299 ("a complaint seeking cancellation of [an insurance] . . . policy on the ground of fraud will not be insufficient because of a failure to use the word 'fraud'").
Union Mutual Insurance Co. v. Bleetstein, 3 F.R.D. 205, 206 (E.D.N.Y. 1942) (Campbell, J.), upon which plaintiffs rely, can be distinguished from the present case. In Union Mutual Insurance Co., plaintiff's action was brought to rescind two life insurance policies solely because of misrepresentation. Id. at 206. While the court noted that "nowhere is fraud mentioned in the complaint," it did not base its decision only on these grounds, but instead examined the content of the complaint, concluding that it was not laid in fraud. Id. Here, plaintiffs not only bring a cause of action based on misrepresentation during the formation of the insurance contract but also bring a cause of action based on the intentional submission of false information when making a claim pursuant to that contract.
Defendant contends that the complaint should be dismissed because plaintiffs failed to state a cause of action for fraud. The general rule is that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief," Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Salahuddin v. Cuomo, 861 F.2d 40, 43 (2d Cir. 1988); Hudson's Bay Fur Sales Canada, Inc., No. 90 Civ. 8026, 1991 U.S. Dist. LEXIS 4552, 1991 WL 60377, at *2 (S.D.N.Y. Apr. 8, 1991) (Carter, J.) ("a claim will be dismissed only if its allegations would not entitle the claimant to relief on any possible theory"), and "the court must consider the legal sufficiency of the complaint, not the weight of evidence which might be offered at trial." Granat v. Center Art Galleries -- Hawaii, Inc., No. 91 Civ. 7252, 1993 U.S. Dist. LEXIS 14092, 1993 WL 403977, at *2 (S.D.N.Y. Oct. 6, 1993) (Carter, J.). The court must assume the truth of a plaintiff's allegations in the complaint and draw inferences in favor of the pleader. Id. ; Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989); CPC Int'l Inc. v. McKesson Corp., 70 N.Y.2d 268, 284, 519 N.Y.S.2d 804, 514 N.E.2d 116 (1987).
Nautica maintains that the complaint does not allege the necessary elements to establish a common law fraud claim. To state a claim for common law fraud in New York, plaintiffs must allege "misrepresentation of a material fact, falsity of that representation, scienter, reliance and damages." Mallis v. Bankers Trust Co., 615 F.2d 68, 80 (2d Cir. 1980), cert. denied, 449 U.S. 1123, 67 L. Ed. 2d 109, 101 S. Ct. 938 (1981) (emphasis omitted); accord Flickinger v. Harold C. Brown & Co., Inc., 947 F.2d 595, 599 (2d Cir. 1991); Moll v. U.S. Life Title Ins. Co. of New York, 654 F. Supp. 1012, 1027 (S.D.N.Y. 1987) (Leisure, J.), vacated on other grounds, 700 F. Supp. 1284 (S.D.N.Y. 1988) (Leisure, J.); Kamerman v. Steinberg, 113 F.R.D. 511, 513 (S.D.N.Y. 1986) (Motley, J.).
The complaint alleges that Nautica and/or its agents and brokers misrepresented the age and value of the ALVA I, (Compl. PP 7, 9, 13, 14, 15), and other specifications. (Compl. P 18.) In particular, the plaintiffs allege that Nautica "represented that the yacht was built in July, 1988[,] at the Manoleskos Shipyard located in Pireaus, Greece, and that the vessel had a value of one million dollars ($ 1,000,000)," (Compl. P 7), when "in truth and in fact, the 'ALVA I' was not built in 1988, but was a conversion of the yacht 'MARY,' built in 1967 in South Africa and registered in Greece under the ownership of Al Aydi Maritime Company Limited," (Compl. P 14), and "in truth and in fact," "the true value of the 'ALVA I' was not one million dollars ($ 1,000,000) . . . , but rather . . . did not exceed $ 200,000." (Compl. P 15.) The complaint alleges that Nautica's representations during the formation of the policy were "materially false and misleading." (Compl. P 13.) Plaintiffs also allege that Nautica provided "specifications of the 'ALVA I' allegedly prepared by a naval architect on or about April 23, 1986" which were "false." (Compl. PP 12, 18.) See Granat, 1993 U.S. Dist. LEXIS 14092, 1993 WL 403977, at *3 ("false statements constitute misrepresentations and may be actionable in fraud" under certain circumstances). These misrepresentations may be construed as material and may give rise to a claim of fraud if they were rendered falsely. See Granat, 1993 U.S. Dist. LEXIS 14092, 1993 WL 403977, at *2. Indeed, plaintiffs allege that had they known that ALVA I was much older and worth substantially less than defendant claimed they may have provided a different type and amount of insurance. See id. ; see, e.g., CPC Int'l, Inc., 70 N.Y.2d at 285-86 (financial projections materially misrepresenting business' financial condition sufficiently stated a cause of action for common-law fraud).
The complaint alleges that the misrepresentations were "known by defendant to be false and misleading when made," (Compl. P 13, 18), and that defendant's "concealment and failure to disclose material facts" was "willful." (Compl. P 17.) See Granat, 1993 U.S. Dist. LEXIS 14092, 1993 WL 403977, at *3 ("knowledge of falsity or reckless pretense may establish scienter required for a fraud claim"). The complaint asserts that "in reliance on the submissions by the defendant and/or its agents, plaintiffs agreed to provide insurance on the hull and machinery of the yacht 'ALVA I' for a period of twelve months beginning June 14, 1992 in the amount of one million dollars ($ 1,000,000)," and that the "insured value . . . was agreed to by plaintiffs based on the material representations." (Compl. P 10.) The complaint states that "defendant intended that plaintiffs rely on the false information," (Compl. P 19), and that plaintiffs did in fact rely on that information to their detriment. (Compl. P 20.) In fact, the complaint alleges that "plaintiffs would not have agreed to provide the coverage for the 'ALVA I' had they been provided with accurate information concerning the vessel's age and value, or plaintiffs would have insured the vessel on substantially different terms." (Compl. P 16.) Plaintiffs have alleged all the elements of fraud, and if these allegations are proven, then there has been fraud on the part of Nautica against plaintiffs.
Defendant argues that plaintiffs' allegations are not sufficiently supported by facts. However, in order to state a valid cause of action for common-law fraud, the Court of Appeals of New York has held that it suffices for the plaintiff to allege that "defendant knowingly uttered a falsehood intending to deprive the plaintiff of a benefit and that the plaintiff was thereby deceived and damaged." CPC Int'l Inc., 70 N.Y.2d at 285; see also Channel Master Corp. v. Aluminium Ltd. Sales, Inc., 4 N.Y.2d 403, 406-407, 176 N.Y.S.2d 259, 151 N.E.2d 833 (1958) (complaint contained all the necessary elements of a good cause of action for fraud for rescission of contract where complaint described misrepresentations and recited other elements of fraud). Here, the complaint adequately sets forth a claim upon which relief could be granted, and consequently defendant's motion to dismiss the claim is denied.
Nautica also contends that the plaintiffs' complaint does not plead fraud with sufficient detail. See Hunter v. H.D. Lee Co., Inc., 563 F. Supp. 1006, 1012 (N.D.N.Y. 1983) ("[a] pleading that simply avers the technical elements of fraud does not have sufficient informational content to satisfy" the requirements of Rule 9(b), F. R. Civ. P.); Wright & Miller, supra, § 1297 at 612. Rule 9(b), F.R. Civ. P., provides that "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." This is an exception to the generally liberal scope of pleadings allowed by Rule 8, F.R. Civ. P. See Ross v. A.H. Robins Co., 607 F.2d 545, 557 (2d Cir. 1979), cert. denied, 446 U.S. 946, 64 L. Ed. 2d 802, 100 S. Ct. 2175 (1980). Conclusory allegations regarding fraudulent conduct do not suffice -- specific fraudulent acts or statements must be alleged. Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 114 (2d Cir. 1982), Rodman v. Grant Foundation, 608 F.2d 64, 73 (2d Cir. 1979), Segal v. Gordon, 467 F.2d 602, 606 (1972) (fraud allegations "wholly conclusory in nature" were a "fatal deficiency"); see Ross, 607 F.2d at 557. Rule 9(b) is satisfied when the complaint includes:
(1) precisely what statements were made in what documents or oral representations or what omissions were made,
(2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making the same),
(3) the content of such statements and the manner in which they misled the [victim], and