Federico and Company LLC v. Zurich General Insurance Malaysia Berhad

Background

Federico and Company LLC, doing business as M&W Suppliers (M&W), sued Zurich General Insurance Malaysia Berhad (Zurich) and moved under Federal Rule of Civil Procedure 12(f) to strike two affirmative defenses from Zurich’s amended answer. An affirmative defense is a legal reason why a defendant argues that the plaintiff should not prevail even if the plaintiff proves the basic allegations of its claims.

The two defenses asserted that coverage under the insurance policies was invalid from the beginning because the named insured, CRY Respond Sdn Bhd (CRY), had engaged in fraud, made material misrepresentations, or omitted material facts. The amended defenses alleged that CRY falsely claimed it could supply nitrile gloves that it did not intend to supply, obtained insurance for shipments it allegedly never intended to make, and made fraudulent representations connected with the insurance certificates. Zurich also identified alleged conduct by CRY’s agents, including Jamal bin Omar and Krishna a/l Seloa Raju.

Legal standard

Rule 12(f) permits a court to strike an insufficient, redundant, immaterial, impertinent, or scandalous matter from a pleading. The court explained that motions to strike affirmative defenses are generally disfavored. It applied the plausibility standard to the defenses and also required the fraud allegations to satisfy Rule 9(b), which requires the circumstances of alleged fraud to be stated with particularity.

Court’s analysis

The court held that Zurich’s two defenses were adequately pleaded. Zurich had incorporated facts from police reports and an investigation report that had already been produced in discovery, and those materials supported the amended answer. The allegations identified the claimed misrepresentations, including CRY’s alleged false claim that it would supply the insured cargo, and identified individuals whom Zurich said had made or concealed the relevant statements. In the court’s view, the allegations gave M&W sufficient notice of the nature and substance of Zurich’s defenses.

M&W also argued that Zurich had not given the notice required to rescind an insurance policy under Insurance Act 2015, Schedule 1, Part 2, Variations, paragraph 8. The court took no position on that argument because M&W raised it only briefly and cited no legal authority addressing the required notice or whether notice was a pleading requirement. The court stated that M&W could raise the argument again in a summary-judgment motion.

The court also rejected M&W’s prejudice argument at this stage. It noted that Zurich had included the defenses in its first answer and that much of the delay in filing that answer resulted from motion practice.

Disposition

The court denied M&W’s motion to strike and directed the Clerk of Court to terminate docket entry 57. The opinion addressed only whether the defenses were sufficiently pleaded; it did not decide whether Zurich will ultimately prevail on those defenses or whether the insurance coverage was actually invalid.