Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-01047/USCOURTS-azd-2_10-cv-01047-0/pdf.json

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

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Both parties have submitted extensive evidence outside of the pleadings. When a

court considers matters outside the complaint on a motion to dismiss, the court typically must

treat the motion as one for summary judgment. Fed. R. Civ. P. 12(b); San Pedro Hotel Co.,

Inc. v. City of Los Angeles, 159 F.3d 470, 477 (9th Cir. 1998). When deciding a motion to

dismiss, the court is bound by the facts pleaded in the complaint with a limited exception for

exhibits that are attached to the complaint, exhibits incorporated by reference in the

complaint, or matters of judicial notice. United States v. Ritchie, 342 F.3d 903, 907-08 (9th

Cir. 2003); Fed. R. Civ. P. 10(c). Here, because neither party requested that Defendants’

Motion to Dismiss be converted into a summary judgment motion, and because the Court

does not rely on anything except the Complaint and the exhibits to the Complaint in deciding

Defendants’ Motion, the Court will treat it as a motion to dismiss. 

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

U-Haul International, Inc., et al.,

Plaintiffs,

v.

National Union Fire Insurance Co. 

of Pittsburgh, Pa., et al.,

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

No. CV-10-1047-PHX-SMM

ORDER

Before the Court is Defendants American International Group, Inc. (“AIG, Inc.”);

Chartis, Inc.; National Union Fire Insurance Co. of Pittsburgh, Pa. (“National Union”); and

Chartis Claims, Inc.’s (“Chartis Claims”) (“Defendants”) Motion to Dismiss (Doc. 22).1

Defendants ask the Court to dismiss: (1) AIG, Inc. and Chartis, Inc. as Party Defendants and

(2) the Count III Fraud claim (Doc. 22). 

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 1 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 Defendants requested oral argument in connection with their Motion to Dismiss.

(Doc. 22). The parties have had the opportunity to submit briefing. Accordingly, the Court

finds the pending motions suitable for decision without oral argument and Defendants’

request is denied. See L.R. Civ. 7.2(f).

- 2 -

Plaintiffs U-Haul International, Inc.; Amerco Inc.; U-Haul Co. of Georgia; and UHaul Co. of Nebraska (“Plaintiffs”) responded (Doc. 28), Defendants replied (Doc. 34), and

Plaintiffs sur-replied (Doc. 37), and the matter is now fully briefed.2

 

BACKGROUND

Plaintiffs allege that Defendants issued them umbrella insurance policies, including

No. 9834789 (“Policy A”) (Doc. 1, Ex. A), effective April 1, 2007 to April 1, 2008; and No.

5380814 (“Policy B”) (Doc. 1, Ex. B), effective April 1, 2008 to April 1, 2009. (Doc. 1 ¶¶

15-16, Ex. A at 2, Ex. B at 2.) Both Policy A and Policy B list National Union as the

company issuing the policy. (Doc. 1, Ex. A at 2, Ex. B at 2.) In December 2008, U-Haul Co.

of Georgia was named as a defendant in five cases filed in Fulton County Court in Georgia.

(Doc. 1 ¶¶ 29-33.) In September 2009, U-Haul International, Inc., Amerco, Inc., and U-Haul

Co. of Nebraska were named as defendants in a case filed in Maricopa County Superior

Court in Arizona. (Doc. 1 ¶ 35.) The plaintiffs in both the Arizona and Georgia cases (the

“underlying cases”) sought damages arising from fatal collisions allegedly caused in part by

a trailer that the defendants designed and manufactured. (Doc. 1 ¶¶ 36-37.) A dispute arose

between the parties over the policies’ coverage in the event that damages were awarded

against Plaintiffs in the underlying cases. (Doc. 1.)

On May 13, 2010, Plaintiffs sued Defendants alleging claims for breach of good faith

and fair dealing and fraud, and seeking declaratory relief and punitive damages. (Doc. 1 at

1-2.) Plaintiffs’ Complaint refers to Defendants collectively in all four claims as “AIG.”

(Doc. 1 at 1-2.) Defendants filed a Motion to Dismiss on July 26, 2010. (Doc. 22.)

Defendants argue for dismissal of AIG, Inc. and Chartis, Inc. as Party Defendants, pursuant

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 2 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

Prior to Twombly, the standard of review for a Rule 12(b)(6) motion was established

by Conley v. Gibson, 355 U.S. 41 (1957). The Court in Conley held that a complaint may

only be dismissed pursuant to Rule 12(b)(6) if “it appears beyond doubt that the plaintiff can

prove no set of facts in support of his claim which would entitle him to relief.” Id. at 45-46;

Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). After Twombly,

however, it was unclear if the new plausibility standard applied to all civil complaints or only

to antitrust complaints. Recently, the Supreme Court clarified the scope of the Twombly

holding by reiterating that it applied to all civil actions. Ashcroft v. Iqbal, 129 S.Ct. 1937,

1953 (2009) (“Our decision in Twombly expounded the pleading standard for ‘all civil

actions.’”). 

- 3 -

to Rule 12(b)(6) of the Federal Rules of Civil Procedure; and dismissal of the Count Three

Fraud allegation against all Defendants pursuant to Rule 9(b). (Doc. 22 at 1.) 

STANDARDS OF REVIEW

I. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)

A pleading that states 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). If the

plaintiff fails to state a claim, the defendant may move in a written motion, separate from the

responsive pleading, that the court dismiss the claim for failure to state a claim. Fed. R. Civ.

P. 12(b)(6). Even though a complaint subject to dismissal for failure to state a claim is not

required to provide “detailed factual allegations,” in order for the plaintiff to meet her

burden, she must present more than labels and conclusions, or a formulaic recitation of the

elements of the asserted cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007).3

 To survive a motion to dismiss for failure to state a claim, a plaintiff must state

enough facts so that the claim is plausible on its face. Id. at 570. The Supreme Court does

not require a heightened pleading standard, just enough facts to push the claim across the

threshold of conceivable to plausible. Id.

The court will treat all allegations of material fact in the complaint as true and

construe the complaint in the light most favorable to the plaintiff. W. Mining Council v.

Watt, 643 F.2d 618, 624 (9th Cir. 1981). But “conclusory allegations of law and

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 3 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 4 -

unwarranted inferences are insufficient to defeat a motion to dismiss.” Ove v. Gwinn, 264

F.3d 817, 821 (9th Cir. 2001) (citing Associated Gen. Contractors v. Metro. Water Dist. of

S. Cal., 159 F.3d 1178, 1187 (9th Cir. 1998)). If the court finds that the plaintiff does not

allege enough facts to support a cognizable legal theory, the court may dismiss the claim.

SmileCare Dental Group v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 783 (9th Cir. 1996).

“Dismissal without leave to amend is improper unless it is clear, upon de novo review, that

the complaint could not be saved by any amendment.” Polich v. Burlington N., Inc., 942

F.2d 1467, 1472 (9th Cir. 1991) (citing Kelson v. City of Springfield, 767 F.2d 651 (9th Cir.

1985)). When exercising it discretion to deny leave to amend, “a court must be guided by

the underlying purpose of Rule 15 to facilitate decision on the merits, rather than on the

pleadings or technicalities.” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981).

II. Motion to Dismiss Under Federal Rule of Civil Procedure 9(b)

Fraud claims must meet the heightened pleading standard of Rule 9(b), which requires

that a party “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P.

9(b). The circumstances surrounding the alleged fraud must “be ‘specific enough to give

defendants notice of the particular misconduct . . . so that they can defend against the charge

and not just deny that they have done anything wrong.’” Kearns v. Ford Motor Co., 567 F.3d

1120 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir.

2001)). “Averments of fraud must be accompanied by ‘the who, what, where, and how’ of

the misconduct charged.” Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1106 (9th Cir. 2003)

(quoting Cooper v. Pickett, 137 F.3d 616, 727 (9th Cir. 1997)). Plaintiff alleging fraud is

required to “set forth more than the neutral facts necessary to identify the transaction.”

Kearns, 567 F.3d at 1124 (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th

Cir. 1994)). Rule 9(b) exists “to deter the filing of complaints as a pretext for the discovery

of unknown wrongs, to protect [defendants] from the harm that comes from being subject to

fraud charges, and to prohibit plaintiffs from unilaterally imposing upon the court, the parties

and society enormous social and economic costs absent some factual basis.” Bly-Magee, 236

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 4 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 5 -

F.3d at 1018. Dismissal under Rule 9(b) is the functional equivalent of a Rule 12(b)(6)

dismissal for failure to state a claim. Vess, 317 F.3d at 1107. Accordingly, a plaintiff

alleging fraud must state enough facts so that the claim is plausible on its face. Twombly,

550 U.S. at 570. 

DISCUSSION 

I. Motion to Dismiss Defendants AIG, Inc. and Chartis, Inc.

In their Motion to Dismiss, Defendants contend that AIG, Inc. and Chartis, Inc. are

indirect parent corporations of subsidiaries National Union and Chartis Claims, and as such

are improper defendants. (Doc. 22 at 1-5.) Plaintiffs respond that they have sufficiently

pleaded a cause of action against both AIG, Inc. and Chartis, Inc. under theories of “direct

involvement,” “joint venture,” “alter ego,” “instrumentality,” and “parent-subsidiary.” (Doc.

28 at 11-13.) 

Arizona law generally recognizes that a parent corporation is not liable for the actions

of a subsidiary. Deutsche Credit Corp. v. Case Power & Equip. Co., 876 P.2d 1190, 1195

(Ariz. Ct. App. 1994). However, there are exceptions to this general rule. First, a parent

corporation of a subsidiary may be liable to a plaintiff based upon direct involvement in the

controversy at issue. Gatecliff v. Great Republic Life Ins. Co., 821 P.2d 725, 728 (Ariz.

1999). Second, a parent corporation may be liable for its subsidiary if the parties agree to

form a joint venture “to pursue a particular enterprise in the hope of sharing a profit.”

Ellingson v. Sloan, 527 P.2d 1100, 1103 (Ariz. Ct. App. 1974) (quoting Ariz. Pub. Serv. Co.

v. Lamb, 327 P.2d 998, 1000 (Ariz. 1958)). A joint venture requires “five specific elements

which must be present . . .: (1) a contract, (2) a common purpose, (3) a community of interest,

(4) an equal right of control and (5) participation in both profits and losses.” Id. Under a

joint venture theory, a parent company may be found jointly and severally liable with its

subsidiary. See Farr v. Transamerica Occidental Life Ins. Co. of Calif., 699 P.2d 376, 386

(Ariz. Ct. App. 1984). 

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 5 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 6 -

A third way in which a parent corporation may be liable for its subsidiary is under an

alter ego theory, which “allows a parent corporation to be held liable for the acts of its

subsidiary when the individuality or separateness of the subsidiary corporation has ceased.”

Gatecliff, 821 P.2d at 728. To hold a parent corporation liable under an alter ego theory, a

plaintiff must establish both: (1) “unity of control” and (2) “that observance of the corporate

form would sanction a fraud or promote injustice.” Id. (citing Dietel v. Day, 492 P.2d 455,

457 (Ariz. Ct. App. 1972)). Unity of control occurs when a parent exerts “substantially total

control over the management and activities” of its subsidiary. Id. Factors demonstrating

substantially total control include: “stock ownership by the parent; common officers or

directors; financing of subsidiary by the parent; payment of salaries and other expenses of

subsidiary by the parent; failure of subsidiary to maintain formalities of separate corporate

existence; similarity of logo; and plaintiff’s lack of knowledge of subsidiary’s separate

corporate existence.” Id. Distinct from but similar to the alter ego theory is the fourth way

in which a parent company can be liable to a subsidiary: the instrumentality theory. Id. at

729. “When one corporation so dominates and controls another as to make that other a

simple instrumentality or adjunct to it, the courts will look beyond the legal fiction of distinct

corporate existence, as the interests of justice require. Walker v. Sw. Mines Dev. Co., 81

P.2d 90, 95 (Ariz. 1938); See also Savage v. Royal Props., Inc., 417 P.2d 925, 927 (Ariz. Ct.

App. 1966) (“[T]he fiction of corporate entity must be disregarded where one corporation is

so organized and controlled, and its affairs are so conducted that it is, in fact, a mere

instrumentality or adjunct of another corporation.”). As with the alter ego theory of liability,

“[p]laintiffs must [] demonstrate some form of injustice under an instrumentality theory.”

Gatecliff, 821 P.2d at 730. 

A. AIG, Inc.

Plaintiffs’ Complaint fails to plausibly state a claim against AIG, Inc. First, although

Plaintiffs included AIG, Inc. with the three other named defendants under the collective term

“AIG” (Doc. 1 at 1-2), they failed to set forth facts regarding AIG, Inc.’s actual role in any

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 6 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 7 -

of the alleged activity. The only specific allegation included in Plaintiffs’ Complaint that

relates solely to AIG, Inc. is the statement that “Defendant American International Group,

Inc. is a corporation organized and existing under the laws of the State of Delaware, with its

principal place of business in New York.” (Doc. 1 ¶ 7.) Second, Plaintiffs’ Complaint fails

to present a cognizable legal theory that could support a claim against AIG, Inc. under a

theory of direct involvement, joint venture, alter ego, or instrumentality. Twombly, 550 U.S.

at 570. Plaintiffs argue (Doc. 28 at 10) that AIG, Inc. is a proper defendant because Policy

A and Policy B, the two insurance policies that Plaintiffs attached to the Complaint, contain

references to AIG, Inc, including: (1) the phrase “American International Companies® on

the front of the policies (Doc. 1, Ex. A at 2, Ex. B at 2); (2) listing of the same New York

City building address as the executive offices for both National Union and AIG (Doc. 1, Ex.

A at 2, Ex. B at 2); (3) the phrase “© 2001 American International Group, Inc” at the bottom

of much of Policy A and Policy B (Doc. 1, Ex. A at 4-26 & Ex. B at 5-28); and (4) the phrase

‘© 2004 American International Group, Inc.” listed at the bottom of Endorsement No. 13 in

Policy A (Doc. 1, Ex. A at 44-49.) However, both Policy A and Policy B state that National

Union is the company issuing the policy, and the references to AIG, Inc. in the policy do not

transform AIG, Inc. into the insurer or otherwise support a plausible claim against AIG, Inc.

As supplemental authority for its finding that Plaintiffs fail to state a claim against

AIG, Inc., the Court points to the district court’s holding in U-Haul Int’l Inc. v. Am. Int’l

Specialty Lines Ins. Co., No. 2:08-CV-01044-SRB (D. Ariz. Dec. 16, 2008) (Doc. 104) (the

“2008 case”). Under very similar legal issues that the Court now addresses, the district court

in the 2008 case dismissed AIG, Inc. as a party defendant. U-Haul Int’l Inc., No. 2:08-CV01044-SRB (Doc. 104 at 6). As was true in the 2008 case, Plaintiffs’ Complaint here fails

to alleged specific facts against AIG, Inc. beyond merely identifying it, and does not allege

that AIG, Inc. itself “marketed or administered the Plaintiffs’ policy, collected premiums, or

participated in the claim decisions that led to this lawsuit” in a manner that would support

a claim against AIG, Inc. under any applicable theory of parent corporation liability. U-Haul

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 7 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 8 -

Int’l Inc., No. 2:08-CV-01044-SRB (Doc. 104 at 6) (citing Farr, 699 P.2d at 386; Sparks v.

Republic Nat’l Ins. Co., 647 P.2d 1127, 1137-38 (Ariz. 1982)). Though Plaintiffs here argue

that the district court in the 2008 case erred, they do not identify a case from this circuit .

The two holdings from this circuit that Plaintiffs argue support its position both addressed

motions for a more definite statement, not motions to dismiss. (Doc. 28 at 14 (citing

Simmons v. Navajo County, 2006 WL 1897290 (D. Ariz. July 11, 2006); Resolution Trust

Corp. v. Dean, 854 F.Supp. 626, 649 (D. Ariz. 1984)). The Court will dismiss AIG, Inc. as

a defendant in this case, as Plaintiffs have failed to state a claim against AIG, Inc. See Fed.

R. Civ. P. 12(b)(6). 

B. Chartis, Inc.

In contrast to AIG, Inc., the name Chartis, Inc. appears nowhere in either Policy A or

Policy B as attached to Plaintiffs’ Complaint. Plaintiffs acknowledge in their response that

Chartis, Inc. did not exist when Policy A and Policy B were issued, but state that Chartis, Inc.

is a named defendant and potentially liable “because AIG very recently rebranded its

subsidiaries as ‘Chartis.’” (Doc. 28 at 10 n.2.) Plaintiffs’ Complaint did not include this

rebranding information or set forth facts regarding how Chartis, Inc. might be liable under

theories of direct involvement, joint venture, alter ego, or instrumentality. Plaintiffs grouped

Chartis, Inc. with the three other named defendants under the collective term “AIG,” (Doc.

1 at 1-2) but failed to set forth Chartis, Inc.’s actual role in any of the activity Plaintiffs

alleged. The allegation pertaining specifically to Chartis, Inc. is made in the context of

describing it as “a corporation organized and existing under the laws of the State of

Delaware, with its principal place of business in New York.” (Doc. 1 ¶ 6.) Chartis, Inc.

should not be haled into Court absent facts that set forth a plausible claim that Chartis, Inc.

is a proper defendant under one of the grounds for parent corporation liability discussed

above. See Twombly, 550 U.S. at 570. Therefore, the Court will dismiss Chartis, Inc. as a

defendant in this case for failure to state a claim. See Fed. R. Civ. P. 12(b)(6). 

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 8 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 9 -

II. Motion to Dismiss Plaintiffs’ Fraud Claim

Plaintiffs’ Complaint alleges in Count III that Defendants committed fraud related to

the negotiation and underwriting of Policy A and Policy B. (Doc. 1 at 11-13.) First,

Plaintiffs allege Defendants stated that they would provide an insurance policy quote based

upon Plaintiffs’ “[s]ubmission of past losses and their designated coverage type.” (Doc. 1

¶ 84.) Second, Plaintiffs allege Defendants reclassified Plaintiffs’ past losses from General

Liability to Auto Liability in Defendants’ internal documents without Plaintiffs’ knowledge,

in an attempt to reduce Defendants’ exposure. (Doc. 1 ¶¶ 62, 85.) Third, Plaintiffs allege

Defendants quoted Plaintiffs premiums that provided less coverage than Plaintiffs had

initially requested. (Doc. 1 ¶ 86.) Fourth, Plaintiffs allege Defendants induced Plaintiffs to

purchase policies that Plaintiffs believed aligned with their initial past losses submission,

causing damages. (Doc. 1 ¶¶ 87-89.) 

A claim for common law fraud or fraudulent inducement requires: “(1) [a]

representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or

ignorance of its truth; (5) [the speaker’s] intent that it should be acted upon by the [hearer]

and in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) [the

hearer’s] reliance on its truth; (8) [the hearer’s] right to rely thereon; (9) [the hearer’s]

consequent and proximate injury.” Nielson v. Flashberg, 419 P.2d 514 (Ariz. 1966); see also

Wells Fargo Credit Corp. v. Smith, 803 P.2d 900, 905 (Ariz. App. 1990). Here, Plaintiffs’

Complaint fails to with any particularity identify a speaker or speakers; allege specifically

what the speaker is purported to have stated to Plaintiffs; specify what statements were false;

state whether or not the speaker knew if the statements were false; and set forth a cognizable

theory on how Defendants’ purported statements are connected to damages incurred.

Plaintiffs do not allege that any of the language contained in either Policy A and Policy B is

false, and instead focus on Defendants’ internal documents. (Doc. 1¶¶ 67-69.) Because

Plaintiffs have failed to “state with particularity the circumstances constituting fraud,”

including “the who, what, where, and how’ of the misconduct charged,” the Court will

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 9 of 10
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 10 -

dismiss the Count III Fraud claim against Defendants. Fed. R. Civ. P. 9(b); Vess, 317 F.3d

at 1106 (quoting Cooper, 137 F.3d at 727).

CONCLUSION

IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss AIG, Inc. as a party

defendant (Doc. 22) is GRANTED.

IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss Chartis, Inc. as

a party defendant (Doc. 22) is GRANTED.

IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss Count III (Fraud)

(Doc. 22) of Plaintiffs’ Complaint (Doc. 1) is GRANTED.

DATED this 3rd day of January, 2011.

Case 2:10-cv-01047-SMM Document 42 Filed 01/03/11 Page 10 of 10