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Starr Indemnity and Liability Co. v. Peerless Insurance Co.

United States District Court, C.D. California

June 22, 2015

Starr Indemnity and Liability Company,
Peerless Insurance Company, et al.


JOHN F. WALTER, District Judge.


On May 18, 2015, Defendants Peerless Insurance Company and Golden Eagle Insurance Corporation (collectively, "Defendants") filed a Motion to Dismiss, or in the Alternative, Motion to Stay ("Motion"). On May 22, 2015, Plaintiff Starr Indemnity & Liability Company ("Plaintiff") filed its Opposition. On June 1, 2015, Defendants filed a Reply. Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the Court found the matter appropriate for submission on the papers without oral argument. The matter was, therefore, removed from the Court's June 15, 2015 hearing calendar and the parties were given advance notice. After considering the moving, opposing, and reply papers, and the arguments therein, the Court rules as follows:

I. Factual and Procedural Background

On September 20, 2013, at approximately 5:43 a.m., Severo Mares, Jr. ("Mares") and Refugio Ramirez, Jr. ("Ramirez") were traveling westbound on Highway 46 in San Luis Obispo County, California in a 2005 Chevrolet Silverado utility truck when they collided with the 1973 Caterpillar 651V Scraper (the "Scraper") owned by Papich Construction Company, Inc. ("Papich"). The Scraper was allegedly being driven across Highway 46 without operational lights by Ryan Bogunda ("Bogunda"), an employee of Papich. The Scraper failed to yield to all eastbound and westbound traffic, and, instead, it blocked traffic and allegedly caused a head on collision between the Chevrolet and the Scraper, causing injuries to Mares and Ramirez. On November 1, 2013, Mares and Ramirez filed an action in San Luis Obispo Superior Court, entitled Mares v. Bogunda, San Luis Obispo County Superior Court Case No. CV138294 (the "Underlying Action"), seeking damages for the injuries they suffered in the collision with the Scraper. In depositions in the Underlying Action, Bodunga and another deponent, Travis Mankins, testified that, at the time of the collision, a pickup truck owned by Papich was used to light the path for the Scraper, which lacked operational lights.

Papich is insured under Defendants' business auto insurance policy, BA 8291564, for the policy period of July 1, 2013 to July 1, 2014 (the "Auto Policy"), and it provides up to $1, 000, 000 in liability coverage for up to 137 autos owned by Papich. Papich is also insured under Plaintiff's excess insurance policy, SISCCCL001740913, for the policy period of January 25, 2013 to January 25, 2014 (the "Excess Policy"), and it provides $10, 000, 000 in coverage. Defendants have refused to take a coverage position under the Auto Policy in the Underlying Action, despite Plaintiff's belief that Defendants have an obligation to provide coverage to Papich under the Auto Policy, and that Defendants' coverage obligation is primary to Plaintiff's Excess Policy.

In the original Complaint filed on January 28, 2015, Plaintiff alleged that Defendants owe Papich a coverage obligation under the Auto Policy in the Underlying Action that is primary to Plaintiff's Excess Policy because the Scraper was covered under the Auto Policy. On May 4, 2015, Plaintiff filed its First Amended Complaint. In its First Amended Complaint, Plaintiff re-alleged that Defendants owe a coverage obligation to Papich in the Underlying Action because the Scraper was covered, and added a new allegation that there was coverage because of the involvement of Papich's pickup truck on the night of the accident. Specifically, Plaintiff alleged that, even if the Scraper was not a covered vehicle, the pickup truck was covered under the Auto Policy.

In their Motion, Defendants seek to dismiss Plaintiff's First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Alternatively, Defendants seek to stay this action pending resolution of the Underlying Action.

II. Legal Standard

A. Motion to Dismiss

A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. "A Rule 12(b)(6) dismissal is proper only where there is either a lack of a cognizable legal theory' or the absence of sufficient facts alleged under a cognizable legal theory.'" Summit Technology, Inc. v. High-Line Medical Instruments Co., Inc., 922 F.Supp. 299, 304 (C.D. Cal. 1996) (quoting Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988)). However, "[w]hile 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 entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and alterations omitted). "[F]actual allegations must be enough to raise a right to relief above the speculative level." Id.

In deciding a motion to dismiss, a court must accept as true the allegations of the complaint and must construe those allegations in the light most favorable to the nonmoving party. See, e.g., Wyler Summit Partnership v. Turner Broadcasting System, Inc., 135 F.3d 658, 661 (9th Cir. 1998). "However, a court need not accept as true unreasonable inferences, unwarranted deductions of fact, or conclusory legal allegations cast in the form of factual allegations." Summit Technology, 922 F.Supp. at 304 (citing Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981) cert. denied, 454 U.S. 1031 (1981)).

"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990) (citations omitted). However, a court may consider material which is properly submitted as part of the complaint and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201 without converting the motion to dismiss into a motion for summary judgment. See, e.g., id.; Branch v. Tunnel, 14 F.3d 449, 454 (9th Cir. 1994).

Where a motion to dismiss is granted, a district court must decide whether to grant leave to amend. Generally, the Ninth Circuit has a liberal policy favoring amendments and, thus, leave to amend should be freely granted. See, e.g., DeSoto v. Yellow Freight System, Inc., 957 F.2d 655, 658 (9th Cir. 1992). However, a Court does not need to grant leave to amend in cases where the Court determines that permitting a plaintiff to amend would be an exercise in futility. See, e.g., Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987) ...

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