Nor-Cal Products, Inc. v. XL Insurance America, Inc. et al

Filing 13

ORDER signed by Judge John A. Mendez on 11/05/12 ORDERING that defendant's 6 Motion to Dismiss is GRANTED with prejudice. CASE CLOSED (Benson, A.)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 NOR-CAL PRODUCTS, INC., 12 Plaintiff, 13 14 15 16 v. XL INSURANCE AMERICA, INC., GREENWICH INSURANCE, INC.; WELLS FARGO INSURANCE SERVICES USA, INC.; CHARLES CUSHNER, and DOES 1-50, 17 No. 2:12-cv-02193 JAM-CMK ORDER GRANTING DEFENDANT’S MOTION TO DISMISS Defendants. 18 This matter is before the Court on Defendant Wells Fargo 19 20 Insurance Services USA, Inc.’s (“Defendant”) Motion to Dismiss 21 (Doc. #6). 22 opposes the motion (Doc. #10) and Defendant replied (Doc. #11).1 23 For the following reasons, Defendant’s motion is granted. 24 /// 25 /// Plaintiff Nor-Cal Products, Inc. (“Plaintiff”) 26 27 28 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for October 17, 2012. 1 1 2 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND Plaintiff originally filed this action on May 3, 2012, in 3 Siskiyou County Superior Court against Defendant, Defendant’s 4 employee Charles Cushner, XL Insurance America, Inc., and 5 Greenwich Insurance, Inc. 6 America and Greenwich Insurance, Inc. (collectively 7 “XL/Greenwich”), and they were dismissed on July 10, 2012. 8 Cushner was dismissed on August 17, 2012 (Doc. #1). 9 removed this action to this Court on August 22, 2012. Plaintiff settled with XL Insurance Mr. Defendant Id. 10 Plaintiff alleges one cause of action against Defendant for 11 breach of an assumed additional duty. 12 Id. On July 31, 2007, Huston Lesley, an employee of Plaintiff, 13 filed a complaint against Plaintiff with the California 14 Department of Fair Employment and Housing (“DFEH”) alleging 15 employment discrimination based on his disability. 16 August 20, 2007, Plaintiff tendered the defense to XL/Greenwich. 17 On or about June 15, 2009, after receiving his right to sue On or about 18 letter, Mr. Lesley filed an action in Siskiyou County Superior 19 Court against Plaintiff. 20 XL/Greenwich for the lawsuit and XL/Greenwich defended Plaintiff 21 for several months. 22 withdrew coverage for the lawsuit. 23 Plaintiff tendered the defense to On or about May 4, 2012, XL/Greenwich After XL/Greenwich withdrew coverage, Plaintiff contacted 24 Mr. Cushner, its insurance broker. Mr. Cushner allegedly 25 assured Plaintiff that he was exploring insurance coverage for 26 the lawsuit. 27 Plaintiff stating that he was “attempting to find a way this 28 claim will be accepted by Navigators and/or XL.” On June 16, 2012, Mr. Cushner sent an email to 2 Compl. ¶ 24. 1 Plaintiff alleges that there was no follow up 2 correspondence between Mr. Cushner and Plaintiff regarding this 3 matter. 4 Defendant never contacted Navigators Group, Inc., 5 (“Navigators”), Plaintiff’s previous insurer, or XL/Greenwich to 6 contest the denial of coverage. Plaintiff further alleges that Mr. Cushner and 7 Plaintiff alleges that it continued to defend itself in the 8 underlying action and decided to settle the action out of court. 9 10 II. OPINION 11 A. Legal Standard 12 A party may move to dismiss an action for failure to state 13 a claim upon which relief can be granted pursuant to Federal 14 Rule of Civil Procedure 12(b)(6). 15 dismiss, the court must accept the allegations in the complaint 16 as true and draw all reasonable inferences in favor of the 17 plaintiff. 18 overruled on other grounds by Davis v. Scherer, 468 U.S. 183 19 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). 20 are mere “legal conclusions,” however, are not entitled to the 21 assumption of truth. 22 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 23 (2007)). 24 plead “enough facts to state a claim to relief that is plausible 25 on its face.” 26 appropriate where the plaintiff fails to state a claim 27 supportable by a cognizable legal theory. 28 Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). In considering a motion to Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), Assertions that Ashcroft v. Iqbal, 556 U.S. 662, 678 To survive a motion to dismiss, a plaintiff needs to Twombly, 550 U.S. at 570. 3 Dismissal is Balistreri v. 1 Upon granting a motion to dismiss for failure to state a 2 claim, the court has discretion to allow leave to amend the 3 complaint pursuant to Federal Rule of Civil Procedure 15(a). 4 “Dismissal with prejudice and without leave to amend is not 5 appropriate unless it is clear . . . that the complaint could 6 not be saved by amendment.” 7 Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). Eminence Capital, L.L.C. v. Aspeon, 8 B. Discussion 9 Defendant contends that Plaintiff has failed to allege a 10 breach of duty by Defendant or damages caused by Defendant. 11 Plaintiff argues that Defendant’s employee, Mr. Cushner, assumed 12 an additional duty by asserting that he would seek coverage for 13 the underlying claim and as a result of Mr. Cushner and 14 Defendant’s breach of that duty, Plaintiff was not defended in 15 the underlying action. 16 Plaintiff alleges that Defendant assumed a fiduciary duty 17 to seek coverage for the underlying claim. Because an insurance 18 broker is not a fiduciary under California law, claims 19 denominated “breach of fiduciary duty” are analyzed as 20 professional negligence claims. 21 Hayward, Tilton & Rolapp Ins. Associates, Inc., 115 Cal.App.4th 22 1145, 1159-60 (2004). 23 claim, a plaintiff must allege “(1) a legal duty to use due 24 care, (2) a breach of that duty, and (3) the breach is a 25 proximate cause of the resulting injury.” 26 CALIFORNIA LAW: TORTS § 835 (10th ed. 2005); see also Jones v. 27 Grewe, 189 Cal.App.3d 950, 954 (1987) (citation omitted). Hydro-Mill Co., Inc. v. To establish a professional negligence 28 4 6 B.E. WITKIN, SUMMARY OF 1 2 3 4 5 6 7 8 9 10 11 1. Legal Duty and Breach of that Duty Generally, an insurance broker does not have a duty of care to advise a client on insurance matters unless (a) the agent misrepresents the nature, extent or scope of the coverage being offered or provided . . ., (b) there is a request or inquiry by the insured for a particular type or extent of coverage . . ., or (c) the agent assumes an additional duty by either express agreement or by ‘holding himself out’ as having expertise in a given field of insurance being sought by the insured. Fitzpatrick v. Hayes, 57 Cal.App.4th 916, 927 (1997) (citations omitted). In this case, Defendant argues that there is no breach of 12 duty because Plaintiff does not allege that Defendant 13 misrepresented insurance coverage or failed to obtain the 14 coverage requested. 15 Mr. Cushner, “expressly assur[ed] Nor-Cal that he would seek 16 coverage” for the underlying lawsuit, and thereby assumed an 17 additional brokerage duty, which was subsequently breached. 18 Compl. ¶¶ 25, 65. 19 contained in an email sent by Mr. Cushner to Plaintiff. 20 However, in this email, Mr. Cushner stated only that he was 21 “attempting to find a way that this claim will be accepted by 22 Navigators and/or XL.” 23 expressly agreed to contact XL/Greenwich and Navigators and he 24 certainly did not expressly promise Plaintiff that he would 25 obtain coverage from these insurers. At best, he simply stated 26 that he would attempt to help Plaintiff, which does not amount 27 to an express agreement. Moreover, as Defendant points out, the 28 cases relied upon by Plaintiff in its opposition to this motion Plaintiff alleges that Defendant’s agent, This express assurance was allegedly Compl. ¶ 24. 5 Mr. Cushner never 1 do not support its argument that under the facts of this case a 2 legal duty can be imposed on Defendant’s broker. Plaintiff has 3 failed to cite to any case where, after an insurance company has 4 denied a claim, an insurance broker has a duty to attempt to 5 convince the insurer to change its position. 6 Court finds that Plaintiff has not sufficiently alleged a legal 7 duty or a breach of that duty. 8 Plaintiff’s invitation to recognize a new duty under these 9 circumstances. Therefore, the Further, the Court declines 10 11 12 13 2. Proximate Cause Defendant seeks to dismiss this case on the separate ground 14 that Plaintiff has not alleged that it suffered damages caused 15 by Defendant. 16 of Mr. Cushner’s representations, Plaintiff did not pursue the 17 matter with XL/Greenwich or Navigators and as a result, neither 18 XL nor Navigators provided Plaintiff with a defense or 19 indemnification. Plaintiff argues in its opposition that because 20 To establish causation, Plaintiff must allege facts which 21 demonstrate that Defendant’s conduct contributed to the injury 22 “so that ‘but for’ the conduct the injury would have not have 23 occurred.” 24 (1971). 25 bringing about the result, it will be regarded as a legal cause 26 of the injury.” 27 found that but for the insurance’s misrepresentation that the 28 plaintiff had coverage, the plaintiff would have acquired Greenfield v. Ins. Inc., 19 Cal.App.3d 803, 810-11 “If the act or omission was a substantial factor in Id. For example, in Greenfield, the court 6 1 2 adequate coverage. Id. In this case, Plaintiff alleges that “as a direct and 3 proximate result of Mr. Cushner’s and [Defendant’s] breach of 4 their additional duty, the denial of coverage was never 5 reversed.” 6 its face. 7 here, the causal connection is speculative. 8 or Defendant’s agent had acted, it is uncertain whether 9 XL/Greenwich would have reversed its decision or Navigators Compl. ¶ 66. This allegation is not plausible on Unlike the definite causal connection in Greenfield, Even if Defendant 10 would have decided to represent or indemnify Plaintiff because 11 neither Mr. Cushner nor Defendant had control over that 12 decision. 13 confronted, as Mr. Cushner promised he would do, XL/Greenwich 14 settled the litigation for failure to defend and indemnify. 15 Court does not find Plaintiff’s argument persuasive because 16 XL/Greenwich’s decision to settle after being threatened with 17 litigation does not lead to the conclusion that it would have 18 reversed its decision had Mr. Cushner or Defendant contacted 19 XL/Greenwich. Given the uncertainty as to how XL/Greenwich or 20 Navigators would have acted, the Court finds that Plaintiff has 21 not alleged facts demonstrating that Defendant’s alleged breach 22 was a proximate cause of Plaintiff’s alleged injury. Finally, 23 the parties disagree on whether an insurer’s duty to defend can 24 be determined on a motion to dismiss, but this argument is 25 irrelevant because as mentioned above, Defendant had no control 26 // 27 // 28 Plaintiff argues that once XL/Greenwich was // 7 The 1 over XL/Greenwich’s or Navigator’s decision to defend.2 2 Accordingly, the Court finds that Plaintiff cannot allege 3 that there was any additional duty or that it suffered damages 4 caused by Defendant. The Court further finds that the Complaint 5 cannot be saved by amendment and therefore granting Plaintiff 6 leave to amend would be futile. 7 8 III. ORDER 9 10 For reasons set forth above, Defendant’s Motion Dismiss is GRANTED WITH PREJUDICE. 11 12 the IT IS SO ORDERED. Dated: November 5, 2012 13 ____________________________ JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 In the reply, Defendant requests judicial notice of the insurance policy Navigators issued to Plaintiff. However, the Court finds it unnecessary to take judicial notice in order for it to determine this motion and therefore, Defendant’s request for judicial notice is denied. 8 to

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