VINCENT CUSUMANO ARCHITECT P.C. et al v. BERKSHIRE HATHAWAY DIRECT INSURANCE COMPANY et al

Filing 47

OPINION. Signed by Judge Julien Xavier Neals on 3/29/2025. (ld, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
VINCENT CUSUMANO ARCHITECT
P.C. and VINCENT CUSUMANO,

Civil Action No. 23-cv-22970 (JXN)(JSA)

Plaintiff,
OPINION

v.
BERKSHIRE HATHAWAY DIRECT
INSURANCE COMPANY d/b/a THREE
BY BERKSHIRE HATHAWAY, TODD
SHARPEE, JOHN DOES 1-10 (names
being fictitious and unknown), and ABC
Corps. 1-10 (names being fictitious and
unknown),
Defendants.
NEALS, District Judge

This matter comes before the Court by way of Defendants, Berkshire Hathaway Direct
Insurance Company (“Berkshire”) d/b/a Three By Berkshire Hathaway and Todd Sharpee’s
(“Sharpee”) (collectively, “Defendants”) partial motion to dismiss (ECF No. 10) Plaintiffs Vincent
Cusumano (“Cusumano”) and Vincent Cusumano Architects P.C.’s (“VCA”) (collectively,
“Plaintiffs”) Complaint (ECF No. 1), pursuant to Federal Rule of Civil Procedure 12(b)(6).
Plaintiffs opposed the motion (ECF No. 16), and Defendants replied in further support (ECF No.
17). Jurisdiction is proper pursuant to 28 U.S.C. § 1332. Venue is proper pursuant to 28 U.S.C. §
1391. The Court has considered the parties’ submissions and decides this matter without oral
argument pursuant to Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1. For the reasons
set forth below, Defendants’ motion to dismiss (ECF No. 10) is GRANTED.

I.

BACKGROUND 1
This matter arises from a dispute over the terms of an insurance contract. Plaintiff

Cusumano is a licensed architect and the founder, principal architect, and sole shareholder of
Vincent Cusumano Architect P.C. (“VCA”). (Complaint, (“Compl.”) ¶¶ 11, 12, ECF No. 1.) VCA
specializes in large-scale projects including retail stores, shopping malls, and public buildings.
(Compl. ¶ 13.) Plaintiffs are citizens of New Jersey. (Compl. ¶ 2.)
Defendant Berkshire is a Nebraska Stock Insurance Company with a principal place of
business in Omaha, Nebraska. (Compl. ¶ 4.) Defendant Sharpee, a citizen of Nebraska, is
employed by Berkshire as a Small Business Advisor. (Compl. ¶ 17.)
In or around the fall of 2021, Plaintiffs contacted Berkshire about replacing their thenexisting professional liability policy. (Compl. ¶ 16.) Plaintiffs allege that Cusumano “specifically
told Defendants that the new policy needed to provide professional liability coverage, on a claims
made basis, for potential claims arising out of Plaintiffs’ prior work” and that the policy would be
“worthless” if it failed to do so. (Compl. ¶¶ 21, 22.) Plaintiffs claim that Defendants “repeatedly
confirmed and otherwise represented” that the new policy would cover such claims. (Compl. ¶ 24.)
Based on Defendants’ representation, Cusumano purchased professional liability Policy No.
CP140179382P2022, effective from February 24, 2022, to February 24, 2023, from Berkshire
through Sharpee for an annual premium of $22,492.18. (Compl. ¶ 25; see also Certification of
Daniel E. Bryer (“Bryer Cert.”), Ex. B, copy of Berkshire Hathaway Direct Insurance Company’s
Policy Number CP140179382P2022 (“Berkshire Policy”), ECF No. 11-2.) 2
1
When reviewing a motion to dismiss, a court accepts as true all well-pleaded facts in the complaint. Fowler v. UPMC
Shadyside, 578 F.3d 203, 210 (3d Cir. 2009).

Defendants have provided a copy of the Policy as an exhibit in support of their motion. A court may consider “an
undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims
are based on the document.” Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.
1993).
2

2

According to Plaintiffs, Defendants, without notice [], included the following language in
the Berkshire Policy:
We also cover (i) claims of negligence, errors, or omissions in providing
professional services, and (ii) claims against directors or officers of your business
arising from their actions taken on behalf of your business. For these kinds of
claims, if your business first learns about the claim during this policy, and
previously had continuous insurance coverage that would have covered the
claim, we will cover that claim even though it is not the result of an occurrence
during this policy.
(Compl. ¶¶ 28; Berkshire Policy at *3) 3 (emphasis added.) The Berkshire Policy was issued with
a three-month gap in professional liability coverage between the expiration of Plaintiffs’ prior
policy, in November of 2021, and the commencement date of the Berkshire Policy, February 24,
2022. (Compl. ¶¶ 29, 43.) Plaintiffs contend that Defendants “knowingly” issued the Berkshire
Policy with a three-month gap in professional liability coverage between the expiration of
Plaintiffs’ prior policy and the commencement date of the Berkshire Policy “so as to preclude
coverage for future professional liability claims arising out of Plaintiffs’ prior work.” (Compl. ¶¶
29, 30.) Additionally, Plaintiffs allege that Defendants did not inform them that it was possible to
“buy back” or otherwise cover the purported coverage gap in exchange for a higher premium.
(Compl. ¶ 34.)
On or about July 31, 2023, A.J. Richard and Sons, Inc., and P.C. Richard & Son Inc., sued
Plaintiffs for damages exceeding 1.5 million in the Supreme Court of the State of New York,
County of Nassau, in an action entitled A.J. Richard and Sons, Inc. and P.C. Richard & Son Inc.
v. Vincent Cusumano Architect PC a/k/a Vincent Cusumano Architect P.C. and Vicent Cusumano,
Index No. 612142/2023. The lawsuit pertained to the renovation of a commercial property in
Brooklyn, New York, which occurred between November 2017 and January 30, 2023 (the

3

Pin-cites preceded by an asterisk (*) refer to the pagination atop the CM/ECF header.

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“Underlying Action”). (Compl. ¶¶ 37-39.) Plaintiffs notified Defendants of the action against them
and submitted a claim for defense and indemnification. (Compl. ¶ 41.) On September 6, 2023,
Defendants denied coverage based on the continuous coverage provision, requiring Plaintiffs to
“retain counsel at significant cost and face risk of financial ruin.” (Compl. ¶¶ 43-45.)
Plaintiffs filed their Complaint in the Superior Court of New Jersey, Law Division, Essex
County, on October 31, 2023. (Compl. at *35, 36.) In the Complaint, Plaintiffs assert thirteen
causes of action against Defendants including: (1) declaratory judgment pursuant to N.J.S.A.
2A:16-50, et seq.; (2) specific performance; (3) breach of contract; (4) promissory estoppel; (5)
quantum meruit; (6) breach of covenant of good faith and fair dealing; (7) common law fraud; (8)
violation of N.J.S.A. 56:8-1, et seq.; (9) negligent/intentional misrepresentation; (10) professional
negligence/malpractice; (11) negligence; (12) breach of fiduciary duty; and (13) reformation.
(Compl. 47-118.) On December 8, 2023, Defendants removed the action to this Court (See Notice
of Removal (“NOR”), ECF No. 1.)
On January 12, 2024, Defendants moved to dismiss Counts One (declaratory judgment
pursuant to N.J.S.A. 2A:16-50, et seq.), Two (specific performance), Three (breach of contract),
Five (quantum meruit), Six (breach of covenant of good faith and fair dealing), Seven (common
law fraud), and Twelve (breach of fiduciary duty) of Plaintiffs’ Complaint, and their demand for
punitive damages pursuant to Fed. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief
can be granted. (ECF No. 10.) Plaintiffs opposed the motion (ECF No. 16), and Defendants replied
in further support (ECF No. 17).

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II.

LEGAL STANDARD
A. Rule 12(b)(6)
When deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the

Court must “accept all factual allegations as true, construe the complaint in the light most favorable
to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff
may be entitled to relief.” Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citing
Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)). “To survive a motion to
dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Notably, on a Rule 12(b)(6) motion to dismiss,
“[t]he defendant bears the burden of showing that no claim has been presented.” Hedges v. United
States, 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d
1406, 1409 (3d Cir. 1991)).
B. Rule 9(b)
For claims of fraud, however, Rule 9(b) imposes a heightened pleading standard. Naporano
Iron & Metal Co. v. Am. Crane Corp., 79 F. Supp. 2d 494, 510 (D.N.J. 1999). “In alleging fraud
or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”
Fed. R. Civ. P. 9(b). A claimant “alleging fraud must state the circumstances of the alleged fraud
with sufficient particularity to place the defendant on notice of the precise misconduct with which
[it is] charged.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (alteration in original)
(internal citation and quotation marks omitted).

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III.

DISCUSSION

A. Plaintiffs’ Declaratory Judgment Claim (Count 1)
Plaintiffs seek declaratory judgment pursuant to the New Jersey Declaratory Judgment Act,
N.J.S.A. 2A:16-50, et seq. (Compl. ¶¶ 47-49.) Plaintiffs assert that “[a] judicial determination and
a declaration of the rights and responsibilities of the parties is necessary and appropriate at this
time because Plaintiffs have no adequate remedy at law [that] will resolve the current controversy.”
(Compl. ¶ 50.) Plaintiffs contend that Defendants were contracted to “provide Plaintiffs with
professional liability insurance for claims arising out of prior work,” but “[c]ontrary to that
agreement” issued a policy whose “text . . . does not reflect the agreement and provides Plaintiffs
with no meaningful . . . coverage,” and ask this Court to interpret the Berkshire Policy “in
accordance with the representations and agreement of the parties.” (Compl. ¶¶ 51-54.) However,
the written insurance contract contains clear language precluding coverage of claims arising from
such work where the insured did not maintain continuous insurance coverage.
Federal courts sitting in diversity will treat a prayer for declaratory judgment brought under
state law “as though it had been filed under the [federal Declaratory Judgment Act].” Tumi, Inc. v.
Factory Mut. Ins. Co., No. 21-cv-2752, 2021 WL 4170051, at *1 n.3 (D.N.J. Sept. 14, 2021)
(quoting BCB Bancorp, Inc. v. Progressive Cas. Ins. Co., No. 13-cv-1261, 2013 WL 8559731, at
*3 (D.N.J. Oct. 9, 2013)). The Declaratory Judgment Act (“DJA”) allows federal courts to “declare
the rights and other legal relations of any interested party seeking such [a] declaration.” 28 U.S.C.
2201(a). The DJA, provides “[i]n a case of actual controversy within its jurisdiction . . . any court
of the United States, upon the filing of an appropriate pleading, may declare the rights and other
legal relations of any interested party seeking such declaration, whether or not further relief is or
could be sought.” 28 U.S.C.A. § 2201(a). “Declaratory judgment is an appropriate remedy when

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it will terminate the controversy giving rise to the proceeding[, but] the DJA grants discretion to
federal district courts, who have no compulsion to exercise their jurisdiction over cases seeking
declaratory judgment.” Greg Prosmushkin, P.C. v. Hanover Ins. Grp., 479 F. Supp. 3d 143, 147
(E.D. Pa. 2020) (quotations omitted).
The Third Circuit requires that declaratory judgments “have utility,” Travelers Insurance
Co. v. Obusek, 72 F.3d 1148, 1155 (3d Cir. 1995), and “be of significant practical help in ending
the controversy.” Step-Saver Data Sys. v. Wyse Tech., 912 F.2d 643, 650 (3d Cir. 1990). While
Rule 57 of the Federal Rules of Civil Procedure states “[t]he existence of another adequate remedy
does not preclude a declaratory judgment that is otherwise appropriate,” (Fed. R. Civ. P. 57), our
Court of Appeals urges courts to exercise their discretion to decline proceeding with declaratory
judgments when they duplicate other claims. State Auto Insurance Company v. Summy, 234 F.3d
131, 134 (3d Cir. 2000). “A federal court should also decline to exercise its discretionary
jurisdiction when doing so would promote judicial economy by avoiding duplicative and
piecemeal litigation.” Id. at 135.
Courts in this District generally decline to grant declaratory relief when the claim for
declaratory judgment is entirely duplicative of another claim in the cause of action. See, e.g.,
Mladenov v. Wegmans Food Markets, Inc., 124 F. Supp. 3d 360, 379 (D.N.J. 2015) ( dismissing
plaintiffs’ claim seeking a declaration that certain grocery stores engaged in false advertising as
redundant of plaintiffs’ breach of express warranty and New Jersey Consumer Fraud Act (CFA)
claims); Maniscalco v. Brother International Corporation (USA), 627 F. Supp. 2d 494, 505 (D.N.J.
2009) ( dismissing plaintiffs’ declaratory judgment claim as duplicative of their allegations under
the CFA, the court reasoned, “[i]f there is a finding in favor of Plaintiffs on their CFA claims,
then an actual judgment, rather than a mere declaration, would be entered stating that [the

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defendant’s] actions have violated the CFA and further that Plaintiffs, including class members,
are entitled to relief.” Id. at 505).
The Third Circuit directs that “[d]eclaratory judgments are meant to define the legal rights
and obligations of the parties in the anticipation of some future conduct . . . Declaratory judgments
are not meant simply to proclaim that one party is liable to another.” Andela v. Admininstrative
Office of U.S. Courts, 569 F. App’x 80, 83 (3d Cir. 2014). Courts have dismissed declaratory
judgment claims where “actual controversies” have already occurred, reasoning that “address[ing]
uncertainty as to legal rights between [adverse] parties” following the commencement of litigation
does not serve the DJA’s “prophylactic purpose.” See id. at 75; see also Corliss v. O'Brien, 200 F.
App’x 80, 84 (3d Cir. 2006) (“Declaratory judgment is inappropriate solely to adjudicate past
conduct[, n]or is declaratory judgment meant simply to proclaim that one party is liable to
another.”).
Here, litigation has indeed already commenced, and Defendants have declined to defend
Plaintiffs’ submitted claim; therefore, declaratory judgment under the DJA is not an appropriate
remedy. See Kousis v. Fidelity & Guar. Ins. Underwriters, Inc., No. 22-cv-6530, 2023 WL
6141237, at *7 (D.N.J. Sept. 20, 2023) (“Where an insured’s claim is prospective,
a declaratory judgment might serve the useful purpose of clarifying the relations of the parties[,
b]ut where . . . a claim has been made, coverage has been denied, and the insured has sued based
on that denial, a declaratory judgment would be superfluous.”); see also Corliss, 200 F. App’x at
84.
Moreover, Plaintiffs’ declaratory judgment claim cannot survive because it is duplicative
of their breach of contract claim. Courts in this Circuit will “routinely dismiss declaratory
judgment claims [that] are duplicative of breach of contract claims.” Reliable Paper Recycling,

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Inc. v. Helvetia Glob. Sols., Ltd., No. 23-cv-22124, 2024 WL 1461346, at *4 (D.N.J. Apr. 4, 2024)
(quoting AV Design Servs., LLC v. Durant, No. 19-cv-8688, 2021 WL 1186842, at *12 (D.N.J.
Mar. 30, 2021)). Plaintiffs’ declaratory judgment claim, as pled, is “based on the same issues” as
the breach of contract claim. See id.; see also Liberty Mut. Fire Ins. Co., No. 22-cv-0003, 2023
WL 3597675, at *5 n.8 (D.N.J. May 23, 2023) (quotation omitted) (“Where a party brings claims
for both declaratory relief and breach of contract, such claims are duplicative in that adjudication
of the breach of contract claim will still resolve the same issue and necessarily decide the question
raised by the declaratory judgment claim.”).
Accordingly, Defendants’ motion to dismiss Plaintiffs’ declaratory judgment claim is
granted and Count 1 will be dismissed without prejudice. 4
B. Plaintiffs’ Specific Performance Claim (Count 2)
Defendants move to dismiss Plaintiffs’ claim of specific performance, arguing that it is an
equitable remedy that cannot stand as an independent cause of action. (See ECF No. 10-1 at 9.) In
their opposition, Plaintiffs do not dispute Defendants’ assertion that specific performance is not a
claim; instead, Plaintiffs argue that this Court should construe the specific performance claim as a
request for equitable relief. (See ECF No. 17 at 11.) “However, a complaint cannot be amended
(or supplemented) by way of an opposition brief.” Son v. Lynch, No. CV 24-01051 (JXN)(JRA),
2025 WL 850921, at *3 (D.N.J. Mar. 17, 2025) (citing Pennsylvania ex rel. v. Zimmerman v.
Pepsico, 836 F.2d 173 (3d Cir. 1988) (“It is axiomatic that the complaint may not be amended by
the briefs in opposition to a motion to dismiss.”).

The Court dismisses without prejudice due to the dismissal of the breach of contract claim without prejudice, with
the ability to amend.

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Further, New Jersey law provides that “specific performance is an equitable remedy that is
appropriate when the legal remedy of compensation is inadequate or incalculable.” In re Nickels
Midway Pier, LLC, 341 B.R. 486, 499 (D.N.J. 2006), aff’d, 255 F. App’x 633 (3d Cir. 2007). The
entitlement of specific performance against an insurer may be appropriate for future costs of
remediation. In re Env’t Ins. Declaratory Judgment Actions, 149 N.J. 278, 292-93 (1997) (finding
that the action for coverage relating to future harm constitutes action for specific performance).
“A claim for insurance proceeds under a policy for a past loss, like the case here, takes the form
[of] a regular contract action and not one of specific performance.” See Pieper v. USAA Cas. &
Prop. Ins. Co., No. CV 23-2331 (MAS)(DEA), 2023 WL 7709086, at *7 (D.N.J. Nov. 15, 2023)
(citing Ward v. Merrimack Mut. Fire Ins. Co., 711 A.2d 394, 397 (N.J. Super. Ct. App. Div. 1998).
Here, Plaintiffs do not seek remuneration for any future costs, and thus, Plaintiffs are not
entitled to the remedy of specific performance. Plaintiffs’ request for specific performance is
denied and Count 2 of Plaintiffs’ Complaint is dismissed without prejudice.
C. Plaintiffs’ Breach of Contract Claim (Count 3)
Defendants argue that Plaintiffs fail to state a claim for breach of contract as coverage was
properly denied due to Plaintiffs’ failure to meet the explicit terms of the Berkshire Policy for
claims arising from prior work. (ECF No. 10-1 at 7.)
In New Jersey, a valid breach of contract claim requires the existence of “a valid contract,
defective performance by the defendant, and resulting damages.” 22nd Century Techs., Inc. v.
iLabs, Inc., No. 22-1830, 2023 WL 3409063, at *3 (3d Cir. May 12, 2023) (citing Globe Motor
Co. v. Igdalev, 139 A.3d 57, 64 (N.J. 2016)). An insurance policy is a contract that will be enforced
as written, provided its terms are clear, so that the expectations of the parties are
fulfilled. Flomerfelt v. Cardiello, 997 A.2d 991, 996 (N.J. 2010) (citing Kampf v. Franklin Life

10

Ins. Co., 161 A.2d 717 (N.J. 1960)). When considering the meaning of an insurance policy, courts
interpret the language “according to its plain and ordinary meaning.” Id. (citing Voorhees v.
Preferred Mut. Ins. Co., 607 A.2d 1255 (N.J. 1992)). If the terms are ambiguous, they are
construed against the insurer to give effect to the insured’s reasonable expectations. Doto v. Russo,
659 A.2d 1371, 1377 (N.J. 1995). For Plaintiffs’ breach of contract claim to survive a motion to
dismiss, the Court need only find that Plaintiffs’ allegations were well-pleaded and plausibly give
rise to an entitlement for relief. See Iqbal, 556 U.S. at 679. Plaintiffs have not met that burden here.
In their opposition, Plaintiffs appear to overlook the fact that the Berkshire Policy, as
written, does not cover the underlying claim. Instead, Plaintiffs reiterate that the basis for their
breach of contract claim stems from alleged representations made in pre-contractual
communications. (ECF No. 16 at 9-10.) However, in making this argument, Plaintiffs overlook the
requirement that a pleading “alleging breach of contract must, at a minimum, identify the contracts
and provisions breached.” Liberty Mut. Fire Ins. Co. v. Reade Mfg. Co., No. 22-cv-0003, 2023
WL 3597675, at *4. As Plaintiffs have not identified a provision within the insurance contract as
written that Defendants have breached, Defendants’ motion to dismiss Plaintiffs’ breach of
contract claim will be granted and Count 3 will be dismissed without prejudice.
D. Plaintiffs’ Claim for Quantum Meruit/Unjust Enrichment (Count Five)
To state a claim under a quasi-contract theory of unjust enrichment, a plaintiff must allege
“(1) that the defendant has received a benefit from the plaintiff, and (2) that the retention of the
benefit by the defendant is inequitable.” Barnert Hosp. v. Horizon Healthcare Servs., Inc., No.063266, 2007 WL 1101443, at *6 (D.N.J. Apr. 11, 2007) (citing Wanaque Borough Sewerage Auth.
v. West Milford, 677 A.2d 747, 752 (N.J. 1996)). “A claim of unjust enrichment will not stand
when an express contract exists concerning the identical subject matter.” Spano v. JP Morgan

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Chase Bank, NA, 521 Fed. Appx. 66, 70 (3d Cir. 2013). Similarly, the theory of quantum meruit
serves as an alternative to a breach of contract action, which warrants dismissal in the face of an
existing enforceable agreement. Alboyacian v. BP Prods. N. Am., Inc., No. CIV. 9-5143, 2011 WL
5873039, at *5 (D.N.J. Nov. 22, 2011) (dismissing Plaintiffs’ claim of quantum meruit and holding
that Plaintiffs’ allegations were more appropriate for a breach of contract claim given the existence
of a binding agreement governing the rights of the parties).
In Estate of Gleiberman v. Hartford Life Ins. Co., 94 Fed. Appx. 944 (3d Cir. 2004), the
Third Circuit approved the dismissal of unjust enrichment claims where, as here, a plaintiff also
sought relief under a contract. In Estate of Gleiberman, the insurer issued a policy with a free-look
provision, and the insured failed to exercise his right to cancel, hence “indicating an intent to be
bound by the contract.” 94 Fed. Appx. at 946-47. Because the policy was “valid and enforceable,”
the Third Circuit held, “the District Court correctly dismissed [on a 12(b)(6) motion] the claims
for unjust enrichment and restitution.” Id. at 947; see also Davis v. Bankers Life & Cas. Co., No.
CV153559ESJAD, 2016 WL 7668452, at *12 (D.N.J. Dec. 23, 2016).
Here, Plaintiffs’ claim for quantum meruit and unjust enrichment must be dismissed as a
matter of law because the Berkshire Policy is an express and enforceable contract governing the
rights of the parties as to the specific conduct at the heart of this claim. Accordingly, Defendants’
motion to dismiss Plaintiff’s quantum meruit and unjust enrichment claim is granted and Count
five is dismissed without prejudice.
E. Plaintiffs’ Bad Faith Claim (Count 6)
Next, Defendants move to dismiss Plaintiffs’ claim for breach of covenant of good faith
and fair dealing because it is duplicative of Plaintiffs’ breach of contract claim and fails to plead

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facts establishing the elements of bad faith 5 under New Jersey law. (See ECF No. 10-1 at 11-12.)
The Court agrees.
To allege bad faith in the insurance context under New Jersey law, a plaintiff must allege
facts to plausibly suggest that the insurer (1) did not have a “fairly debatable” reason for its failure
to pay the claim, and (2) that the insurer knew or recklessly disregarded the lack of a reasonable
basis for denying the claim. Ketzner v. John Hancock Mut. Life Ins. Co., 118 Fed. App’x. 594, 599
(3d Cir. 2004) (citing Pickett v. Lloyds, 621 A.2d 445, 454 (N.J. 1993)). “If a claim is ‘fairly
debatable,’ no liability in tort will arise.” Pickett, 621 A.2d at 453.
In order to meet the “fairly debatable” standard, a plaintiff must establish as a matter of
law a right to summary judgment on the substantive claim; a plaintiff who cannot do so is not
entitled to assert a claim for bad faith—including at the motion to dismiss stage. 6 See Fuscerello
v. Combined Ins. Group, Ltd., Civ. No. 11-723, 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 presented disputed issues of material fact) (citing Pickett, 621 A.2d at 454); Ketzner, 118
Fed. App’x at 599 (stating that “if there are material issues of disputed fact . . . an insured cannot
maintain a cause of action for bad faith.”).
Plaintiffs argue that “[t]he ‘fairly debatable’ standard applicable to certain insurance claims
is [] wholly irrelevant to Plaintiffs’ bad faith claims in this matter.” (Id.) They contend that their

Plaintiffs assert a claim of “breach of covenant of good-faith [sic] and fair dealing.” (See Compl. ¶¶ 76-79.) “Where,
as here, an insurance contract is at issue,” such a claim is synonymous with bad faith. See, e.g., Veyhl v. State Farm
Fire & Cas. Co., No. 21-cv-10112, 2021 WL 6062304, at *3 (D.N.J. Dec. 22, 2021) (citing Laing v. Am. Strategic
Ins. Corp., 2014 WL 4953250, at *2 (D.N.J. Oct. 1, 2014)).
5

To adequately plead a claim of bad faith, Plaintiffs must first establish that he is entitled to summary judgment on
the underlying contract dispute in Count 3—that is, that Defendants’ reasons for denying Plaintiffs’ claim are not
debatable as a matter of law. See Pickett, 621 A.2d at 453. Thus, the “fairly debatable” standard for bad faith claims
requires only that the Court identify the existence of material issues of disputed fact in the underlying contract dispute.
Snowden v. Standard Ins. Co., No. CV 23-2493 (RBK/EAP), 2024 WL 1154471, at *3 n.2 (D.N.J. Mar. 18, 2024).

6

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bad faith claim should remain because Defendants knowingly issued an insurance policy with a
three-month gap to deprive Plaintiffs of coverage for claims stemming from prior work, and such
conduct is sufficient to establish bad faith. (ECF No. 16 at 13.) However, in making this argument,
Plaintiffs concede that the Berkshire Policy conditioned coverage for claims arising from prior
work and that they failed to meet at least one of those conditions, resulting in Defendants’ denial
of coverage. Therefore, Plaintiffs fail to establish as a matter of law that Defendants lacked a
reasonable basis for denying the claim. See Pickett, 621 A.2d at 454; see also Iqbal, 556 U.S. at
678.
Moreover, under New Jersey law, “a plaintiff cannot maintain a claim for [bad faith] when
. . . the cause of action arises out of the same conduct underlying the alleged breach of
contract.” Petri v. Drive N.J. Ins. Co., No. 21-cv-20510, 2022 WL 4483437, at *6 (quoting Hahn
v. OnBoard LLC, No. 09-03639, 2009 WL 4508580, at *6 (D.N.J. Nov. 16, 2009)); see also Kare
Distribution, Inc. v. Jam Labels & Cards LLC, 09-00969, 2012 WL 266386, at *7 (D.N.J. Jan. 30,
2012); Evonik Corp. v. Hercules Grp., Inc., No. CV167098JMVJBC, 2018 WL 5095991, at *9
(D.N.J. Oct. 18, 2018).
In this case, Plaintiffs have not pled that Defendants’ conduct leading to their purported
“breach of . . . duty” differed from the facts surrounding the alleged breach of contract. (Compare
Compl. ¶¶ 76-79 with ¶¶ 60-64.) In fact, Plaintiffs freely admit that their bad faith claim stems
from the “facts common to all counts,” necessarily including the breach of contract claim. (See
Compl. ¶ 76.) Therefore, the Court finds that Plaintiffs’ bad faith claim is duplicative of their
breach of contract claim. As such, Plaintiff cannot maintain a claim for bad faith, see id.;
Fuscerello, 2011 WL 4549152, at *5. Defendants’ motion to dismiss Plaintiffs’ bad faith claim is
granted and Count 6 will be dismissed without prejudice.

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F. Plaintiffs’ Common Law Fraud Claim (Count 7)
“Under New Jersey law, a plaintiff alleging fraud must plead (i) a material representation
of fact, (ii) knowledge on the speaker's part that the statement is false, (iii) an intent that the other
rely, (iv) actual and reasonable reliance, and (v) resulting damages.” Davis, 2016 WL 7668452, at
*6 (citations omitted).
Similarly, to establish a claim for fraudulent inducement, a party must show the following:
“(1) a material representation of a presently existing or past fact; (2) made with knowledge of its
falsity; and (3) with the intention that the other party rely thereon; (4) resulting in reliance by that
party; (5) to his detriment.” RNC Sys., Inc. v. Modern Tech. Grp., Inc., 861 F. Supp. 2d 436, 451
(D.N.J. 2012) (citing Metex Mfg. Corp. v. Manson, No. 05-2948, 2008 WL 877870, at *4 (D.N.J.
Mar. 28, 2008)). Under New Jersey law, courts have “recognize[d] fraud in the inducement as an
equitable remedy that may serve as the basis for rescission of a contract.” TekDoc Servs., LLC v.
3i-Infotech Inc., No. 09-6573, 2013 WL 2182565, at *21 (D.N.J. May 20, 2013); Evonik Corp.,
2018 WL 5095991, at *8. If fraudulent inducement is found, then the contract may be rescinded.
Tonglu Rising Sun Shoes Co. v. Nat. Nine (USA) Co., 2016 WL 7374543, at *3 (D.N.J. Dec. 20,
2016). As stated above, such pleadings are subject to the heightened pleading standard of Federal
Rule of Civil Procedure 9(b). Kare Distribution, Inc., 2009 WL 3297555, at *4. Fraud in the
inducement can also provide an exception to the parol evidence rule. Harker v. McKissock, 12 N.J.
310, 323 (1953). However, parol evidence cannot be used to contradict express terms of the
contract itself. Atl. N. Airlines v. Schwimmer, 12 N.J. 293, 302 (1953).
Here, Plaintiffs allege that Defendants repeatedly confirmed and otherwise represented to
Plaintiffs that the new policy would cover claims arising out of Plaintiffs’ work that predated the
new policy on a claims-made basis. (Compl. ¶ 24.) Plaintiffs further allege that in reliance upon

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Defendants’ representations and assurances, Plaintiffs purchased the proposed policy from
Defendants for an annual premium of $22,492.18. (Compl. ¶ 25.) Defendants, without notice to
Plaintiffs, inserted contractual language requiring continuous prior coverage that would have
covered a prior claim as a prerequisite for the claims made coverage under the Berkshire Policy.
(Compl. ¶ 28.) Defendants then issued the Berkshire Policy, which had a three-month gap in
professional liability coverage between the expiration of Plaintiffs’ prior policy and the
commencement date of the Berkshire Policy so as to preclude coverage for future professional
liability claims arising out of Plaintiffs’ prior work.” (Compl. ¶¶ 29, 30.) In doing so, the
Defendants intended to deprive Plaintiffs of any professional liability coverage for prior work and
thereby collect annual premiums exceeding $22,000 without providing the core coverage for which
Plaintiffs contracted. Plaintiffs further allege that Defendant Sharpee purportedly represented that
claims stemming from prior work would be covered, without conditions. (See Compl. ¶¶ 80-85.)
Plaintiffs contend that this clearly constitutes bad faith under New Jersey law.
Accepted as true and taken in a light most favorable to Plaintiffs, the Court finds that
Plaintiffs’ allegations satisfy Rule 9(b)’s heightened pleading requirement to “state with
particularity the circumstances constituting fraud or mistake” with respect to their fraud claim
against Defendants. Fed. R. Civ. P. 8(a)(2). This does not end the inquiry, however, whether
Plaintiffs’ fraud claim may proceed. The law is clear that “reasonable reliance . . . cannot be
established in the face of clear contradictory language in an insurance policy.” Davis, 2016 WL
7668452, at *6 (citations omitted).
“When an insured person receives an insurance policy, that person is ‘under a duty to
examine his insurance policies; if the terms disclosed by such an examination are inconsistent with
his desires, he is required to notify the company of the inconsistencies and of his refusal to accept

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the policy in the proffered condition.’” Andrea v. Metro. Life Ins. Co., No. 00-CV-911, 2000 WL
35361960, at *3 (D.N.J. Aug. 14, 2000) (quoting Martinez v. John Hancock Mut. Life Ins. Co.,
145 N.J. Super. 301, 310 (App. Div. 1976); see also Country Side Oil Co. v. Travelers Insurance
Co., 928 F. Supp. 474 (D.N.J. 1995). Moreover, Plaintiffs have not pled that Defendants’ conduct
leading to the alleged fraud differed from the facts surrounding the alleged breach of contract.
Further, Plaintiff is unable to set forth a valid fraud claim since the Berkshire Policy unequivocally
conditions coverage for prior work on knowledge acquired during the policy period and continuous
prior insurance, contradicting Plaintiffs’ allegations. Thus, Defendants’ motion to dismiss
Plaintiffs’ claim for common law fraud is granted and Count 7 is dismissed without prejudice.
G. Plaintiffs’ Breach of Fiduciary Duty Claim (Count 12)
Plaintiffs argue that Defendants held out Sharpee as a “Small Business Advisor” who
would guide Plaintiffs through the process of obtaining replacement professional liability coverage
and procure a policy that met Plaintiffs’ unique needs. (ECF No. 16 at 23.) Plaintiffs claim that
they trusted Defendants and relied on them to apply their premiums to a policy that covered them
against claims arising out of Plaintiffs’ prior work on a claims-made basis. (Id.) Plaintiffs’ further
claim that based upon the Defendants’ course of conduct, representations, and the trust that they
induced, Defendants created a special relationship and assumed a fiduciary duty to Plaintiffs. (Id.)
To plead a breach of fiduciary duty, a plaintiff must allege: “(1) a fiduciary relationship
comprised of two persons when one person is under a duty to act for or give advice for the benefit
of another on matters within the scope of their relationship, and (2) a violation of that trust.” Wiatt
v. Winston & Strawn, LLP, No. 10-6608, 2011 WL 2559567, at *9 (D.N.J. June 27, 2011). Notably,
it is well established that an insurance agent owes a fiduciary duty to the insurance company, not
to the insured. Davis, 2016 WL 7668452, at *9; Weinisch v. Sawyer, 587 A.2d 615, 618 (1991)

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(“An insurance agent owes a fiduciary duty to the insurance company . . . and acts not for the
insured but for the insurer as its employee.”).
Here, the Complaint alleges that Sharpee was, at all relevant times, Berkshire’s employee. 7
(Compl. ¶ 5.) In such case, Sharpee owed a fiduciary duty only to Berkshire as his employer, not
to Plaintiffs. Weinisch v. Sawyer, 587 A.2d 618; In re Nw. Mut. Life Ins., 70 F. Supp. 2d 466, 489
(D.N.J. 1999) (holding that Plaintiffs’ claim for breach of fiduciary duty lacked merit as the
insurance agent did not owe a fiduciary duty to insurance applicant). Accordingly, Defendants’
motion to dismiss Plaintiffs’ claim for breach of a fiduciary duty will be granted and Count 12 will
be dismissed without prejudice.
H. Plaintiff's Demand for Punitive Damages
In New Jersey, breach of contract claims do not give rise to punitive damages unless the
defendant also violates a separate and independent duty beyond the contract. Lightning Lube, Inc.
v. Witco Corp., 4 F.3d 1153,1194 (3d Cir. 1993); see also Sandler v. Lawn–A–Mat Chemical &
Equipment Corp., 141 N.J. Super. 437, 358 A.2d 805, 812 (N.J. Super. App. Div. 1976) (“Where
the essence of a cause of action is limited to a breach of such a contract, punitive damages are not
appropriate regardless of the nature of the conduct constituting the breach”); Pickett, 621 A.2d at
455 (“absent egregious circumstances, no right to recover for . . . punitive damages exists for an
insurer’s allegedly wrongful refusal to pay a first-party claim”).
Because Plaintiffs will be afforded the opportunity to amend certain Counts of the
Complaint dismissed herein, and Defendants did not move to dismiss the Complaint in its entirety,
a ruling that Plaintiffs are not entitled to punitive damages at this stage of the litigation would be

Defendants cite to Plaintiffs’ Complaint as to Sharpee’s status (see ECF No. 10-1 at 23), however, Defendants neither
confirm nor deny the allegation. Accordingly, Count 12 is dismissed without prejudice.

7

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premature. Accordingly, Defendants’ request to bar Plaintiffs’ demand for punitive damages is
denied.
IV.

CONCLUSION
For the foregoing reasons, Defendants’ partial motion to dismiss (ECF No. 10) pursuant to

Rule 12(b)(6) is GRANTED, and Counts One (declaratory judgment); Two (specific
performance); Counts Three (breach of contract); Five (quantum meruit); Six (breach of the
covenant of good faith and fair dealing); Seven (common law fraud) and Twelve (breach of
fiduciary duty) of Plaintiffs’ Complaint of are DISMISSED without prejudice. Further,
Defendants’ request to bar Plaintiffs’ demand for punitive damages is DENIED. An appropriate
Form of Order accompanies this Opinion.
DATED: March 29, 2025

_______________________
JULIEN XAVIER NEALS
United States District Judge

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