Wilmington Tr., N.A. v. Nat'l Gen. Ins. Co., 1:21cv207

CourtUnited States District Courts. 4th Circuit. Middle District of North Carolina
Writing for the CourtTHOMAS D. SCHROEDER, Chief District Judge.
Docket Number1:21cv207
Decision Date17 June 2021




June 17, 2021


THOMAS D. SCHROEDER, Chief District Judge.

This is a dispute over insurance coverage for damage resulting from a fire at a residence located in Great Falls, Virginia. Before the court is the motion to dismiss or, alternatively, to stay by Defendant National General Insurance Company ("National General"). (Doc. 6.) Plaintiffs Wilmington Trust, National Association1 ("Wilmington Trust"), and Fay Servicing, LCC ("Fay Servicing") have responded, opposing the motion (Doc. 8), and National General has replied (Doc. 9). For the reasons set forth below, National General's motion to dismiss or stay will be denied.


The allegations in the complaint, taken in the light most favorable to Plaintiffs, show the following:

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On March 18, 2008, Palwinder Singh obtained a mortgage with Bank of America, N.A. for the original principal amount of $842,080.00 by means of a promissory note ("Note"). (Doc. 1 ¶ 6.) As security for the Note, Singh conveyed a deed of trust for real property located at 817 Walker Road, Great Falls, Virginia ("Property"). (Id. ¶ 7.) The deed of trust required Singh to obtain property insurance "against loss by fire, hazards included within the term 'extended coverage,' and any other hazards including, but not limited to, earthquakes and floods" and required that all policies "shall include a standard mortgage clause, and shall name Lender as mortgagee and/or as an additional loss payee." (Id. ¶ 8.)

On November 29, 2017, the Note was assigned to Wilmington Trust. (Id. ¶ 9.) Fay Servicing is the servicer for the loan. (Id. ¶ 10.) In its capacity as loan servicer, Fay Servicing has the authority to take actions with regard to the debt owed by Singh, including making claims for insurance proceeds. (Id.)

On January 3, 2018, Singh obtained an insurance policy ("Policy") from National General insuring the Property against loss.2 (Id. ¶ 12.) The Policy contains a mortgage clause which reads, in relevant part: "If a mortgagee is named in this policy,

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any loss payable under Coverage A or B will be paid to the mortgagee and you, as interests appear."3 (Doc. 7-1 at 34.) "Bank of America Fay Servicing" is listed on the Policy as the mortgagee. (Id. at 11.) The mortgage clause also states that the insurer can deny the insured's claim and "that denial will not apply to a valid claim of the mortgagee" if the mortgagee takes certain required actions. (Id. at 34.) The clause also contains sections requiring the insurer to notify the mortgagee if it decides to cancel or not renew the Policy.4 (Id. at 36.)

Fay Servicing and Wilmington Trust allege that they were intended third-party beneficiaries of the Policy. (Doc. 1 ¶ 13.) In servicing the loan, Fay Servicing managed an escrow account on behalf of Singh through which all premiums for the Policy were timely and fully paid to National General. (Id. ¶¶ 14-15.)

On May 12, 2020, the Property was damaged by fire. (Id. ¶ 16.) Fay Servicing, in its role as loan servicer on behalf of Wilmington Trust, timely submitted an insurance claim for coverage to National General. (Id. ¶ 18.) National General failed to timely respond, and between June and December 2020 it failed to

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provide any response to the claim. (Id. ¶ 19.) Then, without prior warning, National General cancelled the Policy and refused to pay the claim. (Id. ¶ 20.) National General allegedly cancelled the Policy because of misrepresentations by Singh in connection with his application for the Policy. (Id. ¶ 27.) According to Plaintiffs, neither Wilmington Trust nor Fay Servicing assisted Singh in applying for the Policy or had any knowledge of any alleged misrepresentations. (Id. ¶ 28.)

On January 12, 2021, Integon National Insurance Company ("Integon") -- a company affiliated with National General5 -- filed a declaratory judgment action in Virginia state court seeking a declaration that the Policy is void ab initio due to Singh's misrepresentations, that Wilmington Trust did not comply with certain requirements in the Policy's mortgage clause, and that Integon accordingly does not owe coverage to either Singh or Wilmington Trust. (Doc. 7-3.) The original complaint named as defendants Singh and Bank of America. Integon subsequently amended the complaint to dismiss Bank of America and add Wilmington Trust as a defendant. (Docs. 7-1; 7-6.)

On March 15, 2021, Wilmington Trust and Fay Servicing filed

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the present complaint in this court against National General. (Doc. 1.) In it, they allege breach of contract, negligence, and negligent misrepresentation based on National General's refusal to pay the insurance claim. National General moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), 12(b)(3), 12(b)(6), 12(b)(7), and 19 and the doctrines of forum non conveniens and abstention or, in the alternative, to stay the action. (Doc. 6.) The matter is fully briefed and ready for decision.


A. Failure to State a Claim

National General first moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Plaintiffs have named the wrong insurer. (Doc. 7 at 6.) Specifically, National General argues, "Plaintiffs fail to state a claim upon which relief can be granted against National General as Integon, and not National General, issued and renewed" the Policy. (Id.) Plaintiffs oppose the motion, arguing that National General's use of a brand name by multiple affiliated companies should not result in dismissal at this point. (Doc. 8 at 4-7.)

A motion to dismiss under Rule 12(b)(6) is meant to "test[] the sufficiency of a complaint" and not to "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of N.C. v. Martin, 980 F.2d 943,

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952 (4th Cir. 1992). To survive such a motion, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In considering a Rule 12(b)(6) motion, a court "must accept as true all of the factual allegations contained in the complaint," Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam), and all reasonable inferences must be drawn in the non-moving party's favor, Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997).

In this case, both parties have attached exhibits in support of their positions. Specifically, National General has attached a declaration of Jeffrey Weissmann, the general counsel for both National General Management Corporation ("NGMC") and National General Holdings Corporation ("NGHC"), and the amended complaint in the Virginia state court action that purportedly includes the Policy at issue. (Docs. 7-1; 7-2.) Plaintiffs attach emails and public records concerning the registered business names in Virginia of National General and Integon. (Docs. 8-3; 8-4; 8-5.)

However, because National General is moving for dismissal on this basis under Rule 12(b)(6), the court is constrained in what it can consider without converting the motion to one for summary judgment. Because a motion to dismiss "tests the sufficiency of a complaint," see Martin, 980 F.2 at 952, the court is "generally

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limited to a review of the allegations of the complaint itself," Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016). A court can also consider documents explicitly incorporated into the complaint by reference or attached as exhibits, as well as documents submitted by the party moving for dismissal but only if the document was integral to the complaint and there is no dispute about its authenticity. See id. at 166.

Here, the court might ordinarily be able to consider the Policy attached by National General, because it forms the basis of Plaintiffs' claims and is explicitly referenced in the complaint. However, Plaintiffs appear to dispute its authenticity. (See Doc. 8 at 5 ("As noted in the Complaint, neither the Trust nor Fay were ever provided a copy of the policy obtained by Singh. As such, they cannot even verify that the copy of the policy attached to the Defendant's motion to dismiss is or is not the actual policy.").) In the average case, this might be a hard claim for the court to accept, as a plaintiff suing for breach of contract surely must identify the contract it claims was breached. But here Wilmington Trust alleges it was a third-party beneficiary of Fay's contract with National General, and it is plausible that Wilmington Trust was not provided a copy of the actual policy. Because the authenticity of the Policy is disputed, the court will therefore not consider it at this juncture. Nor can the court consider the parties' dueling exhibits, such as emails and

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declarations, at this stage, especially given the disputed facts contained therein. Cf. Gibbons v. Bank of Am. Corp., No. CV JFM 08-3511, 2009 WL 10727185, at *4 (D. Md. Apr. 22, 2009) (considering defendant's declaration at the motion to dismiss stage but only when the declaration "does not contradict any facts alleged in the Amended Complaint") (citing Wilson-Cook Med., Inc. v. Wilson, 942 F.2d 247, 252 (4th Cir. 1991)).

National General's sole argument on Rule 12(b)(6) grounds is that Plaintiffs named the wrong party. Plaintiffs have otherwise stated a plausible claim for relief as to each count, accepting as true the allegations in the complaint as the court must at this point. The court is constrained, therefore, to deny National General's motion to dismiss for failure to state a claim at this time. The court can reconsider this argument at a later date with a more developed record as to the proper defendant, as well as any...

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