United States District Court, E.D. Louisiana
SECTION:
"G"(5)
ORDER AND REASONS
NANNETTE JOLIVETTE BROWN CHIEF JUDGE UNITED STATES DISTRICT
COURT.
Before
the Court is Third-Party Defendant Bowles & Associates,
Inc's. (“Bowles”) “Rule 12(b)(6) Motion
to Dismiss.”[1] In this litigation, Plaintiff GeoVera
Specialty Insurance Company (“GeoVera”) alleges
that Defendants Ebert Joachin and Mariette Joachin (the
“Joachins”) falsified their insurance application
and filed a fraudulent insurance claim.[2] The Joachins
filed a Third-Party Complaint against Bowles, their insurance
broker, contending that Bowles was negligent in procuring the
insurance policy and should indemnify the Joachins in the
event that GeoVera refuses to provide coverage.[3] Bowles filed the
instant motion, arguing that the Joachins' third-party
claims should be dismissed because they fail to state a claim
upon which relief can be granted.[4] Having considered the
motion, the memoranda in support and in opposition, the
record, and the applicable law, the Court will deny the
motion and grant the Joachins leave to amend the Third-Party
Complaint.
I.
Background
A.
Factual Background
1.
GeoVera's Claims
In the
Complaint, GeoVera alleges that the Joachins filed fraudulent
claims under a homeowner insurance policy.[5] According to
GeoVera, on April 3, 2018, the Joachins purchased a home at
5809 Bienvenue Avenue (the “Property”) for $55,
000.00.[6] GeoVera then alleges that on April 11,
2018, the Joachins purchased from GeoVera a homeowner's
insurance policy that was effective April 11, 2018 until
April 11, 2019.[7] GeoVera asserts that “[t]he dwelling
had termite damage, missing sheetrock, and other
damage” that the Joachins failed to disclose on their
insurance application.[8] GeoVera contends that on May 9, 2018, a
fire caused substantial damage to the Property, and on May
10, 2018, the Joachins filed an insurance claim for $170,
000.00 under the GeoVera policy.[9] On June 6, 2018, the
Property was allegedly demolished by an order of the
Jefferson Parish regulatory department.[10]
GeoVera
avers that after the fire, it began an investigation
regarding the claim and requested that the Joachins submit to
an Examination Under Oath (“EUO”) on July 12,
2018.[11]GeoVera alleges that during the EUO, it
learned that numerous repairs were being made to the property
at the time of fire, the Joachins had not yet moved into the
property, and the Joachins had connected the electricity at
the Property but no other utilities.[12] GeoVera also contends
that the fire department investigation determined that the
fire was accidental, but the results of the police
investigation are still unknown, and the Joachins stated
during the EUO that the prior owner of the Property had been
arrested for the fire.[13]
GeoVera
seeks declaratory judgment on the following: (1) the Property
does not qualify as “residence premises” under
the Policy because the Joachins never resided at the
property; (2) the Joachins engaged in
“misrepresentations” which voided the Policy when
they indicated on their application that they had not been
subject to foreclosure, that the Property did not have
unrepaired damage, that the Property had public utilities in
service, and that the Property was not under renovation; (3)
the Policy does not cover “vandalism and
mischief” if the Court finds that the Property was
vacant and the prior owner started the fire; (4) the Property
is subject to a “vacancy exclusion” under
Louisiana law if it was vacant more than sixty days; and (5)
the Joachins created an “increased hazard” of
fire by leaving the property vacant.[14] Based on these findings,
GeoVera urges the Court to declare that the Policy does not
afford coverage for the Joachins.
2.
The Joachins' Counterclaims
In the
Counterclaim, the Joachins allege that during the EUO,
“there was an obvious language barrier due to the
policyholders being of Haitian origin and speaking French
Creole.”[15]The Joachins assert that GeoVera
conducted the EUO “without any type of interpreter
present, ” and received “ill-obtained”
answers.[16] Specifically, the Joachins contend that
during the EUO, they emphasized that they planned for the
Property to be their home, tried to clarify for GeoVera that
the repairs on the home were not renovations, and mistakenly
interpreted questions about foreclosure as asking whether
they had been evicted from a property and not whether a
foreclosure action had been filed against them.[17] Therefore,
the Joachins argue that GeoVera engaged in bad faith conduct
when the Joachins' attorney was not allowed to object to
questioning during the EUO and GeoVera utilized the
“ill-obtained” responses in refusing to pay the
Joachins under the Policy.[18] The Joachins seek damages for
breach of contract, negligence in insurance adjusting, and
bad faith treatment under Louisiana Revised Statutes 22:1892
and 22:1973.[19]
3.
The Joachins' Third-Party Complaint
In the
Third-Party Complaint, the Joachins assert that they enlisted
the services of Bowles to assist them in procuring
homeowner's insurance, and Bowles is responsible for any
deficiencies in the Joachins' insurance
application.[20] According to their Complaint, the
Joachins provided Bowles with honest information regarding
their plans for the Property and Bowles completed all
necessary forms using this information.[21] The Joachins
allege that Bowles promised them that if they signed the
forms, they would have an insurance policy, and because of
their limited communication skills, the Joachins fully relied
on Bowles' representations.[22] The Joachins now assert
that if the Joachins are found to have misrepresented facts
in their application and are denied insurance coverage
because of these misrepresentations, Bowles should be held
liable.[23] Therefore, in the event that they are
found liable, the Joachins seek indemnification from Bowles
and additional damages for negligence, breach of contract,
detrimental reliance, and failure to use reasonable
diligence.[24]
B.
Procedural Background
On
August 10, 2018, GeoVera filed a Complaint against the
Joachins.[25] On September 5, 2018, the Joachins filed
an answer, counterclaims against GeoVera, and a Third-Party
Complaint against Bowles.[26] On November 5, 2018, Bowles
filed the instant Motion to Dismiss the Third-Party
Complaint.[27] On November 27, 2018, the Joachins filed
an opposition to the motion.[28] With leave of Court, Bowles
filed a reply on December 3, 2018.[29]
II.
Parties' Arguments
A.
Bowles' Arguments in Support of the Motion to
Dismiss
In the
instant motion, Bowles urges the Court to dismiss the
Joachins' third-party claims because the Joachins fail to
state a claim for breach of contract, negligence, detrimental
reliance, or failure to use reasonable
diligence.[30] First, Bowles contends that the Joachins
fail to state a claim for negligence because “the
Joachins have not identified any duties that were allegedly
breached.”[31] Specifically, Bowles claims that the
Joachins do not allege that their insurance application
contained misrepresentations nor that Bowles personally made
any misrepresentations.[32] Bowles insists that in the EUO, the
Joachins confirmed that they thoroughly reviewed the
insurance application with one of Bowles' agents and
verified that all of their responses were
accurate.[33] According to Bowles, where the Joachins
fail to identify any breach of a duty, they fail to state a
claim for negligence.[34]
Next,
Bowles argues that the Joachins cannot state a claim for
breach of contract because they do not plead facts detailing
that they entered into a contract with Bowles, the terms of
the contract, or the provision of the contact that Bowles
allegedly breached.[35] Bowles insists that without an
allegation that Bowles undertook an obligation to perform on
behalf of the Joachins, the Joachins cannot assert that any
contract was breached.[36] Similarly, Bowles avers that the
Joachins do not plead any of the elements of a detrimental
reliance claim because “they have not identified any
representations of Bowles, have not identified how they
allegedly relied on any such representations, and have not
identified a change in position.”[37] Thus, Bowles
argues that the detrimental reliance claim
fails.[38]
Finally,
Bowles contends that the Joachins do not plead a cognizable
claim for failing to use reasonable diligence in procuring
the insurance.[39] Though Bowles admits that the Joachins
plead the first element of undertaking the task of procuring
insurance, Bowles insists that the Joachins do not prove the
second element-that Bowles failed to acquire the requested
insurance.[40] On the contrary, Bowles presents
statements from the Joachins' Third-Party Complaint
wherein the Joachins “allege that the Geovera policy
‘provided coverages for the incidents and damages'
made the basis of this lawsuit.”[41] Bowles then
cites Fifth Circuit and Louisiana law for the proposition
that where an agent procures the requested insurance, it is
the duty of the insured to assess whether the policy actually
meets their needs.[42] Bowles contends that the agent cannot be
held responsible if the insured did not adequately determine
the coverage they needed or read the policy
terms.[43] Thus, Bowles argues that the Joachins
fail to state a claim for lack of reasonable
diligence.[44]
Because
Bowles avers that the Joachins do not plead facts to support
a claim for negligence, breach of contract, detrimental
reliance, or lack of diligence, Bowles requests that the
Court dismiss all of the Joachins' third-party
claims.[45]
B.
The Joachins' Arguments in Opposition to the Motion to
Dismiss
In
opposition, the Joachins argue that the Court should deny
Bowles' motion to dismiss because, if converted into a
motion for summary judgment, the motion is premature because
additional discovery is required.[46] The Joachins assert that
under Federal Rule of Civil Procedure 12(d), “[t]he
Court is granted discretion to convert the motion to dismiss
to a motion for summary judgment, ” and “if
extrinsic material is not excluded by the Court, ” this
conversion is required.[47]The Joachins allege that in the
motion, Bowles relies on statements in GeoVera's
complaint and transcripts of the EUO that are outside the
pleadings.[48] The Joachins thus argue that the Court
must convert Bowles' motion into a motion for summary
judgment if it decides to consider the extrinsic
evidence.[49]
In the
event that the motion is converted into one for summary
judgment, the Joachins offer an affidavit of their expert,
Jim Leatzow (“Mr. Leatzow”), a former insurance
underwriter and insurance executive.[50] In the affidavit, Mr.
Leatzow states that GeoVera and Bowles have, at the time of
his affidavit, withheld key documents detailing GeoVera's
relationship with Bowles and the responsibilities each entity
shares in the customer acquisition process.[51] Mr. Leatzow
also states that based on items currently in the record, it
is his expert opinion that GeoVera and Bowles have engaged in
conduct that falls below industry standards.[52] Based on
these statements, the Joachins argue that further discovery
is needed to support their counterclaim allegations and the
Court should deny the motion until discovery is
completed.[53]
Alternatively,
if the Court proceeds in considering the motion under
12(b)(6), the Joachins contend that their Third-Party
Complaint properly pleads all four claims against
Bowles.[54] The Joachins assert that when they met
with Bowles' agent, they provided candid details about
the Property, their intentions of moving in at a later date,
and the ongoing repairs.[55] They insist that they detailed the
type of coverage they were seeking.[56] According to the
Joachins, the agent completed the application for them using
these details and “simply told the Joachins to sign the
application.”[57] In doing so, the Joachins argue that
Bowles had a duty to provide them with the correct insurance
sought.[58] The Joachins go further to assert that
“[a]n insurance agent's duty can be greater than
merely procuring the insurance requested, depending on what
services the agent holds himself out as performing and the
nature of the specific relationship and agreements between
the agent and his client.”[59]
The
Joachins assert that in signing the application, they relied
on the agent's honesty and accuracy in representing the
Joachins situation and the policy's
coverage.[60] The Joachins contend that if there was a
defect with their application and the Policy accordingly does
not apply, Bowles breached its duty by negligently or
intentionally filling out the application
improperly.[61]Therefore, the Joachins argue that they
fully plead claims for failure to exercise reasonable
diligence, detrimental reliance, negligence, and breach of
contract, and Bowles' motion should be
denied.[62]
C.
Bowles' Arguments in Further Support of the Motion to
Dismiss
In
reply, Bowles argues that the motion should not be converted
into a motion for summary judgment because Bowles did not
attach any extrinsic documents to its motion.[63]Bowles asserts
that its motion only relies on allegations in GeoVera's
complaint, and GeoVera's complaint may be considered by
the Court because it was both referenced in the Joachins'
Third-Party Complaint and attached to the Third-Party
Complaint.[64] Contrarily, Bowles insists that Mr.
Leatzow's affidavit is not referenced in the Third-Party
Complaint and should not be considered by this
Court.[65] If considered, however, Bowles contends
that Mr. Leatzow's affidavit only contains conclusory
allegations and does not offer any facts to support the
Joachins' claims.[66]
Bowles
asserts that under a 12(b)(6) standard, the Joachins fail to
properly plead any of their asserted claims.[67] Bowles
contends that the Joachins do not include in their complaint
any duties that Bowles allegedly breached, and the Joachins
“do not articulate exactly how the application process
was negligently handled, nor do they identify with the
requisite specificity the alleged incorrect information that
was negligently conveyed.”[68] Bowles thus insists that
a policy was procured and “Bowles satisfied its sole
duty in using reasonable diligence to procure the
policy.”[69] Bowles contests the proposition that
Bowles owed a greater duty because of a relationship; Bowles
avers that special relationships are only formed when
procuring insurance for a specific industry.[70] Because
Bowles argues that the Joachins fail to plead any of their
asserted claims, Bowles urges the Court to grant the motion
to dismiss.[71]
III.
Legal Standard
Federal
Rule of Civil Procedure 12(b)(6) provides that an action may
be dismissed “for failure to state a claim upon which
relief can be granted.”[72] A motion to dismiss for
failure to state a claim is “viewed with disfavor and
is rarely granted.”[73] “To survive a motion to
dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is
plausible on its face.'”[74] “Factual
allegations must be enough to raise a right to relief above
the speculative level.”[75] A claim is facially plausible
when the plaintiff has pleaded facts that allow the court to
“draw a reasonable inference that the defendant is
liable for the misconduct alleged.”[76]
On a
motion to dismiss, asserted claims are liberally construed in
favor of the claimant, and all facts pleaded are taken as
true.[77] However, although required to accept all
“well-pleaded facts” as true, a court is not
required to accept legal conclusions as true.[78] “While
legal conclusions can provide the framework of a complaint,
they must be supported by factual
allegations.”[79] Similarly, “[t]hreadbare recitals
of the elements of a cause of action, supported by mere
conclusory statements” will not suffice.[80] The complaint
need not contain detailed factual allegations, but it must
offer more than mere labels, legal conclusions, or formulaic
recitations of the elements of a cause of
action.[81] That is, the complaint must offer more
than an “unadorned, the defendant-unlawfully-harmed-me
accusation.”[82] From the face of the complaint, there
must be enough factual matter to raise a reasonable
expectation that discovery will reveal evidence as to each
element of the asserted claims.[83] If factual allegations
are insufficient to raise a right to relief above the
speculative level, or if it is apparent from the face of the
complaint that there is an “insuperable” bar to
relief, the claim must be dismissed.[84]
IV.
Analysis
In the
instant motion, Bowles urges the Court to dismiss the
Joachins' third-party claims because the Joachins fail to
state a claim for breach of contract, negligence, detrimental
reliance, or failure to use reasonable
diligence.[85] In opposition, the Joachins argue that
Bowles relies on extrinsic evidence to support its motion, so
the Court should convert the motion into a motion summary
judgment and deny that motion as premature.[86] The Joachins
also argue that they clearly plead facts in support of all
their claims.[87] The Court will address each argument in
turn.
A.
Consideration of the Policy and EUO
Transcripts
The
Fifth Circuit has held that “[d]ocuments that a
defendant attaches to a motion to dismiss are considered part
of the pleadings if they are referred to in the
plaintiff's complaint and are central to her
claim.”[88] Here, the Joachins contest Bowles'
reference to GeoVera's complaint and the EUO transcripts,
but these documents are referenced by the Joachins in their
Third-Party Complaint.[89] GeoVera's complaint and the EUO
transcripts are central to the Joachins' claims because
the Joachins rely on these documents to allege that Bowles
acted in a manner that caused GeoVera to investigate, and
subsequently deny, their claim. Thus, the Court may consider
GeoVera's complaint and the EUO transcripts as part of
the motion to dismiss. However, for the reasons that follow,
it is unnecessary to consider these documents in deciding
this motion. Therefore, the Court will not consider these
documents in deciding the instant motion to dismiss.
The
Joachins argue that if the Court considers these documents,
it should also consider Mr. Leatzow's affidavit, but this
affidavit was neither attached to nor referenced in the
Joachins Third-Party Complaint.[90] Accordingly, the Court
will not consider this affidavit in deciding the motion.
B.
Whether the Joachins State a Claim for
Negligence
Bowles
argues that the Joachins fail to state a claim for negligence
because they do not plead any facts alleging that Bowles owed
the Joachins a duty.[91] Louisiana courts conduct a
“duty-risk analysis” to determine whether a
defendant is liable for negligence.[92] To prevail on a
negligence claim, a plaintiff must prove five elements: (1)
the defendant had a duty to conform his conduct to a specific
standard of care; (2) the defendant's conduct failed to
conform to the appropriate standard of care; (3) the
defendant's substandard conduct was a cause-in-fact of
the plaintiff's injuries; (4) the defendant's
substandard conduct was a legal cause of the plaintiff's
injuries; and (5) the defendant's conduct caused actual
damages.[93]
Here,
the Third-Party Complaint contains facts detailing the
Joachins' interactions with Bowles' representative
and the injuries that may result from a denial of their
insurance coverage, but the Joachins do not properly plead
any allegations regarding duty, breach, or
causation.[94]However, because dismissal is a harsh
remedy, short of granting a motion to dismiss, a court may
grant a plaintiff leave to amend his complaint.[95] Therefore,
the Court will deny without prejudice Bowles' motion to
dismiss the negligence claim and grant the Joachins leave to
amend the Complaint to address this deficiency, if possible.
C.
Whether the Joachins State a Claim for Breach of
Contract
Bowles
argues that the Joachins cannot state a claim for breach of
contract because they do not plead facts detailing that they
entered into a contract with Bowles, the terms of the
contract, or the provision of the contact that Bowles
allegedly breached.[96] Under Louisiana law, to assert a breach
of contract claim, the plaintiff must show: “(1) the
obligor undertook an obligation to perform; (2) the obligor
failed to perform the obligation, resulting in a breach; and
(3) the failure to perform resulted in damages to the
obligee.”[97] In the Third-Party Complaint, the
Joachins allege that they “sought to procure
homeowner's insurance from insurance agent/broker Bowels
& Associates” and Bowles completed the application
on their behalf.[98] The Joachins also allege that if GeoVera
denies coverage under the Policy, Bowles is somehow
responsible.[99]
Though
these allegations suggest that a contractual relationship may
have existed and that Bowles may have breached the contract,
the allegations are vague and insufficient to allege a
plausible breach of contract claim.[100] Therefore, the Court
will also deny without prejudice Bowles' motion to
dismiss the breach of contract claim and grant the Joachins
leave to amend the Complaint to address this deficiency, if
possible.
D.
Whether the Joachins State a Claim for Detrimental
Reliance
Bowles
avers that the Joachins do not properly plead a detrimental
reliance claim because the Joachins do not allege any
representations that Bowles made, how they relied on the
representations, and how their position was damaged because
of this reliance.[101] Under Louisiana law, “[a] party
may be obligated by a promise when he knew or should have
known that the promise would induce the other party to rely
on it to his detriment and the other party was reasonable in
so relying.”[102] To establish a claim of detrimental
reliance a plaintiff must demonstrate: “(1) a
representation by conduct or word; (2) made in such a manner
that the promisor should have expected the promisee to rely
upon it; (3) justifiable reliance by the promisee; and (4) a
change in position to the promisee's detriment because of
the reliance.”[103]
In the
Third-Party Complaint, the Joachins allege that they sought
Bowles' assistance with acquiring homeowner's
insurance, and a Bowles representative completed the
application for them and told them that they would have
insurance if they signed the application.[104] Though
these allegations suggest that the agent made a
representation about a policy being in effect, the Joachins
do not sufficiently detail what this representation entailed
and to what extent the agent promised that the Policy would
provide coverage for their Property. Therefore, the Court
will deny without prejudice Bowles' motion to dismiss the
detrimental reliance claim and grant the Joachins leave to
amend the complaint to address this deficiency, if possible.
E.
Whether the Joachins State a Claim for Failure to Exercise
Reasonable Diligence
Bowles
contends that the Joachins do not plead a claim for failure
to use reasonable diligence because the Joachins do not
allege that Bowles failed to acquire the requested
insurance.[105] Under Louisiana law, “[a]n
insurance agent who undertakes to procure insurance for
another owes an obligation to his client to use reasonable
diligence in attempting to place the insurance requested and
to notify the client promptly if he has failed to obtain the
requested insurance.”[106] In order to recover for a
loss arising out of the failure of an insurance agent to
obtain insurance coverage, a plaintiff must prove:
(1) an undertaking or agreement by the insurance agent to
procure insurance; (2) failure of the agent to use reasonable
diligence in attempting to place the insurance and failure to
notify the client promptly if he has failed to obtain the
insurance; and (3) actions by the agent warranting the
client's assumption that the client was properly
insured.[107]
Bowles
admits that the Joachins properly plead the first element.
Regarding the second and third elements, the Joachins allege
that if GeoVera denies their insurance coverage, Bowles is
responsible.[108] The Joachins do not, however, allege
any facts to support the assertion that Bowles failed to use
reasonable diligence in acquiring the policy. In an attempt
to remedy this deficiency, the Joachins suggest in the
opposition that Bowles may have had a greater duty than
merely procuring the requested insurance.[109] While
Louisiana law does not recognize a duty owed by an insurance
agent to spontaneously advise or procure any specific type or
amount of insurance coverage for a client, [110] there are
some instances where an insurance agent can be held liable
for failing to advise the client of recommended
coverage.[111] Yet, the Joachins do not include any
allegations in the Third-Party Complaint regarding
Bowles' duty to advise or procure a specific policy, and
the Court cannot rely on arguments made in an opposition
brief that are not alleged ...