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Reedy v. Novad Management Consulting, LLC

United States District Court, D. Massachusetts

July 9, 2018

CHARLES REEDY, Plaintiff,
v.
NOVAD MANAGEMENT CONSULTING, LLC, Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS SAYLOR, J.

          F. DENNIS SAYLOR, UNITED STATES DISTRICT JUDGE

         This is an action arising out of a lapsed insurance policy on plaintiff's home, which was destroyed by fire.

         Plaintiff Charles Reedy entered into a reverse mortgage under which he was responsible for maintaining hazard insurance on the property. He failed to pay the premium and the policy lapsed. A few months later, an arsonist burned down his house. The insurance company denied his claim. He now asserts claims for negligence, breach of contract, negligent and reckless infliction of emotional distress, and violation of Mass. Gen. Laws ch. 93A against his current loan servicer, defendant NOVAD Management Consulting, LLC, for allegedly failing to inform him that the premium had not been paid.

         NOVAD has filed a motion to dismiss all counts for failure to state a claim upon which relief can be granted. For the following reasons, that motion will be granted.

         I. Background

         A. Factual Background

         The following facts are set forth as alleged in the complaint.

         In 2011, Charles Reedy executed a reverse mortgage on his property at 91-93 Adams Street, New Bedford, Massachusetts. (Compl.¶¶ 3-4). Under the terms of that mortgage, Reedy was required to maintain hazard insurance covering the property. (Id. ¶ 8). According to the complaint, he “was informed” at the time he entered into the reverse mortgage that if he failed to pay his insurance premium, the mortgagee would pay the premium and charge his account. (Id. ¶ 9).

         In 2016, the original mortgagee assigned Reedy's mortgage to the U.S. Department of Housing and Urban Development (“HUD”). (Compl. ¶ 6). NOVAD Management Consulting, LLC became the servicer of the Reedy loan at that time. (Id. ¶ 7). The complaint alleges that NOVAD was “authorized to pay the insurance premium on the Plaintiff's behalf and charge the premium to the Plaintiff's account.” (Id. ¶ 21).

         As of the time of the assignment to HUD, the hazard insurance policy on the property was active. (Id. ¶ 10). It did not automatically renew and was set to expire on May 3, 2017. (Id. ¶¶ 11-12). The complaint alleges that NOVAD sent Reedy a letter on May 3, 2017, to inquire as to the status of the insurance policy, but that Reedy is elderly and forgetful and does not remember receiving the letter. (Id. ¶¶ 14, 16, Ex. A). The letter informed him that his policy was set to expire and requested “a copy of the declarations page for [his] new insurance policy.” (Id. Ex. A). It also explains: “If you prefer us to contact your insurance agent directly for this information, please complete the information below and sign where indicated authorizing release of this information directly to us. A self-addressed envelope has been provided for your convenience.” (Id.).

         Neither Reedy nor anyone else paid the premium for the insurance policy, and it lapsed on May 3, 2017. (Compl. ¶¶ 21-22). On July 22, 2017, an arsonist set fire to the house, causing extensive damage and rendering the property unsafe for human habitation. (Id. ¶ 23). Reedy alleges that he discovered for the first time that the policy had lapsed when he went to his insurance agent to file a claim. (Id. ¶ 25).

         Reedy mailed NOVAD a demand letter pursuant to Mass. Gen. Laws ch. 93A, § 9 on November 17, 2017. (Compl. ¶ 79, Ex. B). NOVAD did not respond. (Id. ¶ 81). Reedy mailed the letter again on January 24, 2018, and NOVAD again failed to respond. (Id. ¶¶ 82-83, Ex. C). On March 12, 2018, Reedy mailed another demand letter, including additional claims and citations. (Id. ¶ 84, Ex. D). NOVAD did not respond to that letter either and has not made any offer of settlement. (Id. ¶¶ 85-86).

         B. Procedural Background

         Reedy filed this claim in Bristol Superior Court on April 17, 2018. NOVAD removed this action to federal court pursuant to 28 U.S.C. §§ 1332(a) and 1441(a), on the ground that Reedy is a citizen of Massachusetts, NOVAD is a citizen of Maryland, and the amount in controversy is about $600, 000.[1]

         The complaint contains 5 counts: (1) negligence; (2) breach of contract; (3) negligent infliction of emotional distress; (4) reckless infliction of emotional ...


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