Wu v. Mt. Hawley Insurance et al

Filing 76

Order by Magistrate Judge Donna M. Ryu granting 55 Motion to Dismiss and denying 66 Motion to Remand.(dmrlc2, COURT STAFF) (Filed on 10/27/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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KIN WAI WU,

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Plaintiff,
v.

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ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS AND DENYING
PLAINTIFF’S MOTION TO REMAND

Mt. HAWLEY INSURANCE, et al.,

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No. C-11-01323-DMR

Defendants.
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Defendant Mt. Hawley Insurance (“Mt. Hawley”), an Illinois insurance carrier, moves

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pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss the third, fourth, and fifth claims for

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relief in Plaintiff Kin Wai Wu’s amended complaint. Defendants Talbot Insurance and Financial

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Services1 (“Talbot”), an insurance broker in California, and Patrick Martin, one of Talbot’s agents

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who resides in California, (together, “California Defendants”; together with Mt. Hawley,

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“Defendants”) join in Mt. Hawley’s motion. [Docket Nos. 58, 65.] Plaintiff opposes Mt. Hawley’s

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motion and cross-moves to remand this matter to California state court. The court grants Mt.

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Hawley’s motion to dismiss and denies Plaintiff’s motion to remand.

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In October 2005, Talbot merged with Hub International and changed its name to Hub International
of California Insurance Services, Inc. (“Hub”). (Am. Compl. ¶ 4.) For the purposes of this opinion, “Talbot”
encompasses Hub.

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I. Background and Procedural History
Because the court is ruling on a motion to dismiss, the court will examine all facts in the light most

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favorable to Plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam). At all relevant times,

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Plaintiff did business under the name Associated Engineering and Construction (“AEC”), a

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California corporation. (Am. Compl. ¶ 1.) At some point, Plaintiff informed California Defendants

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that he wanted to obtain “commercial general liability insurance” for AEC. (Am. Compl. ¶ 9.)

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California Defendants provided him with a detailed questionnaire about his insurance needs, which

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he completed. (Am. Compl. ¶ 9.) On or about March 2005, Martin recommended that Plaintiff

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purchase a commercial general liability policy from Mt. Hawley and informed Plaintiff that the
policy “was sufficient to cover claims against AEC, and would otherwise satisfy plaintiff’s requests

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For the Northern District of California

United States District Court

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for insurance coverage.” (Am. Compl. ¶ 10.) On April 28, 2005, Plaintiff purchased the

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recommended policy (“the Policy”). (Am. Compl. ¶¶ 10-11.)

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While covered by the Policy, a complaint was filed against Plaintiff alleging negligence,

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negligent misrepresentation, and fraud stemming from work performed by AEC which created an

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asbestos hazard. (Am. Compl. ¶ 12, Ex. B at 1.2) Plaintiff submitted the resulting claim for legal

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representation to Mt. Hawley. Mt. Hawley denied the claim, stating that the Policy did not provide

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asbestos liability protection, pollution liability protection, and breach of contract or intentional acts

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coverage. (Am. Compl. ¶¶ 12-13, Ex. B. at 4-5, 9-11.) Mt. Hawley thus did not provide Plaintiff

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with legal representation in the litigation, and Plaintiff incurred $20,064.95 in legal fees and settled

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the action for $2,000.00. (Am. Compl. ¶¶ 14-15.) In September 2009, Plaintiff filed a complaint

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against Mt. Hawley with the California Department of Insurance. (Am. Compl. ¶ 16.) The agency

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informed him that it could take no action against Mt. Hawley because the company was a non-

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admitted insurer and not subject to California regulation. (Am. Compl. ¶ 16.)

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In ruling on a 12(b)(6) motion, a court may consider materials properly submitted as a part of the
complaint, such as the two exhibits that Plaintiff attached to his amended complaint. See Hal Roach Studios,
Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990).

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On February 25, 2011, Plaintiff, proceeding pro se, brought suit in California state court

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against Mt. Hawley, Paul Sirkin Insurance (“Sirkin”),3 and Talbot. (Compl. ¶¶ 1-4.) On March 18,

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2011, Mt. Hawley removed this action to Federal court, claiming diversity jurisdiction pursuant to

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28 U.S.C. § 1441(a). [See Docket No. 1.] Soon thereafter, Talbot filed a motion to dismiss

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Plaintiff’s claims against it. [Docket No. 20.] Plaintiff cross-moved to remand the case to state

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court. [Docket No. 40.] The court granted Talbot’s motion to dismiss, denied Plaintiff’s motion to

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remand, and granted Plaintiff, who had recently retained counsel, leave to file an amended

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complaint. [Docket No. 49.] Plaintiff filed his amended complaint on August 15, 2011. [Docket

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No. 52.] Mt. Hawley now moves to dismiss Plaintiff’s Third, Fourth, and Fifth claims for relief, and
Plaintiff again moves to remand the action to state court.

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For the Northern District of California

United States District Court

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II. Mt. Hawley’s Motion to Dismiss

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A. Applicable Law

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When reviewing a motion to dismiss for failing to state a claim, the court must “accept as

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true all of the factual allegations contained in the complaint,” Erickson, 551 U.S. at 94 (citation

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omitted), and may dismiss the case “only where there is no cognizable legal theory” or there is an

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absence of “sufficient factual matter to state a facially plausible claim to relief.” Shroyer v. New

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Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citation & quotation marks

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omitted) (citing Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)). A claim has facial plausibility

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when a plaintiff “pleads factual content that allows the court to draw the reasonable inference that

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the defendant is liable for the misconduct alleged.” Iqbal, 129 S. Ct. at 1949 (citation omitted).

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B. Analysis

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Defendants attack three of the five claims in Plaintiff’s amended complaint: (1) Breach of

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Fiduciary Duty as to Talbot and Martin, (2) Negligence as to Talbot and Martin, and (3) Negligent

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Misrepresentation as to Talbot and Martin. (See Am. Compl. ¶¶ 35-51.) After outlining the general

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duties that an insurance agent or broker owes a client under California law, the court will address

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each contested claim in turn.

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Plaintiff and Sirkin filed a stipulation of dismissal of his claims against Sirkin on July 14, 2011.
[Docket No. 41.]

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1. The General Duties of an Insurance Agent or Broker in California
The duties that an insurance agent or broker has toward its client are “those duties found in

insurance requested by [the] insured.” Dairy Am., Inc. v. N.Y. Marine & Gen. Ins. Co., No. 07-0537

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LJO, 2010 WL 1328740, at *7 (E.D. Cal. Apr. 1, 2010) (citation and quotation marks omitted);

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accord Jones v. Grewe, 189 Cal. App. 3d 950, 954 (1987). A broker or agent generally need not

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“volunteer that an insured should obtain different or additional insurance coverage” or “procure a

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policy affording the client complete liability protection.” Dairy Am., Inc., 2010 WL 1328740, at *7-

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8 (citations and quotation marks omitted); accord Workmen’s Auto Ins. Co. v. Guy Carpenter & Co.,

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194 Cal. App. 4th 1468, 1476-77 (2011); Jones, 189 Cal. App. 3d at 956 (“[A]n insured’s request for

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For the Northern District of California

any agency relationship,” such as “reasonable care, diligence, and judgment in procuring the

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United States District Court

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‘sufficient coverage’ and an agent’s assurance that the policy provided ‘adequate’ coverage do not

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. . . imply an expanded principal-agent relationship. Such an exchange usually occurs within the

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context of the general principal-agent relationship. Purchasers of insurance generally seek

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‘sufficient coverage.’” (citations and quotation marks omitted)). Moreover, mere allegations that the

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insured had a continuing business relationship with an insurance agent or broker, and that he

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followed the agent or broker’s advice does not give rise to a greater duty. Dairy Am., Inc., 2010 WL

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1328740, at *8 (citation and quotation marks omitted); accord Jones, 189 Cal. App. 3d at 956. The

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insured bears responsibility for informing his agent or broker what insurance he desires, “including

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the limitations of the policy to be issued.” Dairy Am., Inc., 2010 WL 1328740, at *8 (citation and

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quotation marks omitted); accord Piper Savers, Inc. v. Nacsa, 51 Cal. App. 4th 1090, 1095-96

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(1996) (holding that broker’s duties do “not include responsibility for ensuring the insured has

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adequate coverage to protect against all eventualities”); Jones, 189 Cal. App. 3d at 956.

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2. Breach of Fiduciary Duty
Plaintiff contends that California Defendants breached their fiduciary duty to him because

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“as plaintiff’s agent,” they had a duty to disclose to him that the Policy was “not . . . sufficient

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coverage for AEC and the type of business operations of said company” and “that the California

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Department of Insurance did not have jurisdiction over MT. HAWLEY as it was a non-admitted

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carrier in the state of California.” (Am. Compl. ¶ 37; accord Am. Compl ¶ 38.)

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These assertions do not present a cognizable legal theory upon which the court may grant

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relief. Under California law, “an insurance broker cannot be sued for breach of fiduciary duty.”

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Workmen’s Auto Ins. Co., 194 Cal. App. 4th at 1470; accord Miniace v. Pac. Mar. Ass’n, No. C-

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04-3506 SI, 2005 WL 2230149, at *10 (N.D. Cal. Sept. 13, 2005) (“This Court will not expand the

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doctrine of fiduciary duty to include insurance brokers, given that it has not been recognized by

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California courts.”). The court therefore dismisses Plaintiff’s Third Cause of Action.

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3. Negligence
Plaintiff claims that California Defendants negligently failed to “ascertain[] whether the
policy issued was adequate for plaintiff’s stated business needs” and negligently “failed to conduct a
reasonably competent and diligent review of MT. HAWLEY’s status as an out of state insurance

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For the Northern District of California

United States District Court

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carrier.” (Am. Compl. ¶ 44.) This claim fails because Plaintiff has not alleged sufficient facts to

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support a claim for negligence.

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In California, a negligence claim must allege “(1) the defendant’s legal duty of care towards

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the plaintiff, (2) the defendant’s breach of that duty, (3) injury to the plaintiff as a proximate cause

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result of the breach, and (4) damage to the plaintiff.” Jones, 189 Cal. App. 3d at 954 (citation

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omitted). In rare instances, an insurance broker or agent may augment his duties to the insured if

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one of the following occurs:

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(a) the agent misrepresents the nature, extent or scope of the coverage being offered
or provided . . . , (b) there is a request or inquiry by the insured for a particular type
or extent of coverage . . . , or (c) the agent assumes an additional duty by either
express agreement or by holding himself out as having expertise in a given field of
insurance being sought by the insured.

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Dairy Am, Inc., 2010 WL 1328740, at *7 (citations and quotation marks omitted); accord

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Workmen’s Auto Ins. Co., 194 Cal. App. 4th at 1476. In this matter, Plaintiff implicitly alleged only

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one of these events. He asked California Defendants to provide him with a “commercial general

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liability insurance” policy (Am. Compl. ¶ 9), and as Plaintiff notes in his amended complaint, they

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fulfilled this duty and provided him with one. (See Am. Compl. Ex. A at 1-3.)

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Plaintiff’s argument that California Defendants negligently provided him with an inadequate

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policy does not satisfy the first prong of a negligence claim. As discussed above, he requested a

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commercial general liability insurance policy and received just that. (Am. Compl. ¶ 9, Ex. A at 1-3.)

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California Defendants had no legal duty to provide him with an insurance policy that offered

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complete liability protection, particularly when he expressly requested the type of policy that he

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received. Dairy Am., Inc., 2010 WL 1328740, at *7-8 (holding that insured bears responsibility of

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informing agent or broker what insurance he desires, “including the limitations of the policy to be

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issued”); Workmen’s Auto Ins. Co., 194 Cal. App. 4th at 1476-77; Piper Savers, Inc., 51 Cal. App.

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4th at 1095-96 (holding that broker’s duties do “not include responsibility for ensuring the insured

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has adequate coverage to protect against all eventualities”); Jones, 189 Cal. App. 3d at 956.

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With respect to Plaintiff’s contention that California Defendants acted negligently by not
“conduct[ing] a reasonably competent and diligent review of MT. HAWLEY’s status as an out of
state insurance carrier” (Am. Compl. ¶ 37), it is unclear how or if this supposed duty differs from the

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For the Northern District of California

United States District Court

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standard duty of care required in any insurance transaction. See Dairy Am., Inc., 2010 WL 1338740,

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at *7. Based upon the facts alleged in the amended complaint, which center on Mt. Hawley’s refusal

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to provide Plaintiff coverage based upon the Policy’s terms (see Am. Compl. Ex. B), Plaintiff’s

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negligence claim also does not satisfy prongs three and four of the test. He does not allege that

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California Defendants’ purported failure to review Mt. Hawley’s out of state status proximately

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caused him injury. Nor has he pled “factual content that allows the court to draw the reasonable

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inference” that California Defendants’ failure to review Mt. Hawley’s out-of-state status injured

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him. Iqbal, 129 S. Ct. at 1949 (citation omitted). Moreover, to the extent that Plaintiff argues in his

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brief that his ignorance of Mt. Hawley’s out of state status -- or that Mt. Hawley’s status per se --

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injured him, these allegations are not in the amended complaint and, therefore, not properly before

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the court. See Schneider v. Cal. Dep’t of Corrs., 151 F.3d 1194, 1197 (9th Cir. 1998). Because Plaintiff

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has failed to state a proper claim for negligence, the court dismisses the claim.

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4. Negligent Misrepresentation
Plaintiff claims that California Defendants negligently misrepresented to him “that they had

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conducted a competent and diligent investigation regarding an appropriate insurance policy for [his]

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business and advised [him] to purchase” the Policy. (Am. Compl. ¶ 48.) Specifically, he asserts

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that, contrary to California Defendants’ representations, the Policy did not adequately cover his

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business needs and that they should have informed him of the “complete ramifications for obtaining

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insurance from an out of state carrier.” (Am. Compl. ¶ 48.)

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This claim lacks sufficient alleged facts to support a cognizable legal theory and does not

Procedure 9(b). In California, negligent misrepresentation requires “(1) a misrepresentation, (2)

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with no reasonable ground to believe it to be true, (3) with intent to induce another’s reliance on the

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misrepresentation, (4) justifiable reliance, and (5) resulting damage.” Dairy Am., Inc., 2010 WL

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1328740, at *11 (citation omitted). California law treats negligent misrepresentation as a form of

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fraud. Dykstra v. Foremost Ins. Co., 14 Cal. App. 4th 361, 366 (1993). Accordingly, the pleading

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standard for the claim falls within the ambit of Rule 9(b) of the Federal Rules of Civil Procedure,

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meet the heightened pleading standards required for claims of fraud by Federal Rule of Civil

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United States District Court

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which requires that “a party must state with particularity the circumstances constituting fraud or

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mistake.” Fed. R. Civ. P. 9(b); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir.

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2009). This heightened pleading standard demands that “[a]verments of fraud must be accompanied

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by the who, what, when, where, and how of the misconduct charged. A party alleging fraud must set

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forth more than the neutral facts necessary to identify the transaction.” Kearns, 567 F.3d at 1124

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(citations omitted).

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Plaintiff fails to explain with particularity the misrepresentation that he claims California

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Defendants made to him. As Plaintiff concedes, they provided him the insurance policy he

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demanded -- a commercial general insurance liability policy. (See Am. Compl. ¶ 9, Ex. A at 1-3.)

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He also admits that California Defendants gave him a detailed questionnaire about his insurance

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needs, which he duly completed (Am. Compl. ¶ 9), but never contends that California Defendants

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acted contrary to the needs he expressed therein. Nor does he allege that he asked for a broader

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policy that offered asbestos, pollution, breach of contract, or intentional tort coverage. He also does

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not assert that California Defendants falsely informed him that the Policy covered such areas or that

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they dissuaded him from purchasing a policy that did. Instead, he repeats the vague allegations that

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the Policy did not cover any potential liability that he might face and that California Defendants

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should have informed him of the effects of Mt. Hawley’s being an out-of-state insurance provider.

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Because his negligent misrepresentation claim lacks sufficient facts alleged to support a cognizable

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legal theory and falls short of the pleading standard mandated by Rule 9(b), the court dismisses the

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claim.

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III. Motion to Remand

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A. Applicable Law

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A federal court must remand a case to state court if there is any doubt about the propriety of

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removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). Because there exists a presumption

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against removal, the defendant bears the burden of establishing that propriety. Moore-Thomas v.
Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009). When evaluating the validity of removal,

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For the Northern District of California

United States District Court

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courts generally may not look beyond the plaintiff’s pleadings and must resolve disputed questions

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of fact in favor of the plaintiff. Gully v. First Nat’l Bank in Meridian, 299 U.S. 109, 113 (1936);

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Fannie Mae v. Lopez, No. 11-CV-757 LJO, 2011 WL 4929548, at *2 (E.D. Cal. Oct. 17, 2011)

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(citing Williston Basin Interstate Pipeline Co. v. An Exclusive Gas Storage Leasehold & Easement,

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524 F.3d 1090, 1100 (9th Cir.2008)).

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B. Analysis

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Plaintiff contends that Defendants are all “necessary parties” to this action and that the case

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therefore should return to state court because this Court lacks subject matter jurisdiction. (Pl. Mot.

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Remand 3.) This assertion lacks merit. The court already has determined that it must dismiss

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Plaintiff’s Third, Fourth, and Fifth causes of action for failing to state a claim upon which relief may

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be granted. These three claims are the only claims that Plaintiff has asserted against California

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Defendants. (See generally Am. Compl.) Thus, California Defendants are no longer a part of this

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case. As the matter presently stands, only Plaintiff and Mt. Hawley remain, and diversity exists

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between them. Wisc. Dep’t of Corrs. v. Schacht, 524 U.S. 381, 388 (1998). Plaintiff’s motion to

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remand for lack of diversity jurisdiction is denied.

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IV. Conclusion
The court hereby GRANTS Mt. Hawley’s motion to dismiss and DENIES Plaintiff’s motion
to remand. The court further ORDERS the Third, Fourth and Fifth claims in Plaintiff’s amended

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complaint DISMISSED. Because Plaintiff pointed to other potential causes of action in his papers,

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the court GRANTS him until November 10, 2011 to move for leave to amend his complaint.

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Dated: October 27, 2011

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Judge D

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IT IS SO ORDERED.

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DONNA M. RYU
United States Magistrate Judge

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For the Northern District of California

United States District Court

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