Court: District Court, C.D. California; June 14, 2016; Federal District Court
The court granted motions to dismiss from Infinity Insurance Company and Liberty Mutual Fire Insurance Company regarding multiple causes of action in the First Amended Complaint (FAC). The motions were submitted on June 1, 2016, with the court evaluating the sufficiency of the claims based on Federal Rule of Civil Procedure 12(b)(6). For a complaint to survive a motion to dismiss, it must present plausible factual allegations rather than mere legal conclusions, allowing for a reasonable inference of liability.
The FAC included six causes of action, notably alleging violations of California business and insurance codes, breach of contract, conspiracy, and claims for damages related to diminished value or stigma. The court found that the plaintiffs could not demonstrate entitlement to these damages under their contracts with either defendant, as California courts have established that diminished value does not constitute "physical damage" to tangible property. Additionally, the court noted that the plaintiffs failed to establish a private right of action under Cal. Ins. Code Section 790.03, referencing the precedent set by Moradi-Shalal v. Fireman’s Fund Ins. Cos. Consequently, the majority of the plaintiffs' claims were deemed legally insufficient and were dismissed.
The First Cause of Action, brought by both Plaintiffs against both Defendants, alleges unlawful business practices in violation of Cal. Bus. Prof. Code 17200, based on violations of Cal. Ins. Code 790.03 and fraudulent actions by Defendants. However, since the Plaintiffs’ Second Cause of Action, also relying on the same code, was dismissed for lack of standing, the First Cause of Action is similarly rendered invalid, as established in Pantoja v. Countrywide Home Loans, Inc. Additionally, Plaintiffs fail to meet the heightened pleading requirements for fraud under Rule 9(b) of the Federal Rules of Civil Procedure, leading to the dismissal of this claim, as supported by Vess v. Ciba-Geigy Corp. USA.
The Third Cause of Action involves Plaintiff Copelan’s claims against Liberty for breach of contract and breach of the covenant of good faith and fair dealing. The court notes that breach of an insurance contract is limited to the explicit promises in the policy. Copelan's policy does not require Liberty to consider diminished value claims or defer subrogation claims. His argument that Liberty should have factored in diminished value during vehicle repairs contradicts Carson v. Mercury Ins. Co., which upheld that such consideration is not against public policy. Without a breach of contract, Liberty cannot be liable for breach of the implied covenant of good faith, as supported by Gunderson v. Fire Ins. Exch. and State Farm Mut. Auto. Ins. Co. Furthermore, Copelan lacks standing to claim diminished value damages because he leased the vehicle, as per Bristow v. Lycoming Engines, and does not demonstrate a concrete injury-in-fact necessary for Article III standing, in line with Lujan v. Defenders of Wildlife and Texas v. United States.
In the Fourth Cause of Action, both Plaintiffs assert a conspiracy claim against both Defendants. However, civil conspiracy is not a standalone cause of action but a doctrine imposing liability on those sharing a common plan with tortfeasors, as stated in Applied Equip. Corp. v. Litton Saudi Arabia Ltd. Furthermore, the conspiracy claim also fails to meet the fraud pleading requirements of Rule 9(b), resulting in its dismissal, consistent with Vess v. Ciba-Geigy Corp. USA.
The Sixth Cause of Action by Plaintiff Lowenthal against Infinity alleges breach of contract and breach of the covenant of good faith and fair dealing. To succeed, a plaintiff must identify a specific contractual provision that has been breached, as established in Reichert v. Gen. Ins. Co. However, Lowenthal fails to identify such a breach since Infinity's policy does not cover the diminished value damages claimed. Consequently, there is also no breach of the covenant of good faith and fair dealing, as an insurer cannot be held liable without an underlying breach of contract.
The Fifth Cause of Action by Plaintiff Copelan against Infinity seeks payment of judgment and breach of the covenant of good faith and fair dealing, asserting liability under Cal. Ins. Code 11580, which allows Copelan to assume Lowenthal's rights under the policy. However, since Infinity's policy excludes coverage for diminished value damages, it is not liable to Copelan for either claim.
Defendant Infinity’s Motion to Dismiss the First, Second, Fourth, Fifth, and Sixth Causes of Action is granted, as is Defendant Liberty’s Motion to Dismiss the First, Second, Third, and Fourth Causes of Action. The court emphasizes that on a motion to dismiss, it must accept well-pleaded facts as true and assess if they plausibly support a claim for relief. Dismissal is appropriate if there is a lack of a legal theory or insufficient factual allegations under any legal theory.
The plaintiffs’ First Amended Complaint (FAC) outlines six causes of action, with the entire case based on the premise that they are entitled to diminished value or stigma damages. However, they have not demonstrated any contractual entitlement to such damages in their agreements with Infinity or Liberty.
Plaintiffs fail to demonstrate that diminished value or stigma damages fall under "physical damage to tangible property," as defined by the Ninth Circuit, which clarifies that the term "physical" excludes intangible economic losses. Consequently, claims for diminished value are not considered "property damage" under relevant insurance policies, leading to the rejection of most of Plaintiffs' claims. The Second Cause of Action, alleging unfair and deceptive practices under Cal. Ins. Code § 790.03, is dismissed because California law does not provide a private right of action for such violations. This dismissal also impacts the First Cause of Action, which alleges unlawful business practices based on the same section, as it lacks a valid underpinning. Additionally, Plaintiffs do not plead fraud with the required specificity under Rule 9b, further undermining the First Cause of Action. The Third Cause of Action, filed by Plaintiff Copelan against Liberty for breach of contract, fails as the policy does not mandate consideration of diminished value in repair decisions. This position is supported by case law stating that an insurer's decision to repair, without accounting for depreciation, does not constitute a breach of contract or violate the covenant of good faith and fair dealing. Without a breach, liability for bad faith cannot be established.
Copelan lacks standing to pursue a diminished value claim because he leased the vehicle, as established in Bristow v. Lycoming Engines, where only an owner can claim such damages. His potential to purchase and resell the vehicle does not constitute a concrete injury-in-fact necessary for Article III standing, following the precedent set in Lujan v. Defenders of Wildlife and Texas v. United States regarding contingent future events.
In the Fourth Cause of Action, the plaintiffs allege conspiracy against both defendants; however, civil conspiracy is not a standalone cause of action but a doctrine assigning liability to those who share in the tortious plan, as clarified in Applied Equip. Corp. v. Litton Saudi Arabia Ltd. Additionally, the plaintiffs fail to allege fraud with the required specificity under Rule 9b, as outlined in Vess v. Ciba-Geigy Corp. USA.
The Sixth Cause of Action for breach of contract and breach of the covenant of good faith and fair dealing, raised by Plaintiff Lowenthal against Infinity, lacks merit as no specific contractual provision has been breached, per Reichert v. Gen. Ins. Co. Furthermore, without a breach of the insurance contract, Infinity cannot be liable for breach of good faith.
Copelan's Fifth Cause of Action against Infinity for payment of judgment and breach of the covenant of good faith also fails because, under Cal. Ins. Code 11580, he does not have a valid claim for diminished value damages, as previously indicated. Consequently, Infinity is not liable to Copelan for either claim.
The court has granted Defendant Infinity's motion to dismiss the First, Second, Fourth, Fifth, and Sixth Causes of Action, as well as Defendant Liberty's motion to dismiss the First, Second, Third, and Fourth Causes of Action.
