Esplanade 2018 Partners, LLC v. Mt Hawley Ins Co

Background

Esplanade 2018 Partners, LLC brought a first-party insurance dispute against Mt. Hawley Insurance Company. Esplanade alleges that Mt. Hawley refused to pay for damage to its office building in Metairie, Louisiana, caused by Hurricane Ida in August 2021. Esplanade seeks at least $4,681,844.15, along with statutory penalties and attorney’s fees.

The case was initially filed in Louisiana state court, removed to the United States District Court for the Eastern District of Louisiana based on diversity jurisdiction, and later transferred to the Southern District of New York under a forum-selection clause in the insurance policy. The scheduling order set July 14, 2023, as the deadline for motions to amend pleadings.

Motion to Amend

Mt. Hawley moved for leave to amend its Answer to add an affirmative defense based on concealment, misrepresentation, or fraud. The policy provides that coverage is void if the insured intentionally conceals or misrepresents a material fact concerning the coverage, property, insured’s interest, or claim.

Mt. Hawley asserted that discovery revealed facts supporting the proposed defense. According to Mt. Hawley, Esplanade claimed that the building’s main roof needed replacement at a cost exceeding $550,000, even though a contractor’s report allegedly indicated that the roof was not damaged by the storm. Mt. Hawley also relied on reports that allegedly showed the roofs were in poor condition before the storm and that Esplanade had planned to replace them before Hurricane Ida.

Mt. Hawley further alleged that Esplanade urged a consultant to add claim items without evidence that the storm caused the damage, including a $981,986 claim to reseal 2,700 windows. It also alleged that a public adjuster instructed Esplanade’s engineers to remove references to “wind-driven rain” from an engineering report because that type of damage was not covered by the policy, and that Esplanade submitted the altered report without disclosing an earlier version.

Legal Standards

Because the amendment deadline had passed, the court applied Federal Rules of Civil Procedure 16(b)(4) and 15(a)(2). Rule 16(b)(4) requires good cause to modify a scheduling order. Under Rule 15(a)(2), courts generally should freely allow amendments when justice requires, unless there is a reason such as undue delay, bad faith, dilatory motive, or futility.

Because the proposed defense sounded in fraud, it also had to satisfy Rule 9(b). That rule requires fraud to be pleaded with particularity by identifying the alleged false statements or omissions, who made them, when and where they were made, and why they were fraudulent. Intent may be alleged generally, but the allegations must still support a strong inference of fraudulent intent.

Court’s Analysis

The court found good cause for the late amendment. It concluded that Mt. Hawley did not know, and could not reasonably have known, enough facts to plead the fraud defense before the deadline. The disclosures supporting the defense began in October 2023, and relevant depositions occurred in February and March 2024. The court therefore concluded that the information relied on by Mt. Hawley was obtained through discovery after the amendment deadline.

The court also concluded that the proposed amendment was not futile. Taking the allegations as true for purposes of the amendment request, the alleged roof, window, and engineering-report conduct identified the relevant actions with enough detail to satisfy Rule 9(b) and support a strong inference of intent to defraud.

Esplanade argued that Mt. Hawley had misrepresented the property-condition reports and testimony and lacked credible evidence. The court stated that this argument appeared to ask it to evaluate the evidence under a summary-judgment standard. Even under that standard, however, the court found that the evidence showed a plausible dispute about the value of the adjuster’s testimony and the property-condition reports. The court emphasized that it was not deciding the ultimate merits of a possible summary-judgment motion and that credibility and evidence-weighting are generally matters for a jury.

Disposition

The court granted Mt. Hawley’s motion for leave to amend its Answer. Mt. Hawley was directed to file an Amended Answer by February 3, 2025. The court also denied Esplanade’s alternative request for additional briefing because the proposed additional arguments concerned the sufficiency of Mt. Hawley’s evidence and would not change the court’s analysis.