Pruco Life Insurance Company v. Brasner et al

Filing 142

ORDER denying 83 Motion to Dismiss Wells Fargo's Counterclaim. Plaintiff shall file its Answer to 73 Wells Fargo's Counterclaim by no later than 7/18/2011. Signed by Judge James I. Cohn on 7/7/2011. (awe)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 10-80804-CIV-COHN/SELTZER
PRUCO LIFE INSURANCE COMPANY,
Plaintiff,
v.
STEVEN M. BRASNER, individually and as
Principal of Infinity Financial Group, LLC;
MARK A. TARSHIS; INFINITY FINANCIAL
GROUP LLC; WELLS FARGO BANK, N.A.,
as Securities Intermediary; and John Does 1-10,
Defendants.
_______________________________________/
ORDER DENYING PLAINTIFF PRUCO LIFE INSURANCE COMPANY’S MOTION TO
DISMISS WELLS FARGO BANK, N.A.’S COUNTERCLAIM
THIS CAUSE is before the Court upon Plaintiff Pruco Life Insurance Company’s
Motion to Dismiss Defendant Wells Fargo Bank, N.A.’s Counterclaim [DE 83] (“Motion
to Dismiss”). The Court has considered the Motion to Dismiss, Defendant’s Response
[DE 90], Plaintiff’s Reply [DE 94], and the record in this case, and is otherwise advised
in the premises.
I. BACKGROUND
On July 9, 2010, Plaintiff Pruco Life Insurance Company, a subsidiary of The
Prudential Life Insurance Company of America, brought this action against Defendants
Wells Fargo Bank, N.A. (“Wells Fargo”), Infinity Financial Group LLC (“Infinity”),
Infinity’s principal, Steven M. Brasner, Infinity’s employee, Mark A. Tarshis, and John

Does 1-10.1 See Complaint [DE 1]. On February 4, 2011, Wells Fargo filed its
Answer, Affirmative Defenses, and Counterclaim [DE 73]. Plaintiff now moves to
dismiss the Counterclaim.
A. The Complaint
The Complaint arises from the alleged fraudulent procurement of a $10 million
insurance policy on the life of Arlene Berger (“the Berger Policy”). Plaintiff alleges that
in or around February 2006, Mr. Brasner, a life insurance producer, approached Mrs.
Berger to participate in a stranger-originated life insurance (“STOLI”)2 policy. The plan
called for the application for a policy on Mrs. Berger’s life with Plaintiff, and the alleged
concealment from Plaintiff of an intent to sell the policy, and/or an interest in the policy,
to one or more investors in the secondary market. The plan also called for the creation
of a trust that would be the owner and the beneficiary of the policy. However, according
to the Complaint, neither the trust nor the Berger Policy was intended for estate
liquidity, financial planning, or any other legitimate insurance-related purpose. Instead,

1

The Court entered a Default Final Judgment [DE 61] against Defendant
Brasner and Defendant Infinity on January 4, 2011, and entered an Order Dismissing
Defendant Mark A. Tarshis [DE 136] on June 6, 2011. Accordingly, Wells Fargo is the
only remaining Defendant in this case.
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According to the Complaint, in recent years, a secondary market for life
insurance has emerged, in which existing life insurance policies are sold to third-parties
who lack an insurable interest in the insured’s life. Though this type of sale can be
lawful if the policy is procured for legitimate purposes and there is an insurable interest
at the inception of the policy, a STOLI policy that lacks insurable interest at inception
and is sought for the purpose of re-sale to stranger-investors on the secondary market
is void ab initio. STOLI policy promoters frequently provide false information during the
insurance policy application process in order to obtain a policy with a larger face value
than would be otherwise warranted, which in turn maximizes the promoter’s profit when
the policy is sold to investors.
2

the policy was intended to be transferred to a STOLI investor in the secondary market,
and the trust was intended to conceal this intention from Plaintiff.
In its Complaint, Plaintiff contends that the application and accompanying
documentation contained false information. Had Plaintiff known the information was
false, Plaintiff says it would have declined to issue the Berger Policy. But because it did
not know the information was false, on April 13, 2006, Plaintiff issued the Berger Policy,
number V1208044, on Arlene Berger’s life in the amount of $10 million. The Berger
Policy was delivered on or about April 28, 2006, and after an initial premium payment
was made, the Berger Policy was placed in force on or about May 10, 2006. One
month later, on June 16, 2006, Mr. Brasner and Infinity requested to change the Berger
Policy’s owner and beneficiary to the Wilmington Trust Company as Trustee of the
Arlene Berger 2006 Life Insurance Trust dtd. 6/5/06. Thereafter, on December 24,
2008, Plaintiff received a second request to change the owner and beneficiary, this time
to Wells Fargo as securities intermediary.
Based on these allegations, Plaintiff filed its five-count Complaint against
Defendants. Of the five counts, Plaintiff brings only one count against Wells Fargo:
Count I for declaratory judgment that the Berger Policy lacked an insurable interest at
inception and is therefore void ab initio. After the Court denied Wells Fargo’s Motion to
Dismiss Count I [DE 64], Wells Fargo filed its Counterclaim, bringing one count of
negligent misrepresentation against Plaintiff.

3

B. Counterclaim
According to Counterclaim, Wells Fargo’s client, who purchases life insurance
policies in the secondary market, relied on Plaintiff’s assurances that the Berger Policy
was valid, in force, and beyond the contestability period when the client purchased the
Berger Policy in December 2008. Now, over four years after the contestability period
has expired and over two years after issuing the Berger Policy, Plaintiff has filed this
lawsuit to contest the validity of the Berger Policy.
Wells Fargo states, “If [Plaintiff]’s allegations are correct, [Plaintiff] could – and
should – have discovered these misrepresentations in the exercise of due diligence
during the two-year contestability period.” Resp. at 2. The Counterclaim alleges that
throughout the underwriting process for the Berger Policy, Plaintiff “raised ‘internal red
flags’ as to the possibility that the policy being sought was ‘STOLI’ . . . or that it would
be part of a ‘life settlement.’” Countercl. ¶ 11; see also, e.g., id. ¶ 12 (“Tech team should
probably pay special attention to the Brasner case. Looks li[ke] there are a lot of
unanswered questions” and “. . . These are red flags of a potential settlement case . .
.); id. ¶ 15 (“This is a case we thought was a possible [sic] settlement case back in June
. . .”). Wells Fargo alleges that Plaintiff repeatedly disregarded these “internal red
flags,” id. ¶¶ 13-14, 16, and eventually issued the Berger Policy, id. 18.
Wells Fargo further notes that despite the Berger Policy’s two-year contestability
provision, Plaintiff did not investigate or contest the Berger Policy during the two years
after the policy was issued. See id. ¶¶ 23-24. However, after the contestability period
ended, Plaintiff allegedly supplied verification of coverage and made other

4

representations regarding the Berger Policy to inquiring secondary market brokers and
potential purchasers. Id. ¶¶ 29-30. On December 10, 2008, Plaintiff provided such
verification of coverage to Coventry First LLC (“Coventry First”), who then sold the
Berger Policy to Wells Fargo’s client in late December 2008. Id. ¶ 31. Wells Fargo
states that its client relied upon Plaintiff’s representations when it purchased the Berger
Policy. Id. ¶ 32. Further, “[o]n or about December 24, 2008, Wells Fargo, on behalf of
its client, submitted to [Plaintiff] a request for change of ownership and beneficiary of
the Berger Policy . . . Thus, by letter dated January 9, 2009, [Plaintiff] provided written
‘confirmation’ to Wells Fargo that its request for a change of ownership and beneficiary
of the Berger Policy had been accepted by [Plaintiff].” Id. ¶ 33. Since then, Plaintiff has
sent invoices for premiums to Wells Fargo on a regular basis, and Wells Fargo has paid
those premiums. Id. ¶¶ 34-35.
Based on these allegations, Wells Fargo’s Counterclaim brings a single count
against Plaintiff for negligent misrepresentation. Id. ¶¶ 36-42. In the instant Motion to
Dismiss, Plaintiff seeks to dismiss the Counterclaim pursuant to Federal Rules of Civil
Procedure 9(b) and 12(b)(6).
II. LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss lies for
“failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In
order to state a claim, Federal Rule of Civil Procedure 8(a)(2) requires “a short and
plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.
P. 8(a)(2). “While a complaint [or counterclaim] attacked by a Rule 12(b)(6) motion to

5

dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 545 (2007) (citations omitted). “To survive a motion to dismiss,
a complaint [or counterclaim] must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937,
1949 (2009) (quoting Twombly, 550 U.S. at 570).
At this stage in the litigation, the Court must consider the factual allegations in
the Counterclaim as true, and accept all reasonable inferences therefrom. Jackson v.
Okaloosa Cnty., Fla., 21 F.3d 1531, 1534 (11th Cir. 1994). Nevertheless, the Court
may grant a motion to dismiss when, “on the basis of a dispositive issue of law, no
construction of the factual allegations will support the cause of action.” Marshall Cnty.
Bd. of Educ. v. Marshall Cnty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993).
III. ANALYSIS
Plaintiff argues that the Court should dismiss Wells Fargo’s Counterclaim
because (1) Wells Fargo has failed to plead its Counterclaim with particularity, (2) the
economic loss rule bars the Counterclaim, and (3) Wells Fargo has failed to allege all of
the elements necessary to state a claim for negligent misrepresentation under Florida
law. Court will address each argument in turn.

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A. Rule 9 Particularity
Pursuant to Federal Rule of Civil Procedure 9(b), a party alleging fraud or
mistake “must state with particularity the circumstances constituting the fraud or
mistake.” Fed. R. Civ. P. 9(b). Under Eleventh Circuit precedent, “Rule 9(b) is satisfied
if the complaint [or counterclaim] sets forth (1) precisely what statements were made in
what documents or oral representations or what omissions were made, . . . (2) the time
and place of each such statement and the person responsible for making (or, in the
case of omissions, not making) [it], . . . (3) the content of such statements and the
manner in which they misled the plaintiff, and (4) what the defendants obtained as a
consequence of the fraud.” Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th
Cir. 2001) (internal quotations and citations omitted). Allegations of date, time, or place
satisfy the particularity requirement of Rule 9(b), but alternative means are also
available to satisfy the rule. Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1512 (11th
Cir. 1988); see also Colonial Penn Ins. Co. v. Value Rent-A-Car, Inc., 814 F. Supp.
1084 (S.D. Fla. 1992) (finding particularity satisfied when plaintiffs provided general
time frame, described scheme in detail, and included specific allegations about related
correspondence). The purpose of this heightened pleading requirement is to give the
defendant fair notice of the claims brought against it, to protect the defendant from
harm to its reputation, and to prevent plaintiffs from filing baseless claims and then
attempting to discover unknown wrongs. See Holguin v. Celebrity Cruises, Inc., Nos.
10-20215-CIV, 10-20545-CIV, 10-20546-CIV, 2010 WL 1837808, at *2 (S.D. Fla. May
4, 2010).

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1. Applicability of Rule 9(b) to the
Negligent Misrepresentation Counterclaim
As an initial matter, Wells Fargo argues that Rule 9(b) does not apply to its
negligent misrepresentation Counterclaim because it does not allege a fraudulent
misrepresentation. See Resp. at 10. Courts within the Eleventh Circuit and outside this
Circuit have reached varying conclusions regarding whether Rule 9(b) applies to
negligent misrepresentation claims. See Atwater v. Nat’l Football League Players
Ass’n, Case No. 1:06-CV-1510-JEC, 2007 WL 1020848, at *13 (N.D. Ga. March 29,
2007) (discussing various courts’ conclusions regarding whether Rule 9(b) applies to
negligent misrepresentation claims). Some courts have held that Rule 9(b)’s
heightened pleading standard only extends to the cases specifically enumerated in the
rule, while other courts have held that Rule 9(b) applies to any claims that sound in
fraud. Compare Am. Realty Trust, Inc. v. Hamilton Lane Advisors, Inc., 115 Fed. App’x
662, 668 (5th Cir. 2004) (requiring only Rule 8(a) pleading for negligent
misrepresentation claim), with Advisor’s Capital Inv., Inc. v. Cumberland Cas. & Surety
Co. et al., Case No. 8:05-cv-404-T, 2006 WL 1428490, at *3 (M.D. Fla. May 22, 2006)
(requiring Rule 9(b) pleading for negligent misrepresentation claim).
Though the Eleventh Circuit itself has not ruled on the question, Atwater, 2007
WL 1020848, at *13, “[h]istorically, in Florida an action for negligent misrepresentation
sounds in fraud rather than negligence,” Souran v. Travelers Ins. Co., 982 F.2d 1487,
1511 (11th Cir. 1993). Based on this notion, a number of courts in this District have
concluded that Rule 9(b)’s requirements do apply to negligent misrepresentation cases.
See, e.g., Tradewinds Engine Servs., LLC v. IAE Int’l Aero Engines AG, Case No.
8

10-61027-CIV, 2011 WL 900312, at *7 (S.D. Fla. Jan. 13, 2011) (“In addition, claims
for negligent misrepresentation sound in fraud, and thus Plaintiff's claims in this area
are subject to the same particularity requirements as its fraud claims under”), adopted
in part by Tradewinds Engine Servs., LLC v. IAE Int’l Aero Engines AG, Case No.
10-61027-CIV, 2011 WL 900310 (S.D. Fla. March 15, 2011); Johnson v. Amerus Life
Ins. Co., Case No. 05-61363, 2006 WL 3826774, at *4 (S.D. Fla. Dec. 27, 2006) (“Rule
9(b) pleading requirements apply to actions involving claims for negligent
misrepresentation”); MeterLogic, Inc. v. Copier Solutions, Inc., 126 F. Supp. 2d 1346,
1370 n.10 (S.D. Fla. 2000) (applying Rule 9(b) analysis to negligent misrepresentation
claim); Harrison Enters., Inc. v. Moran, No. 97-4362-CIV, 1999 WL 1211753, at *3 (S.D.
Fla. Aug. 30, 1999) (noting that Rule 9(b) applies to claims that sound in fraud, and
quoting Souran for the proposition that “in Florida an ‘action for negligent
misrepresentation sounds in fraud rather than negligence.’”). This Court agrees that
Rule 9(b) governs negligent misrepresentation claims in Florida because such claims
“sound in fraud rather than negligence.” See Souran, 982 F.2d at 1511. Therefore,
Wells Fargo’s negligent misrepresentation Counterclaim must meet Rule 9(b)’s
heightened pleading standard.
2. Rule 9(b) Analysis
The Counterclaim alleges the following:
[Plaintiff] made express representations of material fact concerning the
validity and incontestability of the Berger Policy through [its] verification of
coverage of this Policy and other representations. In particular, in 2008,
[Plaintiff] represented to Coventry First (who sold the Berger Policy to Wells
Fargo’s client) that the Berger Policy was enforceable and that its two-year
contestability period had expired, and then also confirmed Wells Fargo’s
requested change of ownership and beneficiary.
9

Countercl. ¶ 37. It further alleges, “Before making these representations, [Plaintiff]
believed that the Berger Policy was suspect due to numerous ‘internal red flags’ it had
discovered during [the] underwriting process and afterwards.” Id. Nevertheless,
Plaintiff represented that the Berger Policy was valid, and has now turned around and
filed the instant lawsuit to contest the validity of that very policy. Id. Therefore, Wells
Fargo claims Plaintiff “was negligent in repeatedly making these representations . . .
[because it] either knew or should have known that its representations were not true
(based on what it previously believed to be ‘internal red flags’ raised during the
underwriting process. Or it made these representations without knowledge of their truth
or falsity.” Id. ¶ 39. Wells Fargo then alleges that Plaintiff intended or should have
known that a third-party investor would rely on its representations in connection with
purchasing the Berger Policy in the secondary market, that Wells Fargo’s client did rely
on these representations in purchasing the Berger Policy, and that as a result of this,
Wells Fargo has suffered damages including the acquisition costs in purchasing the
Berger Policy and the additional premium payments since acquisition. Id. ¶¶ 40-42.
These allegations, together with the “Factual Background” section of the
Counterclaim, set forth what statements Plaintiff made and what statements Plaintiff
omitted, when and how the statements were made, the content of the statements and
how they misled Wells Fargo’s client, and what Plaintiff obtained as a result of the
statements or omissions. Reading the allegations against the facts of this case, and
taking the allegations as true for the purpose of the instant Motion to Dismiss, the
pleading satisfies Rule 9(b). See Ziemba, 256 F.3d at 1202 (listing criteria that satisfy
Rule 9(b)); see also Durham, 847 F.2d at 1512 (alternatives to allegations of date, time,
10

or place can satisfy the rule).
Plaintiff’s main objection to the particularity with which Wells Fargo pleads is the
fact that Wells Fargo has not named its client. According to Plaintiff, “it goes without
saying that a properly pled misrepresentation claim must include the name of the
person or entity who received and reasonably relied upon the supposed
misrepresentation.” Mot. at 7. Wells Fargo has alleged that Coventry First was the
entity who received the supposed misrepresentation, but it has not named its client who
supposedly relied on the misrepresentation. However, Plaintiff provides no caselaw to
support its argument, and nothing in Rule 9(b) requires that a claim include the name of
every person involved. See Fed. R. Civ. P. 9(b). The Eleventh Circuit has held that
even allegations of date, time, or place satisfy the rule. See Durham., 847 F.2d 1505 at
12. What is important is that the pleading gives the defendant fair notice of the claims
brought against it, see Holguin, 2010 WL 1837808, at *2, and Wells Fargo’s pleading
provides Plaintiff with such notice here. Therefore, the Court will not dismiss Wells
Fargo’s Counterclaim for failure to comply with Rule 9(b)’s particularity requirements.
To the extent Plaintiff seeks to uncover Wells Fargo’s client’s identify, it may request
this information in discovery.
B. Economic Loss Rule
Under certain circumstances, the economic loss rule precludes recovery for
negligence that results only in economic harm. Casa Clara Condo. Ass’n v. Charley
Toppino & Sons, Inc., 620 So. 2d 1244, 1246 (Fla. 1993). The rule bars a negligent
misrepresentation action “where a defendant has not committed a breach of duty apart
from a breach of contract.” Indem. Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d
11

532, 537 (Fla. 2004). This “prohibition against tort actions to recover solely economic
damages for those in contractual privity is designed to prevent parties to a contract from
circumventing the allocation of losses set forth in the contract by bringing an action for
economic loss in tort.” Id. at 536.
Wells Fargo’s Counterclaim seeks purely economic damages, see Countercl.
¶ 42, see also id. at “Wherefore” paragraph, and Wells Fargo is in contractual privity
with Plaintiff under the Berger Policy contract, see id. ¶¶ 34-35. Therefore, under the
economic loss rule, the Counterclaim can only survive if it is indeed distinct from a claim
for breach of the Berger Policy contract. See Am. Aviation, Inc., 891 So. 2d at 537.
“To determine whether the economic loss rule bars recovery under fraud, the
question is simply this: is the fraud alleged in an act of performance or in a term of the
bargain?” Allen v. Stephan Co., 784 So. 2d 456, 458 (Fla. Dist. Ct. App. 2000)
(discussing negligent misrepresentation and fraudulent inducement claims). In support
of dismissal, Plaintiff argues that Wells Fargo’s negligent misrepresentation claim is
merely a breach of contract claim in disguise, Mot. at 9, but a review of the allegations
demonstrates that the claim centers on the bargain to enter into the Berger Policy
contract rather than performance of the contractual terms, see Countercl. Wells Fargo
does not suggest that Plaintiff has breached any obligations under the contract. Like
Allen, where the economic loss rule did not bar the claim because “the representation
[was] simply made and relied upon in inducing the completion of the transaction [and
was therefore] a term of the bargain,” Allen, 784 So. 2d at 458, Wells Fargo’s
allegations center on a representation made and relied upon during the course of Wells
Fargo’s client purchasing the Berger Policy. Under such circumstances, the economic
12

loss rule does not bar a negligent misrepresentation claim seeking solely economic
damages. See id.; see also Mobil Oil Corp. v. Dade Cnty. Esoil Mgmt. Co., Inc., 982 F.
Supp. 873, 880-81 (S.D. Fla. 1997) (negligent misrepresentation claim “centers upon
alleged inducement to enter into a contractual relationship rather than performance of
the contracts and, thus, is not barred by the economic loss doctrine”); HTP, Ltd. v.
Lineas Aereas Costarricenses, 685 So. 2d 1238, 1239 (Fla. 1997) (finding fraudulent
inducement distinct from breach of contract claim, stating, “whether the defendant was
truthful during the formation of the contract is unrelated to the events giving rise to the
breach of contract.”). Therefore, the economic loss rule does not bar Wells Fargo’s
Counterclaim.
C. Elements of a Negligent Misrepresentation Claim
To plead a negligent misrepresentation claim under Florida law, a plaintiff must
allege: “(1) [a] misrepresentation of material fact; (2) the representor . . . ma[d]e the
representation without knowledge as to its truth or falsity, or . . . under circumstances in
which he ought to have known of its falsity; (3) the representor . . . intend[ed] that the
misrepresentation induce another to act on it; (4) injury [resulted] to the party acting in
justifiable reliance on the misrepresentation.” Souran, 982 F.2d at 1504. The Motion to
Dismiss argues that Wells Fargo has failed to allege the first, third, and fourth elements.
The Court will discuss each element in turn.
1. Misrepresentation of Material Fact
The first element in a negligent misrepresentation claim requires a
misrepresentation of material fact. Souran, 982 F.2d at 1504. The Counterclaim
alleges that Plaintiff made representations confirming the validity and incontestability of
13

the Berger Policy in the course of its business. Countercl. ¶¶ 37-38. It alleges that
Plaintiff discovered “numerous ‘internal red flags’ . . . during the underwriting process
and afterwards,” id. ¶ 37, based upon which, it “knew or should have known that its
representations were not true . . . [o]r it made these representations without knowledge
of their truth or falsity,” id. ¶ 38. Though the Response suggests that Plaintiff also
withheld information from Wells Fargo’s client, see Resp. at 13, the Counterclaim itself
is based on the allegation that Plaintiff supplied affirmative information that the Berger
Policy was valid, in-force, and incontestable, see Countercl. ¶¶ 37-41, and that this
information was false. Based on these statements, the Counterclaim pleads a
misrepresentation of material fact. To the extent that Plaintiff disputes the underlying
facts, such arguments are premature at this stage.
2. Intent to Induce Action
The third element in a negligent misrepresentation claim requires that the
representor intended for the misrepresentation to induce another to act on it. Souran,
982 F.2d at 1504. The Counterclaim alleges that Plaintiff “either intended or expected,
through its verification of coverage and other representations, to induce a third-party
investor to acquire the Berger Policy in the secondary market.” Countercl. ¶ 40.
Reading the Counterclaim in the light most favorable to Wells Fargo, this allegation,
along with the other allegations contained in the Counterclaim, is sufficient to survive
dismissal.
Plaintiff nevertheless argues that this allegation is insufficient because the
“misrepresentation is alleged to have been directed toward Coventry First only[,] . . .
Wells Fargo has done nothing to establish a causal link between this misrepresentation
14

and its client’s current ownership of the Policy, other than stating that its client bought
the Policy from Coventry First[,] . . . [and Plaintiff] did not know, and to this day does not
know, the individual or entity that Wells Fargo refers to as its ‘client.’” Mot. at 15. Wells
Fargo responds that pursuant to the Restatement (Second) of Torts § 552,3 it need not
name its client, nor must it prove that the representation was directed at itself or its
client. See Resp. at 8-10.
Section 552 provides as follows:
One who, in the course of his business, profession or employment, or in any
other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information.
Restatement (Second) of Torts § 552(1), (2). This section “permits recovery for
pecuniary losses suffered by persons who reasonably rely upon false information
provided by someone acting in the course of their business, profession, and
employment.” Curd v. Mosaic Fertilizer, LLC, 993 So. 2d 1078, 1081 n.2 (Fla. Dist. Ct.
App. 2008); see also City of St. Petersburg v. Total Containment, Inc., Case No.
06-20953-CIV, 2008 WL 5428179, at *21 (S.D. Fla. 2008).4

3

The Supreme Court of Florida adopted § 552 into Florida law in Gilchrist
Timber Co. v. ITT Rayonier, Inc., 696 So. 2d 334 (Fla. 1997).
4

Despite Plaintiff’s suggestion that § 552 does not apply to insurers, the section
does apply to the instant action. The parties debate the applicability of § 552 based on
Liberty Surplus Insurance Corp., Inc. v. First Indemnity Insurance Services, Inc., 31 So.
3d 852, 857 (Fla. Dist. Ct. App. 2010). Wells Fargo reads the case to mean that the
section “applies to insurers such as [Plaintiff],” Resp. at 4, while Plaintiff reads the case
to preclude application of § 552 to this case because Liberty Surplus only “held that an
insurance broker can be held liable for negligent misrepresentation for supplying false
information to an insurer in pursuit of insurance coverage,” Reply at 5. Both parties
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Here, Wells Fargo alleges that Plaintiff supplied false information while acting in
the course of its business and in the course of a transaction in which it had a pecuniary
interest in that it receives premium payments from the Berger Policy contract. Wells
Fargo also alleges that its client is an intended recipient of such information. See
Countercl. ¶ 40 (Plaintiff “thus either intended or expected, through its verification of
coverage and other representations, to induce a third-party investor to acquire the
Berger Policy in the secondary market. This enabled [Plaintiff] to continue to collect
premiums under the Policy.”).
The fact that Plaintiff did not make its representations directly to Wells Fargo is
inapposite. Under § 552, “it is not necessary that the maker should have any particular
person in mind as the intended, or even the probable, recipient of the information.”
Restatement (Second) of Torts § 552 cmt. h. “It is enough that the maker of the
representation intends it to reach and influence either a particular person or persons,
known to him, or a group or class of persons, distinct from the much larger class who
might reasonably be expected sooner or later to have access to the information and
foreseeably to take some action in reliance upon it. It is enough, likewise, that the
maker of the representation knows that his recipient intends to transmit the information
to a similar person, persons or group.” Id. Therefore, the allegations that Plaintiff

miss the mark. Section 552 “has been applied in cases where individuals who provide
professional services, such as auditors and appraisers, are sued for negligent
misrepresentation of information that third parties rely on to their detriment.” Total
Containment, Inc., 2008 WL 5428179, at *21. The Counterclaim alleges that Plaintiff
provides a professional service during the course of which, it provided false information
on which Wells Fargo’s client relied to its detriment. Therefore, the section applies to
this case. See also Souran, 982 F.2d at 1505 (applying § 552 to negligent
misrepresentation claim based on insurance company’s actions).
16

provided verification of coverage to Coventry First with full understanding that Coventry
First intended to rely on and relay the information to potential purchasers, such as
Wells Fargo’s client, along with the fact that Wells Fargo’s client did receive this
information and relied on it to its detriment, is enough to survive dismissal.
3. Injury
The fourth element in a negligent misrepresentation claim requires that the party
acting in justifiable reliance on the misrepresentation was injured. Souran, 982 F.2d at
1504. Wells Fargo’s Counterclaim alleges that its client “is a bona fide third-party
purchaser who justifiably relied on [Plaintiff’s] verification of coverage of the Berger
Policy and other representations concerning the validity and incontestability of he
Policy. In fact, had [Plaintiff] not issued its verification of coverage, Wells Fargo’s client
would not have acquired the Berger Policy.” Countercl. ¶ 41. The Counterclaim further
alleges that “Wells Fargo’s client has suffered significant damages as a result of
[Plaintiff’s] negligent misrepresentations, including, but not limited to, the significant
acquisition costs incurred in acquiring the Berger Policy and the additional premiums of
approximately $200,000 paid since acquisition of the Berger Policy.” Id. ¶ 42.
Together, these statements constitute allegations that Wells Fargo’s client, acting in
justifiable reliance on Plaintiff’s misrepresentations was injured.
Plaintiff argues that Wells Fargo’s allegations regarding its injury are insufficient
because “[a]ny injury that could possibly be suffered by Wells Fargo and its client is
uncertain and has not yet been sustained.” Mot. at 16. Specifically, “[a]ny future
economic injury to Wells Fargo’s client would be contingent on a future event—the
Court declaring the Policy void ab initio,” id., and “[e]ven if this event were to occur,
17

liability for such injury would not be attributable to [Plaintiff],” id. Wells Fargo states that
it brings its Counterclaim as an “either/or proposition,” Resp. at 16, meaning that it
“seeks the damages suffered in reliance on [Plaintiff’s] misrepresentations and
omissions only to the extent that this Court declares the Policy void ab initio,” id. The
Court understands this to mean that should the Policy survive, Wells Fargo will drop its
Counterclaim. This does not change the fact that Wells Fargo has alleged a claim for
negligent misrepresentation under Florida law. To the extent that Plaintiff disputes
these facts, these arguments are premature at the motion to dismiss stage.
Accordingly, the Court finds that Wells Fargo has stated a Counterclaim for negligent
misrepresentation.
IV. CONCLUSION
Based on the foregoing, it is hereby
ORDERED AND ADJUDGED that Plaintiff Pruco Life Insurance Company’s
Motion to Dismiss Defendant Wells Fargo Bank, N.A.’s Counterclaim [DE 83] is
DENIED. Plaintiff shall file its Answer to Wells Fargo’s Counterclaim [DE 73] by no
later than July 18, 2011.
DONE AND ORDERED in Chambers at Fort Lauderdale, Florida, on this 7th day
of July, 2011.

Copies provided to:
Counsel of record via CM/ECF

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