Novalk, LLC v. Kinsale Ins. Co.

1

NOVALK, LLC, Plaintiff, v. KINSALE INSURANCE CO., DOES 1 through 50, Inclusive. Defendants.

No. 22-cv-00290-BEN-RBB

United States District Court, S.D. California

December 9, 2022

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

[ECF NO. 7]

HON ROGER T. BENITEZ, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Plaintiff Novalk, LLC (“Plaintiff”) brings this action against its insurer, Defendant Kinsale Insurance Company (“Defendant”) and Does 1 through 50 (“Doe Defendants”) for alleged breaches of Defendant's agreement to insure Plaintiff. ECF No. 1.^[1]

Before the Court is Defendant's Motion to Dismiss Plaintiff's Complaint Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (the “Motion”). ECF No. 7. The motion was submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1) and Rule 78(b) of the Federal Rules of Civil Procedure.

ECF No. 12. After considering the papers submitted, supporting documentation, and applicable law, the Court GRANTS the Motion.

II. BACKGROUND

A. Statement of Facts

Plaintiff alleges that it owns real estate located at 310 Rockwood Avenue, Calexico, California, which Defendant insured. ECF No. 1-3 ¶¶ 1, 10. After a fire at the Plaintiff's property, Plaintiff notified Defendant pursuant to the policy. Id. ¶¶ 12, 15. Defendant sent adjustors to the subject property to evaluate damage and losses. Id. ¶¶ 16-17. Plaintiff alleges the amount Defendant offered to pay under the policy was less than the actual damages suffered. Id. ¶¶ 19-20. Plaintiff's suit followed thereafter.

B. Procedural History

On December 8, 2021, Plaintiff filed suit against Defendant in the Superior Court of the State of California, County of Imperial (Novalk, LLC v. Kinsale Insurance Company; and Does 1-50, inclusive, Case No. ECU002178 (the “State Court Action”)). ECF No. 1-3 at 16. The complaint in the State Court Action alleged causes of action for: (1) breach of contract; (2) breach of good faith and fair dealing^[2]; (3) bad faith denial of insurance policy claim and benefits; (4) false advertising; (5) negligent misrepresentation; (6) constructive fraud; (7) violation of the Unfair Competition Law; and (8) declaratory relief. Id. On March 4, 2022, Defendant removed this action to this Court. ECF No. 1.

III. LEGAL STANDARDS

Rule 12(b)(6) permits dismissal for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable plausible claim. See Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1990). A complaint may survive a motion to dismiss only if, taking all well pled factual allegations as true, it contains enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft, 556 U.S. at 678. “The bare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. “In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).

Where a motion to dismiss is granted, leave to amend should be liberally allowed “unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986).

IV. DISCUSSION

Defendant challenges the factual sufficiency and legal applicability of Plaintiff's claims four through eight.

A. Inclusion of Doe Defendants

As a preliminary matter, Defendant challenges the inclusion of the Doe Defendants as improper, and requests dismissal of the Complaint in its entirety. Defendant argues the complaint lacks factual allegations regarding how any Doe Defendants are liable for Plaintiff's harm. Plaintiff argues that inclusion of Doe Defendants is not grounds for dismissal of the complaint under the Federal Rules of Civil Procedure (“Federal Rules”).

Both parties cite Keavney v. County of San Diego, No. 3:19-cv-01947-AJB-BGS, 2020 WL 4192286 (S.D. Cal. 2020). There, the court dismissed the plaintiff's FAC because it did not contain any specific factual allegations against the doe “kitchen staff” and “medical staff,” and did not explain how any of the doe defendants caused a violation of plaintiff's rights. Keavney, 2020 WL 4192286 at *4. The court found that although use of doe defendants was neither authorized nor specifically barred by the Federal Rules, a complaint using fictitious names for unidentified defendants still requires “specific facts showing how each particular doe defendant violated his rights.” Id. at *4-5.

Plaintiff argues Keavney is not applicable to this case because of the differing fact pattern. However, Keavney is illustrative of the point that use of doe defendants does not dissipate the requirement that Plaintiff make sufficient factual allegations as to each defendant. In this application of Keavney, the Court agrees with Defendant.

Plaintiff's allegations regarding the Doe Defendants are sparse. Plaintiff alleges Defendant sent “adjusters and/or other authorized representatives to evaluate Plaintiff's losses” after the fire. ECF No. 1-3, ¶¶16-17. Plaintiff alleges much the same when it states “defendants employed others to investigate the loss, to conduct studies and samples from the Subject Property, and to discover the true cause and origin of the fire...” Id. ¶ 3. Additionally, Plaintiff seems to list names of specific individuals in the caption of its sixth claim for relief, “Sixth Cause of Action for Constructive Fraud (Against Evanston, Markel, Sedgwick, Montijo, and Does 1 through 25).” These individuals are not mentioned anywhere else in the complaint and are not named Defendants in this action. Whether these names are an erroneous inclusion or the names of Defendants known to Plaintiff but not yet joined is unclear. Plaintiff's complaint is similarly devoid of any mention of how Doe Defendants specifically contributed to or participated in any of actions which give rise to Plaintiff's claims for relief.

Accordingly, the Court DISMSSES Defendants Does 1 through 50 without prejudice. The Plaintiff may seek leave to file an amended complaint to amend allegations or identify any Doe Defendants dismissed by this Order.

B. Constructive Fraud, Negligent Misrepresentation and False Advertising

Defendant challenges the factual sufficiency of Plaintiff's fourth, fifth and sixth claims of false advertising, negligent misrepresentation and constructive fraud. Plaintiff responds that it has pled sufficient facts to support false advertising (claim four) and sufficient facts under the heightened pleading standard for negligent misrepresentation and constructive fraud (claims five and six).

1. False Advertising

California's false advertising law makes it unlawful for a business to “disseminate any statement ‘which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading....'” Ariz. Cartridge Remanufacturers Ass'n, Inc., v. Lexmark Intern., Inc., 421 F.3d 981, 985 (9th Cir. 2005) (quoting Cal. Bus. & Prof. Code § 17500). The law encompasses both false statements and those statements which “may be accurate on some level, but will nonetheless tend to mislead or deceive..” Arz. Cartridge Remanufacturers Ass'n, Inc., 421 F.3d at 985.

Plaintiff asserts it has pled sufficient facts to support a claim for false advertising by alleging that the parties entered into an insurance contract which included a promise to “make Plaintiff whole should the Subject Property be damaged.” Plaintiff asserts Defendant's offer of payment below the policy limits supports an inference that this statement was misleading, and that Defendant engaged in “unfair, deceptive, untrue and misleading advertising practices.” Perhaps it does support an inference, but it is no more than a thin inference and, more importantly, not sufficient to make the claim plausible.

The complaint is bereft of factual allegations supporting its assertion. Plaintiff simply asserts Defendant is a surplus lines insurance company specializing in difficult-toplace properties. Plaintiff in essence asks the Court to infer because Defendant specializes in properties that are difficult to insure, any offer of payment below policy limit or below Plaintiff's own estimation of damages must mean Defendant misled its customer. This inference is not reasonable.

The Court GRANTS Defendant's Motion to Dismiss Plaintiff's fourth claim for relief without prejudice.

2. Negligent Misrepresentation

The elements of negligent misrepresentation are: (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance, (4) justifiable reliance, and (5) resulting damage. Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Servs. Grp., Inc., 171 Cal.App.4th 35, 50 (2009) (citation omitted).

Plaintiff alleges there is conflict in the case law regarding the precise degree of particularity required in the pleading for a claim of negligent misrepresentation. However, the complaint lacks sufficient facts without applying the heightened pleading standard. Plaintiff's complaint is...