The Honorable John R. Gibson, Circuit Judge, United States *

Court of Appeals for the Eighth Circuit, sitting by designation.

07-1296-cv

Fred Spagnola v. The Chubb Corporation, et al. 

1 UNITED STATES COURT OF APPEALS

2

3 FOR THE SECOND CIRCUIT

4

5 August Term, 2008

6

7 (Argued: September 17, 2008 Decided: July 28, 2009)

8

9 Docket No. 07-1296-cv

10 -----------------------------------------------------------x

11

12

13 FRED SPAGNOLA, individually, and on behalf of all those

14 similarly situated,

15

16 Plaintiff-Appellant,

17

18 v. 

19

20 THE CHUBB CORPORATION, FEDERAL INSURANCE COMPANY, GREAT

21 NORTHERN INSURANCE COMPANY, JOHN D. FINNEGAN AND THOMAS

22 F. MOTAMED,

23

24 Defendants-Appellees.

25

26

27 -----------------------------------------------------------x

28

29 Before: WALKER, KATZMANN, and JOHN R. GIBSON, Circuit Judges. *

30

31 Appeal from an order of the United States District Court for

32 the Southern District of New York (Harold Baer Jr., District

33 Judge) entered on March 27, 2007, granting Defendants-Appellees

34 Chubb Corporation’s and related entities’ motion to dismiss for

35 failure to state a claim upon which relief can be granted. 

36 Plaintiff-Appellant Fred Spagnola brought a putative class action

37 claiming that the Chubb Corporation unlawfully increased his
Spagnola also named as defendants various affiliated 1

entities and persons related to Chubb. For the purpose of this

appeal we will refer to the named defendants-appellees

collectively as “Chubb.”

2

1 homeowner’s insurance premiums in violation of their insurance

2 contract and New York Law. The district court granted Chubb’s

3 motion to dismiss all claims. We conclude, however, that

4 Spagnola pled sufficient facts to state a claim for breach of

5 contract and we therefore reverse the district court’s dismissal

6 of that claim. We affirm the court’s dismissal of all other

7 claims. 

8

9 ROGER W. KIRBY (David Kovel, on the

10 brief), Kirby McInerney & Squire, LLP,

11 Kenneth Elan, Harold Edgar, New York, NY

12 of counsel, for Plaintiff-Appellant.

13

14

15

16 KEARA M. GORDON, (Joseph G. Finnerty

17 III, Sara Z. Moghadam, on the brief),

18 DLA Piper US LLP, New York, NY and

19 Washington, DC, for Defendants20 Appellees.

21

22

23

24

25 JOHN R. GIBSON, Circuit Judge. 

26 On July 13, 2001, Fred Spagnola and his wife purchased a

27 Chubb Masterpiece homeowner’s policy. The policy provided 1

28 dwelling coverage of $600,000, contents coverage of $300,000, and

29 liability coverage of $500,000.
 In contrast, a verified replacement cost policy covers the 2

reconstruction cost up to a specified amount of coverage, and a

conditional replacement cost policy covers a portion of the

reconstruction cost up to a stated amount.

3

1 The Masterpiece policy allows the insured to select one of 

2 three types of coverage: extended replacement cost, verified

3 replacement cost, or conditional replacement cost. Spagnola

4 purchased the extended replacement coverage, which, in the event

5 of an insurable loss, pays the cost of reconstruction even if

6 that cost exceeds the stated coverage of the policy. The policy 2

7 defines “reconstruction cost” as the “amount required at the time

8 of loss to repair or rebuild the house whichever is less, at the

9 same location, with the same quality of materials and workmanship

10 which existed before the loss.”

11 The amount of coverage was listed in the policy’s Coverage

12 Summary and during each annual policy period, Chubb indicated

13 that the coverage amount: 

14 will be increased daily to reflect the current effect

15 of inflation. At the time of a covered loss, your

16 amount of house coverage will include any increase in

17 the United States Consumer Price Index from the

18 beginning of the policy period. 

19

20 The coverage amount could be changed: 

21

22 With your consent, we may change [the amount of

23 coverage reflected in the coverage summary] when

24 appraisals are conducted and when the policy is

25 renewed, to reflect current costs and values.

26

27 The term “costs and values” is not further defined in the
 Grounds for cancellation include such events as nonpayment 3

of premium, conviction of a crime, or misrepresentation

increasing the hazard assumed.

4

1 policy. Spagnola’s policy originally had a one year policy

2 period. Chubb, however, was obligated to renew the policy for

3 three years and could decline to renew the policy “only on

4 grounds for which [Chubb] could cancel it.” The policy also 3

5 contained a conditional renewal provision. Under this provision,

6 if Chubb had grounds to cancel or refuse to renew the policy, it

7 could instead make continued coverage conditional on a change in

8 policy limits or on eliminating any coverage not required by law.

9 As far as renewing coverage, the policy stated that at the

10 time of renewal, Chubb “may offer to renew [the policy], at the

11 premiums and under the policy provisions in effect at the date of

12 renewal . . . by mailing [the insured] a bill for the premium 

13 . . . along with any changes in the policy provisions or amounts

14 of coverage.” If Spagnola did not pay the new premium, the

15 policy would automatically terminate at the end of the current

16 policy period. “Failure to pay the required renewal premium when

17 due shall mean that you have not accepted our offer.”

18 Over the next five years, Chubb annually increased

19 Spagnola’s coverage and likewise his premiums. The coverage

20 amount for house and contents was increased each year by

21 approximately ten percent, well in excess of the Consumer Price
5

1 Index (“CPI”). Chubb sent the annual premium summary renewals

2 with the bill for the next year’s coverage describing it as an

3 “annual premium savings.” In 2006, Spagnola discovered that the

4 increases in his premiums had risen faster than the CPI and he

5 filed suit on behalf of a putative class, in state court, later

6 removed to federal court, claiming that Chubb breached the terms

7 of the policy and violated New York Insurance Law by improperly

8 increasing coverage and premiums without his consent and in

9 excess of the CPI. In addition, Spagnola brought an unjust

10 enrichment claim as well as a deceptive business practices claim

11 under New York General Business Law § 349. Chubb responded by

12 filing a motion to dismiss under Federal Rule of Civil Procedure

13 12(b)(6).

14 The district court granted Chubb’s motion to dismiss all

15 claims. First, the court held that the complaint failed to state

16 a claim under New York Insurance Law § 3425 because the coverage

17 adjustments at issue were properly made pursuant to a mechanism

18 established in the policy. The court concluded that the policy

19 established that the premium increases were tied to “current

20 costs and values.” The court concluded that the original policy

21 notified Spagnola that Chubb had the right to increase coverage

22 and premiums annually and that Spagnola’s payment of the annual

23 premium bill reflected Spagnola’s consent to each such increase. 

24 The court also dismissed the breach of contract claim, both
 Spagnola does not appeal the district court’s dismissal of 4

his unjust enrichment claim.

At oral argument we questioned whether this issue should be 5

certified to the New York Court of Appeals. After reviewing New

York case law and the opinions of the New York Insurance

Department, we conclude that certification is unnecessary. But

see Great N. Ins. Co. v. Mt. Vernon Fire Ins. Co., 143 F.3d 659,

662 (2d Cir. 1998) (certification appropriate where no state

6

1 because the contract terms upon which Spagnola relied “[did] not

2 exist,” and because the breach of contract claim was “barred by

3 the voluntary payment doctrine.” Finally, the court dismissed

4 the deceptive business practices claim under New York law,

5 holding that there were not sufficient facts to support a finding

6 that the policy was “misleading in a material respect” or that

7 Spagnola or any other member of the putative class was injured as

8 a result. Spagnola now appeals.4

9 We review a Rule 12(b)(6) order of dismissal de novo. Amron

10 v. Morgan Stanley Inv. Advisors Inc., 464 F.3d 338, 343 (2d Cir.

11 2006). In reviewing such an order, we take all well-pled factual

12 allegations as true and draw all reasonable inferences in the

13 plaintiff’s favor to decide whether the plaintiff has pled a

14 plausible claim for relief. See Ashcroft v. Iqbal, 129 S.Ct.

15 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S.

16 544, 555 (2007)).

17 I.

18 Spagnola first argues that the district court erred in

19 dismissing his claim under New York Insurance Law § 3425.5
court decisions interpret relevant provision).

7

1 Section 3425 restricts when and how an insurer may condition

2 renewal or changes of limits or elimination of coverage. With

3 respect to a “personal lines” insurance policy, such as this one,

4 § 3425(e) provides: “[N]o notice of nonrenewal or conditional

5 renewal of a covered policy shall be issued to become effective

6 during the required policy period unless it is based upon a

7 ground for which the policy could have been cancelled.” N.Y.

8 Ins. Law § 3425(e). The statute defines “required policy period”

9 in this instance as “a period of three years from the date as of

10 which a covered policy is first issued or is voluntarily

11 renewed.” Id. at § 3425(a)(7). Spagnola contends that, if Chubb

12 wanted to change the limits of the policy, it was obligated under

13 § 3425(d)(1) to issue a conditional notice that provided the

14 “specific reason or reasons” for the changes. Id. at §

15 3425(d)(1). Since Chubb did not follow the notice requirement of

16 § 3425(d)(1), Spagnola contends that any unilateral increases by

17 Chubb violated the statute.

18 Spagnola’s § 3425 argument is essentially twofold. First he

19 argues that under the protections of § 3425 he was entitled to

20 three years of continuous coverage unless he failed to pay the

21 premiums due under the policy. See N.Y. Ins. Law § 3425(a)(7). 

22 He goes on to assert that Chubb could only increase his premiums

23 and coverage during the three-year period by providing the
8

1 required notice and statement of reasons required by §

2 3425(d)(1). Spagnola concedes that under § 3425 an insurer may

3 increase coverage limits (and premiums) during the three-year

4 required policy period if the policy itself provides for an

5 “automatic increase” or a “mechanism” to determine the increase,

6 such as a predetermined figure or the CPI. Spagnola argues,

7 however, that § 3425 bars the increases Chubb imposed because the

8 policy did not provide for an automatic increase or specify a

9 mechanism by which the increase could be measured. Spagnola

10 alleges that the policy’s provision permitting a change in the

11 amount of coverage “when the policy’s renewed to reflect current

12 costs and values” is not a “mechanism” by which the increase

13 could be measured because the insured cannot look to the policy

14 itself to determine the amount of an increase which could be

15 subject to the “whim” of the insurer.

16 Chubb and Spagnola agree that § 3425 permits an insurer to

17 increase coverage limits (and therefore premiums) when the policy

18 itself provides for such periodic increases. The two disagree on

19 whether there is such a provision in this policy. Chubb

20 characterizes the policy as an “inflation guard” policy which

21 permits periodic coverage increases upon renewal to reflect

22 current costs and values. In his complaint, Spagnola similarly

23 characterizes the policy: “Annual premiums for replacement cost

24 policies theoretically are based on the home’s estimated
9

1 replacement cost, not its market value. These premiums are

2 subject to limited annual cost increases, sometimes referred to

3 in the industry as ‘inflation guard coverage.’”

4 It is well established that we defer to an agency’s

5 construction of a statute when “the interpretation of a statute

6 or its application involves knowledge and understanding of

7 underlying operational practices.” N.Y. State Ass’n of Life

8 Underwriters, Inc. v. N.Y. State Banking Dep’t, 632 N.E.2d 876,

9 879 (N.Y. 1994) (quoting Kurcsics v. Merchants Mut. Ins. Co., 403

10 N.E.2d 159 (N.Y. 1980)). Several opinions from the New York

11 Department of Insurance are instructive.

12 In a July 23, 2003 opinion, the Department unequivocally

13 concluded that the three-year policy period requirement of §

14 3425 “[does] not have any effect upon the ability of the insurer

15 to renew policies with a premium change, provided that the

16 premium change conforms to its rate filing . . . .” Rate Changes

17 and N.Y. Ins. Law § 3425, Office of Gen. Counsel, N.Y. Ins.

18 Dep’t, No. 03-07-38 (Jul. 23, 2003) (informal opinion). Chubb

19 renewed the policy each year and the coverage increase at the

20 time of renewal does not facially violate the three-year required

21 policy period of § 3425(a)(7), nor does it run counter to the

22 purpose behind § 3425. See Rosner v. Metro. Prop. & Liab. Ins.

23 Co., 236 F.3d 96, 100 (2d Cir. 2000) (purpose behind § 3425 is

24 “to provide a three-year period of renewability” and “to
10

1 establish guaranteed continuity of coverage”) (internal quotation

2 marks omitted).

3 As to the notice requirement, the Department considered a

4 policy provision similar to the one here and concluded that no

5 conditional renewal notice was required when a premium increase

6 was due to the application of an inflation guard mechanism

7 provided for in the policy. Conditional Renewal Notices, Office

8 of Gen. Counsel, N.Y. Ins. Dep’t, No. 02-04-10 (April 8, 2002)

9 (informal opinion). The Department reasoned that no notice was

10 required because the premium increase was attributable to the

11 operation of the inflation guard “required by and set forth in

12 the policy itself.” Spagnola argues that this opinion actually

13 supports his interpretation of § 3425 on two grounds. First, he

14 states this is not an inflation guard policy so the Department

15 opinion does not control. Spagnola distances himself from his

16 initial characterization of the policy, stating in his reply

17 brief that the clauses at issue are not “inflation guards as

18 conventionally defined” because they do not “automatically

19 adjust[] the coverage limit on the dwelling each time the policy

20 is renewed to reflect current construction costs.” Second, he

21 contends that the Chubb policy is different in any event because

22 its “costs and values” provision is not fixed or tied to a

23 recognized index within the policy. Spagnola points to the

24 Department’s clarification in that opinion: “Had the increase in
11

1 coverage/premium not been solely attributable to a policy

2 provision or a request by the insured, a conditional renewal

3 notice would be required under the statute . . . .” Although

4 this language is consistent with the conclusion that a

5 conditional notice is not required when the policy provides for

6 an annual increase, it does not affirmatively answer the question

7 of whether the costs and values provision is a sufficient

8 mechanism for increasing annual premiums upon renewal so as to

9 negate the conditional notice requirements. 

10 Two other Department opinions help to resolve this issue. 

11 In the first, the Department decided that a conditional renewal

12 notice was not required under New York Insurance Law § 3426 (the

13 commercial insurance counterpart to § 3425) because the increase

14 was tied to a provision in the policy which required the insured

15 to maintain coverage equal to the appraised value of the

16 property. Conditional Renewal of Commercial Lines Insurance

17 Policies, Office of Gen. Counsel, N.Y. Ins. Dep’t, No. 9-9-96(#1)

18 (Sept. 9, 1996) (informal opinion). The Department concluded

19 that “appraised value,” a term we believe is substantially

20 similar to the “costs and values” term of Spagnola’s policy, is a

21 sufficient mechanism to provide the insured notice that the

22 coverage amount will change on a periodic basis. While this

23 opinion considers the provision of a commercial lines insurance

24 policy and not a personal lines policy, the Department’s
12

1 interpretation of a similar policy provision to the one in this

2 case supports our conclusion that the conditional notice

3 requirements do not apply to the renewals at issue here. 

4 In contrast, another Department opinion decided that an

5 increase in the amount of deductible expenses for windstorm

6 coverage did require conditional notice under § 3425(d)(1). 

7 Conditional Renewal under § 3425(d)(1), Office of Gen. Counsel,

8 N.Y. Ins. Dept., No. 06-08-17 (Aug. 24, 2006) (informal opinion). 

9 The Department based its conclusion on the fact that the

10 “deductible in the original policy was fixed and was not subject

11 to any provision that would provide for an automatic increase of

12 any kind.” Id. These opinions suggest that the determinative

13 factor for the Department in deciding whether conditional notice

14 requirements are necessary is whether the policy contemplates a

15 periodic change in the policy’s coverage or terms.

16 Here, the policy provided that Chubb could condition

17 annual renewal on the payment of increased premiums based on

18 current “costs and values,” and thus, the conditional notice

19 requirements of § 3425 are not triggered. That the increase

20 cannot be specifically measured from the policy itself is not

21 determinative. As the district court wrote: “An extended

22 replacement cost policy is designed to keep pace with inflation

23 and prevent underinsurance, and therefore, does not and for the

24 insured’s protection, cannot specify” the amount of the future
 The complaint also asserted a third breach of contract 6

claim, based on Chubb’s alleged violation of § 3425, which

Spagnola claims was incorporated by reference into the policy. 

However, because we conclude that Chubb did not violate § 3425,

this claim also fails. 

13

1 coverage increases in the original policy. Spagnola v. Chubb

2 Corp., No. 06 CIV 9960, 2007 WL 927198, at *4 (S.D.N.Y. Mar. 27,

3 2007) (emphasis omitted).

4 We therefore affirm the district court’s dismissal of

5 Spagnola’s § 3425 claim.

6 II.

7 Spagnola next argues that the district court erred in

8 dismissing his breach of contract claim. He claims that Chubb

9 violated the insurance contract by: (1) not obtaining his

10 consent to increase the amount of his coverage, and (2)

11 increasing his coverage by an amount that does not reflect

12 current costs and values. 

6

13

14 A.

15 Spagnola contends that Chubb breached the insurance policy

16 by failing to obtain his consent to the annual policy renewals.

17 Spagnola states that his payment of the increased premiums did

18 not amount to consent because the payment was not “knowing and

19 voluntary.” He complains that: (1) Chubb never told him that it

20 was increasing his coverage; (2) Chubb never asked for his
14

1 consent; (3) Chubb did not provide an explanation for the

2 increased coverage; and (4) Chubb never told him the amount of

3 the annual change in premiums and coverage. 

4 We easily resolve this argument. First, the amount of

5 coverage was shown in the coverage summary that Spagnola received

6 with each reissue of the policy. This summary notified Spagnola

7 that “[w]ith your consent, we may change this amount . . . when

8 the policy is renewed, to reflect current costs and values.” The

9 policy provided that renewal each year would be at the premiums

10 and under the policy provisions in effect on the date of renewal. 

11 It would be effectuated when Chubb mailed a bill for the premium

12 “along with any changes in the policy provisions or amounts of

13 coverage.” The policy provided: “Failure to pay the required

14 renewal premium when due shall mean that you have not accepted

15 our offer.” Thus, the offer was contained in each new policy

16 reissue and coverage summary, and acceptance occurred if and when

17 Spagnola paid the renewal premium. Each of these occasions

18 resulted in a new contract between the parties, and Spagnola’s

19 payment was his consent.

20 Spagnola directs us to a New Jersey Supreme Court case from

21 1961 which held that “[a]bsent notification that there have been

22 changes in the restrictions, conditions or limitations of [an

23 insurance policy], the insured is justly entitled to assume that

24 they remain the same and that his coverage has not in anywise
15

1 been lessened.” Bauman v. Royal Indem. Co., 174 A.2d 585, 592

2 (N.J. 1961). We need not address the precedential value of

3 Bauman, as there is nothing here to suggest that Spagnola was

4 “entitled to assume” that the coverage amounts remained the same

5 year to year. As the Bauman Court pointed out, an insured is

6 “expected to [have] read” the restrictions, conditions and

7 limitations in his original policy. Id. at 591-92. Spagnola

8 does not dispute that the original policy included language

9 permitting Chubb to adjust coverage amounts. In addition, Bauman

10 involved an exclusion of insurance coverage that was added for

11 the first time in a renewal policy with nothing to draw the

12 insured’s attention to such a change. See id. at 586. That is a

13 different situation than a dispute centered around premium

14 amounts that are always contained in a renewal notice. 

15 We reject Spagnola’s argument that the district court erred

16 insofar as it dismissed the breach of contract claim based on

17 lack of consent.

18

19 B.

20 Spagnola also claims that Chubb breached the insurance

21 contract by increasing his coverage amounts and premiums in a way

22 that did not reflect current costs and values. The policy does

23 not define the term “current costs and values.” According to
16

1 Spagnola, the policy could reasonably be interpreted to base

2 costs and values on either actual reconstruction costs or the

3 CPI. He alleges that Chubb breached this term by increasing the

4 coverage amount without using either as a basis. Spagnola points

5 out that his contents coverage increased at the same percentage

6 rate as his dwelling coverage each year, and this automatic

7 coupling alone supports an inference that Chubb increased

8 coverage in a manner that did not accurately reflect current

9 costs and values.

10 Chubb concedes that the premiums were not increased in an

11 amount determined by the CPI. Chubb argues that this fact is

12 irrelevant, and that it is to be expected that the increases

13 would have exceeded the CPI because the CPI only applies to

14 interim period adjustments, and not the annual increases at issue

15 here. Chubb states: “No fact is pled to permit the inference

16 that the increased coverage amounts were inconsistent with the

17 reconstruction costs of the plaintiff’s home in any of the last

18 five years.” Chubb characterizes Spagnola’s home and contents

19 comparison analysis as a “red herring” built on ‘multiple layers

20 of unreasonable assumptions.” Chubb asserts that under

21 Spagnola’s interpretation of “costs and values,” one assumes that

22 contents and dwelling coverage must increase at different rates

23 based on the additional assumption that the amount of contents

24 coverage equals the sum of the value of each personal possession,
17

1 and that such an interpretation is inconsistent with industry

2 practice and at odds with the policy terms. 

3 Spagnola directs us to Beller v. William Penn Life Insurance

4 Co. of N.Y., 778 N.Y.S.2d 82 (App. Div. 2004). The plaintiff in

5 Beller purchased a life insurance policy that set out a number of

6 factors the insurer would evaluate in setting premiums to

7 maintain the policy’s coverage. Id. at 84. After paying the

8 premiums for several years, the insured realized that the insurer

9 was determining premiums on a basis different than the one

10 required by the policy’s language. Id. The court suggested in

11 dicta that the insured’s allegations, if true, constituted a

12 breach of contract as well as a deceptive business practices

13 claim. Id. at 85-86. The reasoning of Beller convinces us that

14 Spagnola’s breach of contract claim should survive a motion to

15 dismiss. Chubb’s explanation that the fixed proportion of home

16 and contents coverage is standard industry practice does not

17 address Spagnola’s allegation that the annual increases were not

18 based on current costs and values as required by the express

19 terms of the policy. Cf. id. at 85 (insurer’s customary filed

20 rates do not insulate insurer from contract claim). Chubb does

21 not tell us the basis for its costs and values determination, but

22 only tells us what the calculation is not based on. Chubb’s

23 explanation neither resolves the ambiguity of the term “current

24 costs and values” nor adequately refutes Spagnola’s claim that
18

1 the increases were not based on current costs and values. 

2 Spagnola has therefore met the standard necessary to resist

3 Chubb’s motion to dismiss. See Iqbal, 129 S.Ct. at 1949 (“A

4 claim has facial plausibility when the plaintiff pleads factual

5 content that allows the court to draw the reasonable inference

6 that the defendant is liable for the misconduct alleged.”). 

7 III.

8 The district court dismissed Spagnola’s breach of contract

9 claim on the alternative ground that the claim was barred by the

10 voluntary payment doctrine. According to the doctrine, a breach

11 of contract claim is barred if a party continues to pay amounts

12 charged under the contract without objection. The district court

13 found that Spagnola had full knowledge of the facts regarding

14 coverage and premiums at the time of his first renewal in 2002

15 and continued (without objection) to pay the increased premium

16 amounts on each of the five succeeding anniversary dates. The

17 district court reasoned: “It is a little late now, after

18 [Spagnola] has enjoyed the benefits and protections of [Chubb’s]

19 coverage for more than five years,” to challenge the “propriety

20 of [his] coverage.” Spagnola, 2007 WL 927198, at *3.

21 The voluntary payment doctrine precludes a plaintiff from

22 recovering payments “made with full knowledge of the facts” and

23 with a “lack of diligence” in determining his contractual rights

24 and obligations. See Dillon v. U-A Columbia Cablevision of

25 Westchester, Inc., 740 N.Y.S.2d 396, 397 (App. Div. 2002); see
19

1 also Westfall v. Chase Lincoln First Bank, N.A., 685 N.Y.S.2d

2 181, 182 (App. Div. 1999); Gimbel Bros., Inc. v. Brook Shopping

3 Ctrs., Inc., 499 N.Y.S.2d 435, 438 (App. Div. 1986). The

4 doctrine does not apply, however, when a plaintiff made payments

5 under a mistake of fact or law regarding the plaintiff’s

6 contractual duty to pay. See Dillon, 740 N.Y.S.2d at 397;

7 Gimbel, 499 N.Y.S.2d at 438.

8 Spagnola claims that the voluntary payment doctrine does not

9 apply because he did not have full knowledge of the facts

10 relevant to his claim until he filed suit in 2006, and that his

11 lack of full knowledge was not due to a lack of diligence, but

12 instead due to being misled by Chubb as to the basis upon which

13 his coverage was increased. He points to, among other things,

14 renewal notices which stated that he was receiving an “annual

15 premium savings.”

16 Chubb points out that Spagnola renewed his policy five

17 times, and that “simple math” should have alerted Spagnola to the

18 notion that the increases were not based on the CPI as Spagnola

19 thought. In Dillon, a cable customer brought a putative class

20 action seeking to recover five-dollar late fees paid to her cable

21 company over the course of seven years. 740 N.Y.S.2d at 397. 

22 The cable company represented that the fee was an administrative

23 fee reflecting costs it incurred from the “customers’ late

24 payments or non-payments.” Id. (internal quotation marks

25 omitted). The plaintiff alleged that the fee substantially
20

1 exceeded the cable company’s true cost for a late or non-payment

2 and instead constituted an improper penalty. Id. The trial court

3 granted the cable company’s motion to dismiss based on the

4 voluntary payment doctrine, concluding that the customer should

5 have known that the five-dollar charge might be excessive simply

6 because it constituted 19% of her total bill. Id. at 398. The

7 Appellate Division affirmed. Id.

8 Although the voluntary payment doctrine may ultimately bar

9 Spagnola’s breach of contract claim, we decide that it is too

10 early in this case to conclusively answer that question. In some

11 years, Chubb sent Spagnola a renewal letter enclosing the policy

12 and stating that Spagnola was receiving an “annual premium

13 savings,” even while it increased his premiums. See Samuel v.

14 Time Warner, Inc., 809 N.Y.S.2d 408, 418 (Sup. Ct. 2005)

15 (voluntary payment doctrine not applicable when claim predicated

16 on lack of full disclosure). Chubb does not argue that the

17 increases were such that Spagnola should have been on notice that

18 they were not based on current costs and values. Cf. Dillon, 740

19 N.Y.S.2d at 397 (customer should have known based on degree of

20 increase). The pleadings before the district court do not

21 establish whether Spagnola knew or should have known that the

22 increased amounts were not based on current costs and values, and

23 Spagnola was not required to preemptively plead facts refuting

24 the voluntary payment doctrine. See Abbas v. Dixon, 480 F.3d

25 636, 640 (2d Cir. 2007) (not required to include facts in
21

1 complaint in anticipation of affirmative defense). Thus, drawing

2 all reasonable inferences in Spagnola’s favor, we conclude that

3 the voluntary payment doctrine cannot stand at this time as an

4 alternate basis for dismissal of Spagnola’s claim. 

5 The cases cited by Chubb do not change our view that the

6 complaint cannot be dismisssed based on the voluntary payment

7 doctrine. In Gimbel, the appellate court held that the plaintiff

8 could not receive restitution for certain payments made pursuant

9 to a mistake of fact when the record showed that “no mistake of

10 fact had been made.” 499 N.Y.S.2d at 438. In that case, the

11 plaintiff sought to recover certain extra rent payments it had

12 made to its landlord for a year and a half. The court determined

13 that although the lease did not require the extra rent payments,

14 the plaintiff’s recovery was barred by the voluntary payment

15 doctrine. Because the plaintiff made the improper rent payments

16 for a year and a half before questioning them, it “displayed a

17 marked lack of diligence in determining what its contractual

18 rights were, and is therefore not entitled to the equitable

19 relief of restitution.” Id. at 439. In Gimbel, however, the

20 judgment was entered denying plaintiff’s claim after discovery

21 and a bench trial, not on the basis of plaintiff’s complaint. 

22 Id. at 436-37; see also Lavin v. Town of E. Greenbush, 843

23 N.Y.S.2d 484, 491-92 (Sup. Ct. 2007) (applying voluntary payment

24 doctrine on summary judgment motion). 

25
22

1 IV.

2 Finally, Spagnola appeals the district court’s dismissal of

3 his deceptive business practices claim under § 349 of the New

4 York General Business Law. 

5 To state a claim under § 349, a plaintiff must allege: (1)

6 the act or practice was consumer-oriented; (2) the act or

7 practice was misleading in a material respect; and (3) the

8 plaintiff was injured as a result. Maurizio v. Goldsmith, 230

9 F.3d 518, 521 (2d Cir. 2000) (per curiam). “Deceptive practices”

10 are “acts which are dishonest or misleading in a material

11 respect.” Kramer v. Pollock-Krasner Found., 890 F. Supp. 250,

12 258 (S.D.N.Y. 1995). “‘Deceptive acts’ are defined objectively[]

13 as acts likely to mislead a reasonable consumer acting reasonably

14 under the circumstances.” Boule v. Hutton, 328 F.3d 84, 94 (2d

15 Cir. 2003) (internal quotation marks omitted).

16 The district court dismissed Spagnola’s claim because it

17 failed to plead either a deceptive act or requisite injury. 

18 Although a monetary loss is a sufficient injury to satisfy the

19 requirement under § 349, that loss must be independent of the

20 loss caused by the alleged breach of contract. For example, in

21 Sokoloff v. Town Sports Int’l, Inc., 778 N.Y.S.2d 9, 10 (App.

22 Div. 2004), the Appellate Division dismissed a health club

23 member’s deceptive practice claim made against her health club. 

24 The member sought the return of her initiation fee. Id. The

25 court held that the member did not claim a sufficient injury
 We also deny as without merit Spagnola’s calim that the 7

district court’s failure to consider certain authority

“warrant[s] reassignment” of his case to a different judge. 

23

1 because she alleged no other loss besides the payment of her

2 membership fee. Id. She did not claim that the health club

3 failed to deliver services called for under the contract and “she

4 never sought to cancel the contract.” Id.; see also Small v.

5 Lorillard Tobacco Co., 720 N.E.2d 892, 897-98 (N.Y. 1999) (injury

6 must be separate and distinct from the deceptive act).

7 Here, as in Sokoloff, Spagnola does not claim that he did

8 not receive adequate insurance coverage or that he did not

9 contract for the coverage he received. Cf. Samuel, 809 N.Y.S.2d

10 at 418 (requisite injury established when plaintiffs received

11 services never contracted for). Spagnola has therefore failed to

12 plead a sufficient injury under New York General Business Law §

13 349. 

14 For the foregoing reasons, we reverse the district court’s

15 dismissal of Spagnola’s breach of contract claim and affirm the

16 district court’s dismissal of all other claims. We remand the 7

17 case to the district court for further proceedings consistent

18 with this opinion.