Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-01087/USCOURTS-caed-1_07-cv-01087-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 12:635 Breach of Insurance Contract

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

VALLEY AIR CONDITIONING & )

REPAIR, INC., )

)

Plaintiff, )

)

v. )

)

BENEFICIAL LIFE INSURANCE )

COMPANY, and DOES 1 through 50, )

inclusive, )

)

Defendant. )

____________________________________)

CV-F-07-01087 AWI-SMS 

MEMORANDUM OPINION

AND ORDER GRANTING

DEFENDANT BENEFICIAL

LIFE INSURANCE

COMPANY’S MOTION TO

DISMISS PLAINTIFF’S

THIRD, FOURTH, AND FIFTH

CAUSES OF ACTION

This case comes before the Court on Defendant Beneficial Life Insurance Company’s

(“Beneficial”) motion to dismiss various causes of action in the complaint filed by Plaintiff

Valley Air Conditioning & Repair, Inc. (“Valley Air”) for failure to state a claim under Fed. R.

Civ. Proc. 12(b)(6). Defendant alternatively moves to strike the fourth cause of action in the

complaint pursuant to Rule 12(f) for purported redundancy with the second cause of action. For

the reasons stated herein, Plaintiff’s third, fourth, and fifth causes of action are dismissed with

prejudice. Plaintiff, however, is given leave to amend its second cause of action to incorporate

the allegations presently in the fourth cause of action. 

FACTUAL ALLEGATIONS AND PROCEDURAL HISTORY

Valley Air filed its complaint against Beneficial in Superior Court of California, County

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According to Plaintiff, Mr. Hopper died on December 24, 2005. Valley Air was

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represented by Tobbie D. Biglione, Mr. Hopper’s daughter and an officer and director of Valley

Air who was authorized to file the claim.

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of Fresno on June 29, 2007, regarding an insurance policy issued by Beneficial covering John

Tobbie Hopper (“Hopper”) for $500,000. Beneficial is an insurance company domiciled in the

State of Utah. Plaintiff alleges that it is the beneficiary under the policy, and that on or about

January 26, 2006 it filed a claim for payment of benefits under the policy. Plaintiff further 1

alleges that on or about April 6, 2006, Beneficial wrongly refused to pay benefits due under the

policy. Plaintiff’s complaint alleged five causes of action: breach of insurance contract, breach

of the implied covenant of good faith and fair dealing, breach of fiduciary duties, intentional

interference with a protected property interest, and unfair claims settlement practices in violation

of California Insurance Code § 790.03(h). 

Beneficial removed the case to federal court on July 26, 2007, apparently on diversity

grounds. On August 6, 2007, Beneficial moved to dismiss Plaintiff’s third, fourth, and fifth

causes of action for failure to state a claim under Fed. R. Civ. Proc. 12(b)(6). Beneficial also

moved to strike Plaintiff’s fourth claim because it is purportedly redundant of the second claim. 

LEGAL STANDARD ON MOTION TO DISMISS

A complaint may be dismissed under Rule 12(b)(6) of the Federal Rules of Civil

Procedure if it appears beyond doubt that the plaintiff can prove no set of facts in support of the

claim that would entitle him to relief. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984), citing

Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Dismissal under Rule 12(b)(6) can be based on the

failure to allege a cognizable legal theory or the failure to allege sufficient facts under a

cognziable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.

1984). A court may dismiss a claim under Federal Rule of Civil Procedure 12(b)(6) if the

plaintiff's factual allegations are not sufficient “to state a claim to relief that is plausible on its

face.” Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1960 (2007). Essentially, a motion to

dismiss for failure to state a claim tests plaintiff’s compliance with the liberal requirements of

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Rule 8 of the Federal Rules of Civil Procedure. 5A Charles Alan Wright & Arthur R. Miller,

FEDERAL PRACTICE AND PROCEDURE § 1356, at 294-96. In considering a motion to dismiss, the

court must accept as true the material facts alleged in the complaint, Hospital Bldg. Co. v. Rex

Hospital Trustees, 425 U.S. 738, 740 (1976), and liberally construe the complaint in favor of

plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969).

Rule 12(f) of the Federal Rules of Civil Procedure allows the court to strike from “any

pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous

matter.” The purpose of a Rule 12(f) motion is to avoid the costs that arise from litigating

spurious issues by dispensing with those issues prior to trial. Sidney-Vinstein v. A.H. Robins Co.,

697 F.2d 880, 885 (9th Cir. 1983). 

DISCUSSION

Beneficial argues that Plaintiff’s cause of action for breach of fiduciary duties fails to

state a claim because under California law an insurer is not a fiduciary; that a cause of action for

intentional interference with a protected property interest is not a remediable claim; and also that

violation of Insurance Code § 790.03(h) does not give rise to a private cause of action. Plaintiff’s

opposition brief only addressed the claim for intentional interference with a protected property

interest, and failed to respond to Defendant’s arguments regarding an insured’s purported

fiduciary duties and the Insurance Code § 790.03(h) claim. 

Breach of Fiduciary Duties and Violation of Insurance Code § 790.03(h) Claims

As Defendant argues, under California law an insurer does not owe fiduciary duties to its

insured or to beneficiaries. Although an insurer may have special duties to an insured, it is wellestablished that these duties do not give rise to a fiduciary relationship. See Vu v. Prudential

Property & Casualty Ins. Co. (2001) 26 Cal. 4th 1142, 1151 (“This characteristic has led the

courts to impose ‘special and heightened’ duties, but “[w]hile these ‘special’ duties are akin to,

and often resemble, duties which are also owed by fiduciaries, the fiduciary-like duties arise

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Beneficial improperly cites a non-published federal district court opinion for the 2

proposition that intentional interference with a protected property interest is not a remediable

cause of action. The Court will not consider unpublished cases in its disposition of the instant

motion.

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because of the unique nature of the insurance contract, not because the insurer is a fiduciary.”),

quoting Love v. Fire Ins. Exchange (1990) 221 Cal. App. 3d 1136, 1148. Additionally, the

California Supreme Court has held that Insurance Code § 790.03(h) does not create a private

cause of action. See Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal. 3d 287,

304 (“Neither section 790.03 nor section 790.09 was intended to create a private civil cause of

action against an insurer that commits one of the various acts listed in section 790.03,

subdivision (h).”). 

Valley Air tacitly concedes these causes of action are without merit by failing to address

Beneficial’s arguments in its opposition. Amendment of the complaint would not cure the

defects in the complaint because Plaintiff does not state a cognizable legal theory under either its

breach of fiduciary duty claim or violation of Insurance Code § 790.03(h) claim. Accordingly,

Plaintiff’s third cause of action, for breach of fiduciary duties, and fifth cause of action, for

violation of Insurance Code § 790.03(h) are dismissed with prejudice. 

Intentional Interference with Protected Property Interest

Plaintiff’s fourth cause of action is styled as “intentional interference with a protected

property interest.” According to Plaintiff, “Beneficial knew that Plaintiff was relying on the

financial assistance from the insurance proceeds and benefits as promised in the Policy. Plaintiff

had a protected property interest in such benefits. Nevertheless, Beneficial intentionally and

willfully interfered with this property interest by refusing to pay to Plaintiff the benefits as

promised in the policy.” Complaint ¶ 22. Beneficial argues that California does not recognize

such a cause of action or, in the alternative, that this cause of action is duplicative of the second 2

cause of action for breach of the implied covenant of good faith and fair dealing and thus subject

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to a motion to strike. 

Plaintiff appears to have drawn its label for the “interference with a protected property

interest” claim from Fletcher v. Western National Life Ins. Co. (1970) 10 Cal. App. 3d 376, a

California court of appeal decision that, in the context of an intentional infliction of emotional

distress claim by an insured against his insurer for breach of the covenant of good faith and fair

dealing, recognized an additional basis of liability. 

We further hold that, independent of the tort of intentional

infliction of emotional distress, such [bad faith] conduct on the part

of a disability insurer constitutes a tortious interference with a

protected property interest of its insured for which damages may

be recovered to compensate for all detriment proximately resulting

therefrom, including economic loss .... 

Fletcher, 10 Cal. App. 3d at 401-402. (emphasis added).

Subsequent courts have characterized the “tortious interference with a protected property

interest” language in Fletcher as “more appropriately appraised as a claim for tortious breach of a

duty imposed by the contractual implied covenant of good faith and fair dealing....” See, e.g.,

Hand v. Farmers Ins. Exchange (1994) 23 Cal. App. 4th 1847, 1854; see also McDowell v.

Union Mutual Life Ins. Co., 404 F. Supp. 136, 146 (C.D. Cal. 1975) (“the gravamen of the bad

faith cause of action in tort is the tortious interference with an intangible property interest”)

(interpreting California law). Thus, “tortious interference with a protected property interest” is

understood as a constituent component of the tort of breach of the covenant of good faith and fair

dealing, rather than an independent cause of action. 

 Plaintiff’s fourth cause of action is dismissed, with prejudice. However, Plaintiff is

given leave to amend its second cause of action for breach of the implied covenant of good faith

and fair dealing to include the allegation for tortious interference with a protected property

interest. Beneficial makes a number of objections to that allegation in its present form. 

Accordingly, to shape the contours of that allegation as amended the Court also reaches

Beneficial’s arguments regarding the sufficiency of the allegation. 

Valley Air’s complaint alleges that the insurance policy proceeds themselves are the

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“protected property interest.” Beneficial argues that the protected property interest recognized in

Fletcher referred to certain economic losses, loss of real property and mortgage late fees, suffered

by the plaintiff in that case rather than to the insurance policy proceeds themselves. The Court

agrees with Beneficial’s argument. Fletcher recognizes that a plaintiff is entitled to recover for

economic loss resulting from an insurer’s bad faith conduct. See Fletcher, 10 Cal. App. 3d at

402 (“Although it might be possible to rest our decision solely upon the first holding, we make

the latter holding because we believe that it squares with the economic, social and legal realities

of the problem presented. The tortious conduct in this case has resulted, and could be expected

to result, in both economic loss and emotional distress.”). 

Plaintiff’s argument that the insurance proceeds are themselves a protected property

interest is unavailing. Fletcher indicates that a claim for “tortious interference with a protected

property interest” protects a plaintiff against economic loss stemming from an insurer’s bad faith

failure to pay. See Fletcher, 10 Cal. App. 3d at 402. There is no protected property interest in

insurance proceeds that an insurer declines to pay absent some economic loss engendered by the

insurer’s bad faith refusal to pay insurance proceeds. To be legally sufficient, Plaintiff’s

amended complaint should include factual allegations that Plaintiff has suffered economic loss

suffered as a result of Beneficial’s alleged wrongful withholding of insurance proceeds, rather

than alleging that the proceeds themselves are the protected property interest.

Beneficial also maintains that Valley Air has a contingent rather than a vested interest in

the policy proceeds because such proceeds were never actualized. This issue is best resolved at

summary judgment rather than at the pleading stage. At this stage, a court must assume that

Plaintiff's factual allegations are true. Beneficial is entitled to test the sufficiency of Plaintiff’s

allegations, but at the pleading stage all Plaintiff has to allege is that the proceeds are “due,”

which Plaintiff plainly does in the second cause of action. See Complaint ¶¶ 14, 15. 

Given the disposition of the motion to dismiss, Beneficial’s motion to strike the fourth

cause of action is denied as moot. 

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CONCLUSION AND ORDER

For the reasons stated in the above Memorandum Opinion, IT IS HEREBY ORDERED

that:

1. Defendant’s motion to dismiss the third cause of action for “breach of

fiduciary duties,” the fourth cause of action for “interference with a

protected property interest,” and fifth cause of action for violation of

California Insurance Code § 790.03(h) is hereby GRANTED;

2. Plaintiff’s third, fourth, and fifth causes of actions are dismissed with

prejudice;

3. Plaintiff is given leave to amend its Complaint to incorporate the

allegations in the fourth cause of action for “intentional interference with a

protected property interest” into the second cause of action for “breach of

the implied covenant of good faith and fair dealing”;

4. Defendant’s motion to strike the fourth cause of action is DENIED as

moot; 

5. Any amended complaint SHALL BE FILED within 20 days of this order’s

date of service.

IT IS SO ORDERED.

Dated: September 19, 2007 /s/ Anthony W. Ishii 

0m8i78 UNITED STATES DISTRICT JUDGE

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