Unpublished Disposition, 899 F.2d 1224 (9th Cir. 1990)

MEMORANDUM^** 

The O'Keefes appeal the district court's dismissal of their counterclaim against Allstate Insurance Company (Allstate), arising out of an alleged breach of the implied covenant of good faith and fair dealing. Because this counterclaim is based exclusively on Allstate's filing of a declaratory judgment action, we affirm.

By their own admission, " [t]he gravamen of the [O'Keefes'] Counterclaim is the failure of ALLSTATE to discharge its duty to its insured of a bargained for benefit by filing the declaratory relief action against Appellants...." (Emphasis added.) California law, however, expressly provides that "the mere filing of an action to declare the insurer's rights and duties relative to an insurance policy cannot form the basis of breach of the duty of good faith and fair dealing." Atlas Assurance Co. v. McCombs Corp., 146 Cal. App. 3d 135, 150, 194 Cal. Rptr. 66, 74 (1983).

The O'Keefes rely on California State Auto. Ass'n v. Superior Court, 184 Cal. App. 3d 1428, 229 Cal. Rptr. 409 (1986), which states that "there is no prohibition to filing a cross-complaint in an action for declaratory relief." Id. at 1433, 229 Cal. Rptr. at 412. This case, however, is inapposite. Although the counterclaim involved in California State alleged a breach of the implied covenant of good faith and fair dealing, the claim was founded on allegations other than the insurer's filing of a declaratory judgment action. Id. at 1431, 229 Cal. Rptr. at 411.

The O'Keefes' counterclaim also alleged that "the maintaining of this [declaratory] action ... is for the purpose of harassment." However, the O'Keefes did not allege any facts other than the filing of the declaratory relief suit in support of this claim. We agree with the district court that "the mere allegation of harassment [based on the filing of a declaratory relief suit] cannot alone support a claim of breach, for otherwise an insurer's right to a declaratory judgment would be eviscerated. As Atlas makes clear, some additional facts must be alleged in order for defendants' counterclaim to survive."

Because the O'Keefes failed to allege facts sufficient to state a claim, the district court's decision is AFFIRMED.