FISCHER et al v. NATIONAL SURETY CORPORATION et al

Filing 47

OPINION. Signed by Judge Kevin McNulty on 10/20/17. (sr, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No.16-8220 (1CM) (MAH)

Annette FISCHER and Randi FISCHER,
Plaintiffs,

OPINION
V.

NATIONAL SURETY CORPORATION and
ACE AMERICAN INSURANCE COMPANY,
Defendants.

Kevin McNulty, U.S.D.J.

Annette Fischer and Randi Fischer (“the Fischers”) sue based on the
denial of a claim under their homeowners’ insurance policy for damage
resulting from a burst water pipe. The complaint alleges that National Surety
Corporation (“National Surety”) issued the policy, and that ACE American
Insurance Company (“ACE American”) “serviced” the claim. Now before the
Court is the motion of ACE American to dismiss the Amended Complaint for
failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6). (ECF no. 26.) ACE
American argues (1) that the Fischers have failed to allege the existence of a
valid contract between themselves and ACE American, and (2) that, even if a
valid contract has been alleged, the Fischers still have failed to allege a bad
faith claim. In other words, ACE argues that this dispute is really between the
Fischers and National Surety, the insurer. For the reasons stated herein, I will
deny the motion and allow the parties to proceed to discovery in order to better
determine the relationships among ACE American, National Surety, and the
Fischers.

1

I.

Background’

On January 9, 2015, a frozen water pipe burst in the lower level of the
Fischers’ home in Short Hills, New Jersey, causing much damage to both their
home and their personal property.2 (AC

¶

12.) They were insured under a

Prestige Home Premier Policy, issued by Fireman’s Fund, underwritten by
National Surety, and serviced by ACE American.3 (Id.

¶

7.) The policy insured

their dwelling for $l.8M and their personal property/valuables for $l.1M. (Id.
8.) They reported their claim the same day as the accident. (Id.

¶

¶

13.)

The Fischers allege that they have not received full payment of their
claim, despite their prompt initial report and several interactions with
representatives of the defendants over the course of twenty months.4 (See id.)

Record items cited repeatedly will be abbreviated as follows:
“AC” = Amended Complaint (ECF no. 25). Unless othenvise specified, the
“Complaint” as used herein refers to the Amended Complaint.
“Def. Br.” = Brief in Support of Defendant ACE American Insurance
Company’s Motion to Dismiss Pursuant to F.R.C.P. 12(b)(6) (ECF no. 26)
“P1. Opp.” = Plaintiffs Annette Fischer and Randi Fischer’s Opposition to
Defendant ACE American Insurance Company’s Motion to Dismiss (ECF no. 30)
“Def. Reply” = Reply Brief in Further Support of Defendant Ace American
Insurance Company’s Motion to Dismiss Plaintiffs Amended Complaint Pursuant to
F.RC.R 12(h)(6) (ECFno. 31)
For purposes of this motion only, I will assume the allegations in the Amended
Compliant to be true. See Section II, infra.

2

In the Amended Complaint, the Fischers describe the policy as “written
through” National Surety.

3

The Amended Complaint lists afl the interactions between the Fischers and
representatives of the defendants in some detail, including, among other things, a
three-day examination of Randi Fischer under oath, a meeting at a hotel between the
Fischers and the attorney for one of the defendants, and a July 7, 2015 reinspection
agreement with the Division President of ACE Private Risk Services. (AC ¶31 16, 32,
62.) I will confine the recitation here to the allegations most pertinent to ACE’s motion
to dismiss.

4

2

Additionally, they say, the experience has exacerbated the health issues facing
them, evidenced in part by Annette Fischer’s heart failure, insomnia, and
twelve mini-strokes since the first denial. (Id.

¶

137.)

On October 4, 2016, the Fischers (then appearing pro se) filed a
complaint seeking $490,000 in damages in New Jersey Superior Court. On
November 3, 2016, the defendants removed the case based on this Court’s
diversity jurisdiction under 28 U.S.C.

§

1332. (See Notice of Removal, ECF no.

1.) The Fischers contested the removal. (See Motion for Remand, ECF no. 5.) In
a December 9, 2016 Order and Opinion, I denied their motion to remand,
finding that there was diversity jurisdiction. (ECF no. 12.) The Fischers then
obtained counsel and amended their complaint. (ECF no. 25.)
The Amended Complaint contains two counts. Count 1 alleges breach of
contract, and Count 2 alleges bad faith denial of an insurance claim. Now
before me is ACE American’s Rule l2(b)(6) motion to dismiss both Counts of
the Complaint.
II. Standard of Review
Under Fed. R. Civ. P. 12(b)(6), a complaint may be dismissed, in whole or
in part, if it fails to state a claim upon which relief can be granted. When
deciding such a motion, all allegations in the complaint are taken as true and
viewed in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.s.
490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140
F.3d 478, 483 (3d Cir. 1998); see also Phillips v. Cty. Of Allegheny, 515 F.3d
224, 231 (3d Cir. 2008) (noting that the “reasonable inferences” principle was
not undermined by Twombly, infra). However, the formulaic recitation of the
elements of a cause of action won’t do. Bell Atl. Corp. z’. Twombly, 550 U.S. 544,
555 (2007). The factual allegations of a complaint must be sufficient to raise a
plaintiff’s right to relief above a speculative level, such that it is “plausible on
its face.” See Id. at 570; see also Umland v. PLANCO Fin. Seru., Inc., 542 F.3d
3

59, 64 (3d Cir. 2008). Therefore, a claim has “facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft u.
Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While “[t]he
plausibility standard is not akin to a ‘probability requirement’.

.

.

it asks for

more than a sheer possibility.” Iqbal, 556 U.S. at 678 (2009).
III. Analysis
1.

Breach of Contract (Count 1)

ACE American moves to dismiss Count 1 (breach of contract), arguing
that the Fischers have failed to allege the existence of a valid contract between
themselves and ACE. (DeL Br. 4.) ACE points to the Amended Complaint,
where the Fischers allege that National Surety issued the policy under which
the Fischers make their claim. (Id.) It follows, says ACE American, that
National Surety is the sole party against whom a breach-of-contract claim can
be asserted. (Id.)
It is true that the existence of a valid contract is an essential element of a
breach of contract action. EnviroFinance Grp., LLC u. Envt’l Barrier Co., LLC,
440 N.J. Super. 325, 345 (App. Div. 2015) (listing the opposing party’s failure
to perform a contractual duty and damages as two other elements). An
insurance policy is a contract. See Finnegan v. Inductotherm Corp., No. A-4267l5Tl, 2017 WL 3597032, at *4 (App. Div. Aug. 22, 2017) (“As Judge Skillman
noted, ‘[ajn insurance policy is a contract between the insurer and the
insured.” (quoting Jeffrey M. Brown Assocs., Inc. v. Interstate Fire & Cas. Co.,
414 N.J. Super. 160, 171 (App. Div. 2010))); cf also Zacarias v. Allstate Ins.
Co., 168 N.J. 590, 595 (2001) (describing insurance policies as “contracts of
adhesion”).
There is no dispute that the Fischers allege the existence of a contract in
the form of an insurance policy issued by Fireman’s Fund through National
4

Surety. Less clear is the existence of any contract between the Fischers and
ACE American.5 The Fischers begin their Amended Complaint by averring that
ACE American “service[dJ” the insurance policy they held. (AC

¶

7.) They also,

in their opposition brief, point to eight instances in the Amended Complaint
where they allege the existence of a valid contract between themselves and all
the defendants. (P1. Opp. 4—5.) On the other hand, the Prestige Home Premier
Policy attached to the original complaint makes no mention of ACE American.
(Notice of Removal, Ex. A, ECF no. 1; Def. Reply 2.)
I will deny the motion to dismiss. The allegations will bear the
interpretation, for example, that National Surety delegated its duties under the
policy/contract to ACE American, or that ACE American acted as National
Surety’s agent. It appears from the allegations that ACE American dealt with
the Fischers on National Surety’s behalf, and that the Fischers acquiesced. I
will permit the claim to go forward so that the plaintiffs may explore in
discovery the issue of what ACE’s status as “servicer” entailed.
ACE American’s motion to dismiss Count 1 is denied.

ACE American points to two cases where the claims were dismissed due to the
plaintiffs lack of differentiation between the various defendants: Thetrangelo v. NUT
Corp., No. 04-3223, 2005 WL 1703200 (D.N.J. July 20, 2005) and Shaw u. Hous. Auth.
of Camden, No. 11-4291, 2012 WL3283402 (D.N.J. Aug. 10, 2012). (DeL Reply 2—3.)
Dealing with the liberal pleading standard of Rule 8(a), those cases concerned multiple
counts of breaches of specific fiduciary duties, in Pietrangelo, and counts involving
violations of civil rights, discrimination, defamation, and contract claims, in Shaw. In
both cases, the plaintiffs did not list which defendants were liable for which counts in
the complaint. See H20 Plus, LLC u. Arch Personal Care Products, L.P., No. 10-3089,
2011 WL 2038775, at *3 (D.N.J. May 22, 2011) (finding Pietrangelo distinguishable
because it focused on the fact that the plaintiff failed to distinguish between
defendants in the count of the complaint). That is not the case with respect to this
fairly simple two-count Complaint.
5

3

2.

Bad Faith Denial of Claim (Count 2)

ACE American also moves to dismiss Count 2, which alleges bad
faith denial of an insurance claim. (Def. Br. 4.) It contends that bad faith
claims for the denial of an insurance benefit necessarily arise out of the
insurance contract and the contractual relationship between insured and
insurer. (Id.) As before, if claims that there is no such contract between the
Fischers and itself.
In Pickett v. Lloyd’s, the New Jersey Supreme Court established the
ability of a claimant to sue their insurer for a bad-faith denial of first party
benefits by showing that there were no debatable reasons for the denial of the
benefits. 131 N.J. 457, 478, 481 (1993). The standard, laid out by the Court, is
that “[b]ad faith is established by showing that no valid reasons existed to
delay processing the claim and the insurance company knew or recklessly
disregarded the fact that no valid reasons supported the delay.” Id. at 481 (“In
either case (denial or delay), liability may be imposed for consequential
economic losses that are fairly within the contemplation of the insurance
company.”). While it explained that “every contract imposes on each party the
duty of good faith and fair dealing,” the Court did not decide in the opinion
whether the cause of action arose solely from the implied contractual terms of
the policy, though it did note that this “cause of action is best understood as
one that sounds in contract.” Id. at 467, 469—70 (“We need not debate which is
more appropriate: to consider the bad-faith refusal as a breach of an implied
term of the contract or as an independent tort.”).
As before, the essence of ACE American’s argument is that without
a contract there can be no claim for bad faith. (Def. Reply 4 (“Without a
contractual relationship, there is no implied duty of good faith and fair dealing
and, therefore, no breach of said duty and no bad faith.”).) Pickett itself,
however, seems to contemplate a bad faith cause of action against a party
6

other than the primary insurance company. Indeed, it reasoned that because
an agent owes a duty to the insured, the insurer must “owe[] an equal duty.”
151 N.J. at 467. See also id. at 464, 467, 481 (affirming ajury award where the
jury found the insurer’s agent liable “for a lack of good faith and fair dealing
outside of its agency relationship with Lloyd’s [the insurer]” and stating that
“[a]gents of an insurance company are obligated to exercise good faith and
reasonable skill in advising insureds”). Even if the Fischers fail to establish the
existence of a contract with ACE American, their bad faith cause of action may
still be viable.
I will therefore deny ACE American’s motion to dismiss Count 2.
IV.

Conclusion

For the foregoing reasons, ACE American’s motion (ECF no. 26) to
dismiss the Fischer’s Amended Complaint (ECF no. 25) is denied.
An appropriate Order accompanies this Opinion.

Dated: October 20, 2017

%:

/

ty
Hon. Kevin Mc
United States District Judge

7