Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_10-cv-01374/USCOURTS-cand-3_10-cv-01374-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Insurance Contract

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

TAMMI JONES,

Plaintiff,

v.

AIG RISK MANAGEMENT, INC., et al.,

Defendants.

___________________________________/

No. C-10-1374 EMC

ORDER GRANTING IN PART AND

DENYING PART DEFENDANTS’

MOTION TO STRIKE AND MOTION

TO DISMISS

(Docket Nos. 5-6, 15-16)

Plaintiff Tammi Jones filed suit against multiple defendants, including American

International Group, Inc. (“AIG, Inc.”), AIG Risk Management Inc. (“AIG Risk Management”), and

National Union Fire Insurance Company of Pittsburgh, PA (“National Union”), as a result of injuries

she suffered in an automobile wreck.

Currently pending before the Court are motions to dismiss and motions to strike filed by

AIG, Inc., AIG Risk Management, and National Union (collectively, “Defendants”). Having

considered the parties’ briefs and accompanying submissions, as well as oral argument of counsel,

the Court hereby GRANTS in part and DENIES in part both motions.

I. FACTUAL & PROCEDURAL BACKGROUND

In her complaint, Ms. Jones alleges as follows. 

Ms. Jones was an employee of Tutor-Saliba, a construction company working on the

Richmond Bridge construction project. See Compl. ¶ 8. On May 24, 2004, while driving a company

vehicle down Highway 580, she was rear-ended by a third party, Saengpheth Phimphavanh. See id.

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¶ 9. Ms. Jones sustained serious injuries to her spine, right shoulder, and right upper extremity in

the accident. See id. ¶ 10. 

Tutor-Saliba had purchased insurance coverage for the construction project, including motor

vehicle coverage, allegedly from each Defendant. See id. ¶ 8 (alleging that “Tutor-Saliba purchased

insurance coverage . . . from defendants and each of them”). In other words, according to Ms. Jones,

each Defendant was a party to the insurance contract with and issued the insurance policy at issue to

Tutor-Saliba. The policy insured Tutor-Saliba employees driving company vehicles in the scope of

their employment against accidents caused by underinsured drivers, for up to $1,000,000, less any

amount recovered from the responsible party. See id. Defendants promised to pay the employee’s

benefits as soon as they were informed of the amount covered by the responsible party. See id. The

policy was in place on May 24, 2004, when Ms. Jones’s accident occurred. See id.

Ms. Jones filed for worker’s compensation benefits from Tutor-Saliba and, in February 2005,

filed suit against the responsible party, Saengpheth Phimphavanh, for damages resulting from the

collision. See id. ¶ 10. That action settled in early 2006, with Ms. Jones receiving $25,000. See id.

¶ 10-11. However, her damages were greater than the combined total of the $25,000 and her

anticipated worker’s compensation benefits, so in January 2006, Ms. Jones’ counsel filed a claim for

underinsured motorist (“UIM”) benefits with Tutor-Saliba. See id. ¶ 11. On January 24, 2006,

Tutor-Saliba’s risk manager forwarded the request to AIG Construction Services, located in

Georgia, for processing. See id. 

Although her UIM claim was initiated in January 2006, Ms. Jones’s worker’s compensation

proceeding did not end until November 2, 2006, when she signed a release for $108,163. See id. ¶

12. Therefore, she did not submit a settlement proposal to Defendants until December 7, 2006. See

id. ¶ 13. This is the date on which Defendants’ delay in processing Ms. Jones’s claim began; up to

that point her claim could not be settled because the worker’s compensation benefits were to be

credited toward her UIM benefits. See id. ¶ 12. 

In her settlement proposal package, Ms. Jones asked for $850,000 and provided copies of

medical records, reports, and billings. See id. ¶ 13. The settlement proposal package was submitted

to Deborah Paules, who Ms. Jones claims was an agent and employee for each Defendant. See id. ¶¶

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12-13. Deborah Paules is purportedly an employee of AIG Construction Risk Management Group,

which in turn is part of AIG Risk Management, which in turn is part of other AIG entities. See

Compl. ¶ 12. Ms. Jones requested a response within thirty days, but Ms. Paules provided no answer

for over two months. See id. ¶¶ 13-14. After repeated phone calls and letters, Ms. Paules told Ms.

Jones’s counsel that she was referring the file to Defendants’ outside counsel, Dennis Babbits. See

id. ¶¶ 14, 15-17. However, after seven months, Mr. Babbits had not received Ms. Jones’s file and

Defendants had not taken any action on the claim. See id. ¶¶ 16-19. Throughout this period, Ms.

Jones’s counsel sent numerous letters to both Ms. Paules and Mr. Babbits, explaining that Ms. Jones

remained disabled and out of work and was suffering financial hardship and emotional distress due

to the delay in handling her claim. See id.

In July 2007, Ms. Jones’s counsel sent the settlement package directly to Mr. Babbits. See

id. ¶ 19. In August 2007, Mr. Babbits advised that Defendants wanted Ms. Jones to undergo a

medical examination within the next few weeks; however, an exam was not set up until October 16,

2007. See id. ¶¶ 20-21. This was to be followed by a deposition of Ms. Jones, set for January 3,

2008. See id. ¶ 21. 

In February 2008, a mediation proceeding was held on Ms. Jones’s UIM claim but the claim

was not resolved, and so, in March 2008, Ms. Jones requested arbitration. Although Ms. Jones had

asked Mr. Babbits to select an arbitrator as soon as possible, he did not respond until May 2008. In

June 2008, Defendants attempted to switch arbitrators, and the parties were not able to agree to a

new arbitrator until August. See id. ¶ 23. The arbitration was set for October 2008, then pushed

back until November 2008. See id. ¶ 24. 

On November 12, 2008, the day before arbitration was set to take place, Defendants offered

Ms. Jones $450,000 to settle the claim. See id. ¶ 25. Defendants agreed that the settlement did not

cover any claims Ms. Jones might have regarding Defendants’ handling of her UIM claim, so she

accepted the offer that day. See id. ¶ 25. Defendants sent Ms. Jones a release form and, again,

assured her that signing did not mean she was releasing claims related to the handling of her UIM

claim. See id. ¶ 26. However, in December 2008, Defendants notified Ms. Jones that they would

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not pay the $450,000 unless she released all claims. See id. ¶ 27. When Ms. Jones refused and

requested a rescheduling of arbitration proceedings, Defendants relented. See id. 

Ms. Jones signed and returned the release on December 3, 2008. See id. However,

Defendants continued to delay payment and Ms. Jones did not receive a check until January 26,

2009, over two years after she first provided Defendants with her settlement proposal. See id. ¶ 29. 

Although Ms. Jones’ interactions up to this point had been with AIG-named entities, the settlement

check was drafted by National Union. See id. National Union is not a named AIG entity but is

affiliated with the AIG entities. See id. ¶ 4. 

Subsequently, and consistent with the parties’ settlement agreement, Ms. Jones initiated a

lawsuit against Defendants challenging the way that Defendants had handled her UIM claim. The

suit was filed in state court but was thereafter removed to federal court. In the complaint, Ms. Jones

asserts the following causes of action: (1) breach of contract, (2) breach of the duty of good faith and

fair dealing, (3) interference with contract, (4) fraud and deceit, (5) intentional infliction of

emotional distress, and (6) conspiracy. In addition to compensatory damages, Ms. Jones seeks

punitive damages with respect to all claims except for the breach-of-contract claim.

II. DISCUSSION

A. Motions to Dismiss

1. Legal Standard

AIG Risk Management and National Union, as well as AIG, Inc., have filed motions to

dismiss each of the above causes of action pursuant to Federal Rule of Civil Procedure 12(b)(6). 

The same basic arguments are presented in the two motions to dismiss. 

Under Rule 12(b)(6), a party may move to dismiss based on the failure to state a claim upon

which relief may be granted. See Fed. R. Civ. P. 12(b)(6). A motion to dismiss based on Rule

12(b)(6) challenges the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of

Business v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). In considering such a motion, a court

must take all allegations of material fact as true and construe them in the light most favorable to the

nonmoving party, although “conclusory allegations of law and unwarranted inferences are

insufficient to avoid a Rule 12(b)(6) dismissal.” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.

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 Defendants concede that Ms. Jones has standing to enforce rights under the insurance contract

as an “insured” thereunder.

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2009). While “a complaint need not contain detailed factual allegations . . . it must plead ‘enough

facts to state a claim to relief that is plausible on its face.’” Id. “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.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). See

also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). “The plausibility standard is not akin to

a ‘probability requirement,’ but it asks for more than sheer possibility that a defendant acted

unlawfully.” Id.

2. Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair

Dealing

In their motions to dismiss, Defendants argue that the claims for breach of contract and

breach of the implied covenant of good faith and fair dealing should be dismissed because Ms. Jones

failed to plead the terms of the insurance contract at issue. Defendants also argue that the contractbased claims should be dismissed with respect to AIG, Inc. and AIG Risk Management because

neither defendant was a party to the insurance contract with Tutor-Saliba – i.e., only National Union

was.1

Prior to the hearing, the Court ordered Defendants to produce a copy of the insurance

contract at issue. Defendants complied. See Docket No. 32 (insurance policy). Now that the

insurance policy has been produced, any argument that Jones failed to plead the terms of the contract

is moot. 

The only remaining question for the Court is who are the parties to the contract. It is well

established that, under California law, only a party to an insurance contract may be held liable for

breach of contract or for breach of the implied covenant of good faith and fair dealing. See

Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 576 (1973) (holding that, since the insurance adjusting

firm, law firm, and their employees were not parties to the contract, they were not subject to the

implied covenant of good faith and fair dealing).

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Based on the face of the insurance policy at issue, it is clear that National Union was a party

to the contract. The contract indicates that coverage was being provided by National Union, and the

endorsement pages reflect the same. See Docket No. 32, at NU 1346, 1384-86, 1392, 1398-99,

1403, 1441-43, 1449, 1455-56 (insurance policy). Defendants have conceded that National Union

was a party to the contract.

Defendants contend, however, that AIG, Inc. and AIG Risk Management are not parties to

the contract. Based on the insurance policy submitted by Defendants, the Court agrees. As noted

above, the contract specifies that coverage was being provided by National Union only, not any

other entity. The fact that AIG Risk Management allegedly played a role in the handling of Ms.

Jones’s UIM claim, see Compl. ¶ 12, is not sufficient to establish that it was a party to the contract. 

A party that serves as an adjuster or claims handler is not, absent other circumstances, a party to the

insurance contract. Cf. Thompson v. Cannon, 224 Cal. App. 3d 1413, 1415 (1990) (upholding

summary judgment in favor of independent insurance adjuster who handled insured’s claim and was

not party to the contract between insured and insurer). As for AIG, Inc., there are not even

allegations that it played a role in the handling of the UIM claim. See id.

At the hearing, Ms. Jones pointed out that, at the top of the insurance policy at issue, an

“AIG” logo is displayed, as well as the name American International Companies®. See Docket No.

32, at 1346 (insurance policy). But on their face, the logo and name appear as trademarks only. 

Similarly, while AIG, Inc.’s name is listed on certain endorsement pages of the insurance policy,

that appears to be for copyright purposes only. See Docket No. 32, at NU 1399-1400, 1456-57

(insurance policy). Nowhere does the contract refer to AIG, Inc. or AIG Risk Management – or any

AIG-named entity – as being the insurer or underwriter.

Ms. Jones argued still that it was plausible that AIG, Inc. and/or AIG Risk Management were

parties to the contract, tendering for the first time at the hearing a state court pleading which was

apparently filed by an AIG-named entity in conjunction with Ms. Jones’s UIM claim. According to

Ms. Jones, she did not initiate these UIM proceedings; rather, the UIM proceedings were initiated by

the AIG-named entity. Ms. Jones contends that, by identifying itself as the respondent in the UIM

proceedings, the AIG-named entity indicated that it was a party to the insurance contract. The Court

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 To be sure, even though AIG, Inc. and AIG Risk Management are not, for present purposes,

parties to the insurance contract such that they can be held directly liable for its breach, if it is proved

(as alleged) that they acted as agents of National Union (Compl. ¶ 7), their conduct may be imputable

to National Union. See Cal. Civ. Code § 2338 (stating that “a principal is responsible to third persons

for the negligence of his agent in the transaction of the business of the agency, including wrongful acts

committed by such agent in and as a part of the transaction of such business, and for his willful omission

to fulfill the obligations of the principal”).

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disagrees. First, the pleading is not part of the record and not pled. Second, even if judicial notice

were taken of the pleading, the fact that a party may have played a role in handling and initiating a

UIM claim does not in and of itself establish that it was a party to the contract rather than acting as

an agent. Under the current state of the pleadings, Ms. Jones has not established more than a sheer

possibility that other AIG entities were legal parties to the insurance contract, thus failing to satisfy

Bell Atlantic and Iqbal.

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Accordingly, the Court dismisses the claims for breach of contract and breach of the implied

covenant of good faith and fair dealing with respect to AIG, Inc. and AIG Risk Management. The

dismissal, however, shall be without prejudice. The Court notes that, even though it concludes that

the contract-based claims against AIG, Inc. and AIG Risk Management must be dismissed at this

juncture, it will permit Ms. Jones to take limited discovery to ascertain their role vis-a-vis the

insurance contract/or and her UIM claim. The Court has the ability to permit such discovery even in

the face of dismissal for failure to satisfy Iqbal and Twombly where, as here, relevant evidence is

solely within the province of Defendants, leaving open the possibility of further amendment. Cf.

Santiago v. Walls, 599 F.3d 749, 758-59 (7th Cir. 2010) (improper to discuss complaint where lack

of specificity is due to facts plaintiff cannot know for certain without discovery); Arocho v. Nafziger,

2010 WL 681679 (10th Cir. Mar. 1, 2010) at *9 (where facts known only by defendants, plaintiff

should be afforded opportunity to amend pleadings); Morgan v. Hubert, 2009 WL 1884605 (5th Cir.

July 1, 2009) at *5 (plaintiff cannot be requested to plead facts peculiarly within the knowledge of

defendants); Tompkins v. Lasalle Bank Corp., 2009 WL 4349532 (N.D. Ill. Nov. 24, 2009) (plaintiff

should be afforded opportunity to conduct discovery into liability of parent corporation before

summary judgment). The Court also finds there is good cause under Federal Rule of Civil

Procedure 26(b)(1) to permit such discovery in this case because, while insufficient to establish

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 Of course, if Ms. Jones successfully amends the complaint to allege these entities are in fact

parties to the contract and proves that fact, Dryden would bar the interference with contract claim.

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plausibility under Atlantic Bell at this juncture, Ms. Jones’s allegations suggests the possibility of

AIG-entities’ involvement in this matter to warrant reasonable, tailored discovery on the issue. 

The claims for breach of contract and breach of the implied covenant of good faith and fair

dealing with respect to National Union are viable and so its motion to dismiss is denied.

3. Interference With Contract

In her complaint, Ms. Jones asserts that, pursuant to the insurance policy issued by

Defendants to Tutor-Saliba, she had a contractual right to UIM benefits and that, by delaying the

payment of benefits, Defendants interfered with that contractual right. See Compl. ¶ 5. In other

words, Ms. Jones’s basic contention is that there was an insurance contract between Tutor-Saliba

and Defendants (under which she benefitted as an insured) and that Defendants interfered with that

contract by delaying the benefits owed under the contract.

Defendants correctly argue that a party to a contract may not be held liable for interfering

with that contract. See Dryden v. Tri-Valley Growers, 65 Cal. App. 3d 990, 998-99 (1977) (stating

that “the tort of malicious interference with contractual relations by inducing a breach of contract is

a remedy created by the common law to compensate one whose contractual relations with others are

interfered with by a third person”; adding that “an action for inducing a breach of contract will not

lie against the party to the contract”) (emphasis in original). As discussed above, National Union

was clearly a party to the insurance contract; therefore, as a matter of law, it cannot be held liable for

interference with the same contract.

As for AIG, Inc. and AIG Risk Management, since the Court holds herein that the pleadings

do not establish they are parties to the insurance contract, Dryden does not present a bar.3

 However,

Ms. Jones has alleged that these entities were acting as agents of the contracting party National

Union. See Compl. ¶ 7 (alleging that “each and every [D]efendant was acting as the agent and

employee of every other”). California courts have held that “corporate agents and employees acting

for and on behalf of a corporation cannot be held liable for inducing a breach of the corporation’s

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contract.” Mintz v. Blue Cross of California, 172 Cal. App. 4th 1594, 1604 (2009). Thus, the claim

for interference by AIG, Inc. and AIG Risk Management must also be dismissed.

To be sure, if Ms. Jones’s assertions of agency are not sustained or proven, Mintz would not

bar a claim for interference with contract brought against a party that is neither a party to the

contract nor an agent thereof. But Ms. Jones has not pled absence of agency in the alternative. A

plaintiff is allowed to plead inconsistent claims. See Fed. R. Civ. P. 8(d)(3) (stating that “[a] party

may state as many separate claims or defenses as it has, regardless of consistency”); see also First

Indep. Bank of Nev. v. Mohave State Bank, No. CV-09-8195-PCT-PGR, 2010 U.S. Dist. LEXIS

34517 (D. Ariz. Apr. 7, 2010) (stating that, “[a]s a matter of law, the rules of civil procedure

expressly permit inconsistent pleadings”). However, inconsistent factual allegations must be

explicitly pled in the alternative. See Maloney v. Scottsdale Ins. Co., 256 Fed. Appx. 29, 31 (9th Cir.

2007). She has not done so here.

Accordingly, the interference claim against AIG, Inc. and AIG Risk Management is

dismissed without prejudice.

4. Fraud

In support of her fraud claim, Ms. Jones alleges that Defendants knowingly made false

misrepresentations to Tutor-Saliba in order to induce it to purchase the insurance policy. See

Compl. ¶¶ 46-48. As alleged, Ms. Jones’s fraud claim has several problems.

First, under Federal Rule of Civil Procedure 9(b), “a party must state with particularity the

circumstances constituting fraud.” Fed. R. Civ. P. 9(b). This means that fraud allegations must “be

accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” Vess v. CibaGeigy Corp. USA, 317 F.3d 1097, 1102 (9th Cir. 2003). In the case at bar, Ms. Jones has not

provided this specific information in her complaint but rests instead on general allegations that

Defendants made false representations to Tutor-Saliba. Accordingly, the fraud claim is subject to

dismissal for failure to comply with Rule 9(b) alone.

Second, even if there were no Rule 9(b) problem, Ms. Jones has failed to state a facially

plausible claim for fraud because she has not included in her complaint any factual allegations

supporting her contention that Defendants knew that their representations were false at the time they

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were made. See Lazar v. Superior Court, 12 Cal. 4th 631, 638 (1996) (holding that plaintiff stated a

claim for fraud, as he alleged that defendant’s representations “were false at the time they were

made”).

In her papers, Ms. Jones points out that “subsequent conduct of the defendants in processing

a claim for benefits under the policy may support an inference of prior intent not to fulfill

defendants’ representations.” Miller v. Nat’l American Life Ins. Co. of CA, 54 Cal.App.3d 331, 338-

339 (1976) (finding that defendant insurance company’s use of misleading wording on its forms,

policy of interpreting that language in an peculiar way without warning physicians who filled out the

forms, and failure to consult a particular doctor regarding an acknowledged uncertainty on plaintiff’s

form before terminating his benefits supported “an inference of an intent not to live up to the

promised coverage”); see also Wetherbee v. United Ins. Co. of America, 265 Cal.App.3d 921, 932

(1968) (ruling that “defendant's eagerness to seize upon” a questionable basis for cancelling

plaintiff’s benefits “furnishe[d] ample support for a finding that [defendant] never intended to fulfill

either the representations” made in a letter sent to plaintiff encouraging her not to cancel her policy,

nor the terms of her policy). While that general proposition is true, the problem here is that Ms.

Jones has not pointed to what subsequent conduct of Defendants suggested that they never intended

to perform the contract in the first place. Ms. Jones has not pointed to any facts indicating that her

situation is comparable to that in, e.g., either Miller or Wetherbee. Indeed, based on the allegations

in the complaint alone, it appears that the only subsequent conduct of Defendants was a failure to

perform. However, the California Supreme Court has emphasized that “something more than

nonperformance is required to prove the defendant’s intent not to perform his promise.” Tenzer v.

Superscope, Inc., 39 Cal. 3d 18, 30 (1985). 

Finally, even if both problems discussed above were cured, the fraud claim is still deficient

because of Ms. Jones’s failure to plead the requisite reliance. Contrary to what Defendants argue,

the fact that the alleged misrepresentations were made to Tutor-Saliba and not to Ms. Jones herself is

not dispositive. California courts have adopted the theory of indirect misrepresentation embodied in

§ 533 of the Restatement of Torts, which states as follows: 

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The maker of a fraudulent misrepresentation is subject to liability for

pecuniary loss to another who acts in justifiable reliance upon it if the

misrepresentation, although not made directly to the other, is made to

a third person and the maker intends or has reason to expect that its

terms will be repeated or its substance communicated to the other, and

that it will influence his conduct in the transaction or type of

transaction involved.

Restatement (Second) Torts § 533 (1977); see also Varwig v. Anderson-Behel Porsche/Audi, Inc., 74

Cal. App. 3d 578, 581 (1977) (holding that defendant’s misrepresentation to an automobile dealer

was an indirect misrepresentation to the plaintiff, who purchased the car from the dealer). But even

where an indirect misrepresentation is involved, there must still be reliance, and the reliance must be

on the part of the indirect recipient of the misrepresentation. See Mirkin v. Wasserman, 5 Cal. 4th

1082, 1096 (1993) (stating that, “[a]s the language of the Restatement indicates, a plaintiff who

hears an alleged misrepresentation indirectly must still show ‘justifiable reliance upon it’”).

In her complaint, Ms. Jones refers to reliance on the part of Tutor-Saliba (i.e., entering into

the contract as a result of the alleged misrepresentations) but does not identify any reliance on her

part. In her brief, she argues that Tutor-Saliba’s reliance may be imputed to her, but she has not

cited any authority indicating that such imputation is permissible. Indeed Mirkin indicates

otherwise. Because Ms. Jones has not alleged any reliance on her own part, the fraud claims fails

for that additional reason.

Accordingly, the Court dismisses without prejudice the claim for fraud.

5. Intentional Infliction of Emotional Distress

In their motions to dismiss, Defendants argue that the claim for intentional infliction of

emotional distress (“IIED”) should be dismissed because Ms. Jones simply alleges that Defendants

delayed payment of her UIM benefits, and California courts have ruled that delay does not constitute

the kind of extreme and outrageous conduct necessary to sustain a cause of action for IIED. See,

e.g., Coleman v. Republic Indem. Ins. Co. of Cal., 132 Cal. App. 4th 403, 417 (holding that “delay or

denial of insurance claims is not sufficiently outrageous” to support a cause of action for IIED). 

Defendants, however, have not properly characterized Ms. Jones’s complaint. The

allegations in the complaint go beyond mere delay; in fact, Ms. Jones alleges that there was an

established policy to delay, one intended to deprive her and others “for the purpose of retaining use

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of money” that Defendants owed insureds. Compl. ¶ 38. A purposeful policy of delay or a

concerted cause of conduct can provide a basis for a claim for IIED. See Fletcher v. Western Nat’l

Life Ins. Co., 10 Cal. App.3 d 376, 401 (1970) (holding that defendant insurance company’s

“concerted course of conduct to induce plaintiff to surrender his insurance policy” was outrageous

conduct supporting a claim for IIED); cf. Hernandez v. General Adjustment Bureau, 199 Cal. App.

3d 999, 1007 (1988) (ruling that plaintiff stated a cause of action for IIED by alleging that

defendants – an independent insurance adjuster and its employee – were aware of her profound

mental anguish, including repeated suicide attempts, as well as the fact that she was the sole

provider for her three children, yet still routinely delayed payment of benefits already approved by

the insurance company). This is particularly true where, as here, it is alleged that the defendants

were aware of the plaintiff’s particular vulnerability.

To the extent Defendants argue that there are insufficient allegations in the complaint to

support there being an established policy or concerted course of conduct, the Court does not agree. 

In addition to the fact that it took more than two years to receive payment after Ms. Jones provided

Defendants with her settlement proposal and documentation, she experienced delay – repeated delay

– in the handling, processing, and payment of her UIM claim at nearly every step of the way. For

example, Ms. Jones alleges that there was a seven-month period, between January and July 2007, in

which no action was taken on her claim despite repeated efforts by her counsel to get a response. 

See Compl. ¶¶ 13-19. Ms. Jones further alleges that other decisions resulting in additional delay of

several months, such as the decision to have Ms. Jones undergo a medical exam and the decision to

switch arbitrators, were made by Defendants. See id. ¶¶ 20, 23. When an agreement was finally

reached, Defendants attempted to renege on the terms of the release. See id. ¶ 27. Even after the

release was signed, it took nearly two months for her to receive the check. See id. ¶ 29. Ms. Jones

has established under Bell Atlantic and Iqbal a facially plausibile claim that the repeated and lengthy

delays were the result of a concerted course of conduct designed to inflict delay on a person whom

Defendants knew was vulnerable.

In so concluding, the Court takes note that whether or not there is facial plausibility may be

informed in part by the potential burden potentially imposed upon the Defendants were the motion

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to dismiss denied. The Seventh Circuit has explained that an implicit rationale of Bell Atlantic and

Iqbal is “that a defendant should not be forced to undergo costly discovery unless the complaint

contains enough detail, factual or argumentative, to indicate that the plaintiff has a substantial case.” 

Limestone Dev. Corp. v. Village of Lemont, 520 F. 3d 797, 802-03 (7th Cir. 2007) (citing Bell

Atlantic, 550 U.S. at 558-59); Riley v. Vilsack, 665 F. Supp. 2d 994, 1003 (W.D. Wisc. 2009)

(stating that “the plausibility standard has its most force when special concerns exist about the

burden of litigation on the defendant or when the theory of the plaintiff seems particularly

unlikely”). See Bell Atlantic, 550 U.S. at 557-59 (discussing risk of allowing “in terrorem” effect 

on settlement if substantial expenditure of time and money are threatened,” and danger of allowing

“potentially massive factual controversy to proceed” if specificity in pleadings not required)

(citations omitted).

In the instant case, allowing the IIED claim to proceed past the pleading stage will not force

Defendants to undergo expansive discovery. As discussed above, the contract-based claims against

National Union have survived, and, in evaluating whether, e.g., National Union breached the implied

covenant of good faith and fair dealing, the parties will likely engage in discovery on what the

policies and practices of National Union and its putative agents are and the reasons for the actions

taken. Thus, discovery on the IIED claim is likely to overlap with much of the discovery on the

other claims in this action. There would be little added burden to Defendants, therefore, in allowing

Ms. Jones’ IIED claim to stand at this stage. 

6. Conspiracy

Ms. Jones asserts a claim for conspiracy against Defendants, alleging that the delay in

processing her claim was intentional and agreed upon. See Compl. ¶ 66. Technically, conspiracy is

not a separate cause of action; rather, it “imposes liability on persons who, although not actually

committing a tort themselves, share with the immediate tortfeasors a common plan or design.” 

Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 510-511 (1994) (citing Wyatt

v. Union Mortgage Co., 24 Cal. 3d 773, 784 (1979)). 

Defendants challenge the conspiracy allegations, arguing that Ms. Jones’s complaint does not

establish any of the three necessary elements of a conspiracy: (1) formation and operation of a

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 The Court notes that “[a]gents and employees of a corporation cannot conspire with their

corporate principal or employer where they act in their official capacities on behalf of the corporation

and not as individuals for their individual advantage.” Wise v. Southern Pacific, 223 Cal. App. 3d 50,

72 (Cal. Ct. App. 1963) (internal citations omitted). Ms. Jones is cautioned to consider this and the

above discussion regarding alternative pleadings in considering any further amendments to the

complaint. 

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conspiracy; (2) wrongful acts done in furtherance of the agreed to plan, and (3) resulting damages. 

See Chicago Title Ins. Co. v. Great Western Financial Corp., 69 Cal. 2d 305, 316 (1968) (stating the

elements of civil conspiracy).

The Court does not agree. In her complaint, Ms. Jones alleges that all Defendants

“knowingly and willingly conspired and agreed among themselves to offer for sale, sell and provide

insurance services to Tutor-Saliba and insureds under the Policy.” Compl. ¶ 66. They also agreed

“to engage in concert in the fraudulent, and wrongful tortious conduct” that she alleges in her

various claims. Id. She identifies the damages suffered as a result. See id. ¶¶ 69-72. She, therefore,

pleads all three necessary elements of a conspiracy.

The question is whether Ms. Jones has alleged enough non-conclusory facts to meet the

plausibility standard of Bell Atlantic and Iqbal. The Court concludes she has. As stated above, she

has sufficiently alleged that the repeated delays in processing her claim and making payment were

the result of a deliberate course of action designed to deprive her of benefits owed under the

contract. That the instances of delay were caused by several players allegedly under the control of

AIG-related entities raises a plausible claim of conspiracy.4

 Moreover, as noted above, the scope of

discovery and correlative burden on Defendants on this claim is not likely to be significantly

increased as a result of this claim. See Limestone Dev. Corp., 520 F.3d at 802-03.

B. Motions to Strike

1. Legal Standard

Defendants have filed not only motions to dismiss pursuant to Rule 12(b)(6) but also motions

to strike pursuant to Rule 12(f). More specifically, Defendants move the Court to strike from Ms.

Jones’s complaint her request for punitive damages. Defendants argue that the request for punitive

damages should be stricken because, as a matter of law, she is not entitled to such a remedy.

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Under Rule 12(f), a “court may strike from a pleading an insufficient defense or any

redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “Immaterial

matter is that which has no essential or important relationship to the claim for relief or the defenses

being pleaded.” Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) (internal quotation

marks omitted), overruled on other grounds, Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994). As

indicated by the language of the rule, “‘[t]he function of a 12(f) motion to strike is to avoid the

expenditure of time and money that must arise from litigating spurious issues by dispensing with

those issues prior to trial. . . .’” Id. When ruling on a motion to strike, a court views the pleading

under attack in the light most favorable to the nonmoving party. See RDF Media Ltd. v. Fox Broad.

Co., 372 F. Supp. 2d 556, 561 (C.D. Cal. 2005). Courts generally disfavor motions to strike because

striking is such a drastic remedy. See Stanbury Law Firm v. IRS, 221 F.3d 1059, 1063 (8th Cir.

2000) (stating that “striking a party’s pleadings is an extreme measure, and, as a result, we have

previously held that ‘motions to strike under Fed. R. Civ. P. 12(f) are viewed with disfavor and are

infrequently granted’”). 

In evaluating Defendants’ argument, the Court looks first to California Civil Code § 3294,

which defines when punitive damages are available for a violation of state law. The statute states in

relevant part:

(a) In an action for the breach of an obligation not arising from

contract, where it is proven by clear and convincing evidence that

the defendant has been guilty of oppression, fraud, or malice, the

plaintiff, in addition to the actual damages, may recover damages

for the sake of example and by way of punishing the defendant.

(b) An employer shall not be liable for damages pursuant to

subdivision (a), based upon acts of an employee of the employer,

unless the employer had advance knowledge of the unfitness of

the employee and employed him or her with a conscious

disregard of the rights or safety of others or authorized or ratified

the wrongful conduct for which the damages are awarded or was

personally guilty of oppression, fraud, or malice. With respect to

a corporate employer, the advance knowledge and conscious

disregard, authorization, ratification or act of oppression, fraud,

or malice must be on the part of an officer, director, or managing

agent of the corporation.

Cal. Civ. Code § 3294. 

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In the instant case, Ms. Jones contends that punitive damages are warranted because

Defendants had a policy of delaying the handling, processing, and payment of insurance benefits

owed to insureds. See, e.g., Compl. ¶¶ 39, 47, 49. As Ms. Jones points out, California courts have

indicated that insurers that have “established policies or practices in claims handling which are

harmful to insureds” may be held liable for punitive damages. Mock v. Michigan Millers Mutual

Ins. Co., 4 Cal. App. 4th 306, 329 (1992) (emphasis omitted). For example, in Neal v. Farmers

Insurance Exchange, 21 Cal. 3d 910 (1978), the California Supreme Court held that an award of

punitive damages was justified based on evidence that the defendant insurer was pursuing a

conscious policy to take advantage of the plaintiff insured’s unfortunate financial circumstances as a

lever to force a settlement more favorable to the defendant than the facts otherwise would have

warranted. See id. at 923. That there was such a policy was indicated by the defendant insurer’s

“Claims Representative Field Manual,” which advised its employees to “sense opportune times for

settlement,” asserting that “[s]uch things as a marriage or death in the family, the purchase of a

home or automobile will present the ordinary claimant with a financial situation which will suggest

to him the advisability of getting his money out of his claim” and that “[i]f the injury is such that the

settlement may be tactfully approached, the claims representative should follow through with

appropriate discussion.” Id. 

As noted above, Ms. Jones alleges that Defendants purposefully delayed processing and

payment of her UIM claim, and the Court has found that for pleading purposes she has adequately

alleged these actions were purposefully taken pursuant to policy and/or a concerted course of action. 

The Court also found that Defendants are alleged to have taken advantage of her vulnerable position. 

This conduct, as alleged, is sufficient to state a claim for punitive damages under § 3294(a). The

allegation of purposefulness is also sufficient under § 3294(b) to establish that Defendants

authorized or ratified, e.g., the wrongful conduct of Ms. Paules. See Cal. Civ. Code § 3294(b)

(providing that an employer is liable for punitive damages based an employee’s acts if the employer

either (1) had advance knowledge of the employee’s unfitness and employed her with a conscious

disregard of the rights or safety of others; or (2) authorized or ratified the employee’s wrongful

conduct; or (3) was personally guilty of oppression, fraud, or malice).

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Again discovery related to the claim for punitive damages will not add substantially greater

burden than that related to the underlying claims. The motion to strike is therefore denied.

III. CONCLUSION

For the foregoing reasons, Defendants’ motions to dismiss are granted in part and denied in

part. More specifically:

(1) AIG, Inc. and AIG Risk Management’s motions to dismiss the claims for breach of

contract and breach of the implied covenant of good faith and fair dealing are granted with leave to

amend;

(2) National Union’s motion to dismiss the claims for breach of contract and breach of

the implied covenant is denied;

(3) Defendants’ motions to dismiss the fraud and interference-with-contract claims are

granted with leave to amend except that the claim for interference against National Union is

dismissed with prejudice;

(4) Defendants’ motions to dismiss the claims for IIED and conspiracy are denied; and

(5) Defendants’ motions to strike are denied. 

As to claims on which Ms. Jones has leave to amend, any such amendment must be filed

within thirty (30) days of the date of this order, except that the contract-based claims against entities

other than National Union may be filed only if discovery provides a basis for further allegations.

This order disposes of Docket Nos. 5, 6, 15, and 16.

IT IS SO ORDERED.

Dated: July 20, 2010

_________________________ EDWARD M. CHEN

United States Magistrate Judge

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