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Lincoln General Insurance Company v. Kingsway America Agency

May 17, 2012


The opinion of the court was delivered by: (Judge Conner)


This case is about insurers, their agents, the agents of their agents, and the expensive mistakes that sometimes occur within complex business relationships. Plaintiff Lincoln General Insurance Company contends that it suffered a loss of roughly $1 million because of its agents' carelessness in issuing a particular insurance policy in its name. Counts I and II of Lincoln's complaint (Doc. 1) set forth claims against defendant Kingsway America Agency, Inc., formerly known as Avalon Risk Management, Inc., seeking recovery under theories of indemnification and breach of contract; Counts III and IV allege breaches of fiduciary duty by Kingsway and by defendant Mattoni Insurance Brokerage, Inc., respectively.

Presently before the court are defendants' motions (Docs. 9, 10) to dismiss the complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. Although the motions were filed separately, defendants are represented by the same counsel, and the supporting briefs essentially present the same arguments: that in the first place, all of Lincoln's claims are barred by the applicable statute of limitations, and in any event, the claims alleging breaches of fiduciary duty fail to satisfy federal pleading standards. For the reasons that follow, the court will grant the motions.

I. Background*fn1

All three parties to this action are associated with the insurance industry.

Pennsylvania-based Lincoln is a property and casualty insurance company. (Doc. 1, ¶ 1.) Before Avalon became part of Kingsway, it was an Illinois provider of insurance and surety services; it is now a wholly owned subsidiary of Kingsway Financial Services, Inc., which has a business address in Ontario. (Id. ¶ 2.) Mattoni, a California-based insurance brokerage company, was an independent firm until October 2007, when it was acquired by ARM Holdings, Inc., an affiliate of Avalon. (Id. ¶ 3.) Mattoni operated as a separate subsidiary until May 1, 2009, when Mattoni began transacting its entire book of business under Avalon's name and licensing.*fn2 (Id.)

The insurance policy at the core of this dispute is one issued to a parcel-delivery servicer known as Moore Fogg's, a commercial-trucking company located in Pennsylvania. (Id. ¶¶ 6, 7, 9.) Starting in 2004, Moore Fogg's had begun procuring Commercial Truckers/Motor Carrier insurance for its vehicles and drivers from LGIC through Mattoni's office in Westlake Village, California.*fn3 (Id. ¶ 7.) In the continuance of this course of business, LGIC issued Moore Fogg's a police for the period from November 13, 2006, to November 13, 2007, carrying $1 million liability limits and $35,000 for uninsured/underinsured motorist (UM/UIM) coverage. (Id. ¶ 9.) The premium paid under this policy, as well as the policy itself, reflected the insured's choice of $35,000 in UM/UIM coverage and the rejection of stacked limits. (Id. ¶ 10.)

On February 6, 2007, one of Moore Fogg's insured trucks, driven by one of its employed drivers, collided with another vehicle on Interstate 95 in Delaware County, Pennsylvania, near the off-ramp for Route 476 North. (Id. ¶ 11.) Subsequent investigation determined that a "phantom vehicle"-one that was never identified-caused the accident by cutting in front of the Moore Fogg's truck while they were both southbound on I-95. (Id. ¶ 12.) The Moore Fogg's truck driver lost control of his vehicle, crossed the median into the northbound lanes, and crashed into a large truck. (Id.) Both vehicles burst into flames, and the results, for the driver of the Moore Fogg's truck, were fatal. (Id.)

The estate of the deceased driver filed suit against Lincoln under the UM/UIM coverage for $3 million, despite the policy documents stating that the UM/UIM coverage was limited to $35,000. (Id. ¶ 13.) During litigation, the estate raised two primary arguments against the UM/UIM coverage limits. First, the estate argued that no valid and effective write-down for UM/UIM coverage had been secured from Moore Fogg's, resulting in the UM/UIM limits matching the liability limits of $1 million. (Id. ¶ 14.) Second, when vehicles were added to Moore Fogg's policy in 2006, the renewal process failed to secure a new, signed waiver of stacking.*fn4 (Id.) According to the estate, the lack of a new stacking waiver created a presumption that stacking would apply. (Id.)

Between February and June of 2007, Lincoln investigated the estate's UM/UIM argument and determined that estate was correct: no valid and effective write-down for UM/UIM coverage had been secured by Avalon or Mattoni. (Id. ¶ 15.) Based on this finding, Lincoln concluded that a court applying Pennsylvania law would hold that the UM/UIM coverage limits would match the $1 million liability limits. (Id.)*fn5 Lincoln then settled the estate's claim on September 28, 2007, for a payment of $1 million. (Id. ¶ 17.)

Lincoln submits that its decision to make this settlement was the "direct and proximate result of the errors and omissions of Avalon and Mattoni in failing to secure a proper write-down of UM/UIM coverage." (Id.) As damages, Lincoln seeks the difference between the $1 million it paid in settlement and the $35,000 that should have been the policy limits, i.e. $965,000, plus attorneys' fees and costs. (Id. ¶ 18.)

II. Standard of Review

The Federal Rules of Civil Procedure provide for the dismissal of complaints that fail to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6).

When ruling on a motion to dismiss under Rule 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." Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009) (quoting Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)); see also Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007); Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005). Although the court is generally limited in its review to the facts contained in the complaint, it "may also consider matters of public record, orders, exhibits attached to the complaint and items appearing in the record of the case." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.2 (3d Cir. 1994); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

Federal notice and pleading rules require the complaint to provide "the defendant notice of what the . . . claim is and the grounds upon which it rests." Phillips, 515 F.3d at 231 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To test the sufficiency of the complaint in the face of a Rule 12(b)(6) motion, the court must conduct a three-step inquiry. See Santiago v. Warminster Twp., 629 F.3d 121, 130-31 (3d Cir. 2010). In the first step, "the court must 'tak[e] note of the elements a plaintiff must plead to state a claim.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 675 (2009)). Next, the factual and legal elements of a claim should be separated; well-pleaded facts must be accepted as true, while mere legal conclusions may be disregarded. Id.; see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210--11 (3d Cir. 2009). Once the well-pleaded factual allegations have been isolated, the court must determine whether they are sufficient to show a "plausible claim for relief." Iqbal, 556 U.S. at 678-79 (citing Twombly, 550 U.S. at 556); see also Twombly, 550 U.S. at 555 (requiring plaintiffs to allege facts sufficient to "raise a right to relief above the speculative level"). 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." Iqbal, 556 U.S. at 678. When the complaint fails to present a prima facie case of liability, however, courts should generally grant leave to amend before dismissing a complaint. See Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002); Shane v. Fauver, 213 F.3d 113, 116--17 (3d Cir. 2000).

III. Discussion*fn6

As mentioned above, Lincoln's complaint contains four counts. Count I is a claim for indemnity against Kingsway; Count II, also against Kingsway, claims a breach of contract; and Counts III and IV claim that Kingsway and Mattoni, respectively, breached their fiduciary duties to Lincoln. Both defendants raise statute-of-limitations defenses and argue in the alternative that the breach-offiduciary-duty claims were inadequately pleaded. The analysis begins with the statute-of-limitations defenses, as they put in issue whether the court may proceed to address the complaint on its merits.

A. Statutes of ...

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