Paro Management Co., Inc. v. Willis of New Jersey, Inc.

Background

Paro Management Co., Inc. and J&N Realty Associates, LLC sued Willis of New Jersey, Inc., an insurance broker. The plaintiffs are the owner and manager, respectively, of a residential property in Queens, New York. Willis procured a Location Pollution Legal Liability policy for them from Allied World National Assurance Company covering December 22, 2010, through January 22, 2016. Allied later issued a separate policy covering January 22, 2019, through January 22, 2022.

In January 2014, the plaintiffs received a notice from the New York State Department of Health concerning lead paint in one unit. They allege that they sent the notice to Willis in February 2014 and instructed Willis to notify Allied. According to the plaintiffs, Willis represented that it would provide the notice but did not do so. Former tenants later sued the plaintiffs over alleged lead-paint exposure. Allied denied coverage, including on the grounds that the pollution incident was not reported during the earlier policy period and that the later policy's known-pollution exclusion applied. The plaintiffs' insurance-coverage lawsuit against Allied remained pending in state court when this federal action was decided.

Claims and Motion

The plaintiffs asserted negligence and negligent misrepresentation under New York law. Their theory was that any loss caused by the absence of insurance coverage would result from Willis's failure to relay the notice of violation to Allied.

Willis moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which addresses whether a complaint adequately states a legal claim. Willis also argued that the claims were not ripe, meaning not ready for judicial decision, because they depended on the results of the insurance-coverage case and the lead-exposure lawsuit. In the alternative, Willis sought a stay while those cases proceeded.

Court’s Analysis

The court first ruled that the claims were not ripe. It explained that the plaintiffs could obtain relief against Willis only if two future events occurred: the plaintiffs were found liable for exposing tenants to lead paint, and Allied successfully denied coverage because it had not received notice of the violation. Because those events might not occur as anticipated, the court concluded that the dispute did not present a real and substantial controversy. The court therefore concluded that it lacked subject-matter jurisdiction and that the case should be dismissed under Rule 12(b)(1), the rule addressing lack of subject-matter jurisdiction.

The court also ruled in the alternative that, even if the dispute were ripe, the plaintiffs failed to state a claim under Rule 12(b)(6). Under New York law, an insurance broker generally owes an insured no more than the duty to procure the requested coverage. The plaintiffs did not adequately allege facts showing that Willis owed them an additional duty to provide Allied with the notice of violation. Their references to a business relationship, industry standards, representations, and unspecified agreements were conclusory. The court also said that treating the alleged promise to provide notice as the basis for the negligence claim would make that claim duplicative of the negligent-misrepresentation claim.

The negligent-misrepresentation claim also failed for two independent reasons identified by the court. First, under New York law, a promise about future conduct generally is not an actionable negligent misrepresentation. The alleged promise that Willis would provide the notice to Allied therefore could not support the claim. Second, the plaintiffs did not adequately allege the special relationship required for negligent misrepresentation. They did not allege that they paid Willis for services beyond procuring a single policy, relied on Willis's expertise, or had an extended course of dealings showing that they specially relied on Willis for insurance advice or claim reporting.

Disposition

The court granted Willis's motion to dismiss and dismissed the case without prejudice. It directed the clerk to terminate the motion at docket entry 13 and close the case. The opinion does not state whether the plaintiffs later refiled the claims.