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1346077.10 

PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

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 HEALTH 

INSURANCE INNOVATIONS, INC.’S 

MOTION TO DISMISS AND TO STRIKE_ 

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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1346077.10 -i- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

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

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

FACTUAL BACKGROUND .......................................................................................................... 2

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

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

B. Defendants’ Common Alleged Practices Cause Common Injuries ......................... 3

C. Plaintiffs’ Experiences and the Underlying Litigation............................................. 5

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

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

A. Rule 12(b)(6) ............................................................................................................ 6

B. Rule 9(b) .................................................................................................................. 7

ARGUMENT ................................................................................................................................... 8

A. The Complaint Alleges Sufficient Facts Linking HII to the Conduct ..................... 8

B. The Complaint Alleges Facts Supporting a UCL Claim Against HII .................... 10

C. The Complaint Alleges Facts Supporting an FAL Claim Against HII. ................. 13

D. The Complaint Alleges Facts Supporting Breach of Contract and Bad 

Faith Against HII ................................................................................................... 14

E. The Complaint Alleges Facts Supporting Unjust Enrichment Against HII ........... 15

F. The Court Should Reject HII’s Motion to Strike as Disfavored and 

Unsupported ........................................................................................................... 16

1. Plaintiffs’ Allegations Concerning Prior Cease and Desist Letters 

and Agency Action Are Anything but Immaterial ..................................... 16

2. HII Fails to Articulate that It Is Prejudiced by Inclusion of 

Allegations Concerning the Cease and Desist Letters ............................... 17

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

Identifies Any Pleading Infirmities ........................................................................ 18

CONCLUSION .............................................................................................................................. 18

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1346077.10 -ii- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

Cases

Annunziato v. eMachines, Inc., 

402 F. Supp. 2d 1133 (C.D. Cal. 2005) ................................................................................... 16 

Arthur Andersen LLP v. Carlisle, 

556 U.S. 624 (2009) ................................................................................................................. 17 

Ashcroft v. Iqbal, 

556 U.S. 662 (2009) ................................................................................................................... 7 

Baas v. Dollar Tree Stores, Inc., 

2007 U.S. Dist. LEXIS 659 (N.D. Cal. Aug. 29, 2007) ............................................................. 8 

Bass v. Farmers Mut. Protective Fire Ins. Co., 

21 Cal. App. 2d 21 (Cal. App. 1937) ...................................................................................... 14 

Bell Atlantic v. Twombly, 550 U.S. 544 (2007) ................................................................................................................... 9 

Berger v. Home Depot USA, Inc., 

741 F.3d 1061 (9th Cir. 2014) .................................................................................................. 18 

Boggio v. California-Western States Life Ins. Co., 

108 Cal. App. 2d 597 (Cal. App. 1952) ................................................................................... 14 

Brazil v. Dole Food Co., Inc., 

935 F.Supp.2d 947 (N.D. Cal. 2013) ....................................................................................... 19 

Brewer v. Indymac Bank, 609 F. Supp. 2d 1104 (E.D. Cal. 2009) .............................................................................. 15, 16 

Comerica Bank v. McDonald, 

2006 WL 3365599 (N.D. Cal. Nov. 17, 2006) ........................................................................... 9 

Coolsystems, Inc. v. Nice Recovery Sys. LLC, 

No. 16-CV-02958-PJH, 2016 WL 6091577 (N.D. Cal. Oct. 19, 2016) ............................. 20, 21 

Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1997) ...................................................................................................... 8 

Daniels-Hall v. Nat’l Educ. Ass’n, 

629 F.3d 992 (9th Cir. 2010) ...................................................................................................... 3 

Davidson v. Kimberly-Clark Corp., 

No. C 14-1783 PJH, 2014 WL 3919857 (N.D. Cal. Aug. 8, 2014) ......................................... 21 

Dias v. Nationwide Life Ins. Co., 

700 F. Supp. 2d 1204 (E.D. Cal. 2010) .................................................................................... 14 

Doe v. United States, 419 F.3d 1058 (9th Cir. 2005) .................................................................................................... 9 

Egan v. Mut. of Omaha Ins. Co., 

24 Cal. 3d 809 (1979) .............................................................................................................. 17 

Fantasy, Inc. v. Fogerty, 

984 F.2d 1524 (9th Cir. 1993), rev’d on other grounds 510 U.S. 517 (1994) ......................... 21 

Ferrington v. McAfee, Inc., No. 10-1455, 2010 WL 3910169 (N.D. Cal. Oct. 5, 2010) ..................................................... 14 

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TABLE OF AUTHORITIES 

(continued) 

Page

1346077.10 -iii- PLAINTIFFS’ OPPOSITION TO HCC LIFE INSURANCE COMPANY AND HCC

MEDICAL INSURANCE SERVICES, LLC’S MOTION TO STRIKE

CASE NO. 4:17-CV-618 

Fid. Nat. Title Ins. Co. v. Castle, 

No. C 11-00896 SI, 2011 WL 6141310 (N.D. Cal. Dec. 8, 2011) ........................................... 10 

Foth v. BAC Home Loans Servicing, LP, 

No. CV 11-00114 DAE-BMK, 2011 WL 3439134 (D. Haw. Aug. 4, 2011) .......................... 10 

Frommoethelydo v. Fire Ins. Exch., 42 Cal. 3d 208 (1986) .............................................................................................................. 17 

Gilligan v. Jamco Dev. Corp., 

108 F.3d 246 (9th Cir. 1997) ...................................................................................................... 7 

Hernandez v. Dutch Goose, Inc., 

No. C 13-03537 LB, 2013 WL 5781476 (N.D. Cal. Oct. 25, 2013) ........................................ 19 

In re Fresh & Process Potatoes Antitrust Litig., 834 F. Supp. 2d 1141 (D. Idaho 2011) ..................................................................................... 10 

In re Sagent Tech., Inc., Derivative Litig., 278 F. Supp. 2d 1079 (N.D. Cal. 2003) ................................................................................... 11 

In re Wal-Mart Stores, Inc. Wage & Hour Litig., 

505 F. Supp. 2d 609 (N.D. Cal. 2007) ............................................................................... 20, 21 

In the Matter of Health Insurance Innovations, Inc., et al., Case No. INS-2015-348 (May 9, 2016) ................................................................................... 13 

Jamison v. Royal Caribbean Cruises, Ltd., No. 08-1513 WQH (NLS), 2009 WL 559722 (S.D. Cal. Mar. 4, 2009) ................................. 11 

Love v. Fire Ins. Exch., 

221 Cal. App. 3d 1136 (Ct. App. 1990) ................................................................................... 17 

Meyer v. Bebe Stores, Inc., No. 14-CV-00267-YGR, 2015 WL 431148 (N.D. Cal. Feb. 2, 2015) ............................... 20, 21 

Mohamed v. Jeppesen Dataplan, Inc., 614 F.3d 1070 (9th Cir. 2010) (en banc) .................................................................................... 7 

Moss v. U.S. Secret Serv., 

572 F.3d 962 (9th Cir. 2009) .................................................................................................... 22 

Orosco v. Sun-Diamond Corp., 51 Cal. App. 4th 1659 (Cal. App. 5th Dist. 1997) ................................................................... 12 

Peterson v. Cellco P'ship, 164 Cal. App. 4th 1583, 80 Cal. Rptr. 3d 316 (2008) .............................................................. 19 

Rasidescu v. Midland Credit Mgmt., Inc., 

435 F. Supp. 2d 1090 (S.D. Cal. 2006) .................................................................................... 11 

Rickless v. Temple, 

4 Cal. App. 3d 869 (Cal. App. 2d Dist. Feb. 25, 1970) ........................................................... 13 

Samet v. Procter & Gamble Co., No. 5:12-CV-01891 PSG, 2013 WL 3124647 (N.D. Cal. June 18, 2013) ............................... 19 

Schlagal v. Learning Tree Int’l, 

1998 WL 1144581 (C.D. Cal. Dec. 23, 1998) ........................................................................... 8 

Semegen v. Weidner, 780 F.2d 727 (9th Cir. 1985) ...................................................................................................... 8 

Shroyer v. New Cingular Wireless Servs., Inc., 

Case 4:17-cv-00618-PJH Document 72 Filed 05/12/17 Page 4 of 24
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TABLE OF AUTHORITIES 

(continued) 

Page

1346077.10 -iv- PLAINTIFFS’ OPPOSITION TO HCC LIFE INSURANCE COMPANY AND HCC

MEDICAL INSURANCE SERVICES, LLC’S MOTION TO STRIKE

CASE NO. 4:17-CV-618 

606 F.3d 658 (9th Cir. 2010) ...................................................................................................... 7 

Siracusano v. Matrixx Initiatives, Inc., 

585 F.3d 1167 (9th Cir. 2009) .................................................................................................... 7 

Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007) ...................................................................................................... 8 

United States for Use and Benefit of HCI Sys., Inc. v. Agbayani Construction Co., 

No. 14-cv-02503-MEJ, 2014 WL 4979336 (N.D. Cal. Oct. 6, 2014) ........................................ 8 

United States v. S. Cal. Edison Co., 

300 F. Supp. 2d 964 (E.D. Cal. 2004) ........................................................................................ 3

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) .................................................................................................... 8 

Walling v. Beverly Enterprises, 476 F.2d 393 (9th Cir. 1973) ...................................................................................................... 8 

Weiner v. Fleischman, 

54 Cal. 3d 476 (Cal. 1991) ....................................................................................................... 12 

Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970 (9th Cir. 2010) .................................................................................................... 19 

Zander v. Texaco, Inc., 259 Cal. App. 2d 793 (Cal. App. 3d Dist. 1968) ..................................................................... 15 

Statutes

Cal. Bus. & Prof. Code § 17200, et seq. ........................................................................................ 6 

Cal. Bus. & Prof. Code § 17500, et seq. .................................................................................. 6, 13 

Cal. Ins. Code § 1621 ................................................................................................................... 13 

Cal. Ins. Code § 332 ..................................................................................................................... 10 

Rules

Fed. R. Civ. P. 12 ......................................................................................................................... 11 

Fed. R. Civ. P. 12(b)(6) .................................................................................................................. 7 

Fed. R. Civ. P. 12(f) ............................................................................................................... 19, 20 

Fed. R. Civ. P. 15(a)(2) ................................................................................................................ 22 

Fed. R. Civ. P. 8 ............................................................................................................................. 9 

Fed. R. Civ. P. 8(a) ......................................................................................................................... 8 

Fed. R. Civ. P. 8(a)(20) ................................................................................................................ 10 

Fed. R. Civ. P. 8(d) ...................................................................................................................... 18 

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

Fed. R. Evid. 201(b)(2) .................................................................................................................. 3 

Other Authorities

Lord, Williston on Contracts § 57:19 (4th ed. 2001) ................................................................... 17 

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1346077.10 -1- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

MEMORANDUM OF POINTS AND AUTHORITIES 

 ISSUES TO BE DECIDED 

1. Whether the facts alleged in Plaintiffs’ Complaint provide sufficient notice of the 

specific behavior of Defendant Health Insurance Innovations, Inc. (“HII”) giving rise to 

Plaintiffs’ claims.

2. Whether allegations detailing regulatory scrutiny of Defendant HII—in connection 

with its marketing and sale of insurance policies like those at issue in this litigation—are properly 

included with the Complaint. 

 INTRODUCTION 

Defendant HII’s Motion to Dismiss and to Strike1 rests on a single, faulty premise: that 

the allegations in Plaintiffs’ Complaint do not sufficiently distinguish HII’s culpability from that 

of its co-defendants. However, the allegations in the Complaint demonstrate that HII is actively 

involved in the marketing of the fraudulent Short-Term Medical (“STM”) insurance policies that 

are challenged in this litigation, and that HII developed and offers these plans jointly with HCC. 

These plans, which Plaintiffs purchased, are the heart of the Complaint: the STMs contain a 

series of hidden exclusions and conditions precedent, such that Class members do not have their 

timely and proper claims honored under their policies. In light of these hidden, unlawful, and 

unconscionable obstacles and Defendants’ post-claims underwriting, the marketing of the STMs 

is deceptive. The facts alleged in the Complaint—including many taken verbatim from HII’s own 

statements and from public records, and as fully corroborated by HCC’s improperly-submitted 

and premature declarations in support of its Motion to Dismiss—demonstrate HII’s culpability for 

its role in the marketing and administration of STMs in California. 

HII’s other argument is to strike the references to regulatory actions against HII for its 

illegal and deceptive marketing of its STMs, as detailed in paragraphs 51-52 of the Complaint. 

Mot. at 10-11. This is without basis, especially in light of HII’s argument effectively disavowing 

 

1

 Defendant on this motion is Health Insurance Innovations, Inc. (“HII”). HCC Life Insurance 

Company and HCC Medical Insurance Services LLC (“HCC”) and Consumer Benefits of 

America (“CBA”) are also Defendants in this action, and are included within the term 

“Defendants” where no specific Defendant is indicated. 

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1346077.10 -2- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

its threshold involvement with the practices at issue, even apart from the question of these 

common practices’ legality. As the Complaint specifically states, these data points “underscore[] 

the systematic nature of the practices” complained of, with regard to HII’s marketing and sales. 

Compl. ¶ 51. Further, these paragraphs specify that the STM policies HII fraudulently 

marketed—which were at the heart of the regulatory investigations—were policies jointly 

developed with HCC. Id. ¶ 52. Far from being “immaterial and impertinent,” these allegations 

put HII on notice of the precise activity, conducted either jointly with or on behalf of HCC, from 

which Plaintiffs’ claims arise. 

 HII’s motion should be denied it its entirety. 

 FACTUAL BACKGROUND 

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

the facts stated in Plaintiffs’ Complaint, and in fact barely addresses the allegations contained 

therein. As described below, Defendant HII has developed the STMs at issue in conjunction with 

Defendant HCC and, along with Defendant CBA, provides the STMs to Class members, 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 STMs to California 

consumers. 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, 22 n.5, 23, 51-53, 55. As referenced in Plaintiffs’ Complaint, HII “partners with HCC . . . 

to expand [its] short-term medical portfolio” and provide STMs to consumers. Id. at n.5. The 

document referenced in the Complaint—a June 3, 2013 press release from HII—further clarifies 

that HII “creates customizable and affordable, high-quality health insurance products and 

supplemental services through partnerships with best-in-class carriers.” See HII Press Release, 

Health Insurance Innovations Partners with HCC Like Insurance Company to Expand ShortTerm Medical Portfolio, (Jun. 3, 2013), available at 

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1346077.10 -3- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

http://investor.hiiquote.com/releasedetail.cfm?ReleaseID=775244; see also Compl. at n.5.2

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. Compl. ¶¶ 18, 57. 

B. Defendants’ Common Alleged Practices Cause Common Injuries 

In conjunction with Defendants HCC and CBA, HII’s claim processing procedures for 

their STMs—and the requirements placed upon the insureds—are purposely engineered and 

uniformly applied to cause the delay and denial of the claims of policyholders. Id. ¶¶ 3, 54, 56, 

58-73. Upon submitting claims, insureds are required to provide every identifiable medical 

record in the last five years of 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. 

The first step in the strategy is to 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, 62-73. 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 

 

2

 The Court may take judicial notice of HII’s press release, Compl. ¶ 22, n.5, as well as the 

Montana Notice of Proposed Agency Action issued to HII, id. ¶ 52, as both “can be accurately 

and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. 

Evid. 201(b)(2). See, e.g., Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998-99 (9th Cir. 

2010) (taking judicial notice of information “made publicly available by government entities” and 

websites where “neither party disputes the authenticity of the web sites or the accuracy of the 

information displayed therein”); United States v. S. Cal. Edison Co., 300 F. Supp. 2d 964, 970 

(E.D. Cal. 2004) (“[M]atters of public record may be considered, including pleadings, orders, and 

other papers filed with the court or records of administrative bodies.”). The press release is 

identified in the Complaint by a URL that resolves to a page on HII’s own website, while the 

Notice of Proposed Agency Action is a document produced as the result of an administrative 

proceeding in the public record. 

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1346077.10 -4- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

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—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 the above, 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; 104-114. Through various declarations, HCC has introduced 

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

However, none of these documents, nor any documents referenced in Plaintiffs’ Complaint, alert 

an insured or a prospective insured to the virtually limitless exclusions (or burdensome record 

requests) applied by Defendants in their claims-handling practices. Id.; see also Compl. ¶¶ 3, 39-

72; 104-114. This constitutes false advertising. Id. ¶¶ 104-14. Indeed, Defendant HII’s poor 

behavior in the course of marketing its policies was the subject of intense regulatory scrutiny over 

the last several years, in several states. Id. ¶¶ 50-52. 

Defendants’ internal policies and procedures, public-facing 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 

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1346077.10 -5- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

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. Compl. ¶¶ 90-146. Further, HII’s role in the matter is clearly laid out, as it is 

indisputable that the company (1) markets the STMs to Class members and (2) jointly developed 

those STMs with HCC, with their unconscionable exclusions and conditions precedent. 

C. Plaintiffs’ Experiences and the Underlying Litigation

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

19-38. Plaintiff Azad purchased his STM through HII. Compl. ¶ 22; Declaration of Dan 

Garavuso (“Garavuso Decl.”) (Dkt. No. 51) ¶¶ 1-4; id. at Exs. A-B. Each Plaintiff purchased 

their STM policies in the belief that such policies would cover unexpected medical conditions. 

Compl. ¶¶ 19-38. 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, 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 

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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 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. 

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.; (2) violations of Cal. Bus. & Prof. Code § 

17500, et seq.; (3) breach of contract; (4) breach of the implied covenant of good faith and fair 

dealing; and (5) unjust enrichment. Defendant HII then filed the instant Motion to Dismiss and to 

Strike. Dkt. No. 60 (“Mot.”).3

 LEGAL STANDARDS 

A. Rule 12(b)(6) 

Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks “a 

cognizable legal theory” or “sufficient facts to support a cognizable legal theory.” Shroyer v. New 

 

3

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

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

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Cingular Wireless Servs., Inc., 606 F.3d 658, 664 (9th Cir. 2010). 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). Moreover, the 

Court must draw “all reasonable inferences from the complaint in [plaintiffs’] favor,” Mohamed v.

Jeppesen Dataplan, Inc., 614 F.3d 1070, 1073 (9th Cir. 2010) (en banc), and “must accept as true 

all of the factual allegations contained in the complaint” and “construe them in the light most 

favorable to the plaintiffs.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Siracusano v. Matrixx 

Initiatives, Inc., 585 F.3d 1167, 1177 (9th Cir. 2009). 

B. Rule 9(b) 

Plaintiffs’ claims under the deceptive prong of the UCL and FAL must satisfy 9(b).4 The 

Ninth Circuit has long construed 9(b) to 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., No. 14-cv-02503-MEJ, 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 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, No. 

CV 98-6384 ABC (EX), 1998 WL 1144581, at *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, No. CV 15-04475-BRO 

(JEMx), 2015 WL 6150296, at *4 (C.D. Cal. Oct. 15, 2015) ( “[Rule 9(b)] must be read in 

 

4

 Plaintiffs’ other claims—namely, the common-law claims and the claims under other prongs of 

the UCL—need not satisfy 9(b). 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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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, 

No. C-06-03735 RMW, 2006 WL 3365599, at *2 (N.D. Cal. Nov. 17, 2006). 

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

 ARGUMENT 

Defendant argues that Plaintiffs fall short of the “plausibility” standard under Bell Atlantic 

v. Twombly, 550 U.S. 544, 570 (2007). However, Plaintiffs have asserted extensive and specific 

factual allegations regarding HII’s involvement in Defendants’ unlawful scheme. These wellpleaded and extensive allegations, coupled with the reasonable inferences to which Plaintiffs are 

entitled, show that the allegations against HII are the opposite of conclusory: they are pointed, 

specific, and compelling. See Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005) (“[A] 

complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that 

the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”) 

(citation omitted). Plaintiffs plausibly allege HII’s liability on each claim for relief, and HII’s 

motion should be denied in its entirety.

A. The Complaint Alleges Sufficient Facts Linking HII to the Conduct 

HII contends that Plaintiffs have not done enough to distinguish between the bad acts of 

HII and the other Defendants. However, HII’s formalistic objection does nothing to rebut the 

Complaint’s plain allegations that HII is specifically liable on Plaintiffs’ claims for relief: HII 

described itself as a “partner” of HCC (Compl. ¶ 55), jointly marketed and sold the policy in 

question to Plaintiff Azad (id. ¶ 22), and has been the subject of regulatory action for its 

unscrupulous insurance sales schemes (id. ¶¶ 51-57). HII’s vital role in marketing and 

administrating the plans underwritten by HCC exposes it to statutory or common law liability for 

the misconduct complained of. Id. ¶ 59. 

Rule 8 provides that a complaint must contain “a short and plain statement of the claim 

showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(20). Nothing in the Complaint 

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forces HII to “speculate as to the wrong Plaintiffs have alleged they committed,” and nothing in 

the Rules prevents the filing of well-pleaded claims against co-defenants who have relationships 

that are complex and even opague, but that exist all the same and that harm plaintiffs, separately 

and working in tandem. Foth v. BAC Home Loans Servicing, LP, No. CV 11-00114 DAE-BMK, 

2011 WL 3439134, at *5 (D. Haw. Aug. 4, 2011); see, e.g., Fid. Nat. Title Ins. Co. v. Castle, No. 

C 11-00896 SI, 2011 WL 6141310, at *3 (N.D. Cal. Dec. 8, 2011) (“By referencing the 

‘Defendant Parties’ . . . one is put on notice as to which defendants are alleged to have been 

involved in the ‘Fraudulent Transactions’ described [elsewhere in the complaint].”); In re Fresh 

& Process Potatoes Antitrust Litig., 834 F. Supp. 2d 1141, 1164 (D. Idaho 2011) (holding 

plaintiffs did not need to describe the “who-what-when-where-why” of each defendant in a multiparty scheme where their “basic role in the alleged scheme” was adequately alleged). 

Here, it cannot be disputed that HII was involved in the marketing and sale of Plaintiff 

Azad’s STM policy. See Garavuso Decl. ¶¶ 1-4; id. at Exs. A-B. Nor is it disputed that HII 

expressly and publicly stated that it is a “partner” of HCC in the development of the STMs. 

Compl. ¶ 55. Although HII’s Motion studiously avoids addressing the statement, HII has 

publicly claimed that, as a “partner[]” of HCC, it “creates customizable and affordable, highquality health insurance products and supplemental services through partnerships with best-inclass carriers” including, specifically, the STMs at issue in this litigation. See HII Press Release, 

Health Insurance Innovations Partners With HCC Like Insurance Company to Expand ShortTerm Medical Portfolio, (Jun. 3, 2013);5 see also Compl. at n.5. Plaintiffs’ claims arise from (1) 

the development and administration of STMs that contain material, unconscionable, and hidden 

exclusions and conditions precedent; and (2) the deceptive marketing and sale of those same 

STMs. As discussed above, Plaintiffs have sufficiently pled HII’s culpability in both of those 

practices, sufficient to withstand a challenge under Rule 12. 

Moreover, much of HII’s cited precedent is inaccurate or inapposite. For example, HII 

cites Jamison v. Royal Caribbean Cruises, Ltd., No. 08-1513 WQH (NLS), 2009 WL 559722, *4 

(S.D. Cal. Mar. 4, 2009), for the proposition that “references such as ‘partner,’ ‘close affiliate’ 

5

 Available at http://investor.hiiquote.com/releasedetail.cfm?ReleaseID=775244. 

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and ‘offered and marketed jointly’ are insufficient to survive a motion to dismiss.” Mot. at 5. 

That opinion, on examination, contains no such language. Instead, this case and HII’s other cases 

stand only for the proposition that a bare recitation of the elements of alter ego liability is 

insufficient to link multiple defendants’ conduct. Id. at *4 (involving vague allegations by a pro 

se plaintiff); see also Rasidescu v. Midland Credit Mgmt., Inc., 435 F. Supp. 2d 1090, 1099 (S.D. 

Cal. 2006) (same); In re Sagent Tech., Inc., Derivative Litig., 278 F. Supp. 2d 1079, 1094 (N.D. 

Cal. 2003) (faulting a plaintiff’s failure to apportion bad acts between individual defendants 

where, among other defects, the acts were taken at a certain corporation during time periods in 

which certain defendants were not employed there). 

Here, HII and/or its agents were responsible for false and deceptive practices causing the 

purchase of the policies by Plaintiffs and innumerable Class members. Compl. ¶ 39. HII, 

furthermore, admits that it works in close partnership with HCC on a range of functions. Indeed, 

HII’s press release for the release of the HealtheMed STM plan that Plaintiffs purchased, Compl. 

¶¶ 22, 55, “announces the launch of HealtheMed STM through its partnership with HCC Life 

Insurance Company,” and states that it “creates customizable and affordable, high quality 

insurance products and supplemental services through partnerships.” This cooperative joint 

venture, upon information and belief, gives rise to HII’s vicarious or direct liability for the 

obstructive and bad-faith conduct of, among others, the customer service representatives who 

wrongly obstructed Plaintiffs and Class Members from obtaining claims payments. Compl. ¶ 72. 

And there can be no dispute that HII is responsible for the deceptive or misleading statements it 

made in marketing and selling the policies, as set forth below. 

B. The Complaint Alleges Facts Supporting a UCL Claim Against HII 

HII argues that it cannot possibly violate § 332 of the Insurance Code “because it is 

neither the insurer nor the insured.” Mot. at 7.6 HII is incorrect for two primary reasons. 

First, the allegations of the complaint combined with the official and public records it 

references compel the conclusion that HII and HCC are partners or joint venturers, who under 

6

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fail for the reasons discussed in this section, as well as in Plaintiffs’ discussion of how the 

specificity requirements of 9(b) are satisfied. 

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California law are generally liable for the acts of the other.7 See, e.g., Orosco v. Sun-Diamond 

Corp., 51 Cal. App. 4th 1659, 1670 (Cal. App. 5th Dist. 1997); Rickless v. Temple, 4 Cal. App. 3d 

869, 894 (Cal. App. 2d Dist. Feb. 25, 1970). For example, the complaint alleges that HII is a 

“developer and administrator of” health insurance policies, Compl. ¶ 17, and that in a July 2013 

press release HII announced the launch of its new short-term medical insurance product and 

described itself as a “partner” of HCC, Compl. ¶ 55. Further, that release characterizes the new 

health policy as “HII’s new short-term medical plan with HCC,” rather than the other way 

around; it conveys the impression that HII is not only HCC’s partner but that it is the managing 

partner, with HCC merely helping HII to provide “HII’s new short-term medical plan.” 

Bolstering that impression, the Montana Notice of Proposed Agency Action against HII, 

HCC and others referenced in ¶ 52 of the Complaint states that “[o]n information and belief, the 

HHI entities and the individuals behind these entities are the masterminds behind the short term 

medical policies at issue.” In the Matter of Health Insurance Innovations, Inc., et al., Case No. 

INS-2015-348, Notice of Proposed Agency Action at 8 (May 9, 2016) (emphasis supplied). The 

Notice states that those policies “are routinely sold through misinformation and deception,” and 

makes clear, both in the text and in two charts, that it views HII as the hub and HCC as one of the 

spokes of the operation. Id. at 3-5. The Notice further alleges that the “Respondent HII entities 

violated [Montana law] by acting as, and holding themselves out as, administrators for each 

Respondent insurer,” including HCC. Id. at 19. In addition, it specifically alleges that HII 

created, operated, or knowingly profited from: 

• “Misreprent[ing] pertinent facts or insurance policy provisions relating to coverages at 

issue”; 

• “Fail[ing] to acknowledge and act reasonably promptly upon communications with 

respect to claims arising under insurance policies”; 

 

7

 A joint venture “is an undertaking by two or more persons jointly to carry out a single business 

enterprise for profit,” and is “virtually the same as” a partnership. Weiner v. Fleischman, 54 Cal. 

3d 476, 482 (Cal. 1991) (internal citation omitted). Accordingly, “the courts freely apply 

partnership law to joint ventures when appropriate.” Id. 

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• “Refus[ing] to pay claims without conducting a reasonable investigation based upon 

all available information”; and 

• “Neglect[ing] to attempt in good faith to effectuate prompt, fair, and equitable 

settlements of claims in which liability has become reasonably clear.” 

Id. at 19-21. 

The above-described allegations demonstrate that HCC and HII are partners or joint 

venturers in connection with marketing the short-term insurance policies at issue in this case. As 

such they are each liable for both their own acts and the acts of the other. 

Second, even if HII is viewed as HCC’s agent, it would still be liable for violating Ins. 

Code § 332, and therefore the UCL.8

 Notably, in Dias v. Nationwide Life Ins. Co., 700 F. Supp. 

2d 1204 (E.D. Cal. 2010), the court found that even an agent of an insurer who could not make a 

binding contract on behalf of the insurer “could fraudulently induce the purchase of a policy 

through his solicitation activities by misrepresenting the nature of a product or policy term.” Id. 

at 1221. See also Boggio v. California-Western States Life Ins. Co., 108 Cal. App. 2d 597, 599 

(Cal. App. 1952) (noting circumstances in which applicant properly relied on representations of 

insurance agent); Bass v. Farmers Mut. Protective Fire Ins. Co., 21 Cal. App. 2d 21, 26, 68 (Cal. 

App. 1937). Here, the Complaint alleges that HII “cooperat[es] in the sale” of HCC policies, 

“with knowledge of HCC’s practices.” Compl. ¶ 17. It also alleges that the Montana 

Commissioner of Securities and Insurance has “detailed how unlicensed Producers worked with 

HII to sell HCC health insurance policies to unsuspecting Montana consumers.” Id. ¶ 52. Those 

allegations are sufficient to raise a reasonable inference, at the pleading stage, that HII is an agent 

of HCC. See Cal. Ins. Code § 1621; Rest. 3d of Agency, §§ 2.01, 2.03, 3.03 (3rd 2006); see also 

Zander v. Texaco, Inc., 259 Cal. App. 2d 793, 800 (Cal. App. 3d Dist. 1968) (“A contract of 

 

8

 HII’s unscrupulous conduct is thus in derogation of important legislative policies and unfair 

within the meaning of the UCL’s unfairness prong (which HII barely mentions). The alleged 

conduct is also unfair because there is no benefit to consumers to not having insurance, 

effectively, at the moment they need it most: when there are claims to pay. See Ferrington v. 

McAfee, Inc., No. 10-1455, 2010 WL 3910169, at *12-13 (N.D. Cal. Oct. 5, 2010) (describing 

both 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). 

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agency may be implied from the circumstances and conduct of the parties. The existence of an 

agency is a question of fact.”). 

In short, the Complaint contains sufficient allegations to support both HII as a partner or 

joint-venturer with HCC and HII as an agent of HCC. It thus states a UCL claim against HII as 

well as against HCC. 

C. The Complaint Alleges Facts Supporting an FAL Claim Against HII. 

Plaintiffs have also stated a claim against HII under Cal. Bus & Prof. Code § 17500 

(“FAL” or “Section 17500”). Section 17500 applies to “any person, firm, corporation, or 

association,” and prohibits, among other things, any entity to “cause to be made or disseminated 

. . . in any [] manner or means whatsoever . . . which is untrue or misleading, and which . . . 

should be known, to be untrue or misleading.” Id. As noted above, the Complaint alleges that HII 

cooperates in selling and servicing HCC policies, that the two companies are in a self-described 

“strong and long-lasting partnership,” and that they launched a short-term medical plan together. 

Compl. ¶ 17, 52, 55, 55 n.11. By cooperating in the sale of HCC policies, HII made or caused to 

be made the untrue and misleading statements and material omissions about HCC’s policies, 

practices, and customer service. In servicing those policies, HII did the same. See Brewer v. 

Indymac Bank, 609 F. Supp. 2d 1104, 1124 (E.D. Cal. 2009) (plaintiffs stated claim under FAL 

by asserting that defendants’ explanation of mortgage was misleading, deceptive, or ambiguous). 

Lastly, HII is incorrect that Plaintiffs need to plead reliance upon specific statements. In 

fact, “reading reliance into the UCL and FAL would subvert the public protection aspects of those 

statutes.” Annunziato v. eMachines, Inc., 402 F. Supp. 2d 1133, 1137 (C.D. Cal. 2005). This is 

because “the goal of both the UCL and FAL is the protection of consumers” and there may be 

“numerous situations in which the addition of a reliance requirement would foreclose the 

opportunity of many consumers to sue under the UCL and the FAL.” Id. Claims for false 

advertising are evaluated from the vantage point of a reasonable consumer, and “whether 

consumers have been or will be misled is a factual question that cannot be resolved on a motion 

to dismiss.” Brewer, 609 F. Supp. 2d at 1124. As discussed in greater detail in Plaintiffs’ 

concurrently-filed Opposition to HCC’s Motion to Dismiss, the Complaint alleges that both 

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Plaintiffs Azad and Buckley, as well as many other individuals, had numerous communications 

regarding their insurance policies. They spoke with customer service representatives, agents, and 

brokers; they received emails and letters; and they reviewed website content. Via these common 

and uniform communications, Plaintiffs and others were exposed to false, misleading, and 

misrepresentative statements as well as material omissions. Compl. ¶¶ 19-38, 42-48, 56, 63, 67, 

73. Plaintiffs have stated a claim against HII under both the UCL and FAL. 

D. The Complaint Alleges Facts Supporting Breach of Contract and Bad Faith 

Against HII 

HII contends that Plaintiffs have not alleged facts to support a claim for its liability under 

contract or bad faith. HII is wrong. 

Plaintiffs have alleged that HII sold, developed, and performed vital services under the 

insurance contracts Plaintiffs purchased. Compl. ¶¶ 22, 39, 55, 72. HII urges that because HCC 

was the underwriter of Plaintiffs’ insurance contracts, it cannot be liable for the contractual 

wrongs. Mot. at 9. However, it is well-settled that “traditional principles of state law allow a 

contract to be enforced by or against nonparties to the contract through assumption, piercing the 

corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and 

estoppel.” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S. Ct. 1896, 1902 (2009) 

(citing 21 R. Lord, Williston on Contracts § 57:19, p. 183 (4th ed. 2001)). Here, at a minimum, 

HII’s behind-the-scenes knowledge and close cooperation in the sale and administration of 

Plaintiffs’ worthless insurance contracts, as described above and in the Complaint, render it 

equitably estopped from denying liability under a contract theory. 

Plaintiffs have also stated a claim against HII for breach of the implied covent of good 

faith and fair dealing. Under California law, “a covenant of good faith and fair dealing is implied 

in every insurance contract.” Frommoethelydo v. Fire Ins. Exch., 42 Cal. 3d 208, 214 (1986); see 

also Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136, 1153 (Ct. App. 1990); Egan v. Mut. of 

Omaha Ins. Co., 24 Cal. 3d 809, 818-19 (1979). Here, HII breached the covenant. Plaintiffs 

allege Defendants, including HII, systematically frustrate expectations by erecting common and 

insurmountable roadblocks (including via unlawful post-claims underwriting) to paying claims, 

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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. 

E. The Complaint Alleges Facts Supporting Unjust Enrichment Against HII 

In stating that there is no claim for unjust enrichment, HII 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, HII challenges the UCL claim. Although HII’s arguments lack 

merit—for the reasons set forth in Section B above—HII cannot seriously dispute Plaintiffs’ right 

to restitution in some form. 

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. 

Fourth, HII cites cases where courts had already made findings on other allegations that 

precluded the survival of an unjust enrichment claim. See, e.g., Samet v. Procter & Gamble Co., 

No. 5:12-CV-01891 PSG, 2013 WL 3124647, at *10 (N.D. Cal. June 18, 2013); Brazil v. Dole 

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1346077.10 -16- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

Food Co., Inc., 935 F.Supp.2d 947, 967 (N.D. Cal. 2013). Unjust enrichment, which is 

synonymous with restitution in California law, has its own elements—and these elements do not 

track Plaintiffs’ other claims: “The elements of an unjust enrichment claim are the receipt of a 

benefit and [the] unjust retention of the benefit at the expense of another.” Peterson v. Cellco 

P'ship, 164 Cal. App. 4th 1583, 1593, 80 Cal. Rptr. 3d 316, 323 (2008). 

F. The Court Should Reject HII’s Motion to Strike as Disfavored and 

Unsupported 

Rule 12(f) provides that a court “may strike from a pleading an insufficient defense or 

any redundant, immaterial, impertinent, or scandalous matter.” “The function of a [Rule] 12(f) 

motion to strike is to avoid the expenditure of time and money that must arise from litigating 

spurious issues by dispensing with those issues prior to trial.” Whittlestone, Inc. v. Handi-Craft 

Co., 618 F.3d 970, 973 (9th Cir. 2010) (citation omitted). Motions to strike are “generally 

disfavored because [they] may be used as delaying tactics and because of the strong policy 

favoring resolution of the merits.” Hernandez v. Dutch Goose, Inc., No. C 13-03537 LB, 2013 

WL 5781476, at *3 (N.D. Cal. Oct. 25, 2013) (citation and internal quotation marks omitted). 

A motion to strike should be denied “unless it is clear that the matter to be stricken could 

have no possible bearing on the subject matter of the litigation.” Coolsystems, Inc. v. Nice 

Recovery Sys. LLC, No. 16-CV-02958-PJH, 2016 WL 6091577, at *2 (N.D. Cal. Oct. 19, 2016) 

(Hamilton, J.) (citation and internal quotation marks omitted). “Any doubt concerning the 

import of the allegations to be stricken weighs in favor of denying the motion to strike.” In re 

Wal-Mart Stores, Inc. Wage & Hour Litig., 505 F. Supp. 2d 609, 614 (N.D. Cal. 2007). 

“Given the disfavored status of Rule 12(f) motions, courts often require a showing of 

prejudice by the moving party before granting the requested relief.” Meyer v. Bebe Stores, Inc., 

No. 14-CV-00267-YGR, 2015 WL 431148, at *5 (N.D. Cal. Feb. 2, 2015) (internal quotation 

marks omitted). 

1. Plaintiffs’ Allegations Concerning Prior Cease and Desist Letters and 

Agency Action Are Anything but Immaterial 

HII seeks to strike allegations that: (1) it received cease and desist letters from, at least, 

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1346077.10 -17- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

the states of Michigan (on May 1, 2014), Arkansas (on March 28, 2016), and Montana (on May 9, 

2016), all noting that it was selling short-term insurance plans through unlicensed brokers and/or 

through misinformation and deception; and (2) it was issued a Notice of Proposed Agency Action 

on May 9 by the Montana Commissioner of Securities and Insurance, detailing how unlicensed 

Producers worked with Defendant to sell HCC health insurance policies to unsuspecting Montana 

consumers. Compl. ¶¶ 51-52. 

HII offers only one argument in favor of striking these allegations: that they are 

immaterial because Plaintiffs represent a California class and the cease and desist letters and 

agency actions stem from other states. Mot. at 11. This one sentence argument falls far short of 

making it “clear that the matter to be stricken could have no possible bearing on the subject 

matter of the litigation.” Coolsystems, 2016 WL 6091577, at *2. Moreover, the cases cited by 

HII fair no better in terms of supporting its argument. See Fantasy, Inc. v. Fogerty, 984 F.2d 

1524, 1527 (9th Cir. 1993), rev’d on other grounds 510 U.S. 517 (1994) (affirming striking of 

allegations that were barred by the statute of limitations and by res judicata); Davidson v. 

Kimberly-Clark Corp., No. C 14-1783 PJH, 2014 WL 3919857, at *11-12 (N.D. Cal. Aug. 8, 

2014) (striking allegations of on-line articles/reports and websites because plaintiff did not allege 

that she read or relied on them). Here, neither a statute of limitations nor a res judicata concern is 

in play. In addition, the salience of the cease and desist letters and agency actions do not turn on 

whether Plaintiffs relied on them; rather, as discussed above, the import of these allegations is 

that they underscore the systematic nature of Defendant’s practices, and in particular, Defendant’s 

cooperation with HCC in selling practically worthless health insurance all over the country, 

including in California. See supra at Section B. 

In light of the fact that “[a]ny doubt concerning the import of the allegations to be stricken 

weighs in favor of denying the motion to strike,” In re Wal-Mart Stores, 505 F. Supp. 2d at 614, 

HII’s motion should be denied. 

2. HII Fails to Articulate that It Is Prejudiced by Inclusion of Allegations 

Concerning the Cease and Desist Letters 

HII also fails to make the threshold showing that it is prejudiced by Plaintiffs’ allegations 

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1346077.10 -18- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

regarding prior cease and desist letters and agency action. Meyer, 2015 WL 431148, at *5. In 

fact, HII does not even argue that it faces any prejudice as a result of these allegations. In the 

absence of any other conceivable prejudice, the Court should deny HII’s motion to strike 

Plaintiffs’ allegations. 

G. 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, HII’s motion dismiss and to strike 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 

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) 

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1346077.10 -19- PLAINTIFFS’ OPPOSITION TO HEALTH INSURANCE

INNOVATIONS, INC.’S MOTION TO DISMISS AND TO STRIKE

CASE NO. 4:17-CV-618 

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 

Clayton, 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 72 Filed 05/12/17 Page 24 of 24