McColgan v. Mutual of Omaha Insurance Company

Filing 20

ORDER signed by Judge John A. Mendez on 3/4/2014 is GRANTED defendant's 4 Motion to Dismiss. Court finds plaintiff's Complaint can NOT be saved by amendment and, therefore, DISMISSES this action with prejudice. (Marciel, M)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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SANDRA C. MCCOLGAN,

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2:13-cv-02417-JAM-DAD

Plaintiff,

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No.

v.

ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS

MUTUAL OF OMAHA INSURANCE
COMPANY,

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Defendant.
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This matter is before the Court on Defendant Mutual of Omaha

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Insurance Company’s (“Defendant”) Motion to Dismiss (Doc. #4)

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Plaintiff Sandra C. McColgan’s (“Plaintiff”) Complaint (Doc. #1).

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Plaintiff opposes the motion (Doc. #11).

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#15). 1

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declarations submitted by Defendant (Doc. #4-2, 4-4).

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responded to those objections (Doc. #16).

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reasons, Defendant’s Motion to Dismiss is GRANTED.

Defendant replied (Doc.

Plaintiff submitted objections (Doc. #9) to the
Defendant

For the following

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled
for January 22, 2014.
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I. BACKGROUND

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According to the allegations in the Complaint, in November

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2006, Plaintiff’s husband, Michael McColgan (“Decedent”), entered

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into a contract with Defendant insuring him against death due to

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accidental causes.

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beneficiary under the terms of the policy.

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Decedent accidentally suffered a fatal fall.

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timely payments of the premiums up until his death.

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Comp. ¶ 6.

Plaintiff was the named
In September 2012,
Decedent made

Plaintiff alleges that Defendant was thereupon obligated to

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pay her the sum of $500,000 pursuant to the agreement.

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8.

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only $100,000.

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copy of the application completed by Decedent and the certificate

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of insurance.

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not in possession of the entire policy, but alleges that it is in

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Defendant’s possession.

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Comp. ¶

Despite her demand for full payment, Defendant has received
Id. ¶ 9.

She has attached to the Complaint a

Id. Exh. A.

Plaintiff acknowledges that she is

Id. ¶ 6.

Plaintiff alleges two causes of action against Defendant:

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(1) Breach of Insurance Contract (Bad Faith) and (2) Fraud in the

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Inducement.

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failing to pay the full amount of the policy, $500,000.

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Plaintiff further alleges Defendant fraudulently induced Decedent

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to purchase the policy, misrepresenting to him that the policy

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would provide Plaintiff with $500,000 upon his accidental death,

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regardless of the exact nature of it, when in fact there were

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varying benefits depending on the cause of death.

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alleges that Decedent justifiably relied on these material

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misrepresentations and that Plaintiff has been damaged in the

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amount of $400,000, the difference between the amount paid out by

She first argues Defendant breached the contract by

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Plaintiff

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Defendant and the full coverage of the policy as represented to

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Decedent.

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II. ANALYSIS

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A.

Legal Standard

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A party may move to dismiss an action for failure to state a

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claim upon which relief can be granted pursuant to Federal Rule

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of Civil Procedure 12(b)(6).

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plaintiff must plead “enough facts to state a claim to relief

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that is plausible on its face.”

To survive a motion to dismiss a

Bell Atlantic Corp. v. Twombly,

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556 U.S. 662, 570 (2007).

In considering a motion to dismiss, a

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district court must accept all the allegations in the complaint

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as true and draw all reasonable inferences in favor of the

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plaintiff.

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overruled on other grounds by Davis v. Scherer, 468 U.S. 183

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(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972).

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entitled to the presumption of truth, allegations in a complaint

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or counterclaim may not simply recite the elements of a cause of

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action, but must sufficiently allege underlying facts to give

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fair notice and enable the opposing party to defend itself

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effectively.”

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2011), cert. denied, 132 S. Ct. 2101, 182 L. Ed. 2d 882 (U.S.

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2012).

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must plausibly suggest an entitlement to relief, such that it is

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not unfair to require the opposing party to be subjected to the

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expense of discovery and continued litigation.”

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that are mere “legal conclusions” are therefore not entitled to

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the presumption of truth.

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(2009) (citing Twombly, 550 U.S. at 555).

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974),

“First, to be

Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.

“Second, the factual allegations that are taken as true

Id.

Assertions

Ashcroft v. Iqbal, 556 U.S. 662, 678

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Dismissal is

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appropriate when a plaintiff fails to state a claim supportable

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by a cognizable legal theory.

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Department, 901 F.2d 696, 699 (9th Cir. 1990).

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Balistreri v. Pacifica Police

Upon granting a motion to dismiss for failure to state a

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claim, a court has discretion to allow leave to amend the

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complaint pursuant to Federal Rule of Civil Procedure 15(a).

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“Dismissal with prejudice and without leave to amend is not

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appropriate unless it is clear . . . that the complaint could not

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be saved by amendment.”

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Eminence Capital, L.L.C. v. Aspeon,

Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

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B.

Judicial Notice and Evidentiary Objections

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Defendant requests the Court to consider documents attached

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to two declarations of its employees, submitted in support of

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Defendant’s Motion to Dismiss.

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declarations and the documents attached.

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Plaintiff objects to both

In his declaration (Doc. #4-2), Paul Biler, a senior program

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manager in Defendant’s marketing department, asserts that the

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documents attached as Exhibit A to his declaration are true and

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correct copies of the marketing materials used by Defendant to

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solicit customers in California during the time Decedent applied

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for his policy.

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In her declaration (Doc. #4-4), Nicki Showalter, a senior

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claims analyst, asserts that attached as Exhibit A to her

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declaration is a true and correct copy of the Certificate

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Schedule and Accidental Death Insurance Certificate issued by

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Defendant to Decedent.

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Defendant’s records, the document was mailed to Decedent in

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November 2006.

She asserts that, according to

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Generally, the Court may not consider material beyond the

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pleadings in ruling on a motion to dismiss for failure to state a

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claim.

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the complaint so long as authenticity is not disputed, or matters

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of public record, provided that they are not subject to

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reasonable dispute.

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2241664 at *2 (C.D. Cal. Mar. 30, 2009) (citing Lee v. City of

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Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) and Fed. R. Evid.

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201).

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The exceptions are material attached to, or relied on by,

E.g., Sherman v. Stryker Corp., 2009 WL

In its motion, Defendant specifically relies on the

“incorporation by reference” doctrine used in the Ninth Circuit:

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Under the “incorporation by reference” doctrine in
this Circuit, “a court may look beyond the pleadings
without converting the Rule 12(b)(6) motion into one
for summary judgment.” Van Buskirk v. Cable News
Network, Inc., 284 F.3d 977, 980 (9th Cir.2002).
Specifically, courts may take into account “documents
whose contents are alleged in a complaint and whose
authenticity no party questions, but which are not
physically attached to the [plaintiff's] pleading.”
Knievel [v. ESPN], 393 F.3d [1068,] 1076 [(9th Cir.
2005)], (alteration in original) (internal citation
and quotation marks omitted).

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Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160 (9th Cir.

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2012).

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Defendant argues the solicitation materials attached to

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Biler’s Declaration can be judicially noticed because Plaintiff’s

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allegations of fraudulent inducement make all of the documents

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used to solicit Decedent’s application a central issue.

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p. 8.

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application Plaintiff attached to the Complaint and should thus

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be considered by the Court.

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///

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MTD at

Defendant argues these materials accompanied the one-page

Defendant further argues that the full policy, the document
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attached to Showalter’s Declaration, is both alleged in the

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Complaint and central to Plaintiff’s claims.

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therefore argues the Court can properly consider it.

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MTD at p. 7.

It

Plaintiff contests whether or not the documents attached to

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Defendant’s declarations were actually the documents used in

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conjunction with Decedent’s policy or ever sent to or received by

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Decedent.

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the allegations in the complaint.

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a sufficient challenge to their authenticity has been made.

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The Court finds the documents are clearly relied on by
The issue remaining is whether

Defendant cites two cases dealing with evidence introduced

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at the motion to dismiss stage.

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4.

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Cir. 2005), where the court considered materials submitted by the

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defendant in support of its motion to dismiss.

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Knievel, the plaintiff never made any challenge to the

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authenticity of the documents and thus it does not bear on the

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specific issue now before the Court.

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MTD at pp. 7-8; Reply at pp. 1-

The first is Knievel v. ESPN, 393 F.3d 1068, 1076-77 (9th

However, in

The second case referenced by Defendant is Davis v. HSBC

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Bank Nevada, N.A., 691 F.3d at 1160.

In Davis, the Ninth Circuit

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found the district court had properly incorporated documents

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referenced in the complaint and later submitted by the defendant

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in support of its motion to dismiss.

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plaintiff’s only objection to the evidence was a single sentence

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in their opposition to the motion to dismiss.

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concluded that the plaintiff’s statement that there was “‘no

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evidence that [the] documents were ever reviewed by Plaintiff or

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made available to Plaintiff’” did not constitute a challenge to

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the documents’ authenticity.

Id. at 1161.

Id. at 1160-61.
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Id.

The

The court

The court found

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the plaintiff had numerous opportunities to properly challenge

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the evidence, but held that “where the party opposing

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incorporation by reference argues only that he did not review or

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have access to the proffered copies, this does not amount to a

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challenge to those documents' authenticity.”

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Id.

Here, Plaintiff challenges the authenticity of the marketing

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materials attached to the Biler declaration, arguing that there

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is not credible evidence that these were the only marketing

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materials used by Defendant; that they were always sent to

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consumers such as Decedent; or, most importantly, whether they

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were the materials actually sent to Decedent.

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Pl. Obj. at pp. 1-2.

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attached to the Biler declaration as marketing materials used by

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Defendant, the Court finds the declaration and documents fail to

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conclusively prove, beyond reasonable dispute, that these

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documents were received by Decedent in conjunction with the

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application form submitted by Plaintiff.

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denies the request for judicial notice as to the marketing

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materials. Moreove, these materials are irrelevant to the

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adjudication of the matter now before the Court.

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Opp. at pp. 3-4;

Although the Court can notice the documents

Therefore, the Court

However, the Court overrules Plaintiff’s objections to the

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materials attached to the Showalter declaration.

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contends the Court should not consider the Certificate Schedule

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and Accidental Death Insurance Certificate because Showalter does

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not have personal knowledge the documents were sent to or

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received by Decedent, she does not describe the records she

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reviewed, and she does not know whether they were actually

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received or reviewed by Decedent.
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Plaintiff

Pl. Obj. at pp. 2-3.

The

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Court finds the documents are properly authenticated business

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records, which the Court will view as the operative policy

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underlying the claims in this action and relied on in the

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Complaint.

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evidence does not prove Decedent reviewed the documents or that

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they were made available to him are unavailing as a challenge to

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the authenticity of the documents.

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Accordingly, the Court takes notice of the documents attached to

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the declaration of Showalter as the Certificate of Insurance and

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insurance Policy underlying Plaintiff’s claims and referenced in

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the Complaint.

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C.

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As stated in Davis, Plaintiff’s contention that the

Discussion
1.

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Davis, 691 F.3d at 1160-61.

Breach of Contract – Bad Faith

Defendant contends Plaintiff’s claim for breach of contract

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fails as a matter of law because Plaintiff has not shown any

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factual or legal basis indicating a breach occurred.

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9.

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Showalter Declaration for its contention that the benefit owed to

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Plaintiff was $100,000, the amount already paid out.

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MTD at p.

Defendant relies on the certificate schedule attached to the

The Complaint alleges that the insurance application

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(attached thereto as Exhibit A) indicated Decedent was purchasing

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an insurance policy that would obligate Defendant to pay the sum

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of $500,000 to Plaintiff in the event of Decedent’s accidental

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death.

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submitted with the Showalter declaration and noticed by the

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Court, due to the nature of Decedent’s accidental death,

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Plaintiff was only entitled to a $100,000 benefit.

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Plaintiff concedes that sum was paid out to her by Defendant, the

Comp. ¶¶ 6, 9-12.

However, according to the policy

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Because

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Complaint fails to state a claim for breach of contract.
Plaintiff argues the classifications in the policy should

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not be enforced because they were not clear and conspicuous and

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they were not received by Decedent until after he purchased the

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policy.

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the Complaint that Decedent applied for a policy.

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application indicates that Decedent was applying for a policy and

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that it was not effective until the date indicated on the

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Certificate of Insurance, which would be sent to Decedent.

Opp. at pp. 13-14, 18-19.

However, Plaintiff admits in
The

When

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Defendant approved the application, the certificate and policy

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were issued to Decedent.

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Plaintiff admits Decedent received) clearly identifies three

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levels of coverage under the plan.

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lays out the three classifications.

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no good cause to disregard the clear provisions in the policy

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which indicate that an insured suffering an accidental and fatal

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injury would receive $100,000 under Classification 3.

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The Policy itself clearly
Therefore, the Court finds

Accordingly, the Court grants Defendant’s motion to dismiss
the first cause of action for breach of contract.

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The Certificate Schedule (which even

2.

Fraud in the Inducement

Defendant contends Plaintiff’s second cause of action for

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fraud in the inducement must also fail as a matter of law.

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at pp. 10-12.

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MTD

A claim for fraud in the inducement requires the following

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elements:

“(a) a misrepresentation (false representation,

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concealment, or nondisclosure); (b) scienter or knowledge of its

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falsity; (c) intent to induce reliance; (d) justifiable reliance;

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and (e) resulting damage.”

Hinesley v. Oakshade Town Ctr., 135
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Cal. App. 4th 289, 294 (2005) (citing Lazar v. Superior Court, 12

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Cal.4th 631, 638 (1996).

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is ordinarily a question of fact, “[e]xcept in the rare case

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where the undisputed facts leave no room for a reasonable

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difference of opinion.”

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Cal.App.3d 1463, 1475 (1990).

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Justifiable reliance in a fraud action

Blankenheim v. E.F. Hutton & Co., 217

Defendant argues that even if Decedent only received the

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application form, isolated from the rest of the marketing

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materials, the Complaint fails to properly allege Decedent

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justifiably relied on the terms of that form to conclude he was

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purchasing a policy that would pay out $500,000 in the event of

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his accidental death without any further terms or conditions.

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MTD at pp. 10-12.

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misrepresented the coverage offered under the plans through the

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language on the application.

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Plaintiff argues Defendant intentionally

Opp. at pp. 20-23.

Generally, “the receipt of a policy and its acceptance by

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the insured without an objection binds the insured as well as the

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insurer and he cannot thereafter complain that he did not read it

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or know its terms.”

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3d 1102, 1111-12 (1987).

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his policy.”

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Richmond, 76 Cal.App.3d 645, 652 (1977).

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not serve to defeat any liability for misrepresenting the terms

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of an insurance policy.

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(1993).

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Hackethal v. Nat'l Cas. Co., 189 Cal. App.
“It is a duty of the insured to read

Id. (citing Aetna Casualty & Surety Co. v.
However, this rule does

Clement v. Smith, 16 Cal.App.4th 39, 45

Plaintiff argues Decedent justifiably relied on the monetary
figure next to the box he checked on the application for the
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final and complete terms of his policy.

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Court should not consider the terms of the Policy which was later

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delivered to Decedent.

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assume that the full details of an insurance policy will be

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detailed in one small paragraph on an application form.

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Univ. Partners, LLC v. John O. Bronson, C058893, 2009 WL 2247459,

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at *7 (2009) (finding the plaintiff’s reliance on a single form

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initially presented to him “for purposes of assessing the precise

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coverage provided is unreasonable as a matter of law”); but see

Plaintiff argues the

However, it is unreasonable for one to

See

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Navarro v. Sears Life Ins. Co., 2:08-CV-00527-GEBEFB, 2008 WL

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3863451 (E.D. Cal. 2008) (denying a defendant’s motion to dismiss

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where insurance agent made oral misrepresentations to induce the

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plaintiff’s deceased husband to purchase a policy despite clear

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terms in policy).

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will read the terms of an insurance policy to determine the

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extent of its coverage.

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24 Cal. App. 4th 1578, 1586-88 (1994).

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Court has found an “insured bound by clear and conspicuous

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provisions in [a] policy even if evidence suggests that the

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insured did not read or understand them.”

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Shield of California, 43 Cal. 3d 1, 15 (1987).

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Courts have found that a reasonable person

Hadland v. NN Investors Life Ins. Co.,
The California Supreme

Sarchett v. Blue

The Court finds the Certificate Schedule and the policy

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clearly provide three categories of coverage.

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reliance on the one-page application to determine the extent of

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the policy’s coverage is unreasonable given the clear provisions

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provided in the policy and the Certificate schedule, a document

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the application notified Decedent he would be receiving.

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Accordingly, the Court grants Defendant’s motion to dismiss the
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Decedent’s

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second cause of action.

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I.

ORDER

For the reasons set forth above, the Court GRANTS

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Defendant’s Motion to Dismiss in its entirety. The Court finds

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that Plaintiff’s Complaint can not be saved by amendment and,

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therefore dismisses this action with prejudice.

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IT IS SO ORDERED.

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Dated:

March 3, 2014

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