Fishell v. Nationwide Mutual Ins. Co.

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 AMY FISHELL and JUSTIN FISHELL, No. 2:23-cv-00027-DJC-DB 12 Plaintiffs, 13 v. ORDER

14 NATIONWIDE MUTUAL INS. CO. and AMCO INS. CO., 15 Defendants. 16 17 As recounted in the Court’s Order granting a motion to dismiss the First 18 Amended Complaint in this case (ECF No. 26), Plaintiffs Amy and Justin Fishell 19 (“Plaintiffs”) were unfortunate victims of the Paradise, California Camp Fire in 2018. 20 Plaintiffs had to relocate after their home was destroyed by the fire and incurred 21 additional expenses resulting from additional travel for which they claim 22 reimbursement by their insurance provider, Defendant AMCO Insurance Company, a 23 subsidiary of Defendant Nationwide Mutual Insurance Company (“Defendants”). 24 Plaintiffs claim they were reimbursed improperly under the Internal Revenue Service 25 (“IRS”) standard mileage rate for medical and moving expenses, which they allege 26 constitutes a breach of the covenant of good faith and fair dealing, and a violation of 27 the California Unfair Competition Law (“UCL”). They also seek declaratory relief. 28 //// 1 Plaintiffs seek to bring claims on their own behalf and on behalf of a not yet certified 2 class of similarly situated individuals. 3 Defendants now move the Court to dismiss Plaintiffs’ Second Amended 4 Complaint (“SAC”) (ECF No. 28), arguing that Nationwide is not a proper defendant, 5 that the claims are time barred, and that Plaintiffs have failed to allege plausible 6 claims. Because Plaintiffs have failed to establish that their claims are timely, the 7 claims must be dismissed as time-barred. Accordingly, the Motion to Dismiss (“Mot. 8 or the Motion”) (ECF No. 32) is GRANTED. 9 I. Procedural History 10 Plaintiffs filed their initial Complaint on January 6, 2023. (Compl. (ECF No 1).) 11 Plaintiffs subsequently amended their Complaint to name AMCO Insurance Company 12 as a Defendant. (First Am. Compl. (ECF No. 14).) The First Amended Complaint was 13 dismissed for being time-barred and for failure to state claims. (Order (ECF No. 26) at 14 7–8.) Plaintiffs were granted leave to amend their Complaint to allege facts which 15 would support tolling, or to allege claims that are not time-barred. (Id.) Plaintiffs 16 thereafter filed the operative Second Amended Complaint. (SAC.) 17 Defendants filed a Motion to Dismiss the Second Amended Complaint on 18 September 13, 2023. (Mot.) Plaintiffs opposed the motion, (Opp’n (ECF No. 33)), and 19 Defendants have filed a reply (Reply (ECF No. 34)). The Court heard oral argument on 20 the Motion on October 26, 2023, with J. Paul Gignac and Claire Mitchell appearing for 21 Plaintiffs, and Mark Hanover appearing for Defendants. 22 II. Legal Standard for Motion to Dismiss 23 A party may move to dismiss for “failure to state a claim upon which relief can 24 be granted.” Fed. R. Civ. P. 12(b)(6). The motion may be granted if the complaint 25 lacks a “cognizable legal theory” or if its factual allegations do not support a 26 cognizable legal theory. Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1208 (9th 27 Cir. 2019) (quoting Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)). 28 The Court assumes all factual allegations are true and construes “them in the light 1 most favorable to the nonmoving party.” Steinle v. City and Cnty. of San Francisco, 2 919 F.3d 1154, 1160 (9th Cir. 2019) (quoting Parks Sch. of Bus., Inc. v. Symington, 51 3 F.3d 1480, 1484 (9th Cir. 1995)). If the complaint’s allegations do not “plausibly give 4 rise to an entitlement to relief,” the motion must be granted. Ashcroft v. Iqbal, 556 5 U.S. 662, 679 (2009). 6 A complaint need contain only a “short and plain statement of the claim 7 showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), not “detailed 8 factual allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). But this rule 9 demands more than unadorned accusations; “sufficient factual matter” must make the 10 claim at least plausible. Iqbal, 556 U.S. at 678. In the same vein, conclusory or 11 formulaic recitations of elements do not alone suffice. Id. (citing Twombly, 550 U.S. at 12 555). This evaluation of plausibility is a context-specific task drawing on “judicial 13 experience and common sense.” Id. at 679. 14 III. Discussion 15 Defendants argue that Plaintiffs have exceeded the time limit to bring suit 16 under the contract, which is one year from the date of loss, and that the claims are 17 therefore time-barred. Plaintiffs counter that the claims are not “on the policy” and 18 therefore not subject to this one-year contractual limitation. They further allege that 19 application of the one-year contractual limitation period would be inequitable and 20 unfair because many of the contested payments were made over one year from the 21 date of loss. 22 A. Applicability of the Contractual Limitations Period 23 Ordinarily, a contractual limitation on the time to bring suit would be 24 controlling. See Gaylord v. Nationwide Mut. Ins. Co., 776 F. Supp. 2d 1101, 1113 (E.D. 25 Cal. 2011) (“[A] covenant shortening the period of limitations is a valid provision of an 26 insurance contract.”); Jang v. State Farm Fire & Cas. Co., 80 Cal. App. 4th 1291, 1296 27 (2000), as modified (June 8, 2000) (“The one-year statutory limitations period on 28 insurance actions has ‘long been recognized as valid in California.’” (internal quotation 1 omitted) (quoting Prudential–LMI Com. Insurance v. Superior Court 51 Cal.3d 674, 682 2 (1990))). However, when the claims are not on the policy, they are not subject to the 3 contractual limitation period, and are instead controlled by the statutory limitation 4 period. Id. at 1296. 5 “The phrase ‘on the policy’ is broadly construed to include those claims that are 6 generally ‘grounded in a failure to pay benefits that are due under the policy.’” 7 Brafman v. Nationwide Mut. Ins. Co., No. 2:11-CV-01627-MCE, 2011 WL 5299280, at 8 *3 (E.D. Cal. Nov. 2, 2011) (quoting Campanelli v. Allstate Life Ins. Co., 322 F.3d 1086, 9 1093 (9th Cir. 2003)). Whether a claim is on the policy is determined by the nature of 10 the damages sought, not by the legal basis for the claim. A plaintiff cannot bypass the 11 contractual limitations period by construing their claims as based in tort or “bad faith” 12 conduct rather than contractual terms. Abari v. State Farm Fire & Cas. Co., 205 Cal. 13 App. 3d 530, 536 (1988); Velasquez v. Truck Ins. Exch., 1 Cal. App. 4th 712, 722 14 (1991). “Regardless of whether the insured elects to file a complaint alleging solely 15 tort claims . . . an action seeking damages recoverable under the policy for a risk 16 insured under the policy is merely a ‘transparent attempt to recover on the policy.’” 17 Jang, 80 Cal. App. 4th at 1301, as modified (June 8, 2000) (quoting Abari, 205 Cal. 18 App. 3d at 536). A claim is considered off the policy if it has “nothing to do with the 19 initial claim under the policy.” Velasquez, 1 Cal. App. 4th at 720. 20 Murphy v. Allstate provides an example of a claim that is off the policy. 83 Cal. 21 App. 3d 38, 46 (1978). The case “sets forth a narrow exemption for actions in which 22 the insured seeks damages that are not recoverable under the policy, stemming from 23 conduct by the insurer which results in the uncovered damages.” Jang, 80 Cal. App. 24 4th at 1302. In Murphy, the plaintiff sued for damage to their home which resulted 25 from the “untimely, unworkmanlike and unsatisfactory restoration and repair work” by 26 the contractors hired by the insurance company, and for damages resulting from an 27 interpleader action instituted by the insurance company. Murphy, 83 Cal. App. 3d at 28 49. In holding that the claims were not on the policy, the court emphasized that the 1 “the damages claimed were not caused by any risk insured against under the policy 2 and were not recoverable under the policy.” Id. at 49. 3 Plaintiffs assert two distinct bases for their causes of action, which the court will 4 assess separately. First, Plaintiffs claim that Defendant failed to satisfactorily 5 reimburse them for the additional car insurance premium and depreciation expenses 6 they incurred as a result of the loss. (SAC ¶¶ 63, 72.) These additional expenses are a 7 direct result of their displacement due to the loss of use of their home, which is a risk 8 insured against under the policy. (Id. ¶¶ 18, 21, 37.) Such increased costs are clearly 9 recoverable under the policy which reimburses for “any necessary increase in living 10 expenses incurred” as a result of a loss under the policy. (Id. ¶¶ 4–5, 18–19.) Further, 11 “[t]he fact that an insured seeks damages in addition to those covered by the policy 12 will not render the cause of action ‘off the policy,’” meaning that Plaintiffs’ claims for 13 attorneys’ fees and exemplary and punitive damages does not change this analysis. 14 Campanelli, 322 F.3d at 1096 (citing Velasquez, 1 Cal. App. 4th at 722). 15 Plaintiff attempts to argue under Frazier v. Metro Life Ins. Co., that any claim 16 which “arose after the insurer paid on the policy but not to the satisfaction of the 17 beneficiary of the policy” is a claim not on the policy. See Lawrence v. W. Mut. Ins. Co., 18 204 Cal. App. 3d 565, 575 (1988) (summarizing Frazier v. Metro. Life Ins. Co., 169 Cal. 19 App. 3d 90, 103–04 (1985)). However, the plaintiff in Frazier was not claiming that the 20 payments themselves were unsatisfactory or made in bad faith. Rather, in Frazier, the 21 insurance company had paid benefits for the death of the plaintiff’s husband, but 22 continued to investigate whether the death was an accident, which would have 23 entitled the plaintiff to double indemnity payments. Frazier, 169 Cal. App. 3d at 95– 24 97. It was not until the insurance company’s investigation concluded and it denied the 25 double indemnity payments that the plaintiff’s cause of action arose. Id. at 103–04. 26 Starting the clock at the time of denial, the court found the action was brought within 27 the contractual limitation period. Id. 28 1 Later California Appellate Courts, including the same court which had decided 2 Frazier, have clarified that Frazier presents a tolling doctrine, wherein the limitations 3 period on a bad faith claim does not begin to run until an “ultimate act of bad faith” 4 occurs, not necessarily an example of a claim off the policy. See Jang, 80 Cal. App. 5 4th 1301–02 (summarizing cases and finding that Frazier only has continuing viability 6 as it pertains to equitable tolling); see also Lawrence, 204 Cal. App. 3d at 575 (noting 7 that it was the “subsequent event [which] occurred after the initial policy coverage was 8 triggered which was the basis for the cause of action”); Velasquez, 1 Cal. App. 4th at 9 720 (“[I[t was not until the insurer denied her double indemnity claim that the 10 beneficiary could ascertain whether she had a cause of action for bad faith. Thus, the 11 action did not accrue until such denial.” (internal citations omitted)); Prieto v. State 12 Farm Fire & Cas. Co., 225 Cal. App. 3d 1188, 1194–95, (1990), reh'g denied and 13 opinion modified (Dec. 28, 1990). 14 Moreover, other courts have found that claims which allege dissatisfaction with 15 the amount paid out on a policy are claims under the policy. In Banga v. Americprise 16 Auto & Home Insurance Company the plaintiff brought claims asserting that the 17 amount paid by the insurer based on its adjuster’s estimate was insufficient to cover 18 the repairs. No. 2:18-CV-01072-MCE-AC, 2021 WL 5303914, at *1–*2 (E.D. Cal. Nov. 19 15, 2021), report and recommendation adopted, No. 2:18-CV-01072-MCE-AC, 2022 20 WL 525646 (E.D. Cal. Feb. 22, 2022). The plaintiff in Banga also asserted that the 21 insurance company had engaged in an unfair business practice and bad faith conduct 22 when estimating the amount of the loss incurred. Id. at *5. The court nevertheless 23 found that the claims were on the policy because the damages were grounded in a 24 failure to pay benefits that were due under the policy. Id. at *6–*7. Similarly, in Jang, 25 the plaintiff brought a cross complaint alleging that the amount paid to the property 26 owners was less than they were entitled to. Jang, 80 Cal. App. 4th at 1293–95, 1301– 27 02. The Jang court also held that the claim was on the policy because it was based on 28 “the failure to receive benefits the plaintiff believes are owing under the policy.” Id. at 1 1304. Accordingly, Plaintiffs’ claims that they were insufficiently reimbursed are 2 fundamentally claims for benefits which are recoverable under the policy, meaning 3 they are subject to the one-year contractual limitations period. As the date of loss was 4 on November 8, 2018, this suit filed on January 6, 2023 is untimely for the claims as 5 they relate to unsatisfactory reimbursement. 6 The second basis for Plaintiffs’ causes of action is that Defendants failed to 7 disclose what the reimbursement rate would be, and that they used a non-industry 8 standard rate. As Plaintiffs argued during the hearing, this cause of action does not 9 necessarily arise from the policy because the duty to disclose the rate arose before the 10 contract was formed and is independent of whether Plaintiffs suffered a loss on the 11 policy. But even if the Court were to accept this theory, the claims would still be time 12 barred under the respective statutory limitation periods. 13 The statutes of limitation on these claims begins to run when “the injured party 14 discovers or should have discovered the facts supporting liability.” Davies v. Krasna, 15 14 Cal. 3d 502, 512 (1975); see also Gutierrez v. Mofid, 39 Cal. 3d 892, 897 (1985) 16 (applying to breach of covenant of good faith and fair dealing claims “the uniform 17 California rule [] that a limitations period . . . begins to run no later than the time the 18 plaintiff learns, or should have learned, the facts essential to his claim.”); Aryeh v. 19 Canon Bus. Sols., Inc., 55 Cal. 4th 1185, 1195–96 (2013) (applying the same to UCL 20 claims which allege a deceptive practice). Plaintiffs knew or should have known that 21 Defendant failed to disclose the rate — and suffered appreciable harm as a result of 22 that failure to disclose — when they received the first check which was calculated using 23 the non-standard mileage rate. The additional checks Plaintiffs received thereafter do 24 not provide any additional facts essential to show that Defendant failed to disclose the 25 non-standard mileage rate. This is not a case where a “wrongful course of conduct 26 became apparent only through the accumulation of a series of harms.” Aryeh, 55 Cal. 27 4th 1198 (comparing a harassment claim where the component acts may not be 28 individually actionable until, taken together, they establish a pattern of harassment, 1 with a claim where the defendant commits a discrete fraudulent act); see Gutierrez, 39 2 Cal. at 898 (“It is irrelevant that the plaintiff is ignorant of his legal remedy or the legal 3 theories underlying his cause of action.”) Instead, the additional checks instead only 4 serve as proof of additional damages. 1 5 After receipt of this first check, Plaintiffs would have had two years to bring the 6 breach of the covenant of good faith and fair dealing claims, see Hovsepyan v. GEICO 7 Gen. Ins. Co., 616 F. Supp. 3d 1057, 1068 (E.D. Cal. 2022) (citing Archdale v. Am. 8 Internat. Specialty Lines Ins. Co., 154 Cal. App. 4th 449, 467 n. 19 (2007)), and four 9 years to bring the UCL claims, Cal. Bus. & Prof. Code § 17208. As the check was 10 issued in 2018, Plaintiff’s suit filed on January 6, 2023 is untimely for both claims. 11 Because these underlying claims are untimely, Plaintiffs also cannot maintain 12 the cause of action for declaratory relief. Maguire v. Hibernia Sav. & Loan Soc., 23 Cal. 13 2d 719, 734 (1944) (“[T]he period of limitations applicable to ordinary actions at law 14 and suits in equity should be applied in like manner to actions for declaratory relief. 15 Thus, if declaratory relief is sought with reference to an obligation which . . . is barred 16 by the statute, the right to declaratory relief is likewise barred.”). 17 B. Equitable Tolling 18 Plaintiffs argue that it would be unfair and inequitable to enforce the one-year 19 contractual limitation period against Plaintiff’s unsatisfactory reimbursement claims 20 because the limitation period would have expired before they received most of the 21 payments. (Opp’n at 10.)2 However, even if the Court tolled these claims to the date 22 Plaintiffs received their final check, the suit is still untimely. 23 24 1 The statute of limitations does not pause while a Plaintiff continues to accrue additional damages after 25 having experienced the initial appreciable legal harm. "To delay the running of the period of limitation until defendant's acts furnished plaintiff with a more certain proof of damages would contravene the 26 principle that victims of legal wrong should make reasonable efforts to avoid incurring further damage.” Davies, 14 Cal. 3d at 515. 27 2 Plaintiffs have not presented any equitable tolling argument with respect to their claims that Defendants failed to disclose what the reimbursement rate would be and that they used a non-industry 28 standard rate, and the Court fails to see how any such argument would be applicable. 1 In Frazier the California Supreme Court stated that a contractual limitations 2 period for unsatisfactory reimbursement claims does not begin to run until the 3 defendant “ha[s] committed an ultimate act of bad faith.” Frazier, 169 Cal. App. 3d at 4 103–04. It is arguable that the first inadequate check Plaintiff received which was 5 allegedly calculated in bad faith is an ultimate act of bad faith which would have 6 started the clock. But even if the Court were to find that Plaintiffs’ claims should have 7 been tolled until the final check was received, the claims would still be untimely. 8 Plaintiffs’ last check was issued on December 8, 2021, and Plaintiffs did not initiate this 9 suit until over one year later on January 6, 2023. Therefore, even if Plaintiffs’ claims 10 were equitably tolled to the latest date a cause of action could accrue, they are still 11 time-barred. 12 Because Plaintiffs’ claims are untimely, Plaintiffs cannot state a claim upon which 13 relief can be granted. Accordingly, Defendant’s Motion to Dismiss the Second 14 Amended Complaint is GRANTED. 15 C. Leave to Amend 16 Plaintiffs have already been given the opportunity to amend their Complaint to 17 “provide the necessary information to establish tolling or to sufficiently allege a timely 18 claim,” and have failed to do so — opting instead to bring forward a legal argument 19 that the contractual limitations period does not apply. At oral argument, counsel for 20 Plaintiffs conceded that Plaintiffs cannot provide any additional facts to establish that 21 their claims are timely. The Court will therefore not grant leave to amend. See Zucco 22 Partners, LLC v. Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009), as amended (Feb. 23 10, 2009) (denial of leave to amend appropriate where amendment would be futile 24 because the plaintiff had no additional facts to plead). 25 //// 26 //// 27 //// 28 //// 1 IV. Conclusion 2 For the above reasons, IT |S HEREBY ORDERED that Defendants’ Motion to 3 | Dismiss, ECF No. 32, is GRANTED, and Plaintiff's Second Amended Complaint, ECF 4 | No. 28, is dismissed with prejudice. 5 The Clerk of the Court is directed to close this case. 6 4 IT IS SO ORDERED. 3 | Dated: _ October 31, 2023 Bek | Cbabeatin.. Hon. Daniel labretta 9 UNITED STATES DISTRICT JUDGE 10 11 12 13 | DJC2—23cv00027.mtd 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10