NEW JERSEY TITLE INSURANCE COMPANY v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH et al
Filing
19
OPINION fld. Signed by Judge Dennis M. Cavanaugh on 12/27/11. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
:
NEW JERSEY TITLE INSURANCE
:
COMPANY,
:
:
Plaintiff,
:
:
v.
:
NATIONAL UNION FIRE INSURANCE :
:
COMPANY OF PITTSBURGH and
:
BROWN & BROWN OF
:
CONNECTICUT, INC. d/b/a DILL,
JOYCE & THRESHER INSURANCE, :
Hon. Dennis M. Cavanaugh
OPINION
Civil Action No. 11-CV-0630 (DMC)(JAD)
Defendants.
DENNIS M. CAVANAUGH, U.S.D.J.
This matter comes before the Court upon motion by Defendant National Union Fire Insurance
Company of Pittsburgh, Pa. (“Defendant” or “National Union”) to dismiss Plaintiff New Jersey Title
Insurance Company’s (“Plaintiff” or “NJTIC”) Complaint in this action as against National Union,
or in the alternative, to dismiss Count Two of the Complaint alleging “breach of the implied
covenant of good faith and fair dealing\bad faith,” pursuant to FED . R. CIV . P. 12(b)(6). Pursuant
to FED . R. CIV . P. 78, no oral argument was heard. After considering the submissions of the parties,
it is the decision of this Court for the reasons herein expressed that Defendant’s motion to dismiss
is granted.
I.
BACKGROUND 1
Plaintiff New Jersey Title Insurance Company (“NJTIC” or “Plaintiff”) is a title insurance
company organized under the State of New Jersey. (Pl.’s Compl. ¶ ¶ 1, 6). NJTIC is in the business
of underwriting title insurance policies in New Jersey and engages agents to settle and close title for
real estate closings. (Pl.’s Compl. ¶ ¶ 1, 7; Pl. Br. Opp’n Mot. Dismiss)
On May 22, 2008, NJTIC entered into an “Agency Agreement” (the “Agreement”) with
Landserv Title, LLC (“Landserv”). (Pl.’s Compl. ¶ 18; Mills Decl., April 25, 2011, Ex. 2 p. 1, ECF
No. 10-2). The Agreement established Landserv as NJTIC’s “representative, or agent, to originate
and solicit applications for title insurance, to examine and issue commitments to insure, and to issue
and countersign Policies of Title Insurance and to close title (hold settlement) pursuant thereto...in
the State of New Jersey.”
The Agreement provided that Landserv was to collect, or see to the collection of, all fees
for Commitments to Insure and Policies from the responsible parties. The language of the
Agreement specifically limited the authority of Landserv to receive and hold funds on the
account of NJTIC. Under its terms, Landserv was prohibited to “receive, or receipt for any
funds, including escrow, or closing funds, in the name of Insurer,” and was rather directed to
“receive and receipt for same for its own account.” However, Landserv was authorized to hold
premium and reinsurance fees for NJTIC, which were to become the property of NJTIC
immediately upon receipt of a collection.
1
The facts set-forth in this Opinion are taken from the Parties’ statements in their
respective moving papers. A discussion of the relevant documents that govern the relationships
of the parties is also necessary as the documents are integral and explicitly relied upon in
Plaintiff’s Complaint. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
1997).
2
All other money entrusted to Landserv by NJTIC or others in the course of Landserv’s
operation under the Agreement was required to be kept segregated in a bank account by
Landserv. See Mills Decl., April 25, 2011Ex. 2, Sect. 2.F., ECF No. 10-2 (directing Landserv to
“[k]eep safely and separated in a bank trust account all money entrusted to Agent by Insurer or
others in the course of Agent’s operation under this agreement, and keep safely any property
entrusted to Agent.”). Upon settlement, the agent was directed to disburse funds from said trusts
to pay off prior mortgages, taxes, water bills, and other municipal charges on the property for
which insurance has been issued.
The Agreement addresses the issue of insurance coverage on the part of the insurer and its
agents. The Agreement provided that Landserv was to maintain Errors and Omissions (E&O)
and Employee Fidelity Insurance Coverage, with a minimum liability on each of $500,000.
Paragraph 16 of the Agreement entitled “Insurer’s Liability,” provides that “[i]nsurer shall be
liable for all other losses, damage, expense, and cost arising out of claims covered by, and based
upon, any title insurance forms issued, and services rendered, under the terms of this Agreement,
excepting only those losses, damage, expense and cost caused by actions, or omissions, for which
Agent is responsible in the Agreement.”
Defendant National Union is a corporation organized under the laws of Pennsylvania and
is in the business of issuing policies of insurance coverage. (Pl. Compl. ¶ ¶ 2, 12). Effective July
1, 2009, National Union issued a Financial Institution Bond to provide insurance coverage to
3
NJTIC through insurance broker DJT, Insurance.2 (Mills Decl., April 25, 2011, Ex. 3, Item 5,
ECF No.10-2).
The Financial Institution Bond issued by National Union for NJTIC provided coverage
from July 1, 2009 to July 1, 2010, and provided an Aggregate Liability for the underwriter in an
amount of $1,000,000.00.3 The Bond further provided that the liability of the Underwriter was
subject to the terms of Riders number one to ten attached thereto. The provisions of the Bond
that are of particular importance to the alleged coverage at issue here are Rider 6, Section 10, and
Exclusion f(iii).
Rider 6 to the Bond, entitled “Agents Fidelity,” specifically addresses the issue of
coverage for NJTIC’s agents. Rider 6 provides coverage for “loss resulting directly from
dishonest or fraudulent acts committed by an Agent named or described below,” thereby limiting
coverage to only those Agents identified in the Rider, and then only for the amount applicable to
that Agent. The Agents identified were “all agents provided with the renewal bind order received
from ARC Excess 06/24/2009, inclusive of parts 1, 2, 3, and 4.”
The coverage of Agent’s Fidelity provision is subject to all other terms and exclusions of
the Bond. Section 10 of the Bond (the “Ownership Clause”) provided that the Bond shall not
apply to the loss of “Property (1) owned by the Insured, (2) held by the Insured in any capacity,
2
DJT Ins. is also a Defendant listed in the present action. DJT Ins. is a corporation
organized and existing under the laws of the State of Connecticut, with its principle place of
business outside of New Jersey. Plaintiff engaged DJT Ins. to obtain and place insurance
coverage for it. Pursuant to the directives given by NJTIC, DJT Ins. obtained insurance coverage
for NJTIC under a Financial Institution Bond issued by Defendant, National Union. Plaintiff’s
claims against DJT Ins. are not presently before this court.
3
NJTIC requested, and DJT Ins. agreed to obtain, an insurance policy covering an agent’s
dishonesty and theft.
4
or (3) for which the Insured is legally liable.” Exclusion (f)(iii) specifically identifies losses that
are excluded from the coverage of the Bond, and specifies any loss resulting directly or indirectly
from “contractual or extra contractual liability sustained by the Insured in connection with the
issuance of contracts or purported contracts of insurance, indemnity, or suretyship.”
In November of 2009, NJTIC discovered that an employee and/or principal of Landserv
had misappropriated funds from Landserv’s account for her own personal use.4 (Pl.’s Compl. ¶
21). As a result of the misappropriation, Landserv was unable to make the requisite payments to
clear title for properties for which NJTIC had issued title insurance. Although Plaintiff fails to
allege the specific circumstances for which it made the subsequent payments as a consequence of
the misappropriation, it appears as though NJTIC issued payments to those third party claimants
in order to satisfy the obligations that Landserv was no longer able to fulfill. NJTIC
subsequently filed a claim with National Union for coverage for the loss associated with the
misappropriation by Landserv. (Pl.’s Compl. ¶22). The claim stated “our agent Landserv Title,
LLC . . . misappropriated funds from its trust account which will have to be made up by New
Jersey Title. Agent also misappropriated premiums due to New Jersey Title.” (Mills Decl., April
25, 2011, Ex. 1, ECF No. 10-2). Plaintiff attached to the Claim a document entitled “Landserv
Title & Abstract, Trust Fund Analysis” for a specific trust account as evidence of the
misappropriations. Plaintiff estimated the total amount of diverted trust funds to be $616,894.79.
4
Upon receipt of notification of a check issued by Landserv to pay off a mortgage held on
residential property at a recent closing was returned due to insufficient funds, NJTIC conducted
an audit of Landserv’s office and records. Pursuant to the audit, NJTIC learned that Landserv’s
employee had misappropriated funds from Landserv accounts from December 2007 to November
2009.
5
National Union denied coverage for NJTIC’s claim by letter dated September 23, 2010.
(Mills Decl. Ex. 4, ECF No. 10-2). As grounds for the denial of coverage, National Union
explained that the loss sustained by NJTIC did not fall within the coverage of the Bond, that the
claimed losses arose from contractual liabilities excluded from coverage by Exclusion (f) of the
Bond, and that the coverage provided by the Bond was only excess over any valid and collectible
insurance obtained, and NJTIC had not established that any primary insurance coverage had been
exhausted.
Plaintiff brought the present action on February 3, 2011, raising claims of breach of
contract and breach of the implied covenant of good faith and fair dealing/bad faith against
National Union for its purported improper denial of NJTIC’s claim. Defendant National Union
now moves to dismiss all of Plaintiff’s claims against it, or in the alternative, to dismiss Count
Two of Plaintiff’s Complaint, which alleges a breach of the implied duty of good faith and fair
dealing/bad faith.
For the following reasons, this court finds that Plaintiff has not alleged a loss that falls
within the insurance coverage provided by Defendant National Union. Plaintiff has therefore
failed to state a claim upon which relief can be granted and Defendant’s Motion to Dismiss the
Complaint as against National Union is granted.
II.
MOTION TO DISMISS
A.
LEGAL STANDARD
In deciding a motion under Rule 12(b)(6), the district court is “required to accept as true
all factual allegations in the complaint and draw all inferences in the facts alleged in the light
most favorable to the [Plaintiff].” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir.
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2008). “[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed
factual allegations.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the
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.” Id. “[A court is] not bound to accept as true a legal conclusion couched as a factual
allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986). Instead, assuming that the factual
allegations in the complaint are true, those “[f]actual allegations must be enough to raise a right
to relief above a speculative level.” Bell Atl. Corp. 550 U.S. at 555.
“A complaint will survive a motion to dismiss if it contains sufficient factual matter to
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949
(2009) (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the pleaded
factual content allows the court to draw the reasonable inference that the Defendant is liable for
misconduct alleged.” Id. “Determining whether the allegations in a complaint are ‘plausible’ is a
‘context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.” Young v. Speziale, 2009 WL 3806296, *3 (D.N.J. Nov. 10, 2009) (quoting
Iqbal, 129 S.Ct. at 1950). “[W]here the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, the complaint has alleged–but it has not ‘shown’–that
the pleader is entitled to relief.” Iqbal, 129 S.Ct. at 1950.
The district court may consider “the allegations in the complaint, exhibits attached to the
complaint, matters of public record, and documents that form the basis of a claim.” Lum v. Bank
of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004). If a document is “‘integral to or explicitly
relied upon in the complaint’” it forms the basis of a claim. Id. citing In re Burlington Coat
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Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.1997). “The purpose of this rule is to avoid the
situation where a plaintiff with a legally deficient claim that is based on a particular document
can avoid dismissal of that claim by failing to attach the relied upon document.” Id. By relying
on the document to form the basis of a claim, “the plaintiff is on notice that the document will be
considered.” Id. “When allegations contained in a complaint are contradicted by the document it
cites, the document controls.” In re PDI Sec. Litig., No. 02-CV-0211, 2005 WL 2009892, *21
(D.N.J. Aug. 17, 2005).
B.
DISCUSSION
Defendant alleges that Plaintiff’s Complaint as it pertains to Defendant National Union
should be dismissed for failure to state a cause of action upon which relief can be granted. In the
alternative, Defendant asks this Court to dismiss Count Two of the Complaint, which alleges a
breach of the implied covenant of good faith and fair dealing/bad faith. (Def. Br. Supp. Mot.
Dismiss, April 25, 2011, ECF No. 10-1). For the reasons herein discussed, this Court finds that
Plaintiff has failed to sufficiently allege facts to bring their claim within the coverage of the
Bond. As both of Plaintiff’s claims against National Union are predicated on NJTIC’s claim
falling within the coverage of the Bond, Plaintiff’s claims against National Union must therefore
be dismissed.
1.
Breach of Fidelity Bond
Plaintiff’s claims of breach of contract and bad faith are premised upon National Union’s
denial of coverage under an insurance agreement. Plaintiff bears the burden of bringing its
claims within the basic terms of the insurance policy. Columbus Farmers Mkt, LLC v. Farm
Family Cas. Ins. Co., No. 05-2087, 2006 U.S. Dist. LEXIS 92448, *23-24 (D.N.J. Dec. 21,
8
2006), citing Sears Roebuck & Co. v. Nat’l Union Fire Ins. Co., 340 N.J. Super. 223, 234 (App.
Div. 2001). As Plaintiff’s claims require an interpretation of the Financial Institution Bond
issued by Defendant National Union in conjunction with the Agency Agreement between NJTIC
and Landserv, which establishes the scope of authority for the Agent who occasioned the
misappropriation, resolution of this motion to dismiss necessitates an interpretation of the
relevant instruments. See In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1425-26; see also
Winer Family Trust v. Queen, 503 F.3d 319, 328 (3d Cir. 2007); Mele v. Fed. Reserve Bank of
New York, 359 F.3d 251, 256 n. 5 (3d Cir. 2004).
As previously discussed, the provisions relevant to whether Plaintiff’s claim falls within
the coverage of the Policy are the Ownership Clause, Rider 6 entitled “Agent Fidelity,” and
Exclusion (f)(iii). These provisions must be interpreted in light of the limited nature of
Landserv’s agency as laid out in the Agency Agreement.
Section 10 of the Bond provides limited coverage, directing that the Bond shall apply to
loss of “Property (1) owned by the Insured, (2) held by the Insured in any capacity, or (3) for
which the Insured is legally liable.” Accordingly, in order for Plaintiff’s loss to fall within the
coverage of the Bond, the misappropriated funds must fall into one of the enumerated categories.
As this Court finds that the Plaintiff has failed to allege facts to demonstrate that the
misappropriation falls within any of the enumerated categories, Section 10 of the Bond does not
afford coverage for the alleged loss.
First, the misappropriated funds were not “owned” by NJTIC, as the Agency Agreement
specifically provided that Landserv was to receive the funds for its own account, with only the
premiums and reinsurance fees to become the property of NJTIC. Such premiums were
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instructed to be kept in a segregated account from all other money received by Landserv. While
NJTIC alleged loss of premiums due to it in its claim to National Union, it has only alleged
misappropriation from a single account held by Landserv, and has not alleged that such account
was that specifically designated for collection of NJTIC’s premiums and reinsurance fees.
Plaintiff rather alleges that the loss was occasioned not by the misappropriation itself, but the
subsequent payments made by NJTIC as a result. Therefore, it cannot be alleged that the loss
was occasioned through left of funds that were owned by NJTIC.
Similarly, the funds were not “held” by NJTIC, as the Agency Agreement again
specifically limited the extent to which Landserv could receive funds on the account of NJTIC.
While the Bond does provide broad language in its inclusion of any property “held by the Insured
in any capacity,” NJTIC clearly delineated the nature of property that its agents could hold on its
behalf. Notably, the Agreement specifically precluded Landserv from receiving funds on the
account of NJTIC beyond premiums and reinsurance funds, and we again note that the loss is
alleged to have resulted from subsequent payments made by NJTIC and not theft from the
segregated account. The “in any capacity” language of the Ownership Clause is inconsequential
as the Agency Agreement precluded Landserv’s ability to “hold” such funds on behalf of NJTIC.
Such funds could not be held by NJTIC in the capacity of its agents, and were therefore not held
for NJTIC by Landserv.5
5
Plaintiff relies on several cases to interpret the “in any capacity” language provided in
the Ownership Clause. The cases relied upon by Plaintiff, however, are distinguishable as each
case addressed misappropriations occasioned by employees of the insured who were not
specifically excluded from the insurance coverage provided the employer. Plaintiff attempts to
avoid this distinction by alleging that Landserv was specifically provided for in the coverage of
the Bond, yet has failed to allege sufficient facts to substantiate this assertion. Plaintiff’s attempt
to employ the analysis from these cases is therefore unavailing.
10
Finally, NJTIC has not alleged sufficient facts to demonstrate a plausibility that it was
legally liable for the funds that were misappropriated. NJTIC alleges that the misappropriation
was of funds which NJTIC was required to pay, but does not provide further factual support to
demonstrate why this is so. The only support that Plaintiff provides regarding its assertion of
liability is an interpretation of the term “legally liable” derived from a Tenth Circuit case
involving completely different circumstances. Plaintiff relies on the case of Nelson v. ITT
Hartford Fire Ins. Co., in which a Trustee in Bankruptcy was able to recover for the
misappropriation by employees of the insured. 2000 U.S. App. LEXIS 13919, *8, n.2 (10th Cir.
June 13, 2000). There, the language of the agreement established that the insurance policy was
one for indemnity from liability, not merely from loss. Id. Notably, the court held that the
accrual of liability was controlled by the intent of the parties as expressed by the language of the
policy. Id. There, the court found that the use of the term “liability” established that an action to
enforce indemnity from liability would accrue when the event to which indemnity is due occurs.
Id. Here, Plaintiff has failed to point to any language in the Agreement representing an intent on
the part of the parties to indemnify a misappropriation such as the one occasioned in the present
dispute. In fact, the language of the agreement is to the contrary, specifically disavowing
ownership of any funds other than the designated premiums and reinsurance fees and specifically
limiting coverage to those agents that were named.
Rider 6 of the Bond similarly does not provide coverage for the infidelity of NJTIC’s
agents. Plaintiff argues that the policy clearly provides coverage for the theft by an insured’s
agent, including Landserv, which it maintains was directly and explicitly identified as an agent
under the policy. In support of this assertion, Plaintiff points to an untitled list containing
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Landserv’s name and identifies this document as “the agent list NJ Title provided to the
Defendant in June 2009 with reference to Bond No. 02-283-42-48, which clearly identifies
Landserv Title Agency, LLC . . . as an agent of NJ Title.” (Catenacci Decl. ¶ 2).
The relevant question, however, is not whether Landserv is an agent of NJTIC, but rather
whether Landserv is among those agents specifically designated for insurance coverage under the
Bond. The terms of the Bond clearly indicate that merely being an agent of NJTIC is not
sufficient to fall within the insurance coverage provided.
Rider 6 provides coverage for “loss resulting directly from dishonest or fraudulent acts
committed by an Agent named or described below,” and then only for the amount up to the
Single Loss Limit of Liability applicable to that Agent.” Under the heading “Agent,” the Rider
provides “Single Loss Limit of Liability of $1,000,000 applicable to [all agents provided with the
renewal bind order received from ARC Excess on 6/24/2009, inclusive of parts 1, 2, 3, and 4].”
Plaintiff has failed to produce the referenced documentation to demonstrate that it is among the
agents so named, and has therefore failed to allege sufficient facts to demonstrate entitlement to
relief. Such failure to adequately allege coverage under the Bond is fatal to both Plaintiff’s
breach of contract claim as well as the claim of bad faith. Accordingly, Plaintiff’s Complaint as
against National Union must be dismissed.
Because this Court finds that Plaintiff has failed to sufficiently allege coverage under the
insurance policy at issue, we do not reach the issue of whether Plaintiff’s claim falls within the
exclusion provided in subsection (f)(iii). We do note, however, that to the extent Plaintiff relies
on its position as title insurer as a basis for its claim of legal liability, such liability is expressly
precluded from coverage under Exclusion (f)(iii). Exclusion (f)(iii) of the Bond excludes from
12
coverage losses resulting directly or indirectly from “contractual or extra-contractual liability
sustained by the insured in connection with the issuance of contracts of insurance, indemnity or
suretyship.” Plaintiff can therefore not rely on their obligation to clear title to the property it
insured as a basis for a loss within the coverage of the policy.
Similarly, because we find that Plaintiff has failed to allege sufficient facts to fall within
the coverage of the Bond, we do not address Section 9 of the Bond which provides that
“coverage afforded hereunder shall apply only as excess over any valid and collectible insurance
or indemnity obtained by the insured.” We do note, however, that Plaintiff has failed to allege
exhaustion of the insurance that Plaintiff required Landserv to acquire as a condition of the
Agency Agreement.
Upon consideration of the relevant documents, the limiting language of both the Agency
Agreement and the Bond instruct that Plaintiff has failed to allege sufficient facts to support a
claim of coverage under the Bond. There are no facts that Plaintiff can allege to bring its claim
under the coverage of the policy when the policy by its terms specifically precludes coverage.
Accordingly, Plaintiff has failed to state a claim for relief against National Union that is plausible
on its face and Plaintiff’s claims must be dismissed.
2.
Bad Faith
While we note that Plaintiff’s failure to allege sufficient facts to bring its claim within the
coverage of the Bond’s effectively precludes any claim of bad faith denial of coverage, we briefly
discuss the standard for bad faith in further support of our dismissal of Plaintiff’s Complaint as
against National Union.
13
In order to state a claim for bad faith denial of insurance coverage, Plaintiff must show: (1)
the insurer lacked a reasonable basis for its denying benefits, and (2) the insurer knew or recklessly
disregarded the lack of a reasonable basis for denying the claim. Pickett v. Lloyd’s, 131 N.J. 457
(1993). Under New Jersey precedent, a denial of an insurance claim that is “fairly debatable” will
not be found to constitute bad faith. Id. The “fairly debatable” standard will be met if the claimant
could have established as a matter of law a right to summary judgment on the substantive claim. Id.
at 473. Therefore, as a matter of law, a claim of bad faith must fail if there is an issue of material
fact as to the underlying claim regarding Plaintiff’s entitlement to insurance benefits. See Tarsio v.
Provident Ins. Co., 108 F. Supp. 2d 397, 401 (D.N.J. 2000).
When the insured’s complaint contains issues of material fact as to the underlying claim,
dismissal of a related bad faith claim is proper. Fuscarello v. Combined Ins. Group, Ltd., 2011 WL
4549152, at *5 (D.N.J. Sept. 29, 2011) (dismissing Plaintiff’s bad faith claim on a motion to dismiss
where insurer’s reason for refusing to pay, as alleged in the complaint, presented disputed issues of
material fact as to the underlying substantive claim); Dare Inv., LLC v. Chicago Title Ins. Co., 2011
WL 2600594, at *12 (D.N.J. June 29, 2011) (dismissing Plaintiff’s bad faith claim because Plaintiff
could not prevail on summary judgment for the underlying insurance claim due to the ambiguity of
the title policy at issue and the Plaintiff’s reasonable expectations thereunder). Here, Defendant’s
denial of coverage, as evidenced in the denial letter dated September 23, 2009, provided an extensive
explanation as to why Plaintiff’s claim did not fall within the coverage of the Bond. Such
explanation provides plausible reasons for the denial of coverage and demonstrate that there is, at
the very least, genuine questions regarding whether Plaintiff’s claims fall within the coverage
14
provided. Plaintiff’s claims made under the Bond are therefore fairly debatable and cannot form the
basis of a bad faith claim.
Moreover, Plaintiff’s claims that Defendant has issued coverage in previous similar instances
under policies containing similar language is not sufficient to sustain a claim for bad faith. Mere
payment of previous similar claims does not demonstrate bad faith on the part of the insurer for
subsequent denials of similar claims. See Keystone Filler & MFG. Co., Inc. V. Am. Mining Ins. Co.,
179 F.Supp.2d. 432, 443-444 (E.D.Pa. 2002); (holding mere payment of a previous claim should not,
without more, bind an insurer to an interpretation under which the insured is covered for all similar
claims); Charter Oil Co. v. Am. Emp’r Ins. Co., 69 F.3d 1160, 1168 (D.C. Cir. 1995) (noting that
“[a] contrary holding would require that the insurer, before paying modest claims such as the initial
claims . . . here, conduct an investigation in far greater depth than the amount at stake would justify,
simply to avoid the risk of massive exposure down the road.”). Plaintiff can therefore not establish
a plausible claim of bad faith merely upon allegations that Defendant has issued coverage over
similar claims in the past.
Accordingly, Plaintiff’s claims of bad faith on the part of Defendant due to the denial of
coverage for the alleged loss must be dismissed.
IV.
CONCLUSION
Plaintiff has therefore not alleged sufficient facts to bring the purported loss within the
coverage of the Bond. Defendant’s motion to dismiss for failure to state a claim upon which relief
may be granted is therefore granted.
S/ Dennis M. Cavanaugh
DENNIS M. CAVANAUGH, U.S.D.J.
Date:
cc:
December 27 , 2011
All Counsel of Record
Hon. J. A. Dickson, U.S.M.J.
File
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