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Aames v. Fidelity and Guaranty Insurance Underwriters, Inc.

United States District Court, D. New Jersey

September 25, 2014

STEPHANIE AAMES, Plaintiff,
v.
FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC., et al., Defendants.

MEMORANDUM OPINION & ORDER

JOSEPH H. RODRIGUEZ, District Judge.

This matter is before the Court cross-motions for partial summary judgment on Count One of the Amended Complaint in which Plaintiff Stephanie Aames seeks a Declaratory Judgment that her homeowners' insurance policy holder, Defendant Fidelity and Guaranty Insurance Underwriters, Inc., failed to provide notice of nonrenewal of her Policy # XXXXXXXXXXXXX and, as a result, insurance coverage continued to be effective as of September 28, 2012, the date a fire destroyed Plaintiff's Pennsville, New Jersey house; Fidelity argues that the policy was effectively nonrenewed prior to the fire. Oral argument was heard on the cross-motions on September 10, 2014 and the record of that proceeding is incorporated here.

Factual Background & Procedural History

This action arises from a September 28, 2012 house fire on Plaintiff's property located at 179 South Hook Road, Pennsville, New Jersey. According to the First Amended Complaint, on September 29, 2012, when Plaintiff notified her homeowners' insurance policy[1] holder, Defendant Fidelity and Guaranty Insurance Underwriters, Inc., of her loss, she was advised that her policy had been cancelled effective September 19, 2012, and not renewed.[2] (Am. Compl. ¶ 3.) Plaintiff alleges that she was not provided notice of this cancellation before the fire occurred on September 28, 2012, and therefore asserts a claim against Fidelity for a declaratory judgment that coverage remained in full force and effect. (Am. Compl. ¶ 5; Count One.) Plaintiff also alleges that Fidelity's cancellation and non-renewal of her policy was arbitrary, capricious, and unfairly discriminatory because it was based on prior losses; she therefore asserts that the cancellation and non-renewal was ineffective, and coverage remained in full force and effect. (Am. Compl. ¶ 8-10; Count Two.) Finally, Plaintiff claims that Fidelity breached its contractual obligation to provide insurance coverage. (Am. Compl. ¶ 13; Count Three.) Fidelity has maintained, since its original Answer, (Doc. No. 14), that it issued a Notice of Nonrenewal to Plaintiff on August 15, 2012, advising that the policy would not be renewed on September 19, 2012 because Plaintiff had sustained three or more losses within the previous five years, [3] rendering the risk ineligible for Fidelity's Homeowner Program. Hager Cert., Mar. 24, 2014, Ex. B.

Plaintiff also has sued her insurance agent, Defendant USI Insurance Services, for breach of contract (Am. Compl. Count Four) and negligence (Am. Compl. Count Five) because USI did not notify Plaintiff of the cancellation and non-renewal of her insurance policy, and failed to procure replacement coverage.

In addition, Plaintiff has sued her mortgage company, Defendant Wells Fargo Home Mortgage. As part of her mortgage loan agreement (1) Plaintiff was required to escrow monies to pay, among other things, casualty insurance premiums and (2) the mortgage holder agreed to keep the property insured. (Am. Compl. ¶ 27-28.) Plaintiff alleges that in July 2012, Wells Fargo received notice from Fidelity that the insurance on Plaintiff's property would not be renewed, but Wells Fargo failed to advise Plaintiff of such and failed to take any other steps to ensure that Plaintiff's property was covered. (Am. Compl. ¶ 32.) Therefore, Plaintiff has asserted a claim against Wells Fargo for breach of contract. (Am. Compl. Count Six.) With leave of Court, Plaintiff also added a claim against Wells Fargo for violation of RESPA, 12 U.S.C. § 2605(g) and N.J. Stat. Ann. § 17:16-F-18, because Wells Fargo allegedly failed to timely pay the premium for Plaintiff to obtain coverage from Selective Insurance Company, rather than Fidelity, as Plaintiff had requested in January and February of 2012. (Am. Compl. ¶ 39-44; Count Seven.)

On October 24, 2013, the New Jersey State Fire Marshal issued an Incident Report concerning the September 28, 2012 fire at Plaintiff's property. In his report, the Fire Marshal concluded that the fire was incendiary in nature with multiple points of origin. Hager Cert., Mar. 24, 2014, Ex. D. On November 1, 2013, Fidelity filed a Motion to Amend its Answer and assert a Counterclaim based upon the information provided by the Fire Marshal's Incident Report and the results of Fidelity's own investigation, which included a May 1, 2013 inspection of Plaintiff's property.

Prior to the filing of Fidelity's Motion, Wells Fargo had filed a Motion to Dismiss and Plaintiff cross-moved for leave to file an Amended Complaint. On December 11, 2013, this Court granted in part and denied in part Wells Fargo's Motion to Dismiss and granted Plaintiff's cross-motion to amend to allow her to assert the RESPA claim against Wells Fargo. Plaintiff filed a First Amended Complaint on December 18, 2013. On December 23, 2013, Fidelity filed an Answer to the First Amended Complaint and a Counterclaim, mirroring the proposed pleading that was the subject of its Motion to amend to include the defenses that the fire was incendiary in nature and that Plaintiff was involved in intentionally causing the fire in violation of the "Concealment or Fraud" provision of the homeowners' policy and a counterclaim against Plaintiff under New Jersey's Insurance Fraud Prevention Act, N.J. Stat. Ann. § 17:33(a)-1.

On January 8, 2014, the Honorable Karen M. Williams, United States Magistrate Judge, dismissed as moot Fidelity's Motion for Leave to file an Amended Answer and Counterclaim. The Judge determined that in light of Plaintiff's filing an Amended Complaint, leave of Court was not required for Fidelity to file its Answer to the Amended Complaint and Counterclaim. Aames v. Fidelity & Guaranty Ins. Underwriters, Inc., No. 13-cv-2008, Doc. 58 (D.N.J. Jan. 8, 2014). "The plain language of the Rule does not dictate the need for leave of court nor does it provide that a party respond only to amended portions of the amending pleading-to the contrary, the Rule states the required response is to the amended pleading." Id . As such, Fidelity has advanced the alternative defenses that its policy was not in effect at the time of the loss, but if it was, Plaintiff's actions constituted violations of the Concealment or Fraud condition of the policy and her claim would be further barred by the policy's Intentional Loss exclusion.

February 5, 2014, Plaintiff filed a Motion to Strike the Third, Fourth, and Fifth Affirmative Defenses contained in Fidelity's Answer to the First Amended Complaint and to Strike Fidelity's Counterclaim pursuant to Federal Rule of Civil Procedure 15(a) because they were filed without the Court's permission. Doc. No. 66. Alternatively, Plaintiff seeks to Dismiss the Third, Fourth, and Fifth Affirmative Defenses and the Counterclaim contained in Fidelity's Answer to the First Amended Complaint pursuant to Rule 12(b)(6) for failure to state a claim because the amendments allegedly have no basis in fact and are futile, or to strike the same pursuant to Rules 9(b), and 12(f) for failure to plead the allegations of fraud with particularity and for pleading an insufficient defense containing impertinent or scandalous matter. Specifically, Plaintiff argues that the results of Fidelity's own investigation into the fire is merely an opinion[4], not facts that would form a sufficient basis for a Counterclaim of fraud. Plaintiff also argues that the Fire Marshal's Report should be disregarded under Daubert because it is does not establish that it is based upon reliable principles and methods of fire investigation as established by the National Fire Protection Association.

Federal Rule of Civil Procedure 15 governs amendments to pleadings. See Fed.R.Civ.P. 15. The Rule provides that leave to amend shall be freely given when justice so requires. Fed.R.Civ.P. 15(a)(2). Thus, leave generally should be granted absent undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, or futility of amendment. Foman v. Davis, 371 U.S. 178, 182 (1962). The decision as to whether leave to amend a complaint should be granted is a matter committed to the sound discretion of the district court. Arab African Int'l Bank v. Epstein, 10 F.3d 168, 174 (3d Cir. 1993).

Plaintiff's arguments against allowing Fidelity's Answer to her Amended Complaint relate to the merits of Fidelity's Affirmative Defenses and Counterclaim which allege fraud and misrepresentation based upon information acquired after the original filings to the effect that the fire may have been incendiary in nature with multiple points of origin. As such, at oral argument the Court denied the motion seeking to strike or dismiss Fidelity's Answer.

Discussion

Plaintiff also has filed a Motion for Partial Summary Judgment. (Doc. No. 63.) By this motion, Plaintiff seeks a Declaratory Judgment that Fidelity failed to provide notice of nonrenewal of Policy # XXXXXXXXXXXXX and, as a result, insurance coverage continued to be effective as of September 28, 2012, the date a fire destroyed Plaintiff's house. Fidelity has cross-moved for summary judgment on Count One of ...


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