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Phillips v. Noetic Specialty Ins. Co.

United States District Court, S.D. California

January 22, 2013

Billie PHILLIPS, Plaintiff,
NOETIC SPECIALTY INSURANCE COMPANY, a Vermont Corporation, and Does 1 through 100, Defendants.

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Jacques J. Kirch, Law Office of Jacques J. Kirch, Craig A. Miller, Law Offices of Craig A. Miller, San Diego, CA, for Plaintiff.

Judy Marotti, Lynberg & Watkins, Los Angeles, CA, for Defendants.



Before the Court is Defendant Noetic Specialty Insurance Company's Motion to Dismiss Plaintiff's Complaint, filed August 9, 2012. (Doc. No. 3.) For the reasons set forth below, Defendant's motion is GRANTED IN PART and DENIED IN PART.


Defendant provided liability insurance coverage to Electric Mobility Corporation, a New Jersey Corporation, doing business as The Rascal Company (" EMC" ). (Compl. ¶ 12.) Defendant issued EMC a Medical Technology-Life Sciences Products/Completed Operations Liability Coverage Form, policy no. N09NJ380010, with a " policy period" from September 1, 2009, to September 1, 2010. ( Id. at ¶ 17.) The policy provides primary Products and Completed Operations Liability Coverage and includes policy limits of $2,000,000 for each occurrence and aggregate. ( Id. ) The policy is in excess of a $500,000 self-insured retention (" SIR" ) provision. ( Id. ) Defendant's obligations under the terms of the policy are in dispute, and the applicable provisions are discussed further below.

In August 2006, a representative of EMC visited Plaintiff's home and sold her husband, Mr. Phillips, a motorized scooter. ( Id. at ¶ 14.) On February 29, 2008, Plaintiff's husband was traveling in the scooter, and it toppled over. ( Id. at ¶ 16.) Among other injuries, Mr. Phillips' hip was crushed in the accident. ( Id. ) Mr. Phillips

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filed a civil lawsuit against EMC in San Diego Superior Court on February 25, 2010. ( Id. at ¶ 22.)

On or about July 1, 2010, EMC reported Mr. Phillip's pending lawsuit to Defendant, as its liability insurance carrier. ( Id. at ¶ 23.) Thereafter, Defendant assumed control over the case pursuant to the terms of EMC's policy and assigned EMC's defense to Defendant's panel counsel in San Diego. ( Id. at ¶ 24.) In approximately March of 2011, defense counsel notified Plaintiff that EMC was insolvent. ( Id. at ¶ 25.) Subsequently, defense counsel requested leave to withdraw from service as EMC's counsel in the case, which the court allowed by order entered April 5, 2011. ( Id. at ¶ 26.) On April 13, 2011, EMC's answer was struck and default was entered against EMC. ( Id. at ¶ 27.) On June 16, 2011, the court entered judgment against EMC and in favor of Mr. Phillips in the amount of $1,052,982.10. ( Id. at ¶ 29.) Plaintiff alleges that Defendant took no action to protect its interests and defend against Mr. Phillip's claim following the entry of default or the entry of judgment. ( Id. at ¶ ¶ 28, 30.)

Mr. Phillips passed away on December 10, 2011, and the judgment against EMC became an asset of his estate. ( Id. at ¶ 31.) As executor of his estate and the sole trustee of their joint revocable trust, Plaintiff alleges that she possesses the right to enforce the judgment. ( Id. ) Plaintiff contends that the judgment became final on December 12, 2011, and that Defendant is now bound by the judgment as a result of the liability policy issued to EMC. ( Id. at ¶¶ 32, 33.)

Prior to his passing away, Mr. Phillips sent Defendant a request for payment on the judgment pursuant to EMC's policy. ( Id. at ¶ 35.) On August 16, 2011, Defendant denied coverage for the entire judgment on the basis of EMC's $500,000 SIR provision, claiming that liability under the policy was " not triggered until ... [EMC] PAYS the judgment." ( Id. at ¶ 36.) In December 2011, Mr. Phillips requested a copy of EMC's policy and Defendant's itemized accounting showing the status of EMC's SIR. ( Id. at ¶ 37.) Defendant provided a copy of the policy on January 4, 2012, but did not disclose the status of EMC's SIR. ( Id. at ¶ 38.) Plaintiff contends that Defendant represented to them that EMC had not made any payments that would erode the $500,000 SIR. ( Id. )

On May 15, 2012, Plaintiff submitted the judgment to Defendant for payment " less the unsatisfied amount of EMC's SIR" and requested Defendant's itemized accounting for EMC's SIR. ( Id. at ¶ 40.) Again, Defendant refused to pay the judgment citing its previous denials and claimed that coverage was no longer possible as EMC is no longer in business. ( Id. at ¶ 41.)

Plaintiff filed this action in state court on July 17, 2012. Plaintiff contends that Defendant's refusal to pay the judgment amount less EMC's SIR is in violation of California law as well as EMC's liability insurance policy. Plaintiff alleges three causes of action: (1) Direct Action for Damages Under Insurance Code § 11580; (2) Breach of Third-Party Beneficiary Contract; and (3) Breach of the Implied Covenant of Good Faith and Fair Dealing. On August 9, 2012, Defendant filed the pending Motion to Dismiss. (Doc. No. 3.)

Legal Standard

Federal Rule of Civil Procedure 8(a)(2) requires only " a short and plain statement of the claim showing that the plaintiff is entitled to relief ... [to] give the defendant fair notice of what the ... claim is and the grounds upon which it rests." See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A court may dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) when it lacks sufficient

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facts to state a claim to relief that is plausible on its face. See id. at 570, 127 S.Ct. 1955. " A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). " The plausibility standard is not akin to a ‘ probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). " While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘ grounds' of his ‘ entitle[ment] to relief’ 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." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citations and parentheticals omitted).

In considering a motion to dismiss, a court must accept all of the plaintiff's allegations as true and construe them in the light most favorable to the plaintiff. Erickson v. Pardus, 551 U.S. 89, 93-94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007); Vasquez v. Los Angeles Cnty., 487 F.3d 1246, 1249 (9th Cir.2007). Courts may consider documents attached to the complaint [1] or properly the subject of judicial notice, such as matters of public record.[2] " Although generally the scope of review on a motion to dismiss for failure to state a claim is limited to the Complaint, a court may consider evidence on which the complaint necessarily relies if: (1) the complaint refers to the document; (2) the document is central to the plaintiffs' claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion." Daniels— Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir.2010) (internal quotation marks and citations omitted). The court may " treat such a document as ‘ part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6).’ " Marder v. Lopez, 450 F.3d 445, 448 (9th ...

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