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Petersen v. Arch Insurance Co.

United States District Court, C.D. California

June 30, 2015

MICHAEL PETERSEN, Plaintiff,
v.
ARCH INSURANCE COMPANY; DOES 1-50, Defendants.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS [8]

OTIS D. WRIGHT, II, District Judge.

I. INTRODUCTION

Pending before the Court is a Motion to Dismiss filed by Defendant Arch Insurance Company ("AIC"). (ECF No. 8.) AIC's Motion seeks to dismiss the entire one-count Complaint filed by Plaintiff Michael Petersen. (ECF No. 8.) Petersen, an assignee of a default judgment against a lawyer formerly insured by AIC, is hoping to enforce the judgment against AIC four years after the underlying insurance policy expired. Because the claims-made nature of the insurance policy bars all recovery from AIC, the Court GRANTS AIC's Motion to Dismiss. (ECF No. 8.)

II. FACTUAL BACKGROUND

In May 2009, Mr. Mercury Marilla retained civil rights lawyer Mr. B. Kwaku Duren to bring a lawsuit in federal court. (Compl. ¶ 11.) In June 2009, Duren took out a legal malpractice insurance policy from AIC (hereinafter the "Policy"). ( Id. ¶ 9.) The Policy provided coverage from May 20, 2009, through May 20, 2010, and insured Duren up to $300, 000. ( Id. ¶ 10.) The following text appears on the front page of the Policy: "THIS IS A CLAIMS-MADE AND REPORTED POLICY. PLEASE REVIEW THE POLICY CAREFULLY. THE POLICY IS LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED AND REPORTED TO THE COMPANY DURING THE POLICY PERIOD UNLESS AND TO THE EXTENT THAT AN EXTENDED REPORTING PERIOD OPTION APPLIES." ( Id., Ex. A at 1.)

In the course of Duren's representation of Marilla in federal court, he missed several important filing deadlines. ( Id. ¶ 14.) Duren missed a deadline to file an amended complaint on September 13, 2009. ( Id. ) Duren then failed to file an opposition to a motion to dismiss in October 2009. ( Id. ¶ 17.) As a result of the non-opposition, the District Court dismissed Marilla's complaint on November 13, 2009. ( Id. ) The District Court then denied Duran's ex parte application to set aside the judgement. ( Id. ¶ 18.) On January 25, 2010, Duran filed a notice of appeal to the Ninth Circuit, but his appeal was denied on January 31, 2012. ( Id. ¶¶ 19, 21.)

On or about May 17, 2012, Marilla filed a legal malpractice suit against Duren in California state court. ( Id. ¶ 23.) Duren failed to respond to the malpractice suit, and a default judgment was eventually issued on January 6, 2014. ( Id. ¶ 24.) The default judgment order awarded Marilla $250, 480. ( Id. ) On June 18, 2014, Marilla's lawyer conducted a debtor's examination of Duran and first learned of the Policy. ( Id. ¶ 25.) Marilla's lawyer also learned that Duran had filed bankruptcy and was facing disciplinary action from the State Bar of California. ( Id. ¶ 26.)

On November 14, 2014, Marilla assigned the default judgement to Petersen. ( Id. ¶ 27.) On November 18, 2014, Petersen filed a claim with AIC seeking to recover under the Policy. ( Id. ¶ 28.) AIC denied Petersen's request on December 20, 2014. ( Id. ) Petersen filed this present suit on April 28, 2015. Petersen asserts one cause of action against AIC-breach of contract. ( Id. ¶¶ 30-38.)

III. LEGAL STANDARD

Pursuant to Rule 12(b)(6), a defendant may move to dismiss an action for failure to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "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. 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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted). For purposes of ruling on a Rule 12(b)(6) motion, the Court "accept[s] factual allegations in the complaint as true and construe[s] the pleading in the light most favorable to the non-moving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

The Court is not required to "assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (internal quotation marks and citations omitted). Mere "conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004) (internal quotation marks and citations omitted). "If a complaint is accompanied by attached documents, the court is not limited by the allegations contained in the complaint. These documents are part of the complaint and may be considered in determining whether the plaintiff can prove any set of facts in support of the claim." Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987) (internal citations omitted). The Court may consider contracts incorporated in a complaint without converting a motion to dismiss into a summary judgment hearing. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003).

IV. DISCUSSION

The parties do not dispute any facts in this case. It is undisputed that the Policy is characterized as a claims-made and reported malpractice insurance policy. It is also undisputed that no malpractice claims were asserted against Duren or reported to AIC during the coverage period.[1] On its face, as argued by AIC's Motion to Dismiss, it appears that AIC did not breach the Policy when it denied Petersen's claim in December 2014 because no claims were made against the Policy during the coverage period. (Mot. 5.) In his Opposition, Petersen argues that (a) he is equitably excused from making a timely ...


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