object.
For the reasons discussed, Vermont Mutual's motion to
dismiss count two is granted.
Standard of Review
When ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6), the court must "accept as true all well-pleaded facts
set out in the complaint and indulge all reasonable inferences in favor of the pleader." SEC v. Tambone, 597 F.3d 436, 441 (1st
Cir. 2010). Although the complaint need only contain "a short
and plain statement of the claim showing that the pleader is
entitled to relief," Fed. R. Civ. P. 8(a)(2), it must allege each
of the essential elements of a viable cause of action and
"contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face." Ashcroft v.
Iqbal. 556 U.S. 662, 678 (2009) (citation and internal
punctuation omitted).
Background
Accepting the allegations set forth in the amended complaint
as true, the relevant facts are as follows. In July of 2003,
Richard Lessard was driving a motorcycle on which his wife, Ann,
was a passenger. When the vehicle in front of him stopped to
avoid a deer in the road, Richard stopped his motorcycle. A car
that had been traveling behind the Lessards then collided with
the rear of their motorcycle, seriously injuring Ann.
The driver of the other vehicle was insured to a limit of
$100,000. Her carrier settled the Lessards' claims against her
for the policy limit. The Lessards then made a claim against
their own motorcycle insurance policy (issued by EMC Insurance
Company), which provided underinsured/uninsured coverage up to a
2 limit of $250,000. Although it is not clear from the amended
complaint, the court will assume that the Lessards also made a
timely claim against Vermont Mutual, under their personal
umbrella policy. That umbrella policy provided coverage up to $1
million, but had a retained limit of $250,000. That meant
coverage under the umbrella policy would not be "triggered"
unless the Lessards' damages exceeded $250,000.
The Lessards say that in January of 2012, they asked Vermont
Mutual to participate in mediation, aimed at resolving their
claims against both EMC (for covered damages up to $250,000) and
Vermont Mutual (for covered damages in excess of $250,000) . In
April, Vermont Mutual declined the invitation, contending that,
given the information the Lessards had provided to date, their
damages did not appear to equal or exceed the umbrella policy's
$250,000 threshold. In fact, says Vermont Mutual, the Lessards
never made a demand under the policy and it was not until the day
after this action was filed that they submitted a copy of a
medical report the Lessards claim establishes the extent and
permanency of Mrs. Lessard's injuries.
Approximately one month later, in May of 2012, the Lessards
settled their underinsured motorist claim against EMC for an
3 undisclosed amount. They brought this action against Vermont
Mutual in June of 2012.
Discussion
I. The Implied Covenant of Good Faith.
New Hampshire's common law provides that, in certain
circumstances, contracts contain an implied covenant of good
faith and fair dealing.
[U]nder an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement's value, the parties' intent to be bound by an enforceable contract raises an implied obligation of good faith to observe reasonable limits in exercising that discretion, consistent with the parties' purpose or purposes in contracting.
Centronics Corp. v. Genicom Corp.. 132 N.H. 133, 143 (1989)
(emphasis supplied). The New Hampshire Supreme Court has
recognized three distinct categories of contract cases in which
the implied covenant of good faith and fair dealing is
implicated: "those dealing with standards of conduct in contract
formation, with termination of at-will employment contracts, and
with limits on discretion in contractual performance." .Id. at
139. Count two of the Lessards' amended complaint implicates the
latter of those three categories.
4 In the context of an insurance contract, the New Hampshire
Supreme Court has made clear that " [n]ot every delay or refusal
to settle or pay a claim under the policy will constitute a
breach of the contract." Lawton v. Great Southwest Fire Ins.
Co., 118 N.H. 607, 612 (1978). Moreover, "allegations of an
insurer's wrongful refusal or delay to settle a first-party claim
do not state a cause of action in tort." .Id. at 614. But,
" [w]here the [insurer's] failure to make prompt payment under the
policy is to coerce the insured into accepting less than full
performance of the insurer's contractual obligations, . . . there
is a breach of this covenant [of good faith and fair dealing]."
Id. at 612 (emphasis supplied). In other words, "Lawton may be
seen as holding that under a contract leaving the time for
performance unspecified, good faith limits discretion under a
standard of commercial reasonableness." Centronics, 132 N.H. at
142 .
II. Count Two of the Amended Complaint.
In count two of their amended complaint, the Lessards assert
the following:
57. Plaintiff Ann Lessard has already sustained over $150,000.00 in medical expenses.
58. She has a significant medically documented permanent impairment.
5 59. The value of this case is clearly in excess of $250,000.00.
60. The Plaintiffs, through counsel, have invited Vermont Mutual to attempt to resolve this claim through private mediation.
61. Vermont Mutual not only rejected that offer, but has indicated that it refuses to pay anything to the Plaintiffs in this case.
62. As a result, Vermont Mutual has forced the Plaintiffs to file this action to vindicate their contractual rights.
63. This constitutes a breach of Vermont Mutual's duty of good faith and fair dealing with respect to the insurance contract at issue.
Amended Complaint (document no. 10). Plainly, those allegations
are sufficient to state a viable claim for breach of contract.
They are not, however, sufficient to state a separate claim for
breach of the implied covenant of good faith. For example, the
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Lessard v. Vermont Mutual Ins. Co. 12-CV-236-SM 2/27/13 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Ann & Richard Lessard. Plaintiffs
v. Case No. 12-cv-236-SM Opinion No. 2013 DNH 026 Vermont Mutual Insurance Co., Defendant
O R D E R
Ann and Richard Lessard bring this action against Vermont
Mutual Insurance Company, asserting that it wrongfully denied the
Lessards' claim under a personal liability umbrella policy. In
their amended complaint, the Lessards advance two claims: breach
of contract (count one) and breach of the implied covenant of
good faith and fair dealing (count two). Vermont Mutual moves to
dismiss count two, saying it fails to state a viable cause of
action under New Hampshire common law. The Lessards object.
For the reasons discussed, Vermont Mutual's motion to
dismiss count two is granted.
Standard of Review
When ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6), the court must "accept as true all well-pleaded facts
set out in the complaint and indulge all reasonable inferences in favor of the pleader." SEC v. Tambone, 597 F.3d 436, 441 (1st
Cir. 2010). Although the complaint need only contain "a short
and plain statement of the claim showing that the pleader is
entitled to relief," Fed. R. Civ. P. 8(a)(2), it must allege each
of the essential elements of a viable cause of action and
"contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face." Ashcroft v.
Iqbal. 556 U.S. 662, 678 (2009) (citation and internal
punctuation omitted).
Background
Accepting the allegations set forth in the amended complaint
as true, the relevant facts are as follows. In July of 2003,
Richard Lessard was driving a motorcycle on which his wife, Ann,
was a passenger. When the vehicle in front of him stopped to
avoid a deer in the road, Richard stopped his motorcycle. A car
that had been traveling behind the Lessards then collided with
the rear of their motorcycle, seriously injuring Ann.
The driver of the other vehicle was insured to a limit of
$100,000. Her carrier settled the Lessards' claims against her
for the policy limit. The Lessards then made a claim against
their own motorcycle insurance policy (issued by EMC Insurance
Company), which provided underinsured/uninsured coverage up to a
2 limit of $250,000. Although it is not clear from the amended
complaint, the court will assume that the Lessards also made a
timely claim against Vermont Mutual, under their personal
umbrella policy. That umbrella policy provided coverage up to $1
million, but had a retained limit of $250,000. That meant
coverage under the umbrella policy would not be "triggered"
unless the Lessards' damages exceeded $250,000.
The Lessards say that in January of 2012, they asked Vermont
Mutual to participate in mediation, aimed at resolving their
claims against both EMC (for covered damages up to $250,000) and
Vermont Mutual (for covered damages in excess of $250,000) . In
April, Vermont Mutual declined the invitation, contending that,
given the information the Lessards had provided to date, their
damages did not appear to equal or exceed the umbrella policy's
$250,000 threshold. In fact, says Vermont Mutual, the Lessards
never made a demand under the policy and it was not until the day
after this action was filed that they submitted a copy of a
medical report the Lessards claim establishes the extent and
permanency of Mrs. Lessard's injuries.
Approximately one month later, in May of 2012, the Lessards
settled their underinsured motorist claim against EMC for an
3 undisclosed amount. They brought this action against Vermont
Mutual in June of 2012.
Discussion
I. The Implied Covenant of Good Faith.
New Hampshire's common law provides that, in certain
circumstances, contracts contain an implied covenant of good
faith and fair dealing.
[U]nder an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement's value, the parties' intent to be bound by an enforceable contract raises an implied obligation of good faith to observe reasonable limits in exercising that discretion, consistent with the parties' purpose or purposes in contracting.
Centronics Corp. v. Genicom Corp.. 132 N.H. 133, 143 (1989)
(emphasis supplied). The New Hampshire Supreme Court has
recognized three distinct categories of contract cases in which
the implied covenant of good faith and fair dealing is
implicated: "those dealing with standards of conduct in contract
formation, with termination of at-will employment contracts, and
with limits on discretion in contractual performance." .Id. at
139. Count two of the Lessards' amended complaint implicates the
latter of those three categories.
4 In the context of an insurance contract, the New Hampshire
Supreme Court has made clear that " [n]ot every delay or refusal
to settle or pay a claim under the policy will constitute a
breach of the contract." Lawton v. Great Southwest Fire Ins.
Co., 118 N.H. 607, 612 (1978). Moreover, "allegations of an
insurer's wrongful refusal or delay to settle a first-party claim
do not state a cause of action in tort." .Id. at 614. But,
" [w]here the [insurer's] failure to make prompt payment under the
policy is to coerce the insured into accepting less than full
performance of the insurer's contractual obligations, . . . there
is a breach of this covenant [of good faith and fair dealing]."
Id. at 612 (emphasis supplied). In other words, "Lawton may be
seen as holding that under a contract leaving the time for
performance unspecified, good faith limits discretion under a
standard of commercial reasonableness." Centronics, 132 N.H. at
142 .
II. Count Two of the Amended Complaint.
In count two of their amended complaint, the Lessards assert
the following:
57. Plaintiff Ann Lessard has already sustained over $150,000.00 in medical expenses.
58. She has a significant medically documented permanent impairment.
5 59. The value of this case is clearly in excess of $250,000.00.
60. The Plaintiffs, through counsel, have invited Vermont Mutual to attempt to resolve this claim through private mediation.
61. Vermont Mutual not only rejected that offer, but has indicated that it refuses to pay anything to the Plaintiffs in this case.
62. As a result, Vermont Mutual has forced the Plaintiffs to file this action to vindicate their contractual rights.
63. This constitutes a breach of Vermont Mutual's duty of good faith and fair dealing with respect to the insurance contract at issue.
Amended Complaint (document no. 10). Plainly, those allegations
are sufficient to state a viable claim for breach of contract.
They are not, however, sufficient to state a separate claim for
breach of the implied covenant of good faith. For example, the
amended complaint does not allege that Vermont Mutual's allegedly
wrongful denial of the Lessards' claim was designed "to coerce
the insured into accepting less than full performance of the
insurer's contractual obligations." Lawton, 118 N.H. at 612.
Nor does it allege that Vermont Mutual is delaying payment (on
what it knows to be a legitimate claim under the policy) beyond a
commercially reasonable time. Nor does it allege that Vermont
Mutual has exceeded commercially reasonable limits in exercising
its discretion under the policy. See Centronics 132 N.H. at 143.
6 Nothing in count two of the amended complaint adds anything
of legal significance to the breach of contract claim set forth
in count one. In fact, the only meaningful distinction between
the two counts lies in the different damages the Lessards seek to
recover (in count two, they seek to recover economic damages,
damages for emotional distress and anxiety, and attorney's fees).
Because the Lessards' claim for breach of the implied
covenant of good faith and fair dealing merely restates their
breach of contract claim, and because their amended complaint
alleges no conduct by Vermont Mutual of the sort described in
Centronics and Lawton, count two fails to state a viable cause of
action under New Hampshire common law. See, e.g., Balsamo v.
University System of New Hampshire. 2011 WL 4566111, *4 (D.N.H.
Sept. 30, 2011); Lakeview Management, Inc. v. Care Realty, LLC,
2009 WL 903818, *24 (D.N.H. March 30, 2009) .
Conclusion
For the foregoing reasons, as well as those set forth in
defendant's memoranda (documents no. 9-1 and 13.), defendant's
motion to dismiss count two of the amended complaint (document
no. 9.) is granted.
7 SO ORDERED.
Steven j/McAuliffe Jnited States District Judge
February 27 2013
cc: Peter :C. Hutchins, Esq. Gary M . Burt, Esq.