Lewis v. Government Employees Insurance Co.

          OPINION

          ROBERT B. KUGLER UNITED STATES DISTRICT JUDGE.

         THIS MATTER comes before the Court on Defendant GEICO's Motion to Dismiss (Doc. No. 3) certain claims in Plaintiffs Sherry Lewis and David Lewis's Complaint. (Doc. No. 1). Plaintiffs filed the Complaint on behalf of themselves and all individuals insured by GEICO in New Jersey under a GEICO private passenger vehicle policy who received a first-party total loss settlement or settlement offer that: (1) did not include applicable sales tax, title fees, or license plate fees; or (2) was based in whole or in part on the price of comparable vehicles reduced by a “condition” adjustment. For the reasons articulated in this Opinion, the Motion to Dismiss (Doc. No. 3) is GRANTED.

         I. BACKGROUND^[1]

         This case involves a total loss settlement between an insurer and the insured. Sherry and David Lewis (“Plaintiffs”) leased a 2017 Volkswagen Jetta and purchased an insurance policy from GEICO (“Defendant”). Compl. at ¶¶ 14, 44-45. In the event of a collision, the policy promised payment of the actual cash value (“ACV”), defined by the policy as “the replacement cost of the auto or property less depreciation or betterment.” Id. at ¶ 18. Then in January 2018, Plaintiffs had an auto accident.

         Following the accident, Plaintiffs submitted a claim to GEICO, which adjusted the claim and determined the total loss. Id. at ¶¶ 46-47. GEICO paid $17, 258 for the total loss, which consisted of the value of the vehicle less Plaintiffs' deductible. Id. at ¶¶ 49, 57-58. GEICO determined the value of the vehicle by the base price of the vehicle less an adjusted vehicle value. GEICO relied upon a third-party, Certified Collateral Corporation (“CCC”), to generate the adjusted vehicle value. Id. at ¶ 64. CCC determined this “adjustment” by comparing other vehicles with similar mileage and conditions. Id. The final adjustment, however, did not explain the basis of the reduction. Id. at ¶ 68. Plaintiffs therefore called the $1, 006 adjustment an arbitrary and flat reduction to the value of comparable vehicles. Id. at ¶ 69.

         Plaintiffs highlighted additional concerns with GEICO's adjusted claim. Specifically, Plaintiffs claim that GEICO failed to pay the full ACV because, contrary to New Jersey law, it never accounted for sales tax, license fees, and title fees. Id. at ¶ 58. Plaintiffs also insisted that GEICO pay these taxes and fees as part of the settlement. Id. As such, Plaintiffs asserted that GEICO should not have relied on CCC's report because it applied an arbitrary “condition adjustment” without explanation. Id. at ¶¶ 59, 72. The underlying policy also did not specifically exclude the payment of sales tax or state and local regulatory fees from ACV. Id. at ¶ 31.

         Plaintiffs then filed a class action in this Court on April 2, 2018. The Complaint provides four causes of action. Count I alleges a breach of contract. Count II states a breach of the implied covenant of good faith and fair dealing. Count III asserts a declaratory judgment and injunctive relief. Count IV states a violation of the New Jersey Consumer Fraud Act (“NJCFA”). The class action further states that these actions are a part of an ongoing, widespread, and continuous scheme by GEICO to defraud its insureds in the payment of benefits under their policies of insurance. Id. at ¶ 118. GEICO misrepresents and defrauds policy holders through its advertisements. Specifically, GEICO's claim website states: “If your policy covers a total loss, GEICO will: pay the actual cash value of the vehicle (plus applicable state fees and taxes) less any deductible.” Compl. at ¶ 29. Plaintiffs argue that this provision shows that GEICO was aware of various state laws mandating payment of certain taxes and fees. Thus, GEICO deliberately withholds full payment to policy holders in the event of a total loss.

         Defendant now seeks to dismiss the complaint and provides three main arguments. First, Defendant has moved to dismiss Counts II and III on the grounds that they are duplicative of Plaintiffs' Count I breach of contract claim. Second, Defendant moves to dismiss Count IV on the ground that there is no private right of action against an insurer under the New Jersey Consumer Fraud Act (“NJCFA”). Third, Defendant has moved to dismiss Plaintiffs' demand for punitive damages on the ground that Plaintiffs' allegations do not rise to the requisite level of egregiousness for a finding of punitive damages.

         II. RELEVENT STATUTE

         The New Jersey Consumer Fraud Act provides in pertinent part:

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice.

N.J. Stat. Ann. § 56:8-2. “Merchandise” is defined as “any objects, wares, goods, commodities, services or anything offered directly or indirectly to the public for sale.” Id. § 56:8-1(c).

         III. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss an action for failure to state a claim upon which relief can be granted. When evaluating a motion to dismiss, “courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Fowler v. UPMC Shadyside,578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. Cty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)). In other words, a complaint survives a motion to dismiss if it contains sufficient factual matter, accepted as ...