The opinion of the court was delivered by: Dean D. Pregerson United States District Judge
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
Presently before the court is Defendant Dino Baglioni's Motion to Dismiss Plaintiff's Complaint with Prejudice Pursuant to FRCP 12(b)(6) ("Motion"). Having reviewed the parties' moving papers and supplemental briefs, the court GRANTS the Motion.
Defendant Dino Baglioni ("Baglioni") carried homeowners' and umbrella insurance policies through Plaintiff Allstate Insurance Company ("Allstate"). On September 4, 2010, Baglioni shot Marcos Dodson during a domestic altercation, rendering Dodson paraplegic. On February 14, 2011, Dodson filed suit against Baglioni in California state court ("Dodson Lawsuit"), for intentional torts and general negligence related to the altercation. Allstate defended Baglioni in the Lawsuit, "subject to a full reservation of rights," including the right to seek reimbursement for settlement of uncovered claims. Pursuant to California Civil Code section 2860, Allstate also provided Baglioni the option to retain independent counsel to defend him at Allstate's expense, given the potential conflict of interest. (1st Am. Compl. ("FAC") ¶¶ 7-10; Pl.'s Mot. for Prelim. Inj. ("PI Mot."), Ex. 6 at 165-67.)
On July 13, 2011, "Dodson demanded that Allstate settle the Dodson Lawsuit on behalf of Baglioni for $2 million, the combined liability limits of Baglioni's Allstate Policies." On August 3, 2011, Allstate sent a letter to Baglioni, informing him of Allstate's intent to accept the settlement demand and then seek reimbursement from Baglioni. Allstate further informed Baglioni that it would "proceed with this plan unless [by August 11, 2011,] you state unequivocally in writing that if Allstate does not pay Mr. Dodson $2,000,000, you will waive your right later to contend that Allstate unreasonably failed to accept Mr. Dodson's offer to settle." (FAC ¶¶ 12-14; PI Mot., Ex. 8 at 172-74.)
Baglioni did not respond to Allstate's letter. (FAC ¶ 15.) Accordingly, Allstate settled the Dodson lawsuit and filed this action on August 15, 2011, alleging that the underlying incident was not covered by Baglioni's policies and seeking reimbursement of the settlement amount. Allstate filed its First Amended Complaint on September 22, 2011, to add a dependent claim for fraudulent transfer. Baglioni filed this Motion to Dismiss on October 14, 2011. On December 12, 2011, the court asked the parties to file supplemental briefing, to address whether Allstate adequately alleged meeting one of the requirements for a reimbursement action under California law: making "an express offer to the insureds that they may assume their own defense when the insurer and insureds disagree whether to accept the proposed settlement." Blue Ridge Ins. Co. v. Jacobsen, 25 Cal. 4th 489, 502 (2001).
Federal Rule of Civil Procedure 12(b)(6) requires courts to dismiss claims for which no relief can be granted. When considering a 12(b)(6) motion, "all allegations of material fact are accepted as true and should be construed in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). In Ashcroft v. Iqbal, the Supreme Court explained that a court should first "identify pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." 129 S. Ct. 1937, 1950 (2009). Next, the court should identify the complaint's "well-pleaded factual allegations, . . . assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id.; see also Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) ("In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." (internal quotation marks omitted)).
In his Motion, Baglioni contends that Allstate "completely fails to allege the facts" required for an insurance settlement reimbursement claim under California law. The court must therefore determine whether Plaintiff adequately alleges meeting Blue Ridge's three prerequisites for such a claim: "(1) a timely and express reservation of rights; (2) an express notification to the insureds of the insurer's intent to accept a proposed settlement offer; and (3) an express offer to the insureds that they may assume their own defense when the insurer and insureds disagree whether to accept the proposed settlement." 25 Cal. 4th at 502.
Here, only the third requirement is at issue. Allstate admits that it did not expressly inform Balgioni that he could assume his own defense. In its Opposition to the Motion, however, Allstate contends that: "Because Allstate was defending Baglioni at its expense and did not seek to withdraw that defense, and because Baglioni did not object to the proposed settlement, it was unnecessary for Allstate to offer Baglioni to assume his own defense." In its Supplemental Brief, Allstate further explains its failure to make such an offer, discussing Blue Ridge and two district court decisions.
The court declines to create an exception to Blue Ridge's requirement of an express offer to insureds to assume their own defense. Blue Ridge strikes a balance between the rights of insurers and insureds, by allowing insurers to seek reimbursement for settlements of uncovered claims, but also requiring insurers to first offer to their insureds at least two options: 1) to agree to the settlement - and thereby avoid incurring any legal costs, but risk liability for reimbursement; or 2) to assume their own defense - and thereby control the litigation and settlement, but also take on the legal costs. See id. at 502-05; id. at 506-07 (Mosk, J., concurring). Further, as two Justices explain in a concurrence, an insurer may, but is not required to, provide a third option: "to allow the insured to refuse settlement and still retain the insurance defense, but, consistent with that ...