Austin v. Kemper Corporation

Background

George Jarvis Austin alleged that an unnamed driver rear-ended him in March 2020 and that he incurred thousands of dollars in medical expenses. The driver was insured by Kemper Corporation. Austin alleged that Kemper requested information about his injuries and loss, represented that it would contact him with a potential settlement offer within 45 days after receiving documentation, and then failed to make an offer or otherwise communicate with him within that period.

Austin proceeded without a lawyer. His First Amended Complaint asserted four causes of action: intentional discrimination under federal and state law; breach of contract; breach of an insurance contract; and, despite being labeled a negligence claim, breach of the duty of good faith and fair dealing.

Kemper moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. Kemper also moved under Rule 12(f) to strike portions of the complaint as irrelevant.

Discrimination claim

The court held that Austin did not plausibly allege intentional discrimination. Austin relied primarily on Kemper’s failure to communicate for more than 200 days, despite an alleged 45-day internal timeline, and concluded that Kemper had discriminated against him because of his race.

The court explained that a plaintiff need not provide direct evidence of discriminatory intent at the pleading stage. One possible way to plead intent is to allege that a similarly situated person outside the plaintiff’s protected group received better treatment. But the court found that Austin did not provide facts supporting an inference that white people received better treatment than Black people. The court also held that delay, without more, did not plausibly indicate intentional racial discrimination under federal law. For the same reason, Austin’s state-law discrimination claim was inadequately pleaded.

Contract claims

The court dismissed Austin’s breach-of-contract and breach-of-insurance-contract claims because the allegations and supporting documents did not permit a reasonable inference that a contract existed between Austin and Kemper.

Austin identified documents, Kemper’s alleged 45-day policy, oral promises, and emails as evidence of a contract. The court found that the principal document was a form letter requesting information for Medicare-related reporting and benefits coordination; it did not contain language showing an agreement to settle Austin’s claim or an intent to enter a future settlement agreement. The court also found that another document described by Austin as an affidavit was merely a summary of his accomplishments, and that an email screenshot did not establish an agreement. Because Austin did not adequately plead the existence of a contract, both contract claims failed.

Good-faith-and-fair-dealing claim

Although Austin labeled his fourth claim as negligence, the court treated it as a claim that Kemper violated the duty of good faith and fair dealing by failing to meet its alleged 45-day settlement deadline, communicate, investigate, or serve his needs.

The court held that, to the extent Austin was asserting rights arising from the relationship between an insurer and its insured, the claim was barred because he was a third-party claimant. The court relied on California law holding that a third-party claimant generally has no private right of action against an insurer for unfair settlement practices or for enforcing the implied covenant of good faith and fair dealing. The opinion also noted that Austin had not alleged that Kemper’s insured assigned any rights against Kemper to him.

Disposition

The court granted Kemper’s motion to dismiss the First Amended Complaint as to all claims. It dismissed Kemper’s motion to strike as moot and granted Austin leave to amend. Any amended complaint was due no later than October 22, 2021.