WALLACE CAPEL, Jr., Magistrate Judge.
Before the court is Third-Party Defendant Travelers's Casualty Insurance Company of America's ("Travelers") Motion to Dismiss the Third-Party Complaint (Doc. 21). Plaintiff Federal National Mortgage Association ("Fannie Mae") brought this action naming as Defendants GNM II, LLC ("GNM"), Rockingham Family Limited Partnership, and Lawrence Deovlet. Compl. (Doc. 1). The Complaint alleges breach of contract and guarantees. Compl. (Doc. 1) at 5-6. Defendant GNM then filed an Answer to the Complaint and a Third-Party Complaint (Doc. 6), naming Travelers as a Third-Party Defendant. The Third-Party Complaint listed the following causes of action: (Count 1) Breach of Contract; (Count 2) Breach of Fiduciary Duty; (Count 3) Breach of Implied Covenant of Good Faith and Fair Dealing; (Count 4) Negligence; and (Count 5) Indemnity. (Doc. 6) at 21-27.
Upon consideration of Travelers's Motion to Dismiss the Third-Party Complaint, the court finds that the Motion (Doc. 21) is due to be GRANTED.
Travelers filed the instant Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. In deciding a Rule 12(b)(6) motion to dismiss, the court must accept all well-pleaded factual allegations in a complaint as true and take them in the light most favorable to plaintiff. Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536 U.S. 403, 406 (2002). "To survive dismissal, the complaint's allegations must plausibly suggest that the [plaintiff] has a right to relief, raising that possibility above a speculative level; if they do not, the plaintiff's complaint should be dismissed." James River Ins. Co. v. Ground Down Eng'g, Inc., 540 F.3d 1270, 1274 (11th Cir. 2008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007)); see also Edwards v. Prime Inc., 602 F.3d 1276, 1291 (11th Cir. 2010). The former rule—that "[a] complaint should be dismissed only if it appears beyond doubt that the plaintiffs can prove no set of facts which would entitle them to relief," La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004)— has been retired by Twombly. See James River Ins. Co., 540 F.3d at 1274. Thus, the court engages in a two-step approach: "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009). The court need not accept as true legal conclusions or mere conclusory statements. Id.
This third-party action stems from two checks issued by Travelers to GNM for lost business income and debris removals after a fire destroyed property owned by GNM, insured by Travelers, and mortgaged by Fannie Mae. GNM filed a claim with Travelers for the loss, and Travelers issued payments under the policy. Some of these payments were made payable to GNM and Fannie Mae, as well as other parties not relevant to this third-party action, but one check for lost business income and one for debris removal after the fire were made payable only to GNM. It is those checks that are the subject of this third-party action.
Travelers contends that GNM has failed to state a claim for which relief can be granted regarding the breach of contract claim. Mot. (Doc. 21) at 7-12. Under both Alabama and California contract law,
GNM's breach of contract claim is twofold. First, GNM argues that Travelers breached its contract by failing to pay the appropriate loss payee, Fannie Mae, as required by the insurance policy. (Doc. 6) at 22. Second, GNM argues that Travelers breached its contract with GNM by failing to provide GNM with a defense against the claims asserted in this suit by Fannie Mae. Id. Each argument is discussed below.
GNM alleges that Travelers breached its contract with GNM because Travelers did not list Fannie Mae as a payee on two specific checks issued by Travelers, one check for business income lost by GNM and the other for debris removal after the fire. Travelers moves to dismiss this claim because Travelers has fully paid GNM under the insurance policy and, thus, GNM cannot argue "that Travelers did not perform under its contract with GNM." Mot. (Doc. 21) at 8. GNM responds that "Fannie Mae's name was supposed to be on any/all checks issued under the Business Owner's policy by Travelers as Fannie Mae and GNM were to be `
Indeed, the insurance policy states,
(Doc. 21-1) at 18. "Building" is explained to include the structure itself and personal property within that structure. Id. "Business Personal Property" includes the personal property used by the business. Id. Neither paragraph A.1.a nor A.1.b include any coverage for business income or debris removal. Thus, business income and debris removal are not included as "covered property" under the terms of the insurance policy, and Fannie Mae, as a loss payee, was not entitled to joint payment. GNM correctly cites to the sections of the policy that do provide coverage for Business Income ((Doc. 21-1) at 19) and Debris Removal ((Doc. 21-1) at 22); however, GNM ignores the structure of the policy. As addressed above, the policy explicitly states that covered property only includes "the type of property described in this Paragraph A.1." Business income coverage is set out in Paragraph A.3.a and debris removal coverage is set out in Paragraph A.6.c. (Doc. 21-1) at 19, 22. Thus, neither of these paragraphs fit the definition of "covered property," and GNM's breach of contract claim for failure to pay a loss payee is due to be dismissed.
Travelers also moves to dismiss the breach of contract claim for failure to provide a defense to GNM. Travelers argues this claim should be dismissed because "Travelers owes no duty to defend GNM" in the instant action as it is not covered by the duty to defend terms of the policy. Mot. (Doc. 21) at 9-12. In GNM's policy with Travelers, Travelers had "the right and
Travelers claims the duty to defend was not triggered here, and thus could not have been breached, for two reasons: first, "Fannie Mae's Complaint does not allege bodily injury or property damage"; and second, any damage was not caused by an "occurrence" or accident. Mot. (Doc. 21) at 12. GNM did not respond regarding whether an occurrence or accident caused the alleged harm; rather, GNM argues that "Fannie Mae
Fannie Mae's Complaint alleges breach of a promissory note and loan agreement, as well as guarantees, by GNM and such a suit does not seek damages caused by an occurrence or accident. Travelers's duty to defend would have been triggered only if alleged damages were caused by an occurrence or accident, and therefore, the court finds that Travelers does not have a duty to defend GNM here. The court finds it unnecessary to determine whether lost business income or debris removal are included in the policy's definition of physical property because, in any event, the lack of an occurrence or accident prevents the triggering of the duty to defend. Thus, Plaintiff's breach of contract claim for failure to provide a defense is due to be dismissed.
Travelers contends that GNM has failed to state a claim for which relief can be granted regarding the breach of fiduciary duty claim.
Travelers asserts that GNM's claim fails to satisfy even the first element because "under Alabama law, Travelers does not have a fiduciary relationship with GNM." Mot. (Doc. 21) at 13. Travelers points to a decision from our sister court, which held that "the Alabama Supreme Court has expressly declined to find a fiduciary relationship between insurance companies . . . and their customers in the context of the purchase of casualty, health, or life insurance and attempts to collect under those policies." Sayer v. Lincoln Nat'l Life Ins. Co., No. 7:05-cv-1423-EDP, 2006 WL 6253201, at *6 (N.D. Ala. Oct. 12, 2006) (citing Nat'l Ins. Ass'n v. Sockwell, 829 So.2d 111, 141 (Ala. 2002); King v. Nat'l Found. Life Ins. Co., 541 So.2d 502, 505-06 (Ala. 1989); Quick v. State Farm Mut. Auto. Ins. Co., 429 So.2d 1033, 1035 (Ala. 1983) (Tobert, C.J. concurring specially); Metropolitan Life Ins. Co. v. James, 191 So. 352, 355 (Ala. 1939)); see also Maloof v. John Hancock Life Ins. Co., 60 So.3d 263 (Ala. 2010) (finding no fiduciary duty between insured and insurance company and its agents); Guinn v. Am. Integrity Ins. Co., 568 So.2d 760, 763 (Ala. 1990) (same).
In response, GNM asserts that "the facts in Sayer, and the legal conclusion determined therein, has [sic] absolutely no bearing on the instant litigation" because, GNM argues, this case does not deal with purchasing insurance or an attempt to collect under an existing policy. GNM's Resp. (Doc. 24) at 14-15. Rather, GNM argues that this case "deals with Travelers's failure to adequately, and `jointly,' pay under the Policy." Id. The court finds no merit in GNM's argument. A lawsuit over an alleged "failure to adequately, and jointly, pay" under an existing policy is clearly an attempt to collect under the insurance policy. Therefore, Sayer, as well as the cases on which it relies, would apply in this case. GNM has not and cannot establish a fiduciary relationship between Travelers (an insurance company) and GNM (a customer of Travelers), and GNM's breach of fiduciary duty claim is due to be dismissed.
Even if the court found Sayer to be inapplicable, which it does not, GNM has still not established the existence of a fiduciary relationship. GNM cites no Alabama authority and pleads no set of facts to show special circumstances or a confidential relationship such that could give rise to a fiduciary duty. GNM does point the court to a Louisiana case in an attempt to establish that "an insurer is deemed a fiduciary of its insured." GNM's Resp. (Doc. 24) at 13 (citing Pareti v. Sentry Indem. Co., 536 So.2d 417 (La. 1988)). The court cannot find a fiduciary relationship exists in this case based on the holding of a Louisiana court when this tort action is governed by Alabama law. Systrends, 959 So. 2d at 1075. GNM has failed to plead the existence of a fiduciary relationship between the parties that creates a duty. Thus, GNM's breach of fiduciary duty claim is due to be dismissed.
Travelers contends that GNM has failed to state a claim for which relief can be granted regarding the bad faith claim.
Travelers argues that this claim fails because, for the reasons discussed in the breach of contract section, GNM cannot show a breach of an insurance contract. Mot. (Doc. 21) at 14-15. GNM reasserts that there was a breach of the insurance contract. GNM's Resp. (Doc. 24) at 15-16. As discussed in section II.A above, the court finds that GNM has failed to state a claim for breach of contract. Thus, a claim of bad faith for the alleged breach cannot stand.
Travelers contends that GNM has failed to state a claim for which relief can be granted regarding the negligence claim.
First, Waters, the authority to which GNM points, holds that "a liability insurer may be liable to its insured beyond the policy limits for the insurer's negligence . . . in failing to settle claims against its insured within policy limits when a judgment greater than the policy limits is later obtained against the insured." Turner Ins. Agency v. Cont'l Cas. Ins. Co., 541 So.2d 471, 472 (Ala. 1989) (citing Waters, 73 So. 2d at 254). Those facts are inapplicable to the case at hand, as there has not been any failure to settle within policy limits or a judgment greater than the policy limits obtained against GNM.
Second, Kervin does not limit its holding to the investigation of claims as GNM asserts. Rather, Kervin states clearly that no cause of action is recognized in Alabama for "the negligent handling of insurance claims," Kervin, 667 So. 2d at 706 (emphasis added), and the Kervin decision does not stand alone. See Pate v. Rollison Logging Equipment, Inc., 628 So.2d 337, 345 (Ala. 1993) (The Alabama Supreme Court "has consistently refused to recognize a cause of action for the negligent handling of insurance claims."); Chavers v. National Security Fire & Casualty Co., 405 So.2d 1, 5 (Ala. 1981) ("[W]e have expressly rejected any cause of action based upon an insurer's negligence in handling direct claims. . . . We reaffirm this position."); Calvert Fire Ins. Co. v. Green, 180 So.2d 269 (1965).
GNM's Third-Party Complaint alleges that Travelers owes GNM noncontractual indemnity
For the reasons discussed above, it is ORDERED that Travelers' Motion to Dismiss (Doc. 21) is GRANTED.
Breach of contract sounds in contract law, and "in Alabama, contract claims are governed by the laws of the state where the contract was made." SE Prop. Holdings, LLC v. Sandy Creek II, LLC, 954 F.Supp.2d 1322, 1335 (S.D. Ala. 2013) (citing Cherry, Bekaert & Holland v. Brown, 582 So.2d 502, 506 (Ala. 1991)). Here, the contract was "made" in either California or Alabama. However, a court "need not resolve [a] choice of law problem [when] the relevant law in both states is essentially in harmony," Scott v. Prudential Sec., Inc., 141 F.3d 1007, 1012 (11th Cir. 1998). The court finds it unnecessary to determine whether Alabama or California contract law will apply because the result would be the same.
Ex parte U.S. Bank Nat. Ass'n, No. 1120904, 2014 WL 502370, *9 (Ala. Feb. 7, 2014) (quoting Fitts v. Minnesota Min. & Mfg. Co., 581 So.2d 809, 820 (Ala. 1991)). Here, the harm occurred in Alabama, so Alabama law will apply.
