Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_07-cv-00844/USCOURTS-cand-5_07-cv-00844-2/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

For the Northern District of California

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CORRECTED ORDER DENYING DEFENDANTS' MOTION TO DISMISS—No. C-07-00844 RMW

MAG

United States District Court

For the Northern District of California

E-FILED on 5/29/07

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

RODNEY JESSEN,

Plaintiff,

v.

FULLER-LOGAN INSURANCE AGENCY,

ALLSTATE INSURANCE COMPANY, et al.

Defendants.

No. C-07-00844 RMW

CORRECTED ORDER DENYING

DEFENDANTS' MOTION TO DISMISS

[Re Docket No. 9]

The following corrected order corrects the dates by which the parties are to file

supplemental briefing ordered by the court.

Plaintiff Rodney Jessen's complaint, originally filed in the Superior Court of the State of

California, County of Santa Clara and removed to this court by defendants, sets forth three causes of

action: negligence against Fuller-Logan Insurance Agency ("Fuller-Logan"), and breach of contract

and breach of the implied covenant of good faith and fair dealing against Allstate Insurance

Company ("Allstate"). Fuller-Logan moves for dismissal from the action for failure to state a claim,

or in the alternative, for summary judgment.

Case 5:07-cv-00844-RMW Document 25 Filed 05/29/07 Page 1 of 6
United States District Court

For the Northern District of California

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CORRECTED ORDER DENYING DEFENDANTS' MOTION TO DISMISS—No. C-07-00844 RMW

MAG 2

I. BACKGROUND

Plaintiff Rodney Jessen alleges that Larry and Linda Jessen bought an automobile liability

insurance policy issued by Allstate from Fuller-Logan at least as early as July 24, 2001. Compl. ¶ 5. 

The Allstate policy, number 0 14 751487 01/24, included uninsured/underinsured motorist coverage

with policy limits of $15,000 per person and $30,000 per accident. Plaintiff, a relative of Larry and

Linda Jessen and a resident of their household, was an insured under the policy.

On April 7, 2004, plaintiff was involved in an automobile accident with an underinsured

driver, suffering injuries and damages in excess of $200,000. Compl. ¶ 10. Plaintiff alleges that

prior to April 7, 2007, Linda Jessen contacted Fuller-Logan to request an increase the policy limits

to $100,000 per individual and $300,000 per accident in response to an advertisement sent to her by

Allstate. Compl. ¶¶ 8-9.

Following the accident, plaintiff agreed to accept the $25,000 policy limit as a settlement to

his claims and presented an underinsured motorist claim to Allstate. Compl. ¶ 11. Although

allegedly acknowledging Linda Jessen's request for an increase in the limits in the Allstate policy,

Allstate denied the claim because the increase did not go into effect until April 20, 2004,

approximately two weeks after the accident. Compl. ¶ 12.

Plaintiff alleges that any failure to timely process Linda Jessen's request to increase the

policy limits was the result of negligence of the part of Fuller-Logan. Compl. ¶ 13. Had the

increase been acted upon in a timely manner, the $100,000 policy limit rather than the $15,000

policy limit would have been in effect, resulting in a $75,000 additional recovery under the Allstate

policy. Compl. ¶ 14.

II. ANALYSIS

Fuller-Logan moves for dismissal from the action for failure to state a claim, or in the alternative,

for summary judgment on two grounds: (1) that Fuller-Logan cannot be liable to plaintiff because it is

an exclusive agent of Allstate and (2) that plaintiff incorrectly sued Fuller-Logan when it should have

sued its predecessor, Fuller-Allen. The court shall treat Fuller-Logan's motion on the question of agent

liability as a motion to dismiss and shall treat as a motion for summary judgment the question of

whether plaintiff correctly sued Fuller-Logan rather than another entity, Fuller-Allen.

Case 5:07-cv-00844-RMW Document 25 Filed 05/29/07 Page 2 of 6
United States District Court

For the Northern District of California

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CORRECTED ORDER DENYING DEFENDANTS' MOTION TO DISMISS—No. C-07-00844 RMW

MAG 3

A. Agent Liability

1. Motion to Dismiss

Defendants rely upon Mercado v. Allstate Ins. Co., 340 F.3d 824, 826 (9th Cir. 2003) in support

of their position that Fuller-Logan (or its predecessor, Fuller-Allen) cannot be liable under the

circumstances presented. It is generally true in California that an agent, when acting in the name of a

disclosed principal, is not personally liable for negligence committed within the scope of his or her

employment. See Lippert v. Bailey, 241 Cal. App. 2d 376, 382 (1966). However, California courts have

recognized two exceptions to the general Lippert rule: (1) the dual agency exception, and (2) the

"special duty" exception. See Macey v. Allstate Property and Casualty Insurance Co., 220 F. Supp.

2d 1116, 1120 (N.D. Cal. 2002) (Brazil, J.). 

In Mercado, the Ninth Circuit determined that the defendant, an employee of Allstate, could not

be liable because there was no dual agency relationship. An employee acts as a "dual agent" by

assuming special duties for the benefit of the insured beyond those required by her principal. See Jones

v. Grewe, 189 Cal. App. 3d 950, 954-55 (1987). The principals of Fuller-Logan, Bennett Fuller and Erin

Logan, have submitted declarations that Fuller-Logan was an exclusive agent of Allstate, and that they

were "prohibited from directly or indirectly soliciting, selling or servicing . . . insurance of any kind for

any other insurance company, agent or broker, without the prior written approval of Allstate." Decl. of

Bennett Fuller ¶ 4, Decl. Erin Logan ¶ 5.

Here, however, plaintiffs have alleged that Fuller-Logan has assumed special duties. The

complaint alleges that Fuller-Logan assumed the duty of procuring an increase in policy limits at Linda

Jessen's request. Plaintiffs were allegedly damaged by Fuller-Logan's failure to timely procure such

increase. Under California law, "[a]n insurance agent has an obligation to use reasonable care,

diligence, and judgment in procuring the insurance requested by an insured." Butcher v. Truck Ins.

Exchange, 77 Cal. App. 4th 1442, 1461 (2000) (internal quotation omitted). Thus, "an agent's failure

to deliver the agreed-upon coverage may constitute actionable negligence and the proximate cause of

an injury." Id. at 1464 (holding insurer and agent may be held liable for negligent misrepresentation,

where insurer's agent misled insureds into believing policy provided coverage for malicious

prosecution); see also Greenfield v. Insurance Inc., 19 Cal. App. 3d 803, 810 (1971) ("There was a duty

Case 5:07-cv-00844-RMW Document 25 Filed 05/29/07 Page 3 of 6
United States District Court

For the Northern District of California

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CORRECTED ORDER DENYING DEFENDANTS' MOTION TO DISMISS—No. C-07-00844 RMW

MAG 4

on the part of Insurance to exercise reasonable care in seeking coverage as requested by Greenfield. .

. ."). Therefore, plaintiff has adequately alleged that Fuller-Logan had a duty to timely procure the

requested increase in coverage.

Although Fuller-Logan asks for summary judgment in the alternative, the court does not believe

it is appropriate to convert the motion to dismiss to a summary judgment motion on the record before

it. The court shall continue the motion for summary judgment to allow additional discovery on whether

a special duty arose between Fuller-Logan and plaintiff.

2. Motion for Summary Judgment

Fuller-Logan also asserts that it did not exist as a corporate entity at the time of the alleged

failure to timely secure the policy limit increase in July 2004, having only been incorporated in 2005.

It has submitted declarations stating that a separate entity, Fuller-Allen, sold the policy to the Jessens

and would have been responsible for the Jessen account in 2004. Plaintiff submitted no evidence to

rebut this evidence or to demonstrate that Fuller-Logan is otherwise liable to plaintiff, nor did plaintiff

seek a continuance under Federal Rule of Civil Procedure 56(f). 

Although technically plaintiff should have sought a Rule 56(f) continuance, the court finds it

would be too harsh to grant summary judgment given the early stage of this case. Therefore, the court

shall likewise continue Fuller-Logan's motion for summary judgment that it was improperly sued as the

wrong entity to permit plaintiff to take additional discovery on the issue. 

B. Fraudulent Joinder

Although plaintiff has not sought remand to state court, Fuller-Logan contends that it has been

fraudulently joined to defeat diversity jurisdiction. "'Fraudulent joinder is a term of art. If the plaintiff

fails to state a cause of action against a resident defendant, and the failure is obvious according to the

settled rules of the state, the joinder of the resident defendant is fraudulent.'" Mercado, 340 F.3d at 826

(citing McCabe v. General Foods Corp., 811 F.2d 1336, 1339 (9th Cir. 1987)). Because the court has

continued Fuller-Logan's motion for summary judgment, it does not make a determination as to

fraudulent joinder at this time.

Case 5:07-cv-00844-RMW Document 25 Filed 05/29/07 Page 4 of 6
United States District Court

For the Northern District of California

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CORRECTED ORDER DENYING DEFENDANTS' MOTION TO DISMISS—No. C-07-00844 RMW

MAG 5

III. ORDER

For the foregoing reasons, the court denies defendants' motion to dismiss Fuller-Logan and

continues its motion for summary judgment that it is not liable to plaintiff as an exclusive agent of

Allstate and on the question of whether it is the appropriate agency. The parties shall proceed as

follows:

1. Plaintiff shall file a supplemental opposition to defendant's summary judgment motion on or

before July 6, 2007. 

2. Defendant shall file a supplemental reply on or before July 13, 2007. The motions shall be

deemed submitted on the papers without a hearing unless otherwise requested by the court. 

DATED: 5/21/07

RONALD M. WHYTE

United States District Judge

Case 5:07-cv-00844-RMW Document 25 Filed 05/29/07 Page 5 of 6
United States District Court

For the Northern District of California

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CORRECTED ORDER DENYING DEFENDANTS' MOTION TO DISMISS—No. C-07-00844 RMW

MAG 6

Notice of this document has been electronically sent to:

Counsel for Plaintiff:

James Michael Barrett jb@jamesbarrettlaw.com 

Counsel for Defendants:

Leslie Holmes lholmes@hoganlaw.com 

Mark Vincent Boennighausen mvb@hoganlaw.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 5/29/07 /s/ MAG

Chambers of Judge Whyte

Case 5:07-cv-00844-RMW Document 25 Filed 05/29/07 Page 6 of 6