Ward Hyundai, Inc. v. Zurich American Insurance Company
MEMORANDUM AND ORDER re: 36 MOTION to Dismiss Case filed by Defendant Zurich American Insurance Company motion is DENIED. Signed by District Judge Stephen N. Limbaugh, Jr on 1/20/15. (MRS)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
WARD HYUNDAI, INC.,
ZURICH AMERICAN INS. CO.,
Case No. 1:13-CV-161 SNLJ
MEMORANDUM AND ORDER
Plaintiff Ward Hyundai, Inc. (“Ward”) brought this action against its insurer
Zurich American Insurance Company (“Zurich”). Zurich has moved to dismiss (#36)
Ward’s Second Amended Complaint, and that motion has been fully briefed.
According to the complaint, plaintiff worked with an insurance agent to obtain
insurance coverage for Ward’s inventory of vehicles. Plaintiff alleges that it sought
coverage that would allow it to choose between body-shop estimates or paintless dent
repair (“PDR”) for reimbursement of losses. Plaintiff says that Zurich’s agent, Chris
Foshee, assured plaintiff that Zurich’s policy would include such a choice. Plaintiff says
it switched insurance carriers in reliance upon Foshee’s representation. After plaintiff
purchased the insurance coverage from Zurich, within a month of issuance, Foshee reasserted to Ward that the coverage provided the choice to use body-shop or PDR
estimates. However, on April 8, 2011, an “event” occurred that required plaintiff to
submit a claim to defendant. Foshee again told the plaintiff that the insurance policy
provided plaintiff with the body-shop or PDR estimate choice, but, shortly after the April
8 incident, defendant informed plaintiff that the coverage did not provide for such a
choice. Instead, the policy provided only for PDR estimate.
Plaintiff alleges that it then followed up with Foshee, who continued to tell
plaintiff that the coverage provided the choice of estimate. Plaintiff alleges that, due to
the conflicting information from defendant and Foshee, plaintiff contacted defendant’s
vice president and general manager, who, on April 27, 2011, e-mailed plaintiff that its
agent had misinformed plaintiff about the insurance coverage and that there was no
choice of estimate. (#33 at ¶ 16.) Plaintiff attached that e-mail to his complaint. Plaintiff
alleges that, despite defendant’s being aware of the misinformation its agent provided
plaintiff, defendant refused to “remedy the situation.” (Id. at ¶ 19.)
In this Second Amended Complaint, as with the First Amended Complaint,
plaintiff brings three counts. Count I is for Negligent Misrepresentation. Count II is for
fraudulent misrepresentation. Count III is for reformation of the insurance contract. This
Court dismissed the First Amended Complaint for failure to state a claim but permitted
the plaintiff to amend and refile his complaint. Defendant again seeks dismissal based on
failure to state a claim.
The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to
test the legal sufficiency of a complaint so as to eliminate those actions which are fatally
flawed in their legal premises and designed to fail, thereby sparing litigants the burden of
unnecessary pretrial and trial activity. Young v. City of St. Charles, 244 F.3d 623, 627
(8th Cir. 2001) (quoting Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). A complaint
must be dismissed for failure to state a claim if it does not plead enough facts to state a
claim to relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
560 (2007) (abrogating the traditional “no set of facts” standard set forth in Conley v.
Gibson, 355 U.S. 41, 45-46 (1957)). A petitioner need not provide specific facts to
support his allegations, Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam), but
“must include sufficient factual information to provide the grounds on which the claim
rests, and to raise a right to relief above a speculative level.” Schaaf v. Residential
Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008), cert. denied, 129 S.Ct. 222 (2008)
(quoting Twombly, 550 U.S. at 555-56 & n.3).
In ruling on a motion to dismiss, a court must view the allegations of the
complaint in the light most favorable to the petitioner. Scheuer v. Rhodes, 416 U.S. 232
(1974); Kottschade v. City of Rochester, 319 F.3d 1038, 1040 (8th Cir. 2003). Although
a complaint challenged by a Rule 12(b)(6) motion does not need detailed factual
allegations, a petitioner must still provide the grounds for relief, and neither “labels and
conclusions” nor “a formulaic recitation of the elements of a cause of action” will suffice.
Twombly, 550 U.S. at 555 (internal citations omitted). “To survive a motion to dismiss, a
claim must be facially plausible, meaning that the factual content . . . allows the court to
draw the reasonable inference that the respondent is liable for the misconduct alleged.”
Cole v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). When determining the facial plausibility of a claim, the
Court must “accept the allegations contained in the complaint as true and draw all
reasonable inferences in favor of the nonmoving party.” Id. (quoting Coons v. Mineta,
410 F.3d 1036, 1039 (8th Cir. 2005)).
Defendant maintains that plaintiff has failed to remedy its pleading inadequacies
with the Second Amended Complaint.
Counts I and II — Negligent and Fraudulent Misrepresentation
Defendant again contends that plaintiff cannot bring tort claims against it because
plaintiff is limited to bringing a breach of contract claim against its insurer. Generally,
“insurance is a matter of contract, and [it] is governed by the rules applicable to contracts
and that any claim or suit by either party to an insurance contract must be based on the
policy as issued.” Hartford Acc. & Indem. Co. v. Farmington Auction, Inc., 356 S.W.2d
512, 518-19 (Mo. App. 1962); see also Overcast v. Billings Mut. Ins. Co., 11 S.W.3d 62,
69 (Mo. banc 2000) (“an insurance company’s denial of coverage itself is actionable only
as a breach of contract and, where appropriate, a claim for vexatious refusal to pay.”).
Defendant continues to characterize plaintiff’s claim as a recast claim for breach of
contract and vexatious refusal to pay. The Court disagrees. Plaintiff has not pleaded that
defendant wrongfully refused to pay on the contract; rather, plaintiff pleaded that
defendant’s agent misrepresented the contents of the policy to it both before and after the
issuance of the policy. Unlike the cases relied upon by defendants, see, e.g., Ryann
Spencer Group, Inc. v. Assurance Co. of America, 275 S.W.3d 284, 290 (Mo. App. E.D.
2008), where the claim was ultimately for the policy benefit and was dependent on the
same elements of a contract claim, plaintiff’s allegations are independent of any breach of
contract claim that plaintiff could make. In Ryann Spencer Group, for example, the
insured requested a policy that would insure its property for the full market value. After
a fire loss, the insured determined that the policy did not meet the insured’s coverage
request and sued on several grounds including fraudulent and negligent
misrepresentation. Id. The court determined that the tort claims were based on the
insurer’s “refusal to pay and are not based on conduct distinct from conduct that merely
constitutes a breach of contract.” Id.; cf. Overcast, 11 S.W.3d at 68.
The actionable conduct here is not the denial of any claim under the insurance
contract or the refusal to pay by the defendant’s agent. Plaintiff in fact admits that the
insurance contract does not offer it the choice of estimate, and indeed, the complaint does
not purport to allege that defendant breached the insurance contract. Instead, the
actionable conduct is the misrepresentation made by the defendant’s agent, which
induced plaintiff to enter into a contract that did not include the coverage sought.
Plaintiff’s misrepresentation claims are akin to a negligent or fraudulent inducement
action, which is actionable under Missouri law. As the Eighth Circuit has remarked,
“generally, a person who signs a written contract is presumed to know the contents of the
terms of the contract and is bound by such terms. … However, we do not believe that
under Missouri law a party is free to fraudulently induce the other party to sign an
agreement simply because the relied upon fraudulent misrepresentations were
inconsistent with the signed agreement.” Pinken v. Frank, 704 F.2d 1019, 1025 (8th Cir.
1983) (internal citations omitted); see also Harriman Oil Co. v. Baker, No. 4:11CV01344
AGF, 2012 WL 252233, at *2 (E.D. Mo. Jan. 26, 2012) (“a party may not, by disclaimer
or otherwise, contractually exclude liability for fraud in inducing that contract,” and
“Missouri case law extends this rule to claims that the contract was induced by negligent
misrepresentations”) (internal citations omitted) (quoting Hess v. Chase Manhattan Bank,
USA, N.A., 220 S.W.3d 758, 767 (Mo. banc 2007) and citing Former Vacuum & Janitor
Supply Co. v. Renard Paper Co., No. 4:06CV00905 RWS, 2007 WL 2693828, at *4
(E.D.Mo. Sept. 10, 2007)).
Next the Court turns to whether plaintiff has properly pleaded the elements for
Counts I and II. The First Amended Complaint omitted facts about damages. Plaintiff
has this time pleaded how it was damaged by the alleged misrepresentations. However,
now defendant contends that plaintiff falls short of pleading standards in other ways.
The elements for a negligent misrepresentation claim are
(1) the speaker supplied information in the course of his business; (2)
because of the speaker’s failure to exercise reasonable care, the information
was false; (3) the information was intentionally provided by the speaker for
the guidance of limited persons in a particular business transaction; (4) the
hearer justifiably relied on the information; and (5) due to the hearer’s
reliance on the information, the hearer suffered a pecuniary loss.
Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 134 (Mo. banc 2010).
Defendant does not appear to contest the adequacy of those allegations.
Defendant’s focus is on plaintiff’s pleading of fraudulent misrepresentation. The
elements required for that claim are
(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's
knowledge of its falsity or ignorance of its truth; (5) the speaker's *132
intent that it should be acted on by the person in the manner reasonably
contemplated; (6) the hearer's ignorance of the falsity of the representation;
(7) the hearer's reliance on the representation being true; (8) the hearer's
right to rely thereon; and (9) the hearer's consequent and proximately
Id. As this Court observed in its last order, fraudulent misrepresentation claims must also
comply with to 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. Malice, intent, knowledge, and other conditions of a person’s mind may be
alleged generally.” To meet the requirements of Rule 9(b), the complaint must include
“such matters as the time, place, and contents of false representations, as well as the
identity of the person making the misrepresentation and what was obtained or given up
thereby.” Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir. 1982), quoted in Reding v.
Goldman Sachs & Co., 382 F. Supp. 2d 1112, 1118 (E.D. Mo. 2005). Conclusory
allegations that a defendant’s conduct was fraudulent or that a mutual mistake occurred
are not sufficient. See Commercial Prop. Inv., Inc. v. Quality Inns Int’l, Inc., 61 F.3d
639, 644 (8th Cir. 1995); J.J. Pager, L.L.C. v. Nationwide Mut. Ins. Co., 07-3435-CV-WFJG, 2008 WL 565752, *2 (W.D. Mo. Feb. 28, 2008).
Here, plaintiff identifies Foshee as the individual who made representations on
behalf of the defendant. Defendant observes that plaintiff does not identify who at Ward
--- a corporate entity --- spoke with Foshee. But that level of particularity is not
explicitly required by any caselaw identified by this Court. Defendant also notes that
plaintiff does not identify the dates that representations regarding choice of estimate
provisions were made. Although the “time” of the representation is required generally,
Bennett, 685 F.2d at 1062, Rule 9(b) does not require specificity to the level of the
precise date. See, e.g., Am. Traffic Solutions, Inc. v. B & W Sensors, LLC, No.
4:13CV0229 AGF, 2014 WL 1272509, at *9 (E.D. Mo. Mar. 27, 2014).1 It is clear from
the Second Amended Complaint that the representations occurred just before and after
the plaintiff entered into the insurance policy with defendant; although the allegations do
not include the date of the contract, the complaint suggests (and defendants do not state
otherwise) that there is but one insurance policy between the parties. The purpose of
Rule 9(b)’s particularity requirement is “to enable the defendant to respond specifically
and quickly to the potentially damaging allegations,” U.S. ex rel. Costner v. United
States, 317 F.3d 883, 888 (8th Cir. 2003), and the specifics as pleaded are sufficient to
allow this defendant to do so. Although plaintiff could have offered more specifics in its
Defendant cites the Court’s discussion of the details omitted by plaintiff’s First Amended Complaint and states that
the Court offered those as “specific instructions” that plaintiff was required to follow as part of its repleading. (#37
at 9 (quoting June 24, 2014 Order, #32 at 10-11).) The Court’s Order included a list of numerous details that
plaintiff did not include in its claim for Reformation in the First Amended Complaint. However, the Court did not
state that each and every detail was required for inclusion.
complaint, requiring plaintiff to do so at this stage, pre-discovery, is not required by the
Rules. Plaintiff has adequately pleaded fraudulent misrepresentation.
Count III — Reformation
Reformation of an insurance contract is available in cases of mutual mistake, but it
poses a high hurdle. See Galemore v. Haley, 471 S.W.2d 518 (Mo. App. W.D. 1971).
This Court allowed plaintiff to replead its Reformation count to flesh out allegations in
conformance with Rule 9(b). Defendant complains that plaintiff does not identify with
whom Foshee spoke or how the communications took place or a date on which the initial
communications took place. As discussed above, those precise details are not required by
Rule 9(b). Defendant also states that plaintiff should have pleaded the date of the policy,
but, as there is apparently only one insurance policy between plaintiff and defendant, that
information does not seem necessary in order for defendant to respond to the allegations.
Defendant points out that plaintiff alleges that Foshee reasserted that the policy provided
a choice of estimates within a month after the policy was issued, which raises the
question of who raised doubts about the policy’s provisions and why. Although that is
certainly true, the answers to those questions are more appropriately addressed through
Although plaintiff surely could have been more precise in its pleading, plaintiff
has addressed the Court’s principally stated concerns. The Court’s order specifically
noted that, although plaintiff is charged with reading the policy upon receiving it,
plaintiff pleaded here that it asked Foshee about the choice of estimate provision after
receiving the policy, and that Foshee assured plaintiff that the policy included that
provision. It was not clear, however, when that discovery or subsequent conversation
took place. Plaintiff’s Second Amended Complaint asserts that such conversation took
place within 30 days of receiving the policy. In addition, the Second Amended
Complaint makes clear that the mistake was made by defendant’s agent Foshee. The
allegations as pleaded satisfy Rule 9(b).
IT IS HEREBY ORDERED that defendant’s motion to dismiss is DENIED.
Dated this 20th day of January, 2015.
STEPHEN N. LIMBAUGH, Jr.
UNITED STATES DISTRICT JUDGE
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