Watts Guerra LLC v. Series 1 of Oxford Ins. Co. NC LLC, 2026 NCBC 17.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION WAKE COUNTY 25CV023398-910
WATTS GUERRA LLC,
Plaintiff,
v. ORDER AND OPINION ON DEFENDANT’S MOTION TO SERIES 1 OF OXFORD INSURANCE DISMISS COMPANY NC LLC,
Defendant.
1. THIS MATTER is before the Court on Defendant’s Motion to Dismiss
pursuant to North Carolina Rule of Civil Procedure (Rule(s)) 12(b)(6) (Motion), (ECF
No. 7).
2. The Court, having considered the Motion, the related briefing, and the
arguments of counsel at a hearing on the Motion, concludes for the reasons stated
below that the Motion should be GRANTED in part and DENIED in part.
Parker Poe Adams & Bernstein LLP, by Charles E. Raynal, IV and Cristina C. Stam, and Susman Godfrey, LLP, by Shawn Rabin, Samir Doshi, and Bill Carmody, for Plaintiff Watts Guerra LLC, a Puerto Rico Limited Liability Company.
Tharrington Smith, LLP, by David Noland, and Debevoise & Plimpton LLP, by Susan Reagan Gittes, Ardis Strong, and Jaime Fried, for Defendant Series 1 of Oxford Insurance Company NC LLC, a North Carolina Limited Liability Company.
Earp, Judge.
I. FACTUAL AND PROCEDURAL BACKGROUND
3. The Court does not make findings of fact when ruling on a motion to
dismiss. See Taylor v. Bank of Am., N.A., 382 N.C. 677, 679–80 (2022) (citations omitted). It recites below the factual allegations in the Complaint and its exhibits
that are relevant to the Motion before the Court.
4. Plaintiff Watts Guerra LLC (Watts LLC) is a Puerto Rico limited
liability company with its principal place of business in Puerto Rico. (Compl. ¶¶ 6, 8,
ECF No. 3.) Its sole member is Mikal Watts. (Compl. ¶ 8.)
5. Defendant Series 1 of Oxford Insurance NC LLC (Oxford), a special-
purpose captive insurance company licensed by the state of North Carolina, (Compl.
Ex. 1 § IV.E [Policies], ECF No. 3), is a Delaware LLC with its principal place of
business in North Carolina, (Compl. ¶ 7).
6. In September 2021, Watts LLC invested in mass tort lawsuits brought
by New York law firm Gacovino, Lake & Associates, P.C. that were valued at more
than $340 million (Gacovino Book). (Compl. ¶¶ 1, 12–13.)
7. Watts LLC also paid a total of $7 million to purchase twelve $10 million
insurance policies from Oxford (Policies). 1 (Compl. ¶¶ 2, 4, 14–15.) The insurance
was intended to cover any shortfall between Watts LLC’s $120 million expected
payout from the Gacovino Book and its actual return as of 15 September 2024.
(Compl. ¶¶ 2, 4, 14–15.) Teton Risk Mitigation Solutions LLC reinsured the Policies.
(Compl. ¶ 17.)
8. Watts LLC alleges that in Spring 2024, Teton’s manager, Don Discepolo,
warned Mr. Watts that Oxford would not pay a claim under the Policies because
1 The twelve Policies are identical with respect to the relevant provisions. (See Compl. ¶¶ 13– 16.) Oxford’s parent, Accession Risk Management Group (Accession), was looking to be
acquired. (Compl. ¶ 19.) Around the same time, a credit-rating agency, AM Best,
announced potential financial difficulties at Oxford. (Compl. ¶ 20.) AM Best
attributed the difficulties to Oxford’s shift to insuring “large, financial
guarantee/judgment preservation policies.” (Compl. ¶ 21.)
9. On 15 July 2024, Mr. Watts met with Mr. Discepolo and executives from
Oxford and Accession. (Compl. ¶ 22.) During the meeting, Oxford and Accession
allegedly expressed concern about representations Watts LLC had made to obtain the
Policies. (Compl. ¶ 22.) The specifics of those representations were not identified,
but Mr. Watts thought it clear from the discussion that Oxford did not intend to
uphold its contractual obligations. (Compl. ¶ 22.)
10. Sometime in the summer of 2024, Natalie Logan, a lawyer who worked
for Accession, (Compl. ¶ 25), allegedly told Mr. Watts that Oxford would not pay “any
claim that Watts LLC made and threatened to rescind the Policies altogether.”
(Compl. ¶ 48.)
11. As 15 September 2024 approached, Watts LLC had received only about
$2 million in fees from the Gacovino Book, and Mr. Watts was readying a claim on
the Policies. (Compl. ¶ 23.)
12. On 11 October 2024, Mr. Discepolo reiterated to Mr. Watts that Oxford
would “just deny [any] claim [Watts filed]” because its parent company, Accession,
did not want a large payout to jeopardize its potential sale. (Compl. ¶ 24 (alterations
in original).) 13. Five days later, Mr. Watts again met with Mr. Discepolo, Ms. Logan, the
managing director of Oxford Risk Management Group, and another representative
from Accession. (Compl. ¶ 25.) Watts LLC alleges that they asked Mr. Watts to delay
filing a claim so the parties could look for a third party to purchase Watts LLC’s
interest in the Gacovino Book instead of proceeding with the claims process. (Compl.
¶ 25 (alleging Mr. Watts “was asked to delay filing his claim . . . which Oxford ‘would
have to deny’ ”).)
14. On 19 November 2024, Mr. Discepolo sent Mr. Watts a term sheet from
King Street Capital Management, LP (King Street) with a proposal to purchase Watts
LLC’s Gacovino Book. (Compl. ¶ 26.) However, Watts LLC alleges that Oxford
refused to provide the assurances King Street required to close a deal. (Compl. ¶ 26.)
15. Watts LLC filed a claim on the Policies for approximately $118 million
on 29 November 2024 (First Claim). (Compl. ¶¶ 3, 23, 27.) On 5 December 2024,
Oxford informed Watts LLC that it had received the First Claim and that Oxford Risk
Management would “handle the investigation and adjustment of the Claim.” (Compl.
¶ 27; Compl. Ex. 5 [Claim Acknowledgement], ECF No. 3.)
16. Two weeks later, Oxford requested that Watts LLC submit documents
responsive to a series of requests for information. (Compl. ¶ 28; Compl. Ex. 6 [Doc.
Req. Letter], ECF No. 3.) Watts LLC alleges that the requests far exceed what the
Policies allow. (Compl. ¶ 28; see also Doc. Req. Letter.) 17. The opening page of the Policies provides that “THE COMPANY HAS
THE RIGHT, BUT NOT THE OBLIGATION, TO INVESTIGATE CLAIMS
AGAINST AN INSURED.” 2 (Policies 1.)
18. As part of the “Claims Process,” the Policies impose “Additional Duties”
on Watts LLC once it becomes aware of a “Nonpayment.” (Policies § VI.E.1.)
“Nonpayment” is defined as when “[t]he aggregate Gacovino Net Proceeds collected
by the Insured through the Expiration Date is less than $120,000,000.” (Policies
§ IV.P.) As the insured, Watts LLC was required to
a. preserve all files and documentation of any Loss;
b. complete any claim form(s) reasonably provided by Company and submit the complete form(s) to Company, along with documentation demonstrating evidence of payment and/or loss; [and]
c. afford Company reasonable access to the Insured’s financial records[.]
(Policies § VI.E.1 (emphasis added).) The same section contains this proviso:
d. provided that any such obligation of the Insured hereunder shall, at all times, be subject to the Insured’s legal and ethical obligations and the Insured shall not be required to provide to the Company any information that is privileged or confidential under any applicable disciplinary rules, applicable evidentiary rules or regulations.
(Policies § VI.E.1 (emphasis added).)
2 The Policies refer to Oxford as “Company” and Watts LLC as “Insured.” (See Policies §§ IV.E, K.) 19. The section immediately following Watts LLC’s “Additional Duties”
discusses “Payment” as part of the “Claims Process”:
1. Subject to the provisions of Section VIII.C of this Policy [dealing with policy cancellation], following receipt of the completed Notice of Claim and approved claim form(s) referenced in Section VI.E.1.b, along with the documentation described in Section VI.E.1.b and all other information requested by Company, Company will process one payment to the Insured or the Loss Payees pursuant to Insured’s instructions, within ninety (90) days, pursuant to Section I of this Policy, provided that the Insured has complied with all of the terms of this Policy.
2. The Company shall not deny a Claim or fail to pay a Loss due to the failure of Insured to deliver any document (x) that is privileged or confidential under any applicable disciplinary rules, applicable evidentiary rules or regulations, or (y) the delivery of which would violate any legal or ethical obligations applicable to Insured.
(Policies § VI.F (emphasis added).)
20. In addition to section VI.F.1’s condition precedent to payment, the
“Dispute Resolution” section of the Policies conditions Watts LLC’s right to sue
Oxford on Watts LLC’s compliance with all policy terms:
A. Action Against Company. No person or organization, including the Insured, has a right under this Policy:
...
2. to sue Company with regard to this Policy unless Insured has complied with all the terms of the Policy.
(Policies § IX.A.)
21. Watts LLC alleges that the Policies require it only “to ‘complete any
claim form(s)’ and provide access to ‘financial records . . . along with documentation demonstrating evidence of payment and/or loss’ during the claims process.” (Compl.
¶ 28 (quoting Policies § VI.E.1.b–c).) Watts LLC further alleges that it was “ready to
do each of those things.” (Compl. ¶ 28.)
22. Although the Policies require Oxford to indemnify its insured within
ninety days of receiving a claim, (Policies § VI.F.1), Oxford did not do so, (Compl.
¶ 29). Instead, Oxford attempted to negotiate a settlement with Watts LLC. (Compl.
¶ 29.) Watts LLC agreed to negotiate and rescinded the First Claim. (Compl. ¶ 30.)
23. Watts LLC alleges that, unknown to it, Oxford did not intend to
negotiate in good faith. (Compl. ¶ 30.) Instead, it alleges, Oxford’s goal was “to delay
and obstruct the claims process.” (Compl. ¶ 30.) One of the delay tactics, according
to Watts LLC, involved a meeting with Jason Vanacour, who was with a company
called CornerSight. (Compl. ¶ 30.) Mr. Vanacour asked Mr. Watts to rescind the
First Claim to allow four months for CornerSight to do due diligence on a deal to fund
its acquisition of the Gacovino Book. (Compl. ¶ 30.) During the four months that
followed, however, Mr. Vanacour repeatedly told Mr. Watts that Oxford would never
pay the claim, was not cooperating in the diligence process, and was not responsive
to his firm’s data requests, which made the deal “not feasible.” (Compl. ¶ 30.)
24. Watts LLC alleges that “Oxford took these actions to minimize its
liabilities, improve its AM Best rating, and maximize the acquisition prospects of its
parent, Accession.” (Compl. ¶ 31.)
25. During this process, at Oxford’s urging, Watts LLC agreed to wait until
April 2025 to re-file its claim. (Compl. ¶ 34.) But when that time came, Oxford repeated that it would not pay Watts LLC despite its contractual obligations and
instead asked Watts LLC to extend the claims deadline to 16 June 2025. (Compl.
¶ 34.)
26. Watts LLC alleges that it “continued to engage with Oxford in good faith
during and after this second extension period” ending 16 June 2025. (Compl. ¶ 35.)
According to Watts LLC, Oxford continued to obstruct these efforts, including by
failing to cooperate with Mr. Vanacour’s efforts. (Compl. ¶¶ 35–36.) It also alleges
that in June 2025, Oxford’s general counsel told Mr. Watts that Oxford “would not
pay the claim in full.” (Compl. ¶ 36.)
27. On 10 June 2025, an insurance brokerage firm announced that it would
acquire Accession. (Compl. ¶ 37.)
28. On 16 June 2025, despite Oxford’s representations that it would refuse
to pay a claim, Watts LLC filed a second claim under the Policies (Second Claim).
(Compl. ¶¶ 38, 52.) The Second Claim sought approximately $116 million rather than
$118 million because by then Watts LLC had received additional proceeds from the
Gacovino Book. (Compl. ¶ 38 & n.2.)
29. On 24 June 2025, Oxford’s Director of Claims sent Watts LLC the same
requests for information that Oxford had previously sent Watts LLC in December
2024. (Compl. ¶ 64; Doc. Req. Letter 1–3.) Again, Watts LLC takes the position that
it is not required to provide the information Oxford requested, and it demands that
Oxford pay the Second Claim. (Compl. ¶ 64; Watts Guerra LLC’s Opp’n Def.’s Mot.
Dismiss 12–16, ECF No. 21 [Pl.’s Br. Opp’n].) II. LEGAL STANDARD
30. A motion to dismiss under Rule 12(b)(6) probes “whether the allegations
of the complaint, if treated as true, are sufficient to state a claim upon which relief
can be granted under some legal theory.” Corwin v. Brit. Am. Tobacco PLC, 371 N.C.
605, 615 (2018) (quoting CommScope Credit Union v. Butler & Burke, LLP, 369 N.C.
48, 51 (2016)).
31. Dismissal under Rule 12(b)(6) “is warranted when: (1) the complaint on
its face reveals that no law supports the plaintiff’s claim; (2) the complaint on its face
reveals the absence of facts sufficient to make a good claim; or (3) the complaint
discloses some fact that necessarily defeats the plaintiff’s claim.” Value Health Sols.,
Inc. v. Pharm. Rsch. Assocs., Inc., 385 N.C. 250, 263 (2023) (quoting Krawiec v. Manly,
370 N.C. 602, 606 (2018)) (citation modified). The Court must “take the allegations
in the complaint as true and draw all reasonable inferences in the plaintiff’s favor.”
Id. (quoting New Hanover Cnty. Bd. of Educ. v. Stein, 380 N.C. 94, 106–07 (2022)).
32. The Court also considers documents attached to the Complaint because
they are “part thereof for all purposes” under Rule 10(c). Krawiec, 370 N.C. at 606
(quoting N.C. R. Civ. P. 10(c)). However, “[w]hen reviewing pleadings with
documentary attachments on a Rule 12(b)(6) motion, the actual content of the
documents controls, not the allegations contained in the pleadings.” Hale v. MacLeod,
294 N.C. App. 318, 328 (2024) (quoting Schlieper v. Johnson, 195 N.C. App. 257, 263
(2009)). III. ANALYSIS
33. Watts LLC requests a declaratory judgment and asserts claims for
breach of contract, bad faith, and violation of the North Carolina Unfair and
Deceptive Trade Practices Act (UDTPA) arising from Oxford’s handling of its two
claims on the Policies. Oxford moves to dismiss the case in its entirety. 3
A. Count II: Breach of Contract Claim
34. As a threshold matter, Oxford contends that Watts LLC has failed to
satisfy a condition precedent to suit for breach of contract. (Def.’s Mem. L. Supp. Mot.
Dismiss Compl. 7–8, ECF No. 18 [Def.’s Br. Supp.].) Specifically, Oxford maintains
that the Policies clearly state that Watts LLC owes Oxford responses to the requests
for information it sent after receiving each claim and that Oxford has the right to
evaluate that information as part of its investigation before it can be responsible to
indemnify its insured. (Def.’s Br. Supp. 7–8, 11–13; Policies § VI.F.) It further argues
that the Policies require Watts LLC to comply with all policy terms before it can file
suit against Oxford “with regard to” the Policies and that Watts LLC’s refusal to
respond to its requests means it has not satisfied a condition precedent to suit. (Def.’s
Br. Supp. 7–11; Policies § IX.A.2.)
35. Watts LLC responds that Oxford breached the contract by repudiating
it and that Oxford’s repudiation excuses Watts LLC’s obligation to comply with the
prescribed conditions. (Pl.’s Br. Opp’n 8–11.) In any case, Watts LLC argues that it
3 Counsel for Oxford represented to the Court in the hearing on this Motion that it sought
dismissal of all claims without prejudice. did comply with the preconditions to filing suit. (Pl.’s Br. Opp’n 8–9, 11–16.) Finally,
Watts LLC contends that the Motion is premature because the only published cases
disposing of insurance coverage disputes based on failure of a condition precedent
arose at the summary judgment stage, not at the pleadings stage. (Pl.’s Br. Opp’n
10–11.)
1. Anticipatory Repudiation
36. The Court first considers whether the Complaint adequately alleges
that Oxford engaged in the kind of unequivocal and absolute conduct that would
constitute repudiation of the Policies. Watts LLC alleges that Oxford repudiated the
contracts by both forecasting that it would refuse to pay a claim before any claim was
made and then actually refusing to pay Watts LLC’s claims once made. (Compl.
¶¶ 25, 34, 36, 50–51; Pl.’s Br. Opp’n 20–22.) Oxford argues that the statements and
conduct attributable to it are insufficient to allege repudiation because the Complaint
reveals that Watts LLC did not treat Oxford’s statements and conduct as repudiation.
(Def.’s Reply Supp. Mot. Dismiss Compl. 2–5, ECF No. 26 [Def.’s Reply Br.].)
37. “The elements of a claim for breach of contract are (1) existence of a valid
contract and (2) breach of the terms of that contract.” Johnson v. Colonial Life &
Accident Ins. Co., 173 N.C. App. 365, 369 (2005) (quoting Poor v. Hill, 138 N.C. App.
19, 26 (2000)); see also Wells Fargo Ins. Servs. USA, Inc. v. Link, 372 N.C. 260, 260,
276 (2019) (per curiam). Under the theory of anticipatory repudiation, a promisee
may immediately sue for breach when the promisor “renounces its duty under the
agreement and declares its intention not to perform it[.]” Messer v. Laurel Hill Assocs., 93 N.C. App. 439, 443 (1989) (citing Pappas v. Crist, 223 N.C. 265, 268
(1943)).
38. Actionable anticipatory repudiation requires “words or conduct
evidencing the renunciation or breach” amounting to a “positive, distinct,
unequivocal, and absolute refusal to perform the contract.” Id. (quoting Edwards v.
Proctor, 173 N.C. 41, 44 (1917)). Moreover, such a refusal “is not a breach unless it
is treated as such by the adverse party.” Profile Invs. No. 25, LLC v. Ammons E.
Corp., 207 N.C. App. 232, 237 (2010) (citation modified) (quoting Edwards, 173 N.C.
at 44). Therefore, a breach of contract based on anticipatory repudiation “depends
not only upon the statements and actions of the allegedly repudiating party but also
upon the response of the non-repudiating party.” Id. (citing Edwards, 173 N.C. at
44).
39. Only the statements and conduct attributable to the parties themselves,
not those of third parties, are relevant to determining whether actionable repudiation
has occurred. See Clute v. Gosney, 290 N.C. App. 368, 372–73 (2023) (quoting Profile
Invs., 207 N.C. App. at 236) (considering only interactions between contract parties
to analyze whether actionable repudiation occurred).
40. Here, viewing the allegations in the light most favorable to Watts LLC,
the Complaint describes statements and conduct attributable to Oxford that, but for
other factors, would be sufficient to plead repudiation with respect to the First Claim.
For example, at paragraph 34 of the Complaint, Watts LLC alleges that “Oxford
repeated that it would not pay Watts LLC despite its contractual obligation to do so.” (Compl. ¶ 34.) It alleges that Ms. Logan stated in summer 2024 that Oxford would
not “pay any claim that Watts LLC made and threatened to rescind the Policies
altogether.” (Compl. ¶ 48.) However, other statements Watts LLC includes in its
allegations do not assist it because the Complaint attributes them to persons not
speaking for Oxford. (See, e.g., Compl. ¶ 30 (alleging third-party statement); Pl.’s Br.
Opp’n 21–22 (collecting examples of alleged third-party conduct).)
41. Regardless of whether the alleged statements and conduct of Oxford in
response to Watts’ First Claim were absolute and unequivocal enough to constitute
repudiation, the Complaint also alleges that neither party treated those statements
and conduct as a repudiation. Instead, Watts LLC pleads that both “during and after
th[e] second extension period,” which ended 16 June 2025, “Watts LLC continued to
engage with Oxford in good faith.” (Compl. ¶¶ 34–35 (emphasis added).) It further
pleads that “[d]espite Oxford representing that it will [sic] refuse to pay, on June 16,
2025, Watts LLC filed the Second Claim for over $116 million.” (Compl. ¶ 52
(emphasis added).)
42. Thus, Watts LLC alleges that it continued to pursue indemnity under
the Policies after any alleged repudiation by Oxford. Watts LLC’s failure to treat
Oxford’s alleged statements and conduct as a breach defeats its theory that actionable
repudiation occurred. See Profile Invs., 207 N.C. App. at 238 (“[T]he renunciation
itself does not ipso facto constitute a breach. It is not a breach of the contract unless
it is treated as such by the adverse party. Upon such a repudiation of an executory
agreement by one party the other may make his choice between the two courses open to him, but can neither confuse them nor take both.” (emphasis added) (quoting
Edwards, 173 N.C. at 44)).
43. The Complaint includes one statement allegedly made by Oxford’s
general counsel after Watts LLC submitted its Second Claim. Watts LLC alleges that
the general counsel stated “that Oxford ‘would not pay the claim in full.’ ” (Compl.
¶¶ 36, 50 (emphasis added).) Because this statement, standing alone, is not an
unequivocal refusal to comply with the terms of the Policies, it is insufficient to plead
repudiation. See Messer, 93 N.C. App. at 443 (quoting Edwards, 173 N.C. at 44)
(requiring “positive, distinct, unequivocal, and absolute refusal to perform the
contract”).
44. Moreover, the Complaint reveals that Oxford continued to perform its
obligations under the Policies after Watts LLC presented its Second Claim. Watts
LLC alleges that on 24 June 2025, Oxford re-sent Watts LLC its request for
information as part of its investigation, just as it had done in December 2024,
following receipt of Watts LLC’s First Claim. Thus, Watts LLC’s own allegations
defeat its assertion that it is not required to meet the Policies’ condition precedent to
suit because Oxford repudiated the contract.
2. Conditions Precedent
45. Because it has not alleged breach by repudiation, Watts LLC bears the
burden to plead that it satisfied all conditions precedent to bringing its breach of
contract claim. N.C. R. Civ. P. 9(c). Watts LLC is correct that some of the cases
Oxford cites on this subject arose at the summary judgment stage. (Def.’s Br. Opp’n
10–11.) However, the holdings in those cases are equally applicable at the Rule 12(b)(6) stage if “the complaint on its face reveals the absence of facts sufficient to
make a good claim” or “some fact that necessarily defeats the plaintiff’s claim.” Value
Health Sols., 385 N.C. at 263 (quoting Krawiec, 370 N.C. at 606). Put simply, the
Court must dismiss the claim for breach of contract if Watts LLC’s allegations reveal
the failure of a condition precedent, and whether Watts LLC has satisfied the
condition turns on an interpretation of the Policies’ provisions requiring Watts LLC
to provide Oxford information in the claims process. (Pl.’s Br. Opp’n 12–13.)
46. “An insurance policy is a contract, and its provisions govern the rights
and duties of the parties thereto.” Radiator Specialty Co. v. Arrowood Indem. Co.,
383 N.C. 387, 412 (2022) (citation modified) (quoting Fid. Bankers Life Ins. Co. v.
Dortch, 318 N.C. 378, 380 (1986)). As is true with other contracts, the Court seeks to
ascertain the intent of the parties when it construes an insurance policy. See id.
(quoting Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield L.L.C., 364 N.C. 1, 9
(2010)). It enforces unambiguous contracts as written and determines their meaning
as a matter of law. Accardi v. Hartford Underwriters Ins. Co., 373 N.C. 292, 295
(2020) (citing Wachovia Bank & Tr. Co. v. Westchester Fire Ins. Co., 276 N.C. 348, 354
(1970)).
47. The fact that the parties disagree about the meaning of a policy
provision is not enough. “Ambiguity is not established by the mere fact that the
insured asserts an understanding of the policy that differs from that of the insurance
company.” Id. (citing Wachovia Bank, 276 N.C. at 354). Whether an ambiguity exists
is a question for the Court. See N. State Deli, LLC v. Cincinnati Ins. Co., 386 N.C. 733, 744–45 (2024) (determining whether insurance contract was ambiguous as
matter of law).
48. The canons of construction are useful for construing the language of a
contract. See id. at 740–41; Wachovia Bank, 276 N.C. at 355 (considering ambiguity
doctrine “[s]ubject to . . . principles of construction”); Woods v. Nationwide Ins. Mut.
Ins. Co., 295 N.C. 500, 505–06 (1978) (contemplating use of canons of construction to
determine whether ambiguity exists). The canons counsel that the Court read the
entire policy, harmonize its provisions, and give every word effect. Woods, 295 N.C.
at 506.
49. Watts LLC argues that the principle of ejusdem generis applies when
construing the language of the Policies. (Pl.’s Br. Opp’n 13–16.) Under that principle
of statutory interpretation, not contract construction, “where general words follow a
designation of particular subjects or things, the meaning of the general words will
ordinarily be presumed to be, and construed as, restricted by the particular
designations and as including only things of the same kind, character and nature as
those specifically enumerated.” N.C. Ins. Guar. Ass’n v. Century Indem. Co., 115 N.C.
App. 175, 191 (1994) (quoting State v. Lee, 277 N.C. 242, 244 (1970)).
50. The parties dispute the meaning of this policy language in section VI.F:
“following receipt of the completed Notice of Claim and approved claim form(s)
referenced in Section VI.E.1.b, along with the documentation described in Section
VI.E.1.b and all other information requested by Oxford [sic].” (Pl.’s Br. Opp’n 13
(quoting Policies § VI.F.1).) Watts LLC argues the Court should read this catch-all provision “as being carefully tailored to specific documents like the claims forms and
statements of loss ‘referenced’ and ‘described in Section VI.E.1.b[.]’ ” (Pl.’s Br. Opp’n
14 (quoting Policies § VI.F.1).) Oxford contends that the provision should be read
broadly to encompass any information it requests. (Def.’s Br. Supp. 11–13.)
51. Contrary to Watts LLC’s contention that ejusdem generis is “settled law”
for interpreting insurance contracts in North Carolina, our Supreme Court has not
endorsed its use in the manner Watts LLC espouses. See, e.g., N. State Deli, 386 N.C.
at 740–42 (omitting ejusdem generis from “Rules of Insurance Contract
Interpretation”); Wachovia Bank, 276 N.C. at 354–55 (omitting ejusdem generis from
survey of insurance contract interpretation); see also Woods, 295 N.C. at 505
(describing Wachovia Bank’s discussion of insurance contract interpretive principles
as “well summarized”).
52. In any event, to the extent this principle may be applied to the
construction of insurance contracts, it is what it says it is: a presumption that gives
way in appropriate circumstances. See Century Indem., 115 N.C. App. at 191 (quoting
Lee, 277 N.C. at 244) (describing ejusdem generis as a presumption). Such is the case
here.
53. The Policies require compliance with their terms before Watts LLC has
a right to sue “with regard to” the policies. (Policies § IX.A.2.) Section VI.E.1.b
imposes a duty on Watts LLC to complete and submit Oxford’s claim form in the event
of “Nonpayment,” (Policies § VI.E.1.b), which is defined as a shortfall in proceeds from
the Gacovino Book, (Policies § IV.P). In addition, section VI.E.1.b requires Watts LLC to provide “documentation demonstrating evidence of payment and/or loss.” (Policies
§ VI.E.1.b.) The burden to comply with this requirement is relatively light given the
Policies’ narrow definition of loss as the difference between the expected and actual
amount received from the Gacovino Book as of the Policies’ expiration date. (Policies
§ IV.L.) Watts LLC’s Complaint alleges facts sufficient to satisfy these requirements.
54. On the other hand, section VI.F not only repeats the requirement that
Oxford submit the claim form and documentation of loss but also requires Watts LLC
to produce “all other information requested by” Oxford. (Policies § VI.F.) The dispute
turns on whether this catch-all provision has independent meaning.
55. As stated above, Watts LLC, applying ejusdem generis, argues that the
answer is no. (Pl.’s Br. Opp’n 14–15.) Under its theory, “all other information
requested” is a general term at the end of a list of enumerated, specific terms (i.e.,
the claim form and documentation of loss provisions in section VI.E.1.b). (Pl.’s Br.
Opp’n 14–15.) Watts LLC maintains that the Court must read the general language
(i.e., “all other information requested by” Oxford) to be of the same kind, character,
and nature as the earlier, more specific language (i.e., the claim form and
documentation of loss narrowly defined). (Pl.’s Br. Opp’n 12–15.) Under that
interpretation, Watts LLC contends, any request for “other information” must be
“carefully tailored to specific documents like the claim forms and statements of loss
‘referenced’ and ‘described in Section VI.E.1.b.,’ not the far-sweeping document
requests that Oxford has served.” (Pl.’s Br. Opp’n 14 (citations omitted).) 56. But well-settled principles of contract construction foreclose Watts
LLC’s reading because it would render the catch-all provision superfluous. As noted
above, the universe of information that the two specific duties oblige Watts LLC to
produce is small. And if the universe of documents that the catch-all provision makes
discoverable is null, then that term is surplusage. The canons of construction counsel
against such an interpretation.
57. Watts LLC’s reading of the language would also introduce tensions
between the catch-all provision and other policy provisions. First, section VI.E.1.a
requires Watts LLC to preserve evidence of loss. (Policies § VI.E.1.a.) This provision
would serve little or no purpose if it required Watts LLC to retain this information
but provided Oxford no right to review it in the claims process.
58. Second, section VI.E.1.d protects Watts LLC from having to disclose
privileged or confidential information to Oxford. (Policies § VI.E.1.d.) Including that
provision suggests that the parties anticipated producing more information than just
a claims form and documentation of a loss.
59. Third, the Policies require Watts LLC to handle the cases and collect the
fees for the Gacovino Book with prescribed levels of care and effort. (Policies § II.B.1.)
To read the provisions as narrowly as Watts LLC proposes would undermine Oxford’s
“right . . . to investigate claims” to verify Watts LLC’s compliance before requiring Oxford to make a payment. 4 Reading the policy provisions in harmony with one
another, as the canons counsel, supports a broader reading of section VI.F’s catch-all
provision than Watts LLC contends.
60. Finally, it would be incongruous to permit Watts LLC to claim that
“Oxford has . . . failed to adopt and implement reasonable standards for the prompt
investigation of the claims” and “refused to pay claims without conducting a
reasonable investigation based on the information it had in its possession,” (Compl.
¶ 71), while simultaneously suggesting that Oxford has no right to investigate the
validity of those claims.
61. Instead, section VI.F.1’s requirement that Watts LLC produce “all other
information requested” by Oxford means that Watts LLC must produce all
information that Oxford reasonably and in good faith requests in order to investigate
and process Watts LLC’s claim. Canteen v. Charlotte Metro Credit Union, 386 N.C.
18, 23 (2024) (“In every contract there is an implied covenant of good faith and fair
dealing that neither party will do anything which injures the right of the other to
receive the benefits of the agreement.” (quoting Bicycle Transit Auth., Inc. v. Bell, 314
N.C. 219, 228 (1985)); see Moore v. N.C. Farm Bureau Mut. Ins. Co., 82 N.C. App. 616,
623–24 (1986) (reversing denial of directed verdict in favor of insurer when insured
refused to comply with reasonable document requests); cf. Chavis v. State Farm Fire
4 See also McCulloch v. Hartford Life & Accident Ins. Co., 363 F. Supp. 2d 169, 178 (D. Conn.
2005) (“It is axiomatic that an insurer has the right to investigate the validity of a claim[;] otherwise, there would be no check against fraud.” (quoting Mut. Benefit Life Ins. Co. v. Lindenman, 911 F. Supp. 619, 629 (E.D.N.Y. 1995))). and Cas. Co., 317 N.C. 683, 687–88 (1986) (holding that reasonableness and
relatedness limitations apply to fire insurer’s information requests). 5
62. North Carolina law recognizes that an insured’s proof of loss obligations
may constitute conditions precedent to suit. See Chavis, 317 N.C. at 686 (discussing
fire policy’s examination and document-production requirements as “condition[s]
precedent”); Fineberg v. State Farm Fire & Cas. Co., 113 N.C. App. 545, 548 (1994)
(holding compliance with first-party insured’s duty to submit to examination under
oath to be condition precedent); Baker v. Indep. Fire Ins. Co., 103 N.C. App. 521, 522
(1991) (same); Moore 82 N.C. App. at 623–24 (same for first-party insured’s duty to
comply with insurer’s document requests); accord Ward v. Horace Mann Ins. Co., No.
07-CV-76-F, 2008 U.S. Dist. LEXIS 93743, at *16–17 (E.D.N.C. Nov. 18, 2008)
(“Plaintiffs also recognize that North Carolina appellate courts repeatedly have held
that the failure to submit to an examination under oath, or the failure to produce
reasonably requested documents to an insurance company, bars recovery under an
insurance policy.”), aff’d, 326 F. App’x 699 (4th Cir. 2009) (per curiam).
63. Watts LLC does not allege that it complied with its obligation to respond
to Oxford’s request for information, or even that it only refused to comply with those
5 Non-binding authority is in accord. See Jordan R. Plitt et al., Couch on Insurance § 186:8 (3d ed. 2025) (“The proof of loss requirement is designed to give the insurer facts to facilitate its investigation as opposed to notice to commence a timely investigation.”); Cent. Nat’l Ins. Co. of Omaha v. Mfrs. Acceptance Corp., 544 S.W. 2d 362, 364 (Tenn. 1976) (“The filing of the requisite [p]roof of loss may obviate the necessity for giving [n]otice of loss, but the giving of [n]otice of loss does not satisfy the requirement that [p]roof of loss be filed.” (citations omitted)); Siravo v. Great Am. Ins. Co., 122 R.I. 538, 542 (1980) (“The purpose of a proof of loss . . . is to afford the insurer an [a]dequate opportunity to protect its interests by facilitating its investigation.” (citations omitted)). requests that were unreasonably broad. Rather, Watts LLC alleges that it did not
respond to Oxford’s request for information at all because it does not believe that
Oxford has the contractual right to ask for the information. (Pl.’s Br. Opp’n 11–16.)
The Court concludes that these allegations are insufficient to plead satisfaction of the
condition precedent to suit “with regard to” the Policies.
64. Oxford’s Motion with respect to Count II shall therefore be GRANTED,
and Count II shall be DISMISSED without prejudice. 6
B. Counts III and IV: Bad Faith Claims
65. Watts LLC alleges that Oxford has engaged in bad faith and unfair and
deceptive trade practices with respect to its handling and refusal to pay both of Watts
LLC’s claims on the Policies. A bad faith claim against an insurer typically requires
the plaintiff to allege “(1) a refusal to pay after recognition of a valid claim, (2) bad
faith, and (3) aggravating or outrageous conduct.” Lovell v. Nationwide Mut. Ins. Co.,
108 N.C. App. 416, 420 (1993) (citations omitted), aff’d, 334 N.C. 682 (1993).
66. “Bad faith means not based on honest disagreement or innocent
mistake.” Id. at 422 (citation modified) (quoting Dailey v. Integon Gen. Ins. Corp., 75
N.C. App. 387, 396 (1985)). “Aggravated conduct may be shown by fraud, malice,
6 The Court has broad discretion to decide whether its dismissal of a claim is with or without
prejudice. Orlando Residence, Ltd. v. All. Hosp. Mgmt., LLC, 375 N.C. 140, 154 (2020) (citing Whedon v. Whedon, 313 N.C. 200, 213 (1985)); First Fed. Bank v. Aldridge, 230 N.C. App. 187, 191 (2013). gross negligence, insult, rudeness, oppression, or wanton and reckless disregard of
plaintiff’s rights.” Id. (citing Dailey, 75 N.C. App. at 394).
67. Even when an insurer does not breach the insurance contract because it
ultimately indemnifies its insured, it can be liable in tort for engaging in bad faith
during the claims handling process. Robinson v. N.C. Farm Bureau Ins. Co., 86 N.C.
App. 44, 49–50 (1987); Jordan R. Plitt et al., Couch on Insurance § 9:26 (3d ed. 2025)
(“[T]here are two categories of bad faith claims: bad faith claim handling (reckless or
outrageous claim handling, such as unreasonable delays . . . apart from the actual
denial of policy benefits), and a bad faith refusal to pay money[.]”).
68. In Robinson, our Court of Appeals held that, while alleging breach of
contract alone was insufficient to support a bad faith claim, it was not necessary for
a breach of contract claim to exist in order for a bad faith claim to exist. 86 N.C. App.
at 49–50. The Court concluded that the presence of “bad faith delay and aggravating
conduct” was enough to support a bad faith claim even when the insurer did not deny
coverage. Id. In such a case, the insured must allege that bad faith motivated the
insurer’s delay. See id. at 45 (remanding for determination of “whether the delay in
payment was in fact motivated by bad faith”).
69. Watts LLC purports to state two claims for bad faith, one with respect
to each of its two insurance claims. Assuming the truth of the allegations—as the
Court must for purposes of this Motion—Watts LLC pleads that Oxford engaged in
strategies designed to delay handling of Watts LLC’s claims in order to make Oxford’s
financial condition more appealing to potential buyers. That conduct and the accompanying disregard of Watts LLC’s rights under the Policies are sufficient to
state a bad faith claim based on delay “motivated by bad faith” coupled with
aggravating conduct. See id. at 45.
70. The Complaint also states a bad faith claim with respect to Watts LLC’s
Second Claim. Watts LLC alleges that Oxford sent it an “overbroad” request for
documents about a week after it filed the Second Claim. Based on its interpretation
of the Policies, Watts LLC once again declined to provide the documents Oxford
requested. Particularly given Oxford’s alleged strategy to delay the processing of the
First Claim, and giving Watts LLC the benefit of reasonable inferences with respect
to this Motion, the Court declines to conclude at this early stage that Watts LLC’s
allegations fail to state a bad faith claim. 7
71. The Court shall therefore DENY the Motion on Counts III and IV.
C. Counts V and VI: UDTPA Claims
72. Watts LLC’s fifth and sixth claims are for violations of the UDTPA.
(Compl. ¶¶ 67–81; Pl.’s Br. Opp’n 31–38.) The UDTPA makes “unfair and deceptive
acts or practices in or affecting commerce . . . unlawful.” N.C.G.S. § 75-1.1(a) (2026).
“Whether an act or practice is an unfair or deceptive practice that violates N.C.G.S.
§ 75-1.1 is a question of law for the court.” Gray v. N.C. Ins. Underwriting Ass’n, 352
7 It would be illogical to preclude a bad faith claim because Watts LLC failed to provide
reasonably requested documentation (the condition precedent) when the bad faith alleged is, at least in part, that Oxford’s requests were overbroad and, therefore, unreasonable. See Ronald J. Clark, Diane K. Dailey & Linda M. Bolduan, 3 Law and Practice of Insurance Coverage Litigation § 28:34 (2025) (“Payment under a first-party policy is predicated upon the insured carrying out the conditions of the contract. However, an insured’s noncompliance generally is held not to provide a defense to a bad faith action.” (footnotes omitted)). N.C. 61, 68 (2000) (citation modified) (citing Ellis v. N. Star Co., 326 N.C. 219, 226
(1990)).
73. The elements of a claim for unfair and deceptive trade practices are that
“(1) defendant committed an unfair or deceptive act or practice, (2) the action in
question was in or affecting commerce, and (3) the act proximately caused injury to
the plaintiff.” Value Health, 385 N.C. at 277 (quoting SciGrip, Inc. v. Osae, 373 N.C.
409, 426 (2020)); see also N.C.G.S. § 75-1.1. “Unfairness or deception . . . in the
circumstances of [a contract’s] breach may establish the existence of substantial
aggravating circumstances sufficient to support an unfair and deceptive trade
practices claim.” Value Health, 385 N.C. at 277 (quoting SciGrip, 373 N.C. at 426).
However, a mere breach of contract alone is insufficient to support a claim for unfair
or deceptive trade practices. Bumpers v. Cmty. Bank of N. Va., 367 N.C. 81, 88 (2013)
(citing Mitchell v. Linville, 148 N.C. App. 71, 74 (2001)).
74. “A practice is unfair when it offends established public policy as well as
when the practice is immoral, unethical, oppressive, unscrupulous, or substantially
injurious to consumers.” Id. at 91 (quoting Walker v. Fleetwood Homes of N.C., Inc.,
362 N.C. 63, 72 (2007)). “A practice is deceptive if it has the capacity or tendency to
deceive.” Id. (citation modified) (quoting Walker, 362 N.C. at 72). A UDTPA plaintiff
must show that he suffered “actual harm.” Jackson v. Home Depot U.S.A., Inc., 388
N.C. 109, 120 (2025) (emphasis omitted). 75. Violations of some North Carolina statutes constitute per se violations
of the UDTPA. 8 See Noel Allen, North Carolina Unfair Business Practice § 1.03 n.22
(3d ed. 2025) (listing statutes). Other statutes expressly provide that failure to
comply does not amount to a violation of the UDTPA. See, e.g., N.C.G.S. § 42-14.4(c)
(“Failure to comply with this section shall not constitute an unfair trade practice
under G.S. 75-1.1.”).
76. The North Carolina Insurance Unfair Trade Practices Act, N.C.G.S. §§
58-63-1 to -75, specifies conduct that constitutes “an unfair or deceptive act or practice
in the business of insurance.” N.C.G.S. § 58-63-10. Section 58-63-15(11) lists
actionable “unfair claim settlement practices.” N.C.G.S. § 58-63-15(11). Prohibited
conduct includes (1) “failing to acknowledge and act reasonably promptly upon
communications with respect to claims arising under insurance policies;” (2) “failing
to adopt and implement reasonable standards for the prompt investigation of claims
arising under insurance policies;” (3) “refusing to pay claims without conducting a
reasonable investigation based upon all available information;” (4) “failing to affirm
or deny coverage of claims within a reasonable time after proof-of-loss statements
have been completed;” and (5) “not attempting in good faith to effectuate prompt, fair,
and equitable settlements of claims in which liability has become reasonably clear[.]”
N.C.G.S. § 58-63-15(11)(b)–(f) (citation modified).
8 See generally Matthew W. Sawchak, Refining Per Se Unfair Trade Practices, 92 N.C. L. Rev.
1881 (2014). 77. But section 58-63-15(11) does not apply here for two reasons. First,
section 58-63-15(11) does not create a private cause of action. N.C.G.S. § 58-63-15(11)
(“[N]o violation of this subsection shall of itself create any cause of action in favor of
any person other than the Commissioner [of Insurance].”); see Gray, 352 N.C. at 70–
71 (discussing inapplicability of section 58-63-15(11) to private parties seeking to sue
for discrete violations of that statute). Second, a violation of this provision occurs
only when the enumerated acts occur “with such frequency as to indicate a general
business practice[.]” N.C.G.S. § 58-63-15(11). There is no such allegation here.
78. Despite the statutory hurdles in chapter 58, violations of some of section
58-63-15(11)’s listed unfair acts may support a private cause of action under chapter
75. Gray, 352 N.C. at 73–74. In Gray, our Supreme Court affirmed a jury verdict for
unfair claims settlement practices in favor of a private plaintiff based on isolated
violations of section 58-63-15(11). Id. It held that an insurer responsible for an
enumerated act under section 58-63-15(11) “commit[s] a violation of [chapter 75]
separate and apart from any violation of [section] 58-63-15(11).” Id. at 73. Further,
the fact that the insured in Gray was a private plaintiff who failed to prove that the
insurer–defendant acted “with such frequency as to constitute a general business
practice” was not a bar to recovery under chapter 75. Id. at 73–74. The Court
concluded that section 58-63-15(11)’s list of wrongs provides “examples of conduct to
support a finding of unfair or deceptive acts or practices.” Id. at 71; see also Matthew
W. Sawchak, Refining Per Se Unfair Trade Practices, 92 N.C. L. Rev. 1881, 1902–05
(2014). 79. Here, the parties disagree about whether and how section 58-63-15(11)
applies to Oxford. Watts LLC argues that Gray permits it to state a UDTPA claim
under chapter 75 by alleging isolated instances of conduct that section 58-63-15(11)
prohibits. (Pl.’s Br. Opp’n 32–38.) Oxford responds that violations of section 58-63-
15(11) cannot support a UDTPA claim under chapter 75 because the Captive
Insurance Act excludes Oxford from regulation under chapter 58, including for acts
listed in section 58-63-15(11). (Def.’s Br. Supp. 16–17; Def.’s Reply Br. 11–12;
N.C.G.S. § 58-10-465(a)).
80. Oxford’s argument that it is not subject to the Insurance Unfair Trade
Practices Act is true, but unavailing. The defendant–insurer’s conduct in Gray did
not fall within the ambit of section 58-63-15(11) either. Nevertheless, the Supreme
Court held that chapter 75 independently imposed liability “because [the conduct
listed in section 58-63-15(11)(f)] is inherently unfair, unscrupulous, immoral, and
injurious to consumers.” Gray, 352 N.C. at 71 (emphasis added).
81. Given the holding in Gray, this Court concludes that Watts LLC has
stated claims under chapter 75 for conduct that is also included in section 58-63-
15(11). The Court shall therefore DENY the Motion as to Counts V and VI.
D. Count I: Declaratory Judgment
82. The Declaratory Judgment Act authorizes the Court “to declare rights,
status, and other legal relations, whether or not further relief is or could be
claimed[,]” N.C.G.S. § 1-253, “in any proceedings . . . in which a judgment or decree
will terminate the controversy or remove an uncertainty[,]” N.C.G.S. § 1-256. The
Act specifically authorizes the Court to declare rights and obligations under a contract, whether before or after a breach. N.C.G.S. § 1-254. The Act’s purpose “is to
settle and to afford relief from uncertainty and insecurity . . . and it is to be liberally
construed and administered.” N.C.G.S. § 1-264.
83. Dismissal under Rule 12(b)(6) is “seldom . . . appropriate . . . in actions
for declaratory judgments[.]” N.C. Consumers Power, Inc. v. Duke Power Co., 285
N.C. 434, 439 (1974). The Court dismisses “only when the record clearly shows that
there is no basis for declaratory relief as when the complaint does not allege an actual,
genuine existing controversy.” Id. (citations omitted). Further, “the mere existence
of an alternate adequate remedy will not be held to bar an appropriate action for
declaratory judgment.” State ex rel. Edmisten v. Fayetteville St. Christian Sch., 299
N.C. 351, 357 n.3 (1980) (citing N.C. R. Civ. P. 57).
84. Watts LLC seeks a declaration of its rights and obligations under the
Policies. (Compl. ¶ 42.) It asks the Court to declare that
a. As of the Expiration Date of the Policies, Nonpayment had occurred[;]
b. Due to the Nonpayment, Oxford was required to pay Watts LLC the “amount of Loss arising from Nonpayment”[;]
c. Oxford knew that Watts LLC stated a valid claim pursuant to the Policies[;]
d. Oxford engaged in bad faith conduct by intentionally delaying and obstructing the claims process[;]
e. Oxford’s conduct constituted an unfair and deceptive trade practice[;] [and]
f. As of June 16, 2025, the Loss totals at least $116,317,578.34.
(Compl. ¶ 42.) 85. The Court concludes for the same reasons that require dismissal of
Watts LLC’s breach of contract claim that its request for declarations a–c and f is not
properly pled. But Watts LLC’s request for declarations d and e, in which it asks the
Court to declare that Oxford engaged in bad faith conduct by intentionally delaying
and obstructing the claims process and that Oxford engaged in an unfair and
deceptive trade practice, is based on an existing controversy and is properly pled. The
Court shall therefore DENY the Motion with respect to the request for declaratory
judgment.
IV. CONCLUSION
86. WHEREFORE, the Court GRANTS in part and DENIES in part
the Motion as follows:
a. For Count I seeking declaratory judgment, the Court DENIES
the Motion;
b. For Count II alleging breach of contract, the Court GRANTS the
Motion and DISMISSES the claim WITHOUT
PREJUDICE;
c. For Counts III and IV alleging bad faith with respect to the two
insurance claims, the Court DENIES the Motion;
d. For Counts V and VI alleging violations of the UDTPA with
respect to the two insurance claims, the Court DENIES the
Motion. SO ORDERED, this the 3rd day of March 2026.
/s/ Julianna Theall Earp Julianna Theall Earp Special Superior Court Judge for Complex Business Cases