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Cincinnati Ins. Co. v. Ruch

United States District Court, E.D. Virginia, Richmond Division

April 17, 2013

THE CINCINNATI INSURANCE COMPANY, as Assignee of Hylton Hall Partners, LLC, Plaintiff,
JOHN S. RUCH, et al., Defendants

Decided: April 16, 2013.

For The Cincinnati Insurance Company, as Assignee of Hylton Hall Partners, LLC, Plaintiff: David Brooks Hundley, James Douglas Hundley, LEAD ATTORNEYS, Hundley & Johnson, Richmond, VA; Michael Francis Wallace, PRO HAC VICE, Rosemary Catherine Eikamp, PRO HAC VICE, Law Offices of Robert A. Stutman PC (NA), Berlin, NJ.

For John S. Ruch, Westover Bon Air Insurance, LLC, Defendants: David D. Hudgins, LEAD ATTORNEY, The Hudgins Law Firm, PC, Alexandria, VA.


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Robert E. Payne, Senior United States District Judge.


This matter is before this Court on Defendants John S. Ruch (" Ruch" ) and Westover Bon Air Insurance, LLC's (" Westover" ) (collectively, " Defendants" ) MOTION TO DISMISS (Docket No. 20), the Amended Complaint filed against them by The Cincinnati Insurance Company (" Cincinnati" ), the assignee of Hylton Hall Properties, LLC (" Hylton Hall" ). For the reasons set forth below, the motion will be denied.


Hylton Hall owned property located at 700 Lanier Avenue in Danville, Virginia

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(the " Property" ). Am. Compl. ¶ 9, ECF No. 19. The Property was subject to a deed of trust (" Deed of Trust" ) that required Hylton Hall to maintain property insurance, which was to provide protection against, inter alia, fire damage. Id. ¶ 10. According to Cincinnati, sometime before April 15, 2012, Hylton Hall instructed its insurance agent, Ruch, who sold Westover's insurance plans, to reapply for, and to put into force, sufficient property insurance on the Property. Id. ¶ 11. Defendants deny that Hylton Hall ever gave this instruction. Answer to Am. Compl. ¶ 11, ECF No. 22. However, the parties agree that the then-existing property insurance policy lapsed before April 15, 2012 and that, on April 15, a fire (the " Fire" ) destroyed the Property. Am. Compl. ¶ 12; Answer ¶ 12.

Paragon Commercial Bank (" Paragon" ), the beneficiary of the Deed of Trust, maintained a mortgage insurance policy (the " Policy" ) with Cincinnati. Am. Compl. ¶ 14. Pursuant to the Policy, Cincinnati paid Paragon $618,224.11 for its lost interest in the Property and, as a result, became subrogated to the extent of its payment. Id. ¶ ¶ 15-16. Cincinnati, in its capacity as subrogee, then sued Hylton Hall for failing to maintain property insurance under the terms of the Deed of Trust. Id. ¶ 17. The parties to that action settled, and, in return for a dismissal with prejudice, Hylton Hall assigned to Cincinnati: " any and all rights, claims, causes of action, suits in equity, or other rights of relief, if any, it may possess to recover from Westover [], or its agents, representative, employees, directors, officers for the failure to place property insurance on the Property on or before April [15], 2012" (the " Assignment" ). Pl.'s Resp., Ex. 1, ECF No. 24. As assignee, Cincinnati filed this action against Defendants to recover the amount paid to Paragon.

Count One of the Amended Complaint alleges negligence on the part of Ruch and Westover individually, jointly, severally, or in the alternative. It is alleged that the Defendants had a duty to place the insurance, that they breached their duty, and that the breach was the direct and proximate cause of damages in excess of $618,224.11. Am. Compl. ¶ ¶ 22-26. Count Two of the Amended Complaint alleges breach of fiduciary duty, claiming specifically that a fiduciary relationship existed by virtue of Defendants' dealings with Hylton Hall, and that Defendants breached their fiduciary obligation to Hylton Hall by failing to place the property insurance. Id. ¶ ¶ 29-30. Count Three alleges a breach of contract, specifically that Defendants entered into an oral contract with Hylton Hall to place insurance and subsequently breached that contract by not placing the property insurance. Id. ¶ ¶ 33-36.

In their Answer, Defendants raise a number of affirmative defenses, including failure to state a claim, invalid assignment, contributory negligence, and lack of proximate causation. See Answer at 1-2. In their Memorandum in Support of their Motion to Dismiss, Defendants first argue that Hylton Hall's assignment of its claims to Cincinnati was invalid, arguing that the failure of an insurance agent to procure insurance is a personal action and therefore not assignable. See Defs.' Mem. in Supp. of Mot. to Dismiss 3-5, ECF No. 21. Defendants also argue that Cincinnati's only potential claim must sound exclusively in contract rather than negligence or breach of fiduciary duty. Id. at 5-9. Finally, Defendants allege that Ruch must be dismissed as a defendant because at all times he was acting as an agent for a disclosed principal, Westover. Id. at 9-10. [1]

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A motion to dismiss under Rule 12(b)(6) seeks to test the legal sufficiency of the factual allegations made in the Complaint. F.R.C.P. 12(b)(6). Under Rule 8(a)(2), a pleading must contain a " short and plain statement of the claim showing that the pleader is entitled to relief." F.R.C.P. 8(a)(2). As the United States Supreme Court has held, the pleading standard that Rule 8(a) announces does not require " detailed factual allegations," but it demands more than an unadorned accusation. Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A pleading that offers mere " labels and conclusions" or " a formulaic recitation of the elements of a cause of action will not do." Id. Nor does a complaint suffice if it tenders only " naked assertion[s]" devoid of " further factual enhancement." Id. at 557.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted by the court as true, to " state a claim to relief that is plausible on its face." Id. at 570. A claim has facial " plausibility" when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556. The plausibility standard is not akin to a " probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Id. Where a complaint pleads facts that are " merely consistent with" a defendant's liability, it " stops short of the line between possibility and plausibility of entitlement to relief." Id. at 557. Nevertheless, the Supreme Court repeatedly emphasized that alleging plausible grounds for a claim " simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence" to prove the alleged claim. Id. at 556. This pleading standard governs " all civil actions and proceedings in the United States district courts." Ashcroft v. Iqbal, 556 U.S. 662, 684, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).


To decide the motion to dismiss, it is necessary to address four issues: (i) whether the Assignment is valid; (ii) whether Ruch should be dismissed as a named defendant; (iii) whether Cincinnati may maintain a negligence action; and (iv) whether Cincinnati may maintain a breach of ...

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