Opinion
Civil Action No. 20-20569-Civ-Scola
2021-11-10
ECB USA, INC. and others, Plaintiffs, v. CHUBB INSURANCE COMPANY OF NEW JERSEY and Executive Risk Indemnity, Inc., Defendants.
Davide Proietti, Joel Steven Magolnick, Marko, Magolnick, P.A., Miami, FL, John Evron Kirkpatrick, John E. Kirkpatrick & Associates, Miami, FL, for Plaintiffs ECB USA, Inc., Atlantic Ventures Corp., G.I.E. C2B. Joel Steven Magolnick, Marko & Magolnick, P.A., Miami, FL, Roy Mark Hartman, Sacher Zelman Hartman Paul Beiley et al., Miami, FL, John Evron Kirkpatrick, John E. Kirkpatrick & Associates, Miami, FL, for Plaintiff Constantin Associates LLP Aaron Stenzler Weiss, Steven Jeffrey Brodie, Daniel Gonzalo Enriquez, Carlton Fields Jorden Burt, P.A., Miami, FL, for Defendant Chubb Insurance Company of New Jersey. Aaron Stenzler Weiss, Carlton Fields, P.A., Miami, FL, for Defendant Executive Risk Indemnity, Inc.
Davide Proietti, Joel Steven Magolnick, Marko, Magolnick, P.A., Miami, FL, John Evron Kirkpatrick, John E. Kirkpatrick & Associates, Miami, FL, for Plaintiffs ECB USA, Inc., Atlantic Ventures Corp., G.I.E. C2B.
Joel Steven Magolnick, Marko & Magolnick, P.A., Miami, FL, Roy Mark Hartman, Sacher Zelman Hartman Paul Beiley et al., Miami, FL, John Evron Kirkpatrick, John E. Kirkpatrick & Associates, Miami, FL, for Plaintiff Constantin Associates LLP
Aaron Stenzler Weiss, Steven Jeffrey Brodie, Daniel Gonzalo Enriquez, Carlton Fields Jorden Burt, P.A., Miami, FL, for Defendant Chubb Insurance Company of New Jersey.
Aaron Stenzler Weiss, Carlton Fields, P.A., Miami, FL, for Defendant Executive Risk Indemnity, Inc.
Order on Motion for Judgment on the Pleadings
Robert N. Scola, Jr., United States District Judge
This matter is before the Court upon the Defendants’ motion for judgment on the pleadings as to Counts 5, 6, and 7. (ECF No. 127.) This motion was opposed, and the Plaintiffs filed a response (ECF No. 139), and the Defendants filed a reply in support (ECF No. 148). The Court grants in part and denies in part the Defendants’ motion. (ECF No. 127 .)
1. Background
On December 17, 2019, ECB USA, Inc., Atlantic Ventures Corp., and G.I.E. C2B (collectively, the "ECB Plaintiffs") sued Chubb Insurance Company of New Jersey ("Chubb") in the Circuit Court of the Eleventh Judicial Circuit for various relief associated with Chubb's denial of insurance coverage in a related dispute. (ECF No. 1.) On February 7, 2020, Chubb removed the case to federal court on the basis of diversity jurisdiction. (Id. ) On February 79, 2021, the ECB Plaintiffs and Constantin Associates, LLP ("Constantin") filed the operative pleading, the Fourth Amended Complaint, which brings seven claims against Chubb and Executive Risk Indemnity, Inc. ("ERI"). (ECF No. 79.)
A. The Policies
Constantin Control Associates LP ("Control Group") is a New Jersey-based entity that provides professional and consulting services. (Id. at ¶ 20.) Constantin, a New York limited liability partnership, is an affiliate of Control Group. (Id. at ¶¶ 4, 21.) The Defendants have long provided Control Group and its affiliates insurance policies. (ECF No. 79 at ¶¶ 19, 43.)
This dispute primarily centers around the terms and negotiations of one policy—the 2017-18 Policy. In 2017, Control Group obtained a professional liability insurance policy, number 8168-4190 (the "2017-18 Policy"), from Chubb. (Id. at ¶ 11.) The policy covered the period from December 12, 2017 to December 12, 2018. (Id. ) The 2017-18 Policy was a renewal of an earlier professional liability policy with the same number (8168-4190), issued by ERI in 2016 (the "2016-17 Policy"). (Id. at ¶¶ 12, 15.) In turn, the 2016-17 Policy was a renewal of the 2015-16 Policy, number 8168-4190, issued by ERI in 2015. (Id. at ¶¶ 51–55.)
Both Chubb and ERI are subsidiaries of Chubb Limited and, at least as to the policies at issue here, share underwriters, claims staff, and policies and procedures for underwriting and claims. (ECF No. 79 at ¶¶ 17–19.)
B. The Insureds
An antecedent question that is hotly disputed in this case is whether Constantin was insured and provided coverage under the 2017-18 Policy.
Since at least the early 2000s, Control Group renewed policies with ERI, which were issued to Control Group and its affiliates, including Constantin. (Id. at ¶ 43.) Relevant here, Constantin was listed as a first named insured in the 2015-16 Policy. (Id. at ¶ 51.) In 2016, Control Group requested to keep Constantin as a named insured in the 2016-17 Policy, and therefore that policy also provided coverage to Constantin. (Id. at ¶ 54–56, 58.) Prior to purchase of the 2017-18 Policy, a third party working as an agent of Chubb informed Control Group and Constantin that Constantin was a named insured in the 2017-18 Policy. (Id. at ¶¶ 14, 23, 25–26, 29, 32.) Indeed, Control Group and Constantin were told that the list of named insureds in the 2017-18 Policy would be the same as the previous policy. (Id. at ¶ 73.) Neither Control Group nor Constantin received any notice from the Defendants that Constantin was removed as a named insured under the 2017-18 Policy. (Id. at ¶ 86).
C. The Coverage
As expected in an insurance case, the parties also contest the scope of coverage that the 2017-18 Policy conferred and whether the Policy provided coverage for accounting services.
Among other things, Control Group and Constantin provide professional accounting services. (Id. at ¶¶ 29, 33, 37.) And as of 2017, ERI and Chubb knew, either directly or through their agents, that Control Group and Constantin provide such accounting services. (Id. at ¶¶ 33, 36–39.)
The policies, by their terms, provided coverage for accounting services. (Id. at ¶ 35.) Indeed, the Defendants’ underwriting files confirm their intent to provide coverage to Control Group and Constantin for accounting services. (Id. at ¶ 40.) In particular, the 2015-16 Policy and the 2016-17 Policy covered services that involved an expertise in accounting. (Id. at ¶¶ 52, 57, 59.)
When Control Group and Constantin decided to renew the 2016-17 Policy, they told ERI's agent that they wanted to renew the policy with no changes. (Id. at ¶ 60.) The renewal process involved various communications among the parties and the completion of various forms, almost all of which referred to the forthcoming 2017-18 Policy as a "renewal." (Id. at ¶¶ 60–72.) When the policy was renewed, Control Group and Constantin were not informed that any terms in the 2017-18 Policy were different than the previous policy. (Id. at ¶ 82.) Believing that the 2017-18 Policy was a renewal of its previous policy with the same terms, Control Group and Constantin continued coverage with the Defendants and did not seek coverage elsewhere. (Id. at ¶¶ 75–78.) However, Control Group and Constantin later learned that the 2017-18 Policy had two differences. First, the insurer was changed from ERI to Chubb. (Id. at ¶ 81.) Second, the policy form was changed to a new form. (Id. ) Control Group and Constantin were never made aware of or asked to agree to these changes or any other changes. (Id. at ¶¶ 82, 84–87.)
D. The Litigation
In 2018, the ECB Plaintiffs sued Constantin in the Eleventh Judicial Circuit in Miami-Dade County for its failure to properly provide compliant professional accounting services (the "Underlying Litigation"). (Id. at ¶ 96.) Constantin gave notice of the lawsuit to Chubb and Chubb's agent, BridgePoint. (Id. at ¶¶ 98–100.) But Chubb later issued two claim denial letters, denying coverage to Constantin for the sole reason that accounting services were not covered under the 2017-18 Policy. (Id. at ¶¶ 102–105.) Chubb did not indicate in the claim denial letters that Constantin was not an insured. (Id. at ¶ 106.)
In November 2019, Constantin settled with the ECB Plaintiffs, agreeing to judgment in favor of the ECB Plaintiffs for $4,850,000 and agreeing to assign all rights against Chubb and ERI to the ECB Plaintiffs. (Id. at ¶¶ 107–108.) This current action was initiated approximately one month later. (ECF No. 1.)
2. Legal Standard
As set forth in Federal Rule of Civil Procedure 12(c), "[a]fter the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). "Judgment on the pleadings is proper when no issues of material fact exist, and the moving party is entitled to judgment as a matter of law based on the substance of the pleadings and any judicially noticed facts." Cunningham v. Dist. Attorney's Office , 592 F.3d 1237, 1255 (11th Cir. 2010). A court ruling on a Rule 12(c) motion must "accept all the facts in the complaint as true and view them in the light most favorable to the nonmoving party." Id. A motion for judgment on the pleadings is subject to the same analysis as a motion to dismiss pursuant to Rule 12(b)(6). See Hawthorne v. Mac Adjustment, Inc. , 140 F.3d 1367, 1370 (11th Cir. 1998).
Under the applicable Rule 12(b)(6) standard, a complaint must contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its own face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (cleaned up). While the Court must accept well-pleaded facts as true, it need not assume the truth of conclusory allegations, nor are parties entitled to have the Court view unwarranted deductions of fact or argumentative inferences in their favor. See, e.g. , Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (holding mere "labels and conclusions, and a formulaic recitation of the elements of a cause of action" insufficient to survive motion to dismiss); see also Fin. Sec. Assurance, Inc. v. Stephens, Inc. , 500 F.3d 1276, 1282 (11th Cir. 2007) (per curiam). A court may also properly consider documents attached to the complaint, answer, or motion so long as they are (1) central to the plaintiff's claim, and (2) undisputed. See Horsley v. Feldt , 304 F.3d 1125, 1134–1135 (11th Cir. 2002) ; cf. Griffin Indus., Inc. v. Irvin , 496 F.3d 1189, 1205–06 (11th Cir. 2007) (including exhibits among factual allegations to be considered on 12(b)(6) motion to dismiss, stating "when the exhibits contradict the ... allegations of the pleading, the exhibits govern").
To be "minimally sufficient," a complaint must put a defendant on notice of the claims against him. See Bailey v. Janssen Pharmaceutica, Inc. , 288 F. App'x. 597, 603 (11th Cir. 2008) ; see also City of Fort Lauderdale v. Scott , 773 F. Supp. 2d 1355, 1362 (S.D. Fla. 2011) ("Under the Iqbal standard, a plaintiff must allege facts which put each defendant on notice of the claims against him."). Moreover, a complaint will not suffice if it tenders "naked assertions devoid of further factual enhancement." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (holding that well-pleaded complaint "demands more than an unadorned, the defendant-unlawfully-harmed-me accusation") (cleaned up).
3. Analysis
In the Defendants’ motion for judgment on the pleadings as to Counts 5, 6, and 7, the Defendants argue that Constantin, which is the only entity bringing claims under Counts 5, 6, and 7, has no standing to bring such claims. (ECF No. 127 at 5–10.) In the alternative, the Defendants argue that (1) Count 7 fails as the New Jersey Consumer Fraud Act does not apply to an insurer's refusal to pay and (2) Counts 5, 6, and 7 fail as they are all barred by the economic loss rule. (Id. at 10–17.) Moreover, the Defendants argue that Constantin failed to adequately allege punitive damages. (Id. at 17–18.) Last, the Defendants argue that the Court should stay or abate Counts 5, 6, and 7 pending a final determination of coverage. (Id. at 19–20.) The Court will address each in turn.
Count 5 is a claim for common law fraud, Count 6 is for negligent misrepresentation, and Count 7 is for violation of the New Jersey Consumer Fraud Act. (ECF No. 79.)
A. Constantin Associates, LLP's Standing
The Defendants argue that Constantin has no standing to bring Counts 5, 6, and 7, as Constantin assigned away "any and all rights, claims, or causes of action, accrued or unaccrued, known or unknown, that Constantin has or may have against Chubb and/or any other insurer, relating to insurance coverage ... for the claims in the [Underlying Litigation]." (ECF No. 127-2 at 7.) Constantin argues that Counts 5, 6, and 7 are tort claims, which are not assignable under New Jersey law. (ECF No. 139 at 7.) Therefore, the relevant questions are what law controls and whether Constantin's tort claims are assignable.
As noted above, a court can consider extrinsic evidence where it is central to a claim and is undisputed. See Apparisio v. Pruco Life Ins. Co. , No. 19-20823-CIV, 2020 WL 3268487, at *2 (S.D. Fla. June 17, 2020) (Scola, J.). The Plaintiffs do not dispute the settlement agreement attached to the Defendants’ motion, and the Court finds that consideration of the settlement agreement is central to the parties’ claims. Therefore, the Court will consider the settlement agreement, attached as Exhibit 2 to the Defendants’ motion.
First, Florida law applies. Courts sitting in diversity will apply the conflict-of-laws rules of the forum state—here, Florida. See Trumpet Vine Invs., N.V. v. Union Cap. Partners I, Inc. , 92 F.3d 1110, 1115 (11th Cir. 1996). Constantin contends that the Court should apply Florida's "most significant relationship" test to determine which state's substantive law applies. (ECF No. 139 at 6.) However, in cases involving contracts, Florida courts will first look to any choice-of-law provision in a contract or will otherwise apply the law of the state where the contract was made. See Fioretti v. Mass. Gen. Life Ins. Co. , 53 F.3d 1228, 1235 (11th Cir. 1995) ("When resolving conflict-of-laws issues in contract actions, the Florida Supreme Court has unambiguously indicated its intent to reject the more modern (and flexible) ‘significant contacts’ analysis ... choosing instead to adhere to the traditional rule of lex loci contractus. "); see also Clarendon Am. Ins. Co. v. Miami River Club, Inc. , 417 F. Supp. 2d 1309, 1317 (S.D. Fla. 2006). Here, the settlement agreement—which contains Constantin's assignment—provides that "[t]he procedural and substantive law of the State of Florida shall govern[.]" (ECF No. 127-2 at 14–15.) Therefore, Florida law controls the scope of the assignment. See IAG Engine Ctr. Corp. v. Cagney Glob. Logistics Inc. , 501 F. Supp. 3d 1287, 1296 (S.D. Fla. 2020) (Ruiz, J.) (holding that Florida law governed an assignment pursuant to the applicable choice-of-law provision).
As Florida law governs the scope of the assignment, Constantin has no standing to bring claims against the Defendants "relating to insurance coverage ... for the claims in the [Underlying Litigation]." (See ECF No. 127-2 at 7.) Courts widely recognize that "[a]n assignment of rights to pursue a claim against a third party to another removes the assignor's rights to sue the third party because the assignment transfers all rights in the thing assigned." IAG Engine , 501 F. Supp. 3d at 1308. As Constantin assigned "any and all rights, claims, or causes of action ... against Chubb and/or any other insurer, relating to insurance coverage ... for the claims in the [Underlying Litigation]," Constantin has no standing to bring Counts 5, 6, and 7. (See ECF No. 127-2 at 7); see also Hansen v. Wheaton Van Lines, Inc. , 486 F. Supp. 2d 1339, 1346 (S.D. Fla. 2006) (Ryskamp, J.) (holding that a plaintiff had no standing where the plaintiff "assign[ed] its rights to pursue a claim against [the defendant] to another"); IAG Engine , 501 F. Supp. 3d at 1308.
The Court notes that Constantin does not argue that Counts 5, 6, and 7 do not "relat[e] to insurance coverage ... for the claims in the [Underlying Litigation]," so as to remove the claims from the scope of the assignment. Rather, Constantin only argues that tort claims in general are not assignable under New Jersey law. (ECF No. 139 at 7.) However, as explained above, the Court holds that Florida law controls, and as Florida law permits the assignment of fraud-based tort claims, the Court finds that such assignment is valid. See Aaron v. Allstate Ins. Co. , 559 So.2d 275, 277 (Fla. 4th DCA 1990) (holding that any "cause of action, which is not based on a personal tort" is assignable and holding that a claim for fraud against an insurer was assignable). Therefore, the Court finds that Counts 5, 6, and 7 are claims that "relat[e] to insurance coverage ... for the claims in the [Underlying Litigation]," and therefore these claims were assigned to the ECB Plaintiffs. For these reasons, Constantin has no standing to bring these claims.
B. New Jersey Consumer Fraud Act
As the Plaintiffs expressed an intention to substitute the ECB Plaintiffs for Constantin in the event that the Court held Constantin did not have standing (ECF No. 139 at 7), the Court will consider the Defendants’ remaining arguments. First, the Defendants argue that Count 7 under the New Jersey Consumer Fraud Act ("CFA") fails as a matter of law, as the statute does not provide recovery for an insurer's denial of benefits. (ECF No. 127 at 10–14); Myska v. New Kersey Mfrs. Ins. Co. , 440 N.J. Super. 458, 485, 114 A.3d 761 (N.J. App. 2015) (holding that the CFA "was not intended as a vehicle to recover damages for an insurance company's refusal to pay benefits"); see also Beach Glo Tanning Studio Inc. v. Scottsdale Ins. Co. , No. 3:20-cv-13901, 2021 WL 2206077, at *8–9 (D.N.J. May 28, 2021) (holding that the plaintiff brought a claim for the defendants’ refusal to pay benefits and holding that such claim was not cognizable under the CFA).
The Defendants argue that the ECB Plaintiffs cannot be substituted for Constantin as Constantin lacks standing. (ECF No. 148 at 10.) The Defendants point only to cases that hold that a plaintiff without standing cannot substitute new plaintiffs. However, the ECB Plaintiffs are already plaintiffs in this action and the Defendants have pointed to no authority holding that the ECB Plaintiffs could not assert Count 5, 6, or 7.
However, Count 7 does not allege a CFA claim for the Defendants’ failure to pay insurance benefits. Rather, Count 7 alleges that the Defendants engaged in fraudulent acts "in connection with the sale of insurance." (ECF No. 79 at ¶¶ 78, 188.) As both the Defendants’ and the Plaintiffs’ cases recognize, the CFA supports a claim for fraudulently inducing the purchase of an insurance policy. See Nationwide Mutual Ins. Co. v. Caris , 170 F. Supp. 3d 740, 746 (D.N.J. 2016) (dismissing a claim under the CFA only after holding that "there are no allegations that Nationwide fraudulently procured the purchase of the insurance policies issued"); see also Lemelledo v. Beneficial Mgmt. Corp. of Am. , 150 N.J. 255, 265, 696 A.2d 546 (1997) (holding that the CFA "encompass[es] the sale of insurance policies as goods and services that are marketed to consumers"). Therefore, as Count 7 alleges that the Defendants procured the insurance policies at issue through fraudulent or deceptive means, a claim under the CFA is cognizable.
C. Economic Loss Rule
Next, the Defendants argue that Counts 5, 6, and 7 cannot survive because of the economic loss doctrine. (ECF No. 127 at 14–17.) The economic loss doctrine "prohibits plaintiffs from recovering in tort economic losses to which their entitlement only flows from a contract." See Barton v. RCI, LLC , No. 11-3657, 2011 WL 3022238, at *7 (D.N.J. July 22, 2011) (quoting Bracco Diagnostics, Inc. v. Bergen Brunswig Drug Co. , 226 F. Supp. 2d 557, 562 (D.N.J. 2002) ). The parties appear to agree that the economic loss doctrine does not categorically prohibit tort claims just because a contract is involved. (ECF No. 148 at 10; ECF No. 139 at 10–12.) However, the Defendants argue that the damages that Constantin seeks to recover through Counts 5, 6, and 7 arise from the alleged loss of coverage, and therefore the Defendants argue that these counts are barred by the economic loss doctrine. (ECF No. 127 at 15.) However, as discussed above, the Defendants misrepresent the claims that Counts 5, 6, and 7 assert. Counts 5, 6, and 7 bring claims for alleged acts and representations made before the promulgation of the 2017-18 Policy—acts and representations that are asserted to have fraudulently induced Control Group and Constantin to enter into the 2017-18 Policy. (ECF No. 79 at ¶¶ 78, 171, 176, 180, 185, 188–193.) Therefore, Counts 5, 6, and 7 are not barred by the economic loss doctrine. D. Punitive Damages
The parties primarily argue that New Jersey law applies. Applying the "most significant relationship" test to Counts 5, 6, and 7 (as non-contractual claims), the Court holds that New Jersey law must apply. See Michel v. NYP Holdings, Inc. , 816 F.3d 686, 694 (11th Cir. 2016) (holding that courts must look to the place the injury occurred, the place where the conduct causing the injury occurred, the residence and place of business of the parties, and the place where the relationship among the parties is centered). The alleged misrepresentations and fraudulent behavior were made to Constantin and Control Group in New Jersey. (ECF No. 79 at ¶¶ 174, 183, 192.) Moreover, Chubb and Control Group are both based in New Jersey. (Id. at ¶¶ 7, 20.) As the injury and injurious conduct took place in New Jersey, and as two of the primary parties are based in New Jersey, the Court holds that New Jersey law controls as to Counts 5, 6, and 7.
The Defendants also argue that the Plaintiffs have failed to allege punitive damages and that any request for punitive damages should be dismissed. (ECF No. 127 at 17–18.) To adequately plead punitive damages under the New Jersey Punitive Damages Act, a plaintiff must allege facts permitting an inference of actual malice or intentional acts or omissions made with knowledge of "a high degree of probability of harm to another and reckless indifference to the consequences[.]" See Gillman v. Rakouskas , No. 16-4619, 2017 WL 379433, at *2–3 (D.N.J. Jan. 26, 2017) (internal citations omitted). A court need not accept conclusory allegations of punitive damages. See id.
The Plaintiffs point to paragraph 178 of the operative complaint, which alleges, in part, that the Defendants engaged in "wanton, willful and malicious disregard" of Constantin's rights with knowledge of the potential for serious harm to Constantin. (ECF No. 139 at 13) (quoting ECF No. 79 at ¶ 178). The Defendants argue that this is merely a legal conclusion that lacks sufficient factual support. (ECF No. 148 at 11.)
The Court holds that the Plaintiffs’ allegations regarding punitive damages are sufficient to survive a motion to dismiss. The Court does not hold that these allegations will be borne out or whether these allegations, if proven, will ultimately be sufficient to obtain punitive damages. But the Plaintiffs adequately allege facts in support of punitive damages. In particular, the Plaintiffs allege a scheme where the Defendants and their agents sought to entice Control Group and Constantin to purchase an insurance policy in 2017 by making a series of misrepresentations related to the scope of coverage. (ECF No. 79 at ¶¶ 58–88, 178.) These facts are enough at the motion-to-dismiss stage.
E. Stay or Abate
Last, the Defendants ask the Court to dismiss, stay, or abate Counts 5, 6, and 7, as these claims are "disguised contract claims" that seek extra-contractual damages. (ECF No. 148 at 9–10.) However, the Court has already rejected that characterization of Counts 5, 6, and 7, as discussed above. Rather, these Counts seek relief for alleged torts which do not depend upon a final determination of coverage. Therefore, there is no reason to stay or abate these claims.
The Defendants point to the Court's order denying a stipulation to abate the ECB Plaintiff's earlier claim for common law bad faith. (ECF No. 127 at 19 (citing ECF No. 7).) However, a claim against an insurer for bad faith requires a determination on coverage. See Rausnitz v. Transamerica Life Ins. Co. , No. 19-22894-Civ, 2019 WL 7643148, at *3 (S.D. Fla. Dec. 13, 2019) (Scola, J.). Therefore, case law regarding dismissal or abatement of claims for bad faith have no application to tort claims for misrepresentation and fraud.
4. Conclusion
For the reasons set out above, the Court grants in part and denies in part the Defendants’ motion. (ECF No. 127 .)
Done and ordered , in Miami, Florida, on November 10, 2021.