THOMAS E. JOHNSTON, District Judge.
Before the Court is Defendant Innovative Aftermarket Systems, LP's ("Innovative") Motion to Dismiss. (ECF No. 6.) For reasons discussed below, the Court
This action arises out of a complaint brought by Plaintiff in the Circuit Court of Logan County, West Virginia. (ECF No. 1-1 at 1-8.) According to the First Amended Class Action Complaint (the "Complaint"), Plaintiff purchased a vehicle from a Kentucky automobile dealer on April 14, 2012. (Id. at 2 ¶ 4.) "As part of the sale, Plaintiff also purchased a `Protection Plus' policy from [Innovative] for $299.00." (Id. ¶ 5.) This "Protection Plus" policy allegedly "guaranteed that the anti-theft system [`the product'] installed on the vehicle would be an effective deterrent to vehicle theft."
Based on these alleged facts, Plaintiff contends that Innovative's actions and its product's policy generate the following causes of action: (1) unlawful sale of insurance in violation of West Virginia insurance law and the West Virginia Consumer Credit and Protection Act ("WVCCPA"), (2) common law breach of contract, (3) violations of the West Virginia Unfair Trade Practices Act ("WVUTPA"), and (4) common law bad faith. (Id. at 3-6 ¶¶ 17-37.) Plaintiff seeks the following remedies on behalf of a similarly situated class of plaintiffs: actual, compensatory, and punitive damages, a refund of premiums paid, a civil penalty for statutory violations, attorneys' fees and costs, pre- and post-judgment interest, and any other just relief. (Id. at 7 ¶¶ 2-9.)
Plaintiff filed the Complaint in the Circuit Court of Logan County, and Innovative removed the case to this Court on November 17, 2016, pursuant to 28 U.S.C. § 1332(a), (d). (ECF No. 1 at 1; see also id. at 4-8 ¶¶ 17-28.) Innovative filed its Motion to Dismiss on December 9, 2016. (ECF No. 6.) The motion argues that all of Plaintiff's claims should be dismissed because they all hinge upon the product being insurance, which Innovative contends it is not. (Id. at 3.) Traceable Anti-Theft" decal is placed on the car to discourage potential thieves from stealing the vehicle, and any attempt to remove the labels, which "will be obvious," alerts law enforcement that the vehicle is stolen. (Id.) Thus, the product aims to both decrease the chances of theft and increase the chances of recovery if theft occurs. Plaintiff responded to Innovative's motion on December 22, 2016, (ECF No. 8), and Innovative filed its reply on January 6, 2017, (ECF No. 12). The Court stayed discovery in this case for a three-month period beginning on February 6, 2017. (ECF No. 17.) The Motion to Dismiss is fully briefed and ripe for adjudication.
A motion to dismiss for failure to state a claim upon which relief may be granted tests the legal sufficiency of a civil complaint. Fed. R. Civ. P. 12(b)(6). A plaintiff must allege sufficient facts, which, if proven, would entitle him to relief under a cognizable legal claim. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-55 (2007). A case should be dismissed if, viewing the well-pleaded factual allegations in the complaint as true and in the light most favorable to the plaintiff, the complaint does not contain "enough facts to state a claim to relief that is plausible on its face." Id. at 570. In applying this standard, a court must utilize a two-pronged approach. First, it must separate the legal conclusions in the complaint from the factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Second, assuming the truth of only the factual allegations, the court must determine whether the plaintiff's complaint permits a reasonable inference that "the defendant is liable for the misconduct alleged." Id. Well-pleaded factual allegations are required; labels, conclusions, and a "formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555; see also King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) ("Bare legal conclusions `are not entitled to the assumption of truth' and are insufficient to state a claim." (quoting Iqbal, 556 U.S. at 679)). A plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level," thereby "nudg[ing] [the] claims across the line from conceivable to plausible." Twombly, 550 U.S. at 555, 570.
Innovative's first argument in its Motion to Dismiss relies on the premise that the theft-prevention products accompanying policy is not insurance, which would preclude all of Plaintiff's claims. (See ECF No. 7 at 8.) Innovative states that the West Virginia Insurance Code, the basis for Count I of the Complaint, does not apply to warranties as they are defined in West Virginia Code § 33-4-2(b)(5). (Id. at 4.) Because the product and its accompanying policy fall within a statutory exception to state insurance law, Innovative avers, the company was not required to have any insurance license. (See id. at 5-8.) Innovative argues that this finding also prevents Plaintiff's other three claims from being legally cognizable because Count II, "premised upon an administrative code provision found in the Insurance Commissioner regulations title," applies only to insurers; Count III, "premised upon the Unfair Trade Practices article of insurance code," applies only to the sale of insurance; and "Count IV again refers to [Plaintiff] as an insured and refers to West Virginia insurance law." (Id. at 8.) Alternatively, Innovative attacks all four counts substantively. (See id. at 8-11.)
Plaintiff responds that Innovative did not establish as a matter of law that the product's accompanying policy is not insurance. (See ECF No. 8 at 8 (citing W. Va. Code § 33-1-1).) After attempting to distinguish the policy at issue in this case from several in cases cited in Innovative's memorandum of law, Plaintiff concludes that the "aspect of [Innovative]'s motion to dismiss dependent on accepting its characterization of the policy as a warranty should be denied." (Id. at 17.) Plaintiff further argues that each of the claims is adequately pled. (See id. at 17-24.)
Innovative reiterates in its reply that West Virginia adopted a statute in 2000 defining and exempting warranties from the definition of "insurance." (ECF No. 12 at 4 (citing W. Va. Code § 33-4-2(a)(4)).) It contends that the Safe-Guard Products International, LLC case that Plaintiff relies on is inapposite to the product and policy at issue in this case. (See id. at 5-6.) Innovative further argues that the Riffe case decided by the West Virginia Supreme Court of Appeals and relied upon by Plaintiff does not affect the application of the "warranty-exemption statute," which was passed after the Riffe decision. (See id. at 6-7.) Innovative asserts that the federal cases cited by Plaintiff in support of his argument are easily distinguished. (See id. at 8-9.)
The State of West Virginia has codified the definition of "insurance" to mean "a contract whereby one undertakes to indemnify another or to pay a specified amount upon determinable contingencies." W. Va. Code § 33-1-1. "Generally, an insurance policy sets forth an agreement between parties whereby the insured agrees to pay a specified premium, and, in exchange, the insurer agrees to indemnify the insured against the type of losses contemplated within the terms of the policy yet unknowable at its issuance." McDaniel v. Kleiss, 503 S.E.2d 840, 846 (W. Va. 1998) (citations omitted). These policies are typically "issued by third parties and are based on a theory of distributing a particular risk among many customers." Riffe v. Home Finders Assocs., Inc., 517 S.E.2d 313, 318 (W. Va. 1999) (quoting Griffin Sys., Inc. v. Washburn, 505 N.E.2d 1121, 1124 (Ill. App. Ct. 1987)). See also 1 Eric Mills Holmes & Mark S. Rhodes, Appleman on Insurance § 1.3 (2d ed. 1996) ("In the insurance contract, the risk of an actual loss is distributed (socialized) among a large group of persons exposed to a comparable risk of loss."). For the purposes of determining whether a particular policy is one for insurance, courts must look to the substance of the agreement because "[p]olicy means the contract effecting insurance, or the certificate thereof, by whatever name called. . . ." Riffe, 517 S.E.2d at 317 (emphasis in original) (quoting W. Va. Code § 33-1-16).
Chapter 33 of the State's code, which is dedicated to insurance law, specifically exempts warranties from the chapter's reach. W. Va. Code § 33-4-2(a)(4). That same section defines "warranty" in the following manner:
§ 33-4-2(b)(5). Commentators have noted that, generally, "a warranty is not an insurance contract in that the former only promises indemnity against defects in the article sold, while the latter indemnifies against loss or damage resulting from perils outside of and unrelated to defects in the article itself." 1 Eric Mills Holmes & Mark S. Rhodes, Appleman on Insurance § 1.3 (2d ed. 1996) (citations omitted) (noting that a warranty "may be so drafted, however, as to contain an agreement to indemnify from peril outside of and unrelated to inherent weaknesses in the goods themselves and thus may fall within the purview of an insurance statute").
The West Virginia Supreme Court of Appeals has discussed in a limited number of cases what constitutes insurance within the meaning of W. Va. Code § 33-1-1. In Riffe, the court examined a "home warranty contract" that indemnified a new homeowner for repairs to both the home itself and certain personal property items on the property that became necessary after the transfer of ownership. See 517 S.E.2d at 315. The company promoting the policy claimed that homes protected by the plan sold faster and for more money. See id. The Riffes inherited the policy's benefits from the home's sellers as part of the real estate transaction and sued the company after it denied their claim regarding a problem with the home's foundation. See id. at 316. While the company maintained that the contract was a warranty and not insurance, the court held that it was insurance because "a homeowner would file a claim, have the repair made, and would be indemnified by [the company that sold the policy] for the cost of a covered repair, minus any deductible." Id. at 317 (citing W. Va. Code § 33-1-1) (noting that there was "no question" that the policy was insurance under state statute). The court went on to explain the following:
Id. at 317-18 (emphasis in original).
The reach of "insurance" as defined under West Virginia law was reconsidered in State ex rel. Safe-Guard Products International, LLC v. Thompson (Safe-Guard), 772 S.E.2d 603 (W. Va. 2015). At issue in Safe-Guard was whether GAP Insurance
The West Virginia Supreme Court of Appeals has not applied the statutory definitions of "insurance" or "warranty" to automobile theft prevention products and their policies. Nevertheless, at least four federal district courts have examined whether this type of product's policy constitutes "insurance" under the laws of the states in which those courts are located. For example, Pope v. TT of Lake Norman, LLC involved an amended complaint whose claims hinged on the court's determination of whether the etching product at issue was insurance.
Similarly, the guarantee accompanying Alexico Corporation's ("Alexico") product known as Premium Care Theft-Gard ("PCTG") was deemed warranty and not insurance by two district courts in Moroz and Falkenberg. See Falkenberg v. Alexico Corp., No. 07-4149 (RBK), 2008 WL 2478384, at *3 (D.N.J. June 17, 2008); Moroz v. Alexico Corp., No. 07-3188, 2008 WL 109675, at *4 (E.D. Pa. Jan. 7, 2008). PCTG, which was distributed, sold, and administered by Alexico, consisted of a unique number etched into a car's front windows and registered into company records. See 2008 WL 109675, at *1, 4 (finding that the purpose of PCTG was to deter car theft and aid in the recovery of stolen vehicles). Alexico guaranteed that if a vehicle was stolen within three years of PCTG's installation and not recovered within thirty days or recovered but considered a total loss, it would pay to PCTG's owner $3,000 or the vehicle's wholesale value if less. See id. at *1. The court in Moroz held that PCTG was not insurance under common law. Id. at *4 (noting that "insurance" was not defined under Pennsylvania statutory law). While PCTG required that the purchaser carry comprehensive theft insurance, the Moroz Court found that Alexico sought "to guarantee the performance of the product, not to insure against car theft" and dismissed five counts in the complaint that were premised on the contention that PCTG was insurance. Id. ("[T]he `overall objective' of the arrangement is simply to warrant [PCTG]'s performance."). The Falkenberg Court reached the same conclusion under common law that PCTG is not insurance and dismissed three counts in the complaint that were premised on the status of PCTG as insurance. See 2008 WL 2478384, at *2-3 (noting that while New Jersey does not have a statutory definition of "insurance," the court's conclusion was "supported by holdings from other branches of the New Jersey government"). The court reasoned as follows:
Id. at *3.
At least one district court has ruled that, under the laws of New York, facts supporting an allegation that an anti-theft window etching product was insurance were adequately pleaded to survive a motion to dismiss. See Seekamp v. Fuccillo Auto. Grp., Inc., No. 1:09-CV-0018 (LEK/DRH), 2010 WL 980581, at *7 (N.D.N.Y. Mar. 15, 2010). Under that product's policy, the issuing company would indemnify the car dealership "if the dealer had to issue a credit towards a new vehicle purchase due to theft." See id. at *1 (explaining that the dealer would provide the product owner "with a 10% discount towards the purchase of a replacement vehicle, in an amount up to $2000"). An "insurance contract" was statutorily defined in New York, and the court noted that "the New York Insurance Department has interpreted a `fortuitous event' [under the definition of `insurance contract'] to be the theft or non-recovery of a vehicle, which is the triggering event under the `etch' theft-deterrent agreement." Id. at *5-6 & n.5 (citations omitted) (recognizing that "warranty" was not defined under New York insurance law). The court cited a New York Insurance Department opinion, which was directly relevant to the policy at issue, finding that "by offering a discount on a vehicle purchase following an unrecovered theft or total loss, the consumer would ultimately be provided with a `benefit of pecuniary value upon the happening of a fortuitous event.'" Id. at *6 (citation omitted). Partly because the policy's issuing company would indemnify the dealership and not the product owner, the court found that the policy may be considered insurance and the plaintiff's complaint could survive the motion to dismiss. See id. at *7.
Here, the statutory definition of "warranty" in West Virginia is similar to that in North Carolina, which was analyzed by the Pope Court.
Moreover, the purpose of the product here is similar to that of the products in Pope, Moroz, and Falkenberg—to deter vehicle theft and aid in the vehicle's recovery if stolen. See 2008 WL 2478384, at *3; 2008 WL 109675, at *4; 505 F. Supp. 2d at 312. This is evidenced by the Protection Plus Warranty Registration form, which is attached to the Motion to Dismiss, relied on by Plaintiff in the Complaint, and not contested by Plaintiff in terms of authenticity.
Plaintiff relies on Seekamp to discredit the decisions in Moroz and Falkenberg, (see ECF No. 8 at 15-17), but the dispute in Seekamp involved a policy issuer indemnifying a car dealership after the dealer issued a credit to the policyholder purchasing a replacement vehicle. See 2010 WL 980581, at *1. In effect, the policy issuer indemnified a third party rather than the policyholder herself in the event that the vehicle was stolen. Further, the New York Insurance Department had previously issued an opinion specifically including anti-theft window etching products within the ambit of the state's insurance laws. See id. at *6. The West Virginia OIC has not issued similar guidance,
The policies examined under West Virginia law in Safe-Guard and Riffe are distinguishable from the policy in this case. Plaintiff attempts to equate the policy here to the GAP Insurance in Safe-Guard and the home warranty contract in Riffe. (See ECF No. 8 at 8-12.) However, neither of those cases involved a company seeking to guarantee indemnity for the failure of a product that the company itself manufactured or sold. The defendant company in Safe-Guard did not manufacture or sell the vehicle that, when totaled in a crash, triggered the indemnity, see 772 S.E.2d at 604-05, and the defendant company in Riffe did not manufacture or sell the home or the personal property that, when in need of repair, triggered the indemnity, see 517 S.E.2d at 315-16. The situation here is like in Moroz and Falkenberg, where the courts found that Alexico's product was not insurance because the policy simply warranted the product's performance, the policy could not be purchased separately from the product, and the monetary benefit upon the product's failure was paid directly to the product purchaser. See 2008 WL 2478384, at *3; 2008 WL 109675, at *4. Similarly, the policy here, which Plaintiff does not claim was purchased separately from the product, guarantees the product's performance, and the monetary benefit would be paid to Plaintiff who purchased the policy. (See ECF No. 1-1 at 2 ¶¶ 5-7; ECF No. 6-1 at 1.)
Plaintiff alleges in the Complaint that he purchased the policy from Innovative and that Innovative guaranteed to pay him if its product failed to deter vehicle theft. (See ECF No. 1-1 at 2 ¶¶ 5-7.) It is this alleged relationship between Plaintiff and Innovative and the circumstances under which the product was purchased that lead this Court to conclude that, assuming all the factual allegations in the Complaint are true, the product's policy fits squarely within West Virginia's statutory definition of "warranty." See W. Va. Code § 33-4-2(b)(5). Because the policy at issue here is a warranty, it is exempt from the State's insurance laws. See § 33-4-5(a)(4).
Count I of the Complaint alleges unlawful sale of insurance in violation of W. Va. Code § 33-3-1. (ECF No. 1-1 at 4 ¶ 18.) The Court determined that Chapter 33 of the West Virginia Code does not govern the policy here because it is not insurance, so this claim must fail. Count I also claims that Innovative violated provisions of the WVCCPA "[b]y collecting premiums that it was not entitled to recover and selling an insurance product while not licensed to sell such product. . . ." (Id. ¶ 19 (alleging violations of W. Va. Code §§ 46A-2-127, 46A-6-102, 46A-6-104, 46A-6-106).)
Innovative argues that regardless of whether the policy is insurance, the WVCCPA claims in Count I still fail to survive Rule 12(b)(6) because Count I relies on Innovative being a debt collector, which it says it is not. (See ECF No. 7 at 8.) Plaintiff contends that Count I should partially survive despite a ruling that the policy is not insurance because Innovative is a "debt collector," bringing regulation of its policy under the WVCCPA. (See ECF No. 8 at 19.) Innovative's reply submits that Count I should be dismissed regardless of the Court's decision as to whether the product's policy here is insurance because Innovative is not a debt collector as provided by the statutory definition and because the WVCCPA does not apply to the alleged improper sale of insurance. (See ECF No. 12 at 10-12.)
The WVCCPA provides that "[n]o debt collector shall use any fraudulent, deceptive or misleading representation or means to collect or attempt to collect claims. . . ." W. Va. Code § 46A-2-127. Where the defendant is not a debt collector or creditor of the plaintiff within the definition of the WVCCPA,
Id. at *3 (citations omitted).
Plaintiff alleges that he made an upfront, one-time payment of $299 for the policy, and he does not claim that there was any deferral of payment or additional payment required. (ECF No. 1-1 at 2 ¶ 5.) Without a deferral of payment, Plaintiff cannot allege a collectable "claim" as defined under the WVCCPA. See Hinkle, 2016 WL 3945734, at *3 (citing W. Va. Code § 46A-2-122(b)). In addition to finding that the policy is not insurance, the Court also finds that Innovative is not a debt collector or creditor under the WVCCPA. Thus, Plaintiff's claims under West Virginia insurance law and the WVCCPA must fail, and the Court
Plaintiff concedes that "there is no independent ground for addressing" Count II if the Court accepts Innovative's argument that the policy at issue is not insurance. (ECF No. 8 at 17.) While the Court does not agree that the breach of contract claim found in Count II relies on the policy's status at insurance, Plaintiff has failed nonetheless to state a claim upon which relief can be granted as he does not assert that a valid, enforceable contract has been breached. (See ECF No. 1-1 at 4 ¶¶ 21-24.) See also Sneberger v. Morrison, 776 S.E.2d 156, 171 (W. Va. 2015) (citations omitted) ("A claim for breach of contract requires proof of the formation of a contract, a breach of the terms of that contract, and resulting damages."). Rather, Plaintiff claims that the contract is void because it does not conform to West Virginia regulatory requirements, (see id. ¶ 22), which is an improper basis for a breach of contract claim. See Gen. Elec. Capital Corp. v. Bishop, No. 1:11-cv-00315, 2012 WL 6202758, at *4 (S.D. W.Va. Dec. 12, 2012) (citations omitted) ("In order to establish a claim for breach of contract under West Virginia law, a plaintiff must prove . . . the existence of a valid, enforceable contract. . . ."). Accordingly, the Court now
Count III of the Complaint alleges that Innovative "violated its statutory duties set forth in the [WVUTPA] in W. Va. Code § 33-11-4, et seq.[,] as well as all regulations promulgated thereunder. . . ." (Id. at 5 ¶ 33.) The WVUTPA falls within Chapter 33 of the West Virginia Code, and as the Court outlined earlier, that chapter specifically exempts warranties from the statute's reach. See W. Va. Code § 33-4-2(a)(4). The Court determined that the product's policy here is a warranty under West Virginia law, which precludes the State's insurance statutes, including the WVUTPA, from governing it. See Hawkins v. Ford Motor Co., 566 S.E.2d 624, 629 (W. Va. 2002) (holding that the WVUTPA applies "only to those persons or entities and their agents who are engaged in the business of insurance"). Plaintiff's claim relying on the WVUTPA must fail, and the Court
Plaintiff concedes that "there is no independent ground for addressing" Count IV if the Court accepts Innovative's argument that the policy at issue is not insurance. (ECF No. 8 at 17.) The Court agrees that a common law bad faith claim is not available to Plaintiff if Innovative did not provide insurance. See Hawkins, 566 S.E.2d at 629 (holding that the tort of bad faith only applies to those who are engaged in the business of insurance). The Court found that the policy is not insurance, and as such, the Court now
For the reasons stated above, the Court
The Court
The Court notes that, while not considered by the court in Pope, North Carolina also has a statutory definition for "ancillary anti-theft protection program warranty" that specifically exempts these types of products from state insurance laws. See N.C. Gen. Stat. § 66-370(b)(1a) ("A written agreement by a warrantor that provides if the ancillary anti-theft protection program fails to prevent loss or damage to a motor vehicle from a theft, that the warrantor will pay to or on behalf of the warranty holder specified incidental costs, as a result of the failure of the ancillary anti-theft protection program to perform pursuant to the terms of the ancillary anti-theft protection program warranty."); see also § 66-370(b)(1) (defining an "ancillary anti-theft protection program" to include "window etch products" that are installed on automobiles and "designed to prevent loss or damage to a motor vehicle from theft").
