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Hunter v. Ohio Indemnity Co.

August 22, 2006

IAN HUNTER, PLAINTIFF,
v.
OHIO INDEMNITY COMPANY, DEFENDANT.



The opinion of the court was delivered by: Effrey S. White United States District Judge

ORDER DENYING DEFENDANT'S MOTION TO DISMISS, TO STRIKE, AND FOR A MORE DEFINITE STATEMENT

The motion filed by defendant Ohio Indemnity Company ("Ohio Indemnity") to dismiss, to strike, and for a more definite statement is now fully briefed and ripe for decision. The Court finds that this matter is appropriate for disposition without oral argument and the matter is deemed submitted. See N.D. Civ. L.R. 7-1(b). Accordingly, the hearing set for August 25, 2006 is VACATED. Having carefully reviewed the parties' papers, considered their arguments and the relevant legal authority, the Court hereby denies Ohio Indemnity's motion.

BACKGROUND

Plaintiff Ian Hunter, Ph.D, is the Chair of the Trustees of the Unemployment Insurance Trust ("Trust"). (Complaint, ¶ 1.) The Trust entered into insurance contracts with Ohio Indemnity on behalf of non-profit agencies ("Employers") to limit their exposure for unemployment insurance liability. (Id., ¶¶ 1, 4.) This action centers around two insurance policies covering the years 2002 and 2003. The Trust submitted a claim for $328,212 under the 2002 policy and a claim for $3,723,151 under the 2003 policy. (Id., ¶ 5.) Ohio Indemnity denied the entire claim under the 2002 policy and granted only $343,867 under the 2003 policy.

(Id., ¶ 5.)

The Trust alleges that Ohio Indemnity breached the insurance contract by failing to pay the full claims amounts. Specifically, the Trust alleges that Ohio Indemnity improperly: (1) limited covered benefits to those that were both billed by the state unemployment compensation agency and paid by the Trust during the policy year, (2) failed to reimburse the Trust for $1,112,941 in claims that were both billed by the state unemployment compensation agency and paid by the Trust during 2003, (3) required the Trust to include in the Trust's retained obligation under the policies the estimated taxable payroll for the full year for Employers who terminated their participation in the Trust mid-year, and (4) excluded claims paid by the Trust after the Employers chose not to protest such claims. (Id., ¶¶ 6, 8.) Based on these allegations, the Trust is bringing a breach of contract claim against Ohio Indemnity, as well as a bad faith claim. Ohio Indemnity filed a motion seeking: (1) to dismiss the Trust's claims, (2) to strike the provisions of the Complaint asserting these claims, as well as the request for punitive damage, and (3) for a more definite statement with respect to one paragraph in the Complaint.

ANALYSIS

A. Applicable Legal Standards

A motion to dismiss is proper under Rule 12(b)(6) where the pleadings fail to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Motions to dismiss are viewed with disfavor and are rarely granted. Hall v. City of Santa Barbara, 833 F.2d 1270 (9th Cir. 1986). A complaint should not be dismissed under Rule 12(b)(6) "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Dismissal is proper only where there is 23 no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Federal Rule of Civil Procedure 12(f) provides that a court may "order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Immaterial matter "is that which has no essential or important relationship to the claim for relief or the defenses being pleaded." California Dept. of Toxic Substance Control v. ALCO Pacific, Inc., 217 F. Supp. 2d 1028, 1032 (C.D. Cal. 2002) (internal citations and quotations omitted). Impertinent material "consists of statements that do not pertain, or are not necessary to the issues in question." Id. Motions to strike are regarded with disfavor because they are often used as delaying tactics and because of the limited importance of pleadings in federal practice. Colaprico v. Sun Microsystems Inc., 758 F. Supp 1335, 1339 (N.D. Cal. 1991). The possibility that issues will be unnecessarily complicated or that superfluous pleadings will cause the trier of fact to draw unwarranted inferences at trial is the type of prejudice that is sufficient to support the granting of a motion to strike. Cal. Dept. of Toxic Substances Control, 217 F. 11 Supp. at 1028.

Federal Rule of Civil Procedure 12(e) provides that "[i]f a pleading ... is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading, the party may move for a more definite statement before interposing a responsive pleading." Fed. R. Civ. P. 12(e). Motions for more a definite statement are disfavored and are "proper only where the complaint is so indefinite that the defendant cannot ascertain the nature of the claim being asserted." Sagan v. Apple Computer, Inc., 874 F. Supp. 1072, 1077 (C.D. Cal.1994).

Moreover, such motions may not be used as a substitute for discovery. Id.

B. Ohio Indemnity's Motion

1. Motion to Dismiss

The parties dispute how certain terms in the insurance policies at issue should be interpreted. The Trust alleges that "covered benefits" should not be limited to claims that were both billed by the state unemployment compensation agency and paid by the Trust during the policy year and that the Trust's "retained obligation" should not include the estimated taxable payroll for the full year for Employers who terminated their participation in the Trust mid-year. Ohio Indemnity argues that the provisions at issue in the insurance policies are unambiguous, and thus, may be interpreted by the Court as a matter of law. Even if the Court were to find in Ohio Indemnity's favor on these points and adopt its proposed constructions as matter of law, the Trust alleges another basis for the breach of contract claim - that Ohio Indemnity failed to reimburse the Trust for $1,112,941 in claims that were both billed by the state unemployment compensation agency and paid by the Trust during 2003. (Complaint, ΒΆ 8.) Thus, regardless of which party's interpretation the Court adopts, the Trust sufficiently states a breach of contract claim. Accordingly, the Court denies Ohio Indemnity's motion to dismiss the Trust's breach of contract claim. ...


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