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Hasan v. AIG Property Casualty Co.

United States District Court, D. Colorado

June 12, 2018

MALIK M. HASAN, M.D., and SEEME G. HASAN, Plaintiffs,
AIG PROPERTY CASUALTY COMPANY, a Pennsylvania corporation, Defendant.


          Mark L. Carman United States Magistrate Judge

         This case comes before the court on the renewed motion of Plaintiffs Malik M. Hasan, M.D. and Seeme G. Hasan ("Plaintiffs") to amend their complaint. Doc. 47. Plaintiffs revise a proposed claim for bad faith non-renewal of insurance that the court recently found would be futile for lack of facts to support unreasonable conduct and damages. Doc. 46 (Amended Recommendation).[1] Defendant AIG Property Casualty Company ("AIG") argues the revised claim suffers the same flaws and therefore remains futile. Doc. 50. Plaintiffs replied in support of their renewed motion. Doc. 52. For the reasons that follow, the court concludes Plaintiffs' revision adds detail without a difference for purposes of plausibility. The court accordingly recommends denying the renewed motion.

         I. BACKGROUND

         The court recited the alleged facts and claims in the Recommendation of May 8, 2018. Doc. 46. The Final Pretrial Order was entered December 12, 2017, and the case is set for trial to begin October 1, 2018. In their first motion to amend, Plaintiffs sought to add a claim for bad faith non-renewal of both their private collections insurance policy and homeowners' insurance policy. Plaintiffs now limit the new claim to the non-renewal of their homeowners' insurance. Doc. 47-1 (Revised Proposed Amended Complaint) ¶¶ 34-43 and Fifth Claim for Relief[2]

         Relative to their first proposed amendment, Plaintiffs add allegations that the parties had a prior course of conduct that Plaintiffs negotiated premiums beyond the expiration date of their policies and then paid the agreed-upon premiums. Id. ¶¶ 36-37. Plaintiffs note among other things "[t]his annual premium negotiation was predicated upon the properties to be covered, the amount of coverage, the loss history and other relevant factors." Id. ¶ 36. Plaintiffs continue to propose without significant change that they

have been AIG insurance customers since 2005. Over the past five years, the Hasans have paid AIG $624, 245 in insurance premiums under various insurance policies issued by AIG During that same period, AIG paid the Hasans only $120, 069.86 in covered losses (more than half of which was the $62, 500 paid to the Hasans under a "Fraud SafeGuard Coverage" endorsement to the AIG Homeowners Policy[3] in connection with the Hasans' losses which are the subject of the captioned litigation). Accordingly, it cannot be said that AIG experienced a negative claims history in respect of the insurance coverage that it has provided to the Hasans.

Doc. 47-1 ¶ 38. Again relative to their first motion to amend. Plaintiffs also continue to allege AIG sent "retaliatory Notices of Nonrenewal of the Homeowners Insurance (the 'Non-Renewal Notices'). The Non-Renewal Notices referenced AIG's payments to the Hasans under the Homeowners Insurance and the expenses incurred defending the claims in the captioned litigation brought by the Hasans." Id. ¶ 39. Copies of the Notices are attached to the proposed amended complaint. Doc. 47-2 at 64-65 of 65.[4]

         In their revision. Plaintiffs add the following allegations regarding AIG's non-renewal of the homeowners' policy:

The reasons for non-renewal set forth in the Non-Renewal Notices were sham and pretext. For example, the Non-Renewal Notices recite as a basis the Hasans' loss history but AIG elected not to renew the homeowners insurance coverage with respect of multiple properties and structures for which no losses (or only de minimus losses) had ever been claimed by the Hasans.
Following receipt of the Non-Renewal Notices the Hasans reasonably requested that AIG continue for 30 days the homeowners insurance coverage to enable them to locate and procure replacement coverage from another insurer. That request was denied by AIG.
Predictably, AIG's non-renewal of the homeowners insurance proximately caused material injury, damages and losses to the Hasans. Failure to keep the Hasans' residential properties continuously insured is a material default under lien instruments encumbering the Hasans' properties. Accordingly, the Hasans were required to seek replacement insurance coverage from other insurers. The only replacement insurance that proved to be available is materially inferior. That replacement insurance coverage is materially more expensive and provides materially less coverage than the AIG Homeowners Insurance which was not renewed by AIG in retaliation of the Hasans initiation of the captioned litigation.

Doc. 47-1 ¶¶ 40-42. In alleging future harm, Plaintiffs continue to assert increased insurance premium expense and add "inferior insurance coverage." Id. ¶ 43. The proposed fifth claim for relief now specifies the claim regards only the homeowners' insurance policy.

         II. ANALYSIS

         A. Legal Standards Applicable to the Motion

         Under Federal Rule of Civil Procedure 16(e), the court may amend the Final Pretrial Order "to prevent manifest injustice." Little has changed with respect to the court's May 8 analysis under that standard. If the court were to grant the amendment, the schedule would be tighter but it appears the parties could still meet it - except if a dispositive motion were filed regarding the new claim. The court will assume Plaintiffs still meet the Rule 16 standard for preventing manifest injustice.

         Plaintiffs' revised proposed amendment is a supplemental pleading, which "[o]n motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." Fed.R.Civ.P. 15(d). The court "should apply the same standard for exercising its discretion under Rule 15(d) as it does for deciding a motion under Rule 15(a)." Sw. Nurseries, LLC v. Florists Mut. Ins., Inc., 266 F.Supp.2d 1253, 1256 (D. Colo. 2003). "While Fed.R.Civ.P. 15(a) requires that leave to amend be freely given, that requirement does not apply where an amendment obviously would be futile." Id.

         An amendment or supplement is futile if, notwithstanding the amendment, the claim "would be subject to dismissal." Jefferson Cty. Sch. Dist. No. R-I v. Moody's Investor's Servs.,Inc., 175 F.3d 848, 859 (10th Cir. 1999). A claim is subject to dismissal if it does not "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 ...

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