Reitz et al v. Progressive Direct Insurance Company et al

Filing 7

ORDER granting in part and denying in part defendant's 3 Motion to Dismiss, signed by Judge Garland E. Burrell, Jr., on 8/26/14. Plaintiffs are granted 14 days from the date on which this order is filed to file an amended complaint addressing deficiencies in the dismissed claim. (Kastilahn, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MISTY DAWN REITZ and NICHOLAS
IVEY,
Plaintiffs,

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v.

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Progressive Direct Insurance
Company, an Ohio Corporation
registered to do business in
the State of California and
Does I through CC, inclusive,

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ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS

Defendants.

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No. 2:14-cv-01614-GEB-EFB

Defendant Progressive Choice Insurance Company1 moves
under

Federal

dismissal

of

Rule

of

Civil

Plaintiffs’

Procedure

tort-based

(“Rule”)

implied

12(b)(6)

covenant

of

for
good

faith and fair dealing claim. Plaintiffs oppose the motion.2

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Since Defendant argues in the motion that it is erroneously sued as
“Progressive Direct Insurance Company,” this Order refers to Defendant as
“Progressive Choice Insurance Company,” which Defendant argues is its proper
name.
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Defendant also makes the following conditional motion under Rule 12(b)(6):
“In the event that the Court declines to read the Complaint as sounding partly
in tort, [Defendant] would seek an order dismissing from the Complaint the
allegations and prayer pertaining to non-contractual damages.” (Def.’s Mot.
to Dismiss (“Def.’s Mot.”) 8:11-13, ECF No. 3.) However, the Complaint
“sound[s] partly in tort.”

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I.

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The

FACTUAL ALLEGATIONS

following

factual

allegations

in

Plaintiffs’

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Complaint are pertinent to the dismissal motion. “On or about

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June 21, 2009, [Defendant] entered into a[] written insurance

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contract, . . . with [Plaintiffs], the terms of which contract

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provide inter alia, that [Defendant] would indemnify [Plaintiffs]

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from any damage that they may sustain by reason of fire to or

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theft of [their] . . . 2006 Ford Mustang [(“the Vehicle”)].”

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(Compl. ¶ 4.) “On or about December 3, 2009, . . . [Plaintiffs]

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notified [Defendant] that . . . the [Vehicle] had been stolen . .

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. .” (Id. ¶ 9.)

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“Subsequent

to

receiving

notice

of

the

Claim,

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[Defendant] . . . commenced an investigation . . . .” (Id. ¶ 10.)

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“[Defendant] determined during its investigation that after [the

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Vehicle] had been removed from [Plaintiffs’] residence . . . it

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was totally destroyed by fire . . . .” (Id.

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2010, [Defendant] completed its investigation and . . . refused

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to indemnify [Plaintiffs] for any loss . . . , [on the ground

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that] it had obtained evidence that supplied it with probable

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cause to believe that [Plaintiffs] had notified [Defendant] of

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the Claim fraudulently and . . . had deliberately procured the

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removal of the [Vehicle] from their residence and . . . caused or

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procured the cause of the fire that subsequently destroyed the

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[Vehicle].” (Id. ¶ 15.)

¶ 14.) “On May 28,

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“By making allegations, without probable cause . . . ,

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that [Plaintiffs] had deliberately procured the removal of the

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[Vehicle] . . . and

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to

be

procured,

. . . had deliberately procured, or caused

the

fire

that
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subsequently

destroyed

the

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[Vehicle], [Defendant] . . . breached the covenant of good faith

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and dealing . . . .” (Id. ¶ 18.) “As a direct and proximate

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result of [this breach]

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contemplated by the Policy, in that they were unable to replace

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the [Vehicle], they were accused of and prosecuted for criminal

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activity, they were subjected to arrest and detention, they lost

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past and future income and lost the bargained for peace and

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security of knowledge that their financial losses covered by the

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Policy would be indemnified by [Defendant], all . . . in the sum

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. . . , [Plaintiffs] suffered damages,

of . . . $9,950,000.00[] or according to proof.” (Id. ¶ 19.)

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II.

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Defendant

argues

DISCUSSION
Plaintiffs’

tort-based

implied

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covenant claim should be dismissed because it is barred by the

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two-year statute of limitations prescribed in section 339(1) of

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the California Code of Civil Procedure.

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This limitations period applies to tort-based implied

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covenant claims. Archdale v. Am. Int'l Specialty Lines Ins. Co.,

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154 Cal. App. 4th 449, 467, n. 19 (2007) (citing Cal. Civ. Proc.

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Code § 339(1)); see also Powell v. Liberty Life Assur. Co. of

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Boston, C 06 4328 MMC, 2006 WL 2734315, at * 1 (N.D. Cal. Sept.

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25, 2006) (“[T]o the extent plaintiff elects to proceed under a

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tort theory, [her claim] is subject to a two-year statute of

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limitations.” (citation omitted)). “[T]he statute of limitations

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for [implied covenant tort] claims . . . begins to run[] when the

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insurer unequivocally denies the insured’s claim for benefits

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allegedly

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Assurance Co. of Boston, C 14-01587 RS, 2014 WL 2465121, at *2

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(N.D. Cal. June 2, 2014); accord Smyth v. USAA Prop. & Cas. Ins.

due

under

the

policy.”

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Alberts

v.

Liberty

Life

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Co., 5 Cal. App. 4th 1470, 1477 (1992) (finding that a tort-based

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implied

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existence of [certain] insurance policies.”); Powell, 2006 WL

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2734315,

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“accrued no later than . . . when defendant denied plaintiff’s

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appeal from its decision to terminate payment of benefits.”).

covenant

at

claim

*1

accrued

(finding

when

the

tort-based

insurer

implied

“denied

covenant

the

claim

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Plaintiffs allege that Defendant denied their claim on

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May 28, 2010. (Compl. ¶ 15.) Plaintiffs filed their Complaint on

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May

15,

2014,

which

is

more

than

two

years

after

the

claim

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accrued. Since Plaintiffs have not shown that their tort-based

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implied

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limitations period expired, this portion of Defendant’s motion is

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granted. Defendant also argues this claim should be dismissed

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with

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supported by an unpersuasive, conclusory argument and therefore

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is denied.

covenant

prejudice.

claim

However,

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was

this

filed

before

portion

of

the

the

statute

motion

is

of

only

III. CONCLUSION

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For the stated reasons, Defendant’s motion is granted

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in part and denied in part. Plaintiffs are granted fourteen (14)

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days from the date on which this order is filed to file an

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amended complaint addressing deficiencies in the dismissed claim.

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Dated:

August 26, 2014

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