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Parducci v. Overland Solutions, Inc.

United States District Court, N.D. California

July 17, 2019

RICHARD P. PARDUCCI, Plaintiff,
v.
OVERLAND SOLUTIONS, INC., et al., Defendants.

          ORDER GRANTING MOTIONS TO DISMISS; DENYING MOTION TO STRIKE RE: DKT. NOS. 17, 19, 20

          William H. Orrick, United States District Judge.

         Plaintiff Richard P. Parducci (“Parducci”) brings suit against defendants AMCO Insurance Company (“AMCO”) and Overland Solutions, Inc. (“Overland”) for allegedly engaging in a scheme to overcharge customers for homeowners' insurance by intentionally overestimating the replacement cost of homes. Complaint (“Compl.”) at ¶ 1 [Dkt. No. 1]. He brings this action on behalf of Margarett Parducci as her recently appointed conservator, as Trustee of the John A. Parducci and Margarett L. Parducci Survivor's Trust (the “Parducci Trust”), and on behalf of a putative class of similarly situated customers. Id. at ¶¶ 1, 19-23. AMCO and Overland move to dismiss Parducci's complaint. AMCO also moves to strike Parducci's class action claims.

         Parducci has failed to plead fraud with the requisite particularity to satisfy Federal Rule of Civil Procedure 9(b), cannot state a claim under California Insurance Code section 785, for which there is no private right of action, and has not stated a claim for breach of contract because of operation of the voluntary payments doctrine. Accordingly, because no claims survive, I grant AMCO's and Overland's motion to dismiss. I deny AMCO's motion to strike class allegations as premature and moot.

         BACKGROUND[1]

         I. THE REPLACEMENT COST OF THE PARDUCCI HOME

         Parducci is the grandson of Margarett Parducci and the late John. A Parducci (the “Senior Parduccis”). Id. at ¶ 1. During the relevant time period, the Senior Parduccis were both over the age of 65 and resided in a home located in Ukiah, California. Id. at ¶¶ 7-8. The home is held by the Parducci Trust and has been covered by a homeowners replacement cost insurance policy issued by AMCO since at least 2008 under policy number HA0010221189. Id. at ¶¶ 8-9; Exhibits A-F, attached to AMCO Insurance Company's Request for Judicial Notice (“RJN”) in Support of Motion to Dismiss Complaint and Motion to Strike Class Action Allegations [Dkt. No. 18-1].[2]Parducci alleges that his grandparents, due to their advanced age and frailties, relied on AMCO and its agents to treat them fairly and place the proper amount of insurance on their home. Id. at ¶¶ 9, 16.

         Replacement cost insurance allows recovery of the actual value of property at the time of loss, without deduction for deterioration, obsolescence, or similar depreciation of the property's value. 1 A.L.R.5th 817 (Originally published in 1992). Insurers use the estimated replacement value, i.e. what it would cost to rebuild the home or portion of the home in the event of a loss, to determine the appropriate premium. Parducci believes that the replacement value estimate on the Senior Parduccis' residence was too high. Compl. at ¶ 10. At some point while he was trustee, he requested a seven-year history of the amount of insurance carried on the home and an explanation of how the replacement cost had been determined for each year that the property had been insured from AMCO's agent, Mark Davis Insurance Agency. Id. He learned that the original replacement value placed on the home by AMCO in 2010 (based on a report by Overland) was $1, 525, 000. Id. at ¶ 13. AMCO increased the replacement value of the home until it reached $1, 766, 900 in policy year 2016-2017. Id.

         In 2016, Parducci moved the homeowner's policy to a new AMCO agent, hoping to get a new replacement evaluation. Id. at ¶ 14. The new agent estimated that the replacement value of the residence should be between $855, 000 to $925, 000, depending on the value of certain fixtures. Id. Parducci then solicited the opinion of various unidentified contractors and architects in the area who estimated the total replacement cost as between $840, 000 and $1, 020, 000. Id. He then used these estimates to request that AMCO reduce the amount of coverage to reflect the lowered home replacement cost. Id. at ¶ 15. AMCO refused to lower the replacement cost, claiming that the higher replacement cost reflected in the policy was correct. Id.

         Parducci alleges that the actual replacement cost of the residence in early 2017 was approximately $1, 000, 000, $766, 900 less than what was represented by AMCO and its agents. Id. at ¶ 17. He posits that this resulted in the home being over-insured by approximately 77% and caused the Senior Parduccis to pay premiums for coverage that they could never collect in the event of a total loss. Id.

         II. NOTICES CONTAINED IN THE INSURANCE POLICY

         The homeowners policy contains several notices that are relevant to this suit. AMCO claims that they were provided to Parducci or the Senior Parduccis with each policy renewal for at least six years. They state in relevant part:

READ YOUR POLICY AND POLICY DECLARATIONS PAGE CAREFULLY: The policy declarations page shows the specific coverage limits you have purchased for your dwelling, personal property, separate structures such as detached garages, and additional living expenses. The actual policy and endorsements provide the details on extensions of coverage, limitations of coverage, and coverage conditions and exclusions. . . . It is important to take the time to consider whether the limits and limitations of your policy meet your needs. Contact your agent, broker, or insurance company if you have questions about what is covered or if you want to discuss your coverage options.
. . .
THE RESIDENTIAL DWELLING COVERAGE LIMIT: The coverage limits on the dwelling structure should be high enough so you can rebuild your home if it is completely destroyed. Please note:
• The cost to rebuild your home is almost always different from the market value.
. . .
• The cost to rebuild your home should be adjusted each year to account for inflation.
. . .
You are encouraged to obtain a current estimate of the cost to rebuild your home from your insurance agent, broker, or insurance company or an independent appraisal from a local contractor, architect, or real estate appraiser. If you do obtain an estimate of replacement value, and wish to change your policy limits, contact your insurance company. While not a guarantee, a current estimate can help protect you against being underinsured.

RJN, Ex. G at pp. 1-2). (emphasis added). A separate notice also states

The Coverage A Dwelling limit shown on your declarations page is an estimated replacement cost based on general information about your home. It is developed from models that use cost of construction materials and labor rates for like homes in the area. The actual cost to replace your home may be significantly different. Allied does not guarantee that this figure will represent the actual cost to replace your home. You are responsible for selecting the appropriate amount of coverage and you may obtain an appraisal or contractor estimate, at your own expense, which [AMCO] will consider and accept, if reasonable. Higher coverage limits may be selected and will result in higher premiums.

(Id. Ex. H) (emphasis added).

         III. PARDUCCI'S CLAIMS

         Parducci asserts a number of claims against AMCO and Overland. As to both AMCO and Overland, he brings claims for (i) unlawful, unfair, and fraudulent business practices under Cal. Bus. & Prof. § 17200, et seq.; (ii) intentional misrepresentation; (iii) negligent misrepresentation; and (iv) financial elder abuse. Id. at ¶¶ 29-40, 56-81. Against only AMCO, he brings claims for (i) breach of the covenant of good faith and fair dealing and (ii) breach of contract. Id. at ¶¶ 41-55.

         All claims are brought on behalf of a putative class. Id. at ¶¶ 19-28. Parducci seeks to define the class as:

All owners of a dwelling coverage insurance policy issued by AMCO Insurance Company that insured a dwelling in California on a replacement cost basis utilizing AMCO or its agent's survey, appraisal or inspection methodology to calculate the dwelling coverage limits.

Id. at ¶ 20. He also seeks to represent two sub-classes. The first is defined as:

All Owners over the age of 65 of a dwelling coverage insurance policy issued by AMCO Insurance Company that insured a dwelling in California on a replacement cost basis utilizing AMCO or its agent's survey, appraisal or inspection methodology to calculate the dwelling coverage limits.

Id. at ¶ 21. The second sub-class is defined as

All Owners of a dwelling coverage insurance policy issued by AMCO Insurance Company that insured a dwelling in California on a replacement cost basis utilizing a survey, appraisal or inspection by Overland Solutions, Inc. to calculate the dwelling coverage limits.

Id. at ¶ 22.

         LEGAL STANDARD

         I. MOTION TO DISMISS

         Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss if a claim fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the claimant must 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 is facially plausible when the plaintiff pleads facts that “allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). There must be “more than a sheer possibility that a defendant has acted unlawfully.” Id. While courts do not require ...


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