CHARLES S. MILLER, JR., Magistrate Judge.
Before the court is a "Motion to Dismiss for Failure to State a Claim" filed by the Hanover Insurance Company ("Hanover") on May 26, 2017.
The following facts are either undisputed or are otherwise accepted as true for the purposes of this motion.
Estvold purchased a Hanover-underwritten insurance policy through PayneWest in January 2016 for properties it owned in or near three North Dakota towns: New Town, Alexander, and Richardton. One of Estvold's properties, a Steel Shop located at 8449 39th St. NW, New Town, North Dakota (hereinafter referred to as the "39th St. Steel Shop") was destroyed in a conflagration on April 23, 2016. Estvold promptly tendered a fire loss claim to Hanover. Hanover denied the claim on the ground that the 39th St. Steel Shop was not amongst properties covered by Estvold's insurance policy.
Estvold initiated the above-entitled action on January 18, 2017. It has asserted claims against Hanover for breach of contract, declaratory judgment, reformation of contract and specific performance, and violation of the State's Unfair Insurance Practices Act. It has asserted the same claims along with additional claims for professional negligence and negligence against PayneWest. It seeks a declaration that its insurance policy covers the fire damage to the 39th St. Steel Shop. In the alternative, it seeks either reformation of the policy to reflect that the 39th St. Steel Shop was covered and payment from Hanover for the fire loss claim, or a finding that PayneWest was negligent for failing to correctly identify the 39th St. Steel Shop in the insurance proposal.
The insurance proposal prepared by PayneWest (and presumably accepted as is by Estvold) listed the following schedule of properties to be covered by the policy:
(Doc. No. 1). Conspicuously absent from this schedule was any explicit identification of a fifth location, i.e., 8449 39th St. NW, New Town, or mention of the 39th St. Steel Shop.
In its Complaint, Estvold contends that the 39th St. Steel Shop was not really omitted from the insurance proposal but rather misidentified as Building #1 at Loc. No. 4, that there was mutual understanding amongst the parties that 39th St. Steel Shop was covered by the policy, and that such coverage was calculated into the insurance premiums that were timely paid and that Hanover accepted. Specifically, Estvold asserts that its intent was clear from the outset that it was seeking coverage for all of its property, including the 39th St. Steel Shop; PayneWest understood this and twice inspected the 39th St. Steel Shop during coverage negotiations; PayneWest prepared an insurance proposal that listed a nonexistent property, Building #1 at Loc. No. 4; it and PayneWest mutually understood and agreed that the insurance proposal's reference to the Building #1 at Loc. No. 4 was in actuality the 39th St. Steel Shop; PayneWest acted as Hanover's agent at all times relevant to this action; and PayneWest's knowledge and understanding is imputable to Hanover.
On May 26, 2017, Hanover filed a motion to dismiss Estvold's claims against it pursuant to Fed. R. Civ. P. 12(b)(6). Estvold has filed a response in opposition and has requesting a hearing. PayneWest has filed a special response, staking out its position regarding its relationship to Hanover—it denies that it was Hanover's agent—but otherwise taking no position as to whether Estvold has pled its claims against Hanover with the requisite specificity. Hanover, in turn, has filed a reply in support of its motion.
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a pleading to contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8 (a)(2). Rule 12(b)(6) of the Federal Rules of Civil Procedure mandates the dismissal of a claim if there has been a failure to state a claim upon which relief can be granted. In order to survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face."
The court is generally confined to looking only to the allegations contained in the complaint to make a Rule 12(b)(6) determination.
In assessing the sufficiency of Estvold's pleadings in this diversity action, the court shall apply state substantive law.
"A breach of contract is the nonperformance of a contractual duty when it is due."
Under N.D.C.C. § 9-07-02, "[t]he language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity." "The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable. Each clause is to help interpret the others." N.D.C.C. § 9-07-06.
Here, there is no dispute that the 39th St. Steel Shop was not explicitly listed amongst the properties to be covered in the insurance proposal. Seizing upon this, Hanover insists that, because the policy explicitly and unambiguously excluded coverage for the 39th St. Steel Shop, its denial of the claim for fire damage 39th St. Steel Shop cannot constitute a viable claim for breach of contract.
The gist of Estvold's response is that Hanover breached the contract that was intended. According to Estvold, there was a mutual understanding between PayneWest and Estvold that: (1) Estvold was purchasing coverage for all of its property, including the 39th St. Steel Shop; (2) the reference in the insurance proposal to Building #1 at Loc. No. 4 was a scrivener's error; (3) the aforementioned Building #1 was in actuality the 39th St. Steel Shop; and (4) PayneWest's knowledge and understanding can be imputed to Hanover by the fact that it was acting as its agent either in fact or because of its apparent authority.
Hanover denies that PayneWest was its agent. In its special response, PayneWest likewise denies it was Hanover's agent. Additionally, it disputes Estvold's assertion that the exclusion of the 39th St. Steel Shop from the insurance proposal was a mistake or that it had a mutual understanding with Estvold that Building #1 at Loc. No. 4 was in fact the 39th St. Steel Shop.
While the court has some doubt about whether PayneWest acted as Hanover's agent for purposes of the negotiation of the policy, the resolution of that question is for another day since the court must accept as true what has been pled in the complaint for purposes of the motion to dismiss. Further, if the court was to reform the contract, then, theoretically, it is the breach of the reformed contract that would provide a basis for the recovery. At this point, the court will not dismiss the breach of contract claim.
Hanover next contends that declaratory judgment in Estvold's favor would be inappropriate as Estvold is ostensibly seeking to reform its insurance policy as opposed to a determination of its rights under it and that such a claim is otherwise subject to dismissal on the ground that it is duplicative of the breach of contract claim.
"The construction of a written contract to determine its legal effect is generally a question of law."
"If a written contract is unambiguous, however, parol evidence is nevertheless admissible in an action to reform the contract on the grounds of mutual mistake to establish the alleged mistake and to correct the instrument to conform to the agreement or intention of the parties"
"Reformation is an equitable remedy used to rewrite a contract to accurately reflect the parties' intended agreement."
Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake and consisting in:
N.D.C.C. § 9-03-13.
Hanover asserts that the pleadings are deficient when it comes to the claimed entitlement to reformation. Specifically, it avers that the pleadings are devoid of any suggestion there was any mutual mistake and that Estvold's apparent failure to review the terms of the insurance proposal does not constitute a valid basis for rewriting them after the fact. In so doing, it denies that PayneWest was its agent and, by extension, that PayneWest's knowledge and understanding can be ascribed to it. In its view, the fact that it was not named along with PayneWest in Estvold's claim for professional malpractice is telling.
The fact that Estvold is pursuing a claim against PayneWest for professional malpractice does not foreclose it from seeking, in the alternative, reformation. And, if PayneWest was acting as the agent of for Hanover as contended in the complaint, then what has been pled is sufficient to state a claim for reformation for reasons that are obvious.
Also, the court is not convinced that Estvold would not have a plausible claim for reformation based on mutual mistake, even if PayneWest was acting as its agent and not Hanover's. This is particularly true given (1) the allegation there was a building in the scheduled list of property that did not exist at the address indicated, but for which Hanover collected a premium, and (2) the allegation that the address should have been that of the building that was destroyed. While Hanover denies any mistake on its part, surely Hanover's practice is not to charge and collect premiums based on non-existent property.
In other words, this case would look a lot different if PayneWest was acting as Estvold's agent, the destroyed property was not included in the schedule of property due to the mistake of Estvold and/or PayneWest, and all of the other buildings in the schedule upon which the premiums were based actually existed and presented a risk of loss. But, that is not what is being alleged here. And, just because Hanover might rely upon others to determine whether the property it contracts to insure actually exists, the court cannot think of a reason — at least not one at this point — why that would relieve Hanover of the consequences of a mistake in charging a premium based in part on nonexistent property, if that is what happened.
The court will allow the claim for reformation to proceed forward.
Estvold's fourth and final claim against Hanover is that it violated the Unfair and Deceptive Insurance Practices Act, codified at Ch. 26.1-04. Specifically, Estvold alleges:
(Doc. No. 1).
Hanover asserts this cause of action is unsustainable as the alleged misconduct, the wrongful denial of Estvold's fire loss claim, is a single act and therefore insufficient to establish a "general business practice" for purposes of § 26.1-04-03. For support it relies upon the North Dakota's Supreme Court's holdings in
In
In
Estvold's response is somewhat nuanced. Estvold does not challenge the legal authority upon which Hanover relies. Rather, it takes issue with Hanover's assertion that its denial of the fire loss claim constituted a single act. Specifically, it avers that Hanover denied its fire loss claim six times between May and July 2016 as evinced by emails attached to its responsive brief, that each denial by Hanover constituted a separate act for purposes of § 26.1-04-03, and that collectively these denials are demonstrative of a pattern or practice for purposes of § 26.1-04-03. It further avers that Hanover engaged in other conduct, i.e., the denial of payment to a third-party vendor for work done on the 39th St. Steel Shop in July 2016 and the denial of coverage on an unrelated claim made by Estvold for a skid steer loader — that are further demonstrative of a pattern or practice of deceptive and unfair insurance practices.
Common sense would seemly dictate that, for purposes of Ch. 26.1-04, the repeated denial of the same claim on the same grounds constitutes a single act as opposed to a pattern or practice. Otherwise every insured could arguably "manufacture" a claim against every insurer under Ch. 26.1-04 by repeatedly resubmitting claims that the insurers had denied in the first instance.
In any event, Estvold's pleadings are devoid of any explicit assertion that Hanover engaged in a pattern or practice; tellingly, Estvold complains about the denial of its claim in the singular, not in the plural. Moreover, Estvold has cited no authority to support the assertion it makes in its responsive brief that each denial of the same claim by Hanover on the same grounds constitutes a pattern or practice for purposes for § 26.1-04-03. Finally, Estvold's assertion in its responsive brief that Hanover's refusal to pay a third-party vendor and denial of an unrelated claim as evidence of a pattern or practice are unavailing. The pleadings make no mention of such conduct. And for purposes of the instant motion, the court must focus on what is in the pleadings.
The basis for Estvold's Unfair and Deceptive Insurance Practices Act claim is that Hanover wrongfully denied its fire loss claim. As this denial does not constitute a pattern for purposes of the Act, the pleadings fail to articulate claim for which relief may be granted under the Act.
Hanover's motion to dismiss (Doc. No. 26) is