Court Opinion

ID: 6328131
Source: CourtListenerOpinion
Date Created: 2022-03-30 15:12:24.512193+00
Date Added: 2024-06-11T09:22:36.199511
License: Public Domain

March 30, 2022

                                                               Supreme Court

                                                               No. 2021-30-Appeal.
                                                               (PC 16-4707)

                 Daniel Houle et al.          :

                         v.                   :

        Liberty Insurance Corporation,  :
     Alias, A/K/A Liberty Mutual Group,
        A/K/A Liberty Mutual, A/K/A
          Liberty Mutual Insurance.

                   NOTICE: This opinion is subject to formal revision
                   before publication in the Rhode Island Reporter. Readers
                   are requested to notify the Opinion Analyst, Supreme
                   Court of Rhode Island, 250 Benefit Street, Providence,
                   Rhode Island 02903, at Telephone 222-3258 or Email
                   opinionanalyst@courts.ri.gov of any typographical or
                   other formal errors in order that corrections may be made
                   before the opinion is published.
                                                       Supreme Court

                                                       No. 2021-30-Appeal.
                                                       (PC 16-4707)

            Daniel Houle et al.          :

                    v.                   :

       Liberty Insurance Corporation,  :
    Alias, A/K/A Liberty Mutual Group,
       A/K/A Liberty Mutual, A/K/A
         Liberty Mutual Insurance.

        Present: Suttell, C.J., Goldberg, Robinson, Lynch Prata, and Long, JJ.

                                   OPINION

        Justice Lynch Prata, for the Court. This case came before the Supreme

Court on March 1, 2022, pursuant to an order directing the parties to appear and

show cause why the issues raised in this appeal should not be summarily decided.

The plaintiffs, Daniel Houle and Karen Houle (plaintiffs or the Houles), appeal from

a decision and order of the Superior Court granting the motion for judgment on the

pleadings by the defendant, Liberty Mutual Insurance Corporation, alias, a/k/a

Liberty Mutual Group, a/k/a Liberty Mutual, a/k/a Liberty Mutual Insurance

(defendant or Liberty Mutual). 1 After considering the parties’ written and oral

1
 It appears from the record of the case that the name of the defendant entity is
“Liberty Mutual Insurance Company.”

                                        -1-
submissions and reviewing the record, we are satisfied that cause has not been shown

and that this appeal may be decided at this time. For the reasons set forth herein, we

vacate the order of the Superior Court.

                                 Facts and Travel

       On February 21, 2015, the roof at plaintiffs’ home located at 520 Snake Hill

Road in North Scituate, Rhode Island (the property), collapsed due to accumulating

ice and snow.       The property was insured through a “Libertyguard Deluxe

Homeowners Policy” issued by Liberty Mutual (the policy or the Libertyguard

Deluxe policy). The plaintiffs timely notified Liberty Mutual about the loss, and an

adjuster from Liberty Mutual was assigned to investigate. The adjuster submitted a

repair estimate of $18,349.66. Thereafter, the Houles submitted proof-of-loss

documents estimating that the cost of repair would amount to $193,280.40. The

defendant then enlisted the services of an engineering firm and a construction

company to draw plans and estimate the cost of repairs.           The estimate was

$53,615.26.

       On June 20, 2016, the Houles informed Liberty Mutual that they were electing

to invoke the appraisal provision of the Libertyguard Deluxe policy, which provides,

in pertinent part, that:

              “If you and we fail to agree on the amount of loss, either
              may demand an appraisal of the loss. In this event, each
              party will choose a competent appraiser within 20 days
              after receiving a written request from the other. The two

                                          -2-
             appraisers will choose an umpire. If they cannot agree
             upon an umpire within 15 days, you or we may request
             that the choice be made by a judge of a court of record in
             the state where the ‘residence premises’ is located. The
             appraisers will separately set the amount of loss. If the
             appraisers submit a written report of an agreement to us,
             the amount agreed upon will be the amount of loss. If they
             fail to agree, they will submit their differences to the
             umpire. A decision agreed to by any two will set the
             amount of loss.”

Both parties selected their appraiser, but the appraisers could not agree on an umpire.

      The Houles filed the instant action in Superior Court on October 7, 2016,

seeking “relief in the form of a judgment naming an independent and qualified

umpire to set the amount of loss for insurance coverage[.]” Liberty Mutual filed an

answer and counterclaim, as well as an objection to plaintiffs’ request for declaratory

relief and cross-motion for declaratory judgment. On December 6, 2016, the various

matters were heard before a Superior Court justice. On December 30, 2016, an order

entered by agreement, stating that the parties had agreed upon the selection of an

umpire. The appraisal hearing went forward on March 9, 2018, and plaintiffs were

awarded $81,641 by the appraisal panel.

      On August 7, 2019, plaintiffs filed a second amended complaint, alleging that

Liberty Mutual had breached the terms of the Libertyguard Deluxe policy “by not

performing a full and complete investigation.” The plaintiffs also alleged that

defendant “acted in bad faith in the handling of” their claim. On November 25,

2019, defendant filed a motion for judgment on the pleadings, arguing that plaintiffs’

                                         -3-
claims failed as a matter of law because plaintiffs had failed to allege facts that could

prove that Liberty Mutual breached the policy and/or acted in bad faith. The Houles

objected to the motion, maintaining that, as pled in the second amended complaint,

defendant’s alleged failure to “provide a full and complete investigation of the

Houles’ loss” constituted a prima facie case for breach of contract and bad faith.

      A hearing was held on defendant’s motion on February 26, 2020, at the

conclusion of which the motion justice issued a decision dismissing plaintiffs’

complaint. The motion justice found that plaintiffs failed to “set forth sufficient facts

relating to the allegedly deficient investigation and how [it] was a breach of contract

and led to damages” and did not identify “any part of the policy that’s been breached

by * * * Liberty Mutual.” She noted that plaintiffs’ amount-of-loss “claim went

through the full appraisal process[,]” and was “fully and finally adjudicated by” that

process. Because the motion justice found that plaintiffs could not maintain an

action for breach of contract against defendant, she also dismissed their bad-faith

claim because she found “that bad faith claims cannot be sustained without a breach

of contract claim[.]”2

2
  In her bench decision, the motion justice also addressed Liberty Mutual’s
counterclaim against plaintiffs, which sought a declaratory judgment that “Liberty
Mutual has fully complied with all obligations under the [p]olicy and has not
committed a breach of the [p]olicy.” The motion justice declined to render a
declaratory judgment on the counterclaim; on March 13, 2020, the parties stipulated
in the Superior Court that all claims against plaintiffs were dismissed, thereby
resolving defendant’s counterclaim.

                                          -4-
      An order consistent with the motion justice’s bench decision entered, granting

defendant’s motion for judgment on the pleadings. The Superior Court granted

defendant’s motion for entry of judgment, and plaintiffs filed a timely notice of

appeal.

                               Standard of Review

      Pursuant to Rule 12(c) of the Superior Court Rules of Civil Procedure, a

hearing justice may “dispos[e] of a case early in the litigation process when the

material facts are not in dispute after the pleadings have been closed and only

questions of law remain to be decided.” Premier Home Restoration, LLC v. Federal

National Mortgage Association, 245 A.3d 745, 748 (R.I. 2021) (quoting Nugent v.

State Public Defender’s Office, 184 A.3d 703, 706 (R.I. 2018)). “When reviewing

the decision of a hearing justice on a motion for judgment on the pleadings pursuant

to [R]ule 12(c), we utilize the Rule 12(b)(6) motion-to-dismiss test.” Nugent, 184

A.3d at 706. As such, “a judgment on the pleadings ‘may be granted only when it

is established beyond a reasonable doubt that a party would not be entitled to relief

from the defendant under any set of conceivable facts that could be proven in support

of its claim.’” Premier Home Restoration, LLC, 245 A.3d at 748 (quoting Nugent,

184 A.3d at 706-07).

                                        -5-
                                     Discussion

      On appeal, plaintiffs argue that the motion justice erred in granting judgment

on the pleadings in favor of Liberty Mutual because, they contend, the pleadings

established the facts necessary to support claims for breach of contract and bad faith.

Specifically, plaintiffs maintain that, pursuant to the Libertyguard Deluxe policy,

“Liberty Mutual had an inherent contractual obligation to perform a full and

complete investigation of the loss[,]” which it failed to do.

      It is well established that the terms of an insurance policy are interpreted “in

accordance [with] the rules of construction that govern contracts.” Derderian v.

Essex Insurance Co., 44 A.3d 122, 127 (R.I. 2012). “[W]hether a party has

substantially performed or materially breached its contractual obligations is usually

a question of fact to be decided by the jury.” Women’s Development Corporation v.

City of Central Falls, 764 A.2d 151, 158 (R.I. 2001). Moreover, as this Court has

explained many times, “virtually every contract contains an implied covenant of

good faith and fair dealing between the parties[,]” McNulty v. Chip, 116 A.3d 173,

185 (R.I. 2015) (brackets omitted) (quoting Dovenmuehle Mortgage, Inc. v.

Antonelli, 790 A.2d 1113, 1115 (R.I. 2002)), which “ensures that ‘contractual

objectives may be achieved[.]’” Id. (quoting Ide Farm & Stable, Inc. v. Cardi, 110

R.I. 735, 739, 297 A.2d 643, 645 (1972)).

                                         -6-
      In the case at bar, the motion justice granted defendant’s motion for judgment

on the pleadings because she found that “[p]laintiff[s have] not identified any part

of the policy that[ has] been breached by * * * Liberty Mutual.” She acknowledged

the contention “that there is an implicit requirement [in the contract] that the

insurance company * * * do things correctly and * * * not do a shoddy or an

insufficient job at the investigation[,]” but still found that plaintiffs’ breach-of-

contract claim failed because the complaint did not plead that defendant’s conduct

caused damages to plaintiffs and “plaintiffs’ claim * * * was fully and finally

adjudicated by the appraisal process.”

      After reviewing the record before us, we are of the opinion that the motion

justice erred in granting judgment on the pleadings in favor of defendant. The factual

allegations contained in the pleadings, when viewed in the light most favorable to

the nonmoving plaintiffs, do not allow for the Superior Court to conclude beyond a

reasonable doubt that plaintiffs would be unable to prove facts at trial that constitute

a claim for breach of contract. Cf. Chase v. Nationwide Mutual Fire Insurance

Company, 160 A.3d 970, 974-75 (R.I. 2017) (holding that a plaintiff’s allegation that

its insurer “engaged in a pattern of dilatory conduct thereby refusing to fulfill its

obligations under the [p]olicy” was too “broad and undetailed” to withstand

judgment on the pleadings and allow plaintiff’s breach-of-contract and estoppel

arguments to proceed). The Houles alleged, in their second amended complaint, that

                                         -7-
Liberty Mutual breached the contract by not performing a full and complete

investigation of the loss. The allegation was supported by additional averments in

the complaint, including that defendant “prepar[ed] an estimate in March of 2015

without performing a full and complete investigation, hir[ed] an unlicensed engineer

to prepare a remediation plan and to draw engineering documents, and enlist[ed] the

services of an unlicensed contractor to prepare an estimate.”

      The linchpin of the motion justice’s decision was plaintiffs’ purported failure

to point out specific language in the policy that detailed defendant’s contractual

duties related to investigating a loss. However, this conclusion plainly overlooks the

implied covenant of good faith and fair dealing that is inherent in every insurance

contract. See Skaling v. Aetna Insurance Company, 799 A.2d 997, 1010, 1011 (R.I.

2002) (recognizing that insurers are obligated to deal with their insureds “consistent

with [the] implied in law obligations of good faith and fair dealing” and that

“[i]nsurers doing business in Rhode Island have an implied obligation to promptly

and fully respond to their insured, to investigate a claim and to subject that claim to

appropriate review”). It cannot be said that the allegations as pled, and under any

set of facts that may be proven at trial, would not support a claim for breach of

contract or breach of the implied covenant of good faith and fair dealing. See

McNulty, 116 A.3d at 185 (making clear that a claim for breach of the implied

                                         -8-
covenant of good faith and fair dealing is not an independent cause of action that

must be pled separate and apart from a claim for breach of contract).

                                    Conclusion

      For the foregoing reasons, we conclude that the grant of judgment on the

pleadings for the defendant was erroneous. The order of the Superior Court granting

defendant’s motion is vacated, and the papers in this case may be remanded to the

Superior Court for further proceedings.

                                          -9-
                                               STATE OF RHODE ISLAND
                                        SUPREME COURT – CLERK’S OFFICE
                                              Licht Judicial Complex
                                                250 Benefit Street
                                              Providence, RI 02903

                                 OPINION COVER SHEET

                                     Daniel Houle et al. v. Liberty Insurance Corporation,
Title of Case                        Alias, A/K/A Liberty Mutual Group, A/K/A Liberty
                                     Mutual, A/K/A Liberty Mutual Insurance.
                                     No. 2021-30-Appeal.
Case Number
                                     (PC 16-4707)

Date Opinion Filed                   March 30, 2022

                                     Suttell, C.J., Goldberg, Robinson, Lynch Prata, and
Justices
                                     Long, JJ.

Written By                           Associate Justice Erin Lynch Prata

Source of Appeal                     Providence County Superior Court

Judicial Officer from Lower Court    Associate Justice Melissa E. Darigan

                                     For Plaintiffs:

                                     Tanis G. Caine, Esq.
Attorney(s) on Appeal                Kevin M. Daley, Esq.
                                     For Defendant:

                                     Christopher M. Reilly, Esq.

SU-CMS-02A (revised June 2020)