CET Business Law

Need a response written for the following, 300 words. Please use Grammarly to make sure the sentence structure flows correctly and it is not all fill words.

I have also included the Post below that I need reviewed and responded to as well. I have Inlcuded my initial Post below as well.

Article
to Respond to:

CET Week 5 Discussion – Nunez
Andrew Nunez posted Jun 17, 2021 7:58 PM

The
case Maritz Holdings v. Lloyds of London is a dispute over insurance
coverage regarding losses that resulted from a cybersecurity breach
experienced by Maritz Holdings. Maritz Holdings experienced two
breaches, one in 2015 and another in 2015. Each year, Maritz Holdings
had purchased insurance coverage prior to the events taking place.
Lloyds of London, the insurance company, issued the insurance contracts
to Maritz Holdings, and in these contracts it is stated that Maritz
Holdings is covered for security breaches. Maritz Holdings submitted
claims to Lloyds of London for expenses that the company incurred due
to the breaches that were covered under contract, but Lloyds denied
coverage on these claims which resulted in Maritz Holdings filing a
lawsuit. This lawsuit was originally filed to the state court of
Missouri but ended up being moved to the United States District Court
for the Eastern District of Missouri.
There are a couple of issues within this case that the court had to
address. The first was that each of the Insurance Contracts contained a
choice-of-law provision stating that any dispute with the insurance
shall be governed under the laws of New York. With Lloyds argument
being that because Maritz Holdings is based is Missouri, and the
contract provision states the insurance contract be disputed under New
York law, that Maritz Holdings claim (using Missouri laws) is null due
to the claim not being under applicable law (New York law). The court
had to recognize the insurance contract provision, New York Law, while
also applying the rules of the courts of that state in which its
located, which is in Missouri.
Missouri courts have recognized that contracting parties may choose
the state whose law will govern interpretation, but the application of
those laws may not be contrary to the public policy of Missouri.
Missouri public policy can also override the terms of an insurance
policy normally subject to the laws of another state when the
enforcement of external laws conflicts with Missouri public policy. So
for this case the courts would have to look into New Yorks laws
regarding the breach of contract and compare them with Missouri laws
and public policy. The insurance policy provision leads the conclusion
that anyone in the state of Missouri has no protections with the insurer
and cannot file claims resulting from incidents from the insurer. This
is clearly unfair and allows Lloyds of London to sell a contract
without being liable to pay for claims by those its insured. Matrizs
claim that the provision within the insurance policy violates Missouris
public policy. Being agreed upon by the court, this led to Matrizs
Holdings to be protected by Missouris vexatious refusal law.
I agree with the courts decision on denying Lloyds of Londons
Motion to Dismiss Vexatious Refusal to Pay Claim. Lloyds of London
should not have entered into a contract with Matriz Holdings or with
organizations from other states if they were not going to honor their
contract. It seems to me that the contract was consciously set up in a
manner that Lloyds of London not be held responsible for their end of
the contract for any company outside the state of New York, leading them
to be selling false security which is essentially fake insurance. This
is the definition of fraud. Im surprised Matriz Holdings signed the
contract with that provision in place without looking into New York law.
One could argue that Matriz signed a contract without reading all the
terms and conditions and whatever outcome happens is their fault. And I
could understand why someone would side with the insurance company.
After all, they did put in writing for their customer to review. But in
this case I believe a company should not be able to conduct such a shady
business practice and thats why I agree with the courts decision.

Here is the discussion topic.

Week
5 Discussion
Discussion Topic
Due June 20 at 11:59 PM
Starts Jun 14, 2021 12:00 AMEnds Jul
6, 2021 11:59 PM
Using the Maritz Holdings v. Lloyds
of London case provided in this week’s materials, please analyze the case
discussing the legal issue the court had to resolve, the court’s answer to that
legal issue and how the court reached its decision for your initial post of no
less than 600 words. Please also include in an additional 200 words, your
opinion of the court’s decision stating whether you agree or not with it and
explaining that position.
Please remember to use proper
writing structure which includes sentence and paragraph structure as well as
verb tense.

Neutral
As of: December 18, 2020 6:33 PM Z
Maritz Holdings v. Certain Underwriters at Lloyd’s London
United States District Court
for the Eastern District of Missouri, Eastern Division
November 30, 2020, Decided;
November 30, 2020, Filed
Case No. 4:18-CV-00825 SEP

Reporter
2020 U.S. Dist. LEXIS
222400 *; 2020 WL 7023952

MARITZ
HOLDINGS INC., Plaintiff, vs. CERTAIN UNDERWRITERS AT LLOYD’S LONDON
SUBSCRIBING TO POLICIES NUMBERED B122F10115115 AND F10115116, et al.,
Defendants.

Prior History: Maritz Holdings v. Certain Underwriters at Lloyd’s London,
2020 U.S. Dist. LEXIS 209794, 2020 WL 6582662 (E.D. Mo., Nov. 10, 2020)

Judges: SARAH E. PITLYK.
Opinion by: SARAH E. PITLYK

Opinion

MEMORANDUM
AND ORDER
This matter is before the
Court on Defendant Certain Underwriters at Lloyd’s London Subscribing to
Policies Numbered B122F10115115 and F10115116’s (“Underwriters”) [*2]
Motion to Dismiss Vexatious Refusal to Pay Claim of Plaintiff Maritz Holdings
Inc.’s (“Maritz” or “Plaintiff”) Amended Complaint. Doc.
[101]. For the reasons stated below, the Motion to Dismiss will be denied.

I.
Factual and Procedural Background
This case involves a dispute
over insurance coverage for alleged losses arising out of cyber-security
breaches experienced by Plaintiff, through which certain
electronically stored gift card information was stolen. Underwriters issued breach-response
insurance coverage to Maritz for 2015 through 2017 under two separate insurance
contracts (“Insurance Contracts”). The Insurance Contracts provided
coverage for, among other things, certain fees and costs Maritz might incur in
responding to such a security breach.
Maritz experienced two cyber-security breaches: one in
March 2016, and another in February 2017. Maritz submitted claims to
Underwriters for expenses it alleges are covered under the Insurance Contracts.
Underwriters denied coverage
on Maritz’s claims, after which Maritz filed the instant action, asserting
claims for breach of contract against all Defendants, and
vexatious refusal against Defendant Underwriters, and seeking damages of
between [*3] approximately $4.5 and 5.5 million. Maritz’s
complaint was initially filed in state court and was removed to this Court on
the basis of diversity of the parties. Doc. [1]. Maritz subsequently filed an
Amended Complaint, adding another of its insurers, Affiliated FM, as an
additional Defendant. Doc. [45]. Underwriters filed the instant Motion to
Dismiss Count II of the Amended Complaint for vexatious refusal to pay pursuant
to Federal Rule of Civil Procedure 12(b)(6). Doc.
[101].
Because Underwriters filed
its Motion to Dismiss after it had already answered the Amended Complaint, a
motion to dismiss under subsection (b)(6) of Rule 12 is untimely. See Fed. R. Civ. P. 12(b) (“A motion asserting
[failure to state a claim] must be made before pleading if a responsive
pleading is allowed.”). After Maritz noted this deficiency in its
memorandum in opposition to the Motion to Dismiss (Doc. [108]), Underwriters
asked the Court to treat its motion as one for judgment on the pleadings
pursuant to Federal Rule of Civil Procedure 12(c). Because
the applicable legal standard under either subsection of Rule 12 is the same, the Court will
construe the motion as though it were initially made under Rule 12(c).

II. Discussion

B.
Parties’ Arguments
The Insurance Contracts each
contain a choice-of-law provision stating:
In case of any dispute arising out
of this Insurance, the same shall be governed by the laws of New York and
subject to the exclusive jurisdiction of the courts of the United States of
America in accordance with the attached wording.
Docs. [4-1] at 5; [4-2] at 5.
Underwriters asserts that
Maritz’s claim in Count II for vexatious refusal to pay under Mo. Rev. Stat. 375.4201 is a
“dispute arising out of [the] Insurance,” and as such, is governed by
New York law according to the choice-of-law provision in the Insurance
Contracts. See Doc. [102] at 4-5. Underwriters argues that the claim
must fail as a matter of law because it is made under Missouri law, and
therefore fails to state a claim under the applicable governing law.
Maritz asserts that the
“arising out of” language in the Insurance Contracts only applies to
disputes involving the interpretation of the two policies. Maritz argues that
the vexatious refusal claim is not truly one “arising out of [the]
Insurance,” but rather, one arising out of Underwriters’s allegedly
improper conduct in responding to Maritz’s claimed losses after it submitted
its claim on the breaches.
Maritz also
argues that even [*6] if this Court were to conclude that the
Insurance Contracts’ choice-of-law provision applies to its vexatious refusal
claim, that still would not preclude its claim, because the deprivation of such
claim would be contrary to a fundamental policy of Missouriprotecting its
residents from unfair practices by insurersand Missouri courts apply the law
of another jurisdiction only if “th[e] law is not contrary to a
fundamental policy of Missouri.” Sturgeon
v. Allied Pros. Ins. Co., 344
S.W.3d 205, 210 (Mo. Ct. App. 2011).

C.
Analysis
The Court rejects Maritz’s argument
that its vexatious refusal claim is not a “dispute arising out of [the]
Insurance” policies. The unambiguous wording of the clause is not limited
to contractual disputes, but on its face applies to “any” dispute
arising out of the Insurance Contracts. Maritz’s claim for vexatious refusal to
pay is plainly one that arises out of the Insurance Contracts. The claim is
predicated on the existence of the policies and could not be brought if they
were not in effect. See Thomas Farms, Ltd. v. Nat’l Union Fire Ins. Co. of
Pittsburgh, No. 1:18CV00196 AGF, 2019 WL 460503 at *3 (E.D. Mo. Feb. 6, 2019) (“[A]
claim for vexatious refusal to pay is necessarily predicated on a breach
of an insurance policy.”); see also Minden
v. Atain Specialty Ins. Co., 788
F.3d 750, 756 (8th Cir. 2015) (A vexatious refusal claim
“requires an [*7] insured to prove: (1) the existence of
the insurance policy; (2) the insurance company’s refusal to pay; and (3) such
refusal was without reasonable cause or excuse.”). That is not the end of
the analysis, though. The Court must still determine whether New York law
controls and precludes Maritz’s claim for vexatious refusal to pay.
A district court sitting in
diversity jurisdiction applies the conflict-of-law rules for the state in which
it sits. DCS
Sanitation Mgmt., Inc. v. Castillo, 435
F.3d 892, 895 (8th Cir. 2006); Inacom
Corp. v. Sears, Roebuck & Co., 254
F.3d 683, 687 (8th Cir. 2001) (citing Klaxon
Co. v. Stentor Elec. Mfg. Co., 313
U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941)); see also
Harris
v. Am. Mod. Home Ins. Co., 571
F. Supp. 2d 1066, 1075 (E.D. Mo. 2008) (citing Erie
R.R. Co. v. Tompkins, 304
U.S. 64, 78, 58 S. Ct. 817, 82 L. Ed. 1188 (1938)) (“A
federal district court sitting in diversity jurisdiction must apply the rules
of decision that would be applied by the courts of the state in which it sits,
including the initial choice of the applicable substantive law.”). Thus,
we apply Missouri’s conflict-of-law rules.
Missouri recognizes that
contracting parties may choose the state whose law will govern the
interpretation of their contractual rights and duties. See, e.g., Sturgeon, 344
S.W.3d at 209-11 (citing TriCounty
Retreading, Inc. v. Bandag Inc., 851
S.W.2d 780, 784 (Mo. Ct. App. 1993)); Nakao
v. Nakao, 602
S.W.2d 223, 226 (Mo. Ct. App. 1980). So long as the application of the
chosen law is not contrary to the public policy of Missouri, Missouri courts
will generally honor the parties’ choice-of-law provision. Sturgeon, 344
S.W.3d at 210.
Missouri courts have long
recognized, however, that “‘a state may not be required to enforce in [*8]
its own courts the terms of an insurance policy normally subject to the law of
another state where such enforcement will conflict with the public policy of
the state of the forum.'” Asel
v. Ord. of United Com. Travelers of Am., 355
Mo. 658, 197 S.W.2d 639, 645 (Mo. banc. 1946) (quoting Hoopeston
Canning Co. v. Cullen, 318
U.S. 313, 316-17, 63 S. Ct. 602, 87 L. Ed. 777 (1943)). See
also Milburn v. Zurich Am. Ins. Co., 4:19-cv-02719-SNLJ, 2020 WL 4673785,
at *3 (E.D. Mo. Aug. 12, 2020) (“Long ago, the Missouri Supreme Court made
clear that public policy can override the terms of an insurance policy normally
subject to the laws of another state” when such enforcement would conflict
with the public policy of Missouri.) (internal quotation marks omitted).
Consequently, where the application of the chosen law would be contrary to
Missouri public policy, Missouri courts may instead choose to apply the law of
their own state. See Sturgeon, 344
S.W.3d at 209-11 (refusing to honor insurance policy choice-of-law provision for
California law because application of California law would deprive Missouri
insured of statutory right to avoid arbitration and therefore violated Missouri
public policy). Accordingly, the law of the state chosen by the partieshere,
New Yorkwill only govern if its application would not be contrary to the
public policy of Missouri.
The Missouri Supreme Court informs
us that “exceptions based on public policy must usually find support [*9]
in . . . statutory provisions,” Halpin
v. Am. Fam. Mut. Ins. Co., 823
S.W.2d 479, 483 (Mo. banc. 1992), and are applied where “there
is some local interest in the forum state to be protected” by its
application. Asel, 197
S.W.2d at 645. Additionally, Missouri courts have recognized that the
“paramount concern” of Missouri public policy is “the protection
of its own citizens.” Gilmore
v. Attebery, 899
S.W.2d 164, 168 (Mo. Ct. App. 1995).
Maritz
asserts that these conditions are met here. Maritz notes that the vexatious
refusal statute at issue arises out of the established Missouri public policy
of protecting its residents from unfair and bad faith practices by insurers. See
Duncan
v. Andrew Cnty. Mut. Ins. Co., 665
S.W.2d 13, 19-20 (Mo. Ct. App. 1983) (the vexatious refusal statute
provides “a statutory procedural remedy in favor of insureds for redress
of abuses by insurers” and is “a clear expression of public policy on
the subject”). Maritz contends that it would violate that public policy to
allow an insurer to insulate itself from the vexatious refusal statute by
including in an insurance policy a provision stating, for example, that
“the Missouri insured shall have no right to pursue a claim for vexatious
refusal against the insurer no matter the insurer’s behavior.” See
Doc. [108] at 8. Maritz argues that an insurer should not be allowed to achieve
that same end via a choice-of-law provision that works [*10]
to strip Missouri insureds of the protections afforded by the vexatious refusal
statute. The Court agrees.
Missouri “has a strong
interest in protecting its own citizens,” Sheehan
v. Nw. Mut. Life Ins. Co., 44
S.W.3d 389, 396 (Mo. Ct. App. 2000), as well as a “substantial
interest in the business of insurance of its people [and] property,” Asel, 197
S.W.2d at 645. See also Irish v. Allied Prop. & Cas. Ins. Co., No.
13-05015-CV-SW-JTM, 2013 WL 3773982, at *1 n.1 (W.D. Mo. July 18,
2013) (“Historically, Missouri courts consistently held that when
an insurer refused to pay a claim without good reason, the insured should be
awarded contract damages plus statutory damages for ‘vexatious refusal to pay.’
The statutory damages . . . were enacted to make whole the insured who is
forced to litigate to recover contractual damages.”) (citation omitted)).
The insured, Maritz, has been a Missouri-based corporation at all times
relevant to this lawsuit and is still maintains its principal place of business
in Missouri today. Doc. [45] at 2. Thus, there is a concrete local interest in
Missouri to be protected by the application of Missouri’s vexatious refusal
law. See Milburn, 2020 WL 4673785, at *4 (finding Plaintiffs’ residence
in Missouri for four years that included the relevant policy period sufficient
to provide an “identifiable local interest”).
The
Missouri vexatious refusal [*11] statute, then, relating as
it does to the equitable and fair treatment of Missouri insureds, is not just a
matter of Missouri substantive law, but also a declaration of state public
policy. See Duncan, 665
S.W.2d at 19-20. And in this case, there is a clear local interest to be
protected by its application. Under these circumstances, the Court finds that
the choice-of-law provisions in the Insurance Contracts do not preclude
Maritz’s statutorily prescribed remedy for allegedly vexatious conduct by
Underwriters.
Accordingly,
IT IS
HEREBY ORDERED that Defendant Underwriters’s Motion to Dismiss Vexatious Refusal
to Pay Claim (Doc. [101]) is DENIED.
Dated this 30th day of
November, 2020.
/s/ Sarah E. Pitlyk
SARAH E. PITLYK

End of Document
11 Mo. Rev. Stat. 375.420 provides:
In any
action [*5] against any insurance company to recover the
amount of any loss under a policy of automobile, fire, cyclone, lightning,
life, health, accident, employers’ liability, burglary, theft, embezzlement,
fidelity, indemnity, marine or other insurance except automobile liability
insurance, if it appears from the evidence that such company has refused to pay
such loss without reasonable cause or excuse, the court or jury may, in
addition to the amount thereof and interest, allow the plaintiff damages not to
exceed twenty percent of the first fifteen hundred dollars of the loss, and ten
percent of the amount of the loss in excess of fifteen hundred dollars and a
reasonable attorney’s fee; and the court shall enter judgment for the aggregate
sum found in the verdict.

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