Wendy's of Bowling Green, Inc. v. Marsh USA, Inc.

Filing 61

MEMORANDUM OPINION OF THE COURT. Signed by Chief Judge Todd J. Campbell on 2/3/12. (afs)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
WENDY’S OF BOWLING GREEN,
INC.
v.
MARSH USA, INC.

)
)
) NO. 3-10-1043
) JUDGE CAMPBELL
)
)
MEMORANDUM

Pending before the Court is Defendant’s Motion for Summary Judgment (Docket No. 30).
For the reasons stated herein, Defendant’s Motion is GRANTED in part and DENIED in part.
FACTS
Plaintiff owns and operates a chain of Wendy’s restaurants in Kentucky and Tennessee.
Defendant was selected by Plaintiff to be Plaintiff’s insurance broker in 2009. Docket No. 43, ¶ 4.
Plaintiff claims it also selected Defendant to be its risk manager. Id. This dispute arises from the
record floods in Middle Tennessee in May of 2010, which caused losses and damage to one of
Plaintiff’s restaurants in Clarksville, Tennessee, for which insurance coverage was denied.
Defendant asserts that Plaintiff’s losses were not covered because Plaintiff had failed to pay the
flood insurance policy premium.
The parties entered into a 2010 Brokerage Services Agreement in early 2010. Docket No.
43, ¶ 4. At the time, Plaintiff was insured for flood damage with FEMA. Id., ¶ 8. Defendant
suggested that Plaintiff “rollover” its flood insurance policy to American Bankers Insurance
Company of Florida (“ABIC”). Id., ¶ 9. As part of the submission to ABIC, Defendant sent ABIC
a copy of Plaintiff’s FEMA declarations page which included an incorrect address for Plaintiff. Id.,
¶¶ 10-11. Plaintiff alleges that Defendant instructed Plaintiff not to pay the premium to renew the
FEMA flood insurance policy. Docket No. 7, ¶ 33.

On January 27, 2010, ABIC issued an invoice for the flood insurance policy to Plaintiff but
sent it to the wrong address. Docket No. 43, ¶¶ 12-13. That invoice was returned to ABIC from the
U.S. Post Office. Id., ¶ 17. On January 28, 2010, Defendant sent a copy of the invoice via e-mail
to Plaintiff. Plaintiff admits receiving the January 28th e-mail, but Plaintiff claims the attachment
to this e-mail was not an invoice but, rather, was an “image copy” with missing information, such
as the reverse side of the actual paper invoice. Id., ¶¶ 14 and 16.1 Plaintiff’s employee claims that
she was waiting for a paper copy. Id., ¶ 15.
Defendant avers that ABIC generated and sent, to the correct address, another invoice for
the flood insurance policy on March 2, 2010, and that invoice was never returned to ABIC. Docket
No. 43, ¶¶ 20 and 22. Plaintiff asserts that it never received either the January 27th or the March 2nd
invoice. Id., ¶ 24.2 It is undisputed that the premium on the ABIC flood insurance policy for
Plaintiff’s property was never paid until after the flood. Id.
Plaintiff alleges that Defendant breached its agreement with Plaintiff by failing to use its best
efforts to place flood insurance on the subject property, that Defendant breached its fiduciary duty
to Plaintiff, that Defendant was negligent with regard to the flood insurance on Plaintiff’s property,

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The e-mail from Defendant to Plaintiff stated, among other things, that Plaintiff was
to remit payment directly to American Bankers and to confirm payment to Defendant. Docket No.
43, ¶ 15; see also Docket No. 30-6. Part of the e-mail which apparently was sent from ABIC to
Defendant and forwarded to Plaintiff stated: “Attached is a copy of the invoice(s) and in 5 to 7 days
American Bankers will send the original(s) directly to the insured with a copy to your office. Please
remit payment directly to American Bankers along with the invoice(s).” Id.
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Plaintiff has presented evidence that Ms. Meador, Defendant’s employee, was
informed on March 4, 2010, and March 15, 2010, that the premium on Plaintiff’s flood insurance
had not been paid. Docket No. 30-3, pp. 144-45; Docket No. 30-14.
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and that Defendant violated the Tennessee Consumer Protection Act (“TCPA”). Defendant seeks
summary judgment on all of Plaintiff’s claims.
SUMMARY JUDGMENT
Summary judgment is appropriate where there is no genuine issue as to any material fact and
the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Pennington v. State
Farm Mut. Automobile Ins. Co., 553 F.3d 447, 450 (6th Cir. 2009). The party bringing the summary
judgment motion has the initial burden of informing the Court of the basis for its motion and
identifying portions of the record that demonstrate the absence of a genuine dispute over material
facts. Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003). The moving party may satisfy this
burden by presenting affirmative evidence that negates an element of the non-moving party’s claim
or by demonstrating an absence of evidence to support the nonmoving party’s case. Id.
In deciding a motion for summary judgment, the Court must review all the evidence, facts
and inferences in the light most favorable to the nonmoving party. Pennington, 553 F.3d at 450;
Van Gorder v. Grand Trunk Western Railroad, Inc., 509 F.3d 265, 268 (6th Cir. 2007). The mere
existence of a scintilla of evidence in support of the nonmoving party’s position will be insufficient
to survive summary judgment; rather, there must be evidence on which the jury could reasonably
find for the nonmoving party. Rodgers, 344 F.3d at 595 (citing Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 252 (1986)).
CONFLICT OF LAWS
Defendant asserts that New York law governs Plaintiff’s breach of contract and breach of
fiduciary duty claims, based upon a provision of the 2010 Brokerage Agreement between Plaintiff

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and Defendant. Plaintiff argues that Tennessee law applies to all claims except the breach of
contract claim.
The 2010 Brokerage Services Agreement provides: “The laws of the State of New York
govern this Agreement.” Docket No. 30-2, ¶ 8. Plaintiff has admitted that the laws of New York,
per the above quoted paragraph, would govern the interpretation, enforcement and performance of
the parties under the agreement. Docket No. 47-1, p. 8. The Court finds that Plaintiff’s claims for
breach of contract and breach of fiduciary duty are governed by New York law. Plaintiff’s
negligence claim3 and TCPA claim are governed by Tennessee law. Tenn. Code Ann. § 47-18113(b).
BREACH OF CONTRACT
Under New York law, to establish a claim for breach of contract, a plaintiff must show the
existence of a contract, the plaintiff’s performance pursuant to that contract, the defendant’s breach
of its obligations pursuant to the contract, and damages resulting from that breach. Elisa Dreier
Reporting Corp. v. Global Naps Networks, Inc., 921 N.Y.S.2d 329, 333 (N.Y. App. Div. 2011). An
insurance agent may be held liable, based upon either breach of contract or tort, for neglect in failing
to procure insurance. Herdendorf v. Geico Ins. Co., 909 N.Y.S.2d 277, 279 (N.Y. App. Div. 2010).
Defendant contends that it complied with the terms of the contract by obtaining a flood
insurance policy for Plaintiff and forwarding the January 27th invoice by e-mail to Plaintiff for
payment. Plaintiff argues that Defendant failed to use reasonable diligence in placing the insurance,
failed to make full and complete disclosure of facts that would have benefitted Plaintiff, submitted

3

As explained below, there is no cause of action for negligent breach of contract under
either New York or Tennessee law.
4

inaccurate information to the insurer, and failed to notify Plaintiff that the premium had not been
paid. Plaintiff further asserts that Defendant was required to use its best efforts to “place” insurance
for Plaintiff, which is not completed until the premium is paid.
The Court finds that there are genuine issues of material fact as to whether Defendant
reasonably used its best efforts, as required by the contract, to place flood insurance for Plaintiff,
whether Defendant accurately transmitted information for submission to the insurer, and whether
Defendant breached any reasonable duties under its agreement with the Plaintiff.
For example, whether Plaintiff ever received the March 2, 2010 invoice is a disputed issue
of fact, dependent upon which person the jury believes. In addition, Plaintiff claims that Defendant
knew about the invoice to Plaintiff that was returned to the insurer because of an incorrect address
and unreasonably failed to advise Plaintiff of that problem. Whether these and other actions and
omissions breached Defendant’s contractual obligations to use its best efforts are questions for the
trier of fact.
Defendant also argues, albeit in a later section of its brief, that Plaintiff has failed to show
that it suffered any damages (the final element in a breach of contract action). Defendant asserts that
Plaintiff has been fully compensated for this loss.4
The measure of damages for breach of contract, under New York law, is usually such amount
as will repay the plaintiff for the money loss which it has suffered because of the failure of the
defendant to do as it agreed. Cianciotto v. Hospice Care Network, 927 N.Y.S.2d 779, 785 (N.Y.
Dist. Ct. 2011). Damages in an action for breach of contract are intended to restore the injured party

4

Defendant analyzes this argument under New York law, and Plaintiff analyzes it
under Tennessee law.
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to the position it would have been in had the contract been fully performed. MBIA Ins. Corp. v.
Credit Suisse Securities (USA) LLC, 927 N.Y.S.2d 517, 535 (N.Y. Sup.2011).5
If a jury finds that Defendant breached its contract with Plaintiff, causing Plaintiff damages,
then the extent to which Plaintiff reasonably attempted to mitigate its damages, and also what money
it would take to place Plaintiff in the same position it would have been in if the contract had not been
breached are questions for the trier of fact, precluding summary judgment on this issue as well.
Accordingly, Defendant’s Motion for Summary Judgment on the breach of contract claim
is denied.
BREACH OF FIDUCIARY DUTY
Under New York law, the implied covenant of good faith and fair dealing inheres in every
contract. Travellers International, A.G. v. Trans World Airlines, Inc., 41 F.3d 1570, 1575 (2d Cir.
1994). However, the covenant of good faith cannot be used to impose obligations that were not
explicitly part of the agreement. Vetromile v. JPI Partners, LLC, 706 F.Supp.2d 442, 454 (S.D.
N.Y. 2010). To state a cause of action for breach of the implied covenant of good faith and fair
dealing, a plaintiff must allege facts which tend to show that the defendant sought to prevent
performance of the contract or to withhold its benefits from the plaintiff. Id. at 455. The covenant
of good faith is breached when one party acts to deprive the other of the right to receive the benefits
under the agreement. Id. at 454.

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Similarly, under Tennessee law, the purpose of assessing damages in a breach of
contract suit is to place the plaintiff, as nearly as possible, in the same position he would have had
if the contract had been performed. GSB Contractors, Inc. v. Hess, 179 S.W.3d 535, 541 (Tenn. Ct.
App. 2005); Mize v. Consulo, 2011 WL 6152980 at * 5 (Tenn. Ct. App. Dec. 8, 2011).
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New York generally does not recognize a fiduciary or special relationship between an
insurance broker and the insured. Globalnet Financial.com, Inc. v. Frank Crystal & Co., Inc., 449
F.3d 377, 386 (2d Cir. 2006). The law is reasonably settled in New York that insurance agents have
a common law duty to obtain requested coverage for their clients within a reasonable time or inform
the client of the inability to do so; however, they have no continuing duty to advise, guide or direct
a client to obtain additional coverage. Bruckmann, Rosser, Sherrill & Co. v. March USA, Inc., 885
N.Y.S.2d 276, 278 (N.Y. App. Div. 2009). “Thus, absent a special relationship, a claim for breach
of fiduciary duty does not lie.” Id.
The Court finds that Plaintiff has failed to show such a special relationship or that Defendant
sought to prevent performance of the contract or to withhold its benefits from Plaintiff. Although
there may be a breach of contract, Plaintiff has failed to state a claim for breach of fiduciary duty
in these circumstances under New York law. Accordingly, Defendant’s Motion for Summary
Judgment is granted on this issue, and Plaintiff’s breach of contract claim is dismissed.
NEGLIGENCE6
Plaintiff alleges that Defendant failed to use ordinary or reasonable care in procuring
Plaintiff’s flood insurance policy, in transmitting Plaintiff’s correct mailing address to the insurer,
in monitoring the state of the flood insurance coverage on Plaintiff’s property, and in promptly
informing Plaintiff of any problems with the flood insurance policy on that property. Docket No.
7 (Amended Complaint), ¶ 78. Defendant argues that it had no duty to alert Plaintiff of Plaintiff’s
own failure to pay the premium for the flood insurance and the resulting lapse in coverage.

6

At the election of the client, an agent who fails to procure insurance as promised may
be sued for breach of contract or for negligence. Morrison v. Allen, 338 S.W.3d 417, 451 (Tenn.
2011).
7

To the extent Plaintiff alleges breach of a duty outside the contract,7 Tennessee law requires
Plaintiff, in order to prove negligence, to show (1) the existence of a duty from the defendant to the
plaintiff, (2) breach of that duty, and (3) an injury to the plaintiff as a result of the breach. Menuskin
v. Williams, 145 F.3d 755, 765 (6th Cir. 1998).8 The parties both assert that whether Defendant
owed Plaintiff a duty is a question of law.
An insurance broker can be held liable in negligence if he or she fails to exercise due care
in an insurance brokerage transaction. Morrison v. Allen, 338 S.W.3d 417, 451 (Tenn. 2011). It is
well settled that there are certain situations in which insurance brokers owe their clients a duty of
care. Wood v. Newman, Hayes & Dixon Ins. Agency, 905 S.W.2d 559, 562 (Tenn. 1995). For
example, recovery could be allowed under the theory of negligence if the agent fails to use
reasonable care and diligence in continuing the insurance, obtaining the insurance, or notifying the
client in a timely manner that the insurance cannot be obtained. Id.; Morrison, 338 S.W.3d at 451.
What constitutes due care under these circumstances and whether Defendant breached that
duty of due care are disputed issues for the trier of fact. Defendant’s Motion for Summary
Judgment on Plaintiff’s negligence claim is denied.9

7

There is no cause of action for negligent breach of contract under either New York
or Tennessee law. Weiss v. LaSuisse, 69 F.Supp.2d 449, 462 (S.D. N.Y. 1999); Landon v. Kroll
Laboratory Specialists, Inc., 934 N.Y.S.2d 183, 187-88 (N.Y. App. Div. 2011); Calipari v.
Powertel, Inc., 231 F.Supp.2d 734, 736 (W.D. Tenn. 2002);Morrison, 338 S.W.3d at 451.
8

New York law is the same. Stukas v. Streiter, 918 N.Y.S.2d 176, 180 (N.Y. App. Div.

2011).
9

Any allocation of fault in line with Defendant’s argument concerning comparative
fault would also be a question for the trier of fact to decide under either New York law or Tennessee
law. Fogel v. Rizzo, __ N.Y.S.2d __, 2012 WL 149630 at * 1 (N.Y. App. Div. Jan. 17, 2012);
Timmons v. Metropolitan Gov’t of Nashville and Davidson County, 307 S.W.3d 735, 745 (Tenn. Ct.
App. 2009).
8

TENNESSEE CONSUMER PROTECTION ACT
Plaintiff contends that Defendant willfully violated the TCPA by engaging in unfair or
deceptive acts or practices. The TCPA provides that any person who suffers a loss of money or
property as a result of another person’s unfair or deceptive acts declared unlawful by the TCPA may
bring an action to recover actual damages against the offending person. Tenn. Code Ann. § 47-18109(a)(1). The TCPA applies to the acts and practices of insurance companies. Johnson v. John
Hancock Funds, 217 S.W.3d 414, 422 (Tenn. Ct. App. 2006); Fulton Bellows, LLC v. Federal Ins.
Co., 662 F.Supp.2d 976, 997 (E.D. Tenn. 2009).
The TCPA forbids unfair or deceptive acts or practices affecting the conduct of any trade or
commerce. Tenn. Code Ann. § 47-18-104(a); Poole v. Union Planters Bank, 337 S.W.3d 773,786
(Tenn. Ct. App. 2010). A deceptive act or practice is one which causes or tends to cause a consumer
to believe what is false or that misleads or tends to mislead a consumer as to a matter of fact. Id.
An unfair act or practice is one that, while not necessarily deceptive, is likely to substantially injure
consumers, is not reasonably avoidable by consumers, and is not outweighed by competing benefits
to the consumer market. Id. The determination of whether a defendant has committed unfair or
deceptive acts is a question of fact. Id.10
In order to recover under the TCPA, a plaintiff must prove: (1) that the defendant engaged
in an unfair or deceptive act or practice declared unlawful by the TCPA and (2) that the defendant’s
conduct caused an ascertainable loss of money or property. Tucker v. Sierra Builders, 180 S.W.3d

10

The standards for determining whether a representation is unfair or deceptive under
the TCPA are legal matters to be decided by the courts, but whether a specific representation in a
particular case is unfair or deceptive under those standards is a question of fact. Tucker v. Sierra
Builders, 180 S.W.3d 109, 116 (Tenn. Ct. App. 2005).
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109, 115 (Tenn. Ct. App. 2005). The defendant’s conduct need not be willful or even knowing, but
if it is, the TCPA permits the trial court to award treble damages. Id.
Plaintiff’s Amended Complaint alleges that Defendant falsely advertised certain expertise,
services, and levels of competence and skill concerning insurance. Docket No. 7. There are
disputed issues of fact as to whether Defendant’s advertising and representations were false or true,
but the Court finds that these representations, concerning the character and quality of Defendant’s
work, were opinions set forth generally, more like “puffing.”11

These representations — that

Defendant would offer specialized knowledge, specialized attention, and effective communication,
e.g., — are general statements commending Defendant’s offer of services to the public. The
representation that Defendant would use best efforts to place insurance simply reflects a term of the
agreement between the parties. Plaintiff has not shown that these statements were unfair or deceptive
as defined in the TCPA.
In any event,

Plaintiff has failed to show how any alleged false advertising or

representations concerning the expertise, services, competence and skill of the Defendant are
connected to and/or proximately caused Plaintiff’s failure to recover for its flood losses. As stated
above, the alleged misconduct must have caused an ascertainable loss to the Plaintiff. The Court
finds that Plaintiff’s contentions in this regard do not state a claim under the TCPA.
Plaintiff also alleges that Defendant misrepresented that it had assumed certain
responsibilities and that it had taken certain actions with regard to Plaintiff’s insurance. Docket No.
7. As to alleged misrepresentations about what Defendant had or had not done with regard to

11

“Puffing” refers to loose general statements made by sellers in commending their
products or services. See, e.g., Daugherty v. Sony Electronics, Inc., 2006 WL 197090 (Tenn. Ct.
App. Jan. 26, 2006).
10

Plaintiff’s specific flood insurance, there are disputed issues of fact as to the reasonable duties of
due care and whether Defendant breached those duties. But Plaintiff has failed to show that
Defendant’s alleged statements were more than a part of the alleged breach of contract. A breach
of contract is not in and of itself a deception, misrepresentation or unfairness under the TCPA.
Hamilton County Emergency Communications District v. Orbacom Communications Integrator
Corp., 2006 WL 120157 at * 9 (E.D. Tenn. Jan. 17, 2006). Even if Defendant’s actions were a
breach of contract or negligent, Plaintiff has failed to show that any representations were deceptive
or unfair.
For these reasons, Defendant’s Motion for Summary Judgment as to Plaintiff’s TCPA claims
is granted and those claims are dismissed.
RIGHT TO A JURY TRIAL
Defendant argues that Plaintiff has no right to a jury trial of this dispute. The 2010
Brokerage Services Agreement provides that each party “knowingly, voluntarily, and intentionally
waives its right to a trial by jury in any action or other legal proceeding arising out of or relating to
this Agreement of any services provided by Marsh or its affiliates.” Docket No. 30-2, p. 3.
Both parties requested a jury trial in this action. Docket Nos. 7 and 8. Plaintiff argues that
Defendant has waived the right to rely on this provision of the Agreement by asking for a jury in its
Answer. Fed. R. Civ. P. 38(d) states that a proper demand for a jury may be withdrawn only if the
parties consent. Defendant may not now withdraw its request for a jury without Plaintiff’s consent.
CONCLUSION

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For all these reasons, Defendant’s Motion for Summary Judgment (Docket No. 30) is
GRANTED in part and DENIED in part. Plaintiff’s claims for breach of fiduciary duty and
violations of the TCPA are DISMISSED.
IT IS SO ORDERED.

___________________________________
TODD J. CAMPBELL
UNITED STATES DISTRICT JUDGE

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