No Coverage — No Bad Faith

Failure to Plead Plausible Claims Defeats Lawsuit

It is the obligation of every lawyer representing a plaintiff to plead plausible claims for relief or find the suit dismissed summarily. In Eileen Coonce v. CSAA Fire & Casualty Insurance Company, and Automobile Club Insurance Company; AAA Fire & Casualty Insurance Company, No. 18-7000, United States Court Of Appeals For The Tenth Circuit (September 4, 2018) the failure to plead plausible claims for relief resulted in dismissal by the trial court and affirmed by the Tenth Circuit.


On February 15, 2014, tenants living in a certain house in Broken Arrow, Oklahoma, returned home from dinner to find the ceiling in the living and dining areas had caved in. An engineering survey determined the nails used in construction had failed to hold. The home’s owner, Eileen Coonce, made a claim against an insurance policy (the Policy) issued for the house by CSAA Fire & Casualty Insurance Company, doing business as AAA Fire & Casualty Insurance Company. CSAA denied coverage.

After giving Coonce two opportunities to amend her complaint, the district court granted CSAA’s Fed. R. Civ. P. 12(b)(6) motion to dismiss for failure to state a claim. It held the Policy excluded coverage for the ceiling collapse, and because the Policy did not cover the collapse, there could be no bad-faith claim.


In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court directed:

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. A claim has factual plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief. (Emphasis added)

Iqbal‘s plausibility standard controlled the outcome of the appeal. Coonce argued her Second Amended Complaint pleads plausible claims. To the contrary, the Second Amended Complaint fails to allege any facts to overcome the Policy’s unambiguous exclusions and limitations of coverage, and therefore it fails to plausibly establish coverage under the Policy or a bad-faith denial of coverage.

Although the Policy undisputedly covers the dwelling, it explicitly does not cover losses “[i]nvolving collapse, except as provided in [paragraph] Collapse under Section I – Property Coverages.”   The Second Amended Complaint invokes paragraph E.8. to allege coverage under the Policy.

Paragraph E.8. first defines “collapse” for purposes of the Policy. It then establishes coverage for direct physical loss to covered property involving collapse of a building or any part of a building if the collapse was caused by one or more of the following: (1) The Perils Insured Against named under Coverage C; (2) Decay that is hidden from view, unless the presence of such decay is known to an “insured” prior to collapse; (3) Insect or vermin damage that is hidden from view, unless the presence of such damage is known to an “insured” prior to collapse; (4) Weight of contents, equipment, animals or people; (5) Weight of rain which collects on a roof; or (6) Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation.”

Thus, the Policy makes it clear losses due to a collapse are covered only in certain specified circumstances.

The parties disputed whether the ceiling cave-in qualified as a “collapse” under the Policy, with the district court declining to decide the question in favor of CSAA at the dismissal stage. We need not decide that issue. Even assuming the cave-in was a “collapse,” the Policy covers only a “collapse” caused by one or more of the listed circumstances. But the Second Amended Complaint does not contain any well-pleaded facts to show any of these circumstances would apply. To the contrary, the sole averment concerning the cause of the cave-in is that CSAA’s “engineering firm concluded that the ceiling collapsed because the nails did not hold.” This assertion undermines any inference paragraph E.8.’s limited coverage would apply.

In addition, as CSAA argues, the Policy also unambiguously declines to insure “loss . . . [e]xcluded under Section I – Exclusions,” and “loss . . . [c]aused by . . . [w]ear and tear, marring, [or] deterioration.” In turn, “Section I – Exclusions” denied coverage for loss caused by “[f]aulty, inadequate or defective” “[d]esign, specifications, workmanship, repair, [or] construction” or “[f]aulty, inadequate or defective” “[m]aterials used in repair, construction, renovation or remodeling . . . of part or all of [the] property.” The Second Amended Complaint does not contain any facts showing these exclusions do not apply.

Instead, as with Coonce’s “collapse” argument, the allegations tend to show the exclusions would apply.

In sum, to overcome the motion to dismiss, Coonce had to plead plausible claims. And in light of the Policy’s plain language, to make plausible a claim for coverage of the ceiling collapse, she had to include well-pleaded facts showing one or more of the paragraph 8.E. circumstances would apply and the other unambiguous exclusions would not apply. Because she failed to do so, and therefore failed to nudge her claims across the line from conceivable to plausible, the Tenth Circuit concluded her complaint must be dismissed.

As for the bad-faith claim, under Oklahoma law, tort liability arises only where there is a clear showing that the insurer unreasonably, and in bad faith, withholds payment of the claim of its insured. When a court concludes there was no breach of an insurance policy, it follows a company’s denial of coverage was not unreasonable. Because the Second Amended Complaint lacks well-pleaded facts showing coverage and a breach under the Policy, the district court also did not err in concluding Coonce did not state a plausible bad-faith claim.


Either the insured’s lawyers were incompetent and could not plead a plausible set of facts that would allow for coverage of the “collapse” or, more likely, there were no facts that plausibly allowed for coverage, the suit was destined to fail. Lawyers, although creative, will not state false facts in a pleading to get to trial. There was simply no coverage for Ms. Coonce’s loss and the best that could be said was she presented a fair try and probably should have accepted the trial court’s decision to save the appellate lawyers’ fees.

© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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