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Rsui Indemnity Co. v. Discover P&C Insurance Co.

United States District Court, Ninth Circuit

September 24, 2013



TROY L. NUNLEY, District Judge.

This matter is before the Court on Discover P&C Insurance Company and Discover Re-Managers Inc.'s ("Defendants") Motion to Dismiss Plaintiff RSUI Indemnity Company's Complaint. (ECF No. 12.) RSUI Indemnity Company ("Plaintiff") has filed an opposition to Defendants' Motion (ECF No. 15), and Defendants have replied to the opposition (ECF No. 16). For the reasons set forth below, the Court grants Defendants' motion.[1]

I. Background

Defendants issued South Tahoe Refuse Company (hereinafter referred to as "Insured") a primary commercial automobile liability policy, effective April 10, 2006, through April 10, 2007. The liability limit for the policy was for one million dollars per occurrence and in the aggregate. (ECF No. 2 at ¶ 5.) Plaintiff issued an excess auto liability insurance policy to Insured for the policy period April 10, 2006, to April 10, 2007. (ECF No. 2 at ¶ 4.) The policy issued by Plaintiff had an excess limit from one million dollars to five million dollars. (ECF No. 2 at ¶¶ 21-22.) Plaintiff states that the policy it issued "was specifically written as excess over the [Defendants'] Policy for any and all bodily injury or property damage arising out of the Insured's use of an owned automobile." (ECF No. 2 at ¶ 6.)

On August 22, 2006, a South Tahoe Refuse Company employee, driving a company truck, struck a vehicle driven by Kimberly Abbott and injured her. (ECF No. 2 at ¶ 7.) On August 11, 2008, Ms. Abbott sued South Tahoe Refuse in Kimberly Abbott v. South Tahoe Refuse Co., et al., in El Dorado County Superior Court. The complaint alleged damages arising out of the August 22, 2006, accident. (ECF No. 2 at ¶ 8.)

Insured tendered the Abbott Action to Defendants, who agreed to defend it under the Discover Policy. Defendants appointed panel counsel. (ECF No. 2 at ¶ 10.) Plaintiff was placed on notice of Ms. Abbott's claim. (ECF No. 2 at ¶ 11.) Plaintiff monitored the litigation and requested that counsel keep it informed of material developments. (ECF No. 2 at ¶ 11.) Plaintiff alleges that in June 2009, Ms. Abbott made a reasonable demand to settle her claim for an amount within the Discover policy limits, which the Defendants refused to accept.[2] (ECF No. 2 at ¶¶ 12-15). Plaintiff further contends that the Defendants failed to timely notify it of a demand to settle pursuant to Cal. Civ. Proc. Code § 998; the demand to settle was for $1.25 million, made in July of 2010. (ECF No. 2 at ¶ 18.)

In 2012, Defendants and Plaintiff settled the underlying case. Plaintiff paid $3, 508, 288.11 under its excess policy. Plaintiff now sues Defendants alleging that Defendants breached their duties to the insured. (ECF No. 2 at ¶¶ 24, 37, 44, 47, 48, 55-58.) Plaintiff alleges that the Defendants had a duty to effectuate settlement where liability was reasonably clear and not expose the insured to the risk of liability in excess of the primary limits of the Discover Policy. (ECF No. 2 at ¶¶ 48, 55-58.) Plaintiff has alleged liability under the following causes of action: (1) Indemnity; (2) Contribution; (3) Subrogation; and (4) Tort of Another. Plaintiff asks the Court for declaratory relief and an award of damages in the amount of $3, 508, 288.11.[3]

II. Legal Standard

Federal Rule of Civil Procedure 8(a) requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim... is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege "specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombly, 550 U.S. at 570. "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." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. 544, 556 (2007)).

Nevertheless, a court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."). Moreover, it is inappropriate to assume that the plaintiff "can prove facts that it has not alleged or that the defendants have violated the... laws in ways that have not been alleged[.]" Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 697 (quoting Twombly, 550 U.S. at 570). Only where a plaintiff has failed to "nudge[] [his or her] claims... across the line from conceivable to plausible[, ]" is the complaint properly dismissed. Id. at 680. While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 678. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679.

In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F.Supp.2d 1035, 1042 (C.D. Cal. 1998).

If a complaint fails to state a plausible claim, "[a] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.'" Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 484, 497 (9th Cir. 1995)); see also Gardner v. Marino, 563 F.3d 981, 990 (9th Cir. 2009) (finding no abuse of discretion in denying leave to amend when amendment would be futile). Although a district court should freely give leave to amend when justice so requires under Rule 15(a)(2), "the court's discretion to deny such leave is particularly broad' where the plaintiff has previously ...

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