1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 THOMAS FERRO, M.D., Case No. 1:22-cv-00885 JLT CDB 12 Plaintiff, ORDER DENYING MOTION FOR JUDGMENT ON THE PLEADINGS 13 v. (Doc. 6) 14 SAFECO INSURANCE COMPANY OF AMERICA, et al., 15 Defendants. 16 17 I. BACKGROUND 18 Dr. Thomas Ferro filed this lawsuit in Kern County Superior Court alleging that 19 Defendant, Safeco Insurance Company of America, violated the covenant of good faith and fair 20 dealing in its handling of a claim made on the underinsured motorist benefit provision within the 21 automobile policy issued to Dr. Ferro by Defendant (UIM Policy). (Doc. 1 at 16–29 (Compl.).) 22 Defendant removed the case to this Court based on diversity jurisdiction. (Id. at 3–4.) 23 The relevant facts are straightforward and undisputed. On January 17, 2017, Dr. Ferro was 24 driving westbound on Route 166 in Bakersfield, California, following a Pontiac at approximately 25 55 mph. (Compl., ¶ 6.) The Pontiac drifted into oncoming traffic, colliding head-on with a semi- 26 truck. (Compl., ¶ 6.) The semi-truck then crossed over the center line into Dr. Ferro’s lane, hitting 27 his vehicle head-on. (Id.) Plaintiff’s vehicle spun out and the airbag deployed. (Id.) Dr. Ferro’s 28 vehicle was significantly damaged, and he sustained injuries to his neck, back, and wrists. (Id., ¶ 1 8.) 2 Plaintiff pursued a personal injury claim against the driver of the Pontiac, ultimately 3 settling that claim for the $100,000 liability limit of that driver’s automobile policy. (Compl., ¶ 4 14.) Plaintiff then filed a claim with Safeco, demanding payment of the $400,000 limit under the 5 UIM Policy. (Id.) Safeco refused to meet that demand. (See id.) Dr. Ferro then sent Safeco a 6 demand for arbitration. (Id. at ¶ 15.) 7 In arbitration, Dr. Ferro asserted that the accident caused him nearly $4 million in 8 damages, including more than $3 million in lost earnings. (Compl., ¶ 17, Ex. D.) Following a 9 one-day hearing, the arbitrator ultimately determined that Plaintiff’s total damages were 10 $1,075,742.90 ($950,742 in lost earning capacity, and $125,000 for past and future general 11 damages). (Id.) The arbitrator awarded Plaintiff $400,000 under the UIM Policy (id.), which 12 Safeco paid on August 12, 2020. (Id., ¶ 18.) 13 Plaintiff’s complaint alleges that Safeco unreasonably delayed payment under the UIM 14 Policy by, among other things, misrepresenting relevant facts or insurance policy provisions, 15 failing to act promptly on the claim and/or investigate the claim, failing to accept or deny 16 coverage within a reasonable time, failing to reach a prompt settlement of the claim after liability 17 became reasonably clear, ignoring or failing to reasonably consider evidence submitted to support 18 the value of the claim, and failing to provide a reasonable basis for denying the claim. (Compl., 19 ¶ 23.) 20 Defendant has moved for judgment on the pleadings, arguing that under Rappaport-Scott 21 v. Interinsurance Exchange of the Automobile Club, 146 Cal. App. 4th 831, 837 (2007), the 22 discrepancy between the claim Plaintiff presented to the arbitrator and the arbitrator’s ultimate 23 damages determination warrants judgment as a matter of law. (Doc. 6.) Plaintiff opposes the 24 motion (Doc. 9), and Defendant filed a reply. (Doc. 11.) For the reasons set forth below, the Court 25 DENIES the motion. 26 II. STANDARD OF DECISION 27 Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, a party may seek judgment 28 on the pleadings “[a]fter the pleadings are closed—but early enough to not delay trial.” Fed. R. 1 Civ. P. 12(c). The Ninth Circuit explained that “pleadings are closed for the purposes of Rule 2 12(c) once a complaint and answer have been filed, assuming . . . that no counterclaim or cross- 3 claim is made.” Doe v. United States, 419 F.3d 1058, 1061 (9th Cir. 2005). The pleadings are 4 closed in this action. 5 A motion for judgment on the pleadings “challenges the legal sufficiency of the opposing 6 party’s pleadings and operates in much the same manner as a motion to dismiss under Rule 7 12(b)(6).” Morgan v. Cnty. of Yolo, 436 F. Supp. 2d 1152, 1154-55 (E.D. Cal. 2006), aff’d 277 8 Fed. Appx. 734 (9th Cir. 2008). Indeed, the Ninth Circuit explained a motion pursuant to Rule 9 12(c) is “functionally identical” to a motion under Rule 12(b). Dworkin v. Hustler Magazine, Inc., 10 867 F. 2d 1188, 1192 (9th Cir. 1989) (“[t]he principal difference between motions filed pursuant 11 to Rule 12(b) and Rule 12(c) is the time of filing”). Consequently, “the same standard of review” 12 applies to a Rule 12(c) motion. Chandavong v. Fresno Deputy Sheriff’s Assoc., 599 F. Supp. 3d 13 1017, 1020 (E.D. Cal. 2022) (citing Gregg v. Dep’t of Public Safety, 870 F.3d 883, 887 (9th Cir. 14 2017)). 15 In deciding a motion for judgment on the pleadings, the Court must determine whether the 16 complaint contains “sufficient factual matter, accepted as true, to state a claim of relief that is 17 plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also United States ex rel. 18 Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) (explaining the 19 pleading standard under Iqbal applies to Rule 12(c) motions, because Rule 12(b) and Rule 12(c) 20 motions are functionally equivalent). Thus, the Court “must accept all factual allegations in the 21 [pleadings] as true and construe them in the light most favorable to the non-moving party.” 22 Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). The Court is “not required to accept as 23 true allegations that contradict exhibits attached to the Complaint, or matters properly subject to 24 judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or 25 unreasonable inferences.” Seven Arts Filmed Entm’t, Ltd. v. Content Media Corp. PLC, 733 F.3d 26 1251, 1254 (9th Cir. 2013). To prevail on a Rule 12(c) motion, the moving party bears the burden 27 to demonstrate that (1) “no material issue of fact remains to be resolved” and (2) “he is entitled to 28 judgment as a matter of law.” Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir. 1 1984). 2 III. DISCUSSION 3 Defendant takes pains to make it very clear that the only argument it is presenting in the 4 pending motion is that, under Rappaport-Scott, the disparity between Plaintiff’s claimed damages 5 and the arbitration award entitles Defendant to judgment as a matter of law on Plaintiff’s sole 6 claim for breach of the covenant of good faith and fair dealing. (See Doc. 11 at 3.) 7 A covenant of good faith and fair dealing is implied in every insurance contract under 8 California law. Frommoethelydo v. Fire Ins. Exch., 42 Cal. 3d 208, 214 (1986). To adequately 9 plead a claim for breach of the implied covenant of good faith and fair dealing, a plaintiff must 10 allege: “(1) benefits under the policy were withheld; and (2) the reason for withholding benefits 11 was unreasonable or without proper cause.” Mudpie Inc. v. Travelers Cas. Ins. Co., 15 F.4th 885 12 893 n.6 (9th Cir. 2021) (citing Love v. Fire Ins.
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 THOMAS FERRO, M.D., Case No. 1:22-cv-00885 JLT CDB 12 Plaintiff, ORDER DENYING MOTION FOR JUDGMENT ON THE PLEADINGS 13 v. (Doc. 6) 14 SAFECO INSURANCE COMPANY OF AMERICA, et al., 15 Defendants. 16 17 I. BACKGROUND 18 Dr. Thomas Ferro filed this lawsuit in Kern County Superior Court alleging that 19 Defendant, Safeco Insurance Company of America, violated the covenant of good faith and fair 20 dealing in its handling of a claim made on the underinsured motorist benefit provision within the 21 automobile policy issued to Dr. Ferro by Defendant (UIM Policy). (Doc. 1 at 16–29 (Compl.).) 22 Defendant removed the case to this Court based on diversity jurisdiction. (Id. at 3–4.) 23 The relevant facts are straightforward and undisputed. On January 17, 2017, Dr. Ferro was 24 driving westbound on Route 166 in Bakersfield, California, following a Pontiac at approximately 25 55 mph. (Compl., ¶ 6.) The Pontiac drifted into oncoming traffic, colliding head-on with a semi- 26 truck. (Compl., ¶ 6.) The semi-truck then crossed over the center line into Dr. Ferro’s lane, hitting 27 his vehicle head-on. (Id.) Plaintiff’s vehicle spun out and the airbag deployed. (Id.) Dr. Ferro’s 28 vehicle was significantly damaged, and he sustained injuries to his neck, back, and wrists. (Id., ¶ 1 8.) 2 Plaintiff pursued a personal injury claim against the driver of the Pontiac, ultimately 3 settling that claim for the $100,000 liability limit of that driver’s automobile policy. (Compl., ¶ 4 14.) Plaintiff then filed a claim with Safeco, demanding payment of the $400,000 limit under the 5 UIM Policy. (Id.) Safeco refused to meet that demand. (See id.) Dr. Ferro then sent Safeco a 6 demand for arbitration. (Id. at ¶ 15.) 7 In arbitration, Dr. Ferro asserted that the accident caused him nearly $4 million in 8 damages, including more than $3 million in lost earnings. (Compl., ¶ 17, Ex. D.) Following a 9 one-day hearing, the arbitrator ultimately determined that Plaintiff’s total damages were 10 $1,075,742.90 ($950,742 in lost earning capacity, and $125,000 for past and future general 11 damages). (Id.) The arbitrator awarded Plaintiff $400,000 under the UIM Policy (id.), which 12 Safeco paid on August 12, 2020. (Id., ¶ 18.) 13 Plaintiff’s complaint alleges that Safeco unreasonably delayed payment under the UIM 14 Policy by, among other things, misrepresenting relevant facts or insurance policy provisions, 15 failing to act promptly on the claim and/or investigate the claim, failing to accept or deny 16 coverage within a reasonable time, failing to reach a prompt settlement of the claim after liability 17 became reasonably clear, ignoring or failing to reasonably consider evidence submitted to support 18 the value of the claim, and failing to provide a reasonable basis for denying the claim. (Compl., 19 ¶ 23.) 20 Defendant has moved for judgment on the pleadings, arguing that under Rappaport-Scott 21 v. Interinsurance Exchange of the Automobile Club, 146 Cal. App. 4th 831, 837 (2007), the 22 discrepancy between the claim Plaintiff presented to the arbitrator and the arbitrator’s ultimate 23 damages determination warrants judgment as a matter of law. (Doc. 6.) Plaintiff opposes the 24 motion (Doc. 9), and Defendant filed a reply. (Doc. 11.) For the reasons set forth below, the Court 25 DENIES the motion. 26 II. STANDARD OF DECISION 27 Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, a party may seek judgment 28 on the pleadings “[a]fter the pleadings are closed—but early enough to not delay trial.” Fed. R. 1 Civ. P. 12(c). The Ninth Circuit explained that “pleadings are closed for the purposes of Rule 2 12(c) once a complaint and answer have been filed, assuming . . . that no counterclaim or cross- 3 claim is made.” Doe v. United States, 419 F.3d 1058, 1061 (9th Cir. 2005). The pleadings are 4 closed in this action. 5 A motion for judgment on the pleadings “challenges the legal sufficiency of the opposing 6 party’s pleadings and operates in much the same manner as a motion to dismiss under Rule 7 12(b)(6).” Morgan v. Cnty. of Yolo, 436 F. Supp. 2d 1152, 1154-55 (E.D. Cal. 2006), aff’d 277 8 Fed. Appx. 734 (9th Cir. 2008). Indeed, the Ninth Circuit explained a motion pursuant to Rule 9 12(c) is “functionally identical” to a motion under Rule 12(b). Dworkin v. Hustler Magazine, Inc., 10 867 F. 2d 1188, 1192 (9th Cir. 1989) (“[t]he principal difference between motions filed pursuant 11 to Rule 12(b) and Rule 12(c) is the time of filing”). Consequently, “the same standard of review” 12 applies to a Rule 12(c) motion. Chandavong v. Fresno Deputy Sheriff’s Assoc., 599 F. Supp. 3d 13 1017, 1020 (E.D. Cal. 2022) (citing Gregg v. Dep’t of Public Safety, 870 F.3d 883, 887 (9th Cir. 14 2017)). 15 In deciding a motion for judgment on the pleadings, the Court must determine whether the 16 complaint contains “sufficient factual matter, accepted as true, to state a claim of relief that is 17 plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also United States ex rel. 18 Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) (explaining the 19 pleading standard under Iqbal applies to Rule 12(c) motions, because Rule 12(b) and Rule 12(c) 20 motions are functionally equivalent). Thus, the Court “must accept all factual allegations in the 21 [pleadings] as true and construe them in the light most favorable to the non-moving party.” 22 Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). The Court is “not required to accept as 23 true allegations that contradict exhibits attached to the Complaint, or matters properly subject to 24 judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or 25 unreasonable inferences.” Seven Arts Filmed Entm’t, Ltd. v. Content Media Corp. PLC, 733 F.3d 26 1251, 1254 (9th Cir. 2013). To prevail on a Rule 12(c) motion, the moving party bears the burden 27 to demonstrate that (1) “no material issue of fact remains to be resolved” and (2) “he is entitled to 28 judgment as a matter of law.” Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir. 1 1984). 2 III. DISCUSSION 3 Defendant takes pains to make it very clear that the only argument it is presenting in the 4 pending motion is that, under Rappaport-Scott, the disparity between Plaintiff’s claimed damages 5 and the arbitration award entitles Defendant to judgment as a matter of law on Plaintiff’s sole 6 claim for breach of the covenant of good faith and fair dealing. (See Doc. 11 at 3.) 7 A covenant of good faith and fair dealing is implied in every insurance contract under 8 California law. Frommoethelydo v. Fire Ins. Exch., 42 Cal. 3d 208, 214 (1986). To adequately 9 plead a claim for breach of the implied covenant of good faith and fair dealing, a plaintiff must 10 allege: “(1) benefits under the policy were withheld; and (2) the reason for withholding benefits 11 was unreasonable or without proper cause.” Mudpie Inc. v. Travelers Cas. Ins. Co., 15 F.4th 885 12 893 n.6 (9th Cir. 2021) (citing Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136, 1151 (1990)). “The 13 mistaken or erroneous withholding of policy benefits, if reasonable or if based on a legitimate 14 dispute as to the insurer’s liability under California law, does not expose the insurer to bad faith 15 liability.” Chateau Chamberay Homeowners Ass’n v. Assoc. Int’l Ins. Co., 90 Cal. App. 4th 335, 16 346 (2001) (internal quotation omitted). An insurer does not act in bad faith so long as a “genuine 17 dispute” exists over an insured’s coverage. See Rappaport-Scott, 146 Cal. App. 4th at 837. 18 The Defense is correct that a “genuine dispute” can be established where there is a 19 disparity between the amount of damages initially claimed by the insured and the amount an 20 arbitrator eventually awards, even where the arbitrator awards a greater amount than the insurer 21 offered to settle the claim. See Rappaport-Scott, 146 Cal. App. 4th at 839. That is exactly what 22 happened in Rappaport-Scott, where the insured plaintiff sued her insurer for bad faith after the 23 insurer rejected her settlement offer for a claim caused by an underinsured motorist. Id. at 833. 24 Following the accident, the plaintiff settled her claim against the underinsured motorist for 25 $25,000, the limit of that motorist’s policy. Id. at 834. She then submitted a claim to her insurer 26 and eventually demanded arbitration, asserting losses of $346,732.34, including $26,732.34 in 27 medical expenses, $20,000 in future medical expenses, $150,000 in lost income, and $150,000 in 28 general damages. Id. She made a settlement demand of her insurance company in the amount of 1 $75,000, representing the $100,000 limit of that policy less the $25,000 she already received from 2 the other motorist. Id. Her insurer offered only $7,000. Id. 3 The arbitrator ultimately determined that the plaintiff suffered $15,000 in medical 4 expenses, $3,000 for earnings losses, and $45,000 for pain, suffering and future medical care, for 5 a total of $63,000. Id. The arbitrator reduced the award by the $25,000 the plaintiff received from 6 the underinsured motorist and $5,000 for previously paid medical expenses and awarded the 7 plaintiff $33,000. Id. The California Court of Appeal affirmed dismissal of the claim, finding that 8 “the vast difference between the $346,732.34 in losses claimed by Rappaport–Scott and the 9 $63,000 in actual losses as determined by the arbitrator demonstrates, as a matter of law, that a 10 genuine dispute existed as to the amount payable on the claim. Id. at 839. Moreover, Rappaport– 11 Scott did not “allege or assert any facts that would overcome the necessary inference from the 12 facts she does allege that a genuine dispute existed.” Id.; see also Maynard v. State Farm Mut. 13 Auto. Ins. Co., 499 F. Supp. 2d 1154, 1161–62 (C.D. Cal. 2007) (following Rappaport-Scott 14 when presented with “factually indistinguishable” circumstances). 15 Though there certainly are parallels between Rappaport-Scott and the present case, there 16 is at least one important distinction: the arbitrator’s ultimate damages determination of 17 $1,075,742.90 was far above (more than double) the $400,000.00 limit of the UIM Policy. 18 Defendant attempts to convince the Court that the existence of a significant disparity between the 19 plaintiff’s claimed damages and the arbitrator’s damages determination is dispositive. (See Doc. 20 11 at 4.) It is true that the disparities cited in other cases are arguably less significant than the one 21 here. See, e.g., Maslo v. Ameriprise Auto & Home Ins., 227 Cal. App. 4th 626, 629, 173 Cal. Rptr. 22 3d 854, 856 (2014), as modified (July 22, 2014) ($164,120.91 arbitration award after a claim 23 seeking the $250,000 limit on the policy's uninsured motorist coverage). But it is also true that in 24 all the cases identified by the Court that have applied Rappaport-Scott in the manner argued by 25 Defendant, the arbitration award was under the policy limit. See id.; see also Maynard, 499 F. 26 Supp. 2d at 1159 ($63,005 net arbitration award was under the $85,000 request made by Plaintiff 27 (which was the $100,000 policy limit less $15,000 already paid by the other motorist’s policy)); 28 Keshish v. Allstate Ins. Co., 959 F. Supp. 2d 1226, 1238 (C.D. Cal. 2013) (finding no genuine 1 | dispute where “the appraisal panel awarded substantially less than the amount of plaintiffs’ 2 | claim” under the policy). This distinction is critical because goes to whether there was a 3 | “genuine” (1.e., material) dispute over the amount due under the policy in question. Where the 4 | arbitrator’s ultimate damages determination far exceeds the policy limit, there may be evidence of 5 || some dispute over damages, but that disparity does not establish a material dispute for purposes 6 | of the insurer’s obligations under the policy. Here, because the arbitrator’s award was far higher 7 | than the amount Dr. Ferro actually demanded from Safeco, Rappaport-Scott is inapplicable, and 8 || the Defense motion fails. 9 IV. CONCLUSION 10 For the reasons set forth above, the motion for judgment on the pleadings (Doc. 6) is 11 | DENIED. 12 B IT IS SO ORDERED. 4 Dated: _ March 29, 2024 Cerin | Tower TED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28