1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 JOSE CASTILLO and DOLORES Case No. 24-cv-06550-BLF CASTILLO, 9 Plaintiffs, ORDER GRANTING DEFENDANT 10 GEICO’S MOTION TO DISMISS v. FIRST AMENDED COMPLAINT WITH 11 LEAVE TO AMEND GEICO INSURANCE AGENCY, LLC and 12 HOMESITE INSURANCE COMPANY OF [Re: ECF 17] THE MIDWEST, 13 Defendants. 14
15 16 This action arises from an insurance coverage dispute relating to a homeowner’s policy 17 issued to Plaintiffs Jose and Dolores Castillo (“Plaintiffs”) for a home located in Salinas, 18 California (“the property”). Plaintiffs claim that the insurer, Defendant Homesite Insurance 19 Company of the Midwest (“Homesite”), has breached the policy and acted in bad faith by failing 20 to provide coverage for fire damage to the property. Plaintiffs also claim that Homesite and its 21 agent, Defendant GEICO Insurance Agency, LLC (“GEICO”), made negligent misrepresentations 22 when speaking to Plaintiffs prior to the policy’s issuance. 23 Before the Court is Defendant GEICO’s motion to dismiss the operative first amended 24 complaint (“FAC”) under Federal Rule of Civil Procedure 12(b)(6). See Def. GEICO’s Mot., ECF 25 17. The Court previously submitted the motion for decision without oral argument. See Order 26 Vacating Hearing, ECF 32. 27 Defendant GEICO’s motion to dismiss is GRANTED WITH LEAVE TO AMEND for the 1 I. BACKGROUND1 2 In September 2023, Plaintiffs called Defendant GEICO to obtain homeowner’s insurance 3 for a home they had recently purchased at 110 Chestnut Street in Salinas, California (“the 4 property”). See FAC ¶ 7. Plaintiffs intended to use the property as their residence. See id. The 5 GEICO agent offered a policy that would cover fire damage, and Plaintiffs accepted. See id. ¶ 8. 6 Defendant GEICO was acting as the agent of Defendant Homesite, which ultimately issued the 7 homeowner’s policy. See id. In relevant part, the policy provides coverage of $306,000 for the 8 dwelling, $30,600 for other structures, $153,000 for personal property, and $91,800 for loss of 9 use. See id. Plaintiffs paid the policy premium of $1,206.00. See id. ¶ 10. 10 Plaintiffs immediately moved a substantial number of items into property, including a 11 piano, ten to fifteen pieces of other furniture, and plastic totes. See FAC ¶ 12. Plaintiffs also 12 began paying for utilities and visited the property several times per week. See id. ¶ 13. However, 13 Plaintiffs did not complete the move-in process due to personal reasons. See id. ¶ 14. On April 8, 14 2024, a fire started at the property and caused significant damage. See id. ¶ 14. The property was 15 red tagged and deemed unsafe by the City of Salinas. See id. 16 Immediately following the fire, Plaintiffs submitted a claim under the policy. See FAC ¶ 17 16. Homesite responded by letter, advising that it was investigating the loss under a reservation of 18 rights, because it appeared the property was not Plaintiffs’ primary residence and in Homesite’s 19 view coverage depended on the property being occupied as Plaintiffs’ primary residence. See id. 20 Plaintiffs allege that the policy does not require them to reside in the property full-time. See id. ¶ 21 17. It is Plaintiffs’ position that the policy requires only that they “occupy” the property, which 22 Plaintiffs contend they did. See id. Plaintiffs also contend that the GEICO agent that arranged for 23 issuance of the policy said nothing about a residency requirement for coverage. See id. ¶ 8. 24 Plaintiffs filed the present action against Homesite and GEICO in the Monterey County 25 Superior Court in August 2024. See Notice of Removal Ex. 1 (Compl.), ECF 1-1. GEICO 26
27 1 The Background section is drawn from the facts alleged in the FAC, which are accepted as true 1 removed the action to federal district court based on diversity of citizenship. See Notice of 2 Removal, ECF 1. Plaintiffs filed the operative FAC in October 2024, asserting the following 3 claims: (1) breach of contract against Homesite; (2) breach of the implied covenant of good faith 4 and fair dealing against Homesite; and (3) negligent misrepresentation against both Homesite and 5 GEICO. See FAC, ECF 14. 6 II. LEGAL STANDARD 7 When considering a motion to dismiss under Rule 12(b)(6), the Court must “take all 8 allegations of fact as true and construe them in the light most favorable to the nonmoving party.” 9 Sinclair v. City of Seattle, 61 F.4th 674, 678 (9th Cir. 2023). “Dismissal is appropriate if the 10 complaint fails to state a cognizable legal theory or fails to provide sufficient facts to support a 11 claim.” Id. “Conclusory allegations cannot defeat a motion to dismiss.” Id. 12 III. DISCUSSION 13 The FAC asserts only one claim against Defendant GEICO, Claim 3 for negligent 14 misrepresentation. GEICO moves to dismiss that claim on two grounds. First, GEICO argues that 15 Plaintiffs have not satisfied the heightened pleading standard of Federal Rule of Civil Procedure 16 9(b), under which “a party must state with particularity the circumstances constituting fraud[.]” 17 Fed. R. Civ. P. 9(b). Second, GEICO argues that Plaintiffs have failed to allege an actionable 18 misrepresentation. 19 In their opposition, Plaintiffs simply ignore GEICO’s Rule 9(b) argument, citing to the 20 ordinary pleading standard set forth in Federal Rule of Civil Procedure 8(a), which requires “a 21 short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. 22 P. 8(a)(2). Plaintiffs argue that they have stated a claim for negligent misrepresentation under that 23 standard. 24 The Court first addresses the applicability of Rule 9(b) to Plaintiffs’ claim of negligent 25 misrepresentation, and then addresses the adequacy of the claim. 26 A. Rule 9(b) Applies to the Negligent Misrepresentation Claim 27 “Federal Rule of Civil Procedure 9(b) requires more specificity including an account of the 1 to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal 2 quotation marks and citation omitted). “To satisfy Rule 9(b), a pleading must identify the who, 3 what, when, where, and how of the misconduct charged, as well as what is false or misleading 4 about the purportedly fraudulent statement, and why it is false.” Cafasso, U.S. ex rel. v. Gen. 5 Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks, alterations, 6 and citation omitted). If the plaintiff brings claims against multiple defendants, the complaint 7 must identify the role of each defendant. Rolled Alloys, Inc. v. Walls, No. 20-CV-01961-AJB- 8 KSC, 2021 WL 4034201, at *6 (S.D. Cal. Sept. 3, 2021). 9 “[N]o Ninth Circuit precedent directly addresses whether Rule 9(b) applies to negligent 10 misrepresentation claims,” and district courts are split on the issue. Rolled Alloys, 2021 WL 11 4034201, at *5. This Court agrees with those district courts that have applied Rule 9(b) to 12 negligent misrepresentation claims. See id. (collecting cases). In fact, this Court has applied the 13 Rule 9(b) standard to negligent misrepresentation claims in prior cases. See, e.g., Vitale v.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 8 JOSE CASTILLO and DOLORES Case No. 24-cv-06550-BLF CASTILLO, 9 Plaintiffs, ORDER GRANTING DEFENDANT 10 GEICO’S MOTION TO DISMISS v. FIRST AMENDED COMPLAINT WITH 11 LEAVE TO AMEND GEICO INSURANCE AGENCY, LLC and 12 HOMESITE INSURANCE COMPANY OF [Re: ECF 17] THE MIDWEST, 13 Defendants. 14
15 16 This action arises from an insurance coverage dispute relating to a homeowner’s policy 17 issued to Plaintiffs Jose and Dolores Castillo (“Plaintiffs”) for a home located in Salinas, 18 California (“the property”). Plaintiffs claim that the insurer, Defendant Homesite Insurance 19 Company of the Midwest (“Homesite”), has breached the policy and acted in bad faith by failing 20 to provide coverage for fire damage to the property. Plaintiffs also claim that Homesite and its 21 agent, Defendant GEICO Insurance Agency, LLC (“GEICO”), made negligent misrepresentations 22 when speaking to Plaintiffs prior to the policy’s issuance. 23 Before the Court is Defendant GEICO’s motion to dismiss the operative first amended 24 complaint (“FAC”) under Federal Rule of Civil Procedure 12(b)(6). See Def. GEICO’s Mot., ECF 25 17. The Court previously submitted the motion for decision without oral argument. See Order 26 Vacating Hearing, ECF 32. 27 Defendant GEICO’s motion to dismiss is GRANTED WITH LEAVE TO AMEND for the 1 I. BACKGROUND1 2 In September 2023, Plaintiffs called Defendant GEICO to obtain homeowner’s insurance 3 for a home they had recently purchased at 110 Chestnut Street in Salinas, California (“the 4 property”). See FAC ¶ 7. Plaintiffs intended to use the property as their residence. See id. The 5 GEICO agent offered a policy that would cover fire damage, and Plaintiffs accepted. See id. ¶ 8. 6 Defendant GEICO was acting as the agent of Defendant Homesite, which ultimately issued the 7 homeowner’s policy. See id. In relevant part, the policy provides coverage of $306,000 for the 8 dwelling, $30,600 for other structures, $153,000 for personal property, and $91,800 for loss of 9 use. See id. Plaintiffs paid the policy premium of $1,206.00. See id. ¶ 10. 10 Plaintiffs immediately moved a substantial number of items into property, including a 11 piano, ten to fifteen pieces of other furniture, and plastic totes. See FAC ¶ 12. Plaintiffs also 12 began paying for utilities and visited the property several times per week. See id. ¶ 13. However, 13 Plaintiffs did not complete the move-in process due to personal reasons. See id. ¶ 14. On April 8, 14 2024, a fire started at the property and caused significant damage. See id. ¶ 14. The property was 15 red tagged and deemed unsafe by the City of Salinas. See id. 16 Immediately following the fire, Plaintiffs submitted a claim under the policy. See FAC ¶ 17 16. Homesite responded by letter, advising that it was investigating the loss under a reservation of 18 rights, because it appeared the property was not Plaintiffs’ primary residence and in Homesite’s 19 view coverage depended on the property being occupied as Plaintiffs’ primary residence. See id. 20 Plaintiffs allege that the policy does not require them to reside in the property full-time. See id. ¶ 21 17. It is Plaintiffs’ position that the policy requires only that they “occupy” the property, which 22 Plaintiffs contend they did. See id. Plaintiffs also contend that the GEICO agent that arranged for 23 issuance of the policy said nothing about a residency requirement for coverage. See id. ¶ 8. 24 Plaintiffs filed the present action against Homesite and GEICO in the Monterey County 25 Superior Court in August 2024. See Notice of Removal Ex. 1 (Compl.), ECF 1-1. GEICO 26
27 1 The Background section is drawn from the facts alleged in the FAC, which are accepted as true 1 removed the action to federal district court based on diversity of citizenship. See Notice of 2 Removal, ECF 1. Plaintiffs filed the operative FAC in October 2024, asserting the following 3 claims: (1) breach of contract against Homesite; (2) breach of the implied covenant of good faith 4 and fair dealing against Homesite; and (3) negligent misrepresentation against both Homesite and 5 GEICO. See FAC, ECF 14. 6 II. LEGAL STANDARD 7 When considering a motion to dismiss under Rule 12(b)(6), the Court must “take all 8 allegations of fact as true and construe them in the light most favorable to the nonmoving party.” 9 Sinclair v. City of Seattle, 61 F.4th 674, 678 (9th Cir. 2023). “Dismissal is appropriate if the 10 complaint fails to state a cognizable legal theory or fails to provide sufficient facts to support a 11 claim.” Id. “Conclusory allegations cannot defeat a motion to dismiss.” Id. 12 III. DISCUSSION 13 The FAC asserts only one claim against Defendant GEICO, Claim 3 for negligent 14 misrepresentation. GEICO moves to dismiss that claim on two grounds. First, GEICO argues that 15 Plaintiffs have not satisfied the heightened pleading standard of Federal Rule of Civil Procedure 16 9(b), under which “a party must state with particularity the circumstances constituting fraud[.]” 17 Fed. R. Civ. P. 9(b). Second, GEICO argues that Plaintiffs have failed to allege an actionable 18 misrepresentation. 19 In their opposition, Plaintiffs simply ignore GEICO’s Rule 9(b) argument, citing to the 20 ordinary pleading standard set forth in Federal Rule of Civil Procedure 8(a), which requires “a 21 short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. 22 P. 8(a)(2). Plaintiffs argue that they have stated a claim for negligent misrepresentation under that 23 standard. 24 The Court first addresses the applicability of Rule 9(b) to Plaintiffs’ claim of negligent 25 misrepresentation, and then addresses the adequacy of the claim. 26 A. Rule 9(b) Applies to the Negligent Misrepresentation Claim 27 “Federal Rule of Civil Procedure 9(b) requires more specificity including an account of the 1 to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal 2 quotation marks and citation omitted). “To satisfy Rule 9(b), a pleading must identify the who, 3 what, when, where, and how of the misconduct charged, as well as what is false or misleading 4 about the purportedly fraudulent statement, and why it is false.” Cafasso, U.S. ex rel. v. Gen. 5 Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks, alterations, 6 and citation omitted). If the plaintiff brings claims against multiple defendants, the complaint 7 must identify the role of each defendant. Rolled Alloys, Inc. v. Walls, No. 20-CV-01961-AJB- 8 KSC, 2021 WL 4034201, at *6 (S.D. Cal. Sept. 3, 2021). 9 “[N]o Ninth Circuit precedent directly addresses whether Rule 9(b) applies to negligent 10 misrepresentation claims,” and district courts are split on the issue. Rolled Alloys, 2021 WL 11 4034201, at *5. This Court agrees with those district courts that have applied Rule 9(b) to 12 negligent misrepresentation claims. See id. (collecting cases). In fact, this Court has applied the 13 Rule 9(b) standard to negligent misrepresentation claims in prior cases. See, e.g., Vitale v. Wells 14 Fargo Bank Nat’l Ass’n, No. 5:23-CV-06019-BLF, 2024 WL 4469184, at *8 (N.D. Cal. Oct. 9, 15 2024) (“[A] negligent misrepresentation claim is a fraud-based claim. Thus, it must meet the 16 pleading requirements of Federal Rule of Civil Procedure 9(b)[.]”). The Ninth Circuit has 17 approved application of Rule 9(b)’s heightened pleading standard to negligent misrepresentation 18 claims in recent unpublished decisions. See, e.g., Avakian v. Wells Fargo Bank, N.A., 827 F. 19 App’x 765, 766 (9th Cir. 2020) (“Borrowers’ claims for unfair business practices, intentional 20 misrepresentation, fraud, and negligent misrepresentation are all fraud-based claims, and must 21 meet the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure.”). 22 Accordingly, the Court will evaluate Plaintiffs’ claim for negligent misrepresentation 23 under the heightened pleading standard of Rule 9(b). 24 B. The Negligent Misrepresentation Claim is Not Adequately Pled 25 “The elements of negligent misrepresentation are (1) the misrepresentation of a past or 26 existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to 27 induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the 1 LLC, 158 Cal. App. 4th 226, 243 (2007); see also UMG Recordings, Inc. v. Glob. Eagle Ent., Inc., 2 No. CV 14-3466 MMM (JPRx), 2015 WL 12746208, at *18 (C.D. Cal. Oct. 30, 2015) (reciting 3 elements). 4 Defendant GEICO contends that the first element, misrepresentation of a past or existing 5 material fact, is not pled with adequate specificity under Rule 9(b). Plaintiffs allege in Claim 3 6 that “Defendants represented in September 2023 that they would provide insurance coverage for 7 the Property, including the requested fire insurance,” either knowing that representation to be 8 untrue or without a reasonable basis for believing it to be true. FAC ¶ 30. With respect to 9 GEICO, Claim 3 appears to be based on allegations appearing earlier in the FAC describing how, 10 “In or about September 2023, Plaintiffs called GEICO and requested a homeowner’s insurance 11 policy for a home they had recently purchased at 110 Chestnut Street in Salinas, California (the 12 “Property”), which Plaintiffs intended to use as their residence.” FAC ¶ 7. Plaintiffs allege that 13 “GEICO’s agent asked various questions, which Plaintiffs answered truthfully, and GEICO 14 offered Plaintiffs an insurance policy to cover the Property, which Plaintiffs accepted.” Id. ¶ 8. 15 Plaintiffs also allege that, “GEICO’s agent informed Plaintiffs via telephone in or about 16 September 2023 that the policy would cover fire damage and made no mention of any residency 17 requirements for the coverage to be effective.” Id. 18 As GEICO points out, these allegations do not provide the identity of the GEICO agent 19 who made the alleged misrepresentation, nor do they indicate which of the Plaintiffs spoke to the 20 GEICO agent. Moreover, GEICO argues, the allegations do not provide any context for the 21 alleged misrepresentation, stating only that the GEICO agent “asked various questions” and that 22 “Plaintiffs answered truthfully.” FAC ¶ 8. GEICO also points out that the identification of the 23 alleged misrepresentation in Claim 3 itself lumps the two defendants together, alleging that 24 “Defendants represented . . . .” FAC ¶ 30. 25 The Court agrees with GEICO that Plaintiffs’ allegations are inadequate. Plaintiffs argue 26 that they identified the GEICO agent to the best of their ability, and that the name of the agent is 27 within GEICO’s control. If the failure to identify the agent were the only flaw in the claim, the 1 facts that are within their own control, such as which of the Plaintiffs spoke to the GEICO agent 2 and what was said. Defendants correctly point out that Plaintiffs cannot ground a claim for 3 || negligent misrepresentation on any asserted promise of the GEICO agent regarding future conduct 4 by Homesite. See UMG Recordings, Inc., 2015 WL 12746208, at *18 (“Predictions as to future 5 events, or statements as to future action by some third party, are deemed opinions, and not 6 || actionable” as negligent misrepresentations.). Nor can Plaintiffs ground their claim in a 7 misstatement regarding the scope of coverage under an existing insurance policy. See Dobbel v. 8 Liberty Ins. Corp., No. 2:17-cv-02114-MCE-EFB, 2019 WL 93433, at *5 (E.D. Cal. Jan. 3, 2019). 9 || Without specific allegations regarding the circumstances of GEICO’s alleged misrepresentation, 10 || including precisely what Plaintiffs told the GEICO representative about their needs and what the 11 GEICO representative responded, Plaintiffs’ claim for negligent misrepresentation is not 12 adequately pled under Rule 9(b). 5 13 Defendant GEICO’s motion to dismiss is GRANTED WITH LEAVE TO AMEND. 14 |) Iv. ORDER 3 15 (1) Defendant GEICO’s motion to dismiss is GRANTED WITH LEAVE TO a 16 AMEND; 3 17 (2) Plaintiffs shall file any amended pleading within 21 days, or by March 3, 2025; 18 (3) Leave to amend is limited to the deficiencies identified in this order — Plaintiffs 19 may not add any new claims or parties without express leave of the Court; and 20 (4) This order terminates ECF 17. 21 22 || Dated: February 10, 2025
BETH LABSON FREEMAN 24 United States District Judge 25 26 27 28