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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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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) Case No. 13-0958 SC
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MOHSEN MOHAMED and OAKLAND M&M, ) ORDER GRANTING MOTION TO
INC.,
) DISMISS
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Plaintiffs,
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v.
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AMCO INSURANCE COMPANY and DOES )
1-20,
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Defendants.
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)
)

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I.

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INTRODUCTION
Plaintiffs Mohsen Mohamed and Oakland M&M, Inc. ("M&M" or

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"Insured") (collectively "Plaintiffs") sued Defendant AMCO

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Insurance Company ("Defendant") for a variety of common law claims

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arising from Defendant's refusal to pay benefits under an insurance

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contract.

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Plaintiffs' complaint.

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("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

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The Court's citations to the complaint refer to the page numbers
of the exhibit in which the complaint appears.

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Nos. 13 ("Opp'n"), 17 ("Reply"), and appropriate for decision

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without oral argument, Civ. L.R. 7-1(b).

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Court GRANTS Defendant's motion.

As explained below, the

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5 II.

BACKGROUND

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This is a dispute over an insurance contract.

M&M, a

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California corporation, obtained a "Premier Businessowners Policy"

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from AMCO.

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("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

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covers M&M's real property (the "property"), a convenience store

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and gas station in Oakland.

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M&M's stock.

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property coverage -- only M&M is.

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(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.

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Compl. at 4.

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a proof of loss for damages resulting from the burglary.

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4.

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alarm system was "inadequate and deficient" at the time of the

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burglary, and the Policy will not cover property losses from

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burglaries unless the insured property is outfitted with a burglary

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alarm system that fits the Policy's requirements.

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disputes Defendant's denial, asserting that it had "an operable

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alarm system installed at the insured location and . . . an alarm

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monitoring agreement in force with an independent alarm monitoring

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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.
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company."

Compl. at 4.

In response to the claim's denial, Plaintiffs sued Defendant

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in state court for breach of contract, breach of the implied

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covenant of good faith and fair dealing, intentional

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misrepresentation, and deceit.

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federal court.

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Defendant, in order to obtain Plaintiffs' business, misrepresented

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to Plaintiffs that the Policy would cover property losses related

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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

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not.

See Compl. at 6-7.

Defendant now moves to dismiss, arguing

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that (1) Mr. Mohamed has no standing to sue for denial of insurance

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benefits, because he is not an "insured" under the Policy, and (2)

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Plaintiffs' intentional misrepresentation and deceit claims are not

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pled with sufficient particularity to satisfy Federal Rule of Civil

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Procedure 9(b), and in any event, Plaintiffs cannot state claims

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for those causes of action.

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18 III.

LEGAL STANDARD

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A.

Motions to Dismiss

A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

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Ashcroft v.

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Iqbal, 556 U.S. 662, 679 (2009).

However, "the tenet that a court

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

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generally "limited to the complaint, materials incorporated into

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the complaint by reference, and matters of which the court may take

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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

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540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor

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Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

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B.

Rule 9(b)

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Claims sounding in fraud are subject to the heightened

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pleading requirements of Federal Rule of Civil Procedure 9(b),

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which requires that a plaintiff alleging fraud "must state with

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particularity the circumstances constituting fraud."

See Kearns v.

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Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009).

"To satisfy

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Rule 9(b), a pleading must identify the who, what, when, where, and

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how of the misconduct charged, as well as what is false or

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misleading about [the purportedly fraudulent] statement, and why it

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is false."

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Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks

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and citations omitted).

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///

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///

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///

28 IV.

United States ex rel Cafasso v. Gen. Dynamics C4 Sys.,

DISCUSSION

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A.

Plaintiff Mohamed's Standing

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A party's standing to bring a legal challenge is a threshold

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issue that must be resolved prior to reaching the merits of the

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party's claim.

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646, 654 (9th Cir. 2002).

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plaintiff must show that he has suffered the "invasion of a legally

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protected interest."

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by contract.

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Cal. App. 3d 1027, 1034 (Cal. Ct. App. 1988).

United States District Court

For the Northern District of California

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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

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because he is the sole owner and shareholder of M&M and therefore

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meets the Policy's own definition of "insured."

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Plaintiffs also claim that Gantman v. United Pacific Insurance Co.,

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232 Cal. App. 3d 1560, 1566 (Cal. Ct. App. 1991), supports their

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argument that owners or shareholders of a closely held corporation

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have standing in insurance disputes in which the policy names only

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the corporation.

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may be insured under the Policy's third-party liability section, he

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is not an insured under the first-party property loss claim

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section, which covers burglaries; (2) Mr. Mohamed is not insured by

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definition under the property loss section of the Policy, because

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that section's definition of insured is limited to the Named

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Insured, M&M; and (3) no case law supports Plaintiffs' argument

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that Mr. Mohamed has standing, under any theory, to bring a claim

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based on denials of benefits under the Policy.

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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

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Policy's third-party liability portion to support their contention

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that Mr. Mohamed is a "Named Insured" under the policy.

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See Opp'n

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at 1-2 (citing Policy at 1-70 (providing that for insured LLCs,

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managers are insured with respect to their duties as managers)).

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However, Defendant is correct that because Plaintiffs' insurance

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claim arises from a burglary at the property, the claim is governed

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by the first-party property loss section of the Policy, and that

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section limits who is insured under the Policy to the Named

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Insured, M&M.

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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

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United States District Court

For the Northern District of California

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Mr. Mohamed, and even if he is the owner and sole shareholder of

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M&M, he is not interchangeable with M&M as a legal claimant under

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the Policy.

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Policy that would cover a burglary claim.

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18.

M&M is the only Named Insured under the section of the
Policy at 1-05, 1-06, 1-

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Third, Plaintiffs' own authority supports this limitation:

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"[a] nonparty who is nevertheless entitled to policy benefits, such

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as an 'insured' person under the terms of the policy or an express

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beneficiary, has standing only if [he or she] is the claimant whose

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benefits are wrongfully withheld."

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1566 (quoting Hatchwell, 198 Cal. App. 3d at 1034) (internal

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quotations and citations omitted).

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explain, even though Mr. Mohamed might stand to gain when M&M

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gains, the benefits Plaintiffs seek belong only to M&M, the

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corporation.

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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

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Policy, and no exceptions in the Policy or relevant case law

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provide otherwise.

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alleged denial of the Policy's benefits.

He therefore has no standing to sue based on an

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Plaintiffs' claims as to

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Mr. Mohamed are all DISMISSED WITH PREJUDICE.
B.

Plaintiffs' Intentional Misrepresentation and Deceit
Claims

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Plaintiffs' claims for intentional misrepresentation and

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deceit sound in fraud.

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particularity under Rule 9(b).

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identify "the who, what, when, where, and how of the misconduct

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charged, as well as what is false or misleading about [the

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purportedly fraudulent] statement, and why it is false."

United States District Court

For the Northern District of California

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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:

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(1) the defendant made a misrepresentation, including a false

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representation, concealment, or nondisclosure; (2) the defendant

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had knowledge that the statement was false; (3) the defendant acted

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with intent to defraud or induce reliance; (4) the plaintiff

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justifiably relied on the defendant's statement; and (5) the

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plaintiff was damaged by that reliance.

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Network, 153 F. Supp. 2d 1115, 1128 (N.D. Cal. 2001).

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See Firoozye v. Earthlink

Defendant argues that Plaintiffs' pleading does not meet Rule

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9(b)'s pleading standard and, in any event, the facts pled show

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that Plaintiffs cannot state a claim.

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they met Rule 9(b)'s heightened pleading standard, noting that they

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pled "when" the fraud claim arose: the date when Defendant denied

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the request for burglary loss coverage.

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also state that the "Protective Safeguards" Endorsement of the

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Policy (the "Endorsement") -- a modification to the Policy

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requiring that the insured maintain certain protective safeguards

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Plaintiffs state first that

Opp'n at 3.

Plaintiffs

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at the property -- did not feature the symbol "P-7," which is an

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additional alteration to the Endorsement that specifically requires

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a "Central Station Burglar Alarm protecting the entire building."

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Id.
Since the Endorsement did not include a P-7 symbol, Plaintiffs

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assert that Defendant's denial of Plaintiffs' claim for lacking a

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required burglar alarm has no legal or factual basis.

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However, the Endorsement does include specific exclusions stating

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that Defendant would not pay for loss or damage caused by burglary

Id.

United States District Court

For the Northern District of California

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if the insured did not inform Defendant of a "suspension or

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impairment" in any protective safeguard or if the insured failed to

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maintain any protective safeguard against burglary or robbery "in

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complete working order."

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indicates that as a condition of the insurance, Plaintiff is

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required to maintain applicable protective devices "as designated

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at each premises by symbol in the Declarations," and the

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Declarations of the Policy indeed provide that P-7 is designated

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for Plaintiff's property even though the Endorsement page lacks a

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P-7 symbol.

See id.

Moreover, the Endorsement

Even so, Plaintiffs assert that without the addition of P-7 to

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the Endorsement pages themselves, which bear only the "P-9" symbol

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and no description of what it means, the Policy is ambiguous.

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id.

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policy must be construed against the insurer, and that a limitation

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in an insurance policy's coverage must be in understandable, plain

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language that does not render the policy ineffectual for its

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intended purpose (e.g., to cover property losses from a burglary).

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Id. (citing California v. Allstate Ins. Co., 45 Cal. 4th 1008, 1018

See

Plaintiff further states that ambiguities in an insurance

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(Cal. 2009); Safeway Ins. Co. v. Robert S., 26 Cal. 4th 758, 764-

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765 (Cal. 2009)).

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interpret the Policy in a way that would not require the Central

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Station Burglar Alarm described in P-7, despite P-7's appearance in

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the Declarations.

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Accordingly, Plaintiff urges the Court to

Defendant responds that interpretation of an insurance policy

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is a question of law, citing Waller v. Truck Ins. Exch. Inc., 11

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Cal. 4th 1, 18 (Cal. 1995), for the principle that the Policy

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should be read according to its plain terms.

Reply at 5 (citing

United States District Court

For the Northern District of California

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Policy at 1-95, 1-96).

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terms eliminate coverage when the insured fails to maintain

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protective safeguards for its property (e.g., burglar alarms) or

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fails to notify Defendant of "suspension or impairment" to a

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safeguard.

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require the P-7 protective measure even though the Endorsement

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schedule lists only P-9, the plain language of the Endorsement

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indicates that it is the symbols listed in the Declaration that

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govern, not the schedule in the Endorsement.

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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

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language of the Endorsement's "Condition" section states: "As a

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condition of this insurance, you [i.e., the Named Insured M&M] are

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required to maintain the applicable protective devices or services

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. . . for burglary and robbery, denoted by . . . [symbol P-7], as

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designated at each premises by symbol in the Declarations."

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Nothing in this language purports to make the Endorsement's

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schedule binding.

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in the Policy's Declaration, Policy at 1-09, there can be no

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confusion: Plaintiffs were required to maintain a Central Station

Moreover, since the P-7 symbol clearly appears

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Burglar Alarm according to P-7 under the Endorsement.
In this context, even absent a dispute over the Policy's

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interpretation, the Court does not find that Plaintiffs have met

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any of Rule 9(b)'s pleading standards as to its intentional

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misrepresentation claim.

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facts suggesting that Defendant misled Plaintiffs as to the

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burglary alarm requirements, or that Defendant's refusal to pay

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Plaintiffs' claim was anything but, at best, a breach of contract.

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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

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implausible, and amendment would be futile, Plaintiffs' intentional

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misrepresentation claim is DISMISSED.

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amend if they are able to plead the "who, what, when, where, and

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how" of Defendant's alleged misrepresentations made in convincing

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Plaintiffs to enter a contract.

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the Policy's interpretation are made as a matter of law, Waller, 11

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Cal. 4th at 18, Plaintiffs may not re-plead a misrepresentation

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claim based on the same legal theory dismissed above.
ii.

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Plaintiffs have leave to

Since the Court's findings as to

Deceit

Plaintiffs' claim for deceit is difficult to distinguish from

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their claim for intentional misrepresentation, because "deceit" and

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"intentional misrepresentation" are two terms for the same tort of

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fraud.

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ed. 2005) ("The elements of fraud, which give rise to the tort

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action for deceit, are (a) misrepresentation (false representation,

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concealment, or nondisclosure); (b) knowledge of falsity (or

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'scienter'); (c) intent to defraud, i.e., to induce reliance; (d)

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justifiable reliance; and (e) resulting damage.").

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5 Witkin, Summary of Cal. Law Torts § 772, p. 1121 (10th

However, based on the subtitle for Plaintiffs' claim

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("entering into insurance contract with no intent to perform") as

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well as the claim's substantive allegations, it appears that

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Plaintiffs are pleading a claim for promissory fraud, and the Court

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will therefore construe Plaintiffs' claim liberally to avoid its

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being merely duplicative of Plaintiffs' deficient intentional

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misrepresentation claim.

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action for fraud and deceit.

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implies the intention to perform; hence, where a promise is made

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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

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fact that may be actionable fraud."

Lazar v. Super. Ct., 12 Cal.

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4th 631, 638 (Cal. 1996) (quotations and citations omitted).

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action for promissory fraud may lie where a defendant fraudulently

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induces the plaintiff to enter into a contract."

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and citations omitted).

"An

Id. (quotations

Defendant argues that Plaintiffs fail to plead this claim with

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specificity, and that in any event, Plaintiffs' facts do not

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support their claim.

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specificity, Plaintiffs copy and paste their allegations from the

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complaint.

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allegations concern Plaintiffs' arguments as to the omission of P-7

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from the Policy's modifications as to protective systems, as

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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-

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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.
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according to Plaintiffs, there can be no other credible or logical

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explanation for Defendant's denial of Plaintiffs' claim.

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Apart from those facts, the remainder of Plaintiffs' deceit

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pleadings are purely conclusory statements, like the allegation

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that Defendant omitted P-7 "intentionally with malice, fraud, and

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oppression."

Id.

None of Plaintiffs' allegations about deceit or promissory

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Id.

fraud are plausible or specific enough to state a claim.

Again,

United States District Court

For the Northern District of California

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since the Policy Declaration requires a Central System Burglar

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Alarm, Plaintiffs have pleaded at most a breach of contract if they

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indeed had such a system in place.

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the complaint and the relationship between insurer and insured lead

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to a conclusion that Defendant must have meant to defraud

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Plaintiffs, but the Court finds this untenable: a claim sounding in

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fraud must show much more than this to be plausible.

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regardless of whether Plaintiffs meant their deceit claim to be an

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alternative to their fraudulent misrepresentation claim or, more

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properly, a promissory fraud claim, the deficiencies of their

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pleadings as described above render the claim unsupportable.

Plaintiffs insist the facts of

Plaintiffs' deceit claim is DISMISSED.

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Further,

Plaintiffs have leave

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to amend if they are able to correct the factual deficiencies

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described above.

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clarify exactly what tort they are pleading, and they must also

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keep in mind that (as above) the Court's interpretation of the

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Policy is a matter of law.

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///

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///

If Plaintiffs do re-plead this claim, they should

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V.

CONCLUSION
For the reasons explained above, the Court GRANTS Defendant

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AMCO Insurance Company's motion to dismiss Plaintiffs Mohsen

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Mohamed and Oakland M&M, Inc.'s complaint.

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claims as to Mr. Mohamed are DISMISSED WITH PREJUDICE.

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intentional misrepresentation and deceit claims are DISMISSED with

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leave to amend, per above.

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breach of the implied covenant of good faith and fair dealing

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remain in the case as to Plaintiff Oakland M&M, Inc.

United States District Court

For the Northern District of California

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All of Plaintiffs'
Plaintiffs'

Plaintiffs' breach of contract and

Plaintiffs have thirty (30) days from this Order's signature

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date to file an amended complaint.

If they do not, the deficient

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claims may be dismissed with prejudice.

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IT IS SO ORDERED.

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Dated: April ___, 2013
UNITED STATES DISTRICT JUDGE

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