Class Action Claims Challenging Increases in Homeowner’s Insurance Premiums Properly Dismissed Except for One Aspect of Breach of Contract Claim Second Circuit Holds
Plaintiff filed a putative class action against his homeowner’s insurer, Chubb, alleging inter alia violations of New York’s Insurance Law and deceptive business practices act; the class action complaint alleged that Chubb violated the terms of the policy “by improperly increasing coverage and premiums without his consent and in excess of the [Consumer Price Index].” Spagnola v. Chubb Corp., ___ F.3d ___, 2009 WL 2231635, *1 (2d Cir. July 28, 2009). Defense attorneys moved to dismiss the class action; the district court granted the motion holding that “the coverage adjustments at issues were properly made pursuant to a mechanism established in the policy.” Id., at *2. The district court also dismissed the class action’s deceptive business practices act claim because “there were not sufficient facts to support a finding that the policy was ‘misleading in a material respect’ or that [plaintiff] or any other member of the putative class was injured as a result.” Id. Plaintiff appealed, and the Second Circuit affirmed in part and reversed in part.
Reviewing the district court’s order de novo, the Second Circuit first addressed whether the district court erred in dismissing the class action’s Insurance Law claim and deceptive business practices claim. Spagnola, at *2. *9. We note here only the Circuit Court’s conclusion that the district court did not err in dismissing these claims. See id., at *2-*4, *8-*9. The Court also had no difficulty in concluding that the district court did not err in dismissing plaintiff’s breach of contract claim based on a “failure to obtain consent” theory, see id., at *4-*5. But the Court agreed with plaintiff that the class action’s breach of contract claim should have survived the motion to dismiss to the extent it was based on the allegation that Chubb “increase[ed] his coverage amounts and premiums in a way that did not reflect current costs and values.” Id., at *5. Chubb conceded that the premium increases were not tied to the CPI but argued this fact was irrelevant, id., at *6; the Circuit Court disagreed, holding that for purposes of the motion to dismiss, Chubb’s arguments failed to adequately negate the class action’s allegation “that the annual increases were not based on current costs and values as required by the express terms of the policy.” Id. The voluntary payment doctrine did not aid defendant because it “does not apply…when a plaintiff made payments under a mistake of fact or law regarding the plaintiff’s contractual duty to pay,” and for purposes of the motion to dismiss it was “too early in this case to conclusively answer that question.” Id., at *7 (citations omitted). Accordingly, the district court erred in dismissing this aspect of the breach of contract claim, id., at *8. In all other respects, however, the district court order was affirmed, id., at *9.