United States District Court, W.D. New York
NICHOLAS J. KRAATZ, Plaintiff,
USAA CASUALTY INSURANCE CO., Defendant.
DECISION AND ORDER
FRANK P. GERACI, JR. Chief Judge.
case is about a contract dispute. Nicholas J. Kraatz
(“Plaintiff”) entered into a homeowner's
insurance agreement (“the Policy”) with USAA
Casualty Insurance Company (“Defendant”). During
the life of that agreement, a snow storm hit Western New York
and Plaintiff's home was damaged. Sometime later,
Plaintiff reported the damage to Defendant and pursued a
claim for insurance coverage. Defendant conducted an
investigation and subsequently denied Plaintiff's claim.
Plaintiff alleges that, in denying his claim, Defendant
breached their contract. Defendant disagrees.
Defendant breached the contract is not the question currently
before the Court because Plaintiff also alleges fraud,
constructive fraud, negligent misrepresentation, and
violation of New York General Business Law § 349. ECF
No. 1. Plaintiff also seeks punitive and consequential
damages as well as declaratory and injunctive relief.
Id. In response to Plaintiff's complaint,
Defendant moved to dismiss Plaintiff's allegations of
fraud, constructive fraud, negligent misrepresentation,
violation of New York General Business Law § 349,
Plaintiff's requests for consequential and punitive
damages, and Plaintiff's request for injunctive relief.
ECF No. 7. In his response to Defendant's motion to
dismiss, Plaintiff moved for summary judgment on his claim
for declaratory relief. ECF No. 10. For the reasons stated
below, Defendant's motion to dismiss is GRANTED in part
and DENIED in part. Plaintiff's motion for summary
judgment is DENIED.
the Court is faced with a motion to dismiss and a motion for
summary judgment, some parsing of the facts is required. A
motion to dismiss tests the sufficiency of the complaint.
See Fed. R. Civ. P. 12(b)(6). To that end, the Court
must accept the factual allegations articulated in the
complaint as true and draw all reasonable inferences in the
plaintiff's favor. Faber v. Metro. Life Ins.
Co., 648 F.3d 98, 104 (2d Cir. 2011). Conversely, a
motion for summary judgment tests the sufficiency of the
evidence. See Fed. R. Civ. P. 56(a). When ruling on
a motion for summary judgment, the Court must determine
“whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is
so one-sided that one party must prevail as a matter of
law.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 251-52 (1986). In doing so, the Court must resolve
all ambiguities and draw all reasonable inferences in favor
of the non-moving party. See Giannullo v. City of New
York, 322 F.3d 139, 140 (2d Cir. 2003).
Plaintiff's Factual Allegations
December 17, 2013, Plaintiff entered into a one-year contract
for homeowner's insurance with Defendant. ECF No. 1-1.
The Policy covered, among other things, certain “named
perils” including “[w]eight of ice, snow or
sleet, which causes damage to property contained in a
building.” Id. at 30; ECF No. 1, ¶57. The
Policy conditioned coverage on Plaintiff's performance of
certain duties, including “promptly notify[ing]
[Defendant] or [Defendant's] agent of the loss” and
“keep[ing] an accurate record of repair
expenses.” ECF No. 1-1, 41.
November 17, 2014 to November 19, 2014, five to seven feet of
snow an ice accumulated throughout Western New York. ECF No.
1, ¶9. On November 19, 2014, the chimney on
Plaintiff's home, the door on Plaintiff's garage, and
the roof on Plaintiff's shed collapsed under the weight
of that snow and ice. Id. at ¶11. Through the
hole left by the collapsed chimney, snow and ice began to
accumulate inside Plaintiff's home. Id. Over the
next three days, the temperature in Western New York rose to
60 degrees. Id. at ¶¶10, 12. That
temperature increase caused the snow and ice that had
accumulated inside Plaintiff's home to melt. Id.
at ¶12. When the water came into contact with electrical
wiring, circuits shorted and fires ignited. Id. at
days after his property was damaged, Plaintiff called
Defendant's customer service number to notify Defendant
of the damage. Id. at ¶16. During that call,
Plaintiff spoke to a claims representative for 14 minutes.
Id. Despite the Policy language that indicated
Defendant would cover the cost of damage caused by the weight
of snow and ice, the claims representative informed Plaintiff
that his claim would be denied. Id. at ¶17. The
claims representative said that the damage to his garage
might be covered, but the damage to his home would not be.
Id. Further, the claims representative told
Plaintiff that because of his high deductible, “it
would not be in [his] best interest to pursue a claim at that
time.” Id. at ¶18.
took the claim's representative's advice and did not
pursue a claim at that time. Id. Instead, he took
out a second mortgage on his home to cover the costs of the
repairs. Id. at ¶21. On November 5, 2015, the
principal balance on the second mortgage was $173, 041.78.
Id. at ¶21. On November 6, 2015, the cost of
repairs totaled $171, 873.24 and the expenses for replacing
damaged personal property totaled $31, 000. Id. at
months after the storm, Plaintiff's friend who works in
the insurance business told Plaintiff that he should again
attempt to pursue an insurance claim. Id. at
¶24. Taking that advice, Plaintiff contacted Defendant
on August 11, 2015. Id. This time, Defendant sent an
engineer to inspect the damage to Plaintiff's property.
Id. Nonetheless, on September 4, 2015, Defendant
sent Plaintiff a letter denying his claim. Id. at
¶25. The denial letter stated that “[t]he claim
was not reported promptly and documentation of the cause of
loss and damages is not available for review.”
Id. at ¶27; ECF No. 1-2. The denial letter did
not include a claim number, id. at ¶32, nor did
it inform Plaintiff that he had a right to dispute the denial
with the New York Department of Financial Services.
Plaintiff received Defendant's denial letter,
Plaintiff's attorney contacted Defendant and requested
that it reverse its coverage decision. Id. at
¶35. At first, Defendant refused. Id. But after
some correspondence between the parties, Defendant withdrew
its denial and reopened its investigation of the damage to
Plaintiff's property. Id. at ¶¶35-37.
Defendant demanded that Plaintiff submit to an examination
under oath and produce a number of documents. Id.
Plaintiff agreed to submit to an examination that was limited
to the subject to timeliness, but Defendant refused to limit
its investigation. Id. at ¶38. At that point,
Plaintiff initiated this action. ECF No. 1.
Material Undisputed Facts
parties agree that Plaintiff notified Defendant of the damage
to his home and that Defendant conducted an investigation and
denied coverage. ECF Nos. 10-7, ¶¶8-9; 17,
¶¶8-9. They further agree that, in its denial
letter, Defendant stated that it had “concluded its
investigation of [Plaintiff's] loss, ” explained
that “[t]he claim was not reported promptly and
documentation of the cause of loss and damages is not
available for review, ” and noted that coverage was
conditioned on Plaintiff fulfilling his duties to notify
Defendant promptly of a loss, protect and repair the
property, and submit to Defendant's investigation. ECF
Nos. 10-7, ¶¶10-12; 17, ¶¶10-12.
parties disagree about the cause of the damage, the date of
notification, and the substance of Plaintiff's
conversation with Defendant's claims representative. ECF
Nos. 10-7, ¶¶2-7; 17, ¶¶2-7. Defendant
disputes whether the damage to Plaintiff's property was
caused by the weight of snow and ice, when the electrical
fires occurred, and the extent of the loss. ECF No. 17,
¶2. Further, Defendant disputes whether Plaintiff first
reported the loss on December 1, 2014. Id. at
¶3-6. Finally, Defendant disputes that Plaintiff acted
on the advice of its claims representative when Plaintiff
refrained from formally pursuing his claim until August 11,
2015. Id. at ¶7.
Defendant's Motion to Dismiss
has moved to dismiss seven of Plaintiff's claims. ECF No.
7. Defendant argues that Plaintiff's complaint fails to
state a claim of fraud, constructive fraud, negligent
misrepresentation, violation of New York General Business Law
§ 349, punitive damages, consequential damages, and
injunctive relief. Id.
succeed on a motion to dismiss under Rule 12(b)(6), the
defendant must show that the complaint contains insufficient
facts to state a claim for relief that is plausible on its
face. Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555-56 (2007). A complaint is plausible when the plaintiff
pleads sufficient facts that allow the Court to draw
reasonable inferences that the defendant is liable for the
alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). Plausibility “is not akin to a probability
requirement, ” rather plausibility requires “more
than a sheer possibility that a defendant has acted
unlawfully.” Id. (quotation marks omitted).
“Where a complaint pleads facts that are merely
consistent with a defendant's liability, it stops short
of the line between possibility and plausibility of
entitlement to relief.” Id. (quotation marks
and citation omitted). A pleading that consists of
“labels and conclusions” or “a formulaic
recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. Nor does a
complaint suffice if it tenders “naked
assertion[s]” devoid of “further factual
enhancement.” Id. at 557.
reasons discussed below, Defendant's motion to dismiss
Plaintiff's constructive fraud, negligent
misrepresentation, punitive damages, and New York General
Business Law claims is granted and those claims are
dismissed. Defendant's motion to dismiss as it relates to
Plaintiff's fraud claim, request for injunctive relief,
and claim for consequential damages is denied.
first moves to dismiss Plaintiff's claim of fraud. To
state a claim of fraud under New York law, a plaintiff must
allege that the defendant (1) knowingly, (2) made a statement
of material fact, (3) that was false, (4) on which the
plaintiff justifiably relied, (5) to the plaintiff's
injury. Apace Commc's, Ltd. V. Burke, 522
F.Supp. 29 509, 514 (W.D.N.Y. 2007) (citing Lerner v.
Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006). In
alleging those elements, in addition to meeting the
requirements of 12(b)(6), the plaintiff must satisfy
heightened pleading requirements. Fed.R.Civ.P. 9(b). Rule
9(b) requires the plaintiff to “state with
particularity” the circumstances constituting fraud and
“allege generally” intent, knowledge, and other
conditions of a person's mind. Id. In other
words, “Rule 9(b) places two further burdens on fraud
plaintiffs-the first goes to the pleading of the
circumstances of the fraud, the second to the pleading of the
defendant's mental state.” Loreley Financing
(Jersey) No. 3 Ltd. V. Wells Fargo Securities, LLC, 797
F.3d 160, 171 (2d Cir. 2015). In pleading the circumstances
of the fraud, the plaintiff must “(1) specify the
statements that the plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and when the statements
were made, and (4) explain why the statements were
fraudulent.” Minnie Rose LLC v. Yu, 169
F.Supp.3d 504, 511 (S.D.N.Y. 2016) (quoting DiMuro v.
Clinique Labs, LLC, 572 Fed. App'x 27, 30 (2d Cir.
2014). Regarding the Defendant's mental state, the
plaintiff must “plead the factual basis which gives
rise to a ‘strong inference' of fraudulent
intent.” Stephenson v. PricewaterhouseCoopers,
LLP, 482 Fed.Appx. 618, 622 (2d Cir. 2012) (quoting
Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d
claims that Plaintiff has failed to satisfy both Rule 9(b)
requirements. First, Defendant claims that Plaintiff has
failed to specify a fraudulent statement. ECF No. 7, 5.
Second, Defendant claims that, to the extent that Plaintiff
has identified a fraudulent statement, Plaintiff has not
sufficiently alleged fraudulent intent. Id. at 5.
The Court disagrees. Plaintiff has alleged the circumstances
of the fraud ...