Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01357/USCOURTS-caed-2_06-cv-01357-1/pdf.json

Parties Involved:
Monarch Plumbing Company, Inc.
Counter Defendant
Ranger Insurance Company
Counter Claimant
Riverstone Claims Management, LLC
Counter Claimant

Document Text:

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

MONARCH PLUMBING COMPANY,

INC.,

NO. CIV. S-06-1357 WBS KJM

Plaintiff,

v. MEMORANDUM AND ORDER RE:

MOTION TO DISMISS

RANGER INSURANCE COMPANY and

RIVERSTONE CLAIMS MANAGEMENT,

LLC,

Defendants.

----oo0oo----

Plaintiff Monarch Plumbing Company, Inc., has filed

suit against defendants Ranger Insurance Company and Riverstone

Claims Management, LLC alleging, inter alia, breach of contract

and breach of the covenant of good faith and fair dealing. 

Defendants now move to dismiss for failure to state a claim. For

the following reasons, the court will grant defendant’s motion in

part.

///

///

///

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I. Factual and Procedural Background

Plaintiff is a contract plumbing business. (Compl. ¶

1.) On December 15, 1998, it obtained a Commercial General

Liability (“CGL”) policy from defendant Ranger Insurance Company

(“Ranger”). (Townsend Decl. Ex. A at 1, 15.) This policy

covered, among other things, defects in plaintiff’s product or

work. (Id.) When claims for defective plumbing installations

arose, however, plaintiff was dissatisfied with how Ranger and

its construction defects claims manager, defendant Riverstone

Claims Management (“Riverstone”), handled these disputes. 

(Compl. ¶ 9(a).) It thus filed this lawsuit to clarify the

parties’ rights and duties under the insurance policy.

In particular, plaintiff objects to defendants’ refusal

to permit plaintiff to have input on claim assessments, defense

strategy, and decisions regarding whether to settle claims and

for how much. (Id.) Plaintiff also asserts that the defense

attorneys retained by defendants could not represent its

interests and defendants’ interests at the same time. (Id. ¶

9(e).) Finally, plaintiff complains that defendants involved

themselves in the resolution of additional claims that plaintiff

did not actually tender for defense. (Id. ¶ 9(f), 13, 16(k).)

As a result of this course of conduct, plaintiff

alleges that it has been required to pay higher insurance

premiums, which have resulted from defendants’ autocratic

decisions to pay off many of the claims. (Id. ¶ 16(a).) 

Plaintiff seeks declaratory judgment establishing its right to

decide whether or not to tender claims to defendants for defense

(Claim One), damages for breach of contract and breach of the

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covenant of good faith and fair dealing (Claims Two and Three),

and disgorgement of ill-gotten profits, actionable under

California Business and Professions Code §§ 17200-17210 (Claim

Four). Defendants dispute plaintiff’s ability to raise any of

these claims, primarily arguing that an insurer’s right to pursue

defense of its insureds, without input from the insured, is well

established under California law and that defendants’ actions did

not violate the terms of the insurance contract between the

parties. Additionally, defendants contend that Riverstone, as an

agent of Ranger, cannot be held liable under any circumstances. 

II. Discussion

A. Legal Standard

On a motion to dismiss, the court must accept the

allegations in the complaint as true and draw all reasonable

inferences in favor of the pleader. Scheuer v. Rhodes, 416 U.S.

232, 236 (1974); Cruz v. Beto, 405 U.S. 319 (1972). The court

may not dismiss for failure to state a claim unless “it appears

beyond doubt that plaintiff can prove no set of facts in support

of his claim which would entitle him to relief.” Van Buskirk v.

CNN, Inc., 284 F.3d 977, 980 (9th Cir. 2002). Dismissal is

appropriate, however, where the pleader fails to allege facts

that support a cognizable legal theory. Balistreri v. Pacifica

Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988); see also Conley

v. Gibson, 355 U.S. 41, 47 (1957) (complaint must “give the

defendant fair notice of what the plaintiff’s claim is and the

grounds upon which it rests”).

In general, the court may not consider material other

than the facts alleged in the complaint when deciding a motion to

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dismiss. Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996)

(“A motion to dismiss . . . must be treated as a motion for

summary judgment . . . if either party . . . submits materials

outside the pleadings in support or opposition to the motion, and

if the district court relies on those materials.”). However, the

court may consider extrinsic documents, such as contracts and

insurance policies, when “the plaintiff’s claim depends on the

contents of a document, the defendant attaches the document to

its motion to dismiss, and the parties do not dispute the

authenticity of the document, even though the plaintiff does not

explicitly allege the contents of that document in the

complaint.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir.

2005); see also Fin. Sec. Assurance, Inc. v. Stephens, Inc., 450

F.3d 1257, 1264 (11th Cir. 2006) (“This court recognizes an

exception, however, in cases in which a plaintiff refers to a

document in its complaint, the document is central to its claim,

its contents are not in dispute, and the defendant attaches the

document to its motion to dismiss.”). This exception is designed

to “[p]revent[] plaintiffs from surviving a Rule 12(b)(6) motion

by deliberately omitting references to documents upon which their

claims are based.” Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th

Cir. 1998) (citation omitted), superceded by statute on other

grounds as recognized in Abrego Abrego v. The Dow Chem. Co., 443

F.3d 676, 681 (9th Cir. 2006).

Plaintiff argues that the court should not consider the

terms of the policy it purchased from Ranger because “the

gravamen of the Complaint is violation of basic contractual

duties and implied covenants, rather than of specific policy

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provisions.” (Pl.’s Opp’n to Defs.’ Mot. to Dismiss 3 n.1.) 

However, as noted above, the Ninth Circuit does not require that

the complaint “explicitly allege the contents of [a] document”

before allowing its consideration on a motion to dismiss. 

Knievel, 393 F.3d at 1076. The document need only be “integral

to the plaintiff’s claims . . . .” Parrino, 146 F.3d at 706 n.4. 

Plaintiff’s attempt to distance its complaint, which alleges

breach of contract, from the insurance policy at issue is simply

absurd. Had plaintiff argued that other terms, terms outside the

scope of the policy, governed the relationship between these

parties, then the court might have reason to believe that

plaintiff’s complaint is based on some other agreement. But

plaintiff has not disputed the authenticity of the policy or

suggested that this is not the document that governs the

relationship between the parties. Consequently, because the

policy establishes defendants’ duties to (and covenants with)

plaintiff on which plaintiff bases its complaint, it is

unquestionably central to plaintiff’s claims and the court may

consider it here. Cf. Stephens, 450 F.3d at 1264 (considering an

insurance policy that was not attached to the complaint because

the complaint referred to it and relied on its “effect”). 

B. Defendants’ Liability in General

1. Declaratory Relief (Claim One)

In its complaint, plaintiff first seeks a declaration

establishing its right to determine whether the claims against it

have any merit before making tender. (Compl. ¶ 13.) 

Additionally, plaintiff seeks declaratory judgment as to whether

the attorneys procured by defendants have a conflict of interest

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in representing plaintiff and whether plaintiff has a right to

direct, or at least be informed of, claim management strategy. 

(Id.) Finally, plaintiff seeks a determination that defendants

have wrongfully prompted its other insurers to open files on and

defend claims without instructions from plaintiff to do so. 

(Id.) The court will thus address in turn whether these

allegations are sufficient to survive defendants’ motion to

dismiss plaintiff’s claim for declaratory relief.

a. Defending Un-tendered, Meritless Claims

In California, “the insurer’s obligation to defend and

investigate is not triggered until Plaintiff tenders the defense

of a third party lawsuit to the insurer.” Icasiano v. Allstate

Ins. Co., 103 F. Supp. 2d 1187, 1191 (N.D. Cal. 2000) (emphasis

added) (citing Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co.

of Pittsburgh, 18 Cal. 4th 857, 879 (1998)); North Star

Reinsurance Corp. v. Superior Court, 10 Cal. App. 4th 1815, 1823

(1992) (same); see also Montrose Chem. Corp. v. Superior Court, 6

Cal. 4th 287, 295 (1993) (“The defense duty is a continuing one,

arising on tender of defense . . . .” (emphasis added)). 

Defendants argue that they were compelled to proactively pursue

even mere incipient claims because their “duty to defend attaches

whenever the insurer [simply] ascertains facts which may give

rise to [‘even a bare possibility of’] coverage.” (Defs.’ Mot.

to Dismiss 8.) However, the cases they rely on in support of

this proposition are easily distinguishable from this action. 

Significantly, in both instances, unlike this litigation, the

insureds actually tendered their claims to the insurance

companies. Montrose Chem., 6 Cal. 4th at 293 (“Montrose gave

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At oral argument, defendants suggested that many of the 1

additional insureds covered under the CGL policy did in fact

tender their claims, so as to trigger the duty to defend. As

these facts do not appear from the pleadings, however, the court

will not consider them in deciding a motion to dismiss. 

Insurers can, of course, use language in the policy to 2

secure a right to pursue untendered claims.

Requiring insureds to tender claims before imposing the 3

duty to defend, and conversely permitting insureds to pursue

their own defense prior to tender, is consistent with other

developments in California insurance law. For example, provided

that the policy at issue has a no-voluntary-payment provision, an

insured cannot demand reimbursement from its insurer for costs

voluntarily incurred in the defense of an un-tendered claim. 

Truck Ins. Exchange v. Unigard Ins. Co., 79 Cal. App. 4th 966,

981 (2000) (citing Gribaldo, Jacobs, Jones & Assocs. v. Agrippina

Versicherunges A.G., 3 Cal. 3d 434, 449 (1970)). Thus, absent

policy language to the contrary, an insured can independently

defend a claim against it, and the insurer will not suffer any

detriment as a result. See also Truck Ins. Exchange, 79 Cal.

App. 4th at 975 (“If an insured breaches a notice provision,

resulting in substantial prejudice to the defense, the insurer is

relieved of liability.”).

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notice to the carriers and requested that they provide it with a

defense pursuant to their policies.”); Gray v. Zurich Ins. Co.,

65 Cal. 2d 263, 267 (1966) (“Dr. Gray notified defendant of the

suit, stating that he had acted in self defense, and requested

that the company defend.”). Defendants have simply taken

statements from Montrose and Gray out of context. They 1

therefore have no legal support for their belief that an

insurance company, as a rule, may unilaterally pursue matters on 2

behalf of its insureds without their consent or tender.3

Nevertheless, the court’s analysis does not end here,

because the terms of the contract also govern when an insurer’s

duty to defend arises. In relevant part, the insurance agreement

between the parties provides that Ranger “will have the right and

duty to defend the insured against any ‘suit’ seeking . . .

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This language is significant because by reserving a 4

right to defend both claims and suits, Ranger assured that it had

a right to settle both formal lawsuits and “demand[s] for

something as a right, or as due.” Foster-Gardner, 18 Cal. 4th at

879 (quoting Phoenix Ins. Co. v. Sukut Constr. Co., Inc., 136

Cal. App. 3d 673, 677 (1982)); see also id. (“‘A formal lawsuit

is not required before a claim is made.’”).

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damages [for property damage].” (Townsend Decl. Ex. A at 13.) 

It further states that Ranger “may at [its] discretion

investigate any ‘occurrence’ and settle any claim or ‘suit’ that

may result.” (Id.) But perhaps most notably, it imposes on 4

plaintiff a duty to notify Ranger “as soon as practicable of an

‘occurrence’ or an offense which may result in a claim.” (Id. at

20.) Under the policy, “‘[o]ccurrence’ means an accident,

including continuous or repeated exposure to substantially the

same general harmful conditions.” (Id. at 23.)

The court has no way of knowing at this stage in the

proceedings whether the un-tendered claims that defendants

settled constituted an occurrence, which defendants had a right

to investigate and settle and plaintiff had a duty to disclose. 

This inquiry is a factual one and therefore one that the court

cannot undertake on a motion to dismiss.

b. Appointing Conflicted Counsel

Plaintiff also complains that defendants wrongfully

supplied defense attorneys who suffered from a conflict of

interest and made decisions about whether to settle claims

without input from plaintiff. Under California law, “[a]n

insurer has the right to control the defense it provides its

insured so long as there is not a conflict of interest.” James 3

Corp. v. Truck Ins. Exchange, 91 Cal. App. 4th 1093, 1103 n.3

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Defendants argue that plaintiff’s claims based on an 5

alleged conflict of interests theory should be dismissed because

“Plaintiff fails to allege in its Complaint or assert in its

Opposition any facts which would require RANGER to provide

Plaintiff with independent counsel pursuant to California Civil

Code § 2860.” (Defs.’ Reply 9.) Essentially, defendants ask the

court to hold plaintiff to a heightened pleading standard, in

defiance of the extremely liberal standard provided in Federal

Rule of Civil Procedure 8(a). However, under the federal rules,

plaintiff need only “give the defendant[s] fair notice of what

the . . . claim is and the grounds upon which it rests.” Conley,

355 U.S. at 47. Plaintiff’s assertion that defendants provided

conflicted counsel meets this threshold. Defendants must utilize

the “liberal opportunity for discovery and the other pretrial

procedures established by the Rules to [discern] more precisely

the basis of both claim and defense.” Id. at 47-48.

9

(2001) (citations omitted); see also Cal. Civ. Code § 2860

(requiring that insurers provide independent counsel for an

insured when a conflict of interest arises); W. Polymer Tech.,

Inc. v. Reliance Ins. Co., 32 Cal. App. 4th 14, 24 (1995) (“In

general, the insurer is entitled to control settlement

negotiations [and settle for an amount within the policy limits]

without interference from the insured.”). Although “not every

conflict of interest entitles an insured to an insurer-paid

independent counsel,” whether the circumstances here warranted

appointment of such will involve a factual determination and

consequently, dismissal of the complaint on this ground is not

warranted. James 3, 91 Cal. App. 4th at 1101-02. 5

c. Encouraging Other Insurers to Defend

Meritless Claims

Plaintiff further complains that defendants improperly

involved its other insurers in efforts to settle claims against

it. Significantly, when an insurer’s duty to defend is

triggered, under some circumstances, the insurer may involve the

insured’s other insurers in the defense of claims. Compare Truck

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The complaint does not specify whether the “other” 6

insurers were primary or excess insurers. This might be

significant in this case because, “as between a primary insurer

and an excess insurer, the former is solely responsible for

defense costs . . . .” Truck Ins. Exchange, 79 Cal. App. 4th at

978 (citing Signal Cos., Inc. v. Harbor Ins. Co., 27 Cal. 3d 359,

365-69 (1980)) (emphasis added). Excess insurers can, at their

discretion, “agree to undertake the defense” “once the primary

insurer tenders its full policy limits.” Id. (emphasis added)

(charging primary insurers with responsibility for full defense

costs even if the claim is “for a sum in excess of the primary

coverage”); Diamond Heights, 227 Cal. App. 3d at 582. In

contrast, co-insurers can join the defense at its inception,

regardless of whether the first insurer to undertake a defense

has tendered its full policy limits. Truck Ins. Exchange, 79

Cal. App. 4th at 980.

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Ins. Exchange, 79 Cal. App. 4th at 980 (discussing how coinsurers can be involved), with Diamond Heights, 227 Cal. App. 3d

at 582 (discussing limits on involving excess insurers in defense

of a claim). However, because the court cannot determine from

the face of the complaint and the related policy documents that

defendants actually had a duty to defend, it similarly cannot say

at this time that defendants had a right to involve plaintiff’s

other insurers in a defense of claims against its insured. 

Moreover, the court does not have information at this time

regarding the terms under which these other insurers provided

insurance, which might have had some bearing on defendants’

ability to involve them in the settlement of claims, or potential

claims, against plaintiff. See Diamond Heights, 227 Cal. App. 3d

at 577-80 (discussing (1) the legal rights of primary and excess

insurers to control litigation and settlement and (2) how the

language in an excess insurer’s policy can alter those rights).6

Consequently, plaintiff’s claim for declaratory relief is further

justified on these grounds.

///

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In paragraph 16(a)-(k) of the complaint, plaintiff 7

identifies 11 ways in which defendants have allegedly breached

the agreement for insurance. Some of these subsections elaborate

on, or simply reiterate, more general accusations and the court

has thus distilled these allegations into four broader categories

for ease of analysis.

Given this outcome, the court need not address the 8

viability of plaintiff’s allegations that setting high loss

reserves on construction defect claims, and consequently causing

plaintiff’s premiums to increase, inflicted actionable injury. 

These assertions are only part of plaintiff’s breach of contract

claim and as explained in the text, the court cannot discern, and

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2. Breach of Contract (Claim Two)

Plaintiff’s claim for breach of contract accuses

defendants of breaching their obligations under the insurance

policy by (1) unilaterally pursuing claims that plaintiff has not

tendered for defense and settling claims in excess of the amount

they are worth; (2) encouraging plaintiff’s other insurers to

open files on and defend claims without plaintiff’s permission;

(3) imposing defense attorneys who suffer from a conflict of

interest; and (4) engaging in the practice of setting high loss

reserves on construction defect claims. (Compl. ¶ 16(a)-(k).)7

However, these allegations, as plaintiff itself points out, are

not based “upon specific terms and contents of the insurance

policies.” (Pl.’s Opp’n to Defs.’ Mot to Dismiss 4 n.1.) 

Rather, plaintiff alleges that defendants acted outside of the

terms of their agreement and failed to adhere to general legal

obligations not addressed by the terms of their agreement. 

Consequently, although the court can address these matters via

declaratory judgment or through a claim of breach of the covenant

of good faith and fair dealing, the complaint as drafted fails to

state a claim for breach of contract.8

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plaintiff has failed to explain, how these actions violated the

terms of the insurance agreement. Moreover, the workers’

compensation policy cases on which plaintiff relies to sustain

these allegations, cases which defendants convincingly argue are

inapposite in a case involving a GCL policy, deal with a breach

of the violation of the covenant of good faith and fair dealing--

not a breach of contract–-claim. Sec. Officers Serv., Inc. v.

State Comp. Ins. Fund, 17 Cal. App. 4th 887, 894 (1993)

(recognizing that failure “to handle claims ‘properly’ or

‘expediently’ might constitute a breach of a policy’s implied

covenant of good faith and fair dealing, but not a breach of

contract terms that merely establish an unspecified “duty to

defend”).

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3. Breach of the Covenant of Good Faith and Fair

Dealing (Claim Three)

Plaintiff’s third cause of action is for breach of the

covenant of good faith and fair dealing. Under California law,

all insurance contracts contain an implied covenant of good faith

and fair dealing. Hanson v. Prudential Ins. Co. of Am., 783 F.2d

762, 766 (9th Cir. 1985) (citing Egan v. Mutual of Omaha Ins.

Co., 24 Cal. 3d 809, 818 (1979)). This covenant requires that

“‘neither party . . . do anything which will injure the right of

the other to receive the benefits of the agreement.’” Gruenberg

v. Aetna Ins. Co., 9 Cal. 3d 566, 573 (1973) (quoting Comunale v.

Traders & Gen. Ins. Co., 50 Cal. 2d 654, 658 (1958)). The duty

is separate from those mandated by the terms of a typical

insurance policy--“to defend, settle, or pay.” Id. at 574. 

Instead, it involves an “obligation, deemed to be imposed by the

law, under which the insurer must act fairly and in good faith in

discharging its contractual responsibilities.” Id. 

Plaintiff here alleges that defendants over-stepped

their right to defend by pursuing un-tendered claims contrary to

the provisions of the contract. (Compl. ¶ 13, 22, 23(c)

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Although plaintiff’s explanation of the details of the 9

purported conflict is lacking, it is sufficient to comport with

the liberal pleading standard provided by Rule 8.

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(accusing defendants of “thwarting Plaintiff’s efforts to

minimize its loss history” by pursuing claims before defendant

tendered them).) In addition, plaintiff alleges that defendants

engaged in the practice of pursuing settlements that were less

than the unreasonably high loss reserves, yet greater than the

amount warranted by the claims. (Compl. ¶ 16(b), 22.) In doing

so, plaintiff contends that defendants favorably manipulated

their own financial position, at plaintiff’s expense. (Id.

(claiming that defendants “artificially increase[d] their

combined reported fees, earnings and profits, all to the

detriment of Plaintiff”).) See Anguiano v. Allstate Ins. Co.,

209 F.3d 1167, 1169 (9th Cir. 2000) (citing, inter alia,

Comunale, 50 Cal. 2d at 659) (“California law requires that an

insurer take into account the interest of the insured and give it

at least as much consideration as it does to its own interest

when evaluating settlement offers.”). Finally, plaintiff has

alleged that defendants repeatedly provided conflicted counsel to

represent plaintiffs in these claims. (Compl. ¶ 13, 16(j), 22.)9

Assuming these allegations to be true, plaintiff has

adequately asserted that defendants acted in their own interest

over that of their insured in assessing claims, which “in some

way injured [plaintiff’s] right to receive the benefits of the

agreement.” Gruenberg, 9 Cal. 3d at 573. While plaintiffs may

not prevail on this issue on summary judgment or at trial, the

court cannot say at this stage that plaintiff will be unable to

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Curiously, defendants rely on Heighley v. J.C. Penney 10

Life Ins. Co., 257 F. Supp. 2d 1241 (C.D. Cal. 2003), for the

proposition that plaintiff’s claim is barred because she has an

14

prove any set of facts in support of this claim.

4. Section 17200 Disgorgement (Claim Four)

Plaintiff’s final claim is for unjust enrichment in

violation of California Business and Professions Code §§ 17200-

17210. In support of this claim, plaintiff alleges, inter alia,

that by settling claims without merit, defendants have enriched

themselves (by “artificially increas[ing] their combined reported

fees, earnings and profits) at plaintiff’s expense. (Compl. ¶

31(g).)

The Unfair Competition Law (“UCL”) prohibits “any

unlawful, unfair or fraudulent business act or practice.” Cal.

Bus. & Prof. Code § 17200. California courts have interpreted

this to include just about everything the courts might find

objectionable. Gafcon, Inc. v. Ponsor & Assocs., 98 Cal. App.

4th 1388, 1425 (2002) (“Virtually any law can serve as the

predicate for a Business and Professions Code section 17200

action; it may be . . . civil or criminal, federal, state or

municipal, statutory, regulatory, or court-made.”). Plaintiff

here has alleged, among other things, a violation of California

Civil Code § 2860 (requiring independent counsel when insurer’s

interest conflict with those of the insured) and thus has

properly identified an “unlawful” business practice. 

Additionally, plaintiff has alleged an injury--higher insurance

premiums--that may have resulted from a decision by allegedly

biased counsel to settle meritless claims. See Cal. Bus. & 10

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alternative adequate remedy at law--a claim for breach of

contract. This assertion is, of course, inconsistent with

defendants’ position, and this court’s determination, that

plaintiff has not alleged a claim for breach of contract. 

(Defs.’ Mot. to Dismiss 2.)

Moreover, the court is skeptical that the test for

establishing a UCL claim devised seemingly out of whole cloth in

Heighley is the correct one. Heighley stated that, in the

insurance context, 

[a]llegations that are essential to plead a claim for

violation of the [UCL] are: (1) plaintiff’s status as

an insured or intended beneficiary of the insurance

policy, (2) the existence of the policy, (3) the

insurer’s conduct and that such conduct was an unfair,

unlawful or fraudulent business practice in violation

of Bus. & Prof. Code § 17200, (4) plaintiff has no

adequate remedy at law, (5) a request for injunctive

relief and or restitution . . . , and (6) a request for

attorney’s fees. 

257 F. Supp. 2d at 1259. Since “[t]he unfair competition law

does not provide for attorney fees”, the court is at a loss as to

why a plaintiff must request them as an “essential” element of

its pleadings. Walker v. Countrywide Home Loans, Inc., 98 Cal.

App. 4th 1158, 1179 (2002). Likewise, the requirement that

plaintiff have no adequate remedy at law is not found in the text

of the statute.

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Prof. Code § 17204 (“Actions for any relief pursuant to this

chapter shall be prosecuted exclusively in a court of competent

jurisdiction . . . by any person who has suffered injury in fact

and has lost money or property as a result of such unfair

competition.”). Finally, the limited injunctive and monetary

relief available under the UCL is exactly what plaintiff seeks in

its fourth cause of action. (Compl. Prayer for Relief ¶ 4(a),

(c).) Plaintiff has thus properly plead a cause of action under

the UCL.

C. Riverstone’s Liability

Defendants separately contend that the complaint fails

to state a claim against Riverstone, who managed construction

defect claims for Ranger. Riverstone was not a party to the

insurance contract on which these claims are based. In Gruenberg

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v. Aetna Ins. Co. the California Supreme Court established that

non-insurer defendants, including “corporation[s] engaged in the

business of investigating and adjusting insurance claims”, are

“not parties to the agreements for insurance” nor are they

“subject to an implied duty of good faith and fair dealing.” 9

Cal. 3d 566, 569 n.1, 575 (1973). Similarly, Riverstone cannot

be held liable pursuant to the terms of an insurance agreement

between plaintiff and Ranger. 

Significantly, though, the Gruenberg court did “not

consider the possibility that [the non-insurer defendants] may

have committed another tort in their respective capacities as

total strangers to the contracts of insurance.” Id. at 576. 

Thus, it appears that plaintiff can, legally speaking, bring at

least some claims against non-insurer defendants, and nothing in

plaintiff’s existing complaint precludes it from alleging

additional facts accusing Riverstone of other tortious conduct. 

Accordingly, the court will grant plaintiff leave to amend its

complaint in the event that such claims can be alleged against

Riverstone. Doe v. United States, 58 F.3d 494, 497 (9th Cir.

1995) (“In dismissing for failure to state a claim, ‘a district

court should grant leave to amend even if no request to amend the

pleading was made, unless it determines that the pleading could

not possibly be cured by the allegation of other facts.’”

(quoting Cook, Perkiss & Liehe v. N. Cal. Collection Serv., 911

F.2d 242, 247 (9th Cir. 1990))).

Plaintiff’s fourth cause of action, for violation of

California Business and Professions Code § 17200, is likewise not

cognizable with respect to Riverstone. The relief available

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under § 17200 is strictly limited to restitution--money damages

are not an option. Korea Supply Co. v. Lockheed Martin Corp., 29

Cal. 4th 1134, 1144 (2003). Accordingly, because Ranger, and not

Riverstone, has collected the funds that plaintiff wants returned

(i.e., higher premiums), plaintiff has no cause of action against

Riverstone under the UCL. 

III. Conclusion

The complaint fails to state a claim upon which relief

can be granted against any party for breach of contract and

against Riverstone on any claim. Plaintiff might be able to cure

the defects discussed above through amendment. Defendant’s

arguments with respect to all remaining claims against Ranger are

premature at this stage of the proceedings. 

IT IS THEREFORE ORDERED that 

(1) defendants’ motion to dismiss claim two be, and the

same hereby is, GRANTED; 

(2) defendants’ motion to dismiss the complaint with

respect to defendant Riverstone be, and the same hereby is,

GRANTED; and 

(3) with respect to all other defendants and/or claims,

defendants’ motion to dismiss be, and the same hereby is, DENIED.

Plaintiff is given 30 days from the date of this order

to file an amended complaint consistent with this order. 

DATED: September 23, 2006

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