Calleja v. U.S. Financial Insurance Company

Filing 32

Order by Hon. Samuel Conti granting 21 Motion to Dismiss with leave to amend.(sclc1, COURT STAFF) (Filed on 12/10/2013)

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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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ANN CALLEJA,

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Plaintiff,

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v.

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U.S. FINANCIAL LIFE INSURANCE
COMPANY, CIGI DIRECT INSURANCE
SERVICES, and DOES 1-10,

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Defendants.
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) Case No. 13-00983 SC
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) ORDER GRANTING MOTION TO
) DISMISS
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I.

INTRODUCTION
Plaintiff Ann Calleja ("Plaintiff") brings this action against

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Defendants U.S. Financial Life Insurance Company ("USFL") and CIGI

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Direct Insurance Services ("CIGI") (collectively, "Defendants") for

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breach of contract and negligence.

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The crux of the Plaintiff's complaint is that Defendants refused to

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pay out on a $500,000 life insurance policy issued to Plaintiff's

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husband, who died in 2011.

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("MTD").

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("Reply"), and amenable for determination without oral argument per

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Civil Local Rule 7-1(b).

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Motion is GRANTED.

ECF No. 1 Ex. A ("Compl.").

CIGI now moves to dismiss.

ECF No. 21

The motion is fully briefed, ECF Nos. 26 ("Opp'n"), 27

For the reasons set forth below, CIGI's

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II.

BACKGROUND
In 2000, Plaintiff's husband, Joseph Calleja, took out a

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$500,000 life insurance policy issued by USFL.

Compl. ¶ 1, MTD Ex.

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A ("Policy"). 1

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the Policy.

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James Jeffries, who had sold life insurance policies on behalf

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CIGI, USFL's agent and broker, for decades.

Plaintiff is the sole and primary beneficiary on

Compl. ¶ 16.

Mr. Calleja purchased the policy from

Id. ¶ 14.

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The Policy provides a number of premium payment options,

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including an annual premium of $4,775 and a semi-annual premium of

United States District Court

For the Northern District of California

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$2,483.

Policy at 1.

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basis.

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premium due date USFL will notify Mr. Calleja of the amount of

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premium payable.

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Mr. Calleja does not pay a premium when due, the premium is in

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default.

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grace period to cure default.

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the end of the grace period, the policy is terminated.

Compl. ¶ 23.

Mr. Calleja elected to pay on a semi-annual
The Policy also states that before each

Policy at 2.

Id. at 7.

Under the terms of the Policy, if

The Policy grants Mr. Calleja a thirty-one-day
Id.

If a default is not cured by
Id. at 6.

Plaintiff alleges that inherent in the policies sold by Mr.

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Jeffries was an agreement that when a policy was in danger of

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lapsing due to non-payment of premiums USFL and/or CIGI would

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notify Jeffries in writing.

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Jeffries would allegedly "fix the problem, either by notifying and

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persuading the insured person to pay [the premium], or by paying

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any outstanding premiums, fees, or costs himself, so as to prevent

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said policy from lapsing."

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this agreement or otherwise refer to Mr. Jeffries; however,

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Compl. ¶ 17.

Id. ¶ 18.

Upon notification, Mr.

The Policy does not mention

The Court takes judicial notice of the Policy pursuant to Federal
Rule of Evidence 201 since it is referred to in the Complaint and
its contents are not in dispute.

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Plaintiff alleges that this had been Mr. Jeffries' practice for

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decades.

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Id. ¶ 17.

Mr. Calleja died on January 4, 2011.

Id. ¶ 1.

Plaintiff,

and learned, allegedly for the first time, that the policy had

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lapsed.

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was provided to Mr. Calleja or Mr. Jeffries prior to the lapse.

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appears that the Policy lapsed on November 15, 2009, and USFL

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claims that it sent a letter to Mr. Calleja that the policy was in

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United States District Court

through Mr. Jeffries, reported the death to USFL the following day

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For the Northern District of California

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danger of lapsing sometime in late 2009 or early 2010 via US Mail.

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See id. ¶¶ 33, 39.

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Calleja that his premium was due or whether Mr. Calleja continued

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to pay premiums after the Policy allegedly lapsed in 2009.

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Plaintiff alleges that neither she nor Mr. Jeffries received any

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notice of the lapse prior to January 5, 2011.

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Id. ¶ 28.

The Complaint is vague on exactly what notice
It

It is unclear whether or how USFL notified Mr.

See id. ¶¶ 24-29.

Plaintiff filed this action against USFL and CIGI on December

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31, 2012 in California Superior Court.

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counts of breach of contract, one for Defendants' failure to pay

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out on the Policy and the second for their alleged failure to

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notify Mr. Jeffries.

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that Defendants breached their duties of good faith and fair

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dealing (the "bad faith claims").

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asserts a count for negligence, again based on Defendants' alleged

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failure to notify Mr. Jeffries of the imminent lapse of the Policy.

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Plaintiff asserts two

As part of these counts, Plaintiff asserts

Id. ¶¶ 50, 64.

Plaintiff also

USFL filed an answer to the Complaint in state court.

CIGI

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subsequently removed to federal court on diversity grounds.

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now moves to dismiss pursuant to Federal Rule of Civil Procedure

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12(b)(6).

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CIGI

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III. LEGAL STANDARD
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

"Dismissal can be based

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

United States District Court

For the Northern District of California

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plausibly give rise to an entitlement to relief."

Ashcroft v.

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

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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)).

However, "the tenet that a court

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.

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IV.

DISCUSSION
The crux of Plaintiff's claims is that Defendants were

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obligated to provide Mr. Jeffries with notice that the Policy was

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in danger of lapsing, but failed to do so.

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out, Plaintiff has yet to point to any contractual provisions that

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would require Defendants to provide such notice to Mr. Jeffries.

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The Policy merely provides that, before each premium due date, USFL

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will notify Mr. Calleja of the amount of premium payable.

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no indication that Defendants breached this provision.

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the Policy does not require any follow-up notices in the event that

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Mr. Calleja fails to make a payment by the due date.

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However, as CIGI points

There is

Moreover,

The Policy

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also never mentions Mr. Jeffries, and Plaintiff has not alleged any

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specifics concerning a separate agreement whereby Defendants would

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notify him of an imminent lapse.

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Additionally, Plaintiff has yet to point any statutory

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provisions that would support her claims.

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Insurance Code was amended to state that life insurance policies

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shall not be issued until an applicant "has been given the right to

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designate at least one person, in addition to the applicant, to

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receive notice of lapse or termination of a policy for nonpayment

United States District Court

For the Northern District of California

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of premium."

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code further provide that a notice of pending lapse and termination

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of a life insurance policy shall not be effective unless it is

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mailed to the named policy owner or the owner's designee at least

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thirty (30) days prior to the effective date of the termination.

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Id. § 10113.71.

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provisions, and in any event, they appear to have taken effect

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after Mr. Calleja passed away.

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Cal. Ins. Code § 10113.72.

In 2012, the California

The new provisions of the

However, Plaintiff does not cite to these

Nor has Plaintiff pointed to any case law that would require

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Defendants to provide additional notice to Mr. Calleja or Mr.

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Jeffries.

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from the express notice requirements of a life insurance policy

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when an insurer uniformly follows a practice of giving notice and

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later departs from that practice.

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on Insurance § 71:7 (3d ed. 2013) (citing cases).

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alleges that Defendants had a "normal procedure" of notifying Mr.

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Jeffries if one of their policies was in danger of lapsing.

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Compl. ¶ 62.

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facts regarding how this "normal procedure" applied to Plaintiff.

As CIGI points out, in some cases, courts have departed

See Steven Plitt et al., 5 Couch
Here, Plaintiff

See

However, the Complaint does not contain any specific

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It is insufficient to merely plead that Mr. Jeffries'

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responsibilities were "inherent" in the Policy.

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allege how Mr. Jeffries' responsibilities were established and how

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she or Mr. Calleja came to rely on Mr. Jeffries to provide notice.

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Accordingly, the Court finds that Plaintiff has failed to

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Plaintiff must

state a plausible claim against CIGI or USFL.

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V.

CONCLUSION
For the reasons set forth above, CIGI's motion to dismiss is

United States District Court

For the Northern District of California

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GRANTED.

Plaintiff's complaint is DISMISSED with leave to amend.

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Plaintiff's amended complaint shall set forth specific factual

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allegations regarding Defendant's agreement to or practice of

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providing notice to Jeffries and how Plaintiff came to rely on

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Jeffries.

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as well as factual declarations submitted in opposition to a motion

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to dismiss, are insufficient.

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complaint within thirty (30) days of the signature date of this

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Order.

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with prejudice.

The Court reminds Plaintiff that conclusory allegations,

Plaintiff shall file her amended

Failure to do so may result in dismissal of this action

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IT IS SO ORDERED.

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December 10, 2013
UNITED STATES DISTRICT JUDGE

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