Insurer’s Conclusory Allegations of Fraud Insufficient to Withstand Motion to Dismiss

March 31, 2013

A federal district court has decided that an insurance company’s “conclusory” allegations that applications contained false statements amounting to fraud were insufficient to withstand a motion to dismiss. 

The Case

An insurance company alleged that there were false statements made in insurance applications and filed suit against Risk Placement Services, Gloria Lam, and Joan Vascones (collectively, “the RPS defendants”) and against Karen Faust and Consolidated Agency Partners (collectively, “the CAP defendants”) asserting claims based in whole or in part on allegedly fraudulent acts. The defendants moved to dismiss.

The Court’s Decision

The court found that the complaint did not contain sufficient factual data to state claims that were plausible on their face as to each of the individual RPS and CAP defendants. Specifically, the court found, the complaint did not contain factual allegations as to how any of those individual defendants knew that the allegedly false statements contained in the applications were not truthful or that any of the individual defendants made a fraudulent representation that she had an insufficient basis for making.

Moreover, the court continued, the complaint did not allow a reasonable inference to be drawn that the RPS defendants were involved in the preparation of the applications in any way such that any misrepresentations contained in them could be attributed to them. According to the court, the complaint only contained “general and conclusory allegations that all defendants knew the representations were false.” Grouping the defendants together as to their knowledge that the statements were false satisfied neither the heightened pleading standard required by Rule 9 of the Federal Rules of Civil Procedure or the “plausibility” standard under the recent Twombly and Iqbal decisions by the U.S. Supreme Court, the court ruled.

The court gave the insurer time to file an amended complaint setting forth “the who, what, when, where, and how of the misconduct charged” in its claims based on fraud.

The case is Companion Property and Casualty Group v. Consolidated Agency Partners, No. 3:12-cv-00595-HDM-VPC (D. Nevada March 13, 2013).

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  • Alan S. Rutkin





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