United States District Court, D. Rhode Island
J. MCCONNELL, JR., UNITED STATES DISTRICT JUDGE.
Twin City Fire Insurance Company seeks to dismiss Plaintiff
Gonsalves-Pastore Realty, LLC's Complaint. ECF No. 10.
For reasons set forth below, the Court DENIES Twin City's
Gonsalves-Pastore Realty, LLC ("Gonsalves-Pastore")
seeks coverage under its insurance policy with Twin City Fire
Insurance Company ("Twin City") for an action
brought against it alleging negligent supervision of an
associated real estate salesperson's actions in
connection with her house-flipping business. Linda Glynn, a
licensed real estate salesperson associated with
Gonsalves-Pastore, founded Sunflower Real Estate, LLC
("Sunflower") as a vehicle to purchase, renovate,
and sell or rent residential real estate at a profit. In the
underlying case, Mauro Poletti filed an action in Rhode
Island Superior Court against Ms. Glynn, Sunflower, and
Gonsalves-Pastore. ECF No. 1-4. Mr. Poletti asserts claims
for breach of contract, breach of fiduciary duty and
fraudulent conveyance against Ms. Glynn and claims for breach
of the duty of good faith and fair dealing, conversion,
negligence, and fraud against Ms. Glynn and Sunflower. The
only count against Gonsalves-Pastore alleges that
Gonsalves-Pastore "failed to properly oversee and
supervise the acts of Glynn," causing Mr. Poletti's
damages. ECF No. 1-4 at 9. At all relevant times,
Gonsalves-Pastore held a Real Estate Errors and Omissions
Liability Policy from Twin City. ECF No. 1-5.
STANDARD OF REVIEW
survive a motion to dismiss for failure to state a claim, a
complaint must contain "sufficient factual matter,
accepted as true, to 'state a claim to relief that is
plausible on its face.5" Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). The Court accepts a
plaintiffs allegations as true and construe them in the light
most favorable to him. Gargano v. Liberty Int"
Underwriters, Inc., 572 F.3d 45, 48 (1st Cir. 2009). In
reviewing a motion to dismiss, the "court may consider
not only the complaint, but also the 'facts extractable
from documentation annexed to or incorporated by reference in
the complaint and matters susceptible to judicial notice,
"' Narragansett Elec, Co. v. Constellation
Energy Commodities Grp., Inc., 526 F.Supp.2d 260, 268
(D.R.I. 2007) (quoting Jorge v. Rumsfeld, 404 F.3d
556, 559 (1st Cir. 2005)). Indeed, "when a
'complaint's factual allegations are expressly linked
to-and admittedly dependent upon-a document (the authenticity
of which is not challenged), that document effectively merges
into the pleadings."' Id. (quoting
Beddall v. State St, Bank & Trust Co.,
137 F.3d 12, 17 (1st Cir. 1998)).
City argues that the Misappropriation and Owned Property
exclusions in the insurance policy issued to
Gonsalves"Pastore exclude coverage for claims asserted
in the underlying case. The Court finds that the exclusions
do not apply.
City Fails to Establish the Applicability of the
Misappropriation Exclusion Twin City does not meet its burden
to prove that the Misappropriation Exclusion applies to bar
coverage as it is not clear that the claims brought by Mr.
Poletti exclusively arise out of alleged misappropriation.
Misappropriation Exclusion set forth in the Policy precludes
coverage for claims:
Arising out of the inability or failure to pay, collect, or
safeguard funds held or to be held for others or any
conversion, misappropriation, commingling or defalcation of
funds or other property.
ECF No. 1-5 at 10.
it is not clear that the injury alleged in the underlying
Complaint seeking relief for Ms. Glynn's actions arise
solely from "misappropriation." Mr. Poletti alleges
several theories, including negligence and a breach of
contract claim, and the complaint in the underlying case
appears to allege that he is in fact suing over managerial
decisions on the part of Ms. Glynn that reduced his profits.
ECF No. 1-4 at 6-8. To the extent that Mr. Poletti alleges
that mismanagement of Sunflower reduced his expected profits,
injuries arise from something other than misappropriation,
The question of whether the losses suffered by Mr. Poletti
were caused by misappropriation, some other failure to pay
sums owed, mismanagement, contract damages, or a violation of
a fiduciary duty remains open. It is thus undetermined