Becerra v. Allstate Northbrook Indemnity Company et al, No. 3:2022cv00202 - Document 8 (S.D. Cal. 2022)
Court Description: Order Granting Partial Motion to Dismiss (ECF No. 5 ). Amended complaint due no later than 7/21/22. If no amended complaint is filed by 7/21/22, Allstate's answer is due by 7/28/22. Signed by Judge Cynthia Bashant on 6/30/22. (jmo)
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Becerra v. Allstate Northbrook Indemnity Company et al Doc. 8 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 STEFANIE BECERRA, Case No. 22-cv-00202-BAS-MSB Plaintiff, 12 13 14 15 ORDER GRANTING PARTIAL MOTION TO DISMISS (ECF No. 5.) v. ALLSTATE NORTHBROOK INDEMNITY COMPANY, Defendant. 16 17 18 Before the Court is Defendant Allstate Northbrook Indemnity Company 19 (“Allstate”)’s motion to dismiss Count 1 of Plaintiff Stefanie Becerra (“Becerra”)’s 20 Complaint (Compl., Ex. A to Not. of Removal, ECF No. 1-2).1 (Mot., ECF No. 5; Mem., 21 ECF No. 5-1.) Specifically, Allstate moves to dismiss Becerra’s breach of contract claim 22 pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6). (See Mot. at 1.) Becerra 23 opposes (Opp’n, ECF No. 6) and Allstate replies (Reply, ECF No. 7). The Court finds this 24 Motion suitable for determination on the papers submitted and without oral argument. See 25 Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the reasons explained below, Allstate’s 26 Motion is GRANTED. 27 28 1 All exhibits are annexed to the Complaint at ECF No. 1-2. -122cv0202 Dockets.Justia.com 1 I. BACKGROUND 2 2 A. 3 This action stems from Becerra’s involvement in a two-car accident with an 4 uninsured driver on December 29, 2015. (See Compl. ¶ 5.) Becerra was stopped at an 5 intersection when the uninsured driver, who was being chased by police, struck her vehicle 6 from behind. (See id.) The crash totaled Becerra’s vehicle and caused her to sustain neck 7 and back injuries. (See id.) Accident 8 B. 9 At the time of the accident, Becerra was insured under an Allstate automobile policy 10 (“Policy”), which included uninsured motorist bodily injury (“UM”) coverage with a 11 policy limit of $25,000. (Compl. ¶ 6.) A copy of that Policy is annexed as Exhibit 1 to the 12 Complaint. (Policy, Ex. 1 to Compl.) In pertinent part, the Policy states: 13 14 15 16 17 18 19 20 Policy If you and [Allstate] disagree on your right to receive any damages or on the amount of damages, then upon written request of either party, the disagreement will be settled by a single neutral arbitrator. If arbitration is used, any arbitration award will be binding up to your policy limits and may be entered as a judgment in a proper court. All expenses of arbitration will be shared equally. However, attorney fees and fees paid to medical or other expert witnesses are not considered arbitration expenses and are to be paid by the party incurring them. (Id. at 44.) 21 C. 22 On February 11, 2016, Becerra made a UM claim. (See Compl. ¶ 7.) Claim In 23 approximately November of 2016, when she had substantially completed medical 24 treatment for the injuries she sustained from the accident, Becerra’s attorney sent Allstate 25 a formal demand for payment of the Policy limit. (See id. ¶ 8.) 26 27 28 2 All of these facts are taken from the Complaint. For purposes of this Motion, the Court accepts all the factual allegations therein as true. See Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). -222cv0202 1 Becerra alleges that on December 23, 2016, nearly one year after Becerra initiated 2 her UM claim but just one month after Becerra’s attorney’s formal demand, Allstate made 3 an offer of $7,000 to settle. (See Compl. ¶ 9.) Becerra responded on January 24, 2017, 4 with a formal demand for arbitration. (See id.) Allstate did not respond to Becerra’s 5 demand, prompting her to send Allstate a second demand for arbitration, along with a list 6 of potential arbitrators, on March 14, 2017. (See id.) Again, Allstate did not respond, so 7 Becerra wrote to Allstate’s in-house counsel, “asking to set arbitration after [Becerra’s] 8 deposition which was noticed for June 1, 2017.” (Id.) On May 2, 2017, Allstate 9 acknowledged Becerra’s arbitration demand, indicating arbitration would be set. (See id.) 10 Becerra’s deposition went forward as scheduled. (See Compl. ¶ 10.) In connection 11 with the arbitration, Allstate retained Raymond Vance, M.D. (“Dr. Vance”) to conduct a 12 defense medical examination of Becerra. (See id.) According to Becerra, Dr. Vance 13 concluded “the entirety of [Becerra’s] care was reasonable and necessary.” (Id.) Following 14 the medical examination, Becerra made another demand for payment of the full Policy 15 limit. (See id.) On February 14, 2018, Allstate returned with a “final” offer of $10,000. 16 (Id.) Becerra rejected Allstate’s offer and made another request to proceed with arbitration. 17 (See id.) The parties considered potential arbitrators but could not agree upon whom to 18 choose. (See id.) Becerra avers that Allstate “insisted on using arbitrators who required 19 exorbitant administrative costs and fees,” and that she refused to use such arbitrators unless 20 Allstate incurred the cost of the arbitration. (Id.) Unable to reach an agreement as to an 21 arbitrator, Becerra served a formal “998 settlement offer” for $17,500, which Allstate 22 rejected. (Id. ¶ 11.) 23 According to Becerra, arbitration stalled for approximately one year because 24 Allstate’s “in-house attorney” handling the matter purportedly “had a conflict of interest,” 25 requiring him “to withdraw as counsel” and prompting Allstate to obtain a replacement. 26 (Compl. ¶ 12.) To no avail, the parties continued to suggest to one another proposed 27 arbitrators from approximately August of 2019 until March of 2020. (See id. ¶¶ 14–15.) 28 -322cv0202 1 Finally, on March 10, 2020, Allstate agreed to move forward with one of Becerra’s 2 proposed arbitrators. (See id. ¶ 15.) 3 Formal arbitration was conducted in August and November of 2020, resulting in an 4 award “against [Allstate] in the sum of $78,086.93,” more than $50,000 in excess of 5 Becerra’s Policy limit. (Compl. ¶¶ 8, 17.) Allstate paid Becerra $25,000—her Policy 6 limit—on December 1, 2020. (Id. ¶ 17.) Additionally, Becerra asked Allstate to pay her 7 arbitration costs and fees “[b]ased upon the amount of the award,” in excess of the Policy 8 limit, which Allstate has refused to do. (Id.) 9 D. Present Action 10 Becerra commenced this action against Allstate in San Diego Superior Court on 11 September 23, 2021, alleging breach of contract (Count 1) and breach of the implied 12 covenant of good faith and fair dealing (Count 2). (See Compl. ¶¶ 18–31.) Allstate 13 removed this action to federal court on the ground that there is complete diversity between 14 the parties and the amount in controversy exceeds $75,000, exclusive of costs and interests. 15 (Not. of Removal ¶ 9 (citing 28 U.S.C. § 1441)); see also 28 U.S.C. §1332 (diversity 16 jurisdiction statute). 17 As to Count 1, Becerra alleges Allstate breached the Policy 18 by failing to pay [UM] benefits . . . in a reasonably prompt fashion; by making unreasonable lowball offers of settlement throughout the handling of [Becerra’s] insurance claim; by unreasonably forcing [Becerra] to complete the [UM] arbitration process, even though it was reasonably clear . . . [Becerra’s] claim was a policy limit case; by unreasonably and greatly delaying the arbitration process for four years; by failing to conduct a thorough and reasonably prompt investigation following [Becerra’s] presentation of her UM claim . . .; and by otherwise unreasonably and unlawfully delaying the resolution of [Becerra’s] [UM] claim. 19 20 21 22 23 24 25 (Compl. ¶ 22.) Becerra avers that as a “direct” result of Allstate’s breach of contract, she 26 “suffered damages under the [Policy] in an amount in excess of $25,000.00.” (Id. ¶ 23.) 27 Count 2—Becerra’s claim of breach of the implied covenant of good faith and fair 28 dealing—is predicated upon substantially the same theory as Count 1: Allstate’s -422cv0202 1 purportedly unreasonable delay in performing its obligations under the Policy. (See 2 Compl. ¶¶ 24–31.) However, Becerra seeks additional types of damages under Count 2, 3 namely, compensation for severe and substantial emotional distress, mental anguish, and 4 suffering; attorney’s fees, costs, and expenses incurred in obtaining the Policy benefits 5 from Allstate; and exemplary and/or punitive damages. (Id. ¶¶ 29–31.) 6 On April 14, 2022, Allstate moved to dismiss only Count 1 of the Complaint 7 pursuant to Rule 12(b)(6). (See Mot. at 1; Mem. at 2.) Becerra opposes (Opp’n), and 8 Allstate replies (Reply). 9 II. LEGAL STANDARD 10 A complaint must plead sufficient factual allegations to “state a claim to relief that 11 is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation 12 marks and citations omitted). “A claim has facial plausibility when the plaintiff pleads 13 factual content that allows the court to draw the reasonable inference that the defendant is 14 liable for the misconduct alleged.” Id. 15 A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the 16 claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 17 731 (9th Cir. 2001). The court must accept all factual allegations pleaded in the complaint 18 as true and must construe them and draw all reasonable inferences therefrom in favor of 19 the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). 20 To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual 21 allegations; rather, it must plead “enough facts to state a claim to relief that is plausible on 22 its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “[A] formulaic recitation 23 of a cause of action’s elements will not do.” Id. at 545. 24 III. ANALYSIS 25 Under California law, a contract “is an agreement to do or not to do a certain thing.” 26 Cal. Civ. Code § 1549. The elements of a claim for breach of contract are (1) existence of 27 the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s 28 -522cv0202 1 breach; and, most important here, (4) damages. See Wall St. Network, Ltd. v. N.Y. Times 2 Co., 164 Cal. App. 4th 1171, 1178 (Cal. Ct. App. 2008). 3 Allstate’s Motion appears to be predicated upon two grounds. First, Allstate argues 4 that Count 1 is redundant and duplicative of Count 2, and thus the former should be 5 consolidated into the latter. (See Reply at 2, 5–6.) Second, Allstate argues Count 1 fails 6 as a matter of law because Becerra does not allege any cognizable damages to sustain a 7 breach of contract claim. (See Mem. at 3; Reply at 4–5.) Below, the Court addresses both 8 of Allstate’s arguments in turn. 9 A. Duplicative Claims 10 Allstate argues the Court should dismiss Count 1 because it is premised upon 11 substantially the same theory as Count 2: Allstate’s purported unreasonable delay in 12 providing Becerra with the UM-coverage benefits to which she is entitled under the Policy. 13 (Reply at 5 (“[Becerra’s] allegations in support of her breach of contract claim are the same 14 as those offered in support of her bad faith claim.”).) In Allstate’s view, these allegations 15 sound in breach of the implied covenant of good faith and fair dealing—not as breach of 16 contract—and thus Becerra should be permitted to pursue Count 2 only. (Id. at 2, 5.) 17 Allstate also contends the overlap in allegations supporting Becerra’s two claims further 18 supports dismissal of the breach of contract claim. (Id. at 5–6.). In support of the premise 19 that district courts may dismiss a breach of contract claim that is practically identical to a 20 claim for breach of implied covenant alleged in the same pleading, Allstate relies 21 principally upon Mason v. Allstate Ins. Co., No. SACV 13-01521-JVS, 2014 WL 212245, 22 at *3 n.3 (C.D. Cal. Jan. 6, 2014). 23 Same Theory. As an initial matter, the Court disagrees with the notion that Becerra’s 24 allegation Allstate unreasonably delayed its performance under the Policy, i.e., providing 25 UM coverage to Becerra over four years after she first submitted a claim following her 26 2015 accident, resonates solely as a breach of the implied covenant of good faith and fair 27 dealing. California Civil Code Section 1657 explicitly provides that where, as here, “no 28 time is specified” in a contract “for the performance of an act required to be performed, a -622cv0202 1 reasonable time is allowed.” Consequently, California courts conceptualize a party’s 2 unreasonable delay in performing a required act under a contract not only as a breach of 3 the implied covenant of good faith and fair dealing but also as “an actionable withholding 4 of benefits that may constitute a breach of contract.” Intergulf Dev. LLC v. Superior Court, 5 183 Cal. App. 4th 16, 20 (Cal. Ct. App. 2010) (citing Wilson v. 21st Century Ins. Co., 42 6 Cal. 4th 713, 723 (2007)). 7 To the extent Allstate argues that Becerra’s breach of contract claim should be 8 dismissed because “a delay in the payment of policy benefits cannot salvage a breach of 9 contract claim where all policy benefits have been paid,” the Court observes this argument 10 is about whether Plaintiff adequately alleges damages sufficient to state a cause of action, 11 not about whether Becerra’s theory of breach of contract is a cognizable one. (See Reply 12 at 2.) The Court addresses this issue below, infra Sec. III.B. However, contrary to 13 Allstate’s insinuation otherwise, it simply is not the case that a plaintiff who has been paid 14 all that is owed to her under an agreement is precluded as a matter of law from pursuing a 15 breach of contract claim on the theory of unreasonable delay. See Mattson v. United Servs. 16 Auto. Ass’n, No. 18CV222 JM (KSC), 2019 WL 2330087, at *16 (S.D. Cal. May 31, 2019) 17 (“Unreasonable delay in paying policy benefits or paying less than the amount due is 18 actionable withholding of benefits which may constitute a breach of contract as well as bad 19 faith giving rise to damages in tort.” (citing Intergulf Dev., 183 Cal. App. 4th at 20)); 20 Rabinowitz v. Paul Revere Life Ins. Co., 91 F. App’x 563, 568 n.1 (9th Cir. 2004) (holding 21 that despite being paid full benefits, plaintiff has a valid breach of contract claim because 22 he was not timely paid); Big Bear Trucking Corp. v. Travelers Prop. Cas. Co. of Am., No. 23 2:19-CV-09745-RGK-GJS, 2020 WL 8175606, at *7 (C.D. Cal. Nov. 24, 2020) (“[T]he 24 fact that Travelers paid Big Bear’s claim does not allow Travelers to avoid liability for 25 breach of contract if it unreasonably delayed that payment.”). 26 Redundant Allegations. As for Allstate’s argument that Becerra’s breach of contract 27 claim should be dismissed because the claim’s allegations are “duplicative” of the 28 allegations in her breach of implied covenant claim, the Court finds this argument better -722cv0202 1 suited for a motion to strike under Rule 12(f). See Fed. R. Civ. P. 12(f) (“The court may 2 strike from a pleading . . . any redundant, immaterial, impertinent, or scandalous matter.”). 3 A Rule 12(f) motion to strike allows a party to challenge needlessly duplicative or 4 repetitive material in a pleading. See Wilkerson v. Butler, 229 F.R.D. 166, 170 (E.D. Cal. 5 2005) (“A ‘redundant’ matter consists of allegations that constitute a needless repetition of 6 other averments or which are foreign to the issue to be denied.”). Rule 12(b)(6) is an 7 improper vehicle for challenging duplicative claims because “[i]n the case of a duplicative 8 [claim], the issue is not that the [claim] is insufficient to state a cognizable legal theory as 9 required by Rule 12(b)(6), but rather that the legal and factual issues contained in the 10 [claim] are redundant with issues already present in the proceeding.” Fluke Elecs. Corp. 11 v. CorDEX Instruments, Inc., No. C12-2082 JLR, 2013 WL 2468846, at *3 (W.D. Wash. 12 June 7, 2013). 13 A motion to strike may be granted if “the allegations in the pleading have no possible 14 relation to the controversy, and may cause prejudice to one of the parties.” Travelers Cas. 15 & Sur. Co. of Am. v. Dunmore, No. CIV. S-07-2493 LKK/DAD, 2010 WL 5200940, at *3 16 (E.D. Cal. Dec. 15, 2010). Prejudice may include, for example, conducting expensive and 17 potentially unnecessary and irrelevant discovery, see Barnes v. AT & T Pension Benefit 18 Plan-Nonbargained Program, 718 F. Supp. 2d 1167, 1173 (N.D. Cal. 2010), or “[t]he 19 possibility that issues will be unnecessarily complicated or that superfluous pleadings will 20 cause the trier of fact to draw unwarranted inferences at trial,” Ayat v. Societe Air France, 21 No. C 06-01574 JSW, 2007 WL 1840923, at *1 (N.D. Cal. June 27, 2007). “Motions to 22 strike are generally viewed with disfavor,” Dunmore, 2010 WL 5200940 at *3 (E.D. Cal. 23 Dec. 15, 2010), and “[c]ourts frequently deny motions to strike where the moving party 24 cannot adequately demonstrate such prejudice,” Gunderson LLC v. BCG Props. Grp., Inc., 25 No. 3:19-CV-01569-AC, 2020 WL 1529356, at *4 (D. Or. Mar. 30, 2020). 26 Allstate’s attempt to dismiss Becerra’s breach of contract claim on the ground that 27 the claim is duplicative of her breach of implied covenant claim fails to meet the burden of 28 prejudice required for a Rule 12(f) motion to strike. Allstate is silent as to whether the -822cv0202 1 duplicative nature of Becerra’s breach of contract claim will cause prejudice such as 2 “conducting expensive, and potentially unnecessary and irrelevant, discovery,” see 3 Gunderson, 2020 WL 1529356, at *4, or “caus[ing] the trier of fact to draw unwarranted 4 inferences at trial,” see Ayat, 2007 WL 1840923, at *1. 5 Moreover, “courts have noted the distinction between redundant pleading and 6 alternative pleading in denying Rule 12(f) motions.” Gunderson, 2020 WL 1529356, at *5 7 (D. Or. Mar. 30, 2020). Under Rule 8(d)(2), “[a] party may set out 2 or more statements 8 of a claim or defense alternatively or hypothetically, either in a single count or defense or 9 in separate ones. If a party makes alternative statements, the pleading is sufficient if any 10 one of them is sufficient.” Put differently, “a party may plead different theories of a claim 11 when factual or legal issues differ, or when different relief would be available.” 12 Gunderson, 2020 WL 1529356, at *5 (citing 5C C. Wright & A Miller, Fed. Prac. & Proc. 13 Civ. § 1382 (3d ed.)). While Becerra’s breach of contract and breach of implied covenant 14 claims “may be based on similar or even identical facts,” they are not redundant for the 15 purposes of Rule 12(f) because “they rely on different theories and legal authority and are 16 subject to different defenses.” See Shine v. Fuston, No. 20CV2036-LAB-DEB, 2021 WL 17 4460885, at *11 (S.D. Cal. Sept. 29, 2021). Indeed, courts have suggested “the type of 18 redundancy Rule 12(f) targets is not legal redundancy, but literal redundancy.” State Farm 19 Gen. Ins. Co. v. ABC Fulfillment Servs., LLC, No. 1:15-CV00421-KJM-JLT, 2016 WL 20 159229, at *2 (E.D. Cal. Jan. 13, 2016). 21 Because Allstate’s arguments fail to form the proper grounds for a Rule 12(b)(6) 22 motion or meet the burden for a Rule 12(f) motion to strike, the Court declines Allstate’s 23 invitation to dismiss Becerra’s breach of contract claim on the ground it is redundant or 24 duplicative. 25 B. 26 Alternatively, Allstate argues that Becerra’s breach of contract claim fails as a matter 27 of law because she fails to allege “compensable damages under a breach of contract 28 theory.” (Reply at 4.) Specifically, Allstate avers that Becerra fails to allege cognizable Cognizable Damages Under Breach of Contract -922cv0202 1 contract damages because she acknowledges she received the full Policy limit. (See Mem. 2 At 4; Reply at 4.) Furthermore, Allstate contends that Becerra is precluded by statute from 3 recovering consequential damages in the form of arbitration expenses. (See Mem. at 4.); 4 see also Cal. Civ. Proc. Code § 1284.2. 5 “[T]o support an action at law for breach of contract, the plaintiff must show it has 6 suffered damage.” Emerald Bay Cmty. Ass’n. v. Golden Eagle Ins. Corp., 130 Cal. App. 7 4th 1078, 1088 (Cal. Ct. App. 2005). Failure to do so justifies dismissal under Rule 8 12(b)(6). See Mason, 2014 WL 212245 at *3 (dismissing plaintiff’s breach of contract 9 claim because plaintiff “failed to adequately plead that he has in fact suffered damages that 10 are recoverable under a breach of contract theory”); see also Gardner v. Health Net, Inc., 11 No. CV 10-2140 PA (CWX), 2010 WL 11597979, at *6 (C.D. Cal. Aug. 12, 2010) 12 (dismissing plaintiffs’ breach of contract claim because plaintiffs “failed to allege any 13 cognizable damages”). 14 “Contract damages are generally limited to those within the contemplation of the 15 parties when the contract was entered into or at least reasonably foreseeable by them at the 16 time.” Erlich v. Menezes, 21 Cal. 4th 543, 550 (1999) (quoting Applied Equip. Corp. v. 17 Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 515 (1994)). Put differently, “[d]amages for 18 breach of contract include general (or direct) damages, which compensate for the value of 19 the promised performance, and consequential damages, which are indirect and compensate 20 for additional losses incurred as a result of the breach.” Speirs v. BlueFire Ethanol Fuels, 21 Inc., 243 Cal. App. 4th 968, 989 (Cal. Ct. App. 2015). 22 1. Direct Damages 23 Under California law, the measure of direct damages for breach of contract is “the 24 amount which will compensate the party aggrieved for all the detriment proximately caused 25 thereby.” Cal. Civ. Code § 3300. Thus, direct damages for a breach of contract claim 26 cannot, as a matter of law, exceed the value of the promised performance under the contract 27 by the party in breach. See Speirs, 243 Cal. App. 4th at 989 (instructing that direct damages 28 “compensate for the value of the promised performance”). - 10 22cv0202 1 The Court takes particular note of Paulson v. State Farm Mutual Automobile 2 Insurance Co., 867 F. Supp. 911 (C.D. Cal. 1994), proffered by Allstate. As with Becerra, 3 the policyholder-plaintiff in Paulson alleged that his insurer-defendant’s initial refusal to 4 pay benefits under his policy constituted a breach of contract, despite the fact that his 5 insurer ultimately paid the full policy limit following arbitration. See id. at 917. The 6 Paulson Court held that the policyholder had failed to show he had suffered any direct, or 7 general, damages as a matter of law because he had received the full policy limit, albeit 8 after a purportedly unreasonable delay. See id. at 918; see also Everett v. State Farm Gen. 9 Ins. Co., 162 Cal. App. 4th 649, 660 (Cal. Ct. App. 2008) (holding that plaintiff fails to 10 bring claim for breach of contract because insurer paid up to policy limit as expressly 11 provided in insured’s policy). 12 As in Paulson, Becerra has not suffered any direct damages flowing from breach of 13 the Policy, as a matter of law, because she explicitly alleges that she has already received 14 the $25,000 Policy limit. (See Compl. ¶ 17.) That amount represents the maximum value 15 of Allstate’s performance under the Policy (Policy 31, 58), 3 and thus the maximum amount 16 of general damages Becerra can recover by this action, see Speirs, 243 Cal. App. 4th at 989 17 (holding general damages equals the value of the promised performance). Becerra cannot, 18 on the one hand, concede she was paid the full Policy limit and, on the other hand, allege 19 that she is entitled to recover that amount, for a second time, by this action. That would 20 result in a complete windfall in favor of Becerra, in contravention of the well-settled rules 21 on contract damages and California statutory law. See Benard v. Walkup, 272 Cal. App. 22 2d 595, 605 (Cal. Ct. App. 1969) (“[A] person cannot recover damages for breach of a 23 contract a greater amount than he could have gained by the full performance thereof on 24 both sides.”); Cal. Civ. Code § 3358 (“Except as expressly provided by statute, no person 25 26 27 28 3 In the section of the Policy addressing UM coverage entitled “Limits of Liability,” the Policy states that “[t]he coverage limit shown on the Policy Declarations for a) ‘each person’ is the maximum that [Allstate] will pay for damages arising out of bodily injury to one person in any one motor vehicle accident, including all damages sustained by anyone else as a result of that bodily injury.” (Policy at 31; see also id. at 58.) - 11 22cv0202 1 can recover a greater amount in damages for the breach of an obligation, than he could 2 have gained by the full performance thereof on both sides.”). 3 4 Accordingly, because Allstate paid Becerra the Policy limit of $25,000, the Court finds that Becerra fails to allege direct damages arising from breach of contract. 5 2. Consequential Damages 6 Becerra argues correctly that the absence of direct damages does not necessarily 7 portend dismissal of Count 1. Allstate’s Rule 12(b)(6) challenge fails if Becerra has alleged 8 cognizable consequential damages. See Paulson, 867 F. Supp. at 917–18 (finding “no 9 damages as a matter of law for breach of contract” because plaintiff failed to allege both 10 direct damages and “incidental damages resulting from any alleged breach of contract”). 11 Therefore, the Court next turns to assessing whether the Complaint adequately alleges 12 consequential damages flowing from Allstate’s purported breach of contract. 13 Consequential damages comprise “the losses that are foreseeable and proximately 14 caused by the breach of a contract.” Lewis Jorge Constr. Mgmt., Inc. v. Pomona Unified 15 Sch. Dist., 34 Cal. 4th 960, 969 (2004). The measure of consequential damages for breach 16 of contract is “the amount . . . which, in the ordinary course of things, would be likely to 17 result therefrom.” Cal. Civ. Code § 3300. As mentioned above, consequential damages 18 “compensate for additional losses incurred as a result of the breach.” Speirs, 243 Cal. App. 19 4th at 989. 20 Although Becerra alleges damages exceeding $25,000 in connection with Count 1, 21 she does not explicitly allege any consequential damages flowing from Allstate’s purported 22 breach. 23 Nevertheless, relying on Mattson v. United Services Automobile Ass’n, No. 18CV222 JM 24 (KSC), 2019 WL 2330087, at *1 (S.D. Cal. May 31, 2019), Becerra avers that she has 25 adequately alleged consequential damages to pass Rule 12(b)(6)’s scrutiny. In Mattson, 26 District Judge Jeffrey T. Miller of the United States District Court for the Southern District 27 of California concluded that a policyholder-plaintiff similarly situated to Becerra had 28 adequately alleged breach of contract where the plaintiff alleged consequential damages (See Compl. ¶¶ 22–23.) She alleges “direct” damages only. (Id. ¶ 23.) - 12 22cv0202 1 flowing from the insurer’s failure to timely pay benefits. In particular, the plaintiff alleged 2 that the insurer’s delay had caused “an increase of her attorney’s fees” and, moreover, “a 3 loss of [her business] earnings because [she] was required to reschedule client 4 appointments.” Id. at *17. 5 While Mattson supports the proposition that a policyholder can sustain a breach of 6 contract claim against an insurer for failing to adequately perform under the policy even 7 where an insurer pays the full policy limit, it simultaneously highlights the deficiency of 8 Becerra’s pleadings. Unlike the plaintiff in Mattson, Becerra’s Complaint is devoid of any 9 factual information that would enable this Court to decipher what consequential damages 10 she suffered as a result of Allstate’s alleged breach. Becerra merely alleges that Allstate 11 unreasonably delayed payment of benefits under the Policy and resolution of her claim and 12 that she suffered damages exceeding $25,000 as a “direct” result of that purported breach. 13 (See Compl. ¶¶ 22, 29–31.) Without more, this Court cannot presume that Allstate’s delay 14 in the payment of Policy benefits caused Becerra economic loss; merely alleging a delay 15 does not amount to plausible consequential damages. See Maxwell v. Fire Ins. Exch., 60 16 Cal. App. 4th 1446, 1450 (Cal. Ct. App. 1998) (“[A] delay in paying policy benefits, even 17 if in an unreasonable manner, does not in itself establish economic loss to the plaintiff.”). 18 Becerra alleges damages from being “forced to retain attorneys and incur substantial 19 costs and expenses to obtain the policy benefits from [Allstate],” but she does so under 20 Count 2, not Count 1. (Compl. ¶ 30.) Even if the Court were to attribute this allegation to 21 both Counts, Becerra’s breach of contract claim would still fail. 22 As an initial matter, Becerra is precluded by statute from recovering fees incurred 23 during arbitration. See Cal. Civ. Proc. Code § 1284.2. California Code of Civil Procedure 24 Section 1284.2 (“Section 1284.2”) provides: 25 26 27 Unless the arbitration agreement otherwise provides or the parties to the arbitration otherwise agree, each party to the arbitration shall pay his pro rata share of the expenses and fees of the neutral arbitrator, together with other expenses of the arbitration incurred or approved by the neutral arbitrator, not 28 - 13 22cv0202 including counsel fees or witness fees or other expenses incurred by a party for his own benefit. 1 2 3 California courts have interpreted this statute to mean that parties who participate in UM 4 arbitration proceedings are “not entitled to the costs . . . incurred in arbitration,” absent a 5 provision in the insurance policy providing otherwise. Austin v. Allstate Ins. Co., 16 Cal. 6 App. 4th 1812, 1817 (Cal. Ct. App. 1993); see also Mason, 2014 WL 212245, at *3 (“While 7 California law does permit a plaintiff to recover attorneys’ fees for bad faith claims against 8 insurers, no similar rule extends to insurance breach of contract cases.”). 9 The Policy here explicitly requires Becerra to cover her own attorney’s fees and fees 10 paid towards medical or other expert witnesses in connection with arbitration. (See Policy 11 at 44 (“All expenses of arbitration will be shared equally. However, attorney fees and fees 12 paid to medical or other expert witnesses are not considered arbitration expenses and are 13 to be paid by the party incurring them.”).) Thus, to the extent Becerra alleges she is entitled 14 to consequential damages attributable to fees she incurred during arbitration, those 15 damages are not cognizable in this context. 16 To the extent Becerra alleges Allstate caused her to incur other “costs and expenses” 17 arising out of arbitration besides attorneys’ and medical experts’ fees, the Complaint does 18 not enable this Court to determine what those other “costs and expenses” are. Put simply, 19 more is needed for this Court to draw a plausible inference in Becerra’s favor. See 20 Maxwell, 60 Cal. App. 4th at 1450 (“[A] delay in paying policy benefits, even if in an 21 unreasonable manner, does not in itself establish economic loss to the plaintiff.”). 22 Accordingly, the Complaint also does not adequately allege cognizable, consequential 23 damages. Because Becerra fails to allege cognizable damages, the Court finds that Becerra 24 fails to state a claim for breach of contract. See Mason, 2014 WL 212245 at *3. 25 IV. CONCLUSION 26 For the foregoing reasons, the Court GRANTS the Motion and DISMISSES 27 without prejudice Count 1. If Becerra chooses to amend her complaint to address the 28 deficiencies outlined in this order, she must do so by no later than July 21, 2022. If no - 14 22cv0202 1 amended complaint is filed by July 21, 2022, Allstate’s answer to the complaint is due by 2 July 28, 2022. 3 IT IS SO ORDERED. 4 5 DATED: June 30, 2022 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 15 22cv0202
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