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Carroll v. Nationwide Property & Casualty Co.

United States District Court, W.D. Tennessee, Western Division

June 8, 2015



S. THOMAS ANDERSON, District Judge.

Before the Court is Defendant Nationwide Property & Casualty Insurance Company's Motion to Dismiss the Plaintiffs' Punitive-Damages Claim, filed April 6, 2015. (ECF No. 20). Plaintiffs John and Kimberly Carroll filed their Response on the same day (ECF No. 21), to which Nationwide filed its Reply on April 22, 2015. (ECF No. 24). For the reasons set forth below, Nationwide's Motion to Dismiss Plaintiffs' Punitive-Damages Claim is DENIED.


Plaintiffs John and Kimberly Carroll filed their Amended Complaint with the Court's leave on March 20, 2015. (Am. Compl., ECF No. 18). They allege that Nationwide "wrongfully failed and/or refused to fully and promptly pay Plaintiffs' claim for insurance proceeds." (Id. ¶ 14). The Carrolls state that they submitted a proof of loss to Nationwide indicating a net claim of $639, 436.59. (Id. ¶ 15). Payment was due within 60 days, but the Carrolls allege that Nationwide breached its obligation to pay. (Id. ¶ 17). They seek the statutory bad-faith penalty under Tennessee Code section 56-7-105 and punitive damages "not to exceed $5, 000, 000." (Id. ¶¶ 31-35, prayer for relief). In the instant Motion, Nationwide presents a narrow issue for the Court's review: whether, under Tennessee law, the Carrolls' statutory bad-faith claim under section 56-7-105 precludes punitive damages arising from the same conduct. Nationwide asserts that sections 56-7-105 and the recently enacted section 56-8-113 operate to preclude any claim for punitive damages in this lawsuit, and therefore the Court should grant Nationwide's motion to dismiss the Carrolls' punitive-damages claim. The Carrolls argue that both are available.


I. Motions to Dismiss

A defendant may move to dismiss a claim "for failure to state a claim upon which relief can be granted" under Federal Rule of Civil Procedure 12(b)(6). When considering a Rule 12(b)(6) motion, the Court must treat all of the well-pleaded allegations of the pleadings as true and construe all of the allegations in the light most favorable to the non-moving party.[1] Legal conclusions or unwarranted factual inferences, however, need not be accepted as true.[2] "To avoid dismissal under Rule 12(b)(6), a complaint must contain either direct or inferential allegations with respect to all material elements of the claim."[3] Under Rule 8, a complaint need only contain "a short and plain statement of the claim showing that the pleader is entitled to relief."[4] Although this standard does not require "detailed factual allegations, " it does require more than "labels and conclusions" or "a formulaic recitation of the elements of a cause of action."[5] In order to survive a motion to dismiss, the plaintiff must allege facts that, if accepted as true, are sufficient "to raise a right to relief above the speculative level" and to "state a claim to relief that is plausible on its face."[6] "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."[7]

II. Federal Court's Application of State Law

The Sixth Circuit Court of Appeals held that "[w]hen construing questions of state law, [i]f the state's highest court has not addressed the issue, [a] federal court must attempt to ascertain how that court would rule if it were faced with the issue.'"[8] A court "may use the decisional law of the state's lower courts, other federal courts construing state law, restatements of law, law review commentaries, and other jurisdictions on the majority' rule in making this determination."[9] More importantly here, "a federal court should not disregard the decisions of intermediate appellate state courts unless it is convinced by other persuasive data that the highest court of the state would decide otherwise."[10]


I. Bad-Faith Statute and Punitive Damages

Nationwide's argument hinges on the relationship between two statutes. First, Tennessee's bad-faith statute, section 56-7-105, provides that

in all cases when a loss occurs and [insurance companies] refuse to pay the loss within sixty (60) days after a demand has been made by holder of the policy or fidelity bond on which the loss occurred, [insurance companies] shall be liable to pay the holder of the policy or fidelity bond, in addition to the loss and interest on the bond, a sum not exceeding twenty-five percent (25%) on the liability for the loss; provided that it is made to appear to the court or jury trying the case that the refusal to pay the loss was not in good faith, and that the failure to pay inflicted additional expense, loss, or injury including attorney fees upon the holder of the policy or fidelity bond; and provided, further, that the additional liability, within the limit prescribed, shall in the discretion of the court or jury trying the case, be measured by the additional expense, loss, and injury including attorney fees thus entailed.[11]

In Myint v. Allstate, the Tennessee Supreme Court held that this bad-faith penalty did not preclude plaintiffs in insurance cases from also pursuing claims for treble damages under the Tennessee Consumer Protection Act ("TCPA").[12] In other words, the TCPA was "complementary legislation" to the insurance bad-faith statute: plaintiffs could seek both remedies.[13] In 2011, however, the Tennessee General Assembly passed Tennessee ...

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