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Barry J. Steinfelder v. Catlin Specialty Insurance Company

May 15, 2013


The opinion of the court was delivered by: James K. Bredar United States District Judge


Barry J. Steinfelder ("Plaintiff") brought this suit against Catlin Specialty Insurance Company ("Catlin") and Ogilvie Security Advisors, Corp. ("Ogilvie" and, collectively with Catlin, "Defendants"), alleging breach of contract, fraud, civil conspiracy to commit fraud, violation of N.Y. INS. LAW § 2316, tortious interference with contractual relations, and seeking to recover attorneys' fees. Now pending before the Court are Catlin's motion to dismiss (ECF No. 27), Ogilvie's motion to dismiss (ECF No. 28), and Plaintiff's motion to amend the complaint (ECF No. 37). The issues have been briefed and no hearing is required. Local Rule 105.6. For the reasons set forth below, Catlin's motion to dismiss will be GRANTED IN PART and DENIED IN PART, Ogilvie's motion to dismiss will be GRANTED IN PART and DENIED IN PART, and Plaintiff's motion to amend the complaint will be GRANTED.


From 1999 through October 2010, Plaintiff was an independent contractor for Ogilvie, a Maryland corporation and broker-dealer that did business through licensed representatives. (Am. Compl. ¶ 3, 7; ECF No. 37-1.)*fn1 During this period, Plaintiff was registered with Financial Industry Regulatory Authority ("FINRA")-a self-regulatory organization for securities firms doing business in the United States-as a registered representative for Ogilvie. (Id. ¶ 7.) Ogilvie offered "products, services, support staff, technology and competitive payouts" to the licensed registered representatives, who in turn offered various investment products to their clients. (Id. ¶ 3.) Ogilvie required all of its registered representatives, including Plaintiff, "to enroll and obtain Ogilvie's Errors and Omissions Insurance ("E&O") policy." (Id. ¶ 7.) During his tenure with Ogilvie, Plaintiff purchased this required insurance through various insurance companies, and at all times he paid his premiums for the E&O insurance "directly to Ogilvie." (Id. ¶ 8.)

In May 2007, Ogilvie notified Plaintiff "by e-mail that effective June 1, 2007, Catlin would be providing Ogilvie's E&O insurance coverage." (Id. ¶ 9.) Plaintiff continued paying his insurance premiums to Ogilvie, and "Catlin never demanded or required [Plaintiff] to pay the insurance premium payments directly to Catlin. Ogilvie and Catlin never forwarded copies of the applicable policy then in effect to [Plaintiff], despite his requests." (Id.) "Ogilvie annually renewed its E&O insurance coverage policy with Catlin and Catlin provided continued, uninterrupted E&O coverage to [Plaintiff] from June 2007 through 2010." (Id. ¶ 10.) The events relevant to the amended complaint occurred during the terms of policies that were effective from June 1, 2009 through June 1, 2010 (the "2009/10 Policy"), and June 1, 2010 through June 1, 2011 (the "2010/11 Policy"), respectively. (Id. ¶ 11.)

On April 16, 2010, FINRA served Plaintiff with a copy of an arbitration claim made by Mr. and Mrs. Warren Klawans and their related trusts against Plaintiff and Ogilvie. (Am. Compl. ¶ 18.) Ogilvie received a copy of the arbitration claim on the same day. (Id.) This arbitration, known as FINRA Arbitration No. 10-01314, related to "the possible purchase of variable life insurance policies [by the Klawans] in January 2007." (Id.) After being served with the claim, Plaintiff "began communicating with Ogilvie almost immediately." (Id. ¶ 19.) On May 6, 2010, Plaintiff shared "a copy of his draft response to the FINRA inquiry [with] Ogilvie's counsel." (Id. ¶ 20.) Plaintiff alleges that he "was led to believe that Ogilvie's mandatory E&O policy would be providing coverage," and that he therefore "reasonably concluded that his communications with [Ogilvie and its representative] about the claim thereby provided notice to Catlin." (Id.)

On May 27, 2010, Ogilvie informed Plaintiff that the Policies did not cover the Klawans' arbitration claim. (Id. ¶ 21.) On June 2, 2010, Plaintiff retained counsel. (Id. ¶ 22.) On August 25, 2010, a representative of the producer of the Policies "confirmed that Catlin had been provided notice of the matter." (Id. ¶ 23.) From at least May 2010 through October 2010, Plaintiff repeatedly requested that Ogilvie or Catlin provide Plaintiff with a copy of the Policies. (See id. ¶¶ 21, 24.) On October 15, 2010, Catlin provided Plaintiff with a copy of the 2010/11 Policy. (Id. ¶ 24.) On October 26, 2010, Catlin declined coverage. (Id. ¶ 26.)

On August 27, 2012, Plaintiff filed his complaint in the Circuit Court of Maryland for Baltimore County. On October 5, 2010, Defendants removed the case to this Court. On November 12, 2012, Defendants filed separate motions to dismiss (ECF Nos. 27, 28). On December 18, 2012, Plaintiff filed a motion for leave to amend the complaint (ECF No. 37). On March 29, 2013, Ogilvie filed a notice that it no longer intends to provide a defense in this litigation (ECF No. 47).


A motion to dismiss under FED. R. CIV. P. 12(b)(6) is a test of the legal sufficiency of a complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). To pass this test, a complaint need only present enough factual content to render its claims "plausible on [their] face" and enable the court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plaintiff may not, however, rely on naked assertions, speculation, or legal conclusions. Bell Atl. v. Twombly, 550 U.S. 544, 556-57 (2007). In assessing the merits of a motion to dismiss, the court must take all well-pled factual allegations in the complaint as true and construe them in the light most favorable to the Plaintiff. Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). If after viewing the complaint in this light the court cannot infer more than "the mere possibility of misconduct," then the motion should be granted and the complaint dismissed. Iqbal, 556 U.S. at 679.

Leave to file an amended or supplemental pleading should be "freely give[n] where justice so requires." FED. R. CIV. P. 15(a)(2). A district court may deny leave, however, if: (1) the new pleading would prejudice the opposing party; (2) the moving party has acted in bad faith; or, (3) the new pleading would be futile (i.e., if it could not withstand a motion to dismiss). Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006); Perkins v. U.S., 55 F.3d 910, 917 (4th Cir. 1995). If a district court chooses to deny leave, it must give justifying reasons. See id. (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).


Plaintiff moved to amend the complaint while Defendants' motions to dismiss the original complaint were pending. The amended complaint will not prejudice the Defendants, and there is no evidence that it was offered in bad faith. Therefore, the Court will grant Plaintiff's motion to amend unless that amendment would be futile. The proposed amendment is not futile because, as explained more fully below, some of the proposed amendments can withstand a motion to dismiss. Compare Perkins, 55 F.3d at 917.

It is well-established law that federal district courts sitting in diversity apply the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). The Court will therefore apply Maryland choice of law rules. In contract actions, Maryland courts generally apply the law of the jurisdiction where the contract was made. However, the Policies contain a choice of law provision, which provides that "the laws of the State of New York shall govern all Issues pertaining to the meaning, interpretation and effect of this Policy and its terms and provisions, as well as the parties' rights and obligations under this Policy, the Insurer's handling of Claims and all other related matters." Pursuant to this provision, the breach of contract claims are governed by New York law. See Jackson v. Pasadena Receivables, Inc., 921 A.2d 799, 803 (Md. 2007) ("With limited exceptions, this Court has long recognized the ability of contracting parties to specify in their contract that the laws of a particular State will apply in any dispute over the validity, construction, or enforceability of the contract, and thereby trump the conflict of law rules that otherwise would be applied by the court.").

For tort claims, Maryland courts generally adhere to the doctrine lex loci delicti and apply the substantive law of the place where the injury occurred. See Lewis v. Waletzky, 31 A.3d 123, 129 (Md. 2011). The parties agree that Maryland choice of law rules allow parties to extend their contractual choice of law provisions to encompass contract-related tort claims if the language is sufficiently broad. The parties also seem to agree that the provision, which applies to contractual interpretation and "all other related matters," is sufficiently broad to encompass the tort claims in the amended complaint.*f ...

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