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AMERICAN REGISTRY OF PATHOLOGY v. OHIO CASUALTY INSURANCE CO.

September 26, 2005.

AMERICAN REGISTRY OF PATHOLOGY Plaintiff,
v.
OHIO CASUALTY INSURANCE CO.[fn1] Defendant.



The opinion of the court was delivered by: ROSEMARY COLLYER, District Judge

*fn1 Defendant was initially identified as "Ohio Casualty Group, Inc." Its correct corporate name is substituted without objection.

MEMORANDUM OPINION

This is a lawsuit about insurance coverage. American Registry of Pathology ("ARP") asked its insurer, Ohio Casualty Insurance Co. ("Ohio Casualty"), to pay and defend two lawsuits alleging negligent hiring by ARP. See Amended Complaint ("Am. Compl.") at 1. Ohio Casualty refused to do so. Initially, ARP advanced two breach-of-contract claims and a claim of bad faith refusal to pay (i.e., bad faith refusal to provide insurance coverage), for which it seeks $30 million in punitive damages. Ohio Casualty moved to dismiss the third claim on the basis that such a tort is not recognized in the District of Columbia. ARP then filed leave to amend its complaint and an amended complaint that alleges two breach of contract claims, a breach of the covenant of good faith and fair dealing, and a bad faith refusal to pay. Ohio Casualty opposes the motion for leave to amend.

  I. BACKGROUND

  The facts of the underlying litigation are not germane to the pending motions. Suffice it to say that ARP was sued twice for alleged negligent hiring of a cytotechnologist who misread the Pap smears of two individuals. Despite repeated requests, Ohio Casualty refused to provide a defense. Both cases have now been settled. ARP's two allegations of breach of contract rely on its commercial general liability insurance policy with Ohio Casualty and the alleged failure of the insurer to follow the terms of that contract. In addition, ARP alleges that Ohio Casualty showed willful and reckless disregard of its obligations to defend and pay. The complaint here was filed on September 30, 2004. Ohio Casualty filed its motion to dismiss Count 3 of the complaint on October 29, 2004, and it is now fully briefed. ARP filed a motion for leave to amend the complaint on November 4, 2004. That motion is also fully briefed and ready for decision.

  II. LEGAL STANDARDS

  A. Motion to Dismiss

  Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, dismissal for failure to state a claim upon which relief can be granted is appropriate where it "appears beyond doubt that a plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). The primary issue in resolving a motion to dismiss is not whether the plaintiff will ultimately prevail, but whether he or she is entitled to offer evidence to support his or her claims. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1984), overruled on other grounds, Davis v. Scherer, 468 U.S. 183 (1984). At this early stage of the proceedings, the court must accept as true all of the plaintiff's well-pled factual allegations and draw all reasonable inferences in favor of the plaintiff. See Alexis v. District of Columbia, 44 F. Supp. 2d 331, 3363-7 (D.D.C. 1999). Although the court must construe the complaint in the light most favorable to the plaintiff, it "need not accept inferences drawn by the plaintiff if such inferences are not supported by the facts set out in the complaint." Kowal, 16 F.3d at 1276. In addition, the court need not accept the plaintiff's legal conclusions as true. See Alexis, 44 F. Supp. 2d at 337.

  B. Motion for Leave to Amend Complaint

  Under Rule 15 of the Federal Rules of Civil Procedure, a pleading may be amended after service of a responsive pleading "only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). "Consequently, leave to amend is to be granted absent bad faith, dilatory motive, undue delay . . . or prejudice on the non-moving party." Mississippi Assoc. of Cooperatives v. Farmers Home Admin., 139 F.R.D. 542, 543 (D.D.C. 1991) (citing Forman v. Davis, 371 U.S. 178, 182 (1962) and Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (1971)).

  III. ANALYSIS

  There are two related but distinct issues before the Court: (1) can ARP maintain a contract or a tort suit for bad faith refusal to provide insurance coverage under the laws of the District of Columbia and, regardless of the answer to that question, (2) can ARP maintain a contract suit for breach of the duty of good faith and fair dealing that seeks punitive damages?

  A. Bad Faith Refusal to Pay

  ARP contends that Count III of the complaint "asserts a viable cause of action for Ohio Casualty's bad faith refusal to pay ARP's claim under a contractual theory" and that ARP "is eligible to recover punitive damages as a part of this contractual theory of liability." Plaintiff's Opposition to Defendant's Motion to Dismiss ("Pl.'s Opp.") at 13-14. ARP seeks to recover ...


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