AmTrust North America, Inc. v. KF&B, Inc.

Background

AmTrust North America, Inc., Wesco Insurance Company, Inc., and Technology Insurance Company, Inc. sued KF&B, Inc., which operated under the name KF&B Program Managers Insurance Services. The plaintiffs alleged that they hired KF&B to operate as program manager for the KF&B Limousine and Taxi Program, an insurance program for limousine and taxi companies.

The plaintiffs alleged that KF&B mismanaged the program and that this caused significant reputational damage in addition to the approximately $20.4 million they anticipated losing on the program. In response to KF&B’s summary-judgment motion, the plaintiffs asserted that their reputational harm included policyholders failing to renew policies or place additional business and industry brokers knowing about steps AmTrust took to address KF&B’s handling of the program. The plaintiffs characterized the reputational-damages claim as arising from alleged breaches of fiduciary duties.

Legal Standard

Under Federal Rule of Civil Procedure 56, a court must grant summary judgment when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The party opposing summary judgment must provide specific facts and evidence supporting each essential part of its claim; speculation or a conclusory statement is not enough.

The court explained that, as a general matter, New York law does not allow a plaintiff to recover reputational damages for breach of contract. A limited exception may apply when the plaintiff offers specific proof of lost business opportunities caused by diminished reputation. The court cited decisions stating that vague assertions of reputational damage do not suffice.

Court’s Analysis

The court found that the plaintiffs had identified no record materials showing that they suffered reputational damage because of KF&B’s alleged breaches. Nor had they shown that policyholders or brokers took adverse action because of AmTrust’s efforts to address the program’s handling.

The plaintiffs’ designated witness for the company’s testimony under Rule 30(b)(6) did not know of anyone outside the program who was aware of AmTrust’s alleged losses. The witness could not identify a reputational loss, a specific lost deal, or other damage caused by reputational harm. The witness’s statement that there “could [be] and likely is some reputational damage in some cases” was speculative. The witness also referred to a belief that there had been discussions about nonrenewals or not placing business with AmTrust, but did not identify an actual nonrenewal, lost placement, or effect caused by KF&B’s alleged breaches.

The court also noted that the witness testified that AmTrust, rather than KF&B, decided not to return capital for its own business reasons. The court treated that testimony as binding on AmTrust. It concluded that the witness’s unsupported belief about possible discussions could not create a genuine dispute of material fact.

Disposition

Judge Lewis J. Liman granted KF&B’s motion for summary judgment on the plaintiffs’ claim for reputational damage or harm. The Clerk of Court was directed to close Docket No. 118.