The opinion of the court was delivered by: Irenas, Senior District Judge
This dispute arises out of Defendant Continental Casualty Company's ("Continental") denial of insurance coverage to its policyholder, Plaintiff Diebold, Inc. ("Diebold").*fn1 Presently before the Court is Continental's Motion to Dismiss, pursuant to Fed. R. Civ. P. 12(b)(6), the Amended Complaint.
For the reasons set forth below, the Motion will be granted in part and denied in part.
Diebold services and replenishes ATM machines with money from banks and other financial institutions, often through subcontracts with armored car vehicle companies. Pursuant to contracts between Diebold and its ATM customers, the ATM customers entrusted monies to Diebold to be deposited in the ATM machines. In practice, however, the ATM customers often wired money directly to the armored car subcontractors who actually performed the cash replenishment. One of the armored car subcontractors Diebold used was Tri-State Armored Services, Inc. ("Tri-State").
Under the cash replenishment arrangements between Tri-State and Diebold's ATM Customers, the ATM Customers would advise Tri-State of the amounts of currency to be placed in each of their ATMs and the schedule on which the replenishments were to take place. The ATM Customers would wire-transfer funds into the bank account for use by Tri-State in performing replenishments for Diebold's ATM Customers. Tri-State would withdraw the funds needed to perform the replenishments, have the funds converted to currency, place the currency in cassettes for loading into ATMs, and place the loaded cassettes into the ATM Customers' ATMs. When Tri-State placed the loaded cassettes into the ATMs, it removed the cassettes that were in the ATMs, which generally contained some remaining currency. This [remaining] currency is referred to as residual funds or 'residuals.' Under Tri-State's replenishment arrangements with the ATM Customers, Tri-State was to return the residuals to the ATM Customers. In order to achieve this, Tri-State would convey the [residual funds] cassettes back to Tri-State's vault location for emptying, counting and reconciliation against the ATMs' records of withdrawals since the previous replenishment, and thereafter would return the residual funds to the ATM Customers.
Five Tri-State employees conspired to steal the money belonging to Diebold's ATM Customers, and, in 2001, they pleaded guilty to conspiracy, money laundering, and tax evasion charges. On March 1, 2001, Tri-State terminated its operations. The next day it filed a Chapter 7 bankruptcy petition.
In March, 2003, Diebold filed a proof of loss with Continental setting forth "$8,992,038.33 as its potential loss" ("the Tri-State Loss") (Amend. Compl. ¶ 48).*fn2 Diebold further alleges that "[a]t the direction of [Continental], Diebold agreed to attempt first to recover the Tri-State Loss from Tri-State's fidelity insurance company, Great American Insurance Companies ("Great American").*fn3 However, Great American succeeded in its bankruptcy court adversary proceeding to rescind Tri-State's insurance policy on account of Tri-State's equitable fraud in procuring insurance coverage.*fn4 On April 23, 2007, this Court affirmed the Bankruptcy Court's ruling.*fn5
Around the same time (April, 2007), Diebold submitted another proof of loss for $6,730,832.61, which reflected the $2,038,640.58 that was received and distributed to Diebold customers through the bankruptcy court.
Diebold claims that Continental "refused to timely satisfy its obligation to Diebold, and has not yet even advised Diebold of its coverage position for the loss as of the date of this Complaint." (Amend. Compl. ¶ 67). The Amended Complaint further alleges that Continental "has denied that a deferment of a receivable that is due and owing constitutes a sustained loss because '[Diebold] has not yet repaid its customers;'" and has also asserted that "Diebold 'may be unable to satisfy the Ownership provision of the policy,' because 'the money taken was not owned or held by [Diebold]. Rather, the various contracts and actual course of dealings between the banks and Tri-State show that the money was owned by the customers . . . and held by Tri-State.'" (Id. ¶¶ 71-72). Diebold asserts that Continental's position directly contradicts repeated representations Continental made to Diebold assuring it that losses such as the Tri-State Loss would be covered under the policy.
Diebold's Amended Complaint asserts six counts: (1) declaratory judgment "that [Continental] is obligated, in accordance with the [insurance policy], to provide insurance coverage for [Diebold's] claim;" (2) breach of the insurance policy; (3) breach of the duty of good faith and fair dealing / bad faith; (4) breach of fiduciary duty; (5) reformation of the insurance policy; and (6) misrepresentation. Continental moves to dismiss each count of the Amended Complaint.
Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint "for failure to state a claim upon which relief can be granted." In considering a Rule 12(b)(6) motion, the Court accepts as true all of the factual allegations contained in the complaint and any reasonable inferences that can be drawn therefrom. Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996). Dismissal of claims under Rule 12(b)(6) should be granted only if "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 (1957). Although the Court must assume as true all facts alleged, "[i]t is not . . . proper to assume that the [plaintiff] can prove any facts that [are] not alleged." Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).
Before reaching the merits of the present motion, the Court is faced with a choice of law issue. Continental asserts that Illinois law applies, while Diebold asserts that New Jersey law applies.*fn6
This Court, sitting in diversity, applies New Jersey choice of law rules. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941). "Before a choice of law question arises . . . there must actually be a conflict between the potentially applicable bodies of law. Where there is no difference between the laws of the forum state and those of the foreign jurisdiction, there is a 'false conflict' and the court need not decide the choice of law issue." Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 813 (3d Cir. 1994)(Becker, J.).
As will be apparent in this Court's discussion of each claim, New Jersey law and Illinois law do not materially differ with respect to the legal ...