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Hutson v. AMCO Insurance Co., Inc.

United States District Court, N.D. California

January 9, 2020

JANICE HUTSON, et al., Plaintiffs,
AMCO INSURANCE CO INC, et al., Defendants.


          EDWARD M. CHEN United States District Judge.

         Plaintiffs 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 Court.[1]

         Having considered the parties' briefs and accompanying submissions, [2] as well as the oral argument of counsel, the Court hereby GRANTS in part and DENIES in part both motions to dismiss.


         In the SAC, Plaintiffs allege as follows.

         Betty 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, [3] which was obtained “through an insurance agent” whose “identity is currently unknown.” SAC ¶¶ 8-9.

         In July 2006, Mr. Gremillion died, thus “leaving the [real] property to vest in his wife, Betty Hutson.” SAC ¶ 10.

         In May 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 provision:

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).[4]

         In July 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.

         In 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).

         Betty 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 “‘direct mortgage' billing.”[5] SAC ¶ 16.

         In 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.

         In 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:

         Several 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.

         When 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 loss”).

         As for 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.

         Based on, inter alia, the above allegations, Plaintiffs assert the following causes of action.

(1) Negligence.
(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 only).


         A. Le ...

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