Boobuli's LLC v. State Farm Fire & Cas. Co.

• Decision Date: 05 October 2021
• Docket Number: Case No. 20-cv-07074-WHO
• Citation: 562 F.Supp.3d 469
• Parties: BOOBULI'S LLC, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of California

562 F.Supp.3d 469

BOOBULI'S LLC, Plaintiff,

v.STATE FARM FIRE AND CASUALTY COMPANY, et al., Defendants.

Case No. 20-cv-07074-WHO

United States District Court, N.D. California.

Signed October 5, 2021

Daniel Louis Rottinghaus, Fredrick Arthur Hagen, Berding & Weil LLP, Walnut Creek, CA, Robert Steven Robinson, Law Office of Robert S. Robinson, San Ramon, CA, David Michael Birka-White, Birka-White Law Offices, Danville, CA, for Plaintiff.

Anna S. McLean, Sheppard Mullin Richter & Hampton LLP a Limited Liability Partnership, Including Professional Corp, San Francisco, CA, Jennifer Marie Hoffman, Sheppard Mullin Richter Hampton LLP, Los Angeles, CA, for Defendants State Farm General Insurance Company, State Farm Mutual Automobile Insurance Company.

ORDER DENYING MOTION TO DISMISS

Re: Dkt. No. 35

William H. Orrick, United States District Judge

In March 2020, all nonessential California business were required to substantially reduce or shut down their business operations in an effort to slow the spread of COVID-19. Plaintiff Boobuli's LLC ("Boobuli's") shut down its business, a coffee shop and restaurant located in Walnut Creek, California, for at least three months and was unable to reopen until June 2020, with reduced hours and employees. Despite a decrease in its business operations, Boobuli's alleges that defendant State Farm, from which it purchased business risk insurance in June 2019, has failed to make premium adjustments and returns and has continued to collect premiums on rates approved prior to the unforeseen pandemic-related reduction in business operations. Boobuli's brings this action on behalf of itself and all other similarly situated California business owners insured by State Farm, seeking to remedy State Farm's alleged unfair business practice of collecting and/or failing to return excess premiums in violation of California's public policy.

State Farm moves to dismiss the Complaint on grounds that California's Insurance Commissioner has exclusive original jurisdiction over the matter and that State Farm is immune from this type of suit challenging the application of rates approved by the Commissioner. Boobuli's responds that is it not challenging State Farm's rates as approved by the Commissioner, but is instead challenging the excessive premiums charged to it and other similarly situated businesses due to State Farm's misapplication of the approved rates given circumstances caused by the pandemic.

Following the oral argument on State Farm's motion, I advised the parties that I would "review any information received from the Insurance Commissioner" requested by the Honorable Edward M. Chen in the Rejoice! Coffee Company, LLC v. The Hartford Financial Services Grp. case, Case No. 20-cv-06789-EMC. Dkt. No. 49. State Farm opposed waiting on the Insurance Commissioner's opinion in Rejoice! , contending that the claim here – that State Farm did not adjust premiums enough or issue sufficient rebates under the Insurance Commissioner's COVID-related bulletins – was different than the question submitted to the Commissioner in Rejoice! (challenging an insurer's "refusal to adjust" insurance premiums). Compare Dkt. No. 52 with Dkt. No. 61 in Case No. 20-cv-06789. State Farm proposed that I submit a different question to the Commissioner, concerned with an insurer's alleged failure to adjust enough. Dkt. No. 52. Having now read the Insurance Commissioner's response in Rejoice! (filed September 17, 2021), as well as the briefs filed in this case, I find that the claims asserted by Boobuli's are not within the exclusive jurisdiction of the Insurance Commissioner, although the relief available under the claims may be impacted by future actions by the Commissioner.

Turning to the merits of the claims alleged, most of State Farm's remaining arguments regarding the sufficiency of Boobuli's claims do not warrant dismissal. Even if there is a valid contract between the parties, Boobuli's is allowed to plead an unjust enrichment claim in the alternative under Rule 8. Boobuli's implied covenant claims are sufficiently pleaded based on State Farm's alleged failure to use its discretion to adjust premiums in good faith under the circumstances. However, State Farm's motion to dismiss claims against the parent company of State Farm General that issued the Policies, State Farm Mutual, is GRANTED with leave to amend. Boobuli has insufficiently pleaded these claims: it simply names State Farm Mutual as a party but fails to allege its role in the unfair practices or whether it retained something to which it was not entitled. The motion to dismiss is otherwise DENIED.

BACKGROUND

I. BOOBULI'S 2019 AND 2020 POLICIES

Boobuli's is a California limited liability company that operates a café, Caffé California, in Walnut Creek, California. First Amended Complaint ("FAC") [Dkt. No. 25] ¶ 13. State Farm General Insurance Company ("State Farm General") and State Farm Mutual Automobile Insurance Company ("State Farm Mutual") (collectively "State Farm") are engaged in the business of marketing and selling insurance products in California and other states. Id. ¶¶ 14-17.¹ In June 2019, Boobuli's purchased business risk insurance form State Farm to insure its business operations and its commercial premises. Id. ¶ 34; see Defendant's Request for Judicial Notice ("RJN") [Dkt. No. 24], Ex. A (copy of policy number 97-BU-J516-6 for the time period June 1, 2019 to June 1, 2020, including all declarations pages, forms and endorsements) ("2019 Policy").

The premium collected on the 2019 Policy was set prior to the COVID-19 pandemic. Id. ¶ 35. Boobuli's alleges that the 2019 Policy terminated on June 1, 2020, the day that the 2020 Policy went into effect, covering June 1, 2020 through May 31, 2021. Id. ¶¶ 41, 50; RJN, Ex. B (copy of policy number 97-BU-J516-6 for the time period June 1, 2020 to June 1, 2021, including all declarations pages, forms and endorsements) ("2020 Policy"). Pursuant to California law, State Farm General filed the rates it used to calculate premiums under the Policies with the Insurance Commissioner and the California Department of Insurance ("DOI") approved those rates effective December 15, 2018. RJN, Ex. C (State Farm General Insurance Company's Rate Revision filing for its California Commercial Multi-Peril Mercantile/Service Program with the DOI); RJN, Ex. D (DOI's approval of State Farm General Insurance Company's Rate Revision filing for its California Commercial Multi-Peril Mercantile/Service Program with the DOI effective as of December 15, 2018).

II. DOI BULLETINS

On April 13, 2020, the DOI issued a bulletin to insurers recognizing that "the COVID-19 pandemic caused an unprecedented challenge for California's businesses" and had "severely curtailed activities of policyholders in both personal and commercial lines," so that "projected loss exposures of many insurance policies have become overstated or misclassified." FAC ¶ 42; id. , Ex. A (2020-3 Bulletin) at 1.

"To protect consumers and to provide consistent direction to the insurance industry regarding misclassifications of risk resulting from the COVID-19 pandemic," Insurance Commissioner Ricardo Lara ordered "insurers to make an initial premium refund for the months of March and April to all adversely impacted California policyholders," including those in commercial liability insurance, "as quickly as practicable, but in any event no later than 120 days after the date of this Bulletin," i.e. , August 11, 2020. 2020-3 Bulletin at 1-2. Commissioner Lara "grant[ed] each insurer reasonable flexibility in determining how best to quickly and fairly accomplish the refund of premium to policyholders," adding that "[i]nsurers may comply with the premium refund order by providing a premium credit, reduction, return of premium, or other appropriate premium adjustment." Id. at 2. "Insurers may refund premium without prior approval by the [DOI] if they apply a uniform premium reduction for all policyholders in an individual line of insurance, for recent, current, and upcoming policy periods or any portion thereof." Id.

"Alternatively, insurers may refund premium without prior approval by the [DOI] by reassessing the classification and exposure bases of affected risks on a case-by-case basis for recent, current, and upcoming policy periods or any portion thereof." 2020-3 Bulletin at 2. "Whether choosing one of the above-described approaches, or an alternative approach, insurers shall, no later than 120 days after the date of this Bulletin, provide each affected policyholder, if applicable, with a notification of the amount of the refund, a check, premium credit, reduction, return of premium, or other appropriate premium adjustment." Id. at 3. Commissioner Lara also ordered every insurer "to report to the [DOI] within 60 days ... all actions taken and contemplated future actions to refund premiums in response to or consistent with this Bulletin." Id.

On May 15, 2020, the DOI issued a second bulletin, extending "the directives set forth in Bulletin 2020-3 to reduce premium in the affected lines of insurance where the projected loss exposures have become overstated or misclassified ... through May 31, 2020." FAC, Ex. C (2020-4 Bulletin) at 2. The 2020-4 Bulletin also required insurers to report to the DOI "information with respect to any premium adjustments for May 2020." Id.

On June 25, 2020, the DOI issued a third bulletin, extending the directives and reporting requirements of the previous two bulletins to June 2020 and to "any months subsequent to June if the COVID-19 pandemic continues to result in projected loss exposures remaining overstated or misclassified." FAC, Ex. D (2020-8 Bulletin) at 2. The 2020-8 Bulletin clarified that, "[t]he extension of reporting required by this Bulletin 2020-8 does not change the previous deadline for insurers to provide direct relief to policyholders for March, April, and May premiums by no later than August 11, 2020." Id.

On December 3, 2020, the DOI...