Crum & Forster Indemnity Company v. Robb Report Media LLC

Background

Crum & Forster Indemnity Company, an insurer based in New Jersey, insured a 2018 Ferrari 812 Superfast under a policy issued to Ferrari North America. Robb Report leased the vehicle for a luxury-car test-drive event. The loan agreement required the borrower to be responsible for damage, return the vehicle in the same condition except for normal wear and tear, and permit only authorized drivers to operate it.

Emil and Anatoly Borokhovich signed waivers incorporating the loan agreement. On November 4, 2018, they took the Ferrari for a drive. Anatoly was driving, and Emil was the passenger. The Ferrari crashed and was a total loss. Crum paid Ferrari $292,508.35 and sued to recover that amount, asserting breach-of-contract and negligence claims.

Motion to Dismiss

The Borokovichs moved to dismiss the claims against them. They argued that California Insurance Code section 11580.1 treated permissive drivers as insured to the same extent as Ferrari, preventing Crum from pursuing subrogation claims against them. Subrogation is an insurer’s effort to recover from a person allegedly responsible for a loss after paying its policyholder. They also argued that Emil, as a passenger rather than the driver, could not have caused the accident or breached a duty of care.

Choice of Law and Insurance-Code Argument

The court did not decide whether California Insurance Code section 11580.1 applied. The statute applies only to policies issued or delivered in California. Crum argued that the policy was a New Jersey policy, but the complaint did not allege the policy’s terms, did not attach the policy, and no party submitted it. Crum stated in its opposition that the policy was issued in New Jersey, but the court found the record insufficient to resolve the choice-of-law question. The court deferred that issue until Crum filed an amended complaint.

Contract Claim Against Emil Borokhovich

The court denied Emil’s motion to dismiss the breach-of-contract claim. To state such a claim, Crum had to plausibly allege a contract, its own performance or excuse from performance, a breach by Emil, and damages caused by that breach.

The court rejected Emil’s argument that Crum had not pleaded causation merely because the complaint identified Anatoly as the driver and the person who caused the accident. For the contract claim, the relevant question was whether Emil’s alleged breach caused Crum’s damages. Crum alleged that Emil agreed to return the vehicle in the same condition and failed to do so or pay for the damage. Because the Ferrari was allegedly a total loss and Crum paid Ferrari $292,508.35, the court found a plausible causal connection between the alleged breach and the claimed damages.

Negligence Claim Against Emil Borokhovich

The court granted the motion to dismiss the negligence claim against Emil, with leave to amend. Negligence requires a duty, a breach, causation, and damages. The court found that Crum did not identify an independent duty of care separate from Emil’s contractual promise to return the vehicle in the same condition.

Crum alleged that Emil owed Ferrari a duty to operate the vehicle safely and return it in the same condition. The court concluded that this alleged duty repeated the contractual obligation and that Crum did not identify another independent tort duty applicable to Emil, who was alleged to be a passenger.

Disposition

The court dismissed the negligence claim against Emil Borokhovich and otherwise denied the motion to dismiss. The court directed Crum to clarify the choice-of-law issues in an amended complaint, which it ordered Crum to file within 21 days of the order.