Saul Ewing Arnstein & Lehr LLP

Skinner v. Horace Mann Ins. Co., No. 4:18-CV-00922-RBH, 2019 WL 935243 (D.S.C. Feb. 26, 2019)

Plaintiff Annie Skinner (Skinner) allegedly suffered severe injuries and extensive property damage as a result of a February 10, 2014 automobile accident involving Andrew Poston (Poston) and another driver. 

After the accident, Skinner’s attorney sent Poston’s auto insurer, Defendant Horace Mann Insurance Company (HMI), a demand letter offering to settle all claims against Poston in exchange for the full $100,000 of Poston’s policy limits – $50,000 for bodily injury and $50,000 for property damage. The demand letter detailed Skinner’s physical injuries, but mentioned no property damage other than to her clothes and cell phone, which were destroyed in the accident. In response to the demand, HMI sent Skinner’s counsel a check for the $50,000 for bodily injury liability and a proposed settlement agreement that included a covenant not to enforce judgment. Skinner’s counsel returned the $50,000 check, asserting that HMI, by failing to tender payment for the alleged property damage, failed to comply with the terms of the demand. HMI attempted to re-offer the $50,000 for bodily injury to Skinner’s counsel to no avail.

In April 2015, Skinner sued Posten for negligence. The jury ultimately awarded Skinner five million dollars in actual damages. Thereafter, Skinner and Poston entered into an agreement where Poston irrevocably assigned Skinner all his legal rights and interests against HMI. Skinner then sued HMI alleging (1) breach of contract; (2) negligence/gross negligence; (3) bad faith; and (4) negligence per se. HMI filed a motion to dismiss Skinner’s complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).  

In its motion, HMI contended that Skinner’s policy limits demand for property damage was unreasonable because the only alleged property loss was one outfit and one cell phone. HMI argued that it had no duty to comply with Skinner’s unreasonable demand and that any claim premised that unreasonable demand must fail as a matter of law. The court disagreed, finding that Skinner’s complaint alleged plausible claims for both breach of contract and bad faith. 

After finding that Skinner alleged sufficient facts in support of her breach of contract claim, the court held that Skinner’s complaint sufficiently alleged bad faith. In particular, the court noted that Skinner alleged that: (1) a mutually binding insurance contract existed between Poston and HMI; (2) HMI refused to pay the full amount due under the contract; (3) this refusal resulted from HMI’s alleged bad faith/unreasonable action; and (4) Poston suffered damage when the jury ruled against him and in favor of Skinner for five million dollars in actual damages. As a result, the court denied HMI’s motion to dismiss Skinner’s breach of contract and bad faith claims (although it did dismiss Skinner’s negligence and negligence per se claims as being duplicative of the bad faith claim). 

In a footnote following its denial of HMI’s motion to dismiss on the breach of contract and bad faith claims, the court recognized the shortcomings of Plaintiffs factual contentions. However, the court reminded HMI that, at the motion to dismiss stage, it was “constrained by the legal standard for a Rule 12(b)(6) motion, which merely ‘tests the sufficiency of a complaint’ but does not ‘resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.’” Thus, even though the court acknowledged that the actual proof of the facts Skinner alleged – namely her right to recover the full $50,000 of property damage liability coverage when the only property damage alleged was one outfit and a cell phone – was “improbable” and a recovery “remote and unlikely,” her “well-pleaded” causes of action for breach of contract and bad faith against HMI may proceed at this stage in the litigation.