Arizona Court Of Appeals Division Two Endorses The Pleading Standard Adopted By The United States Supreme Court In Bell Atlantic Corp. v. Twombly, And Holds That Trial Court Properly Dismissed A Claim For Insurance Benefits Because The Plaintiff Failed To Plead Facts Sufficient To Show That He Was C

Cullen v. Koty-Leavitt Insurance Agency, Inc. (10/18/2007): Arizona Court Of Appeals Division Two Endorses The Pleading Standard Adopted By The United States Supreme Court In Bell Atlantic Corp. v. Twombly, And Holds That Trial Court Properly Dismissed A Claim For Insurance Benefits Because The Plaintiff Failed To Plead Facts Sufficient To Show That He Was Covered Under The Policy Or Had A Reasonable Expectation Of Coverage.

Michael Cullen “was injured while riding as a passenger in a vehicle owned by a third party.” A separate vehicle, which Cullen’s family used, had an underinsured motorist insurance policy. The vehicle, however, was owned by a company and the policy was solely in the company’s name. After the insurance company denied Cullen’s claim for benefits under the policy, he brought suit against the insurance company “alleging it had breached the insurance contract and had acted in bad faith by denying benefits to Cullen.” The trial court granted the insurance company’s motion to dismiss because Cullen “‘was not traveling in an automobile that was covered under the . . . policy when he was injured and the policy . . . did not offer ‘portable’ [underinsured motorist] coverage.’” Cullen appealed.

The Arizona Appeals Court affirmed the trial court’s dismissal. First, the Court upheld the trial court’s refusal to convert the insurance company’s motion to dismiss into a motion for summary judgment notwithstanding the fact that the trial court considered the underlying insurance contract when ruling on the motion. The Court held that a “contract central to the plaintiff’s claim . . . is not a ‘matter[] outside the pleadings for purposes of Rule 12(b)(6).” The Court further held that “although Cullen submitted additional affidavits and a statement of facts, it was within the trial court’s discretion under Rule 12(b)(6) to disregard those materials and instead consider the sufficiency of the complaint, in light of the contract at issue.”

Second, relying heavily on the United States Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1965 (2007), which clarified the pleading standard in federal court, the Court concluded that, to survive a motion to dismiss, Cullen must have alleged facts in the complaint sufficient “‘to raise a right to relief above the speculative level.’” Turning to the facts, the Court held that Cullen was not covered because he was not listed on the policy; only a company was listed as the insured in these circumstances. Consequently, the Court concluded that Cullen had failed to allege a viable claim for a reasonable expectation of coverage because (in short) that “doctrine necessarily applies to the reasonable expectations of the contracting parties, not to the reasonable expectations of the hopeful insured, such as Cullen, who is a stranger to the insurance contract.” Finally, the Court declined the insurance company’s attorneys’ fees requests under A.R.S. § 12-341.01.

Judge Brammer authored the opinion; Judge Howard and Chief Judge Pelander concurred.