United States District Court, N.D. California
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTIONS TO DISMISS SECOND AMENDED COMPLAINT
DOCKET NO. 30-31
M. CHEN United States District Judge.
are the heirs of a woman named Betty Hutson. They have sued
two companies: AMCO Insurance Co. and Wells Fargo Bank, NA.
Previously, AMCO answered the original complaint as well as
the first amended complaint (“FAC”). See
Docket No. 1-3 (answer); Docket No. 15 (answer). Wells moved
to dismiss the FAC. The Court granted Wells's motion but
permitted the filing of a second amended complaint
(“SAC”). Docket No. 18 (minutes). After
Plaintiffs filed the SAC, both AMCO and Wells moved for
dismissal. These are the motions currently pending before the
considered the parties' briefs and accompanying
submissions,  as well as the oral argument of counsel,
the Court hereby GRANTS in part and
DENIES in part both motions to dismiss.
FACTUAL & PROCEDURAL BACKGROUND
SAC, Plaintiffs allege as follows.
Hutson was married to Tommy Gremillion. The two owned certain
real property, located in Richmond, California, as joint
tenants with the right of survivorship. See SAC
¶ 7. The property was protected by a homeowners'
insurance policy,  which was obtained “through an
insurance agent” whose “identity is currently
unknown.” SAC ¶¶ 8-9.
2006, Mr. Gremillion died, thus “leaving the [real]
property to vest in his wife, Betty Hutson.” SAC ¶
2007, Betty Hutson obtained a loan from World Savings Bank
(which Wells later acquired), with the loan being secured by
a deed of trust on the real property. See
Wells's RJN, Ex. A (deed of trust). The deed of trust
required that Ms. Hutson “obtain and maintain hazard
insurance” which could cover, inter alia,
“loss or damage caused by fire.” Wells's RJN,
Ex. D (Deed of Trust at 5). The deed of trust also required
that the insurance policy “include what is known as a
Standard Mortgagee Clause to protect Lender.”
Wells's RJN, Ex. D (Deed of Trust at 5) (emphasis
omitted). Finally, the deed of trust included the following
The amount paid by the insurance company is called
“Proceeds.” Any Proceeds received will be applied
first to reimburse Lender for costs and expenses incurred in
connection with obtaining the Proceeds, and then, at
Lender's option and in the order and proportion as Lender
may determine in its sole and absolute discretion, regardless
of any impairment or lack of impairment of security, as
follows: (A) to the extent allowed by applicable law, to the
Sums Secured in a manner that Lender determines and/or (B) to
the payment of costs and expenses of necessary repairs or to
the restoration of the Property to a condition satisfactory
to Lender, such application to be made in the manner and at
the times as determined by Lender.
Well's RJN, Ex. D (Deed of Trust at 6).
2007, the insurance agent transferred her entire book of
business to AMCO, and AMCO bought, inter alia, the
policy that covered the real property. See SAC
¶¶ 15, 20. According to Plaintiffs, at the time
that AMCO bought the policy, it knew - or at least should
have known - that Mr. Gremillion was dead. See SAC
¶¶ 20, 51.
September 2007, AMCO issued its own insurance policy for the
real property at issue. The named insured on the policy was
Mr. Gremillion, even though AMCO allegedly knew he had died.
See SAC ¶ 18; see also AMCO Mot., Ex.
A (insurance policy in effect from September 2016 to 2017,
Bates stamp AMCO 00015) (listing named insured as Mr.
Gremillion). It appears the policy reflected Wells was the
mortgagee with respect to the real property at issue.
See AMCO Mot., Ex. A (insurance policy in effect
from September 2016 to 2017, Bates stamp AMCO 00015)
(identifying Wells as the mortgage loss payee); see
also SAC ¶ 16 (alleging that the insurance agent
told AMCO that Wells was the mortgagee).
Hutson made payments on the policy for many years.
See SAC ¶ 23. According to Plaintiffs, Betty
Hutson did not know about the error in the policy with
respect to Mr. Gremillion's name because she was not
directly billed for the insurance; rather, “all billing
statements were sent to Wells Fargo” as a part of
billing.” SAC ¶ 16.
October 2014, Betty Hutson died. See SAC ¶ 23.
AMCO allegedly knew or should have known that Betty Hutson
died in 2014 but did not change the name on the policy.
See SAC ¶ 53.
February 2017, several years after Betty Hutson's death,
there was a fire on the real property at issue. The fire
consumed part of the house and caused extensive damage.
See SAC ¶ 24. Also, at the time of the fire,
the home was used “as a board and care facility for
several disabled persons, ” and the boarders
“lost significant personal property.” SAC
¶¶ 44-45. “The residents of the board and
care each lost significant personal property none of which
either Defendant has agreed to pay.” SAC ¶ 45:
days after the fire, AMCO claimed that it learned for the
first time that Mr. Gremillion had been dead for 10 years and
Betty Hutson for 3 years. See SAC ¶ 25. AMCO
thereafter issued a notice of cancellation for the policy.
See SAC ¶ 26.
Plaintiffs contacted AMCO about coverage for the loss related
to the fire, AMCO initially told them that “there was
no coverage at all.” SAC ¶ 29. After Plaintiffs
obtained legal counsel, AMCO “finally admitted the home
was covered, but denied coverage for any [personal] property
loss or the loss of use of the [real] property.” SAC
¶ 30; see also SAC ¶ 59 (alleging that
AMCO refused to pay for loss of personal property and
business income loss). In addition, AMCO claimed that the
real property had a low value and proposed a low cost for
repair. See SAC ¶ 31. Moreover, AMCO refused to
communicate with Plaintiffs or their counsel and claimed
instead that it was working directly with Wells, even though
Wells had not actually opened a formal claim. See
SAC ¶¶ 33-34. According to Plaintiffs, after Wells
opened a formal claim, AMCO “unreasonably delayed the
investigation and issuing of the construction check.”
SAC ¶ 45; see also SAC ¶ 54 (alleging that
AMCO “delayed in determining coverage for the
Wells, it forced Plaintiffs' contractor that was carrying
out the repairs “to work on a very limited scope based
on the estimate prepared by AMCO.” SAC ¶ 36. The
true cost of repair was greater. See SAC ¶ 37.
Wells refused to work with Plaintiffs' counsel “to
secure a more realistic scope based on the extensive damage
to the home.” SAC ¶ 41. In addition, Wells still
has not paid for all of the repair work that it signed off
on. See SAC ¶ 43. Finally, Wells delayed in
getting disbursed funds to Plaintiffs and/or the contractor
“so that it took over a year [for] construction to be
completed.” SAC ¶ 46.
on, inter alia, the above allegations, Plaintiffs
assert the following causes of action.
(2) Breach of contract (against AMCO only).
(3) Bad faith (against AMCO only).
(4) Unjust enrichment (against AMCO only).
(5) Breach of fiduciary duty (against Wells only).
(6) Intentional and negligent misrepresentation (against AMCO