OPINION AND ORDER
JOHN G. KOELTL, District Judge.
The plaintiffs, Michael Sher and Paula Sher, bring this purported class action asserting several causes of action against the defendant, Allstate Insurance Company ("Allstate"). The plaintiffs' claims arise out of Allstate's alleged practice of requiring that insured property owners replace or complete repairs of damaged property within 180 days of receipt of an actual cash value payment from Allstate. Allstate requires the completion of such repairs or replacement before reimbursing insureds for such costs over-and-above the actual cash value payment. The Shers suffered an insured fire loss in 2008 but, because they could not complete replacement or repairs within 180 days of receipt of the actual cash value payment, they were denied replacement/repair cost coverage.
The Second Amended Complaint alleges nine causes of action. Count I alleges breach of the initial insurance contract. Count II alleges that the plaintiffs' failure to comply with the 180 day condition should be excused on grounds of impossibility. Count III requests a declaratory judgment. Count IV alleges breach of an alleged contract settling the plaintiffs' claims. Count V alleges fraud. Count VI alleges that Allstate owed the plaintiffs a fiduciary duty, which it allegedly breached. Count VII requests relief under New York General Business Law ("GBL") section 349, which prohibits deceptive business acts and practices. Count VIII alleges that Allstate provided illusory coverage and seeks the return of a portion of the premiums charged. Count IX alleges that Allstate should be estopped from interpreting the 180-day provision in any manner at variance with the representations Allstate made to the New York State Insurance Department ("NYSID") under the doctrine of regulatory estoppel. The defendant now moves to dismiss the plaintiffs' claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons explained below, the motion to dismiss is granted.
In deciding a motion to dismiss pursuant to Rule 12(b)(6), the allegations in the complaint are accepted as true, and all reasonable inferences must be drawn in the plaintiff's favor. McCarthy v. Dun & Bradstreet Corp. , 482 F.3d 184, 191 (2d Cir. 2007). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden , 754 F.2d 1059, 1067 (2d Cir. 1985). The Court should not dismiss the complaint if the plaintiff has stated "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007). "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." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). While the Court should construe the factual allegations in the light most favorable to the plaintiff, "the tenet that a court must accept as true all of the allegations contained in the complaint is inapplicable to legal conclusions." Id . When presented with a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents that are referenced in the complaint, documents that the plaintiffs relied on in bringing suit and that are either in the plaintiffs' possession or that the plaintiffs knew of when bringing suit, or matters of which judicial notice may be taken. See Chambers v. Time Warner, Inc. , 282 F.3d 147, 153 (2d Cir. 2000).
The following facts are accepted as true for the purposes of this motion to dismiss, unless otherwise indicated.
Allstate sells property insurance policies in New York that cover, among other things, damage due to fire. (Second Amended Complaint ("SAC") ¶ 1.) In the 1990s, as part of an overhaul of its business model designed to increase profits, Allstate introduced changes to its property damage policies in New York and elsewhere. (SAC ¶¶ 63-71.) Allegedly in furtherance of higher profits, Allstate changed the language in its property damage policies regarding coverage of replacement or repair costs. Prior to the change, the policies provided:
If you decide not to repair or replace the damaged property, settlement will be on an actual cash value basis, not to exceed the limit of liability applicable to the building. You may make claim within 180 days after the date of the loss for any additional payment on a replacement cost basis if you repair the damaged property.
(SAC ¶ 72.) Under this provision, an insured was only required to "make claim" within 180 days of the date of the loss to qualify for additional payment. (SAC ¶ 72.) An insured was not required to complete or even start repairs within 180 days of the loss. (SAC ¶ 72.)
In the 1990s, Allstate drafted new policy terms that restricted replacement and repair cost coverage. (SAC ¶ 73.) The updated policy provision (the "180-day provision") provides:
If you do not repair or replace the damaged building structure, payment will be on an actual cash value basis... You may make claim for additional payment... if you repair or replace the damaged, destroyed, or stolen covered property within 180 days of the actual cash value payment.
(SAC ¶ 74.) Allstate interprets its updated policy language to require that an insured complete repairs and replacement of the insured's damaged or destroyed home and its contents within 180 days of the date Allstate paid the actual cash value ("ACV") of the covered property (the "completion requirement"). (SAC ¶ 78.) Thus, under Allstate's interpretation, Allstate's policies entitled its insured to the actual cash value of the damaged property and, if repairs or replacements were completed within 180 days of the actual cash value payment, any additional cost of repair or replacement in excess of the actual cash value.
Allstate's updated policy also contains Building Structure Extended Reimbursement coverage (the "Extended Limits endorsement") that provides the insured with coverage for the amount it costs to repair or replace the damaged insured property up to 125 percent of the stated policy limit. (SAC ¶ 93.) Allstate applies the 180-day provision completion to requirement to the Extended Limits endorsement as well. (SAC ¶ 93.) The Allstate policy further provides that "[w]hen the policy provisions conflict with the statutes of the state in which the residence premises is located, the provisions are amended to conform to such statutes." (SAC ¶ 94.)
In 1994, NYSID approved the changes to Allstate's policy, including the 180-day provision. (SAC ¶ 75.) The plaintiffs allege that although NYSID approved the policy changes, it did not "knowingly" approve the 180-day provision. (SAC ¶ 75.) According to the plaintiffs' confidential witness, a former employee of NYSID, NYSID required Allstate to describe changes in the policy language in detail, but Allstate did not disclose the 180-day provision completion requirement as a departure from the prior "make claim" requirement. (SAC ¶ 75.) The plaintiffs allege that Allstate "intentionally engaged in deceptive acts" by seeking NYSID approval without disclosing the 180-day provision completion requirement in order to deprive insureds of policy benefits. (SAC ¶ 194.) The plaintiffs do not allege that NYSID ever withdrew the approval issued in 1994.
Since the date of approval, Allstate has issued policies containing the 180-day provision without expressly informing customers of the completion requirement. (SAC ¶ 77.) The plaintiffs allege that Allstate "intentionally obscured and concealed" the 180-day provision completion requirement from consumers by refusing to allow consumers to see the policy language until after the policy had been purchased. (SAC ¶¶ 77, 197-202.) The plaintiffs allege that Allstate manipulated the timing of their issuance of ACV payments to make it objectively impossible for any insured to repair or replace damaged property completely within 180 days of the ACV payment. (SAC ¶ 169.)
In 2009, NYSID directed Allstate to replace the 180-day provision. (SAC ¶ 114.) As of April 2011, Allstate has issued new policies that allow for at least two years for the insured to undertake repairs, rebuild, or replace damaged property and still obtain repair/replacement cost coverage. (SAC ¶ 116.)
The named plaintiffs, Michael and Paula Sher, suffered an insured fire loss in July 2008 when their home was struck by lightning. (SAC ¶ 17.) Shortly after the fire, the plaintiffs hired a contractor to undertake emergency repairs to their home. (SAC ¶ 18.) In August 2008 the plaintiffs informed Allstate of their intent to repair their home. (SAC ¶ 18.) In September 2008, the plaintiffs received a repair estimate of $733, 098, which they forwarded to Allstate. (SAC ¶ 20.)
The plaintiffs received a check from Allstate for $388, 000, the actual cash value, on December 10, 2008. (SAC ¶ 23.) Despite consistent efforts by the plaintiffs to repair their home, they were unable to obtain a building permit until August 24, 2009, two months after the 180-day window had already closed. (SAC ¶¶ 24-36, 37.) The repairs were not completed until February 2011. (SAC ¶ 43.) Because the plaintiffs were unable to complete repairs within the 180-day period, Allstate refused to pay $97, 000 of additional costs. (SAC ¶¶ 45-48.)
The plaintiffs also received ACV payments for their personal property on July 13, 2009 ($179, 519.16) and September 15, 2009 ($42, 991.81). (SAC ¶ 49.) The plaintiffs failed to replace many items of personal property before the 180-day provision window expired and therefore Allstate refused to pay approximately $70, 000 for personal property losses. (SAC ¶¶ 50-51.)
In support of the class allegations, the Second Amended Complaint cites similar occurrences involving seven unnamed Allstate insureds. (SAC ¶¶ 143-49.) The plaintiffs allege that there are "thousands of such victims." (SAC ¶ 150.)
The plaintiffs brought this action pursuant to the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. § 1332(d). The defendant now moves to dismiss the plaintiffs' Second Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. With the exception of Counts II and IX, each of the other counts is nearly identical to claims that were brought and dismissed in a suit with similar facts. See Woodhams v. Allstate Fire & Cas. Co. , 748 F.Supp.2d 211 (S.D.N.Y. 2010), aff'd, 453 F.Appx. 108 (2d Cir. 2012) (Summary Order). The plaintiffs argue that this case involves additional facts that resolve defects that led to the dismissal of Woodhams. As in Woodhams, each of the plaintiffs' claims, with the exception of the two new claims, relies on the assertion that the 180-day provision completion requirement is prohibited by New York Insurance Law ("NYIL") section 3404, which sets minimum terms and provisions for fire insurance policies. The plaintiffs also claim that the 180-day provision is inconsistent with the terms of the insurance contracts, and that Allstate misleadingly offered policies promising replacement or repair coverage while knowing that the 180-day provision would bar most losses from coverage.
There are two claims in this suit that were not brought in Woodhams. In Count II, the plaintiffs claim that the impossibility of completing a repair or replacement within 180 days of the actual cash value payment requires excusal of the 180-day condition for coverage. In Count IX, the plaintiffs argue that Allstate's failure to explain to NYSID that there was a completion requirement estops Allstate from now interpreting the policy to require completion.
Allstate argues that the 180-day provision is not contrary to New York law and that the performance required by the provision is not impossible or inconsistent with any relevant contract. It also argues that none of Allstate's communications were deceptive or misleading and that the plaintiffs failed to plead fraud with particularity, in violation of Federal Rule of Civil Procedure 9(b). Finally, Allstate argues that it did not owe the plaintiffs a fiduciary obligation, that any claim for rescission is barred by the filed rate doctrine, and that the plaintiffs have not stated a claim for regulatory estoppel.
The central issues animating nearly all of the plaintiffs' claims are (1) whether the 180-day provision completion requirement is inconsistent with New York law and (2) whether Allstate's interpretation is inconsistent with the terms of the insurance policy. These issues will be addressed prior to assessing each of the claims individually.
The first overarching question is whether the 180-day provision completion requirement is inconsistent with the New York standard fire policy. New York law requires that the terms and provisions of fire insurance policies must be "no less favorable to the insured than those contained in the standard fire policy" provided in section 3404(e). N.Y.I.L § 3404(f)(1)(A). The standard fire policy ("SFP") provides that an insurer must afford to the insured:
THE LESSER AMOUNT OF EITHER:
1) THE ACTUAL CASH VALUE OF THE PROPERTY AT THE TIME OF THE LOSS, OR
2) THE AMOUNT WHICH IT WOULD COST TO REPAIR OR REPLACE THE PROPERTY WITH MATERIAL OF LIKE KIND AND QUALITY WITHIN A REASONABLE TIME AFTER SUCH LOSS, WITHOUT ALLOWANCE FOR ANY INCREASED COST OF REPAIR OR RECONSTRUCTION BY REASON OF ANY ORDINANCE OR LAW REGULATING CONSTRUCTION OR REPAIR, AND WITHOUT ...