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1346076.8 

PLAINTIFFS’ OPPOSITION TO CONSUMER

BENEFITS OF AMERICA’S MOTION TO DISMISS

CASE NO. 4:17-CV-618 

Kelly M. Dermody (State Bar No. 171716)

kdermody@lchb.com 

Michelle A. Lamy (State Bar No. 308174) 

mlamy@lchb.com 

LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 

275 Battery Street, 29th Floor 

San Francisco, CA 94111-3339 

Telephone: 415.956.1000 

Facsimile: 415.956.1008 

Rachel Geman (pro hac vice) 

rgeman@lchb.com 

LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 

250 Hudson Street, 8th Floor 

New York, NY 10013-1413 

Telephone: 212.355.9500 

Facsimile: 212.355.9592 

Allen Carney (pro hac vice) 

acarney@cbplaw.com 

David Slade (pro hac vice) 

dslade@cbplaw.com 

CARNEY BATES & PULLIAM, PLLC 

519 W. 7th Street 

Little Rock, AR 72201 

Telephone: 501.312.8500 

Facsimile: 501.312.8505 

Attorneys for Plaintiffs and the Proposed Class

Michael J. Flannery (State Bar No. 

196266) 

mflannery@cuneolaw.com 

CUNEO GILBERT LADUCA, LLP 

7733 Forsyth Boulevard, Suite 1675 

St. Louis, MO 63105 

Telephone: 314.226.1015 

Facsimile: 202.789.1813 

Matthew Prewitt (State Bar No. 

291593) 

mprewitt@cuneolaw.com 

CUNEO GILBERT LADUCA, LLP 

16 Court Street, Suite 1012 

Brooklyn, NY 11241 

Telephone: 202.789.3960 

Facsimile: 202.789.1813 

Jay Angoff (pro hac vice) 

jay.angoff@findjustice.com 

MEHRI & SKALET 

1250 Connecticut Avenue, NW 

Suite 300 

Washington, D.C. 20036 

Telephone: 202.822.5100 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

OAKLAND DIVISION 

MOHAMMED AZAD and DANIELLE 

BUCKLEY, on behalf of themselves and 

all others similarly situated, 

Plaintiffs, 

v. 

TOKIO MARINE HCC – MEDICAL 

INSURANCE SERVICES GROUP, 

HEALTH INSURANCE INNOVATIONS, 

INC., HCC LIFE INSURANCE 

COMPANY, and CONSUMER 

BENEFITS OF AMERICA, 

Defendants. 

Case No. 4:17-cv-618-PJH 

PLAINTIFFS’ MEMORANDUM OF 

POINTS AND AUTHORITIES IN 

OPPOSITION TO DEFENDANT 

CONSUMER BENEFITS OF AMERICA’S 

MOTION TO DISMISS ______ 

Date: June 14, 2017 

Time: 9:00 a.m. 

Place: Courtroom 3 

Complaint Filed: February 7, 2017 

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TABLE OF CONTENTS 

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ISSUES TO BE DECIDED ............................................................................................................. 1

INTRODUCTION ........................................................................................................................... 1

FACTUAL AND PROCEDURAL BACKGROUND ..................................................................... 2

A. Defendants’ Sale and Administration of Short-Term Medical Insurance 

Policies. .................................................................................................................... 2

B. Defendants’ Common Alleged Practices Cause Common Injuries. ........................ 2

C. Plaintiffs’ Experiences and the Underlying Litigation............................................. 4

D. Procedural History. .................................................................................................. 6

LEGAL STANDARDS .................................................................................................................... 6

ARGUMENT ................................................................................................................................... 7

A. Plaintiffs Adequately Allege Fraud-Based Claims Under the UCL and the 

FAL Against CBA. .................................................................................................. 7

B. Plaintiffs Adequately Allege that CBA’s Conduct Also Violates the Unfair 

and Unlawful Prongs of the UCL. ......................................................................... 10

C. Plaintiffs Adequately Allege Contract-Based Claims Against CBA: Breach 

of Contract and Breach of the Duty of Good Faith and Fair Dealing. ................... 12

D. Plaintiffs Adequately Allege Unjust Enrichment. .................................................. 13

E. Plaintiffs Should Be Permitted to Amend the Complaint if the Court 

Identifies Any Pleading Infirmities. ....................................................................... 14

CONCLUSION .............................................................................................................................. 14

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TABLE OF AUTHORITIES 

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1346076.8 -ii- PLAINTIFFS’ OPPOSITION TO CONSUMER

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Cases

Abels v. Bank of Am., No. 11-208, 2011 WL 1362074 (N.D. Cal. Apr. 11, 2011) ....................................................... 13 

Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) ................................................................................................................. 7 

Bank of New York Mellon v. Citibank, N.A., 8 Cal. App. 5th 935 (2017) ........................................................................................................ 15 

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ..................................................................................................................... 7 

Berger v. Home Depot USA, Inc., 741 F.3d 1061 (9th Cir. 2014).................................................................................................... 15 

Bruce v. Harley-Davidson, Inc., No. 9-6588, 2010 WL 3521776 (C.D. Cal. Apr. 19, 2010) ......................................................... 9 

Chapman v. Skype Inc., 220 Cal. App. 4th 217 (2013) ...................................................................................................... 9 

Comerica Bank v. McDonald, 2006 WL 3365599 (N.D. Cal. Nov. 17, 2006) ............................................................................. 8 

Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351 (2003) .................................................................................................... 9 

Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1997)........................................................................................................ 7 

Davenport v. Seattle Bank, 2015 WL 6150296 (C.D. Cal. Oct. 15, 2015) .............................................................................. 8 

Ferrington v. McAfee, Inc., No. 10-1455, 2010 WL 3910169 (N.D. Cal. Oct. 5, 2010) ....................................................... 12 

Gilligan v. Jamco Dev. Corp., 108 F.3d 246 (9th Cir. 1997)........................................................................................................ 6 

In re Adobe Sys., Inc. Privacy Litig., 66 F. Supp. 3d 1197 (N.D. Cal. 2014) ......................................................................................... 9 

In re Bank of Amer. Credit Protection Marketing & Sales Practices Litig., No. MD-11-2269 TEH, 2012 WL 1123863 (N.D. Cal. Apr. 3, 2012) ...................................... 14 

In re Chase Bank USA, N.A. “Check Loan” Contract Litig., 274 F.R.D. 286 (N.D. Cal. 2011) ............................................................................................... 14 

In re First Alliance Mortg. Co., 471 F.3d 977 (9th Cir. 2006)...................................................................................................... 11 

Jones v. Nutiva, 2016 WL 5210935 (N.D. Cal. Sept. 22, 2016) ............................................................................ 9 

McKell v. Wa. Mut., Inc., 142 Cal. App. 4th 1457 (2006) .................................................................................................. 12 

McNeary–Calloway v. JP Morgan Chase Bank, N.A., 863 F. Supp. 2d 928 (N.D. Cal. 2012) ....................................................................................... 11

Meister v. Mensinger, 230 Cal. App. 4th 381 (2014) .................................................................................................... 16 

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TABLE OF AUTHORITIES 

(continued) 

Page

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Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097 (9th Cir. 2008)...................................................................................................... 6 

Mohamed v. Jeppesen Dataplan, Inc., 579 F.3d 943 (9th Cir. 2009)........................................................................................................ 6 

Moss v. U.S. Secret Serv., 572 F.3d 962 (9th Cir. 2009)...................................................................................................... 16 

Nasseri v. Wells Fargo Bank, N.A., 147 F. Supp. 3d 937 (N.D. Cal. 2015) ....................................................................................... 14

Racine v. Laramie, Ltd., Inc. v. Dep’t of Parks and Recreation, 11 Cal. App. 4th 1026 (1992) .................................................................................................... 14 

Rubke v. Capitol Bancorp, 2006 WL 1699569 (N.D. Cal. June 16, 2006) ........................................................................... 11 

Saunders v. Superior Court, 27 Cal. App. 4th 832 (1994) ...................................................................................................... 12 

Schlagal v. Learning Tree Int’l, 1998 WL 1144581 (C.D. Cal. Dec. 23, 1998) ............................................................................. 8 

Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167 (9th Cir. 2009)...................................................................................................... 7 

Smith v. State Farm Mutual Automobile Ins. Co., 93 Cal. App. 4th 700 (2001) ...................................................................................................... 12 

Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007)........................................................................................................ 7 

Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. Rptr. 2d 861 (1991) ........................................................................................................... 8 

United States for Use and Benefit of HCI Sys., Inc. v. Agbayani Construction Co., 2014 WL 4979336 (N.D. Cal. Oct. 6, 2014) ................................................................................ 7 

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003)...................................................................................................... 7 

Walling v. Beverly Enters., 476 F.2d 393 (9th Cir. 1973)........................................................................................................ 7 

Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008).................................................................................................... 8, 9 

Statutes

Cal. Bus. & Prof. Code § 17200 ...................................................................................................... 1 

Cal. Bus. & Prof. Code § 17500 .................................................................................................. 1, 6 

Cal. Ins. Code § 10384 ................................................................................................................... 13 

Cal. Ins. Code § 332 ....................................................................................................................... 13 

Rules

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

Fed. R. Civ. P. 15(a)(2) .................................................................................................................. 16 

Fed. R. Civ. P. 8 ............................................................................................................................. 15 

Fed. R. Civ. P. 8(d) ........................................................................................................................ 15 

Fed. R. Civ. P. 9(b) ...................................................................................................................... 7, 8 

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1346076.8 -1- PLAINTIFFS’ OPPOSITION TO CONSUMER

BENEFITS OF AMERICA’S MOTION TO DISMISS

CASE NO. 4:17-CV-618 

MEMORANDUM OF POINTS AND AUTHORITIES 

 ISSUES TO BE DECIDED 

1. Have Plaintiffs pleaded plausible facts relating to Defendants’, including CBA’s, 

obstructive claims processing practices, bad-faith denials of coverage, and deceptive marketing? 

2. Do the allegations in Plaintiffs’ Complaint—which are corroborated, not belied, by 

the documents separately and improperly introduced into the record by Defendants—sufficiently 

state claims for relief against CBA for (1) violations of Cal. Bus. & Prof. Code § 17200, et seq.; 

(2) violations of Cal. Bus. & Prof. Code § 17500, et seq.; (3) breach of contract; (4) breach of the 

implied duty of good faith and fair dealing; and (5) unjust enrichment? 

 INTRODUCTION 

Defendants1 collaborated to develop, market, sell, and administer Short-Term Medical 

(“STM”) insurance policies that do not provide the coverage they purport to provide, miring 

Plaintiffs and Class members in a nightmare of obstruction, delay, and denial at the moment 

insurance matters: when Plaintiffs are facing large, even catastrophic, medical bills. 

The STMs at issue here are not Affordable Care Act (“ACA”) compliant ones, in which 

pre-existing conditions must be covered—and Plaintiffs nowhere claim otherwise. However, as 

Plaintiffs allege, Defendants engage in distinct fraudulent and bad faith conduct by misusing and 

misapplying the pre-existing conditions limitations (and engaging in related misconduct) to deny 

claims that should be paid via improper delay and unlawful post-claims underwriting. The 

common alleged scheme, pled with specificity, thus consists of both fraudulent marketing and 

improper claims practices. 

CBA seeks to disclaim culpability in this scheme by claiming, inter alia, that it was not a 

party to the fraudulent misrepresentations and omissions related to the marketing of the STMs, or 

the unconscionable bad-faith administration of the policies. This position does not withstand 

scrutiny. The documents referenced in Plaintiffs’ Complaint, and even those improperly 

 

1

 Defendant on this motion is Consumer Benefits of America (“CBA”). Health Insurance 

Innovations, Inc. (“HII”) and HCC Life Insurance Company and HCC Medical Insurance 

Services LLC (“HCC”) are also Defendants in this action, and are included within the term 

“Defendants” where no specific Defendant is indicated. 

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CASE NO. 4:17-CV-618 

introduced by Defendants into the record, make clear that CBA was involved and featured in the 

marketing of the STMs at issue, and was a party to the contract created when Plaintiffs and Class 

members signed up for coverage under the STMs. These allegations support Plaintiffs’ claims of 

unfair competitive practices, deceptive advertising, breach of contract, bad faith, and unjust 

enrichment at the pleading stage. 

CBA’s motion to dismiss should be denied in its entirety. 

 FACTUAL AND PROCEDURAL BACKGROUND 

As a threshold matter, CBA’s Motion does not (and cannot) challenge the accuracy of the 

facts stated in Plaintiffs’ Complaint, and in fact barely addresses them. As described below, 

Plaintiffs allege that CBA has colluded with Defendants HCC and HII in a fraudulent scheme to 

provide insurance policies to Class members that are practically worthless in that there is a 

systematic denial of insureds’ claims under a bad faith and deceptive application of its 

undisclosed policies, in violation of California law. 

A. Defendants’ Sale and Administration of Short-Term Medical Insurance 

Policies. 

Defendants HCC, HII, and CBA collectively market and administer short-term medical 

insurance policies (“STMs”) to California consumers. Complaint (Dkt. No. 1) (“Compl.) ¶¶ 17-

18, 22, 22 n.5, 23, 51-53, 55, 57. Defendants HCC and HII have jointly developed—and market 

and provide—their STM in 45 states, including California. Id. ¶¶ 17, 22, 22n.5, 23, 51-53, 55. 

Defendant CBA colludes with HCC and HII by acting as the group administrator for the STMs, 

thereby allowing HCC and HII to avoid more stringent regulatory requirements governing 

individually-issued health insurance policies. Id. ¶¶ 18, 57. In other words, CBA provides a 

cloak of legitimacy to HCC and HII’s fraudulent scheme. 

B. Defendants’ Common Alleged Practices Cause Common Injuries. 

In conjunction with Defendants HCC and HII, CBA facilitates the provision of insurance 

policies whose claim processing procedures—and the requirements placed upon the insureds—

are purposely engineered and uniformly applied to allow the delay and denial of the claims of 

policyholders. Id. ¶¶ 3, 54, 56, 58-73. Upon submitting claims, insureds are required to provide 

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CASE NO. 4:17-CV-618 

every identifiable medical record in their history, regardless of whether such record relates to the 

claim at issue, and notwithstanding that this requirement is not disclosed in advance. Id. ¶¶ 3, 26-

27, 33-37, 39-73. This requirement, common to all Class members, gives Defendants three 

common avenues for denying valid claims, effectively and improperly guaranteeing that Class 

members’ often large bills go unpaid. 

First, Defendants comb through all records provided by the insured in an effort to 

characterize the claim at issue as a “pre-existing condition.” Id. ¶¶ 3, 26-27, 33-37, 39-57, 63-73. 

Defendants uniformly omit any appropriate explanation of the scope of this exclusion from their 

public-facing marketing materials. Id. ¶¶ 3, 39-57, 63-73. However, once a claim is submitted, 

the term is interpreted so broadly and incorrectly, and in such bad faith, as to encompass virtually 

any medical condition, regardless of when—or even whether—it was diagnosed or treated. Id. If 

the insured’s presented claim can be linked to anything in the insured’s past, from any point in 

time, the claim is denied. Id. 

Second, when there is no plausible way to link an insured’s claim to a prior medical 

condition, Defendants again demand to search through all available records—again, regardless of 

their relation to the claim—seeking evidence of a condition that would have rendered the 

claimant ineligible for coverage under the STM, thereby allowing Defendants to void the policy 

and not pay the claim. Id. ¶¶ 3, 26-27, 33-37, 56-73. This practice is also uniform to all Class 

members. Id. 

Third, Defendants’ policy and practice is to premise refusals to pay on common and 

incorrect assertions that there is insufficient information to process claims. Id. ¶¶ 3, 26-27, 33-37, 

54, 58-73. This allows Defendants to sidestep paying proper claims because it would be 

impossible for the insured to provide the level of detail purportedly needed. Id. 

In light of this common conduct, Defendants have also engaged in serial and uniform 

misrepresentations and omissions to Class members. Namely, they have marketed health 

insurance policies that, because of the unconscionable claims-handling processes described 

above, improperly and unlawfully exclude material numbers of claims, making the insurance 

nearly worthless. Id. ¶¶ 3, 39-57; 104-14. Through various declarations, HCC has introduced 

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1346076.8 -4- PLAINTIFFS’ OPPOSITION TO CONSUMER

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CASE NO. 4:17-CV-618 

copious pages of website screen shots and welcome kits. See generally, Dkt. Nos. 50-52. 

Introduction of this material is improper on a motion to dismiss. Notably, though, none of these 

documents, nor any documents referenced in Plaintiffs’ Complaint, alert a reasonable insured or a 

prospective insured to the virtually limitless exclusions (and burdensome record requests) applied 

by Defendants in their claims-handling practices. Instead, these material facts are omitted. Id.; 

see also Compl. ¶¶ 3, 39-72; 104-14. Such misrepresentations and omissions constitute false 

advertising. Id. ¶¶ 104-14. 

Defendants’ internal policies and procedures, marketing representations, and customer 

service scripts reveal that the above-described practices are uniform to the Class. A 

whistleblower contractor in HCC’s customer service department confirmed that these policies and 

procedures are designed to frustrate Class members’ attempts to appeal a claim’s denial or to 

provide the information purportedly sought by Defendants, and further confirmed that Defendants 

have created a rigid script for dealing with insureds, from which their employees cannot deviate. 

Id. ¶¶ 58-72. As the whistleblower states: “[T]he name of the game is runaround. . . . It really 

felt like everything was designed to be so cumbersome that the customer would either get 

frustrated and give up or they could stall long enough to not have to pay out on the claim. . . . 

The whole idea here is that we’re a legal buffer between HCC and [the insured] as was made 

crystal clear in training when they said outright that we’d be thrown under the bus if we ever 

deviated from the script.” Id. ¶ 67. 

As discussed in Plaintiffs’ Opposition to Defendants’ Motion to Stay (Dkt. No. 66), 

Defendants minimize and misconstrue the Complaint, asserting that ‘Plaintiffs say X is nondisclosed but it is disclosed.’ This misses the point. Defendants engage in a common and 

fraudulent scheme whereby they take Class members’ premium payments, only to subject those 

insureds to a claims process that is designed to uniformly and unconscionably deny the payment 

of valid claims. Plaintiffs’ well-pleaded claims of complex fraud are cognizable under statutory 

and common law against all Defendants, including CBA. Compl. ¶¶ 90-146. 

C. Plaintiffs’ Experiences and the Underlying Litigation.

Plaintiffs Azad and Buckley were, respectively, insured under Defendants’ STMs. Id. ¶¶ 

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19-38. Each Plaintiff purchased their STM policies in the belief that such policies would cover 

unexpected medical conditions. Id. Each Plaintiff did suffer an unexpected and major health 

incident and, in reliance upon the language of the policies, properly submitted claims. Id. Upon 

submitting claims to Defendants, however, each Plaintiff was asked for an ever-increasing 

number of medical records. Id. Specifically, as pled in the Complaint and supported with explicit 

references to Defendants’ records,2 Plaintiffs’ were not merely required to provide medical 

records relevant to their claims; rather, they were required to provide all medical records, 

provider notes, and labs for the five years preceding their claims. Id. ¶¶ 26, 33; see also, 

Declaration of John Padgett in Support of HCC Life Insurance Company and HCC Medical 

Insurance Services, LLC’s Motion to Dismiss and Their Alternative Motion to Strike Class 

Allegations (“Padgett Decl.”) at Exs. 16-19. 

After months of complying with Defendants’ requests for more information, both Azad 

and Buckley were again told that their claims could not be processed. Compl. ¶¶ 26-28, 33-38; 

Padgett Decl. at Exs. 16-19. Plaintiff Azad’s bills totaled roughly $12,000, and Plaintiff 

Buckley’s roughly $3,500. Motion to Stay (Dkt. No 63) at n.4. Plaintiffs each made continual 

efforts to provide sufficient information to Defendants, and were continually asked for more. 

Compl. ¶¶ 26-38. Discouraged and convinced that Defendants were not acting in good faith, 

Plaintiffs, consistent with the conduct of reasonable Class members, gave up and realized they 

would have to pay their medical bills directly. Id. 

Thus, like all Class members, Plaintiffs were: (1) misled into purchasing insurance 

policies that they believed would cover unforeseen medical events; (2) subjected to Defendants’ 

unconscionable claims-handling practices, despite complying in good faith with Defendants’ 

increasingly-unreasonable (and impossible to fulfill) requests; and (3) ultimately had their claims 

files closed by Defendants, in bad faith, which left Plaintiffs (like all Class members) on their 

own to resolve their unpaid, substantial medical bills. 

 

2

 As explained more fully in Plaintiffs’ concurrently-filed Opposition to Defendant HCC’s 

Motion to Dismiss (at pp. 7-8), Defendants are incorrect to suggest the Court should apply the 

“incorporation by reference” doctrine to consider voluminous additional materials as part of the 

Complaint. The doctrine is inapposite here. 

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D. Procedural History. 

Plaintiffs filed their Complaint on February 7, 2017, alleging five claims for relief: (1) 

violations of Cal. Bus. & Prof. Code § 17200, et seq. (“UCL”); (2) violations of Cal. Bus. & Prof. 

Code § 17500, et seq. (“FAL”); (3) breach of contract; (4) breach of the implied covenant of good 

faith and fair dealing; and (5) unjust enrichment. Defendant CBA then filed the instant Motion to 

Dismiss. Dkt. No. 58 (“Mot.”).3

 LEGAL STANDARDS 

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. 

Dismissal is appropriate only where the complaint lacks “a cognizable legal theory” or “sufficient 

facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 

1097, 1104 (9th Cir. 2008). The issue is not whether the non-moving party will ultimately prevail 

but whether it is entitled to offer evidence to support the claims asserted. Gilligan v. Jamco Dev. 

Corp., 108 F.3d 246, 249 (9th Cir. 1997). The Court should draw “all reasonable inferences from 

the complaint in [plaintiffs’] favor,” Mohamed v. Jeppesen Dataplan, Inc., 579 F.3d 943, 949 (9th 

Cir. 2009) (quoting Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005)), and “accept the 

plaintiffs’ allegations as true and construe them in the light most favorable to the plaintiffs.” 

Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167, 1177 (9th Cir. 2009). A complaint need 

only “contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible 

on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1940 (2009) (quoting Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 570 (2007)). 

Plaintiffs’ claims under the deceptive prong of the California UCL and the False 

Advertising Law must satisfy Rule 9(b).4

 The Ninth Circuit has long construed Rule 9(b) to 

 

3

 Each Defendant filed a separate Motion to Dismiss (Dkt. Nos. 48, 58, 60) and, in the case of 

HCC and HII, a Motion to Strike (Dkt. Nos. 49, 60), as well as a Motion to Stay (Dkt. No. 63). 

4

 It is unclear whether CBA asserts that any of Plaintiffs’ other claims—namely, the common-law 

claims and the claims under other prongs of the UCL—must satisfy Rule 9(b), but no such 

requirement exists. Under Ninth Circuit law, “where fraud is not an essential element of a claim, 

only allegations (‘averments’) of fraudulent conduct must satisfy the heightened pleading 

requirements. Allegations of non-fraudulent conduct need satisfy only the ordinary notice 

pleading standards of Rule 8(a).” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 

2003). 

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require only that “allegations of fraud are specific enough to give defendants notice of the 

particular misconduct which is alleged to constitute the fraud charged so that they can defend 

against the charge and not just deny that they have done anything wrong.” United States for Use 

and Benefit of HCI Sys., Inc. v. Agbayani Construction Co., 2014 WL 4979336, at *3 (N.D. Cal. 

Oct. 6, 2014) (quoting Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam)). 

Thus, while Rule 9(b) imposes a heightened standard, it does not require a plaintiff to 

allege each and every detail about the alleged conduct. Cooper v. Pickett, 137 F.3d 616, 627 (9th 

Cir. 1997) (“[W]e cannot make Rule 9(b) carry more weight than it was meant to bear.”); Walling 

v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973); see also Schlagal v. Learning Tree Int’l, 

1998 WL 1144581, *8 (C.D. Cal. Dec. 23, 1998) (“The Court must strike a careful balance 

between insistence on compliance with demanding pleading standards and ensuring that valid 

grievances survive.”); Davenport v. Seattle Bank, 2015 WL 6150296, at *4 (C.D. Cal. Oct. 15, 

2015) (“[Rule 9(b)] must be read in harmony with Fed. R. Civ. P. 8’s requirement of a ‘short and 

plain’ statement of the claim.”). 

Moreover, “‘the requirement of specificity is relaxed when the allegations indicate that a 

defendant must necessarily possess full information concerning the facts of the controversy’ ‘or 

when the facts lie more in the knowledge of the opposite party.’” Comerica Bank v. McDonald, 

2006 WL 3365599, *2 (N.D. Cal. Nov. 17, 2006) (quoting Tarmann v. State Farm Mut. Auto. Ins. 

Co., 2 Cal. Rptr. 2d 861, 863 (1991)). 

Plaintiffs’ fraud-based allegations readily satisfy the requirements of Rule 9(b). 

 ARGUMENT 

A. Plaintiffs Adequately Allege Fraud-Based Claims Under the UCL and the 

FAL Against CBA. 

The FAL, and the UCL’s “fraud” prong, both prohibit representations that are false or that 

are “misleading or which ha[ve] a capacity, likelihood or tendency to deceive or confuse the 

public.” Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). As CBA 

acknowledges, whether a representation has a tendency to deceive is determined based on its 

likely impact on a “reasonable consumer.” Id.; see also Consumer Advocates v. Echostar 

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Satellite Corp., 113 Cal. App. 4th 1351, 1360 (2003) (cited by CBA). 

Ninth Circuit courts have repeatedly recognized that whether a representation has a 

tendency to deceive “will usually be a question of fact not appropriate for decision on [a motion 

to dismiss].” Williams, 552 F.3d at 938-40 (dismissal at pleading stage is “rare”); see also, e.g.,

Jones v. Nutiva, 2016 WL 5210935, at *7 (N.D. Cal. Sept. 22, 2016). As long as plaintiffs offer a 

plausible theory as to why the conduct at issue could mislead a reasonable consumer, their claims 

should not be dismissed at the pleading stage. Williams, 552 F.3d at 940; Chapman v. Skype Inc., 

220 Cal. App. 4th 217, 226-27 (2013). Moreover, a defendant can also violate the UCL “fraud” 

prong by making an omission that is “contrary to a representation actually made by the defendant, 

or an omission of a fact the defendant was obliged to disclose.” In re Adobe Sys., Inc. Privacy 

Litig., 66 F. Supp. 3d 1197, 1229 (N.D. Cal. 2014); Bruce v. Harley-Davidson, Inc., No. 9-6588, 

2010 WL 3521776, *5 (C.D. Cal. Apr. 19, 2010) (“[P]laintiffs’ allegations concerning 

defendants’ superior knowledge and active concealment of a ‘material fact’ could give rise to the 

reasonable inference that [defendant] was under a duty to disclose.”). 

Plaintiffs’ allegations here more than suffice to state a plausible theory of both falsity and 

a tendency to deceive. Plaintiffs allege that Defendants made multiple false representations and 

material omissions related to the sale of the STMs, fraud that deceived the public. They failed to 

mention: (1) the breadth of the five-plus-year pre-existing conditions carveout; (2) the 

requirement that at least five years of medical records be submitted prior to claim coverage; and 

(3) that they engage in unlawful post-claims underwriting. There is little question that these 

omissions were material to Plaintiffs’ relationship with Defendants and that reasonable 

policyholders would want to know about such items prior to purchasing the STM. Or that, in 

context, these true facts render what Defendants claim about the quality of their services, and of 

what they uniformly promise about “trust[ing] the company” and coverage meaningless, or at 

minimum deceptive. See, e.g., Compl. ¶¶ 42-53. 

This axiomatic proposition is underscored repeatedly—and with specificity—throughout 

Plaintiffs’ Complaint, and Plaintiffs’ allegations show that Plaintiffs’ claims are shared by others. 

A former customer-service representative admitted that his job was not to help policyholders and 

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“it was obvious that the name of the game was runaround.” Id. ¶¶ 63, 67. Additionally, an STM 

insured wrote that he “deep[ly] regrets” choosing the insurance, because while he “was led to 

believe that this coverage was good short term insurance,” his claim was later denied under its 

five-year preexisting condition exclusion practice. Id. ¶ 73(b). This consumer’s advice, based on 

his experience with the bait-and-switch, is clear: “DO NOT EVEN CONSIDER THIS 

INSURANCE.” Id.; see also id. ¶ 73(c) (“I would NEVER, EVER suggest that anyone purchase 

insurance from HCC.”). Reasonable consumers are likely to be—and in fact have been—

deceived by the alleged misrepresentations and omissions at issue. 

Moreover, CBA’s premature fact-based argument that it has no culpability in these 

misrepresentations and omissions is simply untrue. The record makes clear that CBA is complicit 

in the advertising and marketing of the STMs. The brochure referenced in Plaintiffs’ Complaint 

(see, e.g., Compl. ¶¶ 42-49) and included as Exhibit 11 to the Padgett Declaration specifically 

singles out CBA and its role in providing the STMs. In pertinent part, the brochure states: 

Consumer Benefits of America 

In most states, HCC Life STM is available to members of the 

Consumer Benefits of America Association. Membership in 

the association will entitle you to discounts of up to 40% 

off regular retail prices on many short-term and long-term 

prescription drugs. Discounts are available from over 

59,000 participating pharmacy providers nationwide or 

by mail service. When membership is required, association 

fees are assessed at the time of application; enrollment in 

the association is automatic upon payment of the correct 

premium and all applicable 

Padgett Decl. at 66. A disclaimer on the same page further states that an “applicant may be 

required to enroll in the Consumer Benefits of America Association.” Id. As a general matter, 

but certainly at the pleadings stage, CBA cannot credibly contend that it has nothing to do with 

this marketing material when the very material it disclaims contains explicit advertisements for 

CBA and its services. It strains credulity—and flies in the face of the Complaint’s allegations—

for CBA to aver that it never reviewed, approved, or otherwise participated in generating the 

marketing materials in question. Accordingly, Plaintiffs’ UCL and FAL claims are proper and 

CBA’s motion should be denied. 

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CBA’s cases do not support a contrary result. It does not cite any cases in its FAL 

section. In its UCL section about fraud, it relies on Rubke v. Capitol Bancorp, 2006 WL 1699569 

(N.D. Cal. June 16, 2006), a class action under the securities laws in which the plaintiff class, 

minority shareholders who had sold shares pursuant to a tender offer, alleged that that defendants 

had engaged in a scheme to lower the value of their stock and engaged in related fraudulent 

conduct to encourage acceptance of the tender offer. In addition to being entirely factually 

inapposite, that case arises under the Private Securities Litigation Reform Act, whose “stringent 

requirements” of pleading fraud and scienter are not applicable here. Id. at *5. 

B. Plaintiffs Adequately Allege that CBA’s Conduct Also Violates the Unfair and 

Unlawful Prongs of the UCL. 

The UCL’s coverage is “sweeping,” and its standard for wrongful business conduct is 

“intentionally broad.” In re First Alliance Mortg. Co., 471 F.3d 977, 995 (9th Cir. 2006). A 

claim under the “unfair” prong should survive a motion to dismiss if facts are alleged that, if 

proven true, could establish a violation. McNeary–Calloway v. JP Morgan Chase Bank, N.A., 

863 F. Supp. 2d 928, 961-62 (N.D. Cal. 2012). “[T]he determination of whether a business 

practice is unfair is ‘one of fact which requires a review of the evidence from both parties’ and 

often cannot be made solely on the pleadings.” Ferrington v. McAfee, Inc., No. 10-1455, 2010 

WL 3910169, at *13 (N.D. Cal. Oct. 5, 2010) (quoting McKell v. Wa. Mut., Inc., 142 Cal. App. 

4th 1457, 1473 (2006)). 

Plaintiffs here sufficiently plead “unfair” conduct by Defendants, including CBA, under 

the “balancing” test (which compares the gravity of the plaintiff’s harm to the utility of the 

defendant’s conduct) and “tethering” test (which examines whether the alleged misconduct is 

tethered to a legislatively declared policy) that are both applied by California courts. Ferrington, 

2010 WL 3910169, at *12 (describing the two tests and explaining that California courts are 

divided on which applies); Compl. ¶¶ 95, 98-99. 

Here, the allegations that Defendants omitted and misrepresented material facts about how 

they use and misuse their pre-existing condition limitations and deny payments are basically the 

essence of an unfair balance. Insurance is only relevant when you need it, by definition. If only 

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those who need it are denied it, this is all benefit to the insurer (and, here, CBA and HII as well) 

and all detriment to the insured. Illusory insurance is of no benefit to consumers. Notably, 

CBA’s own case law supports this conclusion. In Smith v. State Farm Mutual Automobile Ins. 

Co., 93 Cal. App. 4th 700 (2001) the court listed examples of unfair business practices and 

included “placing unlawful or unenforceable terms in form contracts . . . asserting contractual 

rights one does not have . . . and [systematically] breaching a form contract affecting many 

consumers.” Id. at 719. Although the list is by no means exclusive, the sort of systematic bad 

faith Plaintiffs have alleged is plainly unfair. 

Plaintiffs’ allegations of statutory and common law violations also state a claim under the 

UCL’s “unlawful” prong. See generally Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-

39 (1994) (“The ‘unlawful’ practices prohibited by section 17200 are any practices forbidden by 

law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made.”); 

Abels v. Bank of Am., No. 11-208, 2011 WL 1362074, at *4 (N.D. Cal. Apr. 11, 2011) (“An act is 

‘unlawful’ under section 17200 if it violates an underlying state or federal statute or common 

law.”). 

In addition to its other unlawful conduct, Defendants breach California Insurance Code 

§ 332 by failing to communicate in good faith: (1) that their policies did not include claims for 

conditions that were diagnosed or treated within five years of the effective date of coverage; (2) 

that Plaintiffs would be required to provide years of medical records in addition to a proof of loss 

form to get their claims paid out; (3) that it would be impracticable to fulfill Defendants’ 

inevitable requests to provide such medical records; and (4) that Defendants do not have a fair 

claims process or functional customer service. Compl. ¶¶ 26-28, 33-38, 58-73. Further, and 

perhaps even more significant, the requirement that Plaintiffs submit five years of medical 

records only after they were deemed eligible for a policy, after Defendants accepted and invested 

their premium payments, and after Plaintiffs had submitted a claim, is a textbook example of 

post-claims underwriting, which California Insurance Code § 10384 prohibits. 

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C. Plaintiffs Adequately Allege Contract-Based Claims Against CBA: Breach of 

Contract and Breach of the Duty of Good Faith and Fair Dealing. 

CBA cannot convincingly claim it “was never a party to any contract with Plaintiffs.” 

Mot. at 7. As Plaintiffs allege in the Complaint, “[t]he policies that Defendants sold Plaintiffs, 

combined with the timely payment of premiums amounted to legally enforceable promises and 

obligations via contract.” Compl. ¶ 118. And the record that Defendants improperly introduce 

actually corroborate Plaintiffs’ allegations in that they show that CBA was a party to the 

certificate of insurance issued to Plaintiff Buckley (Padgett Decl. at Exhibit 15) and Plaintiff 

Azad (Padgett Decl. at Exhibit 13)—in fact, both documents state, on their first page, that the 

respective policies have “been issued to Consumer Benefits of America which we will refer to as 

‘the Policyholder.’” Padgett Decl. at 74, 117. Those same documents further state “THIS 

CERTIFICATE IS EVIDENCE OF A CONTRACT BETWEEN THE POLICYHOLDER 

AND THE COMPANY” (which is defined as HCC). Id. (emphasis in original). 

In addition, or in the alternative, Plaintiffs assert a valid breach of good faith and fair 

dealing claim against CBA. The covenant of good faith and fair dealing “is implied as a 

supplement to the express contractual covenants to prevent a contracting party from engaging in 

conduct which (while not technically transgressing the express covenants) frustrates the other 

party’s rights to the benefit of the contract.” Racine v. Laramie, Ltd., Inc. v. Dep’t of Parks and 

Recreation, 11 Cal. App. 4th 1026, 1031-32 (1992). 

A covenant claim can thus exist alongside, or instead of, a breach of contract claim, and 

has been applied in similar consumer class action contexts. See, e.g., In re Bank of Amer. Credit 

Protection Mktg. & Sales Practices Litig., No. MD-11-2269 TEH, 2012 WL 1123863, at *5 

(N.D. Cal. Apr. 3, 2012) (holding, in case involving credit card add-on products that purported to 

insure against problems faced by borrowers that could render them unable to pay, “Plaintiffs’ 

contention that the enumeration of allowable fees implies that the cardholder may expect to be 

free from further charges not expressly disclosed or referenced in the agreement is not so beyond 

the realm of credibility that dismissal would be appropriate at this stage”); Nasseri v. Wells 

Fargo Bank, N.A., 147 F. Supp. 3d 937 (N.D. Cal. 2015) (finding Wells Fargo hindered plaintiffs’ 

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1346076.8 -13- PLAINTIFFS’ OPPOSITION TO CONSUMER

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ability to perform and refused to reinstate her loan in bad faith); In re Chase Bank USA, N.A. 

“Check Loan” Contract Litig., 274 F.R.D. 286 (N.D. Cal. 2011) (granting class certification as to 

good faith and fair dealing claim). 

Here, CBA breached the covenant. Defendants, including CBA, systematically frustrate 

expectations by erecting common and insurmountable roadblocks (including via unlawful postclaims underwriting) to paying claims, without acknowledging they are doing so and even 

denying that they will never pay. Defendants hinder insureds’ ability to perform by their claims. 

This is classic bad faith. 

D. Plaintiffs Adequately Allege Unjust Enrichment. 

In stating that there is no claim for unjust enrichment, CBA ignores recent Ninth Circuit 

authority holding that unjust enrichment is a claim for relief in and of itself. See, e.g., Berger v. 

Home Depot USA, Inc., 741 F.3d 1061 (9th Cir. 2014). While Plaintiffs recognize the case law 

providing that an unjust enrichment claim should not be brought alongside a UCL claim for 

restitution when it is duplicative, they respectfully submit that this is not a basis to dismiss 

Plaintiffs’ claim, for various reasons. 

First, in light of this recent Ninth Circuit authority, those holdings dismissing unjust 

enrichment claims at the pleading stage are hard to reconcile with the entitlement of alternative 

pleading under Rule 8 of the Federal Rules of Civil Procedure. Rule 8(d) establishes that unjust 

enrichment may be pled in the alternative to contract or statutory claims, as Plaintiffs have done 

here. Compl. ¶¶ 141-46. 

Second, and relatedly, CBA challenges the UCL claim. Although its arguments lack merit 

for the reasons in Section A above, it cannot seriously dispute Plaintiffs’ right to restitution in 

some form. Even the cases it cites (neither of which is at the pleading stage) so allow, and CBA’s 

reliance on them is thus misplaced. See Bank of New York Mellon v. Citibank, N.A., 8 Cal. App. 

5th 935, 955 (2017) (rejecting defendant’s argument that plaintiff-appellant’s claim for unjust 

enrichment should be dismissed, on the basis that “we are not bound by the form of appellant’s 

claims or the relief demanded” and finding that plaintiff had stated a claim for equitable 

subrogation, which “may be used to enforce restitution in order to prevent unjust enrichment”) 

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(emphasis added); cf. Meister v. Mensinger, 230 Cal. App. 4th 381, 403 (2014) (discussing at 

length the relationship of restitution to disgorgement; rather than rejecting the principle of unjust 

enrichment, the court only held that the trial court, with the assistance of experts, was unable to 

ascertain “how respondents were enriched, let alone unjustly enriched, by their conduct”). 

Third, Plaintiffs expressly seek both restitutionary and non-restitutionary disgorgement, 

making their claim non-duplicative on its face. Compl. at 30 (¶¶ C and D). And, as a substantive 

matter, Plaintiffs have alleged not only that Class members spent money they would not have had 

to spend, but that Defendants have been unjustly enriched in the form of “higher premiums and

greater revenues than they would have enjoyed had they acted lawfully.” Compl. ¶ 143. The 

type of recoupment enjoyed by all Defendants was expressly noted as not being limited to the 

nominal insurer, but included other economic gains beyond premiums. At the pleading stage, 

Plaintiffs have more than adequately alleged that all Defendants have been unjustly enriched. 

E. Plaintiffs Should Be Permitted to Amend the Complaint if the Court 

Identifies Any Pleading Infirmities. 

“Dismissal without leave to amend is improper unless it is clear . . . the complaint could 

not be saved by any amendment.” Moss v. U.S. Secret Serv., 572 F.3d 962, 972 (9th Cir. 2009); 

Fed. R. Civ. P. 15(a)(2) . “[R]equests for leave to amend should be granted with “extreme 

liberality.” Moss, 572 F.3d at 972. 

Plaintiffs have articulated viable legal theories for each of the claims discussed in this 

brief, and should be afforded an opportunity to allege more facts should the Court require it. 

 CONCLUSION 

For the reasons set forth above, Plaintiffs respectfully submit that CBA’s motion to 

dismiss should be denied in its entirety. 

Dated: May 12, 2017 LIEFF CABRASER HEIMANN & BERNSTEIN, LLP 

By: /s/ Rachel Geman 

Rachel Geman (admitted pro hac vice) 

rgeman@lchb.com 

250 Hudson Street, 8th Floor 

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1346076.8 -15- PLAINTIFFS’ OPPOSITION TO CONSUMER

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CASE NO. 4:17-CV-618 

New York, NY 10013-1413 

(212) 355-9500 

Kelly M. Dermody (State Bar No. 171716) 

kdermody@lchb.com 

Michelle A. Lamy (State Bar No. 308174) 

mlamy@lchb.com 

275 Battery Street, 29th Floor 

San Francisco, CA 94111-3339 

(415) 956-1000 

CARNEY BATES & PULLIAM, PLLC 

Allen Carney (admitted pro hac vice) 

acarney@cbplaw.com 

David Slade (admitted pro hac vice) 

dslade@cbplaw.com 

519 W. 7th Street 

Little Rock, AR 72201 

(501) 312-8500 

CUNEO GILBERT & LADUCA, LLP 

Michael J. Flannery (State Bar No. 196266) 

mflannery@cuneolaw.com 

7733 Forsyth Boulevard, Suite 1675 

St. Louis, MO 63105 

(314) 226-1015 

Matthew Prewitt (State Bar No. 291593) 

mprewitt@cuneolaw.com 

16 Court Street, Suite 1012 

Brooklyn, NY 11241 

(202) 789-3960 

MEHRI & SKALET 

Jay Angoff (admitted pro hac vice) 

jay.angoff@findjustice.com 

1250 Connecticut Avenue, NW, Suite 300 

Washington, D.C. 20036 

(202) 822-5100 

Attorneys for Plaintiffs and the Proposed Class 

Case 4:17-cv-00618-PJH Document 71 Filed 05/12/17 Page 19 of 19