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District Court Grants Insurer’s Motion to Dismiss Extracontractual Claims for Failure to State a Claim

The Eastern District of Pennsylvania recently granted an insurer’s motion to dismiss claims for statutory bad faith and violations of the Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), Unfair Insurance Practices Act (“UIPA”), and Unfair Claims Settlement Practices (“UCSP”) regulations. See Clapps v. State Farm Ins. Co., 2020 WL 1308230, (E.D. Pa., March 19, 2020).

The dispute in Clapps arose out of a claim for property damage that the insured alleged was “the result of a peril insured against under the policy.” The insurer denied coverage for the claim. The insured subsequently filed a complaint, alleging that the insurer breached the parties’ insurance contract, acted in bad faith, and violated the UTPCPL, UIPA, and UCSP regulations. The insurer moved to dismiss the insured’s complaint.

The Court granted the motion to dismiss as to all claims except the breach of contract claim. With respect to the breach of contract claim, the Court recognized that the complaint did not recite each essential term of the parties’ contract, but it nevertheless held that the complaint alleged the same level of detail that courts have repeatedly found sufficient to state a breach of contract claim.

In ruling upon the statutory bad faith claim, the Court compared the insured’s allegations to the bad faith allegations in similar cases within the Third Circuit and found that Plaintiff’s bad faith allegations were “nothing more than conclusory statements devoid of any factual detail” and could not support an award of bad faith damages. The insured pointed to one case in which the bad faith allegations were identical to the ones asserted by the insured, but the Court held that this only underscored the deficiencies of the insured’s claim. While the allegations may have been sufficient in that case, it did not create a rule whereby identical allegations could be asserted in order to survive a motion to dismiss.

Next, the Court dismissed the insured’s UTPCPL claim. The insurer argued that the insured’s UTPCPL claim was barred by the economic loss doctrine, which prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract. The Court acknowledged that the Pennsylvania Supreme Court has not decided whether the economic loss doctrine applies to statutory claims under the UTPCPL, but the Court cited a Third Circuit decision which predicted that the Pennsylvania Supreme Court would hold that it does. Thus the Court concluded that, in the absence of a clear statement by the Pennsylvania Supreme Court to the contrary, the economic loss doctrine limits both UTPCPL claims and contract claims when the loss of the benefit of a bargain is the plaintiff’s sole loss.

Lastly, the Court dismissed the insured’s claims for violation of the UIPA and UCSP regulations based on the well-developed line of cases establishing that neither the UIPA nor the UCSP regulations create a private cause of action for citizens as they may only be enforced by the Insurance Commissioner of Pennsylvania.