Certain Underwriters at Lloyd's of London Subscribing to Policy No. E&O 14 10873 A v. General Star Indemnity Company

Filing 15

ORDER signed by District Judge John A. Mendez on 9/12/2018 ORDERING Defendant's counsel to pay sanctions in the amount of $100.00 to the Clerk of the Court within five days of the date of this Order. Defendant's 8 Motion to Dismiss is GRANTED with prejudice. CASE CLOSED. (Zignago, K.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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CERTAIN UNDERWRITERS AT
LLOYD’S OF LONDON SUBSCRIBING
TO POLICY NO. E&O 14 10873 A,

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Plaintiff,

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v.

No.

2:18-cv-00508-JAM-KJN

ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS

GENERAL STAR INDEMNITY
COMPANY,
Defendant.

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This case involves two insurers disagreeing over which one

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was responsible for providing more than $865,000 ($1 million) in

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fire insurance coverage to third-party Dr. Janak Mehtani

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(“Mehtani”) after his residential care facility burned down in

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2013.

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coverage under his insurance policy with Defendant General Star

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Indemnity Company (“General Star” or “Defendant”), he sued

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Defendant and his insurance brokers Ophelia Riego and Riego

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Insurance and Financial Services (“Riego”).

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¶¶ 5-11.

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¶ 15.

After Mehtani was denied $1 million in fire insurance

Compl., ECF No. 1,

Defendant settled with Mehtani for $135,000.

Id.,

Plaintiff Certain Underwriters at Lloyd’s of London
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Subscribing to Policy No. E&O 14 10873 A (“Underwriters” or

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“Plaintiff”) defended Riego in that lawsuit under an errors and

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omissions insurance contract Riego had with Plaintiff (the

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“Underwriters E&O Policy”) and subsequently paid Mehtani

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$1 million under the Underwriters E&O Policy to cover the fire

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damage.

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See id., ¶¶ 12-16.

Plaintiff claims Defendant should have paid Mehtani the full

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$1 million he sought under his fire insurance policy.

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¶¶ 20-21.

See id.,

As a result, Plaintiff has brought this lawsuit

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against Defendant alleging a claim for equitable indemnity.

See

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Compl.

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Plaintiff opposes.

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reasons explained below, the Court grants Defendant’s motion with

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prejudice.1

Defendant has moved to dismiss with prejudice and
Mem., ECF No. 8-1; Opp., ECF No. 10.

For the

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I.

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FACTUAL AND PROCEDURAL BACKGROUND

On or around July 10, 2013, a fire damaged a residential

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care facility owned by Mehtani.

Compl. ¶¶ 5, 9.

After Defendant

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denied Mehtani coverage under his $1 million fire insurance

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policy, Mehtani brought a bad faith insurance lawsuit in October

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2015 against Defendant, Riego, and others in Mehtani v. The AHBE

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Group, et al., Case No. 34-2015-00185527 in Sacramento County

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Superior Court (the “Underlying Action”).

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for Judicial Notice (“RJN”), ECF No. 8-3, Exhs. 2, 3.

Id., ¶ 11; Def. Req.
Mehtani

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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 August 7, 2018. In deciding this motion, the
Court takes as true all well-pleaded facts in the operative
complaint.
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brought claims against Defendant for breach of the insurance

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contract and breach of the covenant of good faith and fair

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dealing.

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RJN, Exhs. 2, 3.

Plaintiff provided Riego a defense in the Underlying Action

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under the Underwriters E&O Policy.

Compl., ¶ 14.

Though the

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fire damage exceeded $1 million, Defendant paid Mehtani only

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$135,000 to settle his claim against it.

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Defendant settled with Mehtani, Plaintiff paid Mehtani $1,000,000

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under Riego’s Underwriters E&O Policy.

Id., ¶ 15.

Id., ¶ 16.

After

Plaintiff

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alleges Defendant should have been paid this amount.

Id., ¶ 16.

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As a result, Plaintiff has brought the immediate equitable

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indemnity claim against Defendant to recover the more than

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$865,000 that it paid to Mehtani.

See Compl.

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II.

OPINION

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A.

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Defendant argues Plaintiff’s claim for equitable indemnity

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fails as a matter of law because Plaintiff has failed to allege

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facts showing General Star owed Mehtani a tort duty of care.

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Mem. at 3-4.

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Analysis

The Court agrees.

The doctrine of equitable indemnity applies only to

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defendants who are jointly and severally liable to the

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underlying plaintiff.

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Forcum/Mackey Construction, Inc., 119 Cal. App. 4th 848, 852

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(2004) (internal citation and quotation marks omitted); Leko v.

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Cornerstone Building Inspection Service, 86 Cal. App. 4th 1109,

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1115 (2001).

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indemnity context can apply to acts that are concurrent or

BFGG Architects Planners, Inc. v.

Joint and several liability in the equitable

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successive, joint or several, so long as they create a detriment

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caused by several actors.

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tort liability against the proposed indemnitor and it is

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generally based on a duty owed to the underlying plaintiff.

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BFGC Architects, 119 Cal. App. 4th at 852.

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any such duty owed by the third-party defendant to the

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underlying plaintiff, the claim of defendant and third-party

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plaintiff for equitable indemnity fails as a matter of law.

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Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Grp., 143

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Id.

There must be some basis for

In the absence of

Cal. App. 4th 1036, 1041-42, 1044.

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Plaintiff argues that Mehtani’s underlying bad faith claim

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against Defendant gives rise to tort liability and equitable

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indemnity applies as a result.

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that Defendant violated the covenant of good faith and fair

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dealing implied in every contract, including insurance policies,

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and this gives rise to tort liability.

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this argument, Plaintiff cites Wilson v. 21st Century Ins. Co.,

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42 Cal. 4th 713, 720 (2007); Gruenberg v. Aetna Ins. Co., 9 Cal.

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3d 566, 673 (1973); Chateau Chambray Homeowners Ass’n v.

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Associated Int’l Ins. Co., 90 Cal. App. 4th 335, 346 (2001);

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Brandwein v. Butler, 218 Cal. App. 4th 1485, 1514-1515 (2013);

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Silberg v. California Life Ins. Co., 11 Cal. 3d 452, 461-462

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(1974); California Shoppers, Inc. v. Royal Globe Ins. Co., 175

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Cal. App. 3d 1, 54 (1985); Archdale v. American Int’l Specialty

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Lines Co., 154 Cal. App. 4th 449, 465-66 n.19 (2007).

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5-6.

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covenant of good faith and fair dealing gives rise to tort

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liability for the purpose of a third-party’s equitable indemnity

Opp. at 5-6.

Plaintiff reasons

Id. at 6.

In support of

Opp. at

None of these cases, however, hold that violation of the

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claim.

These cases simply do not apply.

Further, as Defendant points out, “Underwriters cite no

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authority (because there is none) which establishes that an

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insurer is subject to a claim for equitable indemnity based on

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an underlying claim of breach of the implied covenant.”

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ECF No. 11, at 2.

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breach of the covenant of good faith and fair dealing against

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Defendant, Plaintiff lacks authority to support its claim that

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Defendant is consequently liable in tort for the purpose of an

Reply,

Even though Mehtani brought a claim for

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equitable indemnity claim.

Because Plaintiff’s claim for

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equitable indemnity relies on an unsupported legal theory, the

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Court finds that Plaintiff’s claim may not proceed and that it

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must be dismissed.

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544, 562 (2007) (stating that a complaint must contain either

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direct or inferential allegations respecting all the material

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elements necessary to sustain recovery under some viable legal

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theory).

See Bell Atlantic Corp. v. Twombly, 550 U.S.

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B.

Leave to Amend

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Defendant argues the Court should grant its motion with

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prejudice because Plaintiff cannot state facts to show a tort

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duty owed by General Start to Mehtani in this case since the

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claims were based in contract.

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counters that it should be given leave to amend, seeming to

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argue by implication that amendment would not be futile.

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at 8-9 (citing Federal Rule 15(a); Independent Trust Corp. v.

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Steward Information Services Corp., 665 F.3d 930, 943 (7th Cir.

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2012) (the standard for granting leave is “generous”); National

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Council of La Raza v. Chegavske, 800 F.3d 1032, 1041 (9th Cir.

Mem. at 2-3, 6.

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Plaintiff

Opp.

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2015) (stating that district court must give at least one chance

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to amend absent clear showing that amendment would be futile)).

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But Plaintiff does not explain what facts it would plead in an

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amended complaint to cure any defects in its complaint.

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Opp.

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party cites show that an underlying plaintiff’s claim for breach

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of the covenant of good faith and fair dealing against a

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defendant makes that defendant liable in tort for the purpose of

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an equitable indemnity claim brought by a third party.

See

Moreover, as explained above, none of the cases either

Finding

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otherwise would seem to require this Court to create new law.

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It will not do so.

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would clearly be futile and the Court need not, and does not,

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grant leave to amend.

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Servs., 454 F.3d 1043, 1049 (9th Cir. 2006).

Accordingly, the Court finds that amendment

See Deveraturda v. Globe Aviation Sec.

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III.

SANCTIONS

The Court issued its Order re Filing Requirements (“Order”)

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on March 8, 2018.

ECF No. 3-2.

The Order limits memoranda in

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support of and in opposition to motions to dismiss to fifteen

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pages and reply memoranda in support of motions to dismiss to

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five pages.

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the page limits must pay monetary sanctions of $50.00 per page

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and that the Court will not consider any arguments made past the

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page limit.

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by two pages.

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after page five of the reply brief.

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counsel to pay $100.00 to the Clerk of the Court within five days

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of the date of this Order.

The Order also states that an attorney who exceeds

Defendant’s reply memorandum exceeds the page limit
The Court has not considered any arguments made

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The Court ORDERS Defendant’s

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IV.

ORDER

For the reasons set forth above, the Court GRANTS
Defendant’s motion WITH PREJUDICE.
IT IS SO ORDERED.
Dated:

September 12, 2018

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