Charleswell v. Chase Manhattan Bank, N.A.
| Decision Date | 27 February 2004 |
| Docket Number | Civil Action No. 01-119. |
| Citation | 308 F.Supp.2d 545 |
| Parties | Raymond and Gurda CHARLESWELL, Marsha Christian, Jacqueline Jeffries, Marilyn A. Creque, Jean S. Maynard, Hollister Pierre and Verdine Pierre, Plaintiffs, v. CHASE MANHATTAN BANK, N.A., Chase Manhattan Mortgage Corporation and Chase Agency Services, Inc., Defendants. |
| Court | U.S. District Court — Virgin Islands |
A. Jeffrey Weiss, Terrence Buehler, Chicago, IL, for plaintiff.
Nancy V. Young, George H. Logan, Leann Pederson Pope, Christiansted, VI, for defendant.
This class action arises out of claims by plaintiffs, Raymond and Gurda Charleswell, Marsha Christian, Jacqueline Jeffries, Marilyn A. Creque, Jean S. Maynard, Hollister Pierre and Verdine Pierre ("plaintiffs"), and a putative class of 989 Virgin Islands real property owners against defendants, Chase Manhattan Bank, N.A. ("Chase"), Chase Manhattan Mortgage Corporation ("CMMC"), and Chase Agency Services, Inc. ("CAS") (collectively "defendants"), for recovery of tens of millions of dollars in insurance coverage for damage to their property in the Virgin Islands caused by Hurricane Marilyn in September 1995.
In the Class Action Complaint, plaintiffs allege, inter alia, that defendants Chase and CMMC (collectively "the Chase defendants"), which held mortgages on plaintiffs' property, procured or provided hazard insurance coverage for plaintiffs and then failed to advise plaintiffs of the full nature and extent of their coverage. Plaintiffs also claim that such defendants and CAS charged plaintiffs excessive premiums for insurance on their property after it was demolished or damaged by the hurricane. They seek relief for negligent misrepresentation, fraud, negligence, breach of contract, breach of fiduciary obligation, breach of the duty of good faith and fair dealing, bad faith, and civil violations of the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. and the Criminally Influenced and Corrupt Organizations Act ("CICO"), 14 V.I.C. § 600 et seq.
Presently before the Court is Defendants' Motion to Dismiss Plaintiffs' Complaint ( ). In essence, defendants contend that their only contracts with plaintiffs were the mortgage contracts, and under the mortgages, they had no obligation to provide insurance. In their response to the Motion, plaintiffs argue, inter alia, that their claims are based on separate agreements to procure or provide insurance, not the mortgages.
For the reasons set forth in this Memorandum, defendants' Motion to Dismiss Plaintiffs' Complaint is granted in part and denied in part. Defendants' Motion to Dismiss is granted with respect to plaintiffs' claims of negligent misrepresentation (Count I), bad faith (Count IX), that part of Count XI in which plaintiffs allege a violation of RICO § 1962(a), and that part of Count XII in which plaintiffs allege a violation of CICO § 605(c). Such claims are dismissed without prejudice to plaintiffs' right to file an amended complaint. The Court denies the Motion to Dismiss with respect to plaintiffs' claims for breach of contract (Count VI), breach of the duty of good faith and fair dealing (Count VIII), negligence (Counts III, IV, and X), fraud (Counts II and V), breach of fiduciary duty (Count VII), and violations of RICO § 1962(c) (Count XI) and CICO § 605(a) (Count XII). The denial of the Motion to Dismiss with respect to these Counts is without prejudice to defendants' right to raise the issues addressed in the Motion to Dismiss at the conclusion of relevant discovery by motion for summary judgment and/or at trial.
The Court first sets forth the relevant background for plaintiffs' claims. The facts are taken from the Class Action Complaint ("Complaint"):
Beginning on January 1, 1994, the Chase defendants provided banking and mortgage services in the United States Virgin Islands ("Virgin Islands"). Chase is a national banking association with its principal place of business in New York City, New York. CMMC and CAS are corporations affiliated with Chase.1 Compl. ¶¶ 2-4, 15. Prior to September 15, 1995, plaintiffs obtained mortgages from Chase in connection with the purchase of their homes and other properties in the Virgin Islands. Id. ¶ 17.a. The mortgage agreements required plaintiffs to, inter alia, "acquire and maintain insurance on their mortgaged property." Id. ¶ 18.
Plaintiffs were unable to procure property insurance or could only obtain insurance through substandard carriers. Id. As a result, Chase and CMMC offered plaintiffs a "`forced placed insurance' program." Id. 3, 16(b), 18. The program was administered by Chase's internal insurance group in New York City, The Donnelly Corporation, and Patrick R. Donnelly. Donnelly and the Donnelly Corporation were "engaged" by the Chase defendants in 1994 to assist in the administration of that program and in the procurement of bulk insurance coverage from Lloyd's of London. Id. ¶¶ 16.a., 28. Through this insurance program, referred to as the U.S. Virgin Islands Property Insurance Program ("Property Insurance Program") in the Complaint, "Chase defendants obtained, procured, provided, and sold windstorm, hazard, and casualty insurance coverage" for plaintiffs. Id. ¶ 16.b, 18. Specifically, between January 1, 1994 and at least September 15, 1995, the Chase defendants obtained "a bulk insurance policy for a percentage of their entire loss risk" through Lloyd's of London ("Lloyd's"). Id. ¶ 16.c. According to plaintiffs, this bulk policy "acted essentially as reinsurance" to cover a percentage of the Chase defendants' risk. Id. Chase, CMMC, and Donnelly assured the Virgin Islands Division of Banking and Insurance that the Property Insurance Program would insure both the interests of the homeowners and the interests of the Chase defendants in the insured properties. Id. ¶ 32.a. However, the Chase defendants only secured enough insurance to protect their mortgage loan interest in the properties, leaving the homeowners' equity interests uninsured. Id.
Plaintiffs contend that Chase offered plaintiffs insurance coverage through the Property Insurance Program and "assured" plaintiffs that the program would provide them with "adequate coverage." Id. ¶ 18. Based on those representations, plaintiffs agreed to purchase forced place insurance from the Chase defendants. Id. ¶ 18. Thereafter, plaintiffs submitted mortgage payments and insurance premium payments to the Chase defendants and performed all other obligations required under the mortgage contracts. Id. ¶ 20, 37. The Chase defendants, however, did not provide plaintiffs with copies of their insurance policies or with information describing the full nature, amount, or extent of their coverages. Id. ¶¶ 19, 32.c.
On September 15, 1995, Hurricane Marilyn struck the Virgin Islands. Id. ¶ 21. The Hurricane caused substantial damage to each plaintiff's home and/or other property. Id. 25. Plaintiffs incurred expenses for temporary repairs, landscaping, demolition, and debris removal. Id. In addition, some plaintiffs lost rental income due to the damage to their property or were forced to incur rental expenses when their homes became uninhabitable. Id.
As a result of the damages and losses caused by Hurricane Marilyn, each plaintiff contacted Chase to obtain information on how to file a claim for insurance coverage. Id. ¶ 22. Chase advised plaintiffs that they had insurance coverage and sent adjusters to inspect the damage to plaintiffs' property. Id. ¶ 23.
Plaintiffs claim the Chase defendants failed to inform plaintiffs of the full extent of their coverage and failed to pay for all of the losses covered by plaintiffs' insurance policies. Id. ¶ 85. Specifically, plaintiffs allege that the Chase defendants did not inform plaintiffs of the existence of "additional" coverage under the insurance policy that Chase procured from Lloyd's. Id. ¶¶ 24.a., 25. The "additional" coverage under this policy included coverage for (1) demolition and debris removal costs, (2) landscaping costs, (3) cost of temporary repairs, (4) cost of alternative housing while the insured property remained uninhabitable during the repair/reconstruction period, and (5) lost rental income. Id. Likewise, before the hurricane, the Chase defendants did not disclose that plaintiffs could have obtained personal property insurance and increased their dwelling coverage to an amount above their loan balance. Id. ¶ 54, 55. Moreover, after the hurricane, the Chase defendants continued to insure the mortgaged properties for the full mortgage balance and, together with CAS, charged plaintiffs for that coverage despite the fact that the hurricane damage reduced the value of plaintiffs' properties below their mortgage balances. Id. ¶ 26.
On September 23, 24 and 25, 1995, the Chase defendants mailed letters to plaintiffs. In these letters, those defendants represented that they were "... in the process of arranging renewed insurance for [plaintiffs'] mortgaged property through our U.S.V.I. Property Program." Id. ¶ 32.e. Plaintiffs allege that this statement was fraudulent. Id.
The Chase defendants continued to withhold the complete terms of the insurance policy issued by Lloyd's for the period from July 1, 1995 to June 30, 1996 and "actively sought to suppress disclosure of that information." Id. 24(b). As a result of this conduct, plaintiffs state they first became aware of their entitlement to the additional coverage in December 1999 when A. Jeffrey Weiss, Esq., counsel for plaintiffs, obtained copies of a policy pursuant to a subpoena duces tecum issued in another case — Nibbs v. Chase Manhattan Bank, No. 96/240 (D.V.I.1996). Plaintiffs claim this was the first time...
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