Financial Res. Network Inc. v. Brown & Brown Inc.

754 F.Supp.2d 128

FINANCIAL RESOURCES NETWORK, INC., Financial Family Holdings LLC, Rosalind Herman and Gregg D. Caplitz, Plaintiffs,

v.BROWN & BROWN, INC., Brown & Brown of California, Inc., American Guarantee and Liability Insurance Company, Zurich North America Company and Calsurance, Defendants.

Civil Action No. 09–11315–MBB.

United States District Court, D. Massachusetts.

Nov. 18, 2010.

Robert D. Cohan, Cohan, Rasnick, Myerson LLP, Boston, MA, for Plaintiffs.David A. Grossbaum, Samuel C. Bodurtha, David A. Grossbaum, Hinshaw & Culbertson, LLP, Allen N. David, Peabody & Arnold, LLP, Boston, MA, for Defendants.

MEMORANDUM AND ORDER RE: MOTION FOR SUMMARY JUDGMENT BY DEFENDANTS AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY AND ZURICH NORTH AMERICA COMPANY (DOCKET ENTRY # 46); MOTION FOR SUMMARY JUDGMENT BY DEFENDANTS BROWN & BROWN OF CALIFORNIA, INC., BROWN & BROWN, INC., AND CALSURANCE (DOCKET ENTRY # 54); PLAINTIFFS' CROSS MOTION FOR PARTIAL SUMMARY JUDGMENT (DOCKET ENTRY # 59)

BOWLER, United States Magistrate Judge.

Pending before this court is a motion for summary judgment on counts II through IX filed by defendants American Guarantee and Liability Insurance Company (“American Guarantee”) and Zurich North America Company (“Zurich North”). (Docket Entry # 46). Adopting the arguments in the American Guarantee and Zurich North summary judgment motion, defendants Brown & Brown, Inc. (“B & B”), Brown & Brown of California, Inc. (“BBC”) and Calsurance also move for summary judgment. (Docket Entry # 54). Plaintiffs Financial Resources Network, Inc. (“Financial Resources”), Financial Family Holdings LLC (“FFH”), Rosalind Herman (“Herman”) and Gregg D. Caplitz (“Caplitz”) (collectively “plaintiffs”) filed a cross motion for partial summary judgment seeking a declaration that “plaintiffs' claims are not time barred” and that “defendants were obligated to provide coverage to the plaintiffs” under a Life Insurance Agents Errors & Omissions Liability Policy (“E & O Policy”). (Docket Entry #59 & 60).

The claims subject to the alleged coverage under which American Guarantee and Zurich North had a duty to defend and indemnify originate from a November 2004 civil action (“the Indianapolis action”) filed in this district by Indianapolis Life Insurance Company (“Indianapolis Life”) against Herman, Caplitz, Rudy K. Meiselman, M.D. (“Meiselman”) and his wife, Hope E. Meiselman, (“the Meiselmans”) and the Financial Resources Network Plan and Trust (“FRN Plan”). A final judgment issued in January 2006 on the claims in the complaint as well as those in a crossclaim filed by Meiselman. The final judgment ordered inter alia the rescission of life insurance policies on Meiselman and his wife and a return of a $650,297.01 commission previously paid to Caplitz.

Count I in this proceeding sets out claims against B & B, BBC and Calsurance for breach of a contract “by estoppel.” (Docket Entry # 28, ¶ 53). Counts II through V consist of claims against Zurich North and American Guarantee for breach of contract. Respectively, they set out claims for breach of an express contract to defend and indemnify (Count II), breach of an oral contract (Count III), breach of an implied in fact contract (Count IV) and breach of a contract by estoppel (Count V). Count VI includes claims against all defendants for breach of the implied covenant of good faith and fair dealing. Counts VII, VIII and IX are claims against all defendants for fraud, negligent misrepresentation and violation of section two of Massachusetts General Laws chapter 93A (“chapter 93A”).

PROCEDURAL BACKGROUND

Plaintiffs filed this action in June 2009 in Massachusetts Superior Court (Suffolk County). (Docket Entry # 6). In August 2009, American Guarantee, Zurich North, B & B, BBC and Calsurance (collectively “defendants”) filed a timely notice of removal. Shortly after removal, B & B, BBC and Calsurance filed a motion to dismiss the claims lodged against them in the original complaint pursuant to Rule 9(b), Fed.R.Civ.P., and Rule 12(b)(6), Fed.R.Civ.P. (“Rule 12(b)(6)”).

In particular, B & B, BBC and Calsurance moved to dismiss the claims for breach of an oral contract to provide insurance (Count I), breach of an implied in fact contract to provide insurance (Count II), breach of contract by estoppel (Count III) and breach of the implied covenant of good faith and fair dealing (Count VIII) due to the absence of an allegation of a contract. In addition to asserting the untimeliness of the contract claims, B & B, BBC and Calsurance moved to dismiss the negligent misrepresentation, fraud and chapter 93A claims as untimely and the fraud claim due to the lack of particularity. They also sought to dismiss the claims brought by plaintiffs, except those asserted by Caplitz, because Caplitz was the only plaintiff seeking the errors and omission insurance at issue. (Docket Entry #8 & 9).

The district judge allowed the motion on counts I and II because plaintiffs had not “alleged an express contract.” (Docket Entry # 24, pp. 3–4 & 9). He also dismissed the fraud claim without prejudice, allowed plaintiffs leave to file a motion to amend to set out the fraud claim with particularity and otherwise denied the motion.

On February 9, 2010, this court allowed a motion to amend and denied a motion for reconsideration. In the latter motion, B & B, BBC and Calsurance sought reconsideration of the denial of the motion to dismiss the negligent misrepresentation and chapter 93A counts as untimely and the breach of the implied covenant of good faith and fair dealing count as lacking an enforceable contract. In denying reconsideration, this court advised the parties that:

Defendants may renew the arguments on summary judgment based upon a more developed factual record and the different legal standard of review that applies to a summary judgment motion as opposed to a motion to dismiss. See McKenzie v. BellSouth Telecommunications, Inc., 219 F.3d 508, 513 (6th Cir.2000); McAnaney v. Astoria Financial Corp., 2009 WL 3150430, *7 (E.D.N.Y. Sept. 29, 2009); see also Fisher v. Tarinor [ Trainor ], 242 F.3d 24, 29 n. 5 (1st Cir.2001).

Currently before this court are the summary judgment motions filed by American Guarantee and Zurich North (Docket Entry # 46) and B & B, BBC and Calsurance (Docket Entry # 54) as well as the partial summary judgment motion filed by plaintiffs (Docket entry # 60). After conducting a hearing on June 9, 2010, this court took the motions under advisement.

STANDARD OF REVIEW

Summary judgment is designed “ ‘to pierce the boilerplate of the pleadings and assay the parties' proof in order to determine whether trial is actually required.’ ” Davila v. Corporacion De Puerto Rico Para La Difusion Publica, 498 F.3d 9, 12 (1st Cir.2007). It is appropriate when the summary judgment record shows “there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law.” Rule 56(c), Fed.R.Civ.P. “A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in the favor of the non-moving party.” American Steel Erectors, Inc. v. Local Union No. 7, Int'l Ass'n of Bridge, Structural, Ornamental & Reinforcing Iron Workers, 536 F.3d 68, 75 (1st Cir.2008). “A fact is material if it carries with it the potential to affect the outcome of the suit under the applicable law.” Id. Facts are viewed in favor of the non-moving party. See Noonan v. Staples, Inc., 556 F.3d 20, 23 (1st Cir.2009). Cross-motions for summary judgment do not alter the summary judgment standard, but instead simply require a determination of “whether either of the parties deserves judgment as a matter of law on the facts that are not disputed.” Adria Int'l Group, Inc. v. Ferré Development, Inc., 241 F.3d 103, 107 (1st Cir.2001).

FACTUAL BACKGROUND ¹

Financial Resources is a Massachusetts corporation that administers and maintains the FRN Plan, a qualified 401(k) pension plan for Financial Resources employees. FFH is the sole stockholder of Financial Resources. Herman is an officer and a director of Financial Resources.

In 2003, Financial Resources hired Caplitz who, among other responsibilities, acted as Indianapolis Life's agent in issuing insurance policies to employees of Financial Resources. From 1998 through 2006 and during his employment at Financial Resources, Caplitz “was a contracted agent with Indianapolis Life.” (Docket Entry # 63).

In 2002, Financial Resources hired Meiselman as a technical analyst. As an employee of Financial Resources, Meiselman elected to participate in the FRN Plan and executed a tax free rollover of his retirement funds into the FRN Plan amounting to $11,242,853.20. Herman and Caplitz used funds in Meiselman's account to pay for insurance policies on the lives of Meiselman and his wife (“the Meiselman life insurance policies”). Herman signed the two, July 2003 applications along with Meiselman and his wife with the FRN Plan as the designated owner rather than either of the Meiselmans. Caplitz received the aforementioned commission.

As a contracted agent of Indianapolis Life, Caplitz was enrolled in the E & O Policy provided by American Guarantee, a subsidiary of Zurich North, for Indianapolis Life insurance agents from 2001 to July 2004. BBC, a subsidiary of B & B, offered the insurance “through Calsurance, a division of BBC.” (Docket Entry # 63, ¶ 6). Calsurance acknowledged and approved applications received from Indianapolis Life agents for the policies provided by American Guarantee. Lancer Claims Services, Inc. (“Lancer”), a division of BBC, provided claims services for the policies.

The E & O policy afforded professional liability coverage for life insurance agents such as Caplitz against “[a]ny ‘Claim’ arising out of a negligent act, error or omission of the ‘Insured’ ... in rendering or failing to render Professional Services.” (Docket Entry # 48, Ex. 2, ¶ I(A)(1)). In greater detail, the...