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AMCAL General Contractors, Inc. v. ACE American Insurance Co.

October 20, 2009

AMCAL GENERAL CONTRACTORS, INC., PLAINTIFF,
v.
ACE AMERICAN INSURANCE COMPANY; ACE USA, DEFENDANTS.



The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

ORDER DENYING DEFENDANT ACE AMERICAN INSURANCE COMPANY'S MOTION TO DISMISS PURSUANT TO RULE 12(b)(6), OR IN THE ALTERNATIVE, FOR JUDGMENT ON THE PLEADINGS [FRCP 12(c)] [Motion filed on September 8, 2009]

This matter comes before the Court on a motion to dismiss for failure to state a claim filed by Defendant Ace American Insurance Company ("Defendant"). After reviewing the materials submitted by the parties and hearing oral argument, the Court is inclined to deny the motion and adopt the following order.

I. BACKGROUND

A. Factual History

On October 10, 2005, Plaintiff AMCAL General Contractors, Inc. ("Plaintiff") entered into a contract with Parati of California, Inc. ("Parati"), a subsidiary of Parati Company, LLC. The contract provided that Parati would provide services as consulting engineers, surveyors, and planners for the construction of a residential project located at 6205 48th Avenue in Sacramento, California. (First Amended Complaint ("FAC") ¶ 15.) Pursuant to the contract, Parati agreed to provide surveying and engineering services, including construction staking along Stockton Boulevard and 48th Avenue. (Id. ¶ 16.) The contract provided that Parati would conduct surveying of off-site improvements and that the survey would show the edge of pavement, drainage-ditch, spot elevations, and utilities along Stockton Boulevard and 48th Avenue. (Id.)

Parati was insured under certain "errors and omissions" policies (the "Policies") issued by Defendant to Parati's parent company, Parati Company, LLC. (Id. ¶ 8.) Parati paid all of its premiums due on the Policies. (Id. ¶ 10.) Plaintiff alleges that Defendant was "familiar with Parati's business and assumed the duty of providing full coverage for Parati's business." (Id. ¶ 14.)

Plaintiff alleges that in January 2007, Parati negligently performed its surveying and engineering services by, for example, improperly staking and engineering the off-site base and asphalt work, committing errors in design with respect to as-built drawings and final improvement plans. (Id. ¶ 17.)

Following Parati's negligent engineering and surveying, Plaintiff made a demand for indemnification to Defendant based on the policies, because it believed that Parati was insolvent and defunct. (Id. ¶¶ 18-19.) Defendant denied that the Policies provided coverage and rejected Plaintiff's demand for indemnification. (Id. ¶ 19.) On July 24, 2008, Plaintiff secured a default judgment (the "Judgment") in the amount of $186,604.29 against Parati.

B. Procedural History

On July 20, 2009, Plaintiff filed its FAC against Defendant and Ace USA in Los Angeles County Superior Court alleging a single cause of action against Defendant under California's direct action statute, Cal. Ins. Code § 11580(b)(2), seeking to recover its judgment against Parati under the Policies.

On September 8, 2009, Defendant filed this motion to dismiss for failure to state a claim. Defendant argues that Plaintiff "seeks to recover on a judgment for its economic loss and therefore fails to state a claim for a direct action against [Defendant] pursuant to California Insurance Code Section 11580, which applies only to a judgment in an 'action based upon bodily injury, death, or property damage." (Mot. 7:16-21 (emphasis in original).) Plaintiff counters that its underlying judgment against Parati is based upon the property damage caused by Parati's negligent engineering and surveying. (Opp. 9:24-27.)

II. LEGAL STANDARD

A. Motion to Dismiss: Fed. R. Civ. P. 12(b)(6)

Rule 8 of the Federal Rules of Civil Procedure "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do... Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). When considering a 12(b)(6) motion to dismiss for failure to state a claim, "all allegations of material fact are accepted as true and ...


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