Prorokovic v. United Insurance Holdings Corp.

Background

This diversity case arose from a November 5, 2020 fire at plaintiffs’ premises. Plaintiffs submitted a total-loss claim under a homeowners insurance policy issued by defendant. On January 19, 2021, defendant denied the claim and rescinded, or canceled, the policy, asserting that plaintiffs had made material misrepresentations or false statements on the insurance application.

Plaintiffs asked to file an amended complaint adding allegations that defendant intentionally and in bad faith failed to investigate conflicting information about the age of the roof. They relied on January 13, 2022 deposition testimony from Craig Rubinstein, the former property owner, that he had replaced the roof in 2001.

Governing Standards

Under Federal Rule of Civil Procedure 16(b)(4), a party seeking to amend after the scheduling-order deadline must show good cause, which generally depends on the party’s diligence. If good cause is shown, Rule 15(a)(2) ordinarily directs courts to freely allow amendments when justice requires. The court may nevertheless deny leave to amend for reasons including futility. An amendment is futile if the proposed claim would not survive a motion to dismiss under Rule 12(b)(6), which tests whether the complaint states a legally sufficient claim.

Court’s Analysis

The deadline for amended pleadings was September 27, 2021. The court determined that plaintiffs’ request was untimely but that plaintiffs had shown good cause because they filed the request promptly after Rubinstein’s January 13, 2022 deposition.

The court then considered whether the proposed allegations were futile. Defendant contended, and plaintiffs did not dispute, that Rubinstein and Dina Prorokovic had told defendant before the lawsuit that the roof was more than 20 years old, while Dajan Prorokovic had told defendant that he believed the roof was less than 20 years old. The court concluded that this information was known to defendant when it denied the claim on January 19, 2021.

The court held that Rubinstein’s later deposition testimony that he had replaced the roof in 2001 was not relevant to whether defendant acted in bad faith when it denied the claim. Because the proposed allegations did not logically support a bad-faith claim and would not survive a motion to dismiss, the proposed amendment was futile.

Disposition

Judge Paul E. Davison denied plaintiffs’ application for leave to file an amended complaint. The opinion states that the denial was not dispositive of any existing claims.