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Chicago Motors, LLC v. Apex Insurance Agency International, Inc.

United States District Court, W.D. Kentucky, Louisville

February 27, 2014

CHICAGO MOTORS, LLC d/b/a SPEED AUTO SALES, Plaintiff,
v.
APEX INSURANCE AGENCY INTERNATIONAL, INC. and STATE NATIONAL INSURANCE COMPANY, INC., Defendants.

MEMORANDUM OPINION

CHARLES R. SIMPSON, III, Senior District Judge.

This matter is before the court on the motion of the defendant, Apex Insurance Agency International, Inc. ("Apex Insurance"), to dismiss claims against it pursuant to Federal Rule of Civil Procedure 12(b)(6). (DN 6). The plaintiff, Chicago Motors, LLC d/b/a Speed Auto Sales, has filed a response to Apex Insurance's motion (DN 9), to which Apex Insurance has replied (DN 11).[1] The matter is now ripe for adjudication. For the reasons set forth below, the court will grant Apex Insurance's motion to dismiss (DN 6).

I.

Chicago Motors LLC d/b/a Speed Auto Sales (hereinafter, "Chicago-Speed")[2] owns a used car lot located in Louisville, Kentucky. Apex Insurance appears to have prepared a "Commercial Insurance Proposal" on December 14, 2011 for Chicago-Speed. The following month, State National Insurance Company, Inc. ("State National")[3] issued a Commercial Lines Policy to Chicago-Speed. State National is listed on the Policy's declaration page as the insurer, and Apex Insurance's name does not appear anywhere on the Policy.

Chicago-Speed submitted a claim for insurance benefits under the Policy after its used car inventory was damaged by a hail storm in April 2012. After it was informed that it would not receive the coverage that it allegedly expected under the Policy, Chicago-Speed brought this action in Jefferson County, Kentucky, Circuit Court. Although the complaint initially named Apex Insurance as the sole defendant, Chicago-Speed subsequently amended the complaint to name State National as an additional defendant.

In the amended complaint, Chicago-Speed brings claims against both Apex Insurance and State National for breach of contract, negligence, bad faith, and violation of the Kentucky Unfair Claims Settlement Practices Act. Chicago-Speed seeks damages and a declaration that it is entitled to its reasonable expectation of coverage because, according to Chicago-Speed, the Policy allegedly contains a "coinsurance" calculation that unreasonably reduces the coverage limits. Apex Insurance removed the action to this court on the basis of our diversity jurisdiction and refiled the motion to dismiss that it had previously submitted to the Jefferson Circuit Court.

II.

A pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). During the pleading stage, the plaintiff must provide factual allegations that are "enough to raise a right to relief above the speculative level" and "state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). In ruling on a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court must "construe the complaint in the light most favorable to plaintiff" and "accept all well-pled factual allegations as true[.]" Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir. 2010) (internal marks omitted) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009); League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007)). Yet, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions, " and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft, 556 U.S. at 678 (citation omitted). "[T]o survive a motion to dismiss, the complaint must contain either direct or inferential allegations respecting all material elements" of the offense. In re Travel Agent Comm'n Antitrust Litig., 583 F.3d 896, 903 (6th Cir. 2009) (citation omitted).

Generally, a court may not consider matters outside the pleadings when ruling on a Rule 12(b)(6) motion to dismiss without converting the motion into one for summary judgment. J.P. Silverton Indus. L.P. v. Sohm, 243 F.Appx. 82, 86-87 (6th Cir. 2007); see Fed.R.Civ.P. 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion."). However, "when a document is referred to in the complaint and is central to the plaintiff's claim... [, ] the defendant may submit an authentic copy [of the document] to the court to be considered on a motion to dismiss, and the court's consideration of the document does not require conversion of the motion to one for summary judgment." Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir. 1999) (quotation omitted).

III.

The amended complaint seeks to bring claims against both Apex Insurance and State National for breach of contract, negligence, bad faith, and violation of the Kentucky Unfair Claims Settlement Practices Act, KRS ยง 304.12-230 ("UCSPA"), in addition to a declaration that Chicago-Speed is entitled to its reasonable expectation of coverage under the Policy in accordance with the principles developed in Bidwell v. Shelter Mut. Ins. Co., 367 S.W.3d 585 (Ky. 2012). We will address each of these claims as to Apex Insurance to determine if they can survive Apex Insurance's motion to dismiss. However, we make no determination as to the viability of the claims asserted against State National in this action.

A. Breach of Contract

In the amended complaint, Chicago-Speed alleges that it was damaged as a "direct and proximate cause of Defendant Apex's breach of policy[.]" (Am. Compl., DN 1-13, p. 6). Apex Insurance argues that this breach of contract claim must be dismissed because Apex Insurance is not a party to the insurance policy issued to Chicago-Speed. Apex Insurance submitted a copy of the Policy with its motion to dismiss. Although the Policy was not attached as an exhibit to the amended complaint, the court may consider that document in ruling on the motion because it is referenced in the amended complaint and is central to Chicago-Speed's claims. Greenberg, 177 F.3d at 514.

Under Kentucky law, parties may only sue for a breach of contract if privity of contract existed. Presnell Constr. Managers, Inc. v. EH Constr., LLC, 134 S.W.3d 575, 579 (Ky. 2004) (internal marks and citations omitted) (citing Black's Law Dictionary for the proposition that "[p]rivity of contract is [t]he relationship between parties to a contract, allowing them to sue each other but preventing a third party from doing so'"). If a plaintiff is not a party to the contract, he or she has no right to recover damages for the contract's breach. ...


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