King v. Nat'l Gen. Ins. Co.

• Citation: 129 F.Supp.3d 925
• Decision Date: 15 September 2015
• Docket Number: Case No. 15–cv–00313–DMR
• Parties: Edd King, et al., Plaintiffs, v. National General Insurance Company, et al., Defendants.
• Court: U.S. District Court — Northern District of California

129 F.Supp.3d 925

Edd King, et al., Plaintiffs,

v.National General Insurance Company, et al., Defendants.

Case No. 15–cv–00313–DMR

United States District Court, N.D. California.

Signed September 15, 2015

Michael Francis Ram, Susan S. Brown, Karl Olson, Ram, Olson, Cereghino & Kopczynski LLP, Jeffrey B. Cereghino, Ram, Olson, Cereghino & Kopczynski, San Francisco, CA, William Craig Bashein, John Phillip Hurst, Bashein and Bashein, Cleveland, OH, for Plaintiffs.

Todd Harrison Stitt, Michelman and Robinson, LLP, Irvine, CA, Marc Russell Jacobs, Michelman Robinson LLP, Los Angeles, CA, for Defendants.

ORDER ON MOTION TO DISMISS, MOTION TO STRIKE, AND MOTION TO FILE SURREPLY

Donna M. Ryu

, United States Magistrate Judge

Plaintiffs¹ are qualified "Good Drivers"² who purchased car insurance from the Defendant insurance companies. Plaintiffs now bring a putative class action alleging that Defendants failed to offer Plaintiffs and the putative class members their lowest Good Driver rates, as required by California law. Before the court are Defendants' motion to dismiss ("MTD") pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)

, and motion to strike ("MTS") pursuant to Federal Rule of Civil Procedure 12(f). [Docket Nos. 40, 39, respectively.] Plaintiffs have also filed a motion for leave to file a surreply to the MTD. [Docket No. 53.] The court held a hearing on the motions on September 10, 2015. For the reasons stated below and at the hearing, the motion to dismiss is granted in part and denied in part, and the motion to strike is denied without prejudice.

I. BACKGROUND³

A. Good Driver Discount Rate

Plaintiffs all held insurance policies issued by one or more of the Defendants. Plaintiffs allege that they and all members of the putative class are "Good Drivers" as defined by California statute. First Am. Compl. ["FAC," Docket No. 28] at ¶ 4. California requires insurers providing private passenger automobile insurance ("PPA" policies) to offer a Good Driver discount to qualified drivers. Id. at ¶ 24. See also Cal. Ins.Code § 1861.025

(defining persons qualified to purchase a "Good Driver Discount policy"); § 1861.02(b)(1) ("Every person who meets the criteria of Section 1861.025 shall be qualified to purchase a Good Driver Discount policy from the insurer of his or her choice."); § 1861.02(b)(2) ("The rate charged for a Good Driver Discount policy shall comply with subdivision (a) and shall be at least 20% below the rate the insured would otherwise have been charged for the same coverage.").

B. Common Control Group

According to Plaintiffs, if one or more insurers are commonly owned or are operated under common management, California law requires any insurer within that group to offer a qualified Good Driver the policy with the lowest rates for that coverage offered by any of the insurers within the group. FAC at ¶ 24. See also Cal. Ins.Code § 1861.16(b)

("An agent or representative representing one or more insurers having common ownership or operating in California under common management or control shall offer, and the insurer shall sell, a good driver discount policy to a good driver from an insurer within that common ownership, management, or control group, which offers the lowest rates for that coverage.").

Plaintiffs allege that Defendants are part of a common control group as defined by California Insurance Code § 1861.16(b)

. Id. at ¶¶ 1, 15. Specifically, from at least January 1, 2008, "Defendants' applicable policy form filings, rate filings, rule filings and/or marketing representations with respect to the offering of the policies at issue and the Good Driver discounts were all drafted, developed, filed and/or approved for use by each Defendant insurer in the same or similar manner and by the same managers and personnel." Id. at ¶ 16. Defendants hold themselves out as a single entity when marketing their insurance products, including offering a Good Driver Discount policy for California automobile policyholders. Id. at ¶ 17. There is actual or apparent agency among the Defendants with respect to the conduct, marketing of policies, marketing of Good Driver discounts and the resulting legal and contractual responsibilities of each of the Defendant companies on behalf of the other named Defendant companies. Id.

The California Insurance Code provides for exceptions to the general rule that requires any insurer within a common control group to offer the lowest Good Driver rate of the group. Id. at ¶ 25 (citing Cal. Ins.Code § 1861.16(c)(1)

). Plaintiffs allege that Defendants do not meet the criteria for any exemption from the rule that insurers within a common control group must offer the lowest Good Driver rate of any insurer within that group. Id. at ¶ 26.

C. Allegedly Wrongful Behavior

Plaintiffs allege that "[a]cting together in concert and holding themselves out to be a single entity, [Defendants] have unlawfully overcharged Plaintiffs and other qualified Good Drivers for automobile insurance" and "failed to provide the lowest Good Driver rates⁴ that were legally required under applicable law, marketed and promised to Plaintiffs and the Class and/or contained in Defendants' Control Group regulatory filings." Id. at ¶¶ 1, 33. See alsoid. at ¶ 4 ("Defendants have systematically and uniformly failed to provide [their lowest] Good Driver premium rates to Plaintiffs and the Class, instead overcharging Plaintiffs and the Class and thereby engaging in and continuing to engage in unlawful, unjust, fraudulent and/or unfair business practices."); ¶ 27 ("[A]s evidenced by the issuance of policies, Plaintiffs paid their insurance premiums for automobile insurance as billed by Defendants, which improperly included overcharges and did not include the lowest available Good Driver rate among companies in their Control Group that they were entitled to receive.").

Furthermore, Plaintiffs allege that Defendants did not inform policyholders who had been overcharged of their right to be reimbursed for their premium overpayments, and did not offer to or make the required reimbursements when overcharges were discovered. Id. at ¶ 29. Instead, "as a Control Group, Defendants maintain and/or maintained substantially uniform and systematic policies, procedures and practices designed to conceal this wrongful conduct from Plaintiffs and the Class." Id. Furthermore, "[b]ecause of Defendants' active concealment and ongoing fraudulent actions, the Plaintiffs and the Class were not reasonably able to discover Defendants' wrongful conduct and/or the premium overcharges ..." Id. at ¶ 34; ¶ 70

D. Claims

Plaintiffs bring eight causes of action: (1) breach of contract; (2) bad faith and breach of the covenant of good faith and fair dealing; (3) quantum meruit; (4) declaratory relief; (5) fraud and misrepresentation; and (6)-(8) violations of California's Unfair Competition Law ("UCL"), codified at California Business and Professions Code § 17200 et seq .

, for unlawful, unfair, and fraudulent business practices.

II. LEGAL STANDARDS

A motion to dismiss under Rule 12(b)(6)

tests the legal sufficiency of the claims alleged in the complaint. SeeParks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995). A court may dismiss a claim "only where there is no cognizable legal theory" or there is an absence of "sufficient factual matter to state a facially plausible claim to relief." Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir.2010)

(citing Ashcroft v. Iqbal, 556 U.S. 662, 677–78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001) ) (quotation marks omitted). A claim has facial plausibility when a plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted). In other words, the facts alleged must demonstrate "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ); seeLee v. City of L.A., 250 F.3d 668, 679 (9th Cir.2001), overruled on other grounds byGalbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir.2002) ; Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009) ("[F]or 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.").

III. MOTION TO DISMISS

Defendants raise a host of arguments against Plaintiffs' claims. First , Defendants contend that Plaintiffs have failed to allege that they have been injured by Defendants' conduct, so that they do not have standing under Article III of the Constitution to bring this lawsuit. Second , Defendants contend that Plaintiffs' claims are "regulatory in nature," such that they should be handled by the California Department of Insurance ("DOI") rather than litigated in federal court. Third , Defendants argue that each of Plaintiffs' claims is insufficiently pleaded. Fourth , certain Defendants argue that they fall within the exemptions to Section 1861.16(b)

. The court considers each argument in turn.

A. Article III Standing

Defendants argue that Plaintiffs lack standing to bring this lawsuit because they have not plausibly alleged an ‘injury in fact’ to themselves as required to establish Article III standing.

The question of standing is "an essential and unchanging part of the case-or-controversy requirement of Article III [of the U.S. Constitution]." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)

. "In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues." Allen v. Wright, 468 U.S. 737,...