Norfe Grp. Corp. v. R.Y. Espinosa Inc.

• Decision Date: 09 November 2021
• Docket Number: CIVIL 19-1897 (BJM)
• Parties: NORFE GROUP CORP., Plaintiff, v. R.Y. ESPINOSA INC. ET AL., Defendants.
• Court: U.S. District Court — District of Puerto Rico

NORFE GROUP CORP., Plaintiff,
v.
R.Y. ESPINOSA INC. ET AL., Defendants.

CIVIL No. 19-1897 (BJM)

United States District Court, D. Puerto Rico

November 9, 2021

OPINION AND ORDER

BRUCE J. MCGIVERIN, UNITED STATES MAGISTRATE JUDGE.

Plaintiff Norfe Group Corp. (“Norfe”) filed suit against Defendants R&G Espinosa International Adjusters, LLC (“R&G”)^[1] and QBE Insurance (“QBE”)^[2] (collectively “Defendants”), along with other named and unnamed individuals and insurance companies, claiming that Defendants committed violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c) and (d), along with many violations of the Insurance Code of Puerto Rico. Docket No. (“Dkt.”) 90. Norfe invokes the court's federal question jurisdiction. Id. at 5. Defendants R&G and QBE each separately moved to dismiss Norfe's claims. Dkts. 92, 96. Norfe opposed Defendants' motions to dismiss, Dkt. 99, and Defendants submitted replies further supporting the motions to dismiss. Dkts. 105, 106. This case is before me by consent of the parties. Dkts. 63, 64, 65. For the following reasons, Defendants' motions to dismiss are GRANTED.

BACKGROUND^[3]

Norfe owns real estate in Puerto Rico. R&G is a Florida-based company authorized to do business in Puerto Rico. QBE is an insurance company that provided property insurance coverage

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to Norfe. The claims in question arose out of damage to and destruction of Norfe's property caused by Hurricane María on or about September 20, 2017. R&G and QBE do not challenge the court's jurisdiction to hear Norfe's claims, only the sufficiency of Norfe's pleadings.

Norfe possessed an insurance policy issued by QBE on real estate in Puerto Rico. The policy purportedly provided Norfe with insurance coverage against (a) loss of, damage to, vandalism of, or destruction of real and personal property owned, used, leased, or intended for use by Norfe; (b) loss of, damage to, vandalism of, or destruction of any interest of Norfe in real or personal property in Norfe's care, custody, or control; (c) any lost profits resulting from the necessary interruption of Norfe's business caused by any loss of, damage to, vandalism of, or destruction of real or personal property belonging to Norfe; and (d) loss in the nature of extra business and operating expenses incurred by Norfe as a result of loss of, damage to, vandalism of, or destruction of real or personal property belonging to Norfe. The policy supposedly covered winds, rain and other conditions caused by hurricanes and other meteorological events.

Norfe claims that since on or around September 20, 2017, when Hurricane Maria hit Puerto Rico, Defendants have been operating a scheme to defraud insurance policy holders in Puerto Rico. Elements of the scheme allegedly include hiring R&G solely for the purpose of delaying or reneging on insurance claims while ousting former adjusters in order to do so; not training, supervising, or managing adjusters properly; hiring field inspectors with no preparation or experience in the Puerto Rico real estate market; not treating policyholders in good faith; failing to implement proper standards for the adjustment and investigation of claims; not paying clearly owed portions of claims; adjusting damages estimates downwards in over 60% of all claims; failing to notify policyholders of their right to mediate their claims; and only negotiating disbursements in accordance with the damages estimates if a policyholder complained. Norfe

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claims that Defendants have committed several RICO violations in the process and also invokes supposed violations of the Insurance Code of Puerto Rico under the doctrine of supplemental jurisdiction. However, Norfe does not cite any specific examples of Defendants engaging in such behavior other than towards Norfe.

Norfe alleges that Defendants' scheme was carried out in part via phone and/or electronic messages and that the case therefore has RICO implications. Norfe cites five such messages in particular: a December 1, 2017 email in which a field adjuster supposedly wrote to Defendants that losses suffered on Norfe's insured property would likely exceed the full $3, 600, 000 the property was insured for, making the property “uninsurable”; a December 13, 2017 email in which the same adjuster stated that the losses suffered on the property were being “reduced” to an amount nearer to $3, 600, 000, noting that he planned to apply a policy deduction of 15% because the property was apparently “vacant”; a February 2, 2018 message to Norfe from personnel for Defendants stating that QBE insurance would ultimately determine whether to apply the 15% vacancy deduction; a July 31, 2018 email in which QBE personnel supposedly stated that the vacancy provision in Norfe's policy was inapplicable because the policy had been reissued and QBE was aware that the property at issue was vacant when they collected premiums on the policy; and a December 2018 offer of payment made to Norfe as outlined below. Norfe claims that there are “hundreds, if not thousands” of other emails that prove the implementation of Defendants' purported scheme as well.

In December 2018, Defendants presented Norfe with a $2, 356, 444 offer of payment in accordance with the policy on Norfe's property, which according to Norfe had been “adjusted downwards” by applying a vacancy deduction and other adjustments. Norfe refused this amount, and Defendants increased the offer to $2, 456, 419, which Norfe ultimately accepted. However,

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Norfe claims to have accepted the offer under duress; Norfe now argues that the payment amount was insufficient and that the offer was unfairly low due to Defendants' fraudulent scheme. Norfe now alleges “dozens” of violations of the RICO mail fraud statute, 18 U.S.C. § 1341, the wire fraud statute, 18 U.S.C. § 1343, and numerous violations of the Puerto Rico Insurance Code, including violations of 26 P.R. Laws Ann. §§ 2016a(1), (2), (3), (4), (5), (6), (7), (8), (12), (13), (14), (15), (17), (19), and (20).

APPLICABLE LEGAL...