Untimely lawsuit allowed to proceed

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Where a company failed to file a lawsuit against its carrier within the statute of limitations, but it alleged that it would have filed suit earlier if not for the intentional misrepresentation of the carrier’s agent, it set forth sufficient factual allegations to support equitable estoppel.

Background

On Nov. 9, 2022, Entrepraneur [sic] Dream Team filed its amended complaint against Certain Interested Underwriters of Lloyd’s Insurance Company, alleging breach of contract (Count One), breach of implied covenant of good faith and fair dealing (Count Two), bad faith (Count Three), actual fraud (Count Four) and constructive fraud (Count Five). After defendant filed a motion to dismiss, and plaintiff filed a motion for leave to file second amended complaint, the magistrate judge issued a report and recommendation, or R&R. Defendant filed objections to the R&R.

Lack of objections

No objections were received from the parties regarding the magistrate judge’s recommendation that the court grant defendant’s motion to dismiss as to Counts Two and Three and deny plaintiff’s motion to amend as to those same counts. After reviewing for clear error and finding none, the court will adopt these recommendations and all other portions of the R&R for which no specific objections were filed.

Agency

Defendant objects to the magistrate’s judge’s finding that Christopher Caldwell, the president of Cardinal Associates Inc., was “Lloyd’s agent” at the time he made the alleged misrepresentation to plaintiff. At this stage in the litigation, further factual development is required before the court can conclude whether or not Caldwell acted as Lloyd’s agent as a matter of fact. But, for the purposes of the pending motion to dismiss, the court finds that plaintiff has plausibly alleged that, “[a]cting as agent for Lloyd’s Insurance, Cardinal Associates, through Caldwell, represented to Entrepraneur that Lloyd’s Insurance had paid $177,000 in insurance proceeds to Anchor.”

Equitable estoppel

The insurance policy bars any claims from being brought after July 28, 2020, and plaintiff filed its present claim on July 28, 2022, missing the two-year deadline. Defendant objects to the magistrate judge’s finding that the proposed second amended complaint sets forth sufficient factual allegations to allege equitable estoppel. The court finds plaintiff sufficiently meets its burden in alleging equitable estoppel in the proposed second amended complaint because plaintiff alleges that it would have filed suit if not for Caldwell’s intentional misrepresentation.

Fraud

When alleging fraud, plaintiff must plead with particularity “the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” The court finds that the amended complaint sufficiently described the contents of the misrepresentation, as well as the motive or intent behind the misrepresentation and its timing.

Defendant alleges that the magistrate judge erred in concluding that plaintiff “presumably could correct” the deficiencies by filing an amended pleading that contained “allegations about the place of the alleged fraud.” Even though some other district courts in the Eastern District have denied leave to amend when a plaintiff has already been given two opportunities to plead its case, those decisions are not binding on this court. However, should plaintiff again fail to properly allege facts concerning the place of the alleged misstatement, the court will not be inclined to grant further leave to amend.

Defendant argues that the magistrate judge erred in finding that plaintiff’s reliance on Caldwell’s misstatement — that Lloyd’s had paid $177,000 in insurance proceeds to Anchor — was reasonable. Defendant contends that an “ordinary prudent person” would have asked Anchor about the payment during the litigation and plaintiff’s failure to do so is not justified and reasonable.  The court believes that there is not yet enough factual support in the record to conclude as a matter of law whether an ordinarily prudent person would be on notice of the need to investigate the alleged misrepresentation.

Defendant’s objection overruled. Report and Recommendation granted. Defendant’s motion to dismiss plaintiff’s amended complaint granted. Plaintiff’s motion seeking leave to file second amended complaint granted in part, denied in part.

Entrepraneur [sic] Dream Team v. Certain Interested Underwriters of Lloyd’s Insurance Company, Case No. 3:22-cv-529, Aug. 31, 2023. EDVA at Richmond (Young). VLW 023-3-541. 16 pp.