Dominic Investments v. Sentinel Ins. Co. ( 2022 )

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 10 DOMINIC INVESTMENTS; No. 2:22-CV-01450-JAM-KJN ROSEVILLE FLOORING, INC. 11 Plaintiffs, 12 ORDER GRANTING DEFENDANT’S v. MOTION TO DISMISS 13 SENTINEL INSURANCE COMPANY, 14 LTD., 15 Defendant. 16 17 The matter before the Court is Sentinel Insurance Company, 18 Ltd.’s (“Defendant”) motion to dismiss count two of the complaint 19 filed by Dominic Investments and Roseville Flooring, Inc. 20 (“Plaintiffs”). See Mot. to Dismiss (“Mot.”), ECF No. 6; Compl., 21 Exhibit 1 to Notice of Removal, ECF No. 1. Plaintiffs opposed 22 the motion. See Opp’n, ECF No. 7. Defendant replied. See 23 Reply, ECF No. 10. 24 For the reasons set forth below, this Court GRANTS 25 Defendant’s motion to dismiss.1 26 27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for November 15, 2022. 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Plaintiffs own and operate out of a commercial property in 3 Chico, California. Compl. ¶ 2. Plaintiffs’ property was insured 4 for the risk of damage or loss to the property and the personal 5 property therein under Defendant’s insurance policy; the policy 6 covered up to approximately $4.3 million in damage to the 7 building and personal property. Id. ¶¶ 5-6. On November 18, 8 2018, Plaintiffs suffered damage to their property in the wake of 9 the Camp Fire in the form of smoke, soot, and ash. Id. ¶ 9. 10 Plaintiffs promptly submitted a claim to Defendant, gave 11 Defendant access to the property, and provided Defendant with all 12 requested information for Defendant’s investigation. Id. ¶¶ 10- 13 11. Plaintiffs allege that Defendant failed to conduct a 14 complete investigation, falsified its reports about the extent of 15 the damage, and interpreted the insurance policy in such a way as 16 to limit the amount payable to Plaintiffs. Id. ¶ 12. Plaintiffs 17 also allege that Defendant unreasonably delayed paying Plaintiffs 18 and continues to refuse to pay the full sum of money owed to 19 them. Id. ¶ 13. Defendant contends that it has paid Plaintiffs 20 over $300,000, but Plaintiffs seek more money for COVID-related 21 protections even though COVID shutdowns began one year after the 22 payments were made. Opp’n at 2. 23 On March 8, 2021, Plaintiffs filed the operative complaint 24 in state court, alleging (1) breach of contract and (2) breach of 25 the implied covenant of good faith and fair dealing by Defendant. 26 See Compl. On August 16, 2022, the case was removed to this 27 Court on diversity grounds under §§ 1441 and 1446. See Notice of 28 Removal, ECF No. 1. Several weeks later, Defendant filed this 1 motion to dismiss. See Mot. Plaintiffs opposed the motion. See 2 Opp’n. Defendant replied. See Reply. 3 II. OPINION 4 A. Legal Standard 5 In considering a motion to dismiss for failure to state a 6 claim upon which relief can be granted under FRCP 12(b)(6), the 7 Court must accept the allegations in the FAC as true and draw all 8 reasonable inferences in favor of Plaintiff. Moss v. U.S. Secret 9 Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citing Ashcroft v. 10 Iqbal, 556 U.S. 662, 678 (2009)). The complaint must possess 11 more than “a formulaic recitation of the elements of a cause of 12 action;” it must contain non-conclusory, factual allegations 13 sufficient “to raise a right to relief above the speculative 14 level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554 15 (2007). 16 B. Analysis 17 Defendant argues that Plaintiffs have failed to allege 18 sufficient facts to support their claim that Defendant breached 19 the implied covenant of good faith and fair dealing. Mot. at 2- 20 4. Defendant states that Plaintiffs simply reiterate provisions 21 from the Unfair Claims Practices Act, Insurance Code § 790.03, 22 and the Department of Insurance’s regulations concerning 23 § 790.03, none of which create a private cause of action for 24 Plaintiffs. Id. at 5. Also, Plaintiffs fail to establish why 25 they are entitled to extra money due to COVID when their loss 26 occurred in 2018. Id. at 6. Defendant further contends that, to 27 the extent that Plaintiffs have alleged fraud, they have failed 28 to do so with any particularity as required by FRCP 9(b). Id. 1 Plaintiffs respond that the motion to dismiss should be 2 denied because they are generally disfavored. Opp’n at 3. They 3 cite state case law covering the breach of the implied covenant 4 of good faith and fair dealing and contend that they have alleged 5 sufficient facts to support this claim. Id. at 4. Plaintiffs 6 wholly contest Defendant’s characterization of Plaintiffs’ case 7 as concerning solely COVID-related expenses. Id. 8 The Court finds that Plaintiffs have failed to allege facts 9 sufficient to maintain this claim against Defendant. The 10 complaint must contain non-conclusory, factual allegations 11 sufficient “to raise a right to relief above the speculative 12 level.” Twombly, 550 U.S. at 554. To establish a breach of the 13 implied covenant of good faith and fair dealing for an insurance 14 claim, a plaintiff must show that: (1) a defendant-insurer 15 withheld benefits due under the policy; and (2) that the 16 defendant-insurer withheld the benefits unreasonably or without 17 proper cause. Mosley v. Pac. Specialty Ins. Co., 49 Cal. App. 18 5th 417, 435 (2020). The decision to withhold benefits must be a 19 “conscious and deliberate act, which unfairly frustrates the 20 agreed common purposes [of the insurance policy] and disappoints 21 the reasonable expectations” of the plaintiff. Id. at 436. 22 Plaintiffs have failed to allege sufficient facts to support 23 either element. While Plaintiffs contend that Defendant’s 24 characterization of the benefits Plaintiffs are seeking is false, 25 Plaintiffs have not set forth factual allegations demonstrating 26 that the amount of money they received was inadequate or that 27 reasonably expected benefits were withheld. Plaintiffs simply 28 state the maximum amount payable under their insurance policy and nee enn nna on nnn nn nn ne ne OS IED EE 1 that their property generally suffered damage from the Camp Fire; 2 Plaintiffs offer no evidence of the extent of the alleged damage, 3 the language of the insurance policy, the amount paid to 4 Plaintiffs, or when payments occurred. As for the second 5 element, Plaintiffs’ claims about Defendant’s unreasonable and 6 fraudulent conduct are factually bare, conclusory allegations 7 that fail to raise Plaintiffs’ right to relief above the 8 speculative level; they have also not “stated with particularity 9 the circumstances constituting” Defendant’s alleged fraud as 10 | required by FRCP 9(b). Fed. R. Civ. P. 9(b). In the absence of 11 the non-conclusory, factual allegations necessary to sustain this 12 | claim, the Court dismisses this claim without prejudice. 13 Iti. ORDER 14 For the reasons set forth above, this Court GRANTS 15 Defendant’s Motion to Dismiss. However, because amendment is not 16] futile, this Court grants Plaintiffs leave to amend. Eminence 17 Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003) 18 (“Dismissal with prejudice and without leave to amend is not 19 | appropriate unless it is clear . . . that the complaint could not 20 || be saved by amendment.”). 21 If Plaintiffs elect to amend their complaint, they shall 22 file a First Amended Complaint within twenty days of this Order. 23 | Defendant’s responsive pleading is due twenty days thereafter. 24 IT IS SO ORDERED. 25 Dated: November 29, 2022 Sel JOHN A. MENDEZ 28 SENIOR UNITED*STATES DISTRICT JUDGE