Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_15-cv-01039/USCOURTS-cand-4_15-cv-01039-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

UNITED SPECIALTY INSURANCE 

COMPANY,

Plaintiff,

v.

MERIDIAN MANAGEMENT GROUP, 

INC., et al.,

Defendants.

Case No. 15-cv-01039-HSG 

ORDER DENYING MOTION TO 

DISMISS

Re: Dkt. No. 15

This is an insurance coverage action arising out of an underlying lawsuit (the “Geyer

Action”) brought by tenants at 305 Hyde Street in San Francisco against Defendants Meridian 

Management Group, Inc. (“Meridian”) and HAL 305 Hyde SF, LLC (“HAL 305”). Plaintiff 

United Specialty Insurance Co. (“USIC”) seeks a declaration from the Court that: (1) it has no 

obligation to defend or indemnify Meridian and HAL 305 in connection with the Geyer Action; 

(2) another insurer, Defendant National Union Fire Insurance Company of Pittsburgh, PA 

(“National Union”), is obligated to defend; and (3) either Meridian or National Union must 

reimburse USIC for all or part of the defense costs it has paid and continues to pay for the defense 

of Geyer Action. See Dkt. No. 1 (“Compl.”).

National Union moves to dismiss the Complaint under Rule 12(b)(6), arguing that USIC 

has not sufficiently pled the terms of its insurance policies and that California law precludes 

USIC’s claim for equitable subrogation against National Union under the circumstances alleged. 

See Dkt. No. 15 (“Mot.”). Alternatively, National Union moves for a more definitive statement 

under Rule 12(e). Id. USIC has opposed both motions. Dkt. No. 18 (“Opp.”). The Court has 

carefully considered the arguments offered by the parties and, for the reasons set forth below, 

DENIES National Union’s motion to dismiss and motion for a more definitive statement.

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I. BACKGROUND

On December 27, 2012, Gabriela and Travis Geyer, tenants at 305 Hyde Street in San 

Francisco, filed a lawsuit against Meridian in San Francisco County Superior Court. The Geyer

Action concerned personal injury and property damage from bedbug infestations at the apartment 

building located at 305 Hyde Street. The Geyers amended their complaint to include a request for 

class action certification against Meridian for unlawful business practices and added HAL 305 (the 

owner of their building) as a defendant. The Geyers then settled their individual claims with 

defendants; Jessica Narog, another tenant at 305 Hyde Street, was substituted as the plaintiff. 

Narog filed an amended complaint seeking certification of the same class, as well as damages for 

the bedbug infestations in the apartment she rented at 305 Hyde Street.

USIC insured Meridian from October 25, 2009 to October 25, 2011. USIC agreed to 

defend Meridian in the Geyer Action subject to a reservation of rights, which included a 

reservation of the right to deny coverage based on its policies’ schedule of apartment buildings, 

which limited coverage to claims arising out of buildings identified on that schedule. USIC 

alleges that 305 Hyde Street was not listed as one of the covered buildings. National Union 

insured Meridian and HAL 305 as insureds under various policies effective from November 2006 

through March 2013. Meridian tendered its defense to National Union, but National Union 

offered to pay only 1/24th of the defense expenses being incurred by USIC.

On March 5, 2013, USIC brought this action for declaratory relief against National Union 

(which USIC alleges also insures Meridian and HAL 305) and the underlying defendants. USIC’s 

Complaint asks the Court to find that it has no obligation to defend Meridian or HAL 305 in the 

Geyer Action and that National Union or Meridian has an obligation to reimburse USIC for the 

defense costs it has paid and continues to pay. 

II. LEGAL STANDARD

A court may dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) when it 

does not contain sufficient facts to state a plausible claim on its face. See Bell Atlantic Corp. v. 

Twombly, 550 U.S. 544, 570 (2007). “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 

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for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility 

standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that 

a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 557). “While a complaint 

attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a 

plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than 

labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. 

Factual allegations must be enough to raise a right to relief above the speculative level.” 

Twombly, 550 U.S. at 555 (internal citations and parentheticals omitted). 

In considering a motion to dismiss, a court must accept the plaintiff’s factual allegations as 

true and construe them in the light most favorable to the plaintiff. See Moore v. Kayport Package 

Exp., Inc., 885 F.2d 531, 550 (9th Cir. 1989). However, “the tenet that a court must accept a 

complaint’s allegations as true is inapplicable to threadbare recitals of a cause of action’s 

elements, supported by mere conclusory statements.” Iqbal, 556 U.S. at 678. If the Court 

dismisses the complaint, it will generally grant leave to amend “unless it determines that the 

pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 

122, 1127 (9th Cir. 2000) (citation omitted). When a party repeatedly fails to cure deficiencies, 

however, the court may order dismissal without leave to amend. See Ferdik v. Bonzelet, 963 F.2d 

1258, 1261 (9th Cir. 1992).

III. DISCUSSION

A. Sufficiency of USIC’s Allegations

National Union moves to dismiss USIC’s First, Third, and Fifth Claims for Relief for 

failure to meet the pleading requirements of Rule 8 of the Federal Rules of Civil Procedure. Both 

parties appear to agree that the only possible basis for USIC’s position that it never had a duty to 

defend Meridian at any point during the Geyer Action is USIC’s contention that its policies are 

limited to specified buildings contained in a schedule of apartment buildings. Mot. at 7; Compl. 

¶10. National Union argues that USIC must therefore attach or quote this essential contractual 

term in its Complaint in order to move past the pleading stage. Mot. at 7. USIC responds that the 

precise language of the policies giving rise to alleged contractual obligations need not be 

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specifically alleged. Opp. at 9.

The Court agrees with USIC. Although relevant terms of a contract must be adequately 

described in order to meet Rule 8’s pleading requirements, there is no requirement that the 

contract be attached to the complaint or that the complaint quote each relevant provision verbatim. 

See, e.g., Garibaldi v. Bank of Am. Corp., No. 13-cv-02223-SI, 2014 WL 172284, at *3 (N.D. Cal. 

Jan. 15, 2014) (“While a plaintiff need not attach a copy of the allegedly breached contract to the 

complaint, mere legal conclusions that a contract existed and was breached will be insufficient to 

survive a motion to dismiss.”); Park v. Morgan Stanley & Co., No. 11-cv-9466-ODW, 2012 WL 

589653, at *3 (C.D. Cal. Feb. 22, 2012) (“Although Plaintiff need not set out the terms of the 

contract in detail, Plaintiff must identify enough contractual terms with sufficient factual 

specificity to render his claim more than ‘a formalistic recitation of the elements’ of a breach of 

contract claim.”) (citation omitted). Claims involving contractual language are generally 

dismissed for want of detail only where the complaint fails to identify and describe the provisions 

on which the right to recovery is based. See Manosca v. Wachovia Mortgage, No. 11-cv-2183-SI, 

2011 WL 2970824, at *7 (N.D. Cal. July 20, 2011) (dismissing breach of contract claim because 

“the complaint does not specify what terms of the contract were breached by defendants”).

Although USIC has not attached its policies or quoted their “scheduled apartment 

buildings” provisions verbatim, it has both: (1) identified those provisions as the basis for its claim 

that it is not obligated to defend Meridian; and (2) described the content of the provisions with 

sufficient detail to explain why they have that effect. In paragraph 10 of the Complaint, USIC 

alleges:

The coverage afforded under the USIC Policies is limited to 

scheduled apartment buildings and units managed by Meridian, for 

which Meridian requested coverage, and paid the required premiums 

based upon the number of units, square footage of lease space and 

acreage to be covered. The apartment building and units located at 

305 Hyde Street, San Francisco, California (“Hyde Street Building”) 

is not one of the scheduled apartment buildings for which coverage 

was sought nor any premiums paid under the USIC Policies. There 

is no coverage for the Hyde Street Building under the USIC Policies 

as Meridian did not disclose its activities there to USIC, did not seek 

or request coverage for that location from USIC and/or did not pay 

the required premiums to extend the coverage afforded under the 

USIC Policies to that location.

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Compl. ¶ 10. This detailed description of the relevant provision and its import is more than 

sufficient to provide the facial plausibility required by the Supreme Court’s decisions in Iqbal and 

Twombly. Although the Court does not know why USIC decided against attaching the relevant 

insurance policies to the Complaint, its choice is not fatal given the description quoted above.

National Union’s Motion to Dismiss the First, Third, and Fifth Claims for Relief is 

DENIED.

B. Equitable Subrogation

National Union moves to dismiss USIC’s claim for equitable subrogation on the ground 

that California does not permit such a claim between two primary insurers. Mot. at 9. Instead, 

National Union asserts that USIC’s recovery from National Union must be limited to equitable 

contribution or nothing at all. Id. at 10. The Court disagrees.

“The doctrine of equitable subrogation includes every instance in which one person, not 

acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which

in equity and good conscience should have been discharged by the latter.” Cont’l Cas. Co. v. St. 

Paul Surplus Lines Ins. Co., No. 07-cv-01744-TLN-EF, 2014 WL 4661087, at *17 (E.D. Cal. 

Sept. 17, 2014) (citing Fireman’s Fund Ins. Co. v. Maryland Cas. Co., 65 Cal. App. 4th 1279, 

1292 (1998)). “[W]here different insurance carriers cover differing risks and liabilities, they may 

proceed against each other for reimbursement by subrogation rather than by contribution.” 

Reliance Nat. Indemnity Co. v. General Star Indemn. Co., 72 Cal. App. 4th 1063, 1078 (1999).

No California authority appears to preclude a claim for equitable contribution where two 

primary insurers cover different risks. That is exactly what USIC asserts in this case. USIC 

alleges that: (1) its policies exclude coverage for the Geyer Action; (2) National Union’s policies 

provide coverage for the Geyer Action; (3) National Union wrongfully declined to assume the 

defense of the Geyer Action from USIC; and, accordingly, (4) USIC has paid defense costs that 

should in equity and good conscience have been paid by National Union. Compl. ¶¶ 26-30. These 

allegations are sufficient to plead a cause of action for equitable subrogation. The cases cited by 

National Union for the proposition that a primary insurer cannot seek equitable subrogation 

against another primary insurer all address instances where two primary insurers cover the same 

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loss. See, e.g., Maryland Cas. Co., 65 Cal. App. 4th at 1295-96. None stand for the overbroad 

proposition for which they are cited by National Union.

Contrary to National Union’s assertion, equitable contribution would not be an appropriate 

remedy on the facts alleged by USIC. The doctrine of equitable contribution applies where an 

“insurer seeks to recover part of these costs from a coinsurer that shares the obligation to defend or 

indemnify the same loss or claim.” Cont’l Cas. Co., 2014 WL 4661087 at *16 (citing Herrick 

Corp. v. Canadian Ins. Co. 29 Cal. App. 4th 753, 762 (1994)). If, as USIC alleges, only National 

Union is obligated to defend the Geyer Action, then USIC and National Union would not qualify 

as “coinsurer[s] that share[ ] the obligation to defend or indemnify the same loss or claim.” Id. 

Equitable contribution would only be an appropriate remedy if both the policies issued by USIC 

and National Union are determined to cover some or all of the underlying Geyer Action.

National Union’s Motion to Dismiss the Second Claim for Relief is DENIED.

C. More Definitive Statement

 Finally, National Union moves for a more definitive statement pursuant to Federal Rule 

of Civil Procedure 12(e). Under that rule, “[a] party may move for a more definite statement of a 

pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the 

party cannot reasonably prepare a response.” Rule 12(e) motions are granted only on “rare 

occasions.” See Bautista v. Los Angeles Cnty., 216 F.3d 837, 843 n.1 (9th Cir. 2000); see also 

E.E.O.C. v. Alia Corp., 842 F. Supp. 2d 1243, 1250 (E.D. Cal. 2012) (holding motions pursuant to 

Rule 12(e) are generally “viewed with disfavor and are rarely granted[.]”).

The Court finds that USIC’s complaint is sufficiently clear to permit National Union to 

prepare a response. This is not one of the “rare occasions” where, while the complaint barely 

meets the requirements of Rule 12(b)(6), the defendant cannot make heads or tails of the 

allegations. Instead, National Union merely observes that USIC’s requested relief is not 

completely consistent. For example, USIC’s First Claim for Relief seeks a declaration that it is 

not obligated to provide a defense for the claims brought by Narog, but does not seek a declaration 

that it has no duty to defend the claims brought by the Geyers. Compl. ¶¶ 31-41; see also Opp. at 

4 (“USIC’s First Claim . . . seeks a judicial determination that it owes no duty to defend . . . in the 

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Narog phase of the Underlying Action”) (emphasis in original). This seems somewhat 

inconsistent with its Second Claim for Relief, which requests a declaration that National Union is 

obligated to reimburse USIC for all defense expenses connected to the entire Geyer Action, both 

in the Geyer and Narog phases. Id. ¶¶ 42-46. Of course, that outcome would only be available if 

USIC had no duty to defend the claims brought by both the Geyers and Narog.

While not a perfect model of clarity, USIC’s Complaint is clear enough to convey its 

requested relief and the bases for that relief. USIC will have to live with the claims as it has pled 

them. National Union’s Motion for a more definitive statement is DENIED.

IV. CONCLUSION

For the foregoing reasons, National Union’s Motion to Dismiss and Motion for a More 

Definitive Statement are DENIED.

IT IS SO ORDERED.

Dated: August 7, 2015

______________________________________

HAYWOOD S. GILLIAM, JR.

United States District Judge

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