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Rich v. Brandywine Insurance Advisors, LLC

United States District Court, E.D. Pennsylvania

March 9, 2017

DAVID RICH Plaintiff,
v.
BRANDYWINE INSURANCE ADVISORS, LLC, and BARRY ABRAMS Defendants, TRIGEN INSURANCE SOLUTIONS, INC., as successor in interest to BRANDYWINE INSURANCE ADVISORS, LLC, Third-Party Plaintiff,
v.
CENTRAL INSURANCE AGENCY, INC. Third-Party Defendant.

          MEMORANDUM RE: CENTRAL INSURANCE AGENCY, INC.'S MOTION TO DISMISS BRANDYWINE INSURANCE ADVISORS, LLC'S THIRD-PARTY COMPLAINT

          BAYLSON, J.

         I. Introduction

         This case involves a dispute over where blame lies for the purchase of an insurance policy that failed to provide the coverage the plaintiff wanted. Plaintiff David Rich (“Plaintiff”) brings this action against Brandywine Insurance Advisors[1] (“BIA”) and Barry Abrams, an insurance broker for BIA (“Abrams, ” and collectively, “Original Defendants”). Plaintiff's Complaint (ECF 1, “Compl.”) contains four Counts:

(1) Breach of fiduciary duty;
(2) Negligence;
(3) Negligent Misrepresentation; and
(4) Fraud.

(Compl. ¶¶ 89-152).

         On September 23, 2016, BIA filed a Third-Party Complaint (“T-P Compl.”) against Central Insurance Agency, Inc. (“Central”), an insurance advisor with which BIA consulted, for contribution and indemnification. On December 9, 2016, Central filed a Motion to Dismiss BIA's Third-Party Complaint pursuant to Federal Rules of Civil Procedure 14(a) and 12(b)(6), (ECF 29, “Central's Mot.”), to which BIA filed an Opposition on January 11, 2017 (ECF 42, “BIA's Opp'n”).

         For the following reasons, Central's Motion to dismiss BIA's Third-Party Complaint will be DENIED in part and GRANTED in part.

         II. Factual Background

         The following facts are taken from the Complaint and Third-Party Complaint, and are accepted as true for purposes of the pending motion. See Fed.R.Civ.P. 12(b)(6); United States Express Lines, Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002). In the Spring of 2013, Plaintiff met Steven Peterson (“Peterson”), who was engaged in the business of providing “vaulting services” for ATMs in the New York City metropolitan area. Vaulting services involve supplying and loading ATMs with various denominations of cash, which is then dispensed to customers who draw out money utilizing their bank cards. (Compl. ¶¶ 10-14).

         In April 2013, Plaintiff decided to provide secured loans to Peterson's ATM vaulting business (the “Vaulting Loans”). (Id. ¶¶ 20-25). According to Plaintiff, an “explicit precondition and term of the Vaulting Loans” was that their proceeds were to be used exclusively as working capital-specifically, as vaulting cash-for Peterson's ATM vaulting business, and not for business expenses or other overhead. (Id. ¶¶ 26-27).

         In early 2014, Peterson requested additional loans from Plaintiff. Plaintiff worried that Peterson could abscond with funds in the vaulting accounts, however, and wanted to protect his investment with insurance. (Id. ¶¶ 30-32). Before making further loans to Peterson, Plaintiff required that he obtain “proper business insurance, ” including, inter alia, “(i) employee theft and dishonesty coverage (to, among other things, cover theft and dishonesty by Peterson)[.]” (Id. ¶ 33). Accordingly, Peterson obtained the Original Defendants as insurance brokers to obtain the coverage Plaintiff requested. (Id. ¶ 34).

         Plaintiff made it clear to Original Defendants that he wanted an insurance policy that would protect his interest-i.e. make him the “loss payee or other form of beneficiary”-against theft and dishonesty by employees, including-specifically-Peterson. (Id. ¶¶ 40-41). The Original Defendants represented to Plaintiff that they could obtain a commercial insurance policy (the “Policy”) which would name Plaintiff as the loss payee and would protect his interest against theft and dishonesty by employees, including Peterson. (Id. ¶¶ 44-46). In the Spring of 2014, in reliance on the Original Defendants' representations to Plaintiff, the ATM vaulting business obtained the Policy. (Id. ¶ 47). Despite Plaintiff's instructions, however, the Policy did not include Plaintiff as a loss payee, an insured, or other form of beneficiary. (Id. ¶ 48).

         Thereafter, the Original Defendants, both orally and in writing, repeatedly assured Plaintiff that the Policy protected and insured him against theft or dishonesty by Peterson. (Id. ¶¶ 50-53). Because of those assurances, in July 2014, Plaintiff requested, through the Original Defendants, that the Policy coverage for employee theft and dishonesty be raised to $2, 250, 000, which it was. (Id. ¶¶ 54-55). Plaintiff also made additional loans and advances to Peterson's ATM vaulting business in reliance upon the Original Defendants' representations. (Id. ¶ 56). Plaintiff was not officially added as a loss payee of the Policy, however, until December 2014. (Id. ¶ 58).

         In November 2014, Peterson admitted to Plaintiff that he had misappropriated about $900, 000 from the ATM vaulting business, of which $833, 835 he could not return to the vaulting funds (the “Theft”). (Id. ¶¶ 60, 65, 67). Upon learning of the Theft, Plaintiff immediately contacted the Original Defendants, who assured him that the losses to the ATM vaulting business due to the Theft were covered by the Policy. (Id. ¶¶ 61-63).

         In June 2015, after an investigation and numerous discussions with the Original Defendants, Plaintiff filed a claim as a loss payee under the Policy to recover for the Theft. (Id. ¶ 70). His claim, however, was rejected because-contrary to the explicit representations and assurances of the Original Defendants-the Policy did not cover losses resulting from theft or dishonesty of Peterson because Peterson was an owner of the ATM vaulting business. Unbeknownst to Plaintiff, the Policy expressly excepted from coverage any theft committed by owners of the ATM vaulting business. (Id. ¶¶ 71-72).

         In June 2016, while preparing to bring the instant action, Plaintiff learned that, at all relevant times, Abrams (1) had been convicted of felony insurance fraud and perjury in Pennsylvania, and, (2) as a result of that conviction, had his insurance license revoked, such that he was ...


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