Paintiffs, who had suffered signficant losses on variable annuity policies sold to them by the defendant agents and insurance companies, asserted claims on multiple theories: breach of fiduciary duty, constructive fraud, unfair and deceptive practices, negligence, negligent misrepresentation, aiding and abetting breach of fiduciary duty, and unjust enrichment.
The Court dismissed some claims and ordered the Plaintiffs to replead others with more particularity.
It held that Plaintiffs could proceed on their claims against some of the agents for breach of fiduciary duty, given the Plaintiffs alleged lack of financial sophistication and their allegations of reliance upon the expertise of the agents. There was no claim for such breach against the insurance companies, since they had not obtained any benefit from the sale of the policies other than the commissions received.
The causes of action for breach of fiduciary duty arose when the Plaintiffs knew or should have known of the facts giving rise to their claims. The Court found the facts insufficient to determine whether the statute of limitations had run, and ordered Plaintiffs to replead their claims with more particularity. The Court made a similar order with respect to the constructive fraud claim, and ordered Plaintiffs to provide more detail in their pleading as to when they were charged the commissions and surrender charges that formed the basis of their claims. Those charges would have put Plaintiffs on notice of their claims and begun the running of the statute of limitations.
The Court also demanded more particularity on the negligent misrepresentation claim. It disagreed with Plaintiffs contention that their only burden was to allege the misrepresentations made, and that they had been made negligently. Instead, Plaintiffs had to alleged "(1) there was a duty owed by defendants to plaintiffs, (2) the defendants did not use reasonable care in supplying information leading to (3) misrepresentations made to the plaintiffs which (4) the plaintiffs justifiably relied on (5) and that reliance caused pecuniary injury to the plaintiffs."
The Court dismissed the unfair and deceptive practices claim. It found that variable annuity policies are subject to pervasive and intricate regulation, and that such policies involve securities transactions not within the scope of the statute. It made no difference that the Plaintiffs did not understand that they were investing in securities.
The punitive damages claims against the insurance companies were also dismissed, because there is no vicarious liability for punitive damages.
The unjust enrichment claims were also dismissed because there was an express contract between the parties.