460 F.Supp.3d 481
S.D.N.Y.2020Background
- Pilkington’s glass plant in Ottawa, Illinois suffered a tornado loss (Feb. 2017) that Pilkington values at ~$60–100M; coverage was issued by MSI and brokered by Aon.
- MSI proposed an endorsement (the Endorsement) for the 2015–2016 policy that MSI represented to Aon (and indirectly to Pilkington) as correcting currency valuations; attachments contained unflagged wording that revised a Windstorm Sublimit.
- Aon told Pilkington the Endorsement changed only monetary valuations and relayed consent to MSI; Aon then incorporated the revised Windstorm Sublimit into the 2016–2017 submission, resulting in a $15M cap applicable to the Tornado.
- Pilkington sued MSI and Aon for claims including reformation (fraudulently induced), breach of contract, declaratory relief, breach of the implied covenant of good faith and fair dealing, equitable estoppel (new in AC), and misrepresentation claims against Aon.
- District court previously granted partial dismissal and permitted repleading under Fed. R. Civ. P. 9(b); after the Amended Complaint, the court DENIED MSI’s motion to dismiss in full and GRANTED Aon’s motion to dismiss the intentional misrepresentation claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reformation (fraudulently induced unilateral mistake) against MSI | MSI misrepresented (by omission/half-truths) that Endorsement only changed valuations, inducing consent | MSI: Plaintiffs fail Rule 9(b) particularity, scienter, and reasonable reliance; information was provided to broker Aon | Survives. Court finds omissions (failure to correct Aon) plausibly plead material misrepresentation, scienter, and reasonable reliance at pleading stage |
| Equitable estoppel against MSI | MSI knowingly concealed/misstated facts; Pilkington justifiably relied and was prejudiced | MSI: Same defects as fraud claim | Survives. Court permits estoppel; elements plausibly alleged |
| Breach of implied covenant of good faith and fair dealing (MSI) | MSI’s covert reduction of coverage injured Pilkington’s right to receive contract benefits | MSI: Conduct was negotiation over endorsement, not contract performance; allowing claim would circumvent reformation standard | Survives. Court finds conduct relates to performance (retroactive effect) and plausibly shows bad faith |
| Breach of contract / Declaratory relief | Seeks damages and declaration tied to reformation and coverage | MSI: Claims fail for same pleading defects | Survives. Reformation survives so related breach and declaratory claims may proceed |
| Intentional misrepresentation (Aon) | Aon intentionally told Pilkington Endorsement only changed valuations despite knowing otherwise | Aon: No fraudulent intent; at most negligence; Aon relied on MSI and believed changes were valuation-only | Dismissed. Court finds plaintiffs fail to plead facts giving strong inference of Aon’s fraudulent intent; leave to amend denied |
Key Cases Cited
- Keiler v. Harlequin Enters. Ltd., 751 F.3d 64 (2d Cir. 2014) (Rule 8 pleading standard described)
- Lynch v. City of New York, 952 F.3d 67 (2d Cir. 2020) (accept well-pleaded factual allegations as true)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state plausible claim for relief)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard at pleading stage)
- Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160 (2d Cir. 2015) (Rule 9(b) particularity and scienter analysis)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (strong-inference-of-fraud standard)
- Brass v. Am. Film Techs., Inc., 987 F.2d 142 (2d Cir. 1993) (duty to disclose where statements are half-truths)
- Universal Health Servs. v. United States, 136 S. Ct. 1989 (2016) (half-truths can be actionable misrepresentations)
- In re Carter-Wallace, Inc. Sec. Litig., 220 F.3d 36 (2d Cir. 2000) (scienter can be pleaded by motive/opportunity or circumstantial evidence)
- Travelers Indem. Co. of Ill. v. CDL Hotels USA, Inc., 322 F. Supp. 2d 482 (S.D.N.Y. 2004) (reformation requires high order of evidence given written instrument presumption)