United States District Court, S.D. California
SENTRY INSURANCE A MUTUAL COMPANY, a Wisconsin Corporation; and SENTRY CASUALTY COMPANY, a Wisconsin Corporation, Plaintiffs,
NEW ALTERNATIVES, INC., a California nonprofit corporation; and DOES 1-100, Defendants, NEW ALTERNATIVES, INC., a California nonprofit corporation, Cross-Claimant,
SENTRY INSURANCE A MUTUAL COMPANY, a Wisconsin Corporation and SENTRY CASUALTY COMPANY, a Wisconsin Corporation, Cross-Defendants.
William Q. Hayes United States District Court
following matters are pending before the Court: 1) the Motion
to Dismiss the Third Cause of Action (Fraud) in the
Cross-Complaint filed by Plaintiffs (ECF No. 22) and 2) the
Motion to Dismiss for Failure to State a Claim filed by
Plaintiffs (ECF No. 27).
November 21, 2018, Plaintiffs Sentry Insurance A Mutual
Company (“Sentry Insurance”) and Sentry Casualty
Company (“Sentry Casualty”) initiated this action
by filing a Complaint against Defendant New Alternatives,
Inc. (“New Alternatives”) for breach of contract.
(ECF No. 1). Plaintiffs allege that Defendant breached Sentry
Policies and Casualty Insurance Agreements regarding
workers' compensation insurance coverage by failing to
pay an outstanding balance of $573, 290.35. (ECF No. 24 at
9). Plaintiffs seek a money judgment, reasonable costs and
attorneys' fees incurred, and further relief as the court
deems just and proper.
February 26, 2019, Defendant filed an Answer, Affirmative
Defenses, and a Counterclaim against Plaintiffs. (ECF No. 8).
On July 24, 2019, Plaintiffs filed a Motion to Dismiss the
Third Cause of Action (Fraud) in the Cross-Complaint filed by
Defendant. (ECF No. 22).
August 8, 2019, Defendant filed an Answer, Affirmative
Defenses, and the First Amended Counterclaim. (ECF No. 24).
Defendant admits that Plaintiffs provided workers
compensation insurance coverage for Defendant from January 1,
2013 until January 1, 2017. (ECF No. 24 at 2). Defendant
admits that it agreed to pay premiums to Plaintiffs.
Id. at 4. Defendant alleges that one or more of
Plaintiffs' Policies are illegal, void, and unenforceable
because Plaintiffs supplemented the Sentry Policies with
Casualty Insurance Agreements contrary to California
Insurance Code § 11658. Id. at 8-9. Defendant
alleges the following five claims in the Amended
Counterclaim: 1) declaratory relief and rescission, 2)
tortious breach of the implied covenant of good faith and
fair dealing, 3) fraud (nondisclosure and misrepresentation),
4) declaratory relief, and 5) unjust enrichment. Defendant
seeks a declaration that the Casualty Insurance Agreements
are void and unenforceable; rescission of the Casualty
Insurance Agreements; general and special damages against
Plaintiffs in a sum to be proven at trial with pre and
post-judgment interest; and recovery of all attorneys'
fees and consultants' fees, costs, and expenses.
August 29, 2019, Plaintiffs filed a Motion to Dismiss
Defendant's Amended Counterclaim for Fraud (Counterclaim
3). (ECF No. 27). Plaintiffs contend that Defendant failed to
plead its fraud counter-claim with specificity required by
Fed. R. Civ. Proc. 9(b) and that the fraud counter-claim is
time-barred. (ECF No. 27-1 at 3). On September 23, 2019,
Defendant filed a Response in Opposition to Plaintiffs'
Motion to Dismiss Defendant's Amended Counterclaim for
Fraud (Counterclaim 3). (ECF No. 28). On September 30, 2019,
Plaintiffs filed a Reply. (ECF No. 31).
OF THE FIRST AMENDED COUNTERCLAIM FOR FRAUD
Defendant alleges that Plaintiffs represented that the Sentry
Policies and Casualty Insurance Agreements complied with
California law, including the relevant applicable statutes
and regulations. . . . These representations were false at
the time made based on the specific violations of California
law separately alleged, including the usage of an unapproved
and illegal side agreement intended to bind New Alternatives
prior to the required regulatory approval. Alternatively,
Sentry did not disclose that the Casualty Side Agreement had
not been approved by the California Insurance Commissioner .
. . .
(ECF No. 24 at 13).
alleges the Plaintiffs' misrepresentations and
non-disclosures were material and relied upon. Id.
at 13-14. Defendant alleges that Plaintiffs'
misrepresentations and non-disclosures “served as a
preface to irregularities in the manner and method of
determining premiums all in furtherance of [Plaintiffs']
scheme starting with the Program Inception Date and
continuing to the present.” Id. at 14.
Defendant alleges that “Alternatively,
[Plaintiffs'] intentional failure to disclose the alleged
material facts commenced during the Policy application
process, existed as of the Program Inception Date and
continued without correction until June 7, 2013.”
Id. Defendant alleges that it did not discover that
Plaintiffs' alleged misrepresentations and
non-disclosures until after Sentry Policies had been in
force. Id. at 15. Defendant alleges that
Plaintiffs' alleged conduct increased Defendant's
insurance premiums and resulted in unnecessary and excessive,
fees, costs, and expenses. Id.
Rule of Civil Procedure 12(b)(6) permits dismissal for
“failure to state a claim upon which relief can be
granted.” Fed.R.Civ.P. 12(b)(6). Federal Rule of Civil
Procedure 8(a) provides that “[a] pleading that states
a claim for relief must contain . . . a short and plain
statement of the claim showing that the pleader is entitled
to relief.” Fed.R.Civ.P. 8(a)(2). Dismissal under Rule
12(b)(6) is appropriate where the complaint lacks a
cognizable legal theory or sufficient facts to support a
cognizable legal theory. See Balistreri v. Pacifica
Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).
reviewing a motion to dismiss, a court must accept as true
all “well-pleaded factual allegations.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
However, a court is not “required to accept as true
allegations that are merely conclusory, unwarranted
deductions of fact, or unreasonable inferences.”
Sprewell v. Golden State Warriors, 266 F.3d 979, 988
(9th Cir. 2001). “In sum, for a complaint to survive a
motion to dismiss, the non-conclusory factual content, and
reasonable inferences from that content, must be ...