Darmer v. Jenkins-Jones

Background

Steven Darmer moved to amend his complaint against State Farm Fire and Casualty Company. He sought to add allegations related to his breach-of-contract claim and a new claim for bad-faith denial of insurance benefits under Minnesota Statute section 604.18. He also requested a modification of the scheduling order.

The proposed bad-faith claim concerned three categories of insurance benefits following a November 15, 2016 fire: payment for the loss of the home, payment for the home’s contents, and alternative living expenses. Darmer alleged that State Farm delayed or refused payments without a reasonable basis and knew, or recklessly disregarded, that it lacked a reasonable basis for doing so.

Standard for amendment

The court considered whether the federal amendment rule or Minnesota Statute section 604.18 controlled. The Minnesota statute requires a plaintiff seeking to add this type of claim to provide affidavits and make a preliminary factual showing. The federal rule generally allows amendment when justice requires, but permits denial for reasons such as undue delay, bad faith, prejudice, or futility. Futility means that the proposed amended complaint could not survive a motion to dismiss for failure to state a claim.

The court adopted the reasoning of a recent District of Minnesota decision and held that the federal rule controlled. It concluded that the federal rule and the Minnesota statute imposed conflicting standards, because the federal rule focuses on whether the proposed pleading itself is plausible while the state statute requires an evidentiary showing and consideration of evidence outside the pleading.

Futility analysis

Applying the federal rule’s standard, the court treated the allegations in the proposed Second Amended Complaint as true and considered only the proposed pleading. It concluded that the bad-faith claim was plausible and therefore was not futile.

For the dwelling claim, Darmer alleged that State Farm knew shortly after the fire that the home was a total or constructive total loss, yet did not make full payment for replacing the home until September 1, 2017. For the contents claim, he alleged that State Farm’s own valuation system showed that verified replacement costs exceeded the policy limits, but that State Farm delayed payment, demanded more information, rejected his proof of loss, and ultimately did not pay the policy limits. For alternative living expenses, he alleged that State Farm ended payments in October 2017 before construction of his new residence was complete, even though construction could not begin until State Farm paid the dwelling policy limits.

The court emphasized that it was deciding only whether the allegations were plausible at the amendment stage. It cautioned that a fact-finder examining the complete record could conclude that the claims were fairly debatable and that State Farm had acted reasonably. The court did not convert the amendment dispute into a summary-judgment proceeding and did not consider State Farm’s materials outside the proposed pleading.

Rulings

The court granted Mr. Darmer’s motion for leave to file a Second Amended Complaint and directed him to file it by November 26, 2018, in substantially the same form as the submitted non-redlined proposal. The court also granted in part his request to modify the scheduling order, to the extent it sought a modest extension of the remaining deadlines.

The parties were allowed limited discovery concerning the bad-faith claim, to be completed by January 21, 2019. No additional depositions were allowed without the court’s permission. Dispositive motions were due by April 1, 2019, and the case was to be ready for a jury trial on July 1, 2019.

Classification

This is a procedural order because it decides motions to amend the pleadings and modify the schedule. It does not decide whether State Farm ultimately acted in bad faith or whether Darmer will prevail on his insurance claims.