KENT J. DAWSON, District Judge.
Presently before the Court for consideration is Defendants Safeco Insurance Company of Illinois' and Safeco Insurance Company of America's Joint Motion to Dismiss (#5). Plaintiff Stephen Schmid filed a response in opposition (#7) to which both Safeco entities replied (#8).
Schmid purchased an insurance policy, identified as policy no. A3118256, from Safeco of Illinois on March 19, 2016. Compl. 2, ECF 1-1. About two months later on May 17, 2016, Schmid suffered injuries from an automobile accident caused by an allegedly underinsured person.
A court may dismiss a plaintiff's complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2);
In
Further, where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has "alleged—but it has not show[n]—that the pleader is entitled to relief."
Schmid brings four causes of action against the Safeco entities: 1) breach of contract; 2) breach of fiduciary duty; 3) breach of duty of good faith and fair dealing ("bad faith"); and 4) declaratory relief. Defendants move to dismiss each claim against Safeco of America because it is not a party to the contract between Schmid and Safeco of Illinois. The parties have agreed to dismiss Schmid's fiduciary duty claim, and the Court does so. Finally, Safeco of Illinois did not challenge the breach of contract claim in the motion to dismiss, therefore the Court will not discuss it at this time.
Both Safeco entities argue that Safeco of America should be dismissed from the case because it is not a party to the insurance policy. A certified copy of the policy is attached to the motion to dismiss as an exhibit. Mot. to Dismiss, Ex. 1, ECF No. 5. The policy indicates that the contract is between Safeco of Illinois and Schmid. Safeco of America is correct that it is not a party to the contract. In fact, Safeco of America does not appear in the policy whatsoever. However, before the Court will consider the policy as extrinsic evidence, it must determine if it should convert the motion to dismiss into a motion for summary judgment.
Generally, the court will not consider evidence outside of the complaint in a motion to dismiss, but there are exceptions to that rule.
Courts should exercise caution when incorporating outside documents, however, because the "overuse and improper application" of this doctrine "can lead to ... harmful results."
Here, the Court holds that the incorporation of the contract does not lead to a harmful result. Rather, the claims of the complaint are entirely based on the contract between Safeco of Illinois and Schmid manifested in Policy No. A3118256.
Therefore, the Court grants the motion to dismiss all claims against Safeco of America.
Next, Safeco moves to dismiss the bad faith claim because the complaint does not contain sufficient factual allegations to state a plausible claim. To establish a prima facie bad-faith claim, Schmid must show that Safeco: 1) refused to compensate him for a covered loss; 2) "without proper cause" or "reasonable basis;" and 3) that Safeco "knew [of] or recklessly disregarded" the lack of a reasonable basis for disputing the coverage.
Here, Schmid has failed to allege the second and third elements of the cause of action. Schmid does allege that Safeco refused to compensate him for a covered loss. However, Schmid fails to allege that Safeco did not have proper cause or a reasonable basis for denying his claim. Additionally, the complaint does not allege that Safeco "knew [of] or recklessly disregarded" the lack of a reasonable basis for disputing coverage. While the facts need not be detailed, Rule 8 requires that the complaint give actual factual allegations of each element for the cause of action to proceed. Schmid has not done so.
Accordingly, the claim for bad faith is dismissed with leave to amend.
Finally, Safeco moves to dismiss Schmid's declaratory relief claim because declaratory relief is a remedy, or in the alternative, because the claim is duplicative.
In a civil action, the Court may declare the "rights and other legal relations of any interested party." 28 U.S.C. § 2201 (2010). A case is ripe for declaratory judgment when "the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant" relief.
While declaratory relief can serve a purpose as a separate cause of action in some scenarios, it does not here. The complaint asks for declaratory relief as a cause of action and in the prayer for relief. There is no substantial controversy shown regarding interpretation of the contract or the rights of the parties. Allowing both to proceed would be duplicative. Therefore, the Court will dismiss the cause of action for declaratory relief and allow the prayer for declaratory relief to proceed as a remedy.
Accordingly, IT IS HEREBY ORDERED that Defendants' Motion to Dismiss (#5) is
IT IS FURTHER ORDERED that any amended complaint, addressing matters from this order, be filed within thirty (30) days of the entry of this order.