United States District Court, N.D. California
ORDER GRANTING DEFENDANTS MOTIONS TO DISMISS DOCKET
NOS. 34, 36
M. CHEN, United States District Judge.
are Brian and Alison Sheahan (collectively, the
“Sheahans”), Douglas Pope, and Neil and Sandra
Wylie (collectively, the “Wylies”). They have
filed a class action against State Farm General Insurance
Company (“State Farm”) as well as three
additional companies that are affiliated with one another,
namely, Verisk Analytics, Inc.; Insurance Services Office,
Inc.; and Xactware Solutions, Inc. (collectively, the
“Verisk Defendants”). The gist of the operative
class action complaint is that (1) Plaintiffs and others
similarly situated purchased homeowners insurance policies
from State Farm and that (2) State Farm, using software
developed by the Verisk Defendants, undervalued the
replacement cost of Plaintiffs' homes when issuing the
policies. After Plaintiffs' homes were destroyed during
the October 2017 Northern California wildfires, they did not
have enough money from the policies to rebuild their homes.
Currently pending before the Court are two motions to
dismiss: one filed by State Farm and the other filed by the
considered the parties' briefs and accompanying
submissions, as well as the oral argument of counsel, the
Court hereby GRANTS both State Farm and the
Verisk Defendants' motions to dismiss; however,
Plaintiffs have leave to amend as to certain claims, as
FACTUAL & PROCEDURAL BACKGROUND
operative second amended complaint (“SAC”),
Plaintiffs allege as follows.
Farm is the largest property and casualty insurance provider
in the United States.” SAC ¶ 28. Plaintiffs all
purchased homeowners insurance policies from State Farm.
See SAC ¶¶ 43-44. State Farm uses software
provided by the Verisk Defendants in conjunction with its
homeowners insurance policies. See SAC ¶ 23.
More specifically, the Verisk Defendants provide two software
products to State Farm:
(1) 360 Value, which is a zip code calculator used to
determine the initial insurance policy value, and
(2) Xactimate, which is used to determine the cost to rebuild
or repair property after a loss.
See SAC ¶¶ 23, 45.
to Plaintiffs, “with detailed inventory and input,
including a site visit to document the insured property . .
., 360 Value can deliver an accurate result, ” but,
“without detailed input[, ] it gives [only] a generic,
tract-home type cost valuation.” SAC ¶ 49. The
latter generally leads to an underinsured home. See
SAC ¶ 49.
is used after a loss to calculate the cost of rebuilding or
repairing a home. Similar to above, Xactimate “may be
used . . . to arrive at a valuation within a 10% margin of
error for construction estimation.” SAC ¶ 52.
However, “Xactimate is based on manufactured home data,
such as trailers and prefabricated homes, to price houses
like a kit of parts”; therefore, unless used correctly,
Xactimate “does not represent the true cost to rebuild
homes in Northern California.” SAC ¶ 50.
allege that State Farm used 360 Value to determine their
initial insurance policy limits. See SAC ¶ 57.
But because Plaintiffs “were never specifically
interviewed about the qualities of their [homes], ” 360
Value did not yield an accurate result; accordingly,
Plaintiffs' homes were underinsured and, after the
wildfires, the policies did not give Plaintiffs enough money
to rebuild their homes. SAC ¶ 84. “By
underinsuring homeowners [such as Plaintiffs], State Farm has
been able to lower the rates on their policy premiums [and]
attract a greater volume of business . . . .” SAC
¶ 21; see also SAC ¶ 27.
to Plaintiffs, State Farm represents that 360 Value is a tool
that can accurately and reliably be used in setting insurance
policy value. For example:
• In its website, State Farm states: “The most
appropriate way to estimate the replacement cost of your home
is to hire a building contractor or other building
professional to produce a detailed replacement cost estimate.
Or your State Farm agent can utilize an estimating tool from
Xactware Solutions [i.e., a Verisk Defendant] to
assist you with an estimate.” SAC ¶ 55. Plaintiffs
suggest that the second sentence above indicates that the 360
Value estimate is just as reliable as an estimate provided by
a building contractor.
• Plaintiffs also assert that the “behavior”
of State Farm agents indicates that 360 Value “is
accurate and can be relied upon to determine policy
limits.” SAC ¶ 58. No specifics, however, are
given on what this alleged “behavior” is.
on, inter alia, the above allegations, Plaintiffs
have asserted the following claims for relief (against both
State Farm and the Verisk Defendants, unless otherwise
(1) Breach of the implied covenant of good faith and fair
dealing (State Farm only).
(2) Fraud - intentional misrepresentation.
(3) Fraud - false promise.
(4) Negligent misrepresentation.
(6) Reformation of insurance policies (State Farm only).
(7) Violation of California Business & Professions Code
(8) Violation of the California Cartwright Act.
(9) Violation of California Insurance Code § 790.03.
(10) Violation of the federal Sherman Act -
(11) Violation of the federal Sherman Act -
(12) Violation of the federal Sherman Act -
(13) Violation of California Products Liability Act.
survive a [12(b)(6)] motion to dismiss for failure to state a
claim after the Supreme Court's decisions in Ashcroft
v. Iqbal, 556 U.S. 662 (2009) and Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007), [a
plaintiff's] factual allegations [in the complaint]
“must . . . suggest that the claim has at least a
plausible chance of success.” In other words, [the]
complaint “must allege ‘factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.'” .
. . . [The Ninth Circuit has] settled on a two-step process
for evaluating pleadings:
First, to be entitled to the presumption of truth,
allegations in a complaint or counterclaim may not simply
recite the elements of a cause of action, but must contain
sufficient allegations of underlying facts to give fair
notice and to enable the opposing party to defend itself
effectively. Second, the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such
that it is not unfair to require the opposing party to be
subjected to the expense of discovery and continued
Levitt v. Yelp! Inc., 765 F.3d 1123, 1134-35 (9th
[t]he plausibility standard is not akin to a
“probability requirement, ” but it asks for more
than a sheer possibility that a defendant has acted
unlawfully. Where a complaint pleads facts that are
“merely consistent with” a defendant's
liability, it “stops short of the line between