Saaiman v. American General Life Insurance Company, Inc. et al, No. 3:2018cv00596 - Document 17 (S.D. Cal. 2019)
Court Description: ORDER DENYING PLAINTIFFS MOTION TO REMAND WITHOUT PREJUDICE AND GRANTING DEFENDANTS MOTION TO DISMISS WITH LEAVE TO AMEND re 5 Defendants' Motion to Dismiss for Lack of Jurisdiction; 5 Defendants' Motion to Dismiss for Failure to State a Claim; 10 Plaintiff's Motion to Remand to State Court. Signed by Judge Barry Ted Moskowitz on 4/25/2019. (sjm)
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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 Elizabeth M. Saaiman, Case No.: 18-cv-596-BTM-AGS Plaintiff, 11 12 v. 13 American General Life Insurance Company, Inc., a Texas Corporation; ACG Life Insurance Company, a Texas Corporation; American International Group, Inc., a Delaware Corporation; AIG Life Holdings, Inc., a Delaware Corporation; SAFG Retirement Services, Inc., a Delaware Corporation, 14 15 16 17 18 19 20 ORDER DENYING PLAINTIFF’S MOTION TO REMAND WITHOUT PREJUDICE AND GRANTING DEFENDANTS’ MOTION TO DISMISS WITH LEAVE TO AMEND [ECF Nos. 10, 5] Defendants. 21 22 Plaintiff Elizabeth M. Saaiman moves to remand, (ECF No. 10 (“Mot. 23 Remand”)), and Defendants American General Life Insurance Company 24 (“American General”), AGC Life Insurance Company (“AGC”), American 25 International Group, Inc. (“AIG Group”), AIG Life Holdings, Inc. (“AIG Holdings”), 26 and SAFG Retirement Services, Inc. (“SAFG”) (collectively, Defendants) move to 27 dismiss for lack of subject matter jurisdiction and failure to state a claim, (ECF 28 No. 5 (“MTD”)). For the reasons discussed below, the Court denies Plaintiff’s 1 18-cv-596-BTM-AGS 1 motion to remand without prejudice and grants Defendants’ motion to dismiss, 2 with leave to amend. 3 In March 2009, Plaintiff’s husband, Mr. Danie Saaiman, took out a life 4 insurance policy (#YME0162737) for $1 million, issued by American General. 5 (ECF No. 1-4, Ex. 7A (“Policy”).) The only two parties to the Policy were Mr. 6 Saaiman and American General. (Id.) Mr. Saaiman was the owner of the policy, 7 and Plaintiff was the primary beneficiary. (Id.) Mr. Saaiman died on January 17, 8 2017. (ECF No. 1-2 (“Compl.”), ¶¶ 13.) No benefit payments have been made 9 on the Policy. (Id.) 10 The policy lapsed in the summer of 2016. (Id. at ¶¶ 14-15.) Mr. Saaiman 11 completed a reinstatement application on or about August 31, 2016 and 12 transmitted the application via facsimile on or about September 1, 2016. (ECF 13 No. 1-2 (“Compl.”), ¶¶ 16-17.) The policy was eventually reinstated on or about 14 March 9, 2017. (Id. at ¶ 26; ECF No. 1-4, Ex. 7 (“Adcock Decl.”), ¶ 3.) 15 On April 4, 2017, Plaintiff’s attorney, Mr. Branson, informed a service 16 relationship manager for AIG Consumer Insurance that Mr. Saaiman died in 17 January 2017 during the reinstatement process. (ECF No. 10-2 (“Branson 18 Decl.”), ¶ 7.) On April 11, 2017, Mr. Branson received a letter dated April 6, 19 2017, purporting to unreinstate the policy and refund premium payments. (Id. at 20 ¶ 8, Ex. 5.) On May 2, 2017, Mr. Branson rejected the refund of payments and 21 submitted a claim for benefits under the policy. (Compl., ¶ 30; Branson Decl., 22 ¶ 9.) Plaintiff received a letter in September 2017 denying her insurance claim. 23 (Compl., ¶ 39.) 24 On November 9, 2017, Plaintiff filed a suit in the Superior Court of 25 California, alleging violations of breach of contract, insurance bad faith, 26 conversion, and negligence. (Id.) Plaintiff raises her allegations against all five 27 Defendants, in part based on theories of alter ego and agency liability. (Id. at 28 ¶¶ 8-9.) American General is a wholly owned subsidiary of AGC, which is a 2 18-cv-596-BTM-AGS 1 wholly owned subsidiary of AIG Holdings, which is a wholly owned subsidiary of 2 SAFG, which is a wholly owned subsidiary of AIG Group. (ECF No. 1 (“Notice of 3 Removal” or “Notice”), ¶ 21.) 4 On March 21, 2018, Defendants filed a notice of removal under 28 U.S.C. 5 §§ 1332, 1441, and 1446 on the basis that the action is between parties of 6 diverse citizenship and involves an amount in controversy exceeding $75,000. 7 (Id. at ¶ 4.) Plaintiff asserts in the complaint that she is a resident of California 8 residing in the City of San Diego. (Compl., ¶ 1.) Defendants assert that 9 American General, AGC, and AIG Holdings are citizens of Texas and that AIG 10 Group is citizen of New York. (Notice, ¶¶ 7-10.) Defendants also concede that 11 SAFG is a citizen of California for diversity jurisdiction purposes and 12 consequently is nondiverse as to Plaintiff, also a citizen of California. (Id. at 13 ¶¶ 11, 16.) Defendants argue that removal is nonetheless appropriate because a 14 defendant may remove a case with a non-diverse defendant on the basis of 15 diversity jurisdiction and then seek to persuade the district court that the non- 16 diverse defendant was fraudulently joined. (Id. at ¶ 16.) 17 Plaintiff moves to remand, arguing that removal was improper because 18 Defendants fail to demonstrate that SAFG was fraudulently joined. Defendants 19 move to dismiss due to lack of subject matter jurisdiction and failure to state a 20 claim. 21 // 22 PART I. MOTION TO REMAND 23 24 Standard The removal statute is strictly construed against removal jurisdiction, and 25 the defendant bears the burden of establishing that removal is proper. Provincial 26 Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). 27 A defendant may remove a case with a non-diverse defendant on the basis of 28 diversity jurisdiction by establishing that the non-diverse defendant was 3 18-cv-596-BTM-AGS 1 fraudulently joined. See McCabe v. General Foods Corp., 811 F.2d 1336, 2 1339 (9th Cir. 1987). “The party seeking removal bears a heavy burden of 3 proving that the joinder of the in-state party was improper.” Hunter v. Philip 4 Morris USA, 582 F.3d 1039, 1044 (9th Cir. 2009) (quoting Smallwood v. Illinois 5 Central R.R. Co., 385 F.3d 568 (5th Cir. 2004) (en banc)). “If the plaintiff fails to state a cause of action against a resident defendant, 6 7 and the failure is obvious according to the settled rules of the state, the joinder of 8 the resident defendant is fraudulent.” Id. “If there is any possibility that the state 9 law might impose liability on a resident defendant under the circumstances 10 alleged in the complaint, the federal court cannot find that joinder of the resident 11 defendant was fraudulent, and remand is necessary.” Id. (quoting Florence v. 12 Crescent Res., LLC, 484 F.3d 1293, 1299 (11th Cir. 2007)). 13 To determine whether the plaintiff has stated a cause of action against a 14 resident defendant, the court looks to the complaint and need not “speculate 15 about possible claims.” Kwasniewski v. Sanofi-Aventis U.S., LLC, 637 Fed. 16 App’x 405, 406 (9th Cir. 2016) (citing Hunter, 582 F.3d at 1046). Moreover, 17 whether the complaint is sufficient in stating a claim against the resident 18 defendant “does not include consideration of whether, with further discovery, the 19 plaintiff may uncover a factual basis for its claims.” TPS Utilicom Servs., Inc. v. 20 AT& T Corp., 223 F. Supp. 2d 1089, 1102 (C.D. Cal. 2002) (emphasis in 21 original). Any “deference given to the plaintiff in a fraudulent joinder analysis 22 means that the court refrains from delving into the merits of defenses that do not 23 present a procedural bar to the action.” Id. 24 Finally, while the test for fraudulent joinder resembles a Rule 12(b)(6) 25 analysis, the inquiry is broader in that “[t]he defendant seeking removal to the 26 federal court is entitled to present the facts showing the joinder to be fraudulent.” 27 Id. (citing McCabe, 811 F.2d at 1339); see also Hunter, 582 F.3d at 1044. 28 // 4 18-cv-596-BTM-AGS 1 2 Discussion Plaintiff’s complaint alleges breach of contract, breach of the implied 3 covenant of good faith and fair dealing, conversion, and negligence. Plaintiff 4 brings these claims against Defendants under theories of direct and vicarious 5 liability. Defendants argue that Plaintiff fails to plead facts to support the 6 allegations that the nondiverse defendant, SAFG, is liable under any theory. 7 A. Failure to State A Claim Under a Theory of Direct Liability 8 Plaintiff fails to state any cause of action against SAFG under a theory of 9 direct liability. First, any breach of contract claim asserted directly against SAFG 10 must fail because SAFG was never a party to the Policy. The only two parties to 11 the contract were Mr. Saaiman and American General. As to SAFG, Plaintiff 12 does not allege the existence of a contract, breach, or resulting damages. See 13 Oasis West Realty, LLC v. Goldman, 51 Cal. 4th 811, 820-21 (2011) (“The 14 elements of a cause of action for breach of fiduciary duty are the existence of a 15 fiduciary relationship, breach of fiduciary duty, and damages.”). 16 Second, Plaintiff fails to state a cause of action against SAFG based on a 17 breach of the implied covenant of good faith and fair dealing because Plaintiff 18 does not allege contractual privity with SAFG. Fireman’s Fund Ins. Co. v. 19 Maryland Cas. Co., 21 Cal. App. 4th 1586, 1599 (1994) (stating that action for 20 breach of the implied covenant of good faith and fair dealing requires a 21 contractual relationship between the parties because the covenant is an implied 22 term in the contract). Nor does Plaintiff allege that SAFG took any wrongful acts 23 to interfere with Plaintiff’s rights under the Policy. 24 Third, Plaintiff’s claim for conversion fails because Plaintiff does not present 25 facts that SAFG took any wrongful action to interfere with Plaintiff’s possession of 26 unearned premium payments allegedly belonging to her. McKell v. Washington 27 Mut. Inc., 142 Cal. App. 4th 1457, 1491 (2006) (“A cause of action for conversion 28 requires allegations of plaintiff’s ownership or right to possession of property; 5 18-cv-596-BTM-AGS 1 defendant’s wrongful act toward or disposition of the property, interfering with 2 plaintiff’s possession; and damage to plaintiff.”). 3 Fourth, the complaint fails to state a negligence claim against SAFG 4 because Plaintiff makes no allegation that SAFG played any role in the 5 administration of the Policy, the reinstatement process, or the handling of 6 Plaintiff’s insurance claim. Thus, SAFG owed no legal duty to Plaintiff. Huber v. 7 Tower Grp., Inc., 881 F. Supp. 2d 1195, 1199 (E.D. Cal. 2012) (characterizing 8 the elements to state a claim for negligence as follows, “(1) a legal duty to use 9 reasonable care, (2) breach of that duty, and (3) proximate cause between the 10 breach and (4) the plaintiff's injury”) (citing Mendoza v. City of L.A., 66 Cal. App. 11 4th 1333, 1339 (1998)). 12 While Plaintiff demonstrates that SAFG and American General share at 13 least one corporate officer, Julie Cotton Hearne, this is insufficient to state any 14 claim based on direct liability. Specifically, Plaintiff emphasizes that Ms. Hearne 15 is the Vice President and Secretary of both SAFG and American General. (See 16 ECF No. 12-1 (“SAFG Hearne Decl.”); ECF No. 12-2 (“American General Hearne 17 Decl.”).) Plaintiff argues that Ms. Hearne’s role as both an officer of SAFG and 18 American General supports a claim of intentional interference with a contractual 19 relationship against SAFG under a theory of direct liability because the two 20 declarations together demonstrate SAFG’s knowledge of the insurance contract. 21 (ECF No. 13 (“Pl.’s Reply”), p. 9 (citing Higgins v. Standard Fed. Sav. & Loan 22 Ass’n, 188 Cal. App. 2d 68, 71-72 (1961) for the proposition that when an 23 individual is an agent of two companies, her knowledge about one is imputed to 24 the other).) Even so, and as Plaintiff also points out, intentional interference with 25 a contractual relationship also requires a contract between the plaintiff and a third 26 party, intentional acts by the defendant designed to induce a breach or disruption 27 of the contractual relationship, actual breach or disruption, and resulting damage. 28 Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990). 6 18-cv-596-BTM-AGS 1 However, as stated above, Plaintiff has not pled any facts that SAFG acted in 2 any way to interfere in the Policy. 3 B. Failure to State Any Claim Under Theories of Vicarious Liability 4 Plaintiff also fails to state a claim based on the theory that SAFG is liable 5 for the acts of American General. Under California law, a parent corporation may 6 be held vicariously liable for the acts of its subsidiary only if that subsidiary is 7 either the agent or alter ego of the parent. Salkin v. United Servs. Auto Ass’n, 8 767 F. Supp. 2d 1062, 1065 (C.D. Cal. 2011). To allege claims based on agency 9 or alter ego liability, Plaintiff must plead specific facts, rather than mere 10 conclusory allegations. See Cree, Inc. v. Tarr Inc., No. 3:17-cv-00506, 2017 WL 11 3219974, *7 (S.D. Cal. July 28, 2017) (alter ego); Lincoln III v. Daylight Chem., 12 No. SACV 10-1573, 2011 WL 13225067, *7 (C.D. Cal. Feb. 14, 2011) (agency). 13 Whether a principal-agent relationship exists between a parent corporation 14 and its subsidiary hinges on the degree of control the parent exerts over the 15 subsidiary. See Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 16 541 (2000) (“Control is the key characteristic of the agent/principal relationship.”). 17 Liability may be attributed to the parent “where the nature and extent of the 18 control exercised over the subsidiary by the parent is so pervasive and continual 19 that the subsidiary may be considered nothing more than an agent or 20 instrumentality of the parent, notwithstanding the maintenance of separate 21 corporate formalities.” Id.; see also Salkin, 767 F. Supp. 2d at 1068. 22 The determination of alter ego liability is a question of fact, not law. See 23 Misik v. D’Arco, 197 Cal. App. 4th 1065, 1071-72 (2011). There are two general 24 requirements, first “that there be such unity of interest and ownership that the 25 separate personalities of the [parent] and the [subsidiary] no longer exist” and 26 second “that, if the acts are treated as those of the [subsidiary] alone, an 27 inequitable result will follow.” Mid-Century Ins. Co. v. Gardner, 9 Cal. App. 4th 28 1205, 1212 (1992) (quotations and citations omitted). Moreover, courts have 7 18-cv-596-BTM-AGS 1 relied on an array of more than fifteen different factors when making the 2 determination as to the first requirement. See id. at 1213 (citing Associated 3 Vendors, Inc. v. Oakland Meat Co., 210 Cal. App. 2d 825, 838-40 (1962)). 4 Relevant considerations to the inquiry here include the “identification of the 5 directors and officers of the two entities in the responsible supervision and 6 management” and “the employment of the same employees and/or attorney.” 7 Associated Vendors, Inc., 210 Cal. App. 2d at 840-41. 8 9 Plaintiff argues she has provided facts sufficient to satisfy the requirements for stating a claim based on theories of agency and alter ego liability. For 10 example, Plaintiff points out that SAFG and American General share a corporate 11 officer, Julie Cotton Hearne. (See SAFG Hearne Decl.; American General 12 Hearne Decl.) However, this fact does not support a theory of vicarious liability. 13 See Sonora Diamond Corp., 83 Cal. App. 4th at 549 (“It is entirely appropriate for 14 directors of a parent corporation to serve as directors of its subsidiary, and that 15 fact alone may not serve to expose the parent corporation to liability for its 16 subsidiary’s acts.”) (internal citations and quotations omitted). 17 Plaintiff also presents correspondence from a medical records company 18 that stated it was requesting records from Mr. Saaiman on behalf of an insurance 19 company called, “AIG Life & Retirement-Nashville.” (Branson Decl., ¶ 3; Mot. 20 Remand, Ex. 1.) Plaintiff argues that this shows that American General was not 21 solely responsible for the underwriting, issuance, and administration of the 22 Policy. (Branson Decl., ¶ 3.) In response, Defendants declare that American 23 General has an office near Nashville, where it has employees who handle claims. 24 (American General Hearne Decl., ¶ 4.) Without more, the correspondence fails 25 to show that American General’s actions could be attributed to another entity or 26 were the result of another entity’s direction or supervision. 27 28 Plaintiff also offers a copy of the “AIG Code of Conduct,” which “provides ethical guidelines for conducting business on behalf of all AIG companies.” 8 18-cv-596-BTM-AGS 1 (Branson Decl., ¶ 4; Mot. Remand, Ex. 2.) In addition, Plaintiff provides a copy of 2 the “American International Group, Inc. Third Party Code of Conduct” published 3 on AIG Group’s website. (Branson Decl., ¶ 5; Mot. Remand, Ex. 3.) In the 4 introduction, the code refers to “AIG” as “American International Group, Inc., 5 along with its subsidiaries and affiliates (collectively, ‘AIG’).” (Mot. Remand, Ex. 6 3.) In the second paragraph on “scope,” the code also states that it “applies to all 7 Third Parties engaged by AIG anywhere in the world.” (Id.) However, these 8 facts do not demonstrate the kind of pervasive and continual control necessary 9 for establishing agency liability or such a unity of interest that would make it 10 difficult to distinguish among the AIG companies, as required for alter ego 11 liability. See Sonora Diamond Corp., 83 Cal. App. 4th at 542 (emphasizing that 12 agency requires a showing that the parent “moved beyond the establishment of 13 general policy and direction for the subsidiary and in effect [took] over 14 performance of the subsidiary’s day-to-day operations in carrying out that policy”) 15 (emphasis in original). 16 Plaintiff also presents an email requesting an additional payment to 17 reinstate the Policy from Ms. Sheena Long, whose signature block includes “AIG” 18 and indicates that she is a “Service Relationship Manager” in the “Customer 19 Solutions Unit – Life” of “AIG Consumer Insurance.” (Branson Decl., ¶ 6; Mot. 20 Remand, Ex. 4.) This fact fails to support claims based on agency or alter ego, 21 because it does not reveal that SAFG or any of the three other defendants were 22 controlling the operations or decision-making of American General. 23 Finally, Plaintiff pleads no facts at all in support of the second prong of 24 alter ego liability, which demands a showing that an inequitable result will follow if 25 the Court considers the actions taken by American General to be those of 26 American General alone. Specifically, Plaintiff presents no facts that American 27 General would be unable to satisfy a judgment that Plaintiff might obtain. Thus, 28 Plaintiff fails to plead facts sufficient to state any claim under agency and alter 9 18-cv-596-BTM-AGS 1 ego theories. 2 Accordingly, because Plaintiff has failed to state a claim against SAFG, the 3 Court denies Plaintiff’s motion to remand. However, the Court agrees with 4 Plaintiff that establishing agency and alter ego liability is particularly fact 5 intensive, especially with respect to the inequitable result prong of alter ego. 6 Thus, the denial is without prejudice. 7 // 8 PART II. MOTION TO DISMISS 9 10 11 Standard A. Fed. R. Civ. P. 12(b)(1) Defendants challenge the Complaint, in part, on the ground that Plaintiff 12 lacks Article III standing. Standing under Article III of the U.S. Constitution is an 13 element of subject matter jurisdiction. Generally, on a 12(b)(1) motion regarding 14 subject matter jurisdiction, unlike a 12(b)(6) motion, a court need not defer to a 15 plaintiff’s factual allegations. But the Supreme Court has held that where a 16 12(b)(1) motion to dismiss is based on lack of standing, the Court must defer to 17 the plaintiff's factual allegations and must “presume that general allegations 18 embrace those specific facts that are necessary to support the claim.” Lujan v. 19 Defenders of Wildlife, 504 U.S. 555, 561 (1992) (internal quotation marks 20 omitted). “At the pleading stage, general factual allegations of injury resulting 21 from the defendant’s conduct may suffice.” Id. at 560. In short, a 12(b)(1) motion 22 to dismiss for lack of standing can only succeed if the plaintiff has failed to make 23 “general factual allegations of injury resulting from the defendant’s conduct.” Id. 24 B. Fed. R. Civ. P. 12(b)(6) 25 Defendants also move to dismiss the Complaint for failure to state a claim 26 upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). 27 A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should be 28 granted only where a plaintiff’s complaint lacks a “cognizable legal theory” or 10 18-cv-596-BTM-AGS 1 sufficient facts to support a legal claim. Balistreri v. Pacifica Police Dept., 901 2 F.2d 696, 699 (9th Cir. 1988). When reviewing a motion to dismiss, the 3 allegations of material fact in the plaintiff’s complaint are taken as true and 4 construed in the light most favorable to the plaintiff. Parks Sch. of Bus., Inc. v. 5 Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Although detailed factual 6 allegations are not required, the factual allegations made “must be enough to 7 raise a right to relief above the speculative level.” Bell Atlantic v. Twombly, 550 8 U.S. 544, 555 (2007). Only a complaint that states a plausible claim for relief will 9 survive a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). 10 11 Discussion A. Four Defendants Other Than American General Aside from Defendant American General, Plaintiff’s pleadings make no 12 13 meaningful factual distinctions among Defendants.1 Thus, the analysis in Part I 14 determining that the Complaint fails to state any claim against Defendant SAFG 15 applies to Defendants AGC, AIG Group, and AIG Holdings as well. Accordingly, 16 the Court grants Defendants’ motion to dismiss as to Defendants SAFG, AGC, 17 AIG Group, and AIG Holdings. 18 B. American General 19 20 Defendant American General moves to dismiss the Complaint with respect to causes of action two, three, and four. 21 1. Breach of Implied Covenant of Good Faith and Fair Dealing 22 Plaintiff alleges that American General breached the covenant of good faith 23 and fair dealing implicit to the Policy. Plaintiff argues that American General 24 breached the covenant by delaying the proper reinstatement of the Policy and by 25 denying Plaintiff’s insurance claim under the Policy. American General moves to 26 27 28 1 As discussed above, the exception is that Plaintiff points out that SAFG and American General share a corporate officer, Ms. Hearne. In Part I, the Court held that this fact was not sufficient to establish claims of either direct or vicarious liability. 11 18-cv-596-BTM-AGS 1 dismiss this cause of action in its entirety, arguing that Plaintiff lacks standing to 2 assert bad faith based on any delay in the reinstatement that occurred before Mr. 3 Saaiman died and that Plaintiff fails to state a claim. 4 Under California law, “[e]very contract imposes on each party an implied 5 duty of good faith and fair dealing. Simply stated, the burden imposed is that 6 neither party will do anything which will injure the right of the other to receive the 7 benefits of the agreement.” Bosetti v. U.S. Life Ins. Co., 175 Cal. App. 4th 1208, 8 1235 (2009) (internal citations and quotations omitted). A breach of this duty, 9 often referred to as bad faith as a shorthand, “implies unfair dealing rather than 10 mistaken judgment.” Id. To avoid liability for bad faith, an insurer’s “actions and 11 position with respect to the claim of an insured, and the delay or denial of policy 12 benefits, must be founded on a basis that is reasonable under all the 13 circumstances.” Id. at 1237 (emphasis in original) (internal citations and 14 quotations omitted). This is an objective standard. Id. Importantly, “[a]n insurer 15 denying or delaying the payment of policy benefits due to the existence of 16 a genuine dispute with its insured as to the existence of coverage liability or the 17 amount of the insured’s coverage claim is not liable in bad faith even though it 18 might be liable for breach of contract.” Id. To state a claim of breach of the 19 implied covenant of good faith and fair dealing, the Complaint must allege (1) the 20 existence of a contract between plaintiff and defendant, (2) substantial 21 performance by plaintiff, (3) conditions required for defendant’s performance had 22 occurred or were excused, (4) defendant unfairly interfered with plaintiff’s rights 23 under the contract, and (5) plaintiff suffered harm as a result of defendant’s 24 conduct. See Judicial Council of California Civil Jury Instructions (2019 ed.), 25 CACI No. 325. 26 27 28 a. Delay in the Reinstatement of the Policy As to the delay in the reinstatement of the Policy, Plaintiff alleges that American General failed to act promptly in addressing the reinstatement 12 18-cv-596-BTM-AGS 1 application. Plaintiff asserts that Mr. Saaiman completed and sent in the 2 reinstatement application in September 2016 and that there was no reason to 3 believe that this was not enough to reinstate the Policy. (Compl., ¶¶ 16-17, 56- 4 57.) Nor did Plaintiff know until January 2017 that the Policy had not in fact been 5 reinstated. (Id.) When Mr. Saaiman’s attorney realized the Policy had not been 6 reinstated in January 2017, he allegedly took immediate steps to address the fact 7 that the Policy had not been reinstated. (Id. at ¶¶ 20-30.) Even so, the parties 8 do not dispute that the Policy was not reinstated until several months later. (Id. 9 at ¶ 26.) 10 Plaintiff has standing to bring a bad faith claim with respect to events 11 relating to the reinstatement before Mr. Saaiman died because Plaintiff was at all 12 times a third party beneficiary of the Policy. See Fireman’s Fund Ins. Co. v. 13 Maryland Cas. Co., 21 Cal. App. 4th 1586, 1599-1600 (1994) (“Certainly a 14 noncontracting party is entitled to sue an insurer for breach of the implied 15 covenant if that noncontracting party is a third party beneficiary of the insurance 16 contract.”). 17 However, under all the circumstances, the Complaint fails to state a claim 18 of bad faith against American General with respect to the delay. On the one 19 hand, the allegation of how much time lapsed between the submission of the 20 reinstatement application and the eventual reinstatement supports the claim that 21 the delay was unreasonable. Moreover, American General fails to raise any 22 genuine dispute as to why the delay occurred. On the other hand, 23 notwithstanding the allegation of unreasonable delay, Plaintiff fails to allege that 24 she was harmed by the delay, because the Policy was eventually reinstated. A 25 claim of bad faith would require Plaintiff to allege that she suffered an injury as a 26 result of the delay. Perhaps Plaintiff asks the Court to infer that the delay 27 interfered with any possibility Plaintiff may have had in timely curing the 28 deficiencies in the reinstatement application that American General relied on in 13 18-cv-596-BTM-AGS 1 denying the insurance claim. However, no facts are alleged to support this 2 hypothetical injury, and asking the Court to adopt this inference would be pure 3 speculation. 4 5 b. Denial of Insurance Claim As to the denial of Plaintiff’s insurance claim, Plaintiff alleges that the 6 reasons given by American General in its denial letter were merely pretextual. 7 Plaintiff further alleges that the statements made by American General in the 8 denial letter are false. The denial letter, however, informed Plaintiff that the claim 9 was denied because Mr. Saaiman failed to provide important information in 10 response to at least three questions on the reinstatement application, and for that 11 reason, the reinstatement application would not have been reinstated upon 12 further evaluation of Mr. Saaiman’s health. Thus, American General 13 demonstrates that there is genuine dispute as to why Plaintiff’s insurance claim 14 was denied. As a result, American General is not liable in bad faith based on the 15 denial of benefits, even though it might be liable for breach of contract. 16 17 Accordingly, the Court grants the dismissal of the second cause of action for breach of the implied covenant of good faith and fair dealing. 18 2. Conversion 19 Plaintiff alleges a claim of conversion based on unearned premiums. “A 20 cause of action for conversion requires allegations of plaintiff’s ownership or right 21 to possession of property; defendant’s wrongful act toward or disposition of the 22 property, interfering with plaintiff’s possession; and damage to plaintiff.” McKell, 23 142 Cal. App. 4th at 1491 (2006). “Money cannot be the subject of a cause of 24 action for conversion unless there is a specific, identifiable sum involved, such as 25 where an agent accepts a sum of money to be paid to another and fails to make 26 the payment.” Id. 27 28 Plaintiff argues she is indisputably owed at least $322.01 plus interest based on unearned premium payments that should have been refunded to her. 14 18-cv-596-BTM-AGS 1 Plaintiff essentially argues that she has been overcharged under the Policy, 2 which Plaintiff can assert as part of her breach of contract claim. An overcharge, 3 however, is not enough to make out an independent claim of conversion. Id. at 4 1492 (explaining that California courts have declined to recognize a cause of 5 action for conversion based on an overcharge). Moreover, Plaintiff does not 6 allege that American General has been or is holding this payment on behalf of 7 another. See id. at 1491. Thus, the Court grants Defendants’ motion to dismiss 8 the third cause of action against American General. 9 10 3. Negligence Plaintiff alleges that American General was negligent in failing to (a) 11 process the reinstatement application in a timely manner, (b) monitor the 12 reinstatement application for time sensitive communication, (c) respond promptly 13 to communications from Plaintiff, and (d) maintain the Policy or process the 14 insurance claim with reasonable care. 15 To prove a cause of action for negligence, a plaintiff must show “(1) a legal 16 duty to use reasonable care, (2) breach of that duty, and (3) proximate cause 17 between the breach and (4) the plaintiff's injury.” Huber, 881 F. Supp. 2d at 1199 18 (E.D. Cal. 2012) (citing Mendoza v. City of L.A., 66 Cal. App. 4th 1333, 1339 19 (1998)). 20 As to (a) and (b), American General argues that Plaintiff cannot allege 21 injury due to any failure to process and monitor the reinstatement application 22 because the Policy was eventually reinstated. The Court agrees and holds that 23 without alleging any harm or damages, Plaintiff’s negligence claim with respect to 24 the processing of the reinstatement application must fail. 25 As to (c) and (d), which allege negligence in the handling of Plaintiff’s 26 insurance claim, Plaintiff fails to state a claim because California does not 27 recognize a cause of action based on negligent claim handling. See id. at 1200 28 (“[U]nder California law, negligence claims do not generally lie against insurers.”). 15 18-cv-596-BTM-AGS 1 California courts explain that “a contractual obligation may create a legal duty 2 and the breach of that duty may support an action in tort,” but “conduct 3 amounting to a breach of contract becomes tortious only when it also violates a 4 duty independent of the contract arising from principles of tort law.” Erlich v. 5 Menezes, 21 Cal. 4th 543, 551 (1991). Here, Defendant’s obligation under the 6 Policy was to properly handle any insurance claim. There is no independent duty 7 to take reasonable care in the handling of the claim, so Plaintiff fails to state a 8 cause of action for negligence with respect to the handling of the insurance 9 claim. 10 11 Thus, the Court grants Defendants’ motion to dismiss the fourth cause of action against American General. 12 13 CONCLUSION For the reasons discussed above, Plaintiff Elizabeth M. Saaiman’s motion 14 to remand (ECF No. 10) in denied without prejudice. Defendants’ motion to 15 dismiss (ECF No. 5) is granted, with leave to amend. Any amended complaint 16 must be filed and served by May 17, 2019. 17 IT IS SO ORDERED. 18 Dated: April 25, 2019 19 20 21 22 23 24 25 26 27 28 16 18-cv-596-BTM-AGS
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