Estate of Emma Cartledge v. Columbia Casualty Company
Filing
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ORDER signed by Judge William B. Shubb on 11/22/11 GRANTING 7 Motion to Dismiss. Plaintiff has 21 days from the date of this order to file an amended complaint, if it can do so consistent with this order. (Donati, J)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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ESTATE OF EMMA CARTLEDGE,
NO. CIV. 2:11-2623 WBS GGH
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Plaintiff,
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v.
ORDER RE: MOTION TO DISMISS
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COLUMBIA CASUALTY COMPANY,
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Defendant,
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/
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Plaintiff the Estate of Emma Cartledge, by and through
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her successor in interest, Kenny Cartledge, (“Cartledge”) brought
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this action against defendant Columbia Casualty Company
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(“Columbia”) alleging claims under California Insurance Code
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section 11580(b)(2) and for breach of the implied covenant of
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good faith and fair dealing.
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plaintiff’s Complaint pursuant to Federal Rule of Civil Procedure
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12(b)(6) for failure to state a claim upon which relief may be
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granted.
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///
Defendant now moves to dismiss
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I.
Procedural and Factual Background
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Sierra Manor Associates, Inc. (“Sierra Manor
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Associates”) is a residential elder care facility that does
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business as Sierra Manor.
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Dismiss at 1.)
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court (“the underlying state action”) against Sierra Manor
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Associates, Inc., individually and doing business as Sierra
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Manor, in the amount of $2,000,471.50 for claims arising from
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injuries allegedly sustained by Emma Cartledge while a resident
(Mem. of P. & A. in Supp. of Mot. to
Cartledge obtained a default judgment in state
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at Sierra Manor.
(Compl. at 2.)
Sierra Manor Associates was the
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only defendant named in the underlying state action.
(Id.)
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Columbia issued a commercial liability policy to Attwal
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Enterprises, Inc. (“Attwal Enterprises”), a corporation that uses
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two fictitious business names--Sierra Manor and Woodson Lodge.
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(Id. at 3; Mem. of P. & A. in Supp. of Mot. to Dismiss at 1.)
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That policy was valid at the time of the acts under which the
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underlying state action arose.
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listed as an insured on the policy.
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Balwinder Attwal (“Mr. Attwal”) is the CEO of both Attwal
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Enterprises and Sierra Manor Associates.
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Mot. to Dismiss at 2-3, Exs. 4, 5.)
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Sierra Manor Associates is not
(Miller Decl. ¶ 2; Ex. C.)
(Pl.’s Opp’n to Def.’s
Cartledge alleges that Columbia was aware of the
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underlying action, but did not participate in the underlying
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action and rejected Cartledge’s offers to settle within policy
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limits.
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(Compl. at 3.)
Claiming that Sierra Manor Associates was an insured
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under the Columbia policy, Cartledge brought this action against
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Columbia as a judgment creditor seeking to collect on the default
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judgment against Sierra Manor Associates and bringing a claim for
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breach of the implied covenant of good faith and fair dealing.
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II.
Judicial Notice
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In general, a court may not consider items outside the
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pleadings when deciding a motion to dismiss, but it may consider
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items of which it can take judicial notice.
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F.3d 1370, 1377 (9th Cir. 1994).
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notice of facts “not subject to reasonable dispute” because they
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are either “(1) generally known within the territorial
Barron v. Reich, 13
A court may take judicial
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jurisdiction of the trial court or (2) capable of accurate and
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ready determination by resort to sources whose accuracy cannot
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reasonably be questioned.”
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may properly be taken of matters of public record outside the
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pleadings.
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(9th Cir. 1986).
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Fed. R. Evid. 201.
Judicial notice
See MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504
Defendant has requested that the court take judicial
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notice of five items: (1) the Complaint in the underlying state
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action; (2) the Complaint in the instant action; (3) a copy of
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the California Secretary of State Business Entity Detail for
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Sierra Manor Associates; (4) a copy of the California Secretary
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of State Business Entity Detail for Attwal Enterprises; and (5)
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the insurance policy issued to Attwal Enterprises.
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Judicial Notice (Docket No. 7-1).)
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(Req. for
To the extent that defendant requests that the court
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take judicial notice that the Complaint in the underlying state
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action was filed, the request is granted.
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Burbank-Glendale-Pasadena Airport Auth. v. City of Burbank, 136
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F.3d 1360, 1364 (9th Cir. 1998).
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See
However, the court will not
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take judicial notice of any disputed facts contained in the
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document.
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does not need to judicially notice the pleading in the current
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proceeding to consider it.
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four is appropriate as both are public records.
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policy, item five, is neither generally known and capable of
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accurate and unquestionable determination nor a public record.
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Because the insurance policy is not attached to the Complaint,
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the court will not judicially notice it.1
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See Lee, 250 F.3d at 690.
As to item two, the court
Judicial notice of items three and
The insurance
III. Discussion
On a motion to dismiss, the court must accept the
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allegations in the complaint as true and draw all reasonable
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inferences in favor of the plaintiff.
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U.S. 232, 236 (1974), overruled on other grounds by Davis v.
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Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322
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(1972).
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contain sufficient factual matter, accepted as true, to ‘state a
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claim to relief that is plausible on its face.’”
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Iqbal, 556 U.S. 662, ---, 129 S. Ct. 1937, 1949 (2009) (quoting
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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
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this “plausibility standard,” “[w]here a complaint pleads facts
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that are ‘merely consistent with’ a defendant’s liability, it
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‘stops short of the line between possibility and plausibility of
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entitlement to relief.’”
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at 556-57).
Scheuer v. Rhodes, 416
“To survive a motion to dismiss, a complaint must
Ashcroft v.
Under
Id. at 1949 (quoting Twombly, 550 U.S.
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As the court does not consider any matters outside the
pleadings that are not properly subject to judicial notice, the
court declines to treat the motion to dismiss as a motion for
summary judgment under Federal Rule of Civil Procedure 12(d).
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A.
Insurance Code section 11580(b)(2)
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Under California Insurance Code section 11580,
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“whenever judgment is secured against the insured . . . in an
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action based upon bodily injury, death, or property damage . . .
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an action may be brought against the insurer on the policy and
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subject to its terms and limitations, by such judgment creditor
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to recover on the judgment.”
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judgment creditor’s right to sue is not derivative or dependent
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upon any assignment from the insured.”
Cal. Ins. Code § 11580(b)(2).
“The
Shafer v. Berger, Kahn,
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Shafton, Moss, Figler, Simon & Gladstone, 107 Cal. App. 4th 54,
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68 (2d Dist. 2003) (quoting Croskey et al., Cal. Practice Guide:
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Insurance Litigation ¶ 15:1039 (The Rutter Group 2002)).
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order to state a claim under section 11580(b)(2), a complaint
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must include allegations that a plaintiff (1) obtained a judgment
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for injury (2) against a party who is insured by an insurance
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policy that (3) would cover the injury.
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Eagle Ins. Co., 16 Cal. App. 4th 694, 710 (1st Dist. 2004)
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(quoting Wright v. Fireman’s Fund Ins. Cos., 11 Cal. App. 4th
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998, 1015 (4th Dist. 1992)).
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plaintiff can be said to have obtained a judgment against a party
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insured by Columbia.
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In
Garamendi v. Golden
At issue in this case is whether
The Columbia policy was issued to Attwal Enterprises
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dba Sierra Manor.
In the underlying action, the only named
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defendant was “Sierra Manor Associates, Inc., individually and
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doing business as Sierra Manor.”2
Plaintiff claims that because
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In its Complaint, plaintiff assures the court that the
state court’s opinion may be amended to include Attwal
Enterprises as a named defendant. It is true that California
Civil Code section 187 permits a court to go back and alter its
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Sierra Manor Associates also does business under the fictional
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name “Sierra Manor,” Sierra Manor Associates should be considered
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as an insured under the Columbia policy.
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name, or dba, however, “does not create a separate legal
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identity.”
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Cal. App. 4th 1342, 1348 (4th Dist. 1996).
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designation “dba” is “merely descriptive of the person or
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corporation who does business under some other name.”
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Wash. Ins. Co. v. Valley Forge Ins. Co., 42 Cal. App. 4th 1194,
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1200 (1st Dist. 1996) (quoting Duval v. Midwest Auto City, Inc.,
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425 F. Supp. 1381, 1387 (D. Neb. 1977), affd. 578 F.2d 721 (8th
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Cir. 1978)).
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person, Sierra Manor the dba could never be an insured party
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under any policy.
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Cal. Ins. Code § 151).
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Manor” in the Columbia policy did nothing to change “the risks
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undertaken”--the insured remained Attwal Enterprises.
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1201 (citing Carlson v. Doekson Gross, Inc., 372 N.W.2d 902, 906
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(N.D. 1985)).
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A fictional business
Pinkerton’s Inc. v. Superior Ct. of Orange Cty., 49
Rather, the
Providence
Further, because an “insured” must be a legal
Providence, 42 Cal. App. 4th at 1200 (citing
The inclusion of the words “dba Sierra
Id. at
Nor is the court swayed by plaintiff’s contention that
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the real insured under the Columbia policy is Mr. Attwal himself.
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It is true that courts have held that when individuals who run
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own judgment to “impose liability under a judgment upon the alter
ego who has had control of the litigation,” Alexander v. Abbey of
the Chimes, 104 Cal. App. 3d 39, 45 (1st Dist. 1980), where
“amendment is merely inserting the correct name of the real
defendant, such that adding a party to a judgment after the fact
does not present due process concerns,” Katzir’s Floor & Home
Design, Inc. v. M-MLS.com, 394 F.3d 1143, 1148 (9th Cir. 2004).
Such an argument, however, has no place in this proceeding.
Simply put, this court would have no jurisdiction to alter the
separate judgment of another court.
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sole proprietorships take out insurance policies under fictitious
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business names, the individuals themselves are the insureds.
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See, e.g., O’Hanlon v. Hartford Ins. Accident & Indem. Co., 639
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F.2d 1019, 1024 (3d Cir. 1981); cf. Ball v. Steadfast-BLK, 196
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Cal. App. 4th 694, 701-02 (3d Dist. 2011) (lien listing fictional
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business name as claimant could be foreclosed by sole proprietor
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who operated under the fictional business name).
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not on point here.
Such cases are
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First, Mr. Attwal runs Attwal Enterprises as a
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corporation with a legal identity separate from his own, not as a
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sole proprietorship.
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was taken out under a fictional business name only, forcing the
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court to examine facts external to the insurance policy in order
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to determine the identity of the insured.
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insured is Attwal Enterprises, an insurable corporation.
Second, this is not a case where a policy
Instead, the named
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This analysis is not inconsistent with the holding in
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Goss v. Security Insurance Company of California, 113 Cal. App.
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577 (1st Dist. 1931).
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business under the fictional business name “Pacific Motor
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Company,” but did not create a separate legal identity for their
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business.
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insurance policy under the fictional name Pacific Motor Company.
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Id.
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as Pacific Motor Company, the insurance company denied coverage,
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claiming that while it had insured Pacific Motor Company as a
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corporation, the judgment was against a partnership.
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579-80.
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In that case, three individuals conducted
Goss, 113 Cal. App. at 579.
The three men took out an
When a judgment was entered against the men, doing business
Id. at
The court rejected the insurance company’s argument,
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noting that as Pacific Motor Company never had any “corporate
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life,” under the insurance company’s reasoning it would never be
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required to pay out anything under the policy in question.
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at 580.
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parties in entering the insurance contract.
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that the insurance company accepted premiums from the men and
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that there was never any Pacific Motor Company that could have
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been insured, the court found that the parties’ intentions had
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been to insure the owners of the garage against liability.
Id.
Instead, the court looked to the intention of the
In view of the fact
The
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insurance company, therefore, was required to provide coverage
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for the judgment against the individuals.
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Id. at 580-81.
Unlike in Goss, there is no fear that the policy here
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is one under which Columbia could never be liable.
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policy insures a valid legal entity, Attwal Enterprises.
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Plaintiff claims in its Opposition that the parties intended to
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insure both Attwal Enterprises and Sierra Manor Associates and
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that “a premium was obviously paid to cover Sierra Manor under
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the policy in question.”
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In support of such conclusory statements, all that the Complaint
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alleges is that the Columbia policy “refers” to the address of
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the residential elderly care facility at which Emma Cartledge was
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injured.
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state a plausible claim of entitlement to relief.
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Ct. at 1949.
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(Compl. at 3.)
The Columbia
(Pl.’s Mem. of P. & A. in Opp. at 5-6.)
That fact alone is insufficient to
Iqbal, 129 S.
Plaintiff argues alternatively that court should
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disregard the corporate form and treat Mr. Attwal, Sierra Manor
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Associates, and Attwal Enterprises as one entity.
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plaintiff only states in its Opposition that Mr. Attwal is the
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In support,
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CEO of both corporations and suggests that further discovery
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“may” reveal other facts that would support application of the
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alter ego doctrine or piercing the corporate veil.
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of P. & A. in Opp. at 6-7.)
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factual allegations that would be necessary to support such an
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argument.
(Pl.’s Mem.
The Complaint, however, is devoid of
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Further, in the absence of inequitable conduct on the
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part of the insurer, parties may not use the alter ego doctrine
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to re-write an insurance policy to add insureds.
U.S. Fire Ins.
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Co. v. Nat’l Union Fire Ins. Co., 107 Cal. App. 3d 456, 472
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(1980).
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an insurer’s contractual obligations under an insurance contract
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with a corporation.
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No. CV 09-1173, 2011 WL 1332165, at *6 (E.D. Cal. Apr. 5, 2011)
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(citing Am. Home Ins. Co. v. Travelers Indem., 122 Cal. App. 3d
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951, 966–67 (1981)).
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Columbia played any role in any abuse of corporate privileges Mr.
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Attwal “may” have engaged in.
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allege facts that would support holding Columbia liable under an
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alter ego theory or through piercing the corporate veil.
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B.
Nor can piercing the corporate veil be used to increase
GBTI, Inc. v. Ins. Co. of State of Penn.,
The Complaint contains no allegations that
The Complaint, therefore, does not
Breach of Implied Covenant of Good Faith and Fair
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Dealing
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An insurer’s duty of good faith and fair dealing arises
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from the insurance contract and runs to the insured.
Kransco v.
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Am. Empire Surplus Lines Ins. Co., 23 Cal. 4th 39, 400–01 (2000);
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Murphy v. Allstate Ins. Co., 17 Cal. 3d 937, 944 (1976).
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judgment creditor may bring claims for breach of the implied
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covenant in two situations.
A
First, the creditor may bring claims
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assigned to it by the insured.
Murphy, 17 Cal. at 942.
Second,
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Hand v. Farmers Insurance Exchange, 23 Cal. App. 4th 1847,
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provides that under California Insurance Code section 11580, in
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some circumstances, a judgment creditor is properly considered to
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be a third party beneficiary of an insurance contract who is owed
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certain duties under the implied covenant of good faith and fair
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dealing and may sue the insurer for breach of these duties.
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v. Farmers Ins. Exch., 23 Cal. App. 4th 1847, 1857 (2d Dist.
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1994).
Hand
Such a cause of action, however, only lies where the
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benefits of a duty under the implied covenant run in favor of the
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judgment creditor.
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109 Cal. App. 4th 1020, 1044 (4th Dist. 2003), overruled on other
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grounds by Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal. 4th
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1159 (2005) (quoting Hand, 23 Cal. App. 4th at 1857).
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Diamond Woodworks, Inc. v. Argonaut Ins. Co.,
Plaintiff alleges that Columbia breached duties that
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ran in favor of plaintiff in two ways.
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that Columbia refused to settle within policy limits when there
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was a substantial likelihood of recovery in excess of those
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limits.
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default set aside in the underlying action.
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allegations that plaintiff has been assigned any claims for
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breach of the implied covenant of good faith and fair dealing,
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plaintiff must show that it has standing under Hand as a third
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party beneficiary.
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First, plaintiff alleges
Second, plaintiff alleges that Columbia failed to have
As there are no
As an initial point, as discussed above plaintiff has
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not obtained a judgment against Attwal Enterprises and,
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therefore, has not become a third-party beneficiary of the policy
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issued to Attwal Enterprises who is able to bring a claim for
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breach of good faith and fair dealing under Hand.
See Hand, 23
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Cal. App. 4th at 1858 (“once having secured a final judgment for
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damages, the plaintiff becomes a third party beneficiary of the
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policy”).
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were breached are designed to protect insureds from potential
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claimants, not to protect potential claimants.
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settle protects “the insured from exposure to liability in excess
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of the coverage as a result of the insurer’s gamble--on which
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only the insured might lose.”
In addition, both of the duties that plaintiff alleges
The duty to
Murphy, 17 Cal. 3d at 941 (citing
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Shapero v. Allstate Ins. Co., 14 Cal. App. 3d 433 (1971).
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not a duty that benefits a judgment creditor.
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Co., No. 08-1551, 2009 WL 513474, at *3 (N.D. Cal Mar. 2, 2009).
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The duty to defend, which protects insureds by giving them the
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right to “call on the insurer’s superior resources for the
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defense of third party claims,” Montrose Chem. Corp. v. Superior
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Ct., 6 Cal. 4th 287, 295 (1993), likewise runs only to the
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insured, not to third party claimants.
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v. Indus. Idemn. Co., 95 Cal. App. 4th 669, 962 (4th Dist. 2002).
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Accordingly, plaintiff fails to adequately plead a claim against
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defendant for breach of the implied covenant of good faith and
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fair dealing.
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It is
Ham v. Cont’l Ins.
San Diego Housing Comm’n
IT IS THEREFORE ORDERED that Columbia Casualty’s motion
to dismiss be, and the same hereby is, GRANTED.
Plaintiff has twenty days from the date of this Order
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to file an amended complaint, if it can do so consistent with
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this Order.
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DATED:
November 22, 2011
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