Gen. Star Indem. Co. v. Thunderbutte Enters., LLC
| Decision Date | 16 November 2016 |
| Docket Number | No. 2:16–cv–00628–MCE–AC,2:16–cv–00628–MCE–AC |
| Citation | 221 F.Supp.3d 1174 |
| Parties | GENERAL STAR INDEMNITY COMPANY, Plaintiff, v. THUNDERBUTTE ENTERPRISES, LLC, dba Sierra Nevada House, Defendant. |
| Court | U.S. District Court — Eastern District of California |
Paul Andrew Impellezzeri, Alan H. Barbanel, Barbanel & Treuer, P.C., Los Angeles, CA, for Plaintiff.
Ivo Labar, Kerr and Wagstaffe, San Francisco, CA, for Defendant.
Plaintiff General Star Indemnity Company ("Plaintiff") has filed the present lawsuit seeking a judicial determination that it acted appropriately in denying a fire claim submitted by its insured, Defendant Thunderbutte Enterprises, LLC ("Defendant"). According to Plaintiff, it properly cancelled Defendant's policy prior to the subject fire on grounds that Defendant had failed to adopt mandatory safety recommendations. To the extent that Plaintiff claims it mistakenly advanced Defendant's funds towards the fire losses it sustained, Plaintiff also includes a claim for unjust enrichment as to those funds.
Currently before this Court is Defendant's Motion to Dismiss for failure to state a viable claim under Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, Defendant's Motion is GRANTED.1
Defendant owns and operates the Sierra Nevada House, a historic hotel and restaurant located in Coloma, California. According to Plaintiff's Complaint, Plaintiff is "a surplus lines insurance carrier authorized to do business in the State of California through licensed surplus lines brokers." Pl.'s Compl., ECF No. 1, ¶ 7. On or about June 26, 2015, Plaintiff, through its underwriter, Bass, and retail insurance Broker, Deatsch Insurance Agency, Inc., issued its Commercial Property Insurance Policy ("Policy") to Defendant. The Policy provided loss coverage on Defendant's building of up to $1,000,000.00, and further afforded additional coverage for personal property and business income losses. See Policy, Ex. A to Pl.'s Compl., p. 23. The Common Policy Declarations page states that no inspection of the insured premises was required before issuance of the Policy. Id. at p. 6. The Policy does provide, however, that Plaintiff had the right to inspect the property and "recommend" changes. Id. at p. 7.
Plaintiff's Policy included the following provisions addressing the cancellation of a policy in effect for more than 60 days:
Pl's Compl., ¶ 12. In this way, the Policy tracks the statutorily permissible reasons for cancellation of a commercial policy under California Insurance Code § 676.2, and makes it clear that the required advance notice of cancellation must be mailed at least 30 days before the effective date of cancellation, and must further state the particular reason the policy is subject to cancellation.
On or about July 17, 2015, Bass ordered an inspection of the Sierra Nevada House in accordance with Plaintiff's right to obtain such inspection. That inspection was performed by Insurance Research Services on August 11, 2015 and the resulting report concluded, among other things, that "no unusual hazards appear to be posed by operations, equipment, or materials." Inspection, Ex. 2 to Pl.'s Compl., p. 8. The inspection did, however, reveal the absence of "splash guards between the deep fryers and adjacent cooking units." Id. Lastly, the report noted that "[t]he information contained herein represents conditions and information available at the time of inspection, and the opinions of the on-site inspector, but [are] not based on any laws, codes or regulations." Id. at p. 7.
Following its receipt of the report, Plaintiff's underwriter, Bass, issued a letter on September 16, 2015 which referred to the inspection as a "loss control survey" and contained a "Mandatory Recommendation" consisting of seven separate items for which Defendant was asked to certify compliance. Pl.'s Compl., Ex 3, p. 1. The compliance terms at issue included a recommendation that the fryers be "at least 18 [inches] or more from the open flame cooking unit" with a directive that a metal baffle plate be used to separate the two cooking areas. The letter contained no reference whatsoever to violations of any law or regulation.
On October 21, 2015, Plaintiff issued a Notice of Cancellation by mail, with an effective date of November 23, 2015. Pl.'s Compl., Ex. 4. The stated reason for the cancellation was "[f]ailure to comply with recommendations." No further explication was included in the Notice, and again there was no indication that Defendant had violated any law or regulation. Plaintiff's underwriter, Bass, subsequently emailed the retail broker, Deatsch, and indicated that if Defendant complied with the recommendations, the Policy could be reinstated. Deatsch forwarded Bass an email from Defendant indicating that some of the recommendations had been completed, although apparently not those pertaining to fryer spacing. According to Plaintiff, Defendant never provided a signed compliance form as to that particular recommendation.
On December 14, 2015, the Sierra Nevada House sustained fire damage. The fire started on the second floor after work hours. Apparently not realizing that it purportedly had cancelled Defendant's Policy, Plaintiff appointed an independent adjustor to handle the claim. On or about December 17, 2015, that adjuster, Engle Martin & Associates, made a preliminary determination that the Sierra Nevada House was a total loss. Thereafter, Plaintiff issued a $100,000 advance payment of policy proceeds towards Defendant's loss. Once Plaintiff became aware of the cancellation, its counsel demanded, by letter on March 23, 2016, that Defendant return its advance. In making that demand, Plaintiff indicated for the first time that Defendant's fryer configuration violated California Mechanical Code Section 515.1.1.3, which requires that "deep-fat fryers shall be installed with not less than a 16–inch (406 mm.) space between the fryer and the surface flames from adjacent cooking equipment." See Ex. 2 to Decl. of Ivo Labar, ECF No. 5–2, p. 2. The letter advised Defendant, also for the first time, that Defendant's cancellation was in fact based on a violation of a "state law or regulation establishing safety standards." Id.
Plaintiff brought this suit against Defendant seeking declaratory relief that it had effectively cancelled the Policy before the fire, and that its $100,000 advance was made in error.
Pursuant to Federal Rule of Civil Procedure 3 12(b)(6), Defendant now seeks dismissal of (1) the declaratory relief claim set forth in Plaintiff's First Cause of Action, and (2) the mistaken receipt/unjust enrichment claim made in Plaintiff's Second Cause of Action.
On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co. , 80 F.3d 336, 337–38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (internal citations and quotations omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ().
Furthermore, "Rule 8(a)(2) ... requires a showing, rather than a blanket assertion, of...
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