Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_19-cv-03667/USCOURTS-cand-3_19-cv-03667-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Petition for Removal

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

JANICE HUTSON, et al.,

Plaintiffs,

v.

AMCO INSURANCE CO INC, et al.,

Defendants.

Case No. 19-cv-03667-EMC 

ORDER GRANTING IN PART AND 

DENYING IN PART DEFENDANTS’

MOTIONS TO DISMISS SECOND 

AMENDED COMPLAINT

Docket No. 30-31

Plaintiffs are the heirs of a woman named Betty Hutson. They have sued two companies: 

AMCO Insurance Co. and Wells Fargo Bank, NA. Previously, AMCO answered the original 

complaint as well as the first amended complaint (“FAC”). See Docket No. 1-3 (answer); Docket 

No. 15 (answer). Wells moved to dismiss the FAC. The Court granted Wells’s motion but 

permitted the filing of a second amended complaint (“SAC”). Docket No. 18 (minutes). After 

Plaintiffs filed the SAC, both AMCO and Wells moved for dismissal. These are the motions 

currently pending before the Court.1

Having considered the parties’ briefs and accompanying submissions,2as well as the oral 

argument of counsel, the Court hereby GRANTS in part and DENIES in part both motions to 

dismiss.

 

1 Plaintiffs did not timely file their opposition briefs. Although the Court does not condone this 

failure, Defendants do not appear to have been prejudiced as a result. The Court therefore shall 

consider the opposition briefs but warns Plaintiffs that failure to comply with the Civil Local 

Rules in the future may result in sanctions.

2 The parties’ briefs include the supplemental briefs requested by the Court. The Court notes that 

Plaintiffs exceeded the scope of the supplemental brief (i.e., subject matter) permitted by the 

Court. Similar to above, the Court warns Plaintiffs that failure to comply with Court orders in the 

future may result in sanctions.

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I. FACTUAL & PROCEDURAL BACKGROUND

In the SAC, Plaintiffs allege as follows.

Betty Hutson was married to Tommy Gremillion. The two owned certain real property, 

located in Richmond, California, as joint tenants with the right of survivorship. See SAC ¶ 7. The 

property was protected by a homeowners’ insurance policy,

3 which was obtained “through an 

insurance agent” whose “identity is currently unknown.” SAC ¶¶ 8-9.

In July 2006, Mr. Gremillion died, thus “leaving the [real] property to vest in his wife, 

Betty Hutson.” SAC ¶ 10. 

In May 2007, Betty Hutson obtained a loan from World Savings Bank (which Wells later 

acquired), with the loan being secured by a deed of trust on the real property. See Wells’s RJN, 

Ex. A (deed of trust). The deed of trust required that Ms. Hutson “obtain and maintain hazard 

insurance” which could cover, inter alia, “loss or damage caused by fire.” Wells’s RJN, Ex. D 

(Deed of Trust at 5). The deed of trust also required that the insurance policy “include what is 

known as a Standard Mortgagee Clause to protect Lender.” Wells’s RJN, Ex. D (Deed of Trust at 

5) (emphasis omitted). Finally, the deed of trust included the following provision:

The amount paid by the insurance company is called “Proceeds.” 

Any Proceeds received will be applied first to reimburse Lender for 

costs and expenses incurred in connection with obtaining the 

Proceeds, and then, at Lender’s option and in the order and 

proportion as Lender may determine in its sole and absolute 

discretion, regardless of any impairment or lack of impairment of 

security, as follows: (A) to the extent allowed by applicable law, to 

the Sums Secured in a manner that Lender determines and/or (B) to 

the payment of costs and expenses of necessary repairs or to the 

restoration of the Property to a condition satisfactory to Lender, such 

application to be made in the manner and at the times as determined 

by Lender.

Well’s RJN, Ex. D (Deed of Trust at 6).4

 

3

“Although it is frequently said that property is insured, this is inaccurate. A property insurance 

policy is not an insurance of a specific thing without regard to ownership, but is a special 

agreement of indemnity with the person insured against such loss or damage as he or she may 

sustain.” 2 Witkin, Summ. of Cal. Law 11th Ins. § 107; see also Russell v. Williams, 58 Cal. 2d 

487, 490 (1962) (stating that “[i]t is a principle of long standing that a policy of fire insurance does 

not insure the property covered thereby, but is a personal contract indemnifying the insured 

against loss resulting from the destruction of or damage to his interest in that property”).

4 To the extent the provision indicates that Wells has the above authority “regardless of any 

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In July 2007, the insurance agent transferred her entire book of business to AMCO, and 

AMCO bought, inter alia, the policy that covered the real property. See SAC ¶¶ 15, 20. 

According to Plaintiffs, at the time that AMCO bought the policy, it knew – or at least should have 

known – that Mr. Gremillion was dead. See SAC ¶¶ 20, 51. 

In September 2007, AMCO issued its own insurance policy for the real property at issue. 

The named insured on the policy was Mr. Gremillion, even though AMCO allegedly knew he had 

died. See SAC ¶ 18; see also AMCO Mot., Ex. A (insurance policy in effect from September 

2016 to 2017, Bates stamp AMCO 00015) (listing named insured as Mr. Gremillion). It appears 

the policy reflected Wells was the mortgagee with respect to the real property at issue. See 

AMCO Mot., Ex. A (insurance policy in effect from September 2016 to 2017, Bates stamp AMCO 

00015) (identifying Wells as the mortgage loss payee); see also SAC ¶ 16 (alleging that the 

insurance agent told AMCO that Wells was the mortgagee). 

Betty Hutson made payments on the policy for many years. See SAC ¶ 23. According to 

Plaintiffs, Betty Hutson did not know about the error in the policy with respect to Mr. 

Gremillion’s name because she was not directly billed for the insurance; rather, “all billing 

statements were sent to Wells Fargo” as a part of “‘direct mortgage’ billing.”5 SAC ¶ 16.

In October 2014, Betty Hutson died. See SAC ¶ 23. AMCO allegedly knew or should 

have known that Betty Hutson died in 2014 but did not change the name on the policy. See SAC ¶ 

53.

In February 2017, several years after Betty Hutson’s death, there was a fire on the real 

property at issue. The fire consumed part of the house and caused extensive damage. See SAC ¶

24. Also, at the time of the fire, the home was used “as a board and care facility for several 

 

impairment or lack of impairment of security,” that is (as Wells points out) consistent with 

California Civil Code § 2924.7(b). See Cal. Civ. Code § 2924.7(b) (“The provisions of any deed 

of trust or mortgage on real property which authorize any . . . mortgage . . . to receive and control 

the disbursement of the proceeds of any policy of fire, flood, or other hazard insurance respecting 

the property shall be enforceable whether or not impairment of the security interest in the property 

has resulted from the event that caused the proceeds of the insurance policy to become payable.”).

5 Plaintiffs do not address in the SAC whether, over the years, Betty Hutson ever received a 

declarations page for the insurance policy bearing Mr. Gremillion’s name.

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disabled persons,” and the boarders “lost significant personal property.” SAC ¶¶ 44-45. “The 

residents of the board and care each lost significant personal property none of which either 

Defendant has agreed to pay.” SAC ¶ 45:

Several days after the fire, AMCO claimed that it learned for the first time that Mr. 

Gremillion had been dead for 10 years and Betty Hutson for 3 years. See SAC ¶ 25. AMCO 

thereafter issued a notice of cancellation for the policy. See SAC ¶ 26.

When Plaintiffs contacted AMCO about coverage for the loss related to the fire, AMCO 

initially told them that “there was no coverage at all.” SAC ¶ 29. After Plaintiffs obtained legal 

counsel, AMCO “finally admitted the home was covered, but denied coverage for any [personal] 

property loss or the loss of use of the [real] property.” SAC ¶ 30; see also SAC ¶ 59 (alleging that 

AMCO refused to pay for loss of personal property and business income loss). In addition, 

AMCO claimed that the real property had a low value and proposed a low cost for repair. See

SAC ¶ 31. Moreover, AMCO refused to communicate with Plaintiffs or their counsel and claimed 

instead that it was working directly with Wells, even though Wells had not actually opened a 

formal claim. See SAC ¶¶ 33-34. According to Plaintiffs, after Wells opened a formal claim, 

AMCO “unreasonably delayed the investigation and issuing of the construction check.” SAC ¶ 

45; see also SAC ¶ 54 (alleging that AMCO “delayed in determining coverage for the loss”).

As for Wells, it forced Plaintiffs’ contractor that was carrying out the repairs “to work on a 

very limited scope based on the estimate prepared by AMCO.” SAC ¶ 36. The true cost of repair 

was greater. See SAC ¶ 37. Wells refused to work with Plaintiffs’ counsel “to secure a more 

realistic scope based on the extensive damage to the home.” SAC ¶ 41. In addition, Wells still 

has not paid for all of the repair work that it signed off on. See SAC ¶ 43. Finally, Wells delayed 

in getting disbursed funds to Plaintiffs and/or the contractor “so that it took over a year [for] 

construction to be completed.” SAC ¶ 46.

Based on, inter alia, the above allegations, Plaintiffs assert the following causes of action.

(1) Negligence.

(2) Breach of contract (against AMCO only). 

(3) Bad faith (against AMCO only). 

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(4) Unjust enrichment (against AMCO only). 

(5) Breach of fiduciary duty (against Wells only). 

(6) Intentional and negligent misrepresentation (against AMCO only). 

II. DISCUSSION

A. Legal Standard

Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include “a short and plain 

statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 

complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil 

Procedure 12(b)(6). See Fed. R. Civ. P. 12(b)(6). To overcome a Rule 12(b)(6) motion to dismiss 

after the Supreme Court’s decisions in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic 

Corp. v. Twombly, 550 U.S. 544 (2007), a plaintiff’s “factual allegations [in the complaint] ‘must . 

. . suggest that the claim has at least a plausible chance of success.’” Levitt v. Yelp! Inc., 765 F.3d 

1123, 1135 (9th Cir. 2014). The court “accept[s] factual allegations in the complaint as true and 

construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. 

Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But “allegations in a 

complaint . . . may not simply recite the elements of a cause of action [and] must contain sufficient 

allegations of underlying facts to give fair notice and to enable the opposing party to defend itself 

effectively.” Levitt, 765 F.3d at 1135 (internal quotation marks omitted). “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.” Iqbal, 556 U.S. at 678. “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. (internal quotation marks omitted). 

B. Wells’s Motion to Dismiss

Plaintiffs have asserted two claims against Wells: (1) breach of fiduciary duty and (2) 

negligence. The SAC is not a model of clarity in identifying what conduct Wells engaged in that 

gave rise to the two causes of action. At the hearing, however, Plaintiffs narrowed their claims to 

the following factual predicate: Wells approved of $87,000 of work on the dwelling but then never 

paid for the work. See SAC ¶ 43 (alleging that, “[e]ven though Wells Fargo supervised and 

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ultimately signed off on the repairs, over $87,000 of work that Wells Fargo has already signed off 

on, and the City Inspector approved, remains unpaid for”). Plaintiffs provided additional 

clarification at the hearing – i.e., that Plaintiffs and Wells met, Wells approved of $87,000 in 

repairs, but then Wells never passed on to AMCO the claim for $87,000.6 

1. Breach of Fiduciary Duty

“‘The elements of a cause of action for breach of fiduciary duty are the existence of a 

fiduciary relationship, breach of fiduciary duty, and damages.’” Filbin v. Fitzgerald, 211 Cal. 

App. 4th 154, 174 (2012). In the instant case, Wells argues that Plaintiffs have failed to 

adequately plead the existence of a fiduciary relationship. According to Wells, it had no special 

relationship with Betty Hutson; rather, the two simply had an arms’ length, lender-borrower 

relationship.

“Whether a fiduciary duty exists is generally a question of law” (as opposed to “[w]hether 

the defendant breached that duty towards the plaintiff [which] is a question of fact”). Marzec v. 

Public Employees’ Ret. Sys., 236 Cal. App. 4th 889, 915 (2015).

[A] fiduciary relationship is “‘any relation existing between parties 

to a transaction wherein one of the parties is in duty bound to act 

with the utmost good faith for the benefit of the other party. Such a 

relation ordinarily arises where a confidence is reposed by one 

person in the integrity of another, and in such a relation the party in 

whom the confidence is reposed, if he voluntarily accepts or 

assumes to accept the confidence, can take no advantage from his 

acts relating to the interest of the other party without the latter's 

knowledge or consent. ...’” 

[Notably], “‘[b]efore a person can be charged with a fiduciary 

 

6 Presumably, Plaintiffs narrowed their claims to this specific factual predicate because other 

factual predicates were problematic. For example:

• Plaintiffs suggested in the SAC that AMCO should have advocated on behalf of Plaintiffs 

to get more repairs. But the SAC does not provide any specifics as to what repairs 

Plaintiffs wanted that Wells unreasonably refused to pursue. 

• Similarly, Plaintiffs suggested in the SAC that Wells should have changed the name on the 

insurance policy to reflect that Betty Hutson was the owner (Mr. Gremillion having died). 

But the SAC does not contain any allegations indicating how Wells knew or should have 

known that Mr. Gremillion was dead.

• Finally, Plaintiffs suggested that Wells delayed in passing on checks received from AMCO 

to cover the cost of repairs, but this claim is conclusorily pled, providing no information as 

to when Wells received checks and when it eventually passed them over to Plaintiffs. 

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obligation, he must either knowingly undertake to act on behalf and 

for the benefit of another, or must enter into a relationship which 

imposes that undertaking as a matter of law.’” 

Cleveland v. Johnson, 209 Cal. App. 4th 1315, 1338 (2012) (emphasis added).

In addition, as a general matter, 

[t]he relationship between a lending institution and its borrowerclient is not fiduciary in nature. A commercial lender is entitled to 

pursue its own economic interests in a loan transaction. This right is 

inconsistent with the obligations of a fiduciary which require that 

the fiduciary knowingly agree to subordinate its interests to act on 

behalf of and for the benefit of another.

Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal. App. 3d 1089, 1093 n.1 (1991). Thus, “absent 

special circumstances . . . a loan transaction is at arm’s length and there is no fiduciary relationship 

between the borrower and lender.” Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 

466 (2006); cf. Nymark, 231 Cal. App. 3d at 1096 (stating that, “[a]s a general rule, a financial 

institution owes no duty of care to a borrower when the institution’s involvement in the loan 

transaction does not exceed the scope of its conventional role as a mere lender of money”).

Given the applicable law, Plaintiffs’ claim for breach of fiduciary duty fails. The 

relationship between Wells and Betty Huston was lender-borrower (mortgagee-mortgagor). Thus, 

Plaintiffs must show that there are special circumstances giving rise to a fiduciary relationship, 

such as Wells deliberately undertaking to act on behalf and for the benefit of Betty Hutson (as 

opposed to itself as the lender).

Plaintiffs have failed to make allegations suggesting a fiduciary relationship. For example, 

Plaintiffs allege that, “[b]y entering into the joint venture in the mortgage, Wells Fargo was in the 

position of a fiduciary to [Betty Hutson].” SAC ¶ 64. But this allegation clearly runs against 

well-established California law that a lender-borrower relationship in and of itself is not enough to 

establish a fiduciary relationship. Moreover, the deed of trust makes clear that Wells’s interest 

was to protect itself and not Betty Hutson. See Well’s RJN, Ex. D (Deed of Trust at 6) (providing 

that insurance proceeds “will be applied first to reimburse Lender for costs and expenses incurred 

in connection with obtaining the Proceeds, and then, at Lender’s option and in the order and 

proportion as Lender may determine in its sole and absolute discretion”).

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Plaintiffs also assert there was a fiduciary relationship because the AMCO insurance 

policy included a lender’s loss payable endorsement, which essentially created a contractual 

relationship between AMCO and Wells, and Betty Hutson was the intended third-party beneficiary 

of that contract. In Home Savings of America, F.S.B. v. Continental Insurance Co., 87 Cal. App. 

4th 835 (2001), a California state court explained that there are two different kinds of lender’s loss 

payable endorsements:

The simple or open loss payable clause was first added to insurance 

policies with the intention of protecting the secured creditor. The 

simple or open “loss payable clause[] directs the insurer to pay the 

proceeds of the policy to the lienholder, as its interest may appear, 

before the insured receives payment on the policy. Under this type 

of policy, the lienholder is simply an appointee to receive the 

insurance fund to the extent of its interest, and its right of recovery 

is no greater than the right of the insured. There is no privity of 

contract between the two parties because there is no consideration 

given by the lienholder to the insured. Accordingly, a breach of the 

conditions of the policy by the insured would prevent recovery by 

the lienholder.”

To afford even greater protection to the secured creditor, it became 

customary to modify the simple or open loss payable clause “to 

provide that the lender's coverage could not be forfeited by the act or 

default of any other person. This modified provision [originally 

known as a union or New York clause] came to be known as a 

standard mortgage clause.” . . .

Under the standard loss payable clause, “a lienholder is not subject 

to the exclusions available to the insurer against the insured because 

an independent or separate contract of insurance exists between the 

lienholder and the insurer. In other words, there are two contracts of 

insurance within the policy – one with the lienholder and the insurer 

and the other with the insured and the insurer.”

The typical consideration given by the lienholder in return for 

obtaining a standard clause is the lienholder's promise to pay 

premiums on demand. “The union, standard or New York clause 

provides that the owner/mortgagor's acts or neglect will not 

invalidate the insurance provided that if the owner/mortgagor fails to 

pay premiums due, the lienholder/mortgagee shall on demand pay 

the premiums. In return for incurring premium liability, the 

lienholder/mortgagee is freed from the policy defenses which the 

insured might have against the owner/mortgagor. The union, 

standard or New York loss payable clause is then an agreement 

between the lienholder/mortgagee and the insurer independent of the 

policy contract between the owner/mortgagor and the insurer.”

Id. at 841-43.

AMCO has submitted to the Court a copy of the AMCO insurance policy in place at the 

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time of the fire, and Plaintiffs do not dispute that it is a true and correct copy. That policy does 

contain a “Lender’s Loss Payable Endorsement.” AMCO Mot., Ex. A (insurance policy in effect 

from September 2016 to 2017, Bates stamp AMCO 00050). The endorsement includes both a 

simple/open loss payable clause and a standard loss payable clause. See AMCO Mot., Ex. A 

(insurance policy in effect from September 2016 to 2017, Bates stamp AMCO 00050). Because of 

the standard clause, there is a separate and independent contract between AMCO and Wells, as 

Plaintiffs contend.7 That specific contract is for the benefit of Wells, as indicated by the 

consideration for the agreement – i.e., Wells’s promising to step in and pay premiums. There is 

nothing in the endorsement suggesting that Betty Hutson (or even Mr. Gremillion) as the asserted 

insured was an intended third-party beneficiary with respect to the AMCO-Wells contract. The 

contract provision is intended to benefit Wells, not any insured. See generally Loduca v. Polyzos, 

153 Cal. App. 4th 334, 341 (2007) (“[A] party not named in the contract may qualify as a 

beneficiary under it where the contracting parties must have intended to benefit the unnamed party 

and the agreement reflects that intent.”).

Accordingly, the Court dismisses the claim for breach of fiduciary duty. The dismissal is 

with prejudice as nothing in the SAC nor the opposition brief suggests a potentially viable claim.

2. Negligence

“The elements of negligence are: (1) defendant’s obligation to 

conform to a certain standard of conduct for the protection of others 

against unreasonable risks (duty); (2) failure to conform to that 

standard (breach of the duty); (3) a reasonably close connection 

between the defendant's conduct and resulting injuries (proximate 

cause); and (4) actual loss (damages).”

McGarry v. Sax, 158 Cal. App. 4th 983, 994 (2008). Wells challenges the adequacy of Plaintiffs’ 

allegations on legal duty.

“The existence of a legal duty to use reasonable care in a particular factual situation is a 

question of law for the court to decide.” Id. 

 

7

In its papers, AMCO seems to concede that there was a contract between it and Wells based on 

the endorsement. See AMCO Reply at 4 (“Because of [the] separate contract of insurance, AMCO 

paid $161,586.51 to Wells Fargo as the cost of repair of the damaged residence.”).

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The determination whether in a specific case the defendant will be 

held liable to a third person not in privity is a matter of policy and 

involves the balancing of various factors, among which are [1] the 

extent to which the transaction was intended to affect the plaintiff, 

[2] the foreseeability of harm to him, [3] the degree of certainty that 

the plaintiff suffered injury, [4] the closeness of the connection 

between the defendant's conduct and the injury suffered, [5] the 

moral blame attached to the defendant's conduct, and [6] the policy 

of preventing future harm.

Biakanja v. Irving, 49 Cal. 2d 647, 650 (1958). 

As noted above, Plaintiffs have now narrowed their negligence claim to the following 

factual predicate: that Plaintiffs and Wells met, Wells approved of $87,000 in repairs, but then 

Wells never passed on to AMCO the claim for $87,000. Here, Plaintiffs have made sufficient 

allegations in support of a legal duty with respect to this factual predicate. The alleged interaction 

between Plaintiffs and Wells was intended to affect Plaintiffs; harm to Plaintiffs was foreseeable if 

Wells did not submit the claim; and there is a close connection between Wells’s failure to act and 

the alleged injury suffered. Plaintiffs have sufficiently alleged facts which could establish a duty.

The Court therefore denies the motion to dismiss the negligence claim. To the extent 

Wells argues that certain damages are not recoverable based on the alleged misconduct, that is a 

question of fact that cannot be resolved at this stage of the proceedings.

C. AMCO’s Motion to Dismiss

In its motion, AMCO argues for dismissal because Mr. Gremillion was the named insured 

on the policy but, because Mr. Gremillion was dead at the time AMCO issued its own policy in 

2007,8a contract could not have been formed.

As an initial matter, the Court notes, that per the SAC, AMCO knew or should have known 

at the time it issued its own policy that Mr. Gremillion was dead. But because this allegation is 

conclusorily pled – with no factual allegations indicating how AMCO knew or should have known 

 

8 As noted above, the SAC indicates that, prior to AMCO issuing its own policy in 2007, Mr. 

Gremillion and/or Betty Hutson had insurance through a different company and AMCO bought 

that policy. Because AMCO issued its own policy in 2007, Plaintiffs’ reference, in their 

supplemental brief, to California Insurance Code § 304 is not on point. See Cal. Ins. Code § 304 

(providing that, “[i]n the case of partners, joint owners, or owners in common, who are jointly 

insured, a transfer of interest by one to another thereof does not avoid insurance, even though it 

has been agreed that the insurance shall cease upon an alienation of the subject insured”).

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that Mr. Gremillion was dead – the Court gives it no credit.

9

 That being the case, the Court agrees 

with AMCO that the allegations in the SAC, on their face, establish that no contract was ever 

formed between Mr. Gremillion and AMCO.10 Consequently, Plaintiffs have failed to state a 

claim for breach of contract or bad faith, both of which are dependent on there being an insurance 

contract. Plaintiffs’ negligence claim – as pled – is also dependent on there being an insurance 

contract and therefore that claim is not adequately pled either. See SAC ¶ 54 (alleging negligence 

based on refusal to deal with Plaintiffs, misrepresenting that AMCO was working with Wells 

when it was not, and not correcting the name of the insured on the policy).

Plaintiffs protest that they only made the allegation that AMCO issued its own policy in 

2007 on information and belief – i.e., AMCO gave them this information but it is not clear to them 

that the information is necessarily correct. Plaintiffs add that they have difficulty in understanding 

how AMCO could have issued a policy to Mr. Gremillion in 2007 when he had already passed and 

therefore could not have signed any policy.11 However, Plaintiffs have not pointed to anything 

suggesting that AMCO and Mr. Gremillion had an insurance contract at any point prior to his 

death. Plaintiffs’ assertion that there was one is speculative.12

Accordingly, dismissal of the breach of contract, bad faith, and negligence claims is 

 

9 The Court acknowledges that, in their supplemental brief, Plaintiffs argue that, “when AMCO 

bought the initial book of business from the Agent, it was at least on inquiry notice why the name 

Gremillion appeared on the Policy when the name on the deed was Betty Hutson.” Pls.’ Supp. Br. 

at 6. However, Plaintiffs have not explained how AMCO would have known that Betty Hutson’s 

name was on the deed of trust; there is no allegation that AMCO as the insurer would have 

received a copy of the deed of trust.

10 In their supplemental brief, Plaintiffs contend that there is nothing wrong with Betty Hutson 

“purchasing insurance under Tommy Gremillion’s name” because “most insurance companies 

allow people to purchase insurance for someone else.” Pls.’ Supp. Br. at 3. But Plaintiffs have 

cited no authority that allows an individual to purchase insurance for another individual when the 

latter is already dead.

11 For purposes of this order, the Court assumes that a homeowners’ insurance policy cannot be 

issued without the insured signing the insurance contract.

12 Plaintiffs make no affirmative claim for reformation of the contract. Any claim for reformation 

would be problematic. See Cal. Civ. Code § 3399 (“When, through fraud or a mutual mistake of 

the parties, or a mistake of one party, which the other at the time knew or suspected, a written 

contract does not truly express the intention of the parties, it may be revised on the application of a 

party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights 

acquired by third persons, in good faith and for value.”) (emphasis added).

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appropriate. However, the Court shall dismiss these claims without prejudice. As discussed 

below, Plaintiffs have a viable claim for unjust enrichment and, in litigating this claim, it is fair for 

Plaintiffs to obtain from AMCO, as part of discovery, any and all insurance policies related to Mr. 

Gremillion, Betty Hutson, and/or the real property at issue. This would include the very first 

insurance policy issued by AMCO plus renewal policies, as well as any insurance policy issued by 

another company but which AMCO purchased. If Plaintiffs learn from this discovery that AMCO

specifically and Mr. Gremillion had an insurance contract before he died, then Plaintiffs may have 

a basis to ask for leave to amend, i.e., to re-introduce the claims for breach of contract, bad faith, 

and negligence.13 

Besides the claims for breach of contract, bad faith, and negligence, Plaintiffs have 

asserted claims for unjust enrichment and intentional/negligent misrepresentation. The Court 

declines to dismiss the unjust enrichment claim because, if no contract was ever formed between 

Mr. Gremillion and AMCO, then arguably AMCO should have to disgorge the insurance 

premiums that Betty Hutson and/or her heirs paid. At the hearing, AMCO suggested that it should 

not have to give up any premiums because Plaintiffs still obtained a benefit that exceeded the 

amount of the premiums (i.e., repairs were made to the dwelling because of the separate contract

between AMCO and Wells), but that issue (and, e.g., whether there should be some kind of offset 

or proration) is not properly before the Court at this time.

As for the intentional/negligent misrepresentation claim, here, the Court dismisses, and 

with prejudice. According to Plaintiffs, AMCO misrepresented that the insurance policy did not 

cover personal property loss because no named insured lived on the premises on the date of the 

fire when, in fact, “insured” is defined in the policy to include the adult children of the homeowner 

living on the premises. See SAC ¶ 70. Plaintiffs also claim that AMCO suppressed the fact that 

the lender’s loss payable endorsement did not bar AMCO from communicating directly with the 

 

13 If there was at some point a valid contract between AMCO and Mr. Gremillion, California 

Insurance Code § 303 might come into play. See 2 Witkin, Summ. of Cal. Law 11th Ins. § 107 

(noting that, under § 303, “a change of interest by will or succession on the death of the insured 

[does not] avoid the insurance; the insured’s interest in the insurance passes to the person taking 

the interest in the insured subject matter”). Absent such a predicate, however, the Court need not 

address its scope and applicability.

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insured (i.e., AMCO had claimed it could only communicate with Wells as the lender). See SAC ¶

73. Neither of these factual predicates is sufficient to support a claim for intentional/negligent 

misrepresentation. For both intentional and negligent misrepresentation, there must be reasonable 

reliance on the part of the plaintiff. See Zakaria v. Gerber Prods. Co., No. LA CV15-00200 JAK 

(Ex), 2016 U.S. Dist. LEXIS 184861, at *39 (C.D. Cal. Mar. 23, 2016) (noting that reasonable 

reliance is an element of both intentional and negligent misrepresentation). Here, even if AMCO 

made a misrepresentation about the term “insured,” Plaintiffs could not have reasonably relied on 

the misrepresentation because the insurance policy on its face provided the definition of the term 

“insured.” As for Plaintiffs’ contention that AMCO suppressed information related to the lender’s 

loss payable endorsement, that claim is similarly not viable because the endorsement was available 

to Plaintiffs as part of the policy. The Court dismisses with prejudice because nothing in 

Plaintiffs’ opposition indicates that amendment on the misrepresentation claim would not be futile.

III. CONCLUSION

For the foregoing reasons, the Court grants in part and denied in part both motions to 

dismiss. More specifically:

• The claim for breach of fiduciary duty against Wells is dismissed with prejudice.

• The negligence claim against Wells is not dismissed. However, the claim is limited 

to the factual predicate identified above (i.e., that Wells failed to pass on to AMCO 

a claim for $87,000 in repairs that it had approved).

• The claims for breach of contract, bad faith, and negligence against AMCO are 

dismissed but without prejudice. Plaintiffs are not precluded from moving for 

leave to amend if they learn through discovery that an insurance contract existed 

between AMCO specifically and Mr. Gremillion prior to his death.

• The claim for unjust enrichment against AMCO is not dismissed.

• The claim for intentional/negligent misrepresentation against AMCO is dismissed 

with prejudice.

As for Plaintiffs’ motion for leave to amend, it is moot in light of the Court’s rulings

above. No further amendments are permitted at this time, except, as noted above, Plaintiffs may 

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move for leave to amend if they learn through discovery that an insurance contract existed 

between AMCO specifically and Mr. Gremillion prior to his death.

This order disposes of Docket Nos. 30 and 31.

IT IS SO ORDERED.

Dated: January 9, 2020

______________________________________

EDWARD M. CHEN

United States District Judge

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