Travelers Indem. Co. v. Excalibu R Reinsurance Corp. (D.Conn.Feb. 1, 2013)
On February 1, 2013, a federal judge in Connecticut granted an insurer’s motion to amend its complaint against a reinsurer to include claims based on information revealed during discovery. In the case, the reinsurer refused to pay to the insurer amounts the insurer claims it is owed under a treaty of reinsurance and the insurer sued the reinsurer to recover them. After discovery was already underway, the insurer moved to amend its complaint.
The insurer’s original complaint was an uncomplicated pleading simply alleging the existence of the reinsurance treaty, amounts owing under its terms, demand and failure to pay, and breach. By its motion to amend, insurer sought leave to file a somewhat more complex pleading; reiterating the count for breach of contract and adding two new counts for account stated and a violation of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-110a et seq.
In its brief supporting its motion to amend the complaint, the insurer argued that the additional counts are based on two relatively recent factual sources developed during discovery. The reinsurer opposed the motion to amend the complaint, principally upon the grounds that the motion was untimely, and that on the facts as the insurer perceived them, the two causes of action the insurer seeked to assert are not viable as a matter of law, so that the amendment would be futile.
The motion to amend could not be granted as a matter of course. Instead, the question was governed by Rule 15(a)(2), Fed. R. Civ. P., which provides that in the circumstances of the case at bar a party may amend its pleading only with the opposing party’s written consent or the court’s leave. The court should freely give leave when justice so requires. Because the reinsurer did not consent, the insurer sought leave of the court to amend. The court noted that “notwithstanding the favor with which the Rule regards motions for leave to amend pleadings, leave is not granted uncritically or whenever sought” and “ should generally be denied in instances of futility, undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, or undue prejudice to the non-moving party.” (Citations omitted). The court then went on to consider in turn the reinsurer’s two principal augments for denying the insurer’s leave to amend; untimeliness and insufficiency in law.
The court concluded that there was no substance to the reinsurer’s objection the insurer’s motion to amend on the basis that is was untimely. The reinsurer neither asserted specifically nor suggested generally that it had been prejudiced by the insurer’s not moving to amend earlier. The case was being litigated be experienced insurance-law counsel and is in its early stages. Discovery was still ongoing and trial is neither scheduled nor imminent. The reinsurer has time and the full resources of discovery to combat the two additional causes of action the insurer seeks to assert in the amended complaint.
The court noted that a recognized reason for denying leave to amend a pleading is “futility.” A proposed pleading is futile if it is legally insufficient. Thus it is frequently held that an amendment to a pleading will be futile if a proposed claim could not withstand a motion to dismiss pursuant to Rule 12(b)(6). The court went on to explain that the Second Circuit has embraced the concept of a complaint being legally sufficient if it is plausible. In deciding whether to dismiss a complaint under Rule 12(b)(6), or to grant leave to file an amended complaint under Rule 15(a)(2), the court accepts the truth of well-pleaded factual allegations, and considers whether they state a claim that is plausible on its face. Putting aside conclusions, the court concluded that facts alleged in the insurer’s amended complaint state a plausible claim for an account stated.
As for the amending to add a claim for violation of the Connecticut Unfair Trade Practices Act, the court applied same principles apply. While the insurer bases this claim upon information obtained during discovery, the filing of the amended complaint was still timely for the reasons stated above. With that decided, the court need only decide whether the proposed amended complaint stated a plausible claim against the reinsurer for violations of the Connecticut Unfair Trade Practices Act. The court concluded the amended pleading did state a plausible claim and therefore granted leave to amend.