NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

NEW JERSEY TITLE INSURANCE

COMPANY, 

Plaintiff,

v. 

NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH and

BROWN & BROWN OF

CONNECTICUT, INC. d/b/a DILL,

JOYCE & THRESHER INSURANCE,

Defendants.

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Hon. Dennis M. Cavanaugh

OPINION

Civil Action No. 11-CV-0630 (DMC)(JAD)

DENNIS M. CAVANAUGH, U.S.D.J.

Thismatter comes before the Court upon motion byDefendant National Union Fire Insurance

Company of Pittsburgh, Pa. (“Defendant” or “National Union”) to dismiss Plaintiff New JerseyTitle

Insurance Company’s (“Plaintiff” or “NJTIC”) Complaint in this action as against National Union,

or in the alternative, to dismiss Count Two of the Complaint alleging “breach of the implied

covenant of good faith and fair dealing\bad faith,” pursuant to FED. R. CIV. P. 12(b)(6). Pursuant

to FED.R.CIV. P. 78, no oral argument was heard. After considering the submissions of the parties,

it is the decision of this Court for the reasons herein expressed that Defendant’s motion to dismiss

is granted.

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I. BACKGROUND

1

Plaintiff New Jersey Title Insurance Company (“NJTIC” or “Plaintiff”) is a title insurance

company organized under the State of New Jersey. (Pl.’s Compl. ¶ ¶ 1, 6). NJTIC is in the business

of underwriting title insurance policies in New Jersey and engages agents to settle and close title for

real estate closings. (Pl.’s Compl. ¶ ¶ 1, 7; Pl. Br. Opp’n Mot. Dismiss) 

On May 22, 2008, NJTIC entered into an “Agency Agreement” (the “Agreement”) with

Landserv Title, LLC (“Landserv”). (Pl.’s Compl. ¶ 18; Mills Decl., April 25, 2011, Ex. 2 p. 1, ECF

No. 10-2). The Agreement established Landserv as NJTIC’s “representative, or agent, to originate

and solicit applications for title insurance, to examine and issue commitments to insure, and to issue

and countersign Policies of Title Insurance and to close title (hold settlement) pursuant thereto...in

the State of New Jersey.” 

The Agreement provided that Landserv was to collect, or see to the collection of, all fees

for Commitments to Insure and Policies from the responsible parties. The language of the

Agreement specifically limited the authority of Landserv to receive and hold funds on the

account of NJTIC. Under its terms, Landserv was prohibited to “receive, or receipt for any

funds, including escrow, or closing funds, in the name of Insurer,” and was rather directed to

“receive and receipt for same for its own account.” However, Landserv was authorized to hold

premium and reinsurance fees for NJTIC, which were to become the property of NJTIC

immediately upon receipt of a collection.

 The facts set-forth in this Opinion are taken from the Parties’ statements in their 1

respective moving papers. A discussion of the relevant documents that govern the relationships

of the parties is also necessary as the documents are integral and explicitly relied upon in

Plaintiff’s Complaint. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.

1997).

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All other money entrusted to Landserv by NJTIC or others in the course of Landserv’s

operation under the Agreement was required to be kept segregated in a bank account by

Landserv. See Mills Decl., April 25, 2011Ex. 2, Sect. 2.F., ECF No. 10-2 (directing Landserv to

“[k]eep safely and separated in a bank trust account all money entrusted to Agent by Insurer or

others in the course of Agent’s operation under this agreement, and keep safely any property

entrusted to Agent.”). Upon settlement, the agent was directed to disburse funds from said trusts

to pay off prior mortgages, taxes, water bills, and other municipal charges on the property for

which insurance has been issued. 

The Agreement addresses the issue of insurance coverage on the part of the insurer and its

agents. The Agreement provided that Landserv was to maintain Errors and Omissions (E&O)

and Employee Fidelity Insurance Coverage, with a minimum liability on each of $500,000. 

Paragraph 16 of the Agreement entitled “Insurer’s Liability,” provides that “[i]nsurer shall be

liable for all other losses, damage, expense, and cost arising out of claims covered by, and based

upon, any title insurance forms issued, and services rendered, under the terms of this Agreement,

excepting only those losses, damage, expense and cost caused by actions, or omissions, for which

Agent is responsible in the Agreement.”

Defendant National Union is a corporation organized under the laws of Pennsylvania and

is in the business of issuing policies of insurance coverage. (Pl. Compl. ¶ ¶ 2, 12). Effective July

1, 2009, National Union issued a Financial Institution Bond to provide insurance coverage to

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NJTIC through insurance broker DJT, Insurance. (Mills Decl., April 25, 2011, Ex. 3, Item 5, 2

ECF No.10-2).

The Financial Institution Bond issued by National Union for NJTIC provided coverage

from July 1, 2009 to July 1, 2010, and provided an Aggregate Liability for the underwriter in an

amount of $1,000,000.00. The Bond further provided that the liability of the Underwriter was 3

subject to the terms of Riders number one to ten attached thereto. The provisions of the Bond

that are of particular importance to the alleged coverage at issue here are Rider 6, Section 10, and

Exclusion f(iii). 

Rider 6 to the Bond, entitled “Agents Fidelity,” specifically addresses the issue of

coverage for NJTIC’s agents. Rider 6 provides coverage for “loss resulting directly from

dishonest or fraudulent acts committed by an Agent named or described below,” thereby limiting

coverage to only those Agents identified in the Rider, and then only for the amount applicable to

that Agent. The Agents identified were “all agents provided with the renewal bind order received

from ARC Excess 06/24/2009, inclusive of parts 1, 2, 3, and 4.” 

The coverage of Agent’s Fidelity provision is subject to all other terms and exclusions of

the Bond. Section 10 of the Bond (the “Ownership Clause”) provided that the Bond shall not

apply to the loss of “Property (1) owned by the Insured, (2) held by the Insured in any capacity,

DJT Ins. is also a Defendant listed in the present action. DJT Ins. is a corporation 2

organized and existing under the laws of the State of Connecticut, with its principle place of

business outside of New Jersey. Plaintiff engaged DJT Ins. to obtain and place insurance

coverage for it. Pursuant to the directives given by NJTIC, DJT Ins. obtained insurance coverage

for NJTIC under a Financial Institution Bond issued by Defendant, National Union. Plaintiff’s

claims against DJT Ins. are not presently before this court. 

NJTIC requested, and DJT Ins. agreed to obtain, an insurance policy covering an agent’s 3

dishonesty and theft. 

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or (3) for which the Insured is legally liable.” Exclusion (f)(iii) specifically identifies losses that

are excluded from the coverage of the Bond, and specifies any loss resulting directly or indirectly

from “contractual or extra contractual liability sustained by the Insured in connection with the

issuance of contracts or purported contracts of insurance, indemnity, or suretyship.” 

In November of 2009, NJTIC discovered that an employee and/or principal of Landserv

had misappropriated funds from Landserv’s account for her own personal use. (Pl.’s Compl. ¶ 4

21). As a result of the misappropriation, Landserv was unable to make the requisite payments to

clear title for properties for which NJTIC had issued title insurance. Although Plaintiff fails to

allege the specific circumstances for which it made the subsequent payments as a consequence of

the misappropriation, it appears as though NJTIC issued payments to those third party claimants

in order to satisfy the obligations that Landserv was no longer able to fulfill. NJTIC

subsequently filed a claim with National Union for coverage for the loss associated with the

misappropriation by Landserv. (Pl.’s Compl. ¶22). The claim stated “our agent Landserv Title,

LLC . . . misappropriated funds from its trust account which will have to be made up by New

Jersey Title. Agent also misappropriated premiums due to New Jersey Title.” (Mills Decl., April

25, 2011, Ex. 1, ECF No. 10-2). Plaintiff attached to the Claim a document entitled “Landserv

Title & Abstract, Trust Fund Analysis” for a specific trust account as evidence of the

misappropriations. Plaintiff estimated the total amount of diverted trust funds to be $616,894.79.

Upon receipt of notification of a check issued by Landserv to pay off a mortgage held on 4

residential property at a recent closing was returned due to insufficient funds, NJTIC conducted

an audit of Landserv’s office and records. Pursuant to the audit, NJTIC learned that Landserv’s

employee had misappropriated funds from Landserv accounts from December 2007 to November

2009.

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National Union denied coverage for NJTIC’s claim by letter dated September 23, 2010. 

(Mills Decl. Ex. 4, ECF No. 10-2). As grounds for the denial of coverage, National Union

explained that the loss sustained by NJTIC did not fall within the coverage of the Bond, that the

claimed losses arose from contractual liabilities excluded from coverage by Exclusion (f) of the

Bond, and that the coverage provided by the Bond was only excess over any valid and collectible

insurance obtained, and NJTIC had not established that any primary insurance coverage had been

exhausted. 

Plaintiff brought the present action on February 3, 2011, raising claims of breach of

contract and breach of the implied covenant of good faith and fair dealing/bad faith against

National Union for its purported improper denial of NJTIC’s claim. Defendant National Union

now moves to dismiss all of Plaintiff’s claims against it, or in the alternative, to dismiss Count

Two of Plaintiff’s Complaint, which alleges a breach of the implied duty of good faith and fair

dealing/bad faith.

For the following reasons, this court finds that Plaintiff has not alleged a loss that falls

within the insurance coverage provided by Defendant National Union. Plaintiff has therefore

failed to state a claim upon which relief can be granted and Defendant’s Motion to Dismiss the

Complaint as against National Union is granted.

II. MOTION TO DISMISS

A. LEGAL STANDARD

In deciding a motion under Rule 12(b)(6), the district court is “required to accept as true

all factual allegations in the complaint and draw all inferences in the facts alleged in the light

most favorable to the [Plaintiff].” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir.

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2008). “[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed

factual allegations.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the

Plaintiff’s “obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than

labels and conclusions, and a formulaic recitation of the elements of a cause of action will not

do.” Id. “[A court is] not bound to accept as true a legal conclusion couched as a factual

allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986). Instead, assuming that the factual

allegations in the complaint are true, those “[f]actual allegations must be enough to raise a right

to relief above a speculative level.” Bell Atl. Corp. 550 U.S. at 555.

 “A complaint will survive a motion to dismiss if it contains sufficient factual matter to

‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949

(2009) (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the pleaded

factual content allows the court to draw the reasonable inference that the Defendant is liable for

misconduct alleged.” Id. “Determining whether the allegations in a complaint are ‘plausible’ is a

‘context-specific task that requires the reviewing court to draw on its judicial experience and

common sense.” Young v. Speziale, 2009 WL 3806296, *3 (D.N.J. Nov. 10, 2009) (quoting

Iqbal, 129 S.Ct. at 1950). “[W]here the well-pleaded facts do not permit the court to infer more

than the mere possibility of misconduct, the complaint has alleged–but it has not ‘shown’–that

the pleader is entitled to relief.” Iqbal, 129 S.Ct. at 1950.

The district court may consider “the allegations in the complaint, exhibits attached to the

complaint, matters of public record, and documents that form the basis of a claim.” Lum v. Bank

of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004). If a document is “‘integral to or explicitly

relied upon in the complaint’” it forms the basis of a claim. Id. citing In re Burlington Coat

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Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.1997). “The purpose of this rule is to avoid the

situation where a plaintiff with a legally deficient claim that is based on a particular document

can avoid dismissal of that claim by failing to attach the relied upon document.” Id. By relying

on the document to form the basis of a claim, “the plaintiff is on notice that the document will be

considered.” Id. “When allegations contained in a complaint are contradicted by the document it

cites, the document controls.” In re PDI Sec. Litig., No. 02-CV-0211, 2005 WL 2009892, *21

(D.N.J. Aug. 17, 2005).

B. DISCUSSION

Defendant alleges that Plaintiff’s Complaint as it pertains to Defendant National Union

should be dismissed for failure to state a cause of action upon which relief can be granted. In the

alternative, Defendant asks this Court to dismiss Count Two of the Complaint, which alleges a

breach of the implied covenant of good faith and fair dealing/bad faith. (Def. Br. Supp. Mot.

Dismiss, April 25, 2011, ECF No. 10-1). For the reasons herein discussed, this Court finds that

Plaintiff has failed to sufficiently allege facts to bring their claim within the coverage of the

Bond. As both of Plaintiff’s claims against National Union are predicated on NJTIC’s claim

falling within the coverage of the Bond, Plaintiff’s claims against National Union must therefore

be dismissed. 

1. Breach of Fidelity Bond

Plaintiff’s claims of breach of contract and bad faith are premised upon National Union’s

denial of coverage under an insurance agreement. Plaintiff bears the burden of bringing its

claims within the basic terms of the insurance policy. Columbus Farmers Mkt, LLC v. Farm

Family Cas. Ins. Co., No. 05-2087, 2006 U.S. Dist. LEXIS 92448, *23-24 (D.N.J. Dec. 21,

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2006), citing Sears Roebuck & Co. v. Nat’l Union Fire Ins. Co., 340 N.J. Super. 223, 234 (App.

Div. 2001). As Plaintiff’s claims require an interpretation of the Financial Institution Bond

issued by Defendant National Union in conjunction with the Agency Agreement between NJTIC

and Landserv, which establishes the scope of authority for the Agent who occasioned the

misappropriation, resolution of this motion to dismiss necessitates an interpretation of the

relevant instruments. See In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1425-26; see also

Winer Family Trust v. Queen, 503 F.3d 319, 328 (3d Cir. 2007); Mele v. Fed. Reserve Bank of

New York, 359 F.3d 251, 256 n. 5 (3d Cir. 2004).

As previously discussed, the provisions relevant to whether Plaintiff’s claim falls within

the coverage of the Policy are the Ownership Clause, Rider 6 entitled “Agent Fidelity,” and

Exclusion (f)(iii). These provisions must be interpreted in light of the limited nature of

Landserv’s agency as laid out in the Agency Agreement. 

Section 10 of the Bond provides limited coverage, directing that the Bond shall apply to

loss of “Property (1) owned by the Insured, (2) held by the Insured in any capacity, or (3) for

which the Insured is legally liable.” Accordingly, in order for Plaintiff’s loss to fall within the

coverage of the Bond, the misappropriated funds must fall into one of the enumerated categories. 

As this Court finds that the Plaintiff has failed to allege facts to demonstrate that the

misappropriation falls within any of the enumerated categories, Section 10 of the Bond does not

afford coverage for the alleged loss. 

First, the misappropriated funds were not “owned” by NJTIC, as the Agency Agreement

specifically provided that Landserv was to receive the funds for its own account, with only the

premiums and reinsurance fees to become the property of NJTIC. Such premiums were

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instructed to be kept in a segregated account from all other money received by Landserv. While

NJTIC alleged loss of premiums due to it in its claim to National Union, it has only alleged

misappropriation from a single account held by Landserv, and has not alleged that such account

was that specifically designated for collection of NJTIC’s premiums and reinsurance fees. 

Plaintiff rather alleges that the loss was occasioned not by the misappropriation itself, but the

subsequent payments made by NJTIC as a result. Therefore, it cannot be alleged that the loss

was occasioned through left of funds that were owned by NJTIC.

Similarly, the funds were not “held” by NJTIC, as the Agency Agreement again

specifically limited the extent to which Landserv could receive funds on the account of NJTIC. 

While the Bond does provide broad language in its inclusion of any property “held by the Insured

in any capacity,” NJTIC clearly delineated the nature of property that its agents could hold on its

behalf. Notably, the Agreement specifically precluded Landserv from receiving funds on the

account of NJTIC beyond premiums and reinsurance funds, and we again note that the loss is

alleged to have resulted from subsequent payments made by NJTIC and not theft from the

segregated account. The “in any capacity” language of the Ownership Clause is inconsequential

as the Agency Agreement precluded Landserv’s ability to “hold” such funds on behalf of NJTIC. 

Such funds could not be held by NJTIC in the capacity of its agents, and were therefore not held

for NJTIC by Landserv.5

Plaintiff relies on several cases to interpret the “in any capacity” language provided in 5

the Ownership Clause. The cases relied upon by Plaintiff, however, are distinguishable as each

case addressed misappropriations occasioned by employees of the insured who were not

specifically excluded from the insurance coverage provided the employer. Plaintiff attempts to

avoid this distinction by alleging that Landserv was specifically provided for in the coverage of

the Bond, yet has failed to allege sufficient facts to substantiate this assertion. Plaintiff’s attempt

to employ the analysis from these cases is therefore unavailing.

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Finally, NJTIC has not alleged sufficient facts to demonstrate a plausibility that it was

legally liable for the funds that were misappropriated. NJTIC alleges that the misappropriation

was of funds which NJTIC was required to pay, but does not provide further factual support to

demonstrate why this is so. The only support that Plaintiff provides regarding its assertion of

liability is an interpretation of the term “legally liable” derived from a Tenth Circuit case

involving completely different circumstances. Plaintiff relies on the case of Nelson v. ITT

Hartford Fire Ins. Co., in which a Trustee in Bankruptcy was able to recover for the

misappropriation by employees of the insured. 2000 U.S. App. LEXIS 13919, *8, n.2 (10th Cir.

June 13, 2000). There, the language of the agreement established that the insurance policy was

one for indemnity from liability, not merely from loss. Id. Notably, the court held that the

accrual of liability was controlled by the intent of the parties as expressed by the language of the

policy. Id. There, the court found that the use of the term “liability” established that an action to

enforce indemnity from liability would accrue when the event to which indemnity is due occurs.

Id. Here, Plaintiff has failed to point to any language in the Agreement representing an intent on

the part of the parties to indemnify a misappropriation such as the one occasioned in the present

dispute. In fact, the language of the agreement is to the contrary, specifically disavowing

ownership of any funds other than the designated premiums and reinsurance fees and specifically

limiting coverage to those agents that were named. 

Rider 6 of the Bond similarly does not provide coverage for the infidelity of NJTIC’s

agents. Plaintiff argues that the policy clearly provides coverage for the theft by an insured’s

agent, including Landserv, which it maintains was directly and explicitly identified as an agent

under the policy. In support of this assertion, Plaintiff points to an untitled list containing

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Landserv’s name and identifies this document as “the agent list NJ Title provided to the

Defendant in June 2009 with reference to Bond No. 02-283-42-48, which clearly identifies

Landserv Title Agency, LLC . . . as an agent of NJ Title.” (Catenacci Decl. ¶ 2). 

The relevant question, however, is not whether Landserv is an agent of NJTIC, but rather

whether Landserv is among those agents specifically designated for insurance coverage under the

Bond. The terms of the Bond clearly indicate that merely being an agent of NJTIC is not

sufficient to fall within the insurance coverage provided. 

Rider 6 provides coverage for “loss resulting directly from dishonest or fraudulent acts

committed by an Agent named or described below,” and then only for the amount up to the

Single Loss Limit of Liability applicable to that Agent.” Under the heading “Agent,” the Rider

provides “Single Loss Limit of Liability of $1,000,000 applicable to [all agents provided with the

renewal bind order received from ARC Excess on 6/24/2009, inclusive of parts 1, 2, 3, and 4].” 

Plaintiff has failed to produce the referenced documentation to demonstrate that it is among the

agents so named, and has therefore failed to allege sufficient facts to demonstrate entitlement to

relief. Such failure to adequately allege coverage under the Bond is fatal to both Plaintiff’s

breach of contract claim as well as the claim of bad faith. Accordingly, Plaintiff’s Complaint as

against National Union must be dismissed. 

Because this Court finds that Plaintiff has failed to sufficiently allege coverage under the

insurance policy at issue, we do not reach the issue of whether Plaintiff’s claim falls within the

exclusion provided in subsection (f)(iii). We do note, however, that to the extent Plaintiff relies

on its position as title insurer as a basis for its claim of legal liability, such liability is expressly

precluded from coverage under Exclusion (f)(iii). Exclusion (f)(iii) of the Bond excludes from

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coverage losses resulting directly or indirectly from “contractual or extra-contractual liability

sustained by the insured in connection with the issuance of contracts of insurance, indemnity or

suretyship.” Plaintiff can therefore not rely on their obligation to clear title to the property it

insured as a basis for a loss within the coverage of the policy. 

Similarly, because we find that Plaintiff has failed to allege sufficient facts to fall within

the coverage of the Bond, we do not address Section 9 of the Bond which provides that

“coverage afforded hereunder shall apply only as excess over any valid and collectible insurance

or indemnity obtained by the insured.” We do note, however, that Plaintiff has failed to allege

exhaustion of the insurance that Plaintiff required Landserv to acquire as a condition of the

Agency Agreement. 

Upon consideration of the relevant documents, the limiting language of both the Agency

Agreement and the Bond instruct that Plaintiff has failed to allege sufficient facts to support a

claim of coverage under the Bond. There are no facts that Plaintiff can allege to bring its claim

under the coverage of the policy when the policy by its terms specifically precludes coverage. 

Accordingly, Plaintiff has failed to state a claim for relief against National Union that is plausible

on its face and Plaintiff’s claims must be dismissed. 

2. Bad Faith

While we note that Plaintiff’s failure to allege sufficient facts to bring its claim within the

coverage of the Bond’s effectively precludes any claim of bad faith denial of coverage, we briefly

discuss the standard for bad faith in further support of our dismissal of Plaintiff’s Complaint as

against National Union. 

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In order to state a claim for bad faith denial of insurance coverage, Plaintiff must show: (1)

the insurer lacked a reasonable basis for its denying benefits, and (2) the insurer knew or recklessly

disregarded the lack of a reasonable basis for denying the claim. Pickett v. Lloyd’s, 131 N.J. 457

(1993). Under New Jersey precedent, a denial of an insurance claim that is “fairly debatable” will

not be found to constitute bad faith. Id. The “fairly debatable” standard will be met if the claimant

could have established as a matter of law a right to summary judgment on the substantive claim. Id.

at 473. Therefore, as a matter of law, a claim of bad faith must fail if there is an issue of material

fact as to the underlying claim regarding Plaintiff’s entitlement to insurance benefits. See Tarsio v.

Provident Ins. Co., 108 F. Supp. 2d 397, 401 (D.N.J. 2000). 

When the insured’s complaint contains issues of material fact as to the underlying claim,

dismissal of a related bad faith claim is proper. Fuscarello v. Combined Ins. Group, Ltd., 2011 WL

4549152, at *5 (D.N.J. Sept. 29, 2011) (dismissing Plaintiff’s bad faith claim on a motion to dismiss

where insurer’s reason for refusing to pay, as alleged in the complaint, presented disputed issues of

material fact as to the underlying substantive claim); Dare Inv., LLC v. Chicago Title Ins. Co., 2011

WL 2600594, at *12 (D.N.J. June 29, 2011) (dismissing Plaintiff’s bad faith claim because Plaintiff

could not prevail on summary judgment for the underlying insurance claim due to the ambiguity of

the title policy at issue and the Plaintiff’s reasonable expectations thereunder). Here, Defendant’s

denial of coverage, as evidenced in the denial letter dated September 23, 2009, provided an extensive

explanation as to why Plaintiff’s claim did not fall within the coverage of the Bond. Such

explanation provides plausible reasons for the denial of coverage and demonstrate that there is, at

the very least, genuine questions regarding whether Plaintiff’s claims fall within the coverage

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provided. Plaintiff’s claims made under the Bond are therefore fairly debatable and cannot form the

basis of a bad faith claim. 

Moreover, Plaintiff’s claims that Defendant has issued coverage in previous similar instances

under policies containing similar language is not sufficient to sustain a claim for bad faith. Mere

payment of previous similar claims does not demonstrate bad faith on the part of the insurer for

subsequent denials of similar claims. See Keystone Filler & MFG. Co., Inc. V. Am. Mining Ins. Co.,

179 F.Supp.2d. 432, 443-444 (E.D.Pa. 2002); (holdingmere payment of a previous claim should not,

without more, bind an insurer to an interpretation under which the insured is covered for all similar

claims); Charter Oil Co. v. Am. Emp’r Ins. Co., 69 F.3d 1160, 1168 (D.C. Cir. 1995) (noting that

“[a] contrary holding would require that the insurer, before paying modest claims such as the initial

claims . . . here, conduct an investigation in far greater depth than the amount at stake would justify,

simply to avoid the risk of massive exposure down the road.”). Plaintiff can therefore not establish

a plausible claim of bad faith merely upon allegations that Defendant has issued coverage over

similar claims in the past.

Accordingly, Plaintiff’s claims of bad faith on the part of Defendant due to the denial of

coverage for the alleged loss must be dismissed. 

IV. CONCLUSION

Plaintiff has therefore not alleged sufficient facts to bring the purported loss within the

coverage of the Bond. Defendant’s motion to dismiss for failure to state a claim upon which relief

may be granted is therefore granted.

 S/ Dennis M. Cavanaugh 

 DENNIS M. CAVANAUGH, U.S.D.J.

Date: December 27 , 2011

cc: All Counsel of Record

Hon. J. A. Dickson, U.S.M.J.

File

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