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David Lust, et al v. State Farm Mutual Automobile Insurance


February 21, 2012



Plaintiffs David and Lynette Lust ("Plaintiffs") initiated this action in the Superior Court of the State of California for the County of Sacramento against Defendant State Farm Mutual Automobile Insurance Company ("Defendant") alleging causes of action for: 1) breach of contract; 2) breach of the implied covenant of good faith and fair dealing; 3) fraud and deceit; and 4) intentional infliction of emotional distress. Defendant removed the action to this Court on August 3, 2011, and subsequently filed a Motion to Dismiss Plaintiffs' third and fourth causes of action ("Motion").

For the following reasons, Defendant's Motion is GRANTED with leave to amend.*fn1


In 2010, Defendant issued to Plaintiffs a joint insurance policy (the "Policy") covering Plaintiffs' Ford Mustang automobile ("Mustang") as well as their multiple other cars. The Policy listed "Lozier, Lynette & Lust, David" as the policyholders.

On July 3, 2010, the Mustang, along with Plaintiffs' personal property, was purportedly stolen and set on fire. The car was recovered that same day.

Nine days later, on July 12, Plaintiffs' insurance agent assisted them in processing an amendatory endorsement to the Policy by which Lynette Lust's last name on the Policy was changed from "Lozier" to "Lust" and David Lust became the first named insured. At the same time, David Lust signed a "proof of loss" form with regard to Plaintiffs' loss of the Mustang, and the parties arranged to have the Policy covering that vehicle suspended.

The Complaint is far from clear, but Plaintiffs seem to be alleging that executing the name-related Policy changes gave Plaintiffs the impression that David Lust could properly sign the above proof of loss when Lynette Lust actually should have done so.

According to Plaintiffs, Defendant subsequently delayed acceptance of Plaintiffs' claim for their loss of the Mustang on the basis that it arose under "suspicious circumstances." Given Defendant's suspicions, an "intrusive investigation" of Plaintiffs was conducted during which time Defendant's employees and agents allegedly conspired to manufacture reasons to deny Plaintiffs their Policy benefits. Two of Defendant's employees purportedly accused Plaintiffs of fraud as well.

On September 21, 2010, Defendant nonetheless accepted coverage of Plaintiffs' claim as it pertained to the vehicle itself. Defendant refused, however, to compensate Plaintiffs for the loss of their personal property. Plaintiffs thereafter filed this action for: 1) breach of contract; 2) breach of the implied covenant of good faith and fair dealing; 3) fraud and deceit; and 4) intentional infliction of emotional distress. Defendant now moves to dismiss the latter two of these claims.


On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6),*fn3 all allegations of material fact must be accepted 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). Rule 8(a)(2) "requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the [. . .] claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (internal citations and quotations omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, ___ U.S. ____, 129 S. Ct. 1937, 1950 (2009) (quoting Twombly, 550 U.S. at 555). "Factual allegations must be enough to raise a right to relief above the speculative level."

Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must contain something more than "a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.")).

When alleging fraud, however, a plaintiff must meet a heightened pleading standard under which "a party must state with particularity the circumstances constituting fraud...."

Fed. R. Civ. P. 9(b). In order to pass muster under Rule 9(b), a pleading must provide enough information to put the defendant on notice of the conduct complained of so that an adequate defense can be formulated. See, e.g., Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1989).

If the court grants a motion to dismiss a complaint, it must then decide whether to grant leave to amend. The court should "freely give[]" leave to amend when there is no "undue delay, bad faith[,] dilatory motive on the part of the movant,...undue prejudice to the opposing party by virtue of...the amendment, [or] futility of the amendment...." Fed. R. Civ. P. 15(a)(2); Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is only denied when it is clear that the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).


Defendant moves to dismiss Plaintiffs' fraud and deceit and intentional infliction of emotional distress causes of action. Defendants' Motion is well taken, and both claims are now dismissed with leave to amend.

A. Fraud and Deceit.

Defendant moves to dismiss Plaintiff's third cause of action for fraud and deceit on the basis that Plaintiffs have failed to adequately plead the required elements of the claim. "The well-established common law elements of fraud which give rise to the tort action for deceit are: (1) misrepresentation of a material fact (consisting of false representation, concealment or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to deceive and induce reliance; (4) justifiable reliance on the misrepresentation; and (5) resulting damage." City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal. App. 4th 445, 481-82 (1998) (citations omitted). "The absence of any one of these required elements will preclude recovery." Wilhelm v. Pray, Price, Williams & Russell, 186 Cal. App. 3d 1324, 1331 (1986).

Moreover, as stated above, "Rule 9(b) demands that, when averments of fraud are made, the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular that they can defend against the charge and not just deny that they have done anything wrong."

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal citations and quotations omitted). Indeed, "[a]verments of fraud must be accompanied by 'the who, what, when, where, and how' of the misconduct charged." Id. (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). "[A] plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false." Id. (quoting In re GlenFed, Inc. Securities Litigation, 42 F.3d 1541, 1548 (9th Cir. 1994)) (alteration and emphasis in original). Defendant thus contends dismissal is required here because Plaintiffs alleged their fraud claim only in general terms and without reliance on sufficiently specific allegations.

Plaintiffs of course disagree and take the position in their Opposition that their third cause of action is adequately pled. In support of this argument, however, Plaintiffs simply reiterate a variety of factually deficient allegations from their Complaint. For example, Plaintiffs allege that Defendant:

1) altered sworn testimony from the examinations under oath;

2) "intentionally failed to disclose that the proof of loss was invalid since it was signed by the wrong named insured";

3) "engaged in improper post-claim underwriting" by retroactively processing an amendatory endorsement with three different dates to create the appearance that the proper named insured signed the proof of loss"; 4) concealed the improper post-claim underwriting by improperly issuing policy renewals, which caused an increase in Plaintiffs premium for their replacement vehicle; and

5) "actively concealed important facts from [Plaintiffs]."

Complaint, ¶¶ 90-97. Plaintiffs also aver very generally that:

1) they "did not know of the concealed facts"; 2) Defendant "intended to deceive [Plaintiffs] by concealing the facts";

3) Plaintiffs "reasonably relied on [Defendant's] deception; and

4) Plaintiffs "were harmed." Plaintiffs point the Court to a variety of additional allegations throughout their Complaint as well, none of which add any real detail going to the "who, what, when, where and how of the misconduct charged."

Accordingly, even construing all of Plaintiffs' allegations in the light most favorable to them, given the generality of those assertions, it is entirely unclear what was fraudulent or deceitful about Defendant's actions. More to the point, none of Plaintiffs' allegations standing alone or in combination with one another establish what, exactly, Defendant misrepresented to Plaintiffs, nor have Plaintiffs alleged with even minimal particularity those facts that might support the scienter, intent or damages elements of their deceit cause of action. Defendant's Motion to Dismiss Plaintiffs' fraud and deceit claim is thus GRANTED with leave to amend.

B. Intentional Infliction of Emotional Distress.

Defendant also moves to dismiss Plaintiffs' fourth cause of action for intentional infliction of emotional distress. "The elements of a prima facie case for the tort of intentional infliction of emotional distress are: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress; (3) and actual and proximate causation of the emotional distress by the defendant's outrageous conduct." Cervantez v. J.C. Penny Co., 24 Cal. 3d 579, 593 (1979) (superseded by statute on other grounds). To be "outrageous" Defendant's conduct must be so "extreme as to exceed all bounds of that usually tolerated in a civilized community." Kelley v. Conco Cos., 196 Cal. App. 4th 191, 215 (Cal. App. 2011) (internal citations and quotations omitted). California courts have set a high bar for emotional distress claims, requiring "emotional distress of such substantial quality or enduring quality that no reasonable [person] in civilized society should be expected to endure it." Id. at 215-16 (citations omitted alteration in original).

Despite this high bar, Plaintiffs believe they sufficiently stated an emotional distress claim by alleging that Defendant's investigation into whether they had purposefully destroyed their own vehicle in order to recoup the insurance proceeds caused them severe emotional distress and constituted extreme and outrageous behavior on Defendants' part. The allegations in the Complaint do not support this conclusion.

First, Plaintiffs' intentional infliction of emotional distress is based almost entirely on a series of legal assertions, see Complaint, ¶¶ 104-108, all of which are conclusory and none of which serve to state a claim. Moreover, while Plaintiffs have attempted to provide some factual support for the "severe emotional distress" aspect of this claim by charging Defendant with causing Plaintiffs to suffer anxiety, to lose sleep and to contemplate forgoing a previously planned vacation, id. at ¶ 84, this sort of emotional distress is simply not "severe" as a matter of law. See Hughes v. Pair, 46 Cal. 4th 1035, 1051 (2009) ("[P]laintiff's assertions that she ha[d] suffered discomfort, worry, anxiety, upset stomach, concern, and agitation as the result of defendant's comments to her...[did] not comprise emotional distress of such substantial quality or enduring quality that no reasonable [person] in civilized society should be expected to endure it.") (alterations in original and internal quotations and citations omitted). Plaintiffs have likewise failed to allege sufficiently "outrageous" conduct on Defendant's part.

See, e.g., Ricard v. Pacific Indemnity Co., 132 Cal. App. 3d 886, 890, 895 (1982) (allegations that individual defendants "intentionally, willfully, knowingly and maliciously refused to properly investigate, process and communicate with plaintiff concerning his...claim for the purpose of wrongfully terminating [the insurer's] continuing obligation to furnish medical care" were not sufficiently "outrageous"); Schlauch v. Hartford Accident & Indemnity Co., 146 Cal. App. 3d 926, 936 (1983) (not "outrageous" to delay tender of policy limits for two and one-half years despite the fact damages were well in excess of policy limits and liability was obvious). Accordingly, this cause of action is also dismissed with leave to amend.


For the foregoing reasons, Defendant's Motion to Dismiss (ECF No. 9) is GRANTED with leave to amend. Not later than twenty (20) days following the date this Memorandum and Order is electronically filed, Plaintiffs may (but are not required to) file an amended complaint. If no amended complaint is filed within said twenty-day period, without further notice to the parties, those causes of action dismissed by virtue of this Order will be deemed dismissed with prejudice.


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