Incorporeal Damages – Not Damages
Lawyers often dislike insurers. Many believe all that is needed to make a small fortune is to sue an insurance company since jurors seem to dislike insurers as much as lawyers do. However, when a lawyer sues in pro se, acting as both plaintiff and lawyer, it is important that he plead a real cause of action where he can prove actual damages. If not there is a serious question who is the true fool or idiot, the lawyer or the client.
In Alfred Degennaro v. American Bankers Insurance Company Of Florida; Government Employees Insurance Company; Assurant Specialty Property, No. 17-2539, United States Court Of Appeals For The Third Circuit (June 8, 2018) Alfred DeGennaro, a member of the New Jersey bar proceeding pro se, appeals from the District Court’s dismissal of his complaint alleging various statutory, contract, and tort claims against Defendants Government Employees Insurance Company (“GEICO”), Assurant Specialty Property, and American Bankers Insurance Company of Florida (“ABIC”).
In late 2013, DeGennaro contacted GEICO, his auto insurance carrier, seeking to obtain a $1 million umbrella liability policy. GEICO informed DeGennaro that he first needed to secure a renter’s insurance policy for his home with a minimum personal liability coverage limit of $300,000 per occurrence. DeGennaro then sought and obtained such a renter’s policy—issued by ABIC—with $300,000 of personal liability coverage per occurrence, which allowed him to obtain the umbrella policy through GEICO.
DeGennaro later received a letter from GEICO about his umbrella policy, stating that he “may not meet the required underlying liability limit of $300,000,” and that he should review his policy to ensure he was “carrying the adequate limit” to avoid a “gap of coverage.” At the time, the declaration page accompanying DeGennaro’s renter’s policy with ABIC listed his personal liability coverage limit as $300,000 per occurrence.
Less than a month later, however, DeGennaro received an amended declaration page from ABIC stating that his personal liability coverage limit had been reduced to $100,000 per occurrence. DeGennaro acknowledges receiving this amended declaration, which stated in bold lettering that it superseded the previous declaration page. To account for the reduction in coverage, DeGennaro’s annual insurance premiums were correspondingly lowered from $24 to $8, and his credit card was refunded $16.
DeGennaro renewed his one-year renter’s policy with ABIC on two occasions—each time the renewal declaration pages listed his personal liability coverage limit as only $100,000 per occurrence. Because ABIC’s underwriting policies had since changed, however, ABIC agreed to increase his liability limit $300,000 and charge him a new premium of $16.78 per year.
Not satisfied with this result, DeGennaro filed a consumer complaint with the New Jersey Department of Banking and Insurance (“NJDOBI”) “to address the reduction of his comprehensive personal liability coverage from $300,000 to $100,000.” Because ABIC made an offer to increase coverage to $300,000 back to the inception date, NJDOBI determined that the “matter has been favorably resolved,” and it closed the matter.
Instead of paying the increased premium to have his renter’s liability coverage increased retroactive to the inception date of the policy, DeGennaro cancelled his ABIC renter’s insurance policy and his GEICO auto and umbrella policies. And although DeGennaro never made a claim under these policies while they were in effect, he filed a complaint in the District Court alleging various statutory, contract, and tort claims against Defendants, seeking $172.8 million in damages. The Defendants each filed motions to dismiss the complaint under Rule 12(b)(6), which the District Court granted. DeGennaro appealed.
DeGennaro’s claims alleging fraud, including his claims under New Jersey’s Consumer Fraud Act (the “CFA”), N.J.S.A. § 56:8-1 et seq., are subject to the heightened pleading standard imposed by Federal Rule of Civil Procedure 9(b). This requires a plaintiff to “state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the ‘precise misconduct with which [it is] charged.'”
DeGennaro alleges: (A) nine counts under the CFA; (B) a tortious interference with prospective economic advantage claim; (C) a common law fraud claim; (D) a breach of fiduciary duty claim; and (E) two breach of contract claims.
To state a claim under the CFA, a plaintiff needs to allege: “1) unlawful conduct by defendant; 2) an ascertainable loss by plaintiff; and 3) a causal relationship between the unlawful conduct and the ascertainable loss.” The District Court held that DeGennaro failed to sufficiently plead these elements.
Even assuming any of Defendants’ conduct was “unlawful,” DeGennaro’s claims still fail because he fails to sufficiently plead an “ascertainable loss,” which he frames as the loss associated with carrying additional risk.
The Supreme Court of New Jersey has stated that, in the CFA context, an ascertainable loss is “a definite, certain and measurable loss, rather than one that is merely theoretical.” An ascertainable loss “need not yet have been experienced as an out-of-pocket loss to the plaintiff,” but it cannot be “hypothetical or illusory”—”[t]he certainty implicit in the concept of an ‘ascertainable’ loss is that it is quantifiable or measurable.”
DeGennaro admits that his theory of loss—having to carry the “risk” associated with the gap in his coverage—”is a damage of an incorporeal nature.” DeGennaro has not suffered any out-of-pocket costs, because he never made a claim under his policy, he never had to cover the gap in his coverage, and the $16 additional premium was returned to his account.
Courts adjudicating CFA claims have dismissed complaints for lack of ascertainable loss where a “defendant . . . takes action to ensure that the plaintiff sustains no out-of-pocket loss or loss of value prior to litigation.” Here, ABIC offered to increase DeGennaro’s coverage limit—prior to any litigation—retroactive to the inception date of the policy.
DeGennaro does not allege what economic benefit he lost as a result of Defendants’ alleged actions, nor any facts suggesting that any alleged actions were done intentionally or with malice. Moreover he has failed to properly allege any damages whatsoever—let alone damages resulting from the alleged “interference.”
DeGennaro’s complaint contains no specific facts supporting his bare allegations of fraud. DeGennaro also admits that he received a revised declaration page indicating that his limit had been reduced. This fraud claim—which is subject to Rule 9(b)’s stringent pleading standard—would not survive a Motion to Dismiss even under the normal pleading standard.
Even assuming ABIC breached the insurance contract, it offered to increase DeGennaro’s coverage limit retroactive to the inception of the contract—thereby putting him in “as good a position as . . . if performance had been rendered.”
DeGennaro has failed to plead anything to suggest a fiduciary duty exists, let alone that Defendants breached such a duty.
How this case survived to the appellate court is amazing. The suit was so obviously without merit and the plaintiff – a lawyer representing himself – could not even allege, let alone prove, that he was damaged by the acts of the insurers. DeGennaro should consider himself lucky that the court did not sanction him for his frivolous suit but took seriously his claims and wrote a long opinion explaining why he had a very foolish client.
© 2018 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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