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Fernando v. Federal Insurance Co.

United States District Court, D. Massachusetts

May 28, 2019

ASHAN FERNANDO and MEGAN FERNANDO, Plaintiffs,
v.
FEDERAL INSURANCE CO., and CHUBB GROUP OF INSURANCE COMPANIES d/b/a CHUBB PERSONAL INSURANCE d/b/a CHUBB MASTERPIECE INSURANCE, Defendants.

          MEMORANDUM AND ORDER RE: PLAINTIFFS' MOTION TO AMEND COMPLAINT (DOCKET ENTRY # 9)

          MARIANNE B. BOWLER UNITED STATES MAGISTRATE JUDGE.

         Pending before this court is a motion to amend a complaint filed by plaintiffs Ashan Fernando and Megan Fernando (“plaintiffs”) under Fed.R.Civ.P. 15(a) (“Rule 15(a)”) to add three new defendants in lieu of defendants Chubb Group of Insurance Companies d/b/a Chubb Personal Insurance d/b/a Chubb Masterpiece Insurance. (Docket Entry # 9). Defendant Federal Insurance Company (“Federal”) and proposed defendants Chubb National Insurance Co. (“Chubb National”), the Chubb Corporation (“Chubb Corp.”), and Chubb Insurance Company of New Jersey (“Chubb New Jersey”) (collectively “proposed defendants”) oppose the motion. (Docket Entry ## 10, 14). After conducting a hearing, this court took the motion (Docket Entry # 9) under advisement.

         BACKGROUND

         Like the original complaint, the proposed amended complaint alleges that Federal and the proposed defendants failed to “fulfill their obligations and to make payment of a covered claim under” a valuable articles insurance policy (“the Policy”) issued by Federal. (Docket Entry ## 1, 9-1). The Policy's coverage encompassed loss by theft for itemized jewelry items insured under the Policy for December 11, 2015 to December 11, 2016 time period. (Docket Entry # 9-1).

         Because the parties rely on documents extrinsic to the Policy to support or refute the futility of the causes of action, it is helpful to outline the Policy's provisions. The Policy itself states on two different pages that it consists of a “Coverage Summary” and the “entire Masterpiece Policy.” (Docket Entry # 10, pp. 19, 22).[1] More specifically, the “Introduction” defines the “Policy [as] “mean[ing] your entire Masterpiece Policy, including the Coverage Summary and any Mortgagee's Coverage Summary.” (Docket Entry # 10, p. 22). The same “Introduction” page in the Policy likewise states, “This is your Chubb Masterpiece Policy. Together with your Coverage Summary, it explains your coverages and other conditions of your insurance in detail.” (Docket Entry # 10, p. 22). The Policy also includes an “Itemized Articles” page, which lists various items of jewelry covered under the Policy. (Docket Entry # 10, p. 20); (Docket Entry # 10, p. 23) (“[t]he amount of coverage . . . for each itemized article[] is shown in your Coverage Summary”).[2] In light of the foregoing language in the Policy, the Policy includes the “Coverage Summary, ” the “Itemized Articles, ” and the “Introduction” followed by the language of Policy. (Docket Entry # 10, pp. 19-20, 22-40). In addition, a “Table of Contents” for the Policy confirms the contents of the Policy as the “Introduction, ” a “Valuable Articles Coverage, ” (presumably the “Itemized Articles” page), the “Policy Terms, ” and a “Policy Information Notice.”[3] (Docket Entry # 10, p. 21).

         Separate from the Policy, a cover letter from “Chubb Personal Insurance” to plaintiffs states that, “This mailing contains information about your new insurance policy with Chubb.” (Docket Entry # 10, p. 12). The cover letter identifies and attaches various documents for plaintiffs to review including a “Premium Summary, ” a “Privacy Notice, ” and a “Premium Discount Summary.”[4] (Docket Entry # 10, p. 12). The cover letter also includes language that describes “Chubb Group of Insurance Companies” as a “marketing name.” (Docket Entry # 10, p. 12). Viewing the above language defining the “Policy” as the “entire Masterpiece Policy” and the “Coverage Summary, ” neither this cover letter (Docket Entry # 10, p. 12) nor another cover letter (Docket Entry # 10, p. 13) or the “Premium Summary, ” the “Privacy Notice, ” and the “Premium Discount Summary” form part of the actual Policy.[5] (Docket Entry # 10, pp. 14-17).

         Turning to the facts surrounding the claim as set forth in the proposed amended complaint, plaintiffs' house was burglarized on or about the evening of March 18, 2016, and several items of jewelry covered under the Policy were taken. (Docket Entry # 9-1, p. 5, ¶ 23). Plaintiffs filed a police report with the local police and shortly thereafter filed a claim with “defendants”[6] for the covered loss which has been “continuously denied.” (Docket Entry # 9-1, pp. 5-6).

         The police report recounts that video from a home security system reflects that a “male subject in a grey sweatshirt is seen in the hall of the home” and describes a broken window used “to gain access to the home.” (Docket Entry # 9-1, p. 46). The police report denotes the missing items as “stolen” and the incident as “still under investigation.” (Docket Entry # 9-1, p. 46). The investigation by Federal and the proposed defendants “did not conclude with any information sufficient to deny the” claim. (Docket Entry # 9-1, p. 6, ¶ 33).

         Federal and the proposed defendants denied the claim for several reasons, including that a “jeweler who signed the Appraisals was prohibited by the conditions of his probation from engaging in the jewelry business.” (Docket Entry # 9-1, p. 7, ¶ 36). Upon information and belief, Federal and the proposed defendants attended a probation violation hearing for the jeweler to confirm that he “conducted the Appraisals.” (Docket Entry # 9-1, p. 7, ¶ 43). During the hearing, a different individual testified that he was the appraiser as opposed to the above-noted jeweler. (Docket Entry # 9-1, pp. 7-8). The court agreed inasmuch as it did not issue “a probation condition violation” against the jeweler for engaging in the jewelry business. (Docket Entry # 9-1, pp. 7-8, ¶¶ 36, 44). Also upon information and belief, Federal and the proposed defendants had an affidavit from this individual “confirming that he, individually, performed the Appraisals.” (Docket Entry # 9-1, ¶ 42).

         On or about April 20, 2016, plaintiffs sent a formal demand letter ostensibly pursuant to section 11 of Massachusetts General Laws chapter 93A (“chapter 93A”) and Massachusetts General Laws chapter 176D (“chapter 176D”) to “defendants.”[7](Docket Entry # 9-1, pp. 6, 49-51). Plaintiffs sent a second formal demand letter pursuant to chapter 93A and chapter 176D on September 1, 2017 but “defendants”[8] “refused to make payments under the Policy or provide a good faith offer” to plaintiffs. (Docket Entry # 9-1, pp. 8, 53-55).

         The Policy includes a provision requiring plaintiffs “to bring” an action “within two years of the date of loss.”[9](Docket Entry # 9-1, p. 23). Massachusetts also has a two-year statute of limitations, which Federal and the proposed defendants submit applies to the Policy. See Mass. Gen. Laws ch. 175, § 99 (“section 99”).[10] Plaintiffs maintain that if section 99 applies, the proposed amended complaint relates back to the date of the original, timely-filed complaint under Rule 15(c)(1)(C) because the proposed defendants received notice and will not be prejudiced. (Docket Entry ## 9, 13).

         PROCEDURAL BACKGROUND

         Plaintiffs commenced this action when they filed the original complaint on March 16, 2018, two days before the expiration of the two-year limitations period “from the time the loss occurred” on March 18, 2016 with the theft of itemized articles from their home. On or about April 11, 2018, counsel for Federal and the proposed defendants sent plaintiffs' attorney an email stating that “Chubb Group of Insurance Companies” is no longer used and “was never an entity, corporation, partnership, unincorporated association, or insurance company.” (Docket Entry # 9-2). Thereafter, on July 3, 2018, plaintiffs filed the motion seeking leave to amend the complaint. (Docket Entry # 9).

         The proposed amended complaint (Docket Entry # 9-1) makes no changes to the factual allegations and the legal claims in the original complaint. (Docket Entry # 1). Rather, the proposed amended complaint seeks to replace defendants Chubb Group of Insurance Companies d/b/a Chubb Personal Insurance d/b/a Chubb Masterpiece Insurance (the “Chubb Entities”) with the proposed defendants on the basis that the naming of the Chubb Entities was a “misnomer.” (Docket Entry # 9). Plaintiffs do not assert any new claims specific to the proposed defendants. Like the original complaint, the proposed amended complaint asserts the following claims: (1) breach of contract (Count I); (2) breach of the implied covenant of good faith and fair dealing (Count II); and (3) unfair and deceptive acts and practices under section 11 of chapter 93A and chapter 176D (Count III).[11] (Docket Entry # 9-1). The original complaint and the proposed amended complaint assert jurisdiction based on diversity. (Docket Entry ## 1, 9-1); 28 U.S.C. § 1332(a)(1).

         Federal and the proposed defendants oppose the motion on the basis of untimeliness and futility. (Docket Entry ## 10, 14). They argue that plaintiffs are seeking to add new defendants, not merely rectify a mistake concerning the identity of the proper parties after the applicable limitations period expired. (Docket Entry # 10, p. 7). They assert that if “[n]one of the [proposed] defendants are parties to [the Policy], ” the proposed amended complaint is futile. (Docket Entry # 10, p. 4). If, on the other hand, the proposed defendants are “subject to the terms and conditions” of the Policy, the two-year limitations period in the Policy as well as the applicable statute of limitations under section 99 render the “claims against the [proposed] defendants” untimely, according to Federal and the proposed defendants. (Docket Entry # 10, p. 4) (Docket Entry # 14, p. 4).

         DISCUSSION

         Rule 15(a) instructs that leave to amend a complaint “‘shall be freely given when justice so requires.” Foman v. Davis, 371 U.S. 178, 182 (1962) (internal citation omitted). “[T]he grant or denial of an opportunity to amend is within the discretion of the District Court” but absent a showing of “undue delay, bad faith” or “futility of amendment” should not be denied. Id.

         I. Futility

         Even if the relation back requirements under Rule 15(c) are met, Federal and the proposed defendants contend that the claims against the proposed defendants are futile because “[n]one of the [proposed] defendants are parties to [the Policy]” or “involved in the underwriting, adjustment or handling of the plaintiffs' claim.”[12] (Docket Entry # 10, pp. 4-5) (Docket Entry # 14, p. 4). Plaintiffs maintain that the argument “that Chubb has had no relationship to the [p]laintiffs” and “was not involved in the handling of the claim is without merit.” (Docket Entry # 13, p. 2).

         It is well settled that futility constitutes an adequate basis to deny amendment. See Universal Commc'ns Sys., Inc. v. Lycos, Inc., 478 F.3d 413, 418 (1st Cir. 2007); Maine State Bldg. and Construction Trades Council, AFL-CIO v. United States Dep't of Labor, 359 F.3d 14, 19 (1st Cir. 2004). “In assessing futility, the district court must apply the standard which applies to motions to dismiss under [Rule 12(b)(6)].” Adorno v. Crowley Towing and Transp. Co., 443 F.3d 122, 126 (1st Cir. 2006). “‘In assessing futility, the district court must apply the standard which applies to motions to dismiss under Fed.R.Civ.P. 12(b)(6).'” Morgan v. Town of Lexington, MA, 823 F.3d 737, 742 (1st Cir. 2016) (citation omitted). To survive a Rule 12(b)(6) motion to dismiss, the complaint must include factual allegations that when taken as true demonstrate a plausible claim to relief even if actual proof of the facts is improbable. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-558 (2007); see, e.g., Kenney v. State Street Corp., Civil Action No. 09-10750-DJC, 2011 WL 4344452, at *2 (D. Mass. Sept. 15, 2011) (applying Rule 12(b)(6) Twombly standard in assessing futility of proposed amendment).

         In conducting a futility analysis, this court's review is confined to the proposed amended complaint and the attached documents (Docket Entry # 9-1) as well as external documents that fall into certain narrow exceptions applicable to review of a Rule 12(b)(6) motion to dismiss. See Jaundoo v. Clarke, 690 F.Supp.2d at 22 (recognizing, in context of motion to amend based on futility, that court may not consider documents “outside of the [proposed amended] complaint, or not expressly incorporated therein” unless they fall within an “exception ‘for documents sufficiently referred to in the complaint'”) (brackets in original) (internal citation omitted); accord In re Atl. Power Corp. Sec. Litig., Civil Action No. 13-10537-IT, 2015 WL 13679766, at *4 (D. Mass. Oct. 21, 2015) (in considering Rule 12(b)(6) or Rule 15 motion, “court may properly consider ‘only facts and documents that are part of or incorporated into the complaint'”) (citation omitted); Leahy-Lind v. Maine Dep't of Health and Human Servs., Civil Action No. 13-00389-GZS, 2014 WL 4681033, at *10 n.6 (D. Me. Sept. 19, 2014); see also Newman v. Lehman Bros. Holdings Inc., 901 F.3d 19, 25 (1st Cir. 2018) (in reviewing motion to dismiss, court may consider “‘documents the authenticity of which are not disputed by the parties; official public records; documents central to the plaintiff's claim; and documents sufficiently referred to in the complaint'”) (ellipses, brackets, and citations omitted). In opposing the motion to amend, Federal and the proposed defendants filed a number of documents extraneous to the proposed amended complaint. Turning to each of the documents, it is appropriate to consider the Policy, which is central to the claims and referenced in the proposed amended complaint. It is also appropriate to consider the court decisions attached to Federal and the proposed defendants' opposition (Docket Entry # 10, pp. 46-49) and sur-reply (Docket Entry # 14, pp. 26-29) as documents subject to judicial notice. See Mississippi Pub. Employees' Ret. System v. Boston Sci. Corp., 523 F.3d 75, 86 (1st Cir. 2008) (“‘sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss'” include “‘matters of which a court may take judicial notice'”) (internal citations omitted); see, e.g., Bluetarp Fin., Inc. v. Matrix Constr. Co., Inc., 709 F.3d 72, 78 n.4 (1st Cir. 2013) (taking “judicial notice that neither the South Carolina state-court case or the Maine state-court case has gone to final judgment”); Ezra Charitable Trust v. Tyco Int'l, Ltd., 466 F.3d 1, 9 n.7 (1st Cir. 2006).[13] Neither the letters by Federal's counsel and plaintiffs' counsel (Docket Entry # 10, pp. 42, 44-45) (Docket Entry # 14, pp. 10-22, 24-25) nor the affidavits by Daniel I. Jaeger (Docket Entry # 10, pp. 51-52) and Rider (Docket Entry # 14, p. 8), however, fall within one of the recognized exceptions and, accordingly, are not part of the record in examining the futility of the proposed amended complaint.

         A. Breach of Contract

         Plaintiffs allege Federal and the proposed defendants breached the Policy by: (a) denying coverage for the claim; (b) failing to make payment for the covered loss under the Policy; and (c) conducting an investigation for the loss in an unfair and deceptive manner. (Docket Entry # 9-1, ¶¶ 48-52). As previously noted, Federal and the proposed defendants submit that Federal issued the Policy and “[n]one of the [proposed] defendants are parties to [the Policy].” (Docket Entry # 10, p. 4). Plaintiffs maintain that certain statements in the Policy and in various documents extraneous to the Policy refute Federal's and the proposed defendants' argument that none of the proposed defendants are parties to the Policy.[14] (Docket Entry ## 9, 13).

         As stated in the proposed amended complaint, “Chubb Corp. is the parent company of Federal” and “Chubb National and Chubb New Jersey are subsidiaries of Federal.” (Docket Entry # 9-1, ¶ 8). The Policy denotes Federal as the company that issued the Policy. (Docket Entry # 10, pp. 19-20).

         A viable breach of contract claim requires the existence of “a valid contract between the parties.”[15] Bose Corp. v. Ejaz, 732 F.3d at 21. As explained below, Federal is a party to the Policy because it issued the Policy, as stated in the Coverage Summary of the Policy and the list of Itemized Articles in the Policy, and the Policy unequivocally states it is a contract between plaintiffs and Federal. (Docket Entry # 10, pp. 19-20, 22, 39-40). The determination of whether the proposed defendants are parties to the Policy entails an interpretation of the Policy.

         Under Massachusetts law, interpretation of an insurance policy adheres to “‘the general rules of contract interpretation, beginning with the actual language of the polic[y], given its plain and ordinary meaning.'” Easthampton Congregational Church v. Church Mut. Ins. Co., 916 F.3d 86, 91 (1st Cir. 2019) (internal citation omitted); AIG Prop. Cas. Co. v. Cosby, 892 F.3d 25, 27 (1st Cir. 2018) (same); accord Metro. Prop. and Cas. Ins. Co. v. Morrison, 951 N.E.2d 662, 671 (Mass. 2011) (“interpretation of language in an insurance contract ‘is no different from the interpretation of any other contract, '” with words construed “‘in their usual and ordinary sense'”) (citation omitted). A court interprets words in an insurance “policy in light of their plain meaning, considering the document as a whole.” Sanders v. Phoenix Ins. Co., 843 F.3d 37, 42 (1st Cir. 2016); accord 116 Commonwealth Condominium Trust v. Aetna Cas. & Surety Co., 742 N.E.2d 76, 78 (Mass. 2001) (words in insurance policy are “construe[d] in their usual and ordinary sense'”) (internal citation omitted). “‘Every word'” is “‘“presumed to have been employed with a purpose and must be given meaning and effect whenever practicable.”'” Metro. Prop. and Cas. Ins. Co. v. Morrison, 951 N.E.2d at 671 (internal citations omitted).

         The “construction must be consistent with what an objectively reasonable insured, reading the relevant policy language, would expect the words to mean.” Sanders v. Phoenix Ins. Co., 843 F.3d at 42; see Metro. Prop. and Cas. Ins. Co. v. Morrison, 951 N.E.2d at 671 (“‘[i]f in doubt, [a court] “consider[s] what an objectively reasonable insured, reading the relevant policy language, would expect to be covered”'”) (internal citations omitted). In the event “this analysis yields two reasonable (but conflicting) interpretations of the policy's text, the insured must be given the benefit of the interpretation that redounds to his benefit.” Sanders v. Phoenix Ins. Co., 843 F.3d at 43; see AIG Prop. Cas. Co. v. Cosby, 892 F.3d at 27 (“‘[a]mbiguity exists when the policy language is susceptible to more than one meaning'”) (internal citation omitted); United States Liab. Ins. Co. v. Benchmark Constr. Servs., Inc., 797 F.3d 116, 119-20 (1st Cir. 2015) (“[i]f a term is ‘susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one,' the term is ambiguous”) (internal citation omitted); Certain Interested Underwriters at Lloyd's, London v. Stolberg, 680 F.3d 61, 66 (1st Cir. 2012) (“policy provision ‘is ambiguous only if it is susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one'”) (internal citation omitted). Thus, when presented with ambiguous language, the policy is construed “in favor of the insured and against” the insurer. Metro. Prop. and Cas. ...


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