Lockhart v. Travelers Commercial Ins. Co.

• Decision Date: 22 February 2022
• Docket Number: 1:21-cv-00268-DAD-SKO
• Court: U.S. District Court — Eastern District of California
• Parties: DONALD LOCKHART and PATRICIA LOCKHART, Plaintiffs, v. TRAVELERS COMMERCIAL INSURANCE COMPANY, Defendant.

DONALD LOCKHART and PATRICIA LOCKHART, Plaintiffs,
v.
TRAVELERS COMMERCIAL INSURANCE COMPANY, Defendant.

No. 1:21-cv-00268-DAD-SKO

United States District Court, E.D. California

February 22, 2022

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND GRANTING NONPARTY'S MOTION TO INTERVENE

(Doc. Nos. 33, 47)

This matter is before the court on the motion to dismiss filed on behalf of defendant Travelers Commercial Insurance Company (“Travelers”) and the motion to intervene filed by nonparty American Security Insurance Company (“American Security”). (Doc. Nos. 33, 47.) Pursuant to General Order No. 617 addressing the public health emergency posed by the COVID-19 pandemic, both motions were taken under submission on the papers. (Doc. Nos. 35, 49.) For the reasons explained below, the court will grant American Security's motion to intervene and defendant Travelers' motion to dismiss.^[1]

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BACKGROUND

This case concerns an insurance policy on a structure that burned down. Plaintiffs claim the policy entitles them to relief for their loss. Defendant disagrees. Nonparty intervenor--the subrogee of the mortgagee with regard to the subject property--seeks to intervene.

On November 17, 2020, plaintiffs filed this action in the Fresno County Superior Court. (Doc. No. 1 at 5.) On February 25, 2021, defendant removed the action to this federal court pursuant to 28 U.S.C. §§ 1332, 1441 on the grounds that diversity jurisdiction exists. (Id. at 2.)

Through this insurance coverage lawsuit, plaintiffs Donald and Patricia Lockhart^[2] seek to recover benefits from defendant Travelers in connection with a fire loss that occurred on November 18, 2019. (Doc. No. 1.) The destroyed property was located at 745 S. Chestnut Avenue, Fresno, CA 93721. (Id. at ¶ 8.) Plaintiffs insured the subject property through a policy issued by defendant Travelers, and they made a claim for benefits under the policy in connection with the damage caused by the fire. (Id. at ¶¶ 7-8.) Plaintiffs claim that defendant unfairly declined to cover their loss based on defendant's conclusion that plaintiffs lacked an insurable interest in the property and that plaintiffs were no longer using the property as their “residence premises.” (Id. at ¶ 8.) Plaintiffs allege that they were eligible for the policy benefit and that they have met all terms and conditions to be performed by them in order to receive that benefit. (Id. at ¶ 9.) Based on the foregoing allegations, plaintiffs bring four causes of action against defendant. Specifically, plaintiffs assert the following claims: (1) breach of contract; (2) tortious bad faith breach of the covenant of good faith and fair dealing; (3) insurance bad faith in violation of California Insurance Code § 790.03; and (4) declaratory relief. (Id. at 6-9.)

On June 18, 2021, defendant filed a motion to dismiss two of plaintiffs' claims. (Doc. No. 33.) Specifically, defendant seeks to dismiss plaintiffs' claim brought pursuant to § 790.03 and their declaratory relief claim. (Id.) On July 16, 2021, plaintiffs filed an amended response to

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defendant's motion to dismiss. (Doc. No. 43.) On August 10, 2021, defendant filed its reply. (Doc. No. 44.) Additionally, on October 29, 2021, American Security filed a motion to intervene in this action. (Doc. No. 47.) On November 23, 2021, defendant filed a statement of non-opposition to American Security's motion. (Doc. No. 50.)

LEGAL STANDARD

A. Rule 12(b)(6) Motion to Dismiss

The purpose of a motion to dismiss brought pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Though Rule 8(a) does not require detailed factual allegations, a plaintiff is required to allege “enough facts to state a claim for relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). “A claim has facial plausibility when the 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. In determining whether a complaint states a claim on which relief may be granted, the court accepts as true the allegations in the complaint and construes the allegations in the light most favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1989). It is inappropriate to assume that the plaintiff “can prove facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

B. Motion to Intervene

An individual or corporation may “become a ‘party' to a lawsuit by intervening in the action.” U.S. ex rel. Eisenstein v. City of New York, N.Y., 556 U.S. 928, 933 (2009). Intervention in federal court, either as of right or permissive, is governed by Federal Rule of Civil Procedure 24. Nat'l Ass'n for Advancement of Colored People v. N.Y., 413 U.S. 345, 365 (1973). Rule 24

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provides in relevant part as follows:

(a) Intervention of Right. On Timely motion, the court must permit anyone to intervene who

(1) is given an unconditional right to intervene by a federal statute; or

(2) claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

(b) Permissive Intervention.

(1) In General. On timely motion, the court may permit anyone to intervene who:

(A) is given a conditional right to intervene by a federal statute; or

(B) has a claim or defense that shares with the main action a common question of law or fact.

Here, although the prospective intervenor alternatively seeks permissive intervention under Rule 24(b), the resolution of the motion to intervene before the court is dependent on whether the prospective intervenor has satisfied the requirements to intervene as of right under Rule 24(a)(2). In this regard, it is well-established that intervention as of right under Rule 24(a)(2) is construed “liberally in favor of potential intervenors.” Cal. ex. rel. Lockyer v. United States, 450 F.3d 436, 440 (9th Cir. 2006) (citation omitted); see also United States v. Alisal Water Corp., 370 F.3d 915, 919 (9th Cir. 2004).

Rule 24(a)(2) requires a prospective intervenor to establish the following elements:

(1) the intervention application is timely; (2) the applicant has a significant protectable interest relating to the property or transaction that is the subject of the action; (3) the disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect its interest; and (4) the existing parties may not adequately represent the applicant's interest.

Citizens for Balanced Use v. Montana Wilderness Ass'n, 647 F.3d 893, 897 (9th Cir. 2011) (internal quotation marks and citation omitted); see also Smith v. Los Angeles Unified Sch. Dist., 830 F.3d 843, 853 (9th Cir. 2016). In evaluating these elements, the court is “guided primarily by

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practical considerations, not technical distinctions, ” and no “specific legal or equitable interest need be established.” Id. Moreover, the court must “take all well-pleaded, nonconclusory allegations in the motion to intervene, the proposed complaint or answer in intervention, and declarations supporting the motion as true absent sham, frivolity or other objections.” Sw. Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 820 (9th Cir. 2001).

ANALYSIS

A. Motion to Dismiss

As noted, defendant Travelers moves to dismiss two of plaintiffs' claims. (See Doc. No. 33 at 2.) Specifically, defendant seeks to dismiss plaintiffs' claim for bad faith in violation of California Insurance Code § 790.03 and their claim for declaratory relief. The court will address each claim in turn below.

1. Bad Faith in Violation of California Insurance Code §...