City of Escondido v. General Reinsurance Corporation

• Court: District Court, S.D. California
• Decided: August 20, 2019
• Docket: 3:19-cv-00868
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CITY OF ESCONDIDO, Case No.: 19cv868-MMA (BGS)

12 Plaintiff, ORDER GRANTING GENESIS 13 v. MANAGEMENT AND INSURANCE SERVICES CORPORATION'S 14 GENERAL REINSURANCE MOTION TO DISMISS CORPORATION and GENESIS 15 MANAGEMENT AND INSURANCE 16 SERVICES CORPORATION, [Doc. No. 10] 17 Defendants. 18

19 GENERAL REINSURANCE CORPORATION, 20 Counter Claimant, 21 v. 22 CITY OF ESCONDIDO, 23 Counter Defendant. 24 25 On April 4, 2019, Plaintiff City of Escondido (“Plaintiff”) filed a Complaint for 26 breach of contract, breach of the implied covenant of good faith and fair dealing, and 27 declaratory relief in San Diego County Superior Court against Defendants General 28 Reinsurance Corporation (“GRC”) and Genesis Management and Insurance Services 1 Corporation (“Genesis”). Doc. No. 1-2. Defendants removed the action to this Court on 2 May 9, 2019. Doc. No. 1. On May 23, 2019, Plaintiff filed the operative First Amended 3 Complaint (“FAC”). Doc. No. 8 (“FAC”). Genesis now moves to dismiss the causes of 4 action against it pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. No. 10-1 5 (“MTD”). Plaintiff opposes dismissal [Doc. No. 13 (“Oppo.”)] and Genesis replied [Doc. 6 No. 14 (“Reply”)]. The Court found the matter suitable for determination on the papers 7 and without oral argument pursuant to Civil Local Rule 7.1.d.1. Doc. No. 4. For the 8 following reasons, the Court GRANTS Genesis’ motion to dismiss. 9 BACKGROUND1 10 GRC is an insurance company and Genesis is a wholly owned subsidiary of GRC. 11 FAC ¶¶ 1-2. From February 1, 1990 to May 15, 1994, Defendants insured Plaintiff for 12 workers’ compensation payments to Plaintiff’s covered employees and allocated 13 investigation, adjustment, and legal expenses. FAC ¶ 8. Plaintiff alleges that the 14 insurance policy was issued by GRC, but that it was directed by Defendants “solely to 15 Genesis with respect to claims, questions and reimbursement requests involving the 16 policy,” and “was directed by [D]efendants to submit all its claims status reports solely to 17 Genesis representatives . . . .” FAC ¶ 2. According to Plaintiff, it only communicated 18 with Genesis, who was the “sole decision maker and entirely controlled whether or not 19 reimbursements were to be issued to [P]laintiff under the policy.” Id. “Over the course 20 of more than 15 years in dealing with [P]laintiff concerning the policy, GRC and Genesis 21 acted as a unitary entity with Genesis conducting all the communications with [P]laintiff 22 concerning the policy” such that “Genesis is the alter ego of GRC.” Id. 23 Plaintiff alleges that the policy requires Defendants to indemnify Plaintiff when its 24 expenditures on a worker’s compensation claim falling within the policy period exceed 25 26 27 1 Because this matter is before the Court on a motion to dismiss, the Court must accept as true the allegations set forth in the complaint. See Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 740 28 1 the policy’s $250,000 self-insured retention. FAC ¶ 8. During the policy period, 2 Plaintiff paid or incurred liability to pay workers’ compensation claims plus allocated 3 investigation, adjustment, and legal expenses in excess of $250,000 on three claims: (1) 4 GRC claim number 6040678 for claimant Paula Westenberger (the “Westenberger 5 Claim”); (2) GRC claim number 6037896 for claimant Aida Faeldan (the “Faeldan 6 Claim”); and (3) GRC claim number 6034852 for claimant Michael Gain (the “Gain 7 Claim”) (collectively, the “Three Underlying Claims”). FAC ¶ 10. 8 Plaintiff timely submitted requests for indemnity to Defendants for amounts in 9 excess of $250,000 for each of the Three Underlying Claims. FAC ¶ 11. Each time, 10 Plaintiff alleges Defendants refused “to pay Plaintiff and . . . adopted a pattern and 11 practice of wrongful and bad faith claims evaluations, during which [D]efendants have 12 withheld benefits under the pretext of continuing to investigate while they assert a variety 13 of challenges and excuses . . . .” Id. Additionally, Defendants “have refused to 14 reasonably and timely investigate, refused to provide legitimate, reasonable or accurate 15 reasons for their refusal to provide benefits owed, and have unreasonably withheld 16 benefits owed to Plaintiff.” FAC ¶ 12. With respect to the Westenberger Claim, Plaintiff 17 alleges Defendants falsely represented that they would reimburse Plaintiff for future 18 medical payments made pursuant to a settlement agreement. FAC ¶¶ 60-77. However, 19 Defendants intended not to fully reimburse Plaintiff and intended to delay or avoid 20 making reimbursement payments. Id. Accordingly, Plaintiff asserts causes of action for 21 breach of contract, breach of the implied covenant of good faith and fair dealing, and 22 declaratory relief with respect to each of the Three Underlying Claims. Additionally, 23 Plaintiff asserts causes of action for concealment and negligent misrepresentation against 24 Defendants with respect to the Westenberger Claim. 25 A. The Westenberger Claim 26 Mrs. Westernberger injured her low back on July 30, 1993, while working as an 27 employee of Plaintiff. FAC ¶ 17. She became temporarily totally disabled due to 28 increased pain. Id. When conservative treatment proved ineffective, Mrs. Westenberger 1 underwent several failed back surgeries. FAC ¶¶ 16-17. In December 1995, Mrs. 2 Westenberger began working at the City Heights Town Council (“CHTC”). FAC ¶ 19. 3 When her pain increased, she was referred to a pain management specialist, which 4 included a series of back injections to alleviate back pain. Id. She also received a right 5 hip injection, which caused complications necessitating a right hip replacement. FAC ¶ 6 16. As a result, Mrs. Westenberger developed a left foot deformity requiring multiple 7 surgeries. Id. “These surgeries were complicated by the development of reflex 8 sympathetic dystrophy (“RSD”).” FAC ¶ 22. She was diagnosed with left foot 9 neurologic problems and complex regional pain syndrome (“CRPS”). FAC ¶ 16. Mrs. 10 Westenberger’s worker’s compensation case determined that her right hip replacement, 11 left foot deformity, left foot neurological problems, and CRPS were all causally related to 12 her industrial injury suffered while working for Plaintiff. Id. Thus, Plaintiff was 13 responsible for paying for Mrs. Westenberger’s treatment for these conditions. Id. 14 During the worker’s compensation proceeding, Plaintiff sought a right of 15 contribution against CHTC and its insurer for costs associated with Mrs. Westenberger’s 16 right hip problems and right hip replacement. FAC ¶ 34. Ultimately, 50% of Mrs. 17 Westenberger’s right hip problems were apportioned to the 1993 back injury and 50% 18 were apportioned to her full-time work at CHTC. FAC ¶ 35. However, CHTC “is a non- 19 profit community advocacy group with no assets and it had no worker’s compensation 20 insurance” during the time Mrs. Westenberger was working full-time. FAC ¶ 37. Thus, 21 Plaintiff, with Defendants’ concurrence, abandoned the contribution claim. Id. As a 22 result, Defendants purportedly knew that Plaintiff faced “near certain joint and several 23 liability” for the costs of Mrs. Westenberger’s past and future treatment that would likely 24 exceed $1 million. FAC ¶ 31. 25 In 2011, Defendants’ authorized Plaintiff to offer a structured settlement of $1.25 26 million to Mrs. Westenberger. Id. The “Compromise and Release” would release 27 Plaintiff from further disability payments and any obligation to pay for Mrs. 28 Westenberger’s future medical care. Id. Genesis advised Plaintiff that it would initially 1 fund all components of the settlement, but that Genesis would reimburse Plaintiff for 2 each settlement payment. FAC ¶ 74. Mrs. Westenberger rejected the offer because she 3 believed her future medical care would exceed the settlement amount. FAC ¶ 31. 4 In May of 2012, Plaintiff and Mrs. Westenberger entered into a “Stipulation with 5 Request for Award.” FAC ¶ 25. Defendants “authorized and approved of [Plaintiff’s] 6 entering into [the] “Stipulation with Request for Award” which stated [Plaintiff] was 7 liable for all future medical care for [Mrs. Westenberger’s] ‘low back, hips, left foot, 8 psyche, and RSD . . . .” Id. Genesis’s authorization of the settlement allegedly 9 acknowledged that Plaintiff’s payments for future medical care would be fully 10 reimbursable pursuant to the policy. FAC ¶ 62. Plaintiff alleges that Genesis’s 11 authorization of the “Stipulation and Request for Award” was a “ruse intended to defraud 12 and damage” Plaintiff. FAC ¶ 64. Genesis purportedly concealed its true intentions to 13 induce Plaintiff to enter into the settlement so that Defendants could benefit from the 14 reduced permanent disability and life pension exposure while knowing it would not fully 15 reimburse Plaintiff. Id. Genesis’ intent was to “stall, delay and concoct false reasons to 16 avoid reimbursing [P]laintiff for these future medical care payments.” Id. Defendants 17 have reimbursed Plaintiff over $1.2 million on the Westenberger claim. FAC ¶ 32. 18 “However, in 2018, Defendants began raising numerous objections to [Plaintiff’s] 19 additional reimbursement requests.” Id. Plaintiff alleges that these objections are 20 “meritless and are based upon false and intentionally inaccurate grounds as well as 21 knowing misrepresentations of California law and the terms of the Policy.” FAC ¶¶ 32- 22 45, 68-69 (listing examples of Defendants’ objections). 23 B. The Faeldan Claim 24 On September 1, 1993, Ms. Faeldan “experienced right arm and elbow pain in 25 connection with pushing a steel cabinet file and lifting boxes of police files” while 26 working as a data entry operator for Plaintiff’s Police Department. FAC ¶ 46. 27 Conservative treatment minimally improved her pain and Ms. Faeldan returned to work 28 with limited use of her right arm. Id. She then developed pain in her left arm and elbow 1 from overuse. Id. Ms. Faeldan eventually had surgery on her left elbow, was diagnosed 2 with bilateral carpal tunnel syndrome, and myofascial pain syndrome. Id. She received 3 psychiatric treatment in connection with her injuries and inability to work. Id. 4 In June of 2008, Defendants issued Plaintiff a check for $8,132.18 to reimburse 5 Plaintiff for the amounts expended by Plaintiff in excess of the policy’s retention on the 6 Faeldan claim. FAC ¶ 47. Years later, Plaintiff began making monthly life pension 7 payments to Ms. Faeldan pursuant to an earlier stipulation and award. Id. These 8 payments were in excess of the policy’s retention on the Faeldan claim. Id. Plaintiff 9 made numerous reimbursement requests to Defendants for these life pension payments to 10 no avail. FAC ¶ 49. 11 C. The Gain Glaim 12 On May 16, 1993, Mr. Gain was working as a fire investigator for Plaintiff when 13 he fell through the second story of a fire damaged building, suffering significant injuries 14 to his neck, low back, right shoulder, and right knee. FAC ¶ 51. As of 2008, Defendants 15 had reimbursed Plaintiff approximately $133,000, but determined that they overpaid 16 Plaintiff by $58,000. Id. Plaintiff issued a check to Defendants in 2009 for $58,481.75. 17 Id. After 2009, Plaintiff has paid over $17,000 in life pension payments to Mr. Gain. 18 FAC ¶ 52. For several years, Plaintiff has submitted proper reimbursement requests for 19 these life pension payments but has not received any reimbursement from Defendants. 20 FAC ¶ 53. Most of these requests have been ignored, “except for once when Defendants 21 incorrectly asserted the retention had not been exceeded.” Id. Defendants ignored 22 Plaintiff’s response with documentation showing the exceeded retention. Id. In August 23 2017, Defendants asked for more information regarding a reimbursement request. Id. 24 After receiving the information, Defendants did not reimburse Plaintiff. Id. Since then, 25 all of Plaintiff’s requests and e-mails to Defendants have been ignored. Id. 26 LEGAL STANDARD 27 A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro 28 v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A pleading must contain “a short and plain 1 statement of the claim showing that the pleader is entitled to relief . . .” Fed. R. Civ. P. 2 8(a)(2). However, plaintiffs must also plead “enough facts to state a claim to relief that is 3 plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Fed. R. Civ. 4 P. 12(b)(6). The plausibility standard thus demands more than a formulaic recitation of 5 the elements of a cause of action, or naked assertions devoid of further factual 6 enhancement. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Instead, the complaint “must 7 contain sufficient allegations of underlying facts to give fair notice and to enable the 8 opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 9 2011). 10 In reviewing a motion to dismiss under Rule 12(b)(6), courts must assume the truth 11 of all factual allegations and must construe them in the light most favorable to the 12 nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). 13 The court need not take legal conclusions as true merely because they are cast in the form 14 of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). 15 Similarly, “conclusory allegations of law and unwarranted inferences are not sufficient to 16 defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). 17 Where dismissal is appropriate, a court should grant leave to amend unless the 18 plaintiff could not possibly cure the defects in the pleading. Knappenberger v. City of 19 Phoenix, 566 F.3d 936, 942 (9th Cir. 2009). 20 DISCUSSION 21 Genesis moves to dismiss all claims against it on two grounds: (1) the claims based 22 on contract must be dismissed because Genesis is not a party to the insurance contract; 23 and (2) Genesis cannot be liable for the claims sounding in fraud because it acted within 24 the scope of its agency with GRC. MTD at 5. 25 A. Claims Based on Contract 26 Genesis avers that Plaintiff’s first, second, and fifth causes of action for breach of 27 contract, breach of the implied covenant of good faith and fair dealing, and declaratory 28 relief must be dismissed because there is no contractual relationship between Plaintiff and 1 Genesis. Id. at 10. Plaintiff maintains that Genesis is liable as the alter ego of GRC. 2 Oppo. at 8-11. Alternatively, Plaintiff contends that Genesis is liable as a member of a 3 joint venture with GRC. Id. at 11-12. In response, Genesis argues Plaintiff’s alter ego 4 and joint venture allegations are conclusory. Reply at 1-3. 5 Under California law, a defendant must have been a consenting party to the 6 contract at issue to be liable for breach of contract and breach of the implied covenant of 7 good faith and fair dealing. Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 576 (1973) 8 (holding that the non-insurer defendants were not parties to the insurance contract and 9 cannot be liable for breach of the implied covenant of good faith and fair dealing); 10 Minnesota Mut. Life Ins. Co. v. Ensley, 174 F.3d 977, 981 (9th Cir. 1999) (holding that 11 “an insurance agent cannot be held liable for breach of contract or breach of the implied 12 covenant of good faith and fair dealing because he is not a party to the insurance 13 contract”). Here, Plaintiff alleges that the insurance policy “was issued by GRC.” FAC ¶ 14 2. The insurance policy itself, which Plaintiff attached to its FAC as exhibit 1, lists GRC 15 as the insurer. Doc. No. 8-1 (“Policy”). Genesis is not named in the policy. See id. 16 Based on the face of the insurance policy, Genesis was not a party to the contract. Thus, 17 Genesis cannot be held liable for breach of contract, breach of the implied covenant of 18 good faith and fair dealing, or declaratory relief based on contract under the general rule. 19 However, the alter ego doctrine permits courts to disregard the distinction between 20 a corporation and its owner and to extend liability to the owner for the acts of the 21 corporation. Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 538 (Ct. 22 App. 2000). To establish a party as the alter ego of a corporation, two requirements must 23 be met: (1) “there must be such a unity of interest and ownership between the corporation 24 and its equitable owner that the separate personalities of the corporation and the 25 shareholder do not in reality exist[;]” and (2) “there must be an inequitable result if the 26

27 2 The Court DENIES Plaintiff’s request to judicially notice GRC’s answer and counterclaim as it did not 28 1 acts in question are treated as those of the corporation alone.” Id.; see also United States 2 v. Boyce, 38 F. Supp. 3d 1135, 1154-55 (C.D. Cal. 2014) (quoting In re Schwarzkopf, 626 3 F.3d 1032, 1038 (9th Cir. 2010)). Conclusory allegations of alter ego status are 4 insufficient to state a claim. See Hokama v. E.F. Hutton & Co., Inc., 566 F. Supp. 636, 5 647 (C.D. Cal. 1983). In assessing unity of interest, courts consider several factors, 6 including “inadequate capitalization, commingling of funds and other assets of the two 7 entities, the holding out by one entity that it is liable for the debts of the other, identical 8 equitable ownership in the two entities, use of the same offices and employees, use of one 9 as a mere conduit for the affairs of the other, disregard of corporate formalities, lack of 10 segregation of corporate records, and identical directors and officers.” Virtualmagic 11 Asia, Inc. v. Fil-Cartoons, Inc., 99 Cal. App. 4th 228, 245 (Ct. App. 2002) (citations 12 omitted). “No single factor is determinative, and instead a court must examine all the 13 circumstances to determine whether to apply the doctrine.” Virtualmagic Asia, Inc., 99 14 Cal. App. 4th at 245. 15 Here, Plaintiff has alleged that there is “a unity of interest and ownership between 16 GRC and Genesis.” FAC ¶ 3. Specifically, Plaintiff alleges that “GRC and Genesis 17 share a mutual interest in administering requests for reimbursement under the policy and 18 Genesis has the ability to independently exercise broad discretionary authority 19 concerning providing policy benefits.” Id. In addition, Plaintiff maintains that it 20 communicates solely with Genesis “with respect to claims, questions and reimbursement 21 requests” through a Genesis website, Genesis e-mail address, or a Genesis mailing 22 address. FAC ¶ 2. Plaintiff specifies that “Genesis was the sole decision maker and 23 entirely controlled whether or not reimbursements were to be issued under the policy.” 24 Id. Thus, Plaintiff’s allegations focus on GRC’s use of Genesis as a conduit for some of 25 its affairs. See Oppo. at 9 (“The facts here show that GRC uses Genesis as a mere 26 instrumentality to engage in all conduct with the City.” (emphasis added)). This alone 27 cannot support a finding that Genesis and GRC share a unity of interest and ownership. 28 Plaintiff failed to allege any other factors indicative of a unity of ownership and interest, 1 such as commingling of assets, treatment of the assets of one corporation as the other’s 2 own assets, failure to maintain corporate records, employment of the same employees and 3 attorneys, undercapitalization, or use of the corporation as a shell. In any event, Plaintiff 4 simply recites the second element of alter ego liability without providing any factual 5 support. See FAC ¶ 3 (“Adhering to the fiction of the separate existence of Genesis as an 6 entity distinct from GRC would permit an abuse of the corporate privilege and would 7 sanction fraud and promote injustice. This is because GRC seeks to maintain the fiction 8 of the corporate separateness to insulate itself and avoid liability for the wrongful conduct 9 of Genesis and thereby deprive plaintiff of its ability to recover damages against GRC.”). 10 Therefore, Plaintiff has failed to allege specific facts indicating that fraud or injustice 11 would result in this case if the Court does not find that Genesis is liable under an alter ego 12 theory of liability. 13 Plaintiff also alleges that Genesis is a joint venture of GRC. Courts apply the joint 14 venture doctrine to hold each joint venture liable in tort and contract when three elements 15 are met: (1) “the members must have joint control over the venture (even though they 16 may delegate it)[;] (2) the members “must share the profits of the undertaking[;]” and (3) 17 “the members must each have an ownership interest in the enterprise.” Jeld-Wen, Inc. v. 18 Superior Court, 131 Cal. App. 4th 853, 872 (Ct. App. 2005). Here, Plaintiff alleges that 19 GRC and Genesis “share a mutual interest in administering requests for reimbursement 20 under the Policy,” have a “unity of interest and ownership,” and that Genesis “controlled 21 whether or not reimbursements were to be issued to plaintiff under the policy.” FAC ¶¶ 22 2-3. Plaintiff has failed to allege facts showing that Defendants have expressly or 23 implicitly entered into a joint venture with one another. The FAC contains no allegations 24 that Defendants share profits or losses or that they exercise equal authority and control 25 over the conduct of each other. 26 Based on the foregoing, the Court finds that Plaintiff has not adequately pled facts 27 to find Genesis liable under either an alter ego theory of liability or a joint venture theory. 28 Thus, Plaintiff has failed to sufficiently allege that Genesis could be held liable for breach 1 of contract, breach of the implied covenant of good faith and fair dealing, and declaratory 2 relief based on contract. 3 B. Claims Sounding in Fraud 4 Genesis argues the remaining causes of action for negligent misrepresentation and 5 concealment must be dismissed because it was acting within the scope of its agency with 6 GRC and, in any event, Plaintiff’s allegations are insufficient to withstand a motion to 7 dismiss. MTD at 12-18. Plaintiff maintains that it adequately pleads both causes of 8 action and that Genesis can be individually liable for its own torts. Oppo. at 12-19. 9 1. Agency 10 As an initial matter, “[a]n agent or employee is always liable for his or her own 11 torts, whether the principal is liable or not, and in spite of the fact that the agent acts in 12 accordance with the principal’s directions. Similarly, an agent who commits an 13 independent tort, such as fraud, remains liable despite the fact that the principal, by 14 ratification, also becomes liable.” Bock v. Hansen, 225 Cal. App. 4th 215, 230 (Ct. App. 15 2014) (citation and internal quotation marks omitted). Further, an insurer’s agent or 16 employee may be held personally liable for torts committed in the course of handling a 17 third party claim, “e.g., misrepresentation or deceit, invasion of privacy, intentional 18 infliction of emotional distress, etc.” Id. at 228. Here, Plaintiff alleges that Genesis was 19 the agent of GRC and was acting within the course and scope of its employment “in 20 doing the things . . . alleged.” FAC ¶ 5. Genesis does not dispute this allegation. See 21 MTD. As a result, Genesis may be liable for its own torts, such as negligent 22 misrepresentation and concealment, despite the fact that it was acting within the scope of 23 its agency with GRC. 24 2. Negligent Misrepresentation 25 Under California law, the elements of negligent misrepresentation are: “(1) a 26 misrepresentation of a past or existing material fact, (2) without reasonable grounds for 27 believing it to be true, (3) with intent to induce another’s reliance on the fact 28 misrepresented, (4) ignorance of the truth and justifiable reliance thereon by the party to 1 whom the misrepresentation was directed, and (5) damages.” Fox v. Pollack, 181 Cal. 2 App. 3d 954, 962 (Ct. App. 1986). 3 Genesis contends it may not be liable for negligent misrepresentation because it 4 owed no duty to Plaintiff. MTD at13-15. In support, Genesis cites Sanchez v. Lindsey 5 Morden Claims Serv.s, Inc., 72 Cal. App. 4th 249, 253 (Ct. App. 1999) for the 6 proposition that insurers’ agents owe no duty of care to third parties for negligence. 7 MTD at 13-15. Plaintiff counters that a later California opinion distinguished negligence 8 from negligent misrepresentation in the context of torts committed by insurance agents. 9 Oppo. at 13. In Bock v. Hansen, the court noted that an insurance agent owes a duty to 10 communicate accurate information to a third party in two situations: (1) “where providing 11 false information poses a risk of and results in physical harm to person or property[;]” 12 and (2) “where information is conveyed in a commercial setting for a business purpose.”3 13 See Bock, 225 Cal. App. 4th at 229 (internal quotation marks and citation omitted). 14 “[T]he ‘ordinary rule’ is that liability for negligent misrepresentation is imposed only on 15 those who supply information for ‘business purposes in the course of a business or 16 profession.’” Friedman v. Merck & Co., 107 Cal. App. 4th 454, 481 (Ct. App. 2003) 17 (quoting Garcia v. Superior Court, 50 Cal. 3d 728, 735 (1990)). This rule is based on the 18 premise that “‘a plaintiff cannot expect the defendant to exercise the same degree of care 19 [in social meetings] as he would when acting in a business or professional capacity.’” Id. 20 at 482 (quoting Garcia, 50 Cal. 3d at 735). 21 Plaintiff’s allegations satisfy this rule. Plaintiff alleges that Genesis represented it 22 would reimburse it for payments made pursuant to the Westenberger settlement. 23 However, Genesis focuses on specific language from Section 552 of the Restatement 24 (Second) of Torts. Reply at 4. Section 552(1) provides: 25 26 27 3 Genesis attempts to lessen the impact of the “business purpose” exception as dicta. Reply at 4 n.1. However, Bock clearly stated that “the setting here involves both” situations providing for a duty to 28 1 One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false 2 information for the guidance of others in their business transactions, is subject 3 to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in 4 obtaining or communicating the information. 5 6 Restatement (Second) of Torts § 552(1) (emphasis added). Genesis argues it “did not 7 have a pecuniary interest in any representation to [Plaintiff] as it was not hired by 8 [Plaintiff] to provide advice and in fact, had no contractual relationship with [Plaintiff] at 9 all.” Reply at 4 n.1. However, this misconstrues § 552(1). Section 552(1) does not 10 require that Genesis have a pecuniary interest in advising Plaintiff if Genesis, “in the 11 course of his business, profession or employment, . . . supplie[d] false information for the 12 guidance of others in their business transactions.” Restatement (Second) of Torts § 13 552(1). Plaintiff alleges that Genesis supplied the information regarding reimbursements 14 for payments made pursuant to the Westenberger settlement in the course of its business 15 or profession and that Plaintiff sought the information to guide it in its business 16 transactions—i.e., whether to enter the settlement agreement or not. Genesis does not 17 dispute this. See Reply at 4. Thus, the Court finds that Plaintiff has sufficiently alleged 18 that Genesis owed a duty to communicate accurate information. 19 Genesis also argues Plaintiff has not alleged any facts establishing a 20 misrepresentation, or breach of its duty to communicate accurate information. MTD at 21 15. Specifically, Genesis avers that its reimbursement representation in 2011 was 22 unrelated to the 2012 settlement. Id. According to Plaintiff, in May of 2011, Genesis 23 authorized a settlement offer to the Westenberger Claim wherein Genesis would 24 reimburse Plaintiff for payments made pursuant to that settlement. FAC ¶¶ 74-75. While 25 that settlement offer was rejected, Plaintiff appears to argue that Genesis’ 2011 26 representation “that it would reimburse [P]laintiff for payments made pursuant to a 27 settlement reached with Mrs. Westenberger” also applied to the 2012 settlement. FAC ¶¶ 28 75-76; see Oppo. at 15. As such, when Genesis subsequently authorized a different 1 settlement in May 2012, Plaintiff contends it justifiably relied on Genesis’ 2011 2 representation that it would reimburse Plaintiff for payments made pursuant to the 2012 3 settlement. FAC ¶¶ 75-76. These allegations do not make clear whether Genesis 4 represented to Plaintiff that it would reimburse Plaintiff for payments made pursuant to 5 any settlement offer authorized by Genesis or only for payments made pursuant to the 6 2011 settlement offer. See FAC ¶¶ 74-77. As a result, Plaintiff has not sufficiently 7 alleged that Genesis made a misrepresentation. 8 3. Concealment 9 “‘The required elements for fraudulent concealment are (1) concealment or 10 suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the 11 plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or 12 suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as 13 he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff 14 sustained damage as a result of the concealment or suppression of the fact.’” Hambrick 15 v. Healthcare Partners Med. Grp., Inc., 238 Cal. App. 4th 124, 162 (Ct. App. 2015) 16 (quoting Graham v. Bank of America, N.A. 226 Cal. App. 4th 594, 606 (Ct. App. 2014)). 17 Fraud by concealment remains subject to Rule 9(b) and must be pleaded with specificity 18 rather than with general and conclusory allegations. 19 Plaintiff alleges Genesis concealed its intent to not “fully reimburse plaintiff for 20 the future medical care payments” made pursuant to the 2012 settlement with Mrs. 21 Westenberger and that it intended to “stall, delay and concoct false reasons to avoid 22 reimbursing [P]laintiff for these future medical care payments.” FAC ¶ 64. Genesis 23 argues, in part, that the FAC alleges no facts imposing a duty to disclose material facts to 24 Plaintiff. MTD at 17-18. “To maintain a cause of action for fraud through nondisclosure 25 or concealment of facts, there must be allegations demonstrating that the defendant was 26 under a legal duty to disclose those facts.” Los Angeles Mem’l Coliseum Comm’n v. 27 Insomniac, Inc., 233 Cal. App. 4th 803, 931 (Ct. App. 2015). Here, Plaintiff’s claim for 28 fraudulent concealment is deficient. Plaintiff alleges that Genesis authorized a settlement 1 || with Mrs. Westenberger when Genesis harbored a secret intent not to fully reimburse 2 || Plaintiff and to stall or avoid reimbursing Plaintiff. See FAC 4 64. The FAC does not set 3 || forth any particularized facts to establish whether Genesis had a duty to disclose its 4 || intent” or any other material facts to Plaintiff.* As a result, the FAC fails to plead fraud 5 || by concealment with the specificity required by Rule 9(b). 6 CONCLUSION 7 For the foregoing reasons, the Court GRANTS Genesis’s motion to dismiss. 8 || Although Plaintiff has failed to adequately plead its claims against Genesis, it is not clear 9 it would be unable to do so if given leave to amend. Accordingly, dismissal is 10 || without prejudice and with leave to amend. See Knappenberger, 566 F.3d at 942. 11 || Plaintiff must file an amended complaint, if any, on or before September 3, 2019. 12 IT IS SO ORDERED. 13 ||Dated: August 20, 2019 Mikel Td Ll 14 Hon. Michael M. Anello tell 15 United States District Judge 16 17 18 19 20 21 22 23 24 25 26 * Plaintiff contends that Bock establishes that an insurance agent owes a duty to disclose material facts to 27 third party. Oppo. at 17. However, the Court is not convinced that Bock holds that an insurance agent a duty to disclose its intent. See Bock, 225 Cal. App. 4th at 228-31. Bock discusses only an insurance agent’s duty with respect to negligent misrepresentation. Id.