Mohamed et al v. AMCO Insurance Company

Filing 19

Order by Hon. Samuel Conti granting 10 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 4/22/2013)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 United States District Court For the Northern District of California 9 10 11 12 13 14 15 16 ) Case No. 13-0958 SC ) MOHSEN MOHAMED and OAKLAND M&M, ) ORDER GRANTING MOTION TO INC., ) DISMISS ) Plaintiffs, ) ) v. ) ) AMCO INSURANCE COMPANY and DOES ) 1-20, ) ) Defendants. ) ) ) ) 17 18 19 I. 20 INTRODUCTION Plaintiffs Mohsen Mohamed and Oakland M&M, Inc. ("M&M" or 21 "Insured") (collectively "Plaintiffs") sued Defendant AMCO 22 Insurance Company ("Defendant") for a variety of common law claims 23 arising from Defendant's refusal to pay benefits under an insurance 24 contract. 25 Plaintiffs' complaint. 26 ("Compl.")1; ECF No. 10 ("MTD"). Now before the Court is Defendant's motion to dismiss ECF No. 1 ("Notice of Removal") Ex. 1 The matter is fully briefed, ECF 27 28 1 The Court's citations to the complaint refer to the page numbers of the exhibit in which the complaint appears. 1 Nos. 13 ("Opp'n"), 17 ("Reply"), and appropriate for decision 2 without oral argument, Civ. L.R. 7-1(b). 3 Court GRANTS Defendant's motion. As explained below, the 4 5 II. BACKGROUND 6 This is a dispute over an insurance contract. M&M, a 7 California corporation, obtained a "Premier Businessowners Policy" 8 from AMCO. 9 ("Wucher Decl.")) Ex. 1 (the "Policy") at 1-05.2 ECF No. 10-1 (Decl. of Joseph Wucher ISO Def.'s MTD The Policy United States District Court For the Northern District of California 10 covers M&M's real property (the "property"), a convenience store 11 and gas station in Oakland. 12 M&M's stock. 13 property coverage -- only M&M is. 14 (stating that M&M is the "Named Insured"). Id. Compl. at 4. Mr. Mohamed owns all of He is not named as an insured under the Policy's See id.; see also Policy at 1-05 On October 17, 2011, a burglary occurred at the property. 15 16 Compl. at 4. 17 a proof of loss for damages resulting from the burglary. 18 4. 19 alarm system was "inadequate and deficient" at the time of the 20 burglary, and the Policy will not cover property losses from 21 burglaries unless the insured property is outfitted with a burglary 22 alarm system that fits the Policy's requirements. 23 disputes Defendant's denial, asserting that it had "an operable 24 alarm system installed at the insured location and . . . an alarm 25 monitoring agreement in force with an independent alarm monitoring 26 2 27 28 M&M notified Defendant of the burglary and submitted Compl. at Defendant denied M&M's claim on the grounds that its burglary Id. at 6. M&M The Court takes judicial notice of the Policy since it is incorporated by reference into Plaintiffs' complaint. The Exhibit including the Policy is broken up into ECF Nos. 10-1, 10-2, and 103, but as it is consecutively paginated, the Court cites to page numbers without reference to the ECF numbers. 2 1 company." Compl. at 4. In response to the claim's denial, Plaintiffs sued Defendant 2 3 in state court for breach of contract, breach of the implied 4 covenant of good faith and fair dealing, intentional 5 misrepresentation, and deceit. 6 federal court. 7 Defendant, in order to obtain Plaintiffs' business, misrepresented 8 to Plaintiffs that the Policy would cover property losses related 9 to burglaries and robberies, even though Defendant knew it would Defendant removed the suit to The core of Plaintiffs' complaint is that United States District Court For the Northern District of California 10 not. See Compl. at 6-7. Defendant now moves to dismiss, arguing 11 that (1) Mr. Mohamed has no standing to sue for denial of insurance 12 benefits, because he is not an "insured" under the Policy, and (2) 13 Plaintiffs' intentional misrepresentation and deceit claims are not 14 pled with sufficient particularity to satisfy Federal Rule of Civil 15 Procedure 9(b), and in any event, Plaintiffs cannot state claims 16 for those causes of action. 17 18 III. LEGAL STANDARD 19 A. Motions to Dismiss A motion to dismiss under Federal Rule of Civil Procedure 20 21 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. 22 Block, 250 F.3d 729, 732 (9th Cir. 2001). 23 on the lack of a cognizable legal theory or the absence of 24 sufficient facts alleged under a cognizable legal theory." 25 Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 26 1988). 27 should assume their veracity and then determine whether they 28 plausibly give rise to an entitlement to relief." "Dismissal can be based "When there are well-pleaded factual allegations, a court 3 Ashcroft v. 1 Iqbal, 556 U.S. 662, 679 (2009). However, "the tenet that a court 2 must accept as true all of the allegations contained in a complaint 3 is inapplicable to legal conclusions. 4 elements of a cause of action, supported by mere conclusory 5 statements, do not suffice." 6 Twombly, 550 U.S. 544, 555 (2007)). 7 generally "limited to the complaint, materials incorporated into 8 the complaint by reference, and matters of which the court may take 9 judicial notice." Threadbare recitals of the Id. (citing Bell Atl. Corp. v. The court's review is Metzler Inv. GMBH v. Corinthian Colls., Inc., United States District Court For the Northern District of California 10 540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor 11 Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)). 12 B. Rule 9(b) 13 Claims sounding in fraud are subject to the heightened 14 pleading requirements of Federal Rule of Civil Procedure 9(b), 15 which requires that a plaintiff alleging fraud "must state with 16 particularity the circumstances constituting fraud." See Kearns v. 17 Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). "To satisfy 18 Rule 9(b), a pleading must identify the who, what, when, where, and 19 how of the misconduct charged, as well as what is false or 20 misleading about [the purportedly fraudulent] statement, and why it 21 is false." 22 Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks 23 and citations omitted). 24 /// 25 /// 26 /// 27 /// 28 IV. United States ex rel Cafasso v. Gen. Dynamics C4 Sys., DISCUSSION 4 1 A. Plaintiff Mohamed's Standing 2 A party's standing to bring a legal challenge is a threshold 3 issue that must be resolved prior to reaching the merits of the 4 party's claim. 5 646, 654 (9th Cir. 2002). 6 plaintiff must show that he has suffered the "invasion of a legally 7 protected interest." 8 by contract. 9 Cal. App. 3d 1027, 1034 (Cal. Ct. App. 1988). United States District Court For the Northern District of California 10 See Scott v. Pasadena Unified Sch. Dist., 306 F.3d Id. In order to establish standing, a That interest may be protected by law or See, e.g., Hatchwell v. Blue Shield of Calif., 198 Plaintiffs assert that Mr. Mohamed is insured under the Policy 11 because he is the sole owner and shareholder of M&M and therefore 12 meets the Policy's own definition of "insured." 13 Plaintiffs also claim that Gantman v. United Pacific Insurance Co., 14 232 Cal. App. 3d 1560, 1566 (Cal. Ct. App. 1991), supports their 15 argument that owners or shareholders of a closely held corporation 16 have standing in insurance disputes in which the policy names only 17 the corporation. 18 may be insured under the Policy's third-party liability section, he 19 is not an insured under the first-party property loss claim 20 section, which covers burglaries; (2) Mr. Mohamed is not insured by 21 definition under the property loss section of the Policy, because 22 that section's definition of insured is limited to the Named 23 Insured, M&M; and (3) no case law supports Plaintiffs' argument 24 that Mr. Mohamed has standing, under any theory, to bring a claim 25 based on denials of benefits under the Policy. 26 Id. Opp'n at 2. Defendant replies that (1) while Mr. Mohamed Defendant is right. Reply at 2-3. First, Plaintiffs cite sections of the 27 Policy's third-party liability portion to support their contention 28 that Mr. Mohamed is a "Named Insured" under the policy. 5 See Opp'n 1 at 1-2 (citing Policy at 1-70 (providing that for insured LLCs, 2 managers are insured with respect to their duties as managers)). 3 However, Defendant is correct that because Plaintiffs' insurance 4 claim arises from a burglary at the property, the claim is governed 5 by the first-party property loss section of the Policy, and that 6 section limits who is insured under the Policy to the Named 7 Insured, M&M. 8 reaches no further. Policy at 1-05, 1-06, 1-18. The Policy's definition Id. at 1-05, 1-06. Second, M&M as a corporation is a separate legal entity from 9 United States District Court For the Northern District of California 10 Mr. Mohamed, and even if he is the owner and sole shareholder of 11 M&M, he is not interchangeable with M&M as a legal claimant under 12 the Policy. 13 Policy that would cover a burglary claim. 14 18. M&M is the only Named Insured under the section of the Policy at 1-05, 1-06, 1- 15 Third, Plaintiffs' own authority supports this limitation: 16 "[a] nonparty who is nevertheless entitled to policy benefits, such 17 as an 'insured' person under the terms of the policy or an express 18 beneficiary, has standing only if [he or she] is the claimant whose 19 benefits are wrongfully withheld." 20 1566 (quoting Hatchwell, 198 Cal. App. 3d at 1034) (internal 21 quotations and citations omitted). 22 explain, even though Mr. Mohamed might stand to gain when M&M 23 gains, the benefits Plaintiffs seek belong only to M&M, the 24 corporation. 25 Gantman, 232 Cal. App. 3d at As Gantman and Hatchwell Id. at 1568; Hatchwell, 198 Cal. App. 3d at 1034. The Court finds that Mr. Mohamed is not an insured under the 26 Policy, and no exceptions in the Policy or relevant case law 27 provide otherwise. 28 alleged denial of the Policy's benefits. He therefore has no standing to sue based on an 6 Plaintiffs' claims as to 1 2 Mr. Mohamed are all DISMISSED WITH PREJUDICE. B. Plaintiffs' Intentional Misrepresentation and Deceit Claims 3 4 Plaintiffs' claims for intentional misrepresentation and 5 deceit sound in fraud. 6 particularity under Rule 9(b). 7 identify "the who, what, when, where, and how of the misconduct 8 charged, as well as what is false or misleading about [the 9 purportedly fraudulent] statement, and why it is false." United States District Court For the Northern District of California 10 11 12 They must therefore be pled with This means that Plaintiffs must Cafasso, 637 F.3d 1047 at 1055. i. Intentional Misrepresentation The elements of a claim for intentional misrepresentation are: 13 (1) the defendant made a misrepresentation, including a false 14 representation, concealment, or nondisclosure; (2) the defendant 15 had knowledge that the statement was false; (3) the defendant acted 16 with intent to defraud or induce reliance; (4) the plaintiff 17 justifiably relied on the defendant's statement; and (5) the 18 plaintiff was damaged by that reliance. 19 Network, 153 F. Supp. 2d 1115, 1128 (N.D. Cal. 2001). 20 See Firoozye v. Earthlink Defendant argues that Plaintiffs' pleading does not meet Rule 21 9(b)'s pleading standard and, in any event, the facts pled show 22 that Plaintiffs cannot state a claim. 23 they met Rule 9(b)'s heightened pleading standard, noting that they 24 pled "when" the fraud claim arose: the date when Defendant denied 25 the request for burglary loss coverage. 26 also state that the "Protective Safeguards" Endorsement of the 27 Policy (the "Endorsement") -- a modification to the Policy 28 requiring that the insured maintain certain protective safeguards 7 Plaintiffs state first that Opp'n at 3. Plaintiffs 1 at the property -- did not feature the symbol "P-7," which is an 2 additional alteration to the Endorsement that specifically requires 3 a "Central Station Burglar Alarm protecting the entire building." 4 Id. Since the Endorsement did not include a P-7 symbol, Plaintiffs 5 6 assert that Defendant's denial of Plaintiffs' claim for lacking a 7 required burglar alarm has no legal or factual basis. 8 However, the Endorsement does include specific exclusions stating 9 that Defendant would not pay for loss or damage caused by burglary Id. United States District Court For the Northern District of California 10 if the insured did not inform Defendant of a "suspension or 11 impairment" in any protective safeguard or if the insured failed to 12 maintain any protective safeguard against burglary or robbery "in 13 complete working order." 14 indicates that as a condition of the insurance, Plaintiff is 15 required to maintain applicable protective devices "as designated 16 at each premises by symbol in the Declarations," and the 17 Declarations of the Policy indeed provide that P-7 is designated 18 for Plaintiff's property even though the Endorsement page lacks a 19 P-7 symbol. See id. Moreover, the Endorsement Even so, Plaintiffs assert that without the addition of P-7 to 20 21 the Endorsement pages themselves, which bear only the "P-9" symbol 22 and no description of what it means, the Policy is ambiguous. 23 id. 24 policy must be construed against the insurer, and that a limitation 25 in an insurance policy's coverage must be in understandable, plain 26 language that does not render the policy ineffectual for its 27 intended purpose (e.g., to cover property losses from a burglary). 28 Id. (citing California v. Allstate Ins. Co., 45 Cal. 4th 1008, 1018 See Plaintiff further states that ambiguities in an insurance 8 1 (Cal. 2009); Safeway Ins. Co. v. Robert S., 26 Cal. 4th 758, 764- 2 765 (Cal. 2009)). 3 interpret the Policy in a way that would not require the Central 4 Station Burglar Alarm described in P-7, despite P-7's appearance in 5 the Declarations. 6 Accordingly, Plaintiff urges the Court to Defendant responds that interpretation of an insurance policy 7 is a question of law, citing Waller v. Truck Ins. Exch. Inc., 11 8 Cal. 4th 1, 18 (Cal. 1995), for the principle that the Policy 9 should be read according to its plain terms. Reply at 5 (citing United States District Court For the Northern District of California 10 Policy at 1-95, 1-96). 11 terms eliminate coverage when the insured fails to maintain 12 protective safeguards for its property (e.g., burglar alarms) or 13 fails to notify Defendant of "suspension or impairment" to a 14 safeguard. 15 require the P-7 protective measure even though the Endorsement 16 schedule lists only P-9, the plain language of the Endorsement 17 indicates that it is the symbols listed in the Declaration that 18 govern, not the schedule in the Endorsement. 19 Id. Defendant asserts that the Policy's plain According to Defendant, since the Declarations See Reply at 5-6. The Court finds for Defendant on this issue. The plain 20 language of the Endorsement's "Condition" section states: "As a 21 condition of this insurance, you [i.e., the Named Insured M&M] are 22 required to maintain the applicable protective devices or services 23 . . . for burglary and robbery, denoted by . . . [symbol P-7], as 24 designated at each premises by symbol in the Declarations." 25 Nothing in this language purports to make the Endorsement's 26 schedule binding. 27 in the Policy's Declaration, Policy at 1-09, there can be no 28 confusion: Plaintiffs were required to maintain a Central Station Moreover, since the P-7 symbol clearly appears 9 1 2 Burglar Alarm according to P-7 under the Endorsement. In this context, even absent a dispute over the Policy's 3 interpretation, the Court does not find that Plaintiffs have met 4 any of Rule 9(b)'s pleading standards as to its intentional 5 misrepresentation claim. 6 facts suggesting that Defendant misled Plaintiffs as to the 7 burglary alarm requirements, or that Defendant's refusal to pay 8 Plaintiffs' claim was anything but, at best, a breach of contract. 9 Since Plaintiffs' assertions as to this cause of action are Plaintiffs have simply not indicated any United States District Court For the Northern District of California 10 implausible, and amendment would be futile, Plaintiffs' intentional 11 misrepresentation claim is DISMISSED. 12 amend if they are able to plead the "who, what, when, where, and 13 how" of Defendant's alleged misrepresentations made in convincing 14 Plaintiffs to enter a contract. 15 the Policy's interpretation are made as a matter of law, Waller, 11 16 Cal. 4th at 18, Plaintiffs may not re-plead a misrepresentation 17 claim based on the same legal theory dismissed above. ii. 18 19 Plaintiffs have leave to Since the Court's findings as to Deceit Plaintiffs' claim for deceit is difficult to distinguish from 20 their claim for intentional misrepresentation, because "deceit" and 21 "intentional misrepresentation" are two terms for the same tort of 22 fraud. 23 ed. 2005) ("The elements of fraud, which give rise to the tort 24 action for deceit, are (a) misrepresentation (false representation, 25 concealment, or nondisclosure); (b) knowledge of falsity (or 26 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) 27 justifiable reliance; and (e) resulting damage."). 28 5 Witkin, Summary of Cal. Law Torts ยง 772, p. 1121 (10th However, based on the subtitle for Plaintiffs' claim 10 1 ("entering into insurance contract with no intent to perform") as 2 well as the claim's substantive allegations, it appears that 3 Plaintiffs are pleading a claim for promissory fraud, and the Court 4 will therefore construe Plaintiffs' claim liberally to avoid its 5 being merely duplicative of Plaintiffs' deficient intentional 6 misrepresentation claim. 7 action for fraud and deceit. 8 implies the intention to perform; hence, where a promise is made 9 without such intention, there is an implied misrepresentation of "Promissory fraud is a subspecies of the A promise to do something necessarily United States District Court For the Northern District of California 10 fact that may be actionable fraud." Lazar v. Super. Ct., 12 Cal. 11 4th 631, 638 (Cal. 1996) (quotations and citations omitted). 12 action for promissory fraud may lie where a defendant fraudulently 13 induces the plaintiff to enter into a contract." 14 and citations omitted). "An Id. (quotations Defendant argues that Plaintiffs fail to plead this claim with 15 16 specificity, and that in any event, Plaintiffs' facts do not 17 support their claim. 18 specificity, Plaintiffs copy and paste their allegations from the 19 complaint. 20 allegations concern Plaintiffs' arguments as to the omission of P-7 21 from the Policy's modifications as to protective systems, as 22 described above. In opposition to Defendant's argument on See Opp'n at 4 (quoting Compl. at 11).3 See id. These Plaintiffs assert that the absence of P- 23 24 25 26 27 28 3 Defendant objects to Plaintiffs' quoting this section of the complaint in their opposition brief in support of the deceit claim, because that page of the complaint, the "Exemplary Damages Attachment," does not state that it incorporates by reference the other pages of the complaint. Reply at 4 n.3. The Court disregards this argument. Plaintiffs' pleadings were evidently clear enough to enable Defendant to understand the nature and extent of the incorporation. In any event, if Plaintiffs re-plead their complaint, they should make their incorporations by reference clearer. 11 1 7 proves that Defendant intended to defraud Plaintiffs, since, 2 according to Plaintiffs, there can be no other credible or logical 3 explanation for Defendant's denial of Plaintiffs' claim. 4 Apart from those facts, the remainder of Plaintiffs' deceit 5 pleadings are purely conclusory statements, like the allegation 6 that Defendant omitted P-7 "intentionally with malice, fraud, and 7 oppression." Id. None of Plaintiffs' allegations about deceit or promissory 8 9 Id. fraud are plausible or specific enough to state a claim. Again, United States District Court For the Northern District of California 10 since the Policy Declaration requires a Central System Burglar 11 Alarm, Plaintiffs have pleaded at most a breach of contract if they 12 indeed had such a system in place. 13 the complaint and the relationship between insurer and insured lead 14 to a conclusion that Defendant must have meant to defraud 15 Plaintiffs, but the Court finds this untenable: a claim sounding in 16 fraud must show much more than this to be plausible. 17 regardless of whether Plaintiffs meant their deceit claim to be an 18 alternative to their fraudulent misrepresentation claim or, more 19 properly, a promissory fraud claim, the deficiencies of their 20 pleadings as described above render the claim unsupportable. Plaintiffs insist the facts of Plaintiffs' deceit claim is DISMISSED. 21 Further, Plaintiffs have leave 22 to amend if they are able to correct the factual deficiencies 23 described above. 24 clarify exactly what tort they are pleading, and they must also 25 keep in mind that (as above) the Court's interpretation of the 26 Policy is a matter of law. 27 /// 28 /// If Plaintiffs do re-plead this claim, they should 12 1 2 V. CONCLUSION For the reasons explained above, the Court GRANTS Defendant 3 AMCO Insurance Company's motion to dismiss Plaintiffs Mohsen 4 Mohamed and Oakland M&M, Inc.'s complaint. 5 claims as to Mr. Mohamed are DISMISSED WITH PREJUDICE. 6 intentional misrepresentation and deceit claims are DISMISSED with 7 leave to amend, per above. 8 breach of the implied covenant of good faith and fair dealing 9 remain in the case as to Plaintiff Oakland M&M, Inc. United States District Court For the Northern District of California 10 All of Plaintiffs' Plaintiffs' Plaintiffs' breach of contract and Plaintiffs have thirty (30) days from this Order's signature 11 date to file an amended complaint. If they do not, the deficient 12 claims may be dismissed with prejudice. 13 14 IT IS SO ORDERED. 15 16 17 22 Dated: April ___, 2013 UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 13

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