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Renovate America, Inc. v. Lloyd's Syndicate 1458

United States District Court, S.D. California

December 10, 2019

LLOYD'S SYNDICATE 1458, Defendant.


          Hon. Gonzalo P. Curiel, United States District Judge.

         Before the Court is the Defendant Lloyd's Syndicate 1458's (“Lloyd's” or “Defendant”) motion to dismiss the complaint. ECF No. 10. Renovate America, Inc. (“Renovate” or “Plaintiff”) filed an opposition on October 15, 2019. ECF No. 12. Defendant filed a reply on October 22, 2019. ECF No. 14. For the reasons discussed below the Court DENIES Defendant's motion to dismiss.


         Renovate is a Delaware corporation with its headquarters in San Diego, California. ECF No. 1 (“Complaint”) ¶ 5. Renovate provides services for homeowners, including the administration of residential Property Assessed Clean Energy programs for government entities under the Home Energy Renovation Opportunity (“HERO”) program. Id. ¶¶ 5, 10. As part of its insurance portfolio, Renovate maintains a professional liability insurance covering liabilities that it may face based on its administration of loan programs. Id. ¶ 11. Lloyd's, through its agent Euclid, issued the relevant professional liability policy to Lloyd's with a policy period of at least May 27, 2017 to May 27, 2018 (the “Policy”). Id. ¶ 12.

         Plaintiff filed the Complaint on August 2, 2019. ECF No. 1. According to the Complaint, the Policy covers costs that Renovate would incur from defending against claims for, inter alia, “actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act.” Id. ¶ 13. Plaintiff alleges that the Policy requires Lloyd's to pay defense costs while the underlying claims are being litigated. Id. ¶ 15. Under the Policy, coverage is limited to $2, 500, 000 and Renovate assumes a $250, 000 retention, which increases to $500, 000 for class actions. Id. ¶ 13, 14. Any defense costs incurred by Renovate count against the retention amounts. Id. ¶ 14.

         Between January of 2018 and April of 2018, Renovate was served in two separate lawsuits in California state court (the “Underlying Actions”): All Pro Installation v. Claude Rowe et al., Case No. 37-2016-00042327, California Superior Court, County of San Diego (the “Rowe Action”) and Reginald Nemore et al. v. Renovate America, Inc., Case No. BC701810, California Superior Court of California, County of Los Angeles (the “Nemore Action”). Id. ¶¶ 18, 19. In the Rowe Action, defendants served a cross-complaint on Renovate on January 23, 2018 for alleged elder abuse and other harms due to Renovate's administration of the HERO programs. Id. ¶ 18. In the Nemore Action, the plaintiffs served Renovate on April 16, 2018, and in their complaint they allege that participants of the HERO programs also suffered elder abuse and various other harms due to Renovate's administration of the program. Id. ¶ 19.

         On April 14, 2018 and May 1, 2018 respectively, Renovate tendered both Nemore and Rowe actions to Lloyd's, seeking full coverage including payment of their defense costs. Id. ¶ 20. Lloyd's did not reply to Renovate within 40 days, which Renovate alleges is the applicable period for coverage determinations. Id. ¶ 21. Renovate selected defense counsel and paid for its own defense costs. Id. Renovate also used a broker to prod Lloyd's to provide a response and pay for the defense costs incurred by Renovate. Id. ¶¶ 22-23. Lloyd's first responded in November of 2018 by letters through counsel that acknowledged that the Underlying Actions raised the potential for coverage under the Policy, but stated that rates of Renovate's defense counsel raised issues. Id. ¶ 25-26. After Lloyd's reviewed the defense counsel invoices, Lloyd's stated that it would not pay full rates for the defense counsel services and that it may also take other deductions on the invoices. Id. ¶ 28.

         By June 21, 2019, Renovate incurred over $750, 000 in costs ($500, 000 in excess of the applicable retention) from defending the Rowe action, and over $570, 000 in costs ($70, 000 in excess of the applicable class action retention) from defending the Nemore action. Id. ¶ 31. At this time, Lloyd's informed Renovate that it would reduce the invoices and apply other deductions, and ultimately pay $70, 000 for the Rowe action but pay nothing for the Nemore action. Id. ¶¶ 31, 33. Renovate contested Lloyd's proposed deductions and requested that Lloyd's provide an accounting of the deductions. Id. ¶ 34. Renovate also stated that they still expected Lloyd's to pay the $70, 000 for the Rowe action, and Lloyd's said that they would make a partial payment within the next one to two weeks. Id. ¶ 34. As of the date of filing of the Complaint, Renovate had not received any payment from Lloyd's. Id. ¶ 35.

         Renovate alleges claims for breach of contract and breach of covenant of good faith and dealing, and seeks declaratory relief and to recover the costs incurred for defense counsel's services arising from the Nemore and Rowe litigations. Renovate additionally seeks to recover damages for bad faith such as attorney fees required to prosecute this action.


         Federal Rule of Civil Procedure (“Rule”) 12(b)(6) permits dismissal for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). 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). Under Rule 8(a)(2), the plaintiff is required only to set forth a “short and plain statement of the claim showing that the pleader is entitled to relief, ” and “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         A complaint may survive a motion to dismiss only if, taking all well-pleaded factual allegations as true, it contains enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “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.” Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. “In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations omitted). In reviewing a Rule 12(b)(6) motion, the Court accepts as true all facts alleged in the complaint, and draws all reasonable inferences in favor of the plaintiff. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). The court evaluates lack of statutory standing under the Rule 12(b)(6) standard. Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011).

         I. Breach of Contract

         Under California law, the elements required for a cause of action for breach of contract are: (1) the existence of a contract, (2) plaintiffs' performance or excuse of nonperformance, (3) defendant's breach, and (4) resulting damages to plaintiff. Reichert v. General Ins. Co., 442 P.2d 377 (Cal. 1968); McDonald v. John P. Scripps Newspaper,210 Cal.App.3d 100, 104 (1989). Lloyd's alleges that Renovate's claim for breach of contract fails for two reasons: (1) Renovate's claims are not yet at “final disposition” and ...

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