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

February 21, 2012

DAVID LUST, ET AL.,
PLAINTIFFS,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, DEFENDANT.



MEMORANDUM AND ORDER

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

BACKGROUND*fn2

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.

STANDARD

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. ...


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