United States District Court, D. Columbia
September 26, 2005.
AMERICAN REGISTRY OF PATHOLOGY Plaintiff,
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
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.
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
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 $30 million
in punitive damages, which is why Ohio Casualty contests the
viability of its claim.
First, ARP's argument that it may recover punitive damages as a
part of a claim for contractual bad faith refusal to pay is
misplaced. "[I]t is well settled that no punitive damages will be
allowed for breach of contract, regardless of defendants' motive.
Plaintiff is confined to interest as the only recovery for the
breach in excess of actual loss." Minick v. Associates Inv.
Co., 110 F.2d 267, 268 (D.C. Cir. 1940) (per curiam); see
Washington v. Group Hospitalization, Inc., 585 F. Supp. 517
(D.D.C. 1985) ("Punitive damages are not recoverable in the
District of Columbia in a breach of contract action even if the
breach was willful, wanton, or malicious."). While punitive
damages are generally disfavored in the law, they are most
appropriate "[in] the realm of tort actions generally . . . in
cases which present circumstances of extreme aggravation." Sere
v. Group Hospitalization, Inc., 443 A.2d 33, 37 (D.C.App.
1982), cert. den. 459 U.S. 912 (1982).
However, whether ARP has presented a cognizable claim for bad
faith refusal to pay that lies in tort presents a more complex
issue. ARP bases its tort allegations of bad faith refusal to pay
on a 1984 decision issued by Judge Harold Greene of this Court in
Washington v. Group Hospitalization, Inc., 585 F. Supp. 517
(D.D.C. 1984). Ohio Casualty contends that there is no such
recognized tort in the District of Columbia because of a series
of District Court decisions declining to follow Judge Greene's
lead*fn2 and the failure of the District of Columbia City
Council to adopt legislation with that purpose. See Defendant's
Response to Plaintiff's Opposition to Motion to Dismiss ("Def.'s
Reply") at 6-7. The undersigned is not bound by the decisions of members of this Court and there is no decision at an
appellate level that resolves the point.
In Washington v. Group Hospitalization, Inc., Judge Greene
read Continental Insurance Co. v. Lynham, 293 A.2d 481, 483
(D.C.App. 1973), to stand for the proposition that the tort of
bad faith refusal to pay is a recognized cause of action in
several jurisdictions, including the District of Columbia.
585 F. Supp. at 520 ("Many jurisdictions have recognized a cause of
action in tort for the bad faith refusal of an insurer to pay.
The District of Columbia is no exception."). In fact, however,
Lynham involved the question of payment of attorneys' fees and
not the tort of bad faith refusal to pay. See Washington v.
GEICO, 769 F. Supp. 383, 386 (D.D.C. 1991) ("The only issue
before the Court of Appeals [in Lynham] was whether the award
of attorneys' fees was justified. . . . The parties did not raise
a tort claim of bad faith refusal to pay, nor did the Court of
Appeals decide that such a cause of action existed.").
In addition, no legislative body within the District of
Columbia has created a statutory private cause of action for bad
faith refusal to pay an insurance claim. As noted by the court in
Washington v. GEICO, this fact is particularly significant
because the D.C. Code has provided for other remedies in this
arena,*fn3 yet has remained silent on this particular issue.
See id. at 386-87 ("Relying upon the doctrine of expressio
unius est exclusio alterius the mention of one thing implies the exclusion of another the Court will not
infer a private cause of action for bad faith denial of an
insurance claim when the District of Columbia Council has
expressly provided for other remedies.") (internal citations and
The Court is persuaded by the sound reasoning of Judge Thomas
Flannery in Washington v. GEICO and declines to adopt or follow
the holding in Washington v. Group Hospitalization that the bad
faith refusal of an insurer to pay is a recognized tort in the
District of Columbia. See American Nat'l Red Cross v. Travelers
Indemnity Co. of Rhode Island, 896 F. Supp. 8, 10 n. 4 (D.D.C.
1995) ("This Court is of the view that Judge Flannery's holding
in GEICO, that such a tort does not exist under District of
Columbia law, is the better approach.").
Accordingly, Defendant's motion to dismiss ARP's tort claim for
bad faith refusal to pay will be granted.
B. Breach of the Duty of Good Faith and Fair Dealing
ARP's amended complaint seeks to "clarify" the intentions of
the initial complaint by adding a count for breach of the duty of
good faith and fair dealing, a contract action that it says was
fairly comprehended in the original complaint. See Plaintiff's
Memorandum of Points and Authorities in Support of Plaintiff's
Motion for Leave to Amend Complaint ("Pl.'s Mot. to Amend") at 2.
Ohio Casualty cries foul, arguing that ARP's attempt to amend the
complaint in the face of a meritorious motion to dismiss should
not be granted because such action would merely delay this case
without purpose and would unfairly prejudice Defendant. See
Defendant's Opposition to Plaintiff's Motion for Leave to Amend
Complaint ("Def.'s Opp.") at 2.
The law is a wondrous thing. It goes from being marvelously
clear to marvelously opaque on the same issue in a matter of
a few words. On the one hand, "[w]here the basis of a complaint is, as here, a breach of contract, punitive damages
will not lie, even if it is proved that the breach was willful,
wanton, or malicious." Sere, 443 A.2d at 37 (citing Den v.
Den, 222 A.2d 647, 648 (D.C.App. 1966); Minick v. Associates
Investment Co., 110 F.2d 267, 268 (D.C. Cir. 1940); McIntosh v.
Aetna Life Insurance Co., 268 A.2d 518, 521 (D.C.App. 1970). On
the other hand, "[t]he rule in this jurisdiction is that only
where the alleged breach of contract `merges with, and assumes
the character of, a willful tort' will punitive damages be
available." Id. (citing Brown v. Coates, 253 F.2d 36, 39
(D.C. Cir. 1968); see also Washington v. GEICO,
769 F. Supp. at 388 (punitive damages available in breach of contract action
"where a breach of contract merges with and assumes the character
of a wil[l]ful tort, calculated rather than inadvertent,
flagrant, and in disregard of obligations of trust."). "The mere
allegation that an insurer breached the duty of good faith and
fair dealing does not automatically entitle a litigant to submit
the issue to a jury for determination. . . . Until the facts . . .
have established what might reasonably be conceived as tortious
conduct on the part of the insurer, the legal gate to submission
of the issue to the jury remains closed." American Nat'l Red
Cross v. Travelers Indemnity Co. of Rhode Island,
924 F. Supp. 304, 308 (D.D.C. 1996) (quoting Oulds v. Principal Mut. Life
Ins. Co., 6 F.3d 1431, 1436 (10th Cir. 1993)).
The Court will grant Plaintiff's motion for leave to amend the
complaint and allow ARP to engage in discovery concerning its
allegation that Ohio Casualty breached its duty of good faith and
fair dealing. "Leave to amend should ordinarily be freely granted
to afford a plaintiff `an opportunity to test his claims on the
merits,' and a refusal to allow an amendment must be based on a
valid ground." Gaubert v. Federal Home Loan Bank Bd.,
863 F.2d 59, 69 (D.C. Cir. 1988) (quoting Forman, 371 U.S. at 182). This
matter is in its early stages and the Court can see no prejudice to Defendant from allowing the
amendment to the complaint. While it is entirely too premature to
determine whether there is any merit to this allegation, the
Court notes that it will not get to the jury unless the Plaintiff
can present sufficient facts from which tortious conduct "might
reasonably be conceived." American Nat'l Red Cross,
924 F. Supp. at 308.
For these reasons, Ohio Casualty's motion to dismiss ARP's
claim of bad faith refusal to pay (Count 3 in the initial
complaint and Count 4 in the amended complaint) will be GRANTED.
ARP's motion for leave to amend the complaint will otherwise be
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