Failure to Plead Sufficient Facts to State a Facially Plausible Claim Defeats Suit

Post number 5378

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Screwed by Insurance Brokers Judge Allows Plaintiff to Continue some of His Suit

In Wilfredo Cruz, et al. v. Bay Point Insurance LLC, et al., Civil Action No. GLR-25-44, United States District Court, D. Maryland on June 10, 2026 dealt with a suit brought by  Wilfredo Cruz who alleged that Bay Point Insurance LLC, Karl Smith, and David Small committed insurance fraud in connection with insurance policies brokered for Cruz’s trucking business, W&DC General Contractor, LLC.

Cruz claimed Defendants represented that they could procure workers’ compensation, commercial general liability, motor cargo, and physical damage coverage even though Bay Point Insurance and Small allegedly were not licensed to transact insurance in Virginia at the relevant time. After two tractors were involved in a January 26, 2024 incident in Baltimore, Cruz reported the matter and sought claim handling and policy documents, but alleged that Defendants failed to provide the policies or benefits.

Cruz further alleged that the lack of coverage caused business losses, the shutdown of W&DC General Contractor, and other damages.

LAW:

The Court applied Rule 12(b)(6), under which a complaint must plead sufficient facts to state a facially plausible claim, and Rule 9(b), which requires fraud-based allegations to be pleaded with particularity.

For the RICO claim, Cruz had to allege conduct of an enterprise through a pattern of racketeering activity and, for conspiracy, knowledge of an agreement to facilitate RICO violations. The Court also applied Virginia law governing the Virginia Consumer Protection Act, common law civil conspiracy, fraud, tortious interference, breach of fiduciary duty, breach of contract, and indemnification, as well as Federal Rule of Civil Procedure 55 governing default.

DISCUSSION/ANALYSIS:

The Court first denied Cruz’s Motion for Entry of Partial Default because Defendants had filed a Motion to Dismiss, which constituted defending the action and postponed the time to answer even if the motion did not address every count.

CONCLUSIONS

On the Motion to Dismiss:

The Court dismissed the RICO conspiracy claim because Cruz alleged only conclusory assertions of agreement and did not plead specific facts showing how, when, or where Defendants agreed to form or participate in a RICO enterprise.

The Court dismissed the Virginia Consumer Protection Act claim because the insurance transactions involved Cruz’s business and tractors, not goods or services primarily for personal, family, or household purposes.
The Court dismissed the common law civil conspiracy claim because Bay Point Insurance, its owner Smith, and employee Small were not legally separate entities capable of conspiring with one another under the intracorporate-conspiracy principle.

However, the Court allowed the fraud claims to proceed because Cruz pleaded alleged misrepresentations about insurance coverage, reliance, damages, requests for policy documents, and licensing dates with enough detail at the pleading stage.

The Court also allowed the tortious interference claim to proceed, finding sufficient allegations that Defendants knew of and interfered with Cruz’s business relationships by allegedly selling insurance without proper licensing.
The breach of fiduciary duty claim survived because an insurance broker may owe fiduciary duties to an insured once an agency relationship is established.
The breach of contract and contractual indemnification claims also survived because W&DC General Contractor had been joined as a party and Defendants raised no other basis for dismissal.

ZALMA OPINION

When an insurance broker or agent fails to deal fairly and in good faith to sue for the damages caused by the action of the insurance agents or brokers caused. That is not necessarily east and usually requires the work of an experienced attorney. A court must, as did the USDC, apply the law when the allegations in the suit are challenged. The court removed the causes of actions that a complaint must plead sufficient facts to state a facially plausible claim, and Rule 9(b), which requires fraud-based allegations to be pleaded with particularity.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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