United States District Court, S.D. Indiana, Indianapolis Division
ORDER DENYING NATIONWIDE'S PARTIAL MOTION TO
PATRICK HANLON UNITED STATES DISTRICT JUDGE
Shore Co-Owners' Association alleges that Nationwide
Mutual Insurance Company breached the insurance policy issued
to North Shore by failing to fully pay for covered shingle
damage. North Shore also alleges that Nationwide acted in bad
faith by wrongly and intentionally deceiving North Shore and
denying coverage for open and obvious cosmetic hail damage.
Nationwide has moved to dismiss North Shore's bad-faith
claim, asserting that it had a rational basis for denying
coverage for the shingle damage. Dkt. . For reasons that
follow, that motion is DENIED.
Facts and Background
deciding Nationwide's motion for dismissal, the Court
accepts and recites “the well-pleaded facts in the
complaint as true.” McCauley v. City of
Chicago, 671 F.3d 611, 616 (7th Cir. 2011).
insured North Shore's buildings. Dkt. 1-2 at 3 (Compl.
¶ 1). The policy covered cosmetic shingle damage from
hail, even if that damage was just cosmetic. Id. at
5 (¶ 18). During the policy period, North Shore's
roofs sustained open and obvious hail damage. Id. at
3-4 (¶¶ 2-3, 14).
hired Nederveld, a preferred vendor, to inspect North
Shore's buildings and to submit a report on the damage.
Id. at 5 (¶¶ 16, 17, 20). Nederveld
defined “damage” from hail to only include
functional shingle damage, not cosmetic damage. Id.
(¶ 19). Under that definition, Nederveld reported to
Nationwide that North Shore's roofs had no damage.
Id. (¶ 20). Nationwide used Nederveld's
report to conclude that the applicable policy only covered
functional shingle damage and North Shore's roofs had no
damage. Id. (¶¶ 21-22). Ultimately,
Nationwide did not pay the full amount of the loss.
Id. at 3 (¶ 4).
removed North Shore's complaint to this court on November
20, 2018. Dkt. 1. The complaint alleges two counts: Count I
for breach of contract and Count II for bad faith. Dkt. 1-2.
Nationwide answered Count I, dkt. 8, and moves to dismiss
Count II, arguing that North Shore has not alleged sufficient
facts under Indiana law to support a claim of bad faith, dkt.
10. In response, North Shore argues that the Court should
deny the motion to dismiss or alternatively stay
Nationwide's motion pending bad faith discovery and/or
grant North Shore leave to amend its complaint. Dkt. 14.
may move under Federal Rule of Civil Procedure 12(b)(6) to
dismiss claims for “failure to state a claim upon which
relief may be granted.” Fed. R. Civ. Pro. 12(b)(6). To
survive a Rule 12(b)(6) motion to dismiss, a complaint must
“contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). A facially plausible claim is one that
allows “the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
ruling on a 12(b)(6) motion, the Court will “accept the
well-pleaded facts in the complaint as true, ” but will
not defer to “legal conclusions and conclusory
allegations merely reciting the elements of the claim.”
McCauley, 671 F.3d at 616.
federal court hearing a case under diversity jurisdiction
must apply the substantive law of the state in which it sits.
Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78
(1938). Indiana law governs this case. See
Kartman v. State Farm Mut. Auto. Ins. Co.,
634 F.3d 883, 890 (7th Cir. 2011) (applying Indiana law).
argues that Count II should be dismissed because it had a
rational basis for its coverage position and North Shore
fails to allege any “element of conscious
wrongdoing.” Dkt. 10 at 3.
Shore contends that it sufficiently pleads a bad-faith claim
because it “alleges furtive intent, deceitful conduct
and wrongdoing.” Dkt. 14 at 3. North Shore asserts that
“[d]enying obvious hail damage, coupled with the size
of the claim, estimated at over five hundred thousand