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Sewer v. Nationwide Property and Casualty Insurance Co.

United States District Court, D. Maryland

December 21, 2018

JOHNSON SEWER AND DRAIN CONTRACTORS, INC., et al.
v.
NATIONWIDE PROPERTY AND CASUALTY INSURANCE COMPANY

          MEMORANDUM

          Catherine C. Blake United States District Judge

         Pending before the court is defendant Nationwide Property and Casualty Insurance Company's ("Nationwide") Motion to Dismiss Complaint, seeking dismissal of both counts of plaintiffs' Johnson Sewer and Drain Contractors, Inc., U.S. Heating & Air, LLC, and Johnson Properties, LLC complaint. On November 28, 2018, the court heard oral argument in this matter. For the reasons stated below, the court will grant the motion.

         FACTUAL AND PROCEDURAL HISTORY

         Plaintiffs (collectively, "Johnson") are affiliated companies owned by the same principal owners whose operations are consolidated for the purposes of insurance coverage. Johnson maintains an insurance policy through Nationwide, including a commercial automobile policy and a workers' compensation policy. The parties have renewed the insurance policy annually since at least 2013. The workers' compensation policy identifies the Michael D. Frankos Agency as Johnson's insurance agent. ECF 9-4 at p. 10. The workers' compensation policy includes a subrogation clause entitled "Recovery From Others" which states "[w]e have your rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them." ECF 9-4 at p. 18.

         On or about April 30, 2013, Robert Stacey, a Johnson employee, was struck from behind by a United States Postal Service ("USPS") truck while driving a Johnson-owned vehicle in Delaware and acting within the scope of Johnson's business. As a result, Mr. Stacey sustained injuries and the vehicle was damaged. While the extent of Mr. Stacey's injuries is not clear from the record, it appears that Mr Stacey has undergone spinal surgery as a result of injuries sustained from the accident.

         Johnson reported the accident to Mr. Frankos, who initiated claims under the workers' compensation policy and the commercial automobile policy. USPS acknowledged full liability for the accident. Nationwide consequently compensated Johnson pursuant to the insurance policies for the expenses related to both claims. Nationwide, via Mr. Frankos, informed Johnson that it intended to assert its subrogation rights pursuant to the commercial automobile policy against USPS based on USPS's assumption of full liability for the accident. After asserting its subrogation rights for the damages to Johnson's vehicle, Nationwide resolved the automobile claim in 2014 with little to no impact on Johnson's premiums or the commercial automobile policy overall.

         In 2014, Johnson requested that Nationwide similarly assert its subrogation rights for the workers' compensation claim, and Mr. Frankos represented to Johnson that Nationwide intended to do so. Between 2014 and April 2015, Johnson repeatedly requested that Nationwide assert its subrogation rights, and Mr. Frankos repeatedly assured Johnson that it would do so.[1] Despite the repeated requests and assurances, Nationwide failed to assert its subrogation rights against USPS' regarding the workers' compensation claim by April 30, 2015, [2] and accordingly, the Federal Tort Claims Act's ("FTCA") statute of limitations period expired, precluding Nationwide from seeking compensation from USPS for payments pursuant to the workers' compensation claim. The workers' compensation claim for Mr. Stacey's extensive medical expenses therefore continued to be paid from Johnson's workers' compensation policy without reimbursement from USPS. Beginning in 2014, Johnson's premiums started to rise due to the increase in Johnson's experience rating, [3] which increased at least in part due to Mr. Stacey's ongoing, non-subrogated workers' compensation claim. Additionally, Johnson claimed that it lost business due to commercial customers' unwillingness to contract with Johnson due to Johnson's increasing experience risk rating.

         On April 27, 2018, Johnson filed suit against Nationwide, alleging that 1) Nationwide breached its contract with Johnson when it failed to pursue its subrogation rights against USPS, thus violating the implied covenant of good faith and fair dealing; and, in the alternative, 2) pursuant to the doctrine of promissory estoppel, Johnson had relied to its detriment on Mr. Frankos's repeated assurances of Nationwide's intention to pursue its subrogation rights. Nationwide filed its motion to dismiss on June 12, 2018.

         STANDARD OF REVIEW

         To survive a motion to dismiss, the factual allegations of a complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). "To satisfy this standard, a plaintiff need not 'forecast' evidence sufficient to prove the elements of the claim. However, the complaint must allege sufficient facts to establish those elements." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). "Thus, while a plaintiff does not need to demonstrate in a complaint that the right to relief is 'probable/ the complaint must advance the plaintiffs claim 'across the line from conceivable to plausible/" Id. (quoting Twombfy, 550 U.S. at 570). A court may consider a statute of limitations defense on a motion to dismiss only "where the defense is apparent from the face of the complaint." Wright v. U.S. Postal Service, 305 F.Supp.2d 562, 563 (D. Md. 2004).

         ANALYSIS

         Nationwide premised its motion to dismiss on three primary arguments. First, Nationwide contended that the state of Maryland has assigned the Maryland Insurance Administration ("MIA") exclusive jurisdiction to resolve the dispute, thereby precluding the court from adjudicating Johnson's claims. Second, Nationwide argued that Johnson filed its complaint after the statute of limitations period for Johnson to file suit had expired. Third, Nationwide asserted that it had not breached its contract with Johnson because no specific contractual provision obligated Nationwide to pursue its subrogation rights, and because the existence of the worker's compensation policy precludes Johnson's claim that the quasi-contractual doctrine of promissory estoppel obligated Nationwide to assert its subrogation rights. While the court does not find all of Nationwide's arguments persuasive, [4] nonetheless it will dismiss both counts of the complaint for the reasons that follow.

         i. Breach of contract

         Johnson's claim that Nationwide breached the terms of the worker's compensation policy by failing to pursue subrogation against USPS, which allegedly constituted a violation of the implied covenant of good faith and fair dealing, will be dismissed because 1) the parties' agreement did not obligate Nationwide to seek subrogation; 2) the good-faith covenant cannot be used to imply or insert additional obligations into a contract; and 3) Johnson's ability to enjoy the benefits of the workers' compensation policy was not frustrated by Nationwide's failure to seek subrogation. While Johnson claimed that the workers' compensation policy's subrogation clause should be understood to obligate Nationwide to seek subrogation in good ...


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