Thurman v. State Farm Fire and Casualty Company

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
CENTRAL DIVISION
JENIA THURMAN 	PLAINTIFF
V. 	4:25CV00500 JM
STATE FARM FIRE AND
CASUALTY COMPANY 	DEFENDANT
ORDER
Pending is the Defendant’s partial motion to dismiss Plaintiff’s claims of the tort of bad
faith, fraud, conversion, and violation of the Arkansas Deceptive Trade Practices Act. Plaintiff
has responded and the Defendant has filed a reply. The motion has been fully briefed.
I. 	Facts as alleged in the complaint
Plaintiff submitted a claim to her insurer, Defendant State Farm Fire and Casualty
Company, for damage to her home caused by a tornado on March 31, 2023. Plaintiff claims that
she complied with all documentation and inspection requests by the Defendant, but the
Defendant failed to pay the full benefits due under the policy. Plaintiff alleges that her home was
a total loss, but the Defendant demanded that Plaintiff make repairs to the destroyed home.
Plaintiff alleges that the Defendant showed a pattern of unreasonable delays, misrepresentations,
and pressure tactics, including threats of claim closure. Plaintiff claims that the Defendant
ignored photographic evidence showing a collapsed roof and destroyed framing. According to
the Complaint, the Defendant released partial payments, withheld recoverable depreciation, and
refused to acknowledge the property’s total structural failure. Plaintiff was displaced from her
home for months, experienced financial strain and emotional trauma as a result.
Plaintiff filed suit against the Defendant for breach of contract, the tort of bad faith, fraud,
conversion, and the Arkansas Deceptive Trade Practices Act.
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II. 	Standard for Motion to Dismiss
To survive a Rule 12(b)(6) motion to dismiss, the complaint “must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). Although “specific facts are not necessary,” the plaintiff must allege facts sufficient to
“give fair notice of what the ... claim is and the grounds upon which it rests.” Erickson v. Pardus,
551 U.S. 89, 93 (2007) (quoting Twombly, 550 U.S. 544, 555 (2007)). A plaintiff's obligation to
provide the “grounds” of his “entitlement to relief” requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at
555. A complaint “must contain either direct or inferential allegations respecting all the material
elements necessary to sustain recovery under some viable legal theory.” Id. at 562. This standard
“simply calls for enough fact[s] to raise a reasonable expectation that discovery will reveal
evidence of [the claim or element].” Id. at 556. The issue is not whether the plaintiff will
ultimately prevail, but whether the plaintiff is entitled to present evidence in support of his
claim.” Id.
The purpose of a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure is to test the legal sufficiency of the complaint. When considering a Rule 12(b)(6)
motion, the Court must assume the factual allegations of the complaint to be true and construe
them in favor of the plaintiff. Neitzke v. Williams, 490 U.S. 319, 326–27 (1989). The Court is not
bound to accept as true a legal conclusion couched as a factual allegation. Twombly, 550 U.S. at
555.
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III. 	Analysis
A. Bad Faith
“The standard for establishing a claim for bad faith is rigorous and difficult to satisfy.” Unum
Life Ins. Co. of Am. v. Edwards, 210 S.W.3d 84, 87 (Ark. 2005). “In order to state a claim for bad
faith, one must allege that the defendant insurance company engaged in affirmative misconduct
that was dishonest, malicious, or oppressive.” Id. The Arkansas Supreme Court “has defined ‘bad
faith’ as ‘dishonest, malicious, or oppressive conduct carried out with a state of mind
characterized by hatred, ill will, or a spirit of revenge.’” Id. (quoting State Auto Prop. & Cas. Ins.
Co. v. Swaim, 991 S.W.2d 555 (Ark. 1999)). Bad faith does not arise merely from the denial of a
claim—there must be affirmative misconduct. Id. at 88.
Plaintiff’s allegations that the Defendant applied policy terms unequally, pressed her to live
in temporary conditions for an unreasonable amount of time, capped additional living expenses,
and sent warning that her benefits would expire do not support a plausible claim that State Farm
acted with a “with a state of mind characterized by hatred, ill will, or a spirit of revenge” as
required under Arkansas law. Even assuming all of Plaintiff’s allegations against State Farm are
true, these allegations do not allow the Court to find State Farm acted in bad faith. State Farm’s
motion to dismiss the bad faith claim is granted.
B. Fraud
A higher pleading standard also applies to fraud claims under Federal Rule of Civil
Procedure 9(b), which states that “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.” Warren v. Millennia Hous. Mgmt.,
Ltd., 2024 WL 4372159, at *10 (E.D. Ark. Sept. 30, 2024). “To satisfy Rule 9(b), the Eighth
Circuit has found that the complaint ‘must plead such facts as the time, place, and content of the
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defendant's false representations, as well as the details of the defendant's fraudulent acts,
including when the acts occurred, who engaged in them, and what was obtained as a result.’” Id.
(quoting Olin v. Dakota Access, LLC, 910 F.3d 1072, 1075 (8th Cir. 2018)). An allegation of
fraud will only satisfy Rule 9(b)’s particularity requirement (and survive a 12(b)(6) motion to
dismiss) if it identifies “the who, what, where, when, and how” of the material
misrepresentation.” U.S. ex rel. Costner v. United States, 317 F.3d 883, 889 (8th Cir. 2003)
In the Complaint, Plaintiff makes the following allegations regarding fraud.
Defendant made repeated false representations to Plaintiff with the intent to deceive and
deflect. It stated, both orally and in writing, that coverage would be provided in
accordance with the policy. It promised to pay for repairs, replacement, and temporary
housing while knowingly refusing to treat the loss as total. It assured Plaintiff that
additional payments would follow if she submitted documents-then delayed, minimized,
or ignored those submissions entirely. . .. Defendant’s intent was to mislead the Plaintiff
into inaction, delay litigation, limit its financial exposure, and pressure her into absorbing
unreimbursed losses. These misrepresentations were material. . .. As a result of
Defendant’s fraudulent conduct, Plaintiff suffered financial losses, prolonged
displacement, emotional distress, and erosion of trust in the claims process.
(Complaint, Dkt No. 2 at ¶¶ 28-31). The Complaint does not identify the who, where, or when
of the alleged misrepresentations. There is no allegation that a specific person made false
statements to her on behalf of State Farm at a particular time or place. The Complaint is “not
specific enough to give defendants notice of the particular misconduct which is alleged to
constitute the fraud charged so that they can defend against the charge and not just deny that they
have done anything wrong.” U.S. ex rel. Costner, 317 F.3d at 889 (quoting United States ex rel.
Lee v. SmithKline Beecham Clinical Labs., 245 F.3d 1048, 1051–52 (9th Cir. 2001). These
allegations are enough to satisfy Rule 12(b)(6) on Plaintiff’s breach of contract claim but do not
provide specific details to set forth a fraud claim under Rule 9(b). This claim is dismissed.
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C. Conversion
In the Complaint, Plaintiff alleges that she has “a right to the full value of her personal
property, structural benefits, and housing assistance under the insurance contract.” (Comp., Dkt.
No. 2 at ¶ 33). She claims that the “Defendant, having acknowledged the claim and received
documentation supporting that value, assumed control over those funds.” Id. “By withholding
and controlling funds for its own benefit—despite having no legal right to do so—Defendant
exercised dominion over property belonging to the Plaintiff. This unauthorized control deprived
her of timely repairs, replacement items, and stable housing.” Id. at ¶ 35.
The tort of conversion is defined as ‘the exercise of dominion over property in violation
of the rights of the owner or person entitled to possession.’ Integrated Direct Mktg., LLC
v. May, 2016 Ark. 281, 3, 495 S.W.3d 73, 75 (2016). ‘Stated another way, conversion is a
common-law tort action for the wrongful possession or disposition of another's property.’
Id. A valid conversion claim ‘must state that the plaintiff had a property interest in the
subject goods and that the defendant wrongfully converted them.’ Big A Warehouse
Distribs., Inc. v. Rye Auto Supply, Inc., 19 Ark. App. 286, 290, 719 S.W.2d 716, 718
(1986).
Graybar Elec. Co., Inc. v. Weyerhaeuser Co., 2019 WL 12073982, at *4 (W.D. Ark. July 11,
2019).
Plaintiff cites three Arkansas cases in support of the claim that State Farm converted
money that was designated for her under the homeowner’s insurance policy: Integrated Direct
Mktg., LLC v. May, 495 S.W.3d 73 (Ark. 2016); Hatchell v. Wren, 211 S.W.3d 516 (Ark. 2005)
and McQuillan v. Mercedes-Benz Credit Corp., 961 S.W.2d 729 (Ark. 1998). None of these cases
are on point. In Integrated Direct Mktg., an employer sued his former employees for conversion
and violation of the Arkansas Trade Secrets Act among other state law claims. All the claims
were dismissed on summary judgment except for conversion. On that issue, the trial court
certified the question to the Arkansas Supreme Court of whether intangible property, such as
electronic data, standing alone and not deemed a trade secret, could be converted. The Arkansas
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Supreme Court found that it could. The Court stated, “There is simply no reasonable basis for
allowing a claim for conversion of paper documents but not for their electronically stored
counterparts.” Integrated Direct Mktg., 495 S.W.3d at 5-6. The facts alleged in Plaintiff’s
Complaint are not analogous.
In Hatchell, plaintiff backed his car into the defendant’s car while the defendant was
visiting his home. Plaintiff paid for the repairs to the car and delivered the car back to the
defendant. Sometime later, defendant received a check for the repairs from the plaintiff’s
insurance company. Instead of reimbursing plaintiff, the defendant cashed the check and kept the
money. Plaintiff filed suit against the defendant for conversion and unjust enrichment claiming
that when he paid for the repairs to the car and defendant accepted the car, the insurance
company’s reimbursement for the repairs was rightfully his. After a hearing, the trial court
granted summary judgment against the defendant on all claims after she failed to respond to the
plaintiff’s request for admissions. The trial court found that the defendant admitted that she
cashed the check, “declined to give the money back” and that plaintiff was entitled to the money.
Hatchell, 221 S.W.3d at 522. On appeal, the Supreme Court held that these rulings were
“tantamount to a conclusion that [defendant] converted the property of another.” Id.
The Supreme Court’s holding in Hatchell was limited to the fact that the trial court made
findings which were consistent with the tort of conversion. The facts as set forth in the
Complaint here are different. Plaintiff alleges that State Farm converted money which belonged
to Plaintiff by denying parts of her homeowners’ policy claim. There is no allegation in the
Complaint that State Farm distributed reimbursement funds to a third party for repairs paid for
by Plaintiff.
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In McQuillan, the trial court found that the plaintiff did not have a carrier’s lien on two trucks
plaintiff was holding. Instead, the court found that the plaintiff’s actions in refusing to surrender
the trucks, hiding them, and insisting on excess payments constituted the tort of conversion. The
Supreme Court affirmed.
Here, Plaintiff alleges that funds in State Farm’s bank account belong to her up to her policy
limits, and by failing to pay the policy limits, State Farm has converted her money. Plaintiff has
not cited, and the Court has not found, case law supporting this claim. The Court finds that
Plaintiff has failed to state a plausible claim for conversion.
D. ADTPA
Plaintiff alleges that State Farm violated the ADTPA by misrepresenting that her destroyed
home could and should be repaired, demanding contractor updates for a property they knew was
unrepairable, withholding depreciation after acknowledging the loss, threatening to terminate
housing assistance, and using ambiguous correspondence and arbitrary deadlines to create
pressure and confusion. (Comp., Dkt. No. 2 at ¶ 38).
The elements of an ADTPA cause of action are “(1) a deceptive consumer-oriented act or
practice which is misleading in a material respect, and (2) injury resulting from such act. Skalla
v. Canepari, 430 S.W.3d 72, 81-82 (Ark. 2013) (citing Ark. Code Ann. § 4-88-113(f)). However,
the safe-harbor provision of the Act precludes insurance carriers from being subject to suits
brought under the Act. “The ADTPA does not apply to ‘[a]ctions or transactions permitted under
laws administered by the Insurance Commissioner, the Securities Commissioner, the State
Highway Commission, the Bank Commissioner, or other regulatory body or officer acting under
statutory authority of this state or the United States.’” Williams v. State Farm Mut. Auto. Ins. Co.,
No. 2010 WL 2573196, at *4 (E.D. Ark. June 22, 2010) (quoting Ark. Code Ann. § 4-88-101(3)).
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Courts in the Eastern District of Arkansas have previously stated, “the insurance activity
exception ‘essentially includes all insurance activity in the State of Arkansas,’ permissible or
not.” Id. (quoting Jones v. Unum Life Ins. Co. of Am., 4:06CV00547, 2006 WL 3462130, at *3
(E.D. Ark. Nov. 29, 2006) and listing cases Kirby v. United Am. Ins. Co., 4:08CV00338 JLH,
2010 WL 961723, at *1 (E.D. Ark. Mar. 15, 2010) (finding that the ADTPA did not apply to an
insurance transaction even if the insurance policy was misrepresented to the consumer);
Robertson v. White, 633 F. Supp. 954, 978 (W.D. Ark. 1986) (finding that the Consumer
Protection Act, which preceded the ADTPA, “remove[d] from the purview of the Consumer
Protection Act” a transaction governed by the state securities commissioner)). Compare Moore v.
Shelter Mut. Ins. Co., 2013 WL 12085093, at *2 (W.D. Ark. Aug. 26, 2013) (“The Eastern
District of Arkansas has stated that the insurance activity exception of the ADTPA excludes all
insurance activity in the State of Arkansas whether permissible or not. . .. With all due respect to
these decisions, this Court does not need to engage in speculation or conjecture regarding state
law. The plain meaning of the safe harbor provision only excludes activity permitted by the
Insurance Trade Act.”)
Pursuant to Williams, Plaintiff cannot maintain a claim for violation of the ADTPA
against State Farm as alleged in the Complaint. Therefore, this claim is dismissed.
IV. Conclusion
Defendant’s partial motion to dismiss (Dkt. No. 5) is GRANTED as to Plaintiff’s claims
for bad faith, fraud, conversion, and the ADTPA.
IT IS SO ORDERED this 22nd day of October, 2025.
___________________________
James M. Moody Jr.
United States District Judge
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