Pollock v. Federal Insurance Company

Background

Thomas Pollock and Eileen Tabios sued Federal Insurance Company for compensation under a homeowners’ insurance policy covering property damaged in the 2020 Glass Fire. An appraisal panel later valued repairs to the property’s man-made structures at approximately $32.1 million and set a 36-month construction period. The appraisal award stated that it did not decide coverage or Federal’s liability. In an earlier ruling, the court vacated the award’s investigation-cost amount but allowed the appraisal findings concerning repair costs and construction time to remain; it also held that disputed causation questions could be resolved by the court or a jury.

Federal asked for permission under Rules 15 and 16 of the Federal Rules of Civil Procedure to amend its answer to the plaintiffs’ amended complaint. Federal proposed adding an affirmative defense and counterclaim for breach of the insurance policy’s concealment-or-misrepresentation provision, along with a common-law fraud counterclaim. The proposed claims relied on three categories of statements: Pollock’s October 26, 2020 statement that restoration or reconstruction would likely take one to three years; proofs of loss submitted in 2021 claiming more than $85 million in demolition and rebuilding costs and more than $15 million in living expenses; and a September 27, 2021 letter discussing the alleged basis for the plaintiffs’ replacement-value claim and work by Kaizen Safety Solutions.

Parties’ positions

Federal argued that documents produced in late 2024 and depositions taken in January 2025 supplied evidence supporting its new allegations and that it had acted diligently after the court resolved Federal’s motion to vacate the appraisal award. Federal also argued that the proposed claims were sufficiently detailed and would not require significant additional discovery.

The plaintiffs argued that amendment would be futile because the challenged statements were opinions, the September 27 letter was protected by California’s litigation privilege, and the appraisal award established the extent and remedy for the fire-related damage. They also argued that Federal had delayed and that adding claims seeking damages would require additional discovery.

Court’s analysis

Under Rule 16, a scheduling order may be changed for good cause, with diligence being the main consideration. Judge Joseph C. Spero found good cause because waiting for the court to decide Federal’s motion to vacate the appraisal award was reasonable and because much of the evidence supporting Federal’s new allegations became available through late-2024 document production and 2025 depositions.

Under Rule 15, permission to amend should generally be freely given unless amendment would cause undue delay, bad faith, unfair prejudice, or futility. The court found that Federal plausibly alleged that the statements were material, that the plaintiffs knew they were false, and that the plaintiffs intended to deceive Federal. The court did not decide whether the statements were actually false or fraudulent.

The court rejected the plaintiffs’ argument that the statements were necessarily non-actionable opinions, explaining that whether an opinion misrepresented underlying facts could depend on disputed facts better addressed at summary judgment or trial. It likewise declined to resolve on the pleadings whether the September 27 letter was protected by California’s litigation privilege. The court also held that the appraisal award did not establish, for purposes of Federal’s proposed claims, that all assessed damage was caused by the Glass Fire; disputed causation questions remained for later proceedings. Finally, the court found no unfair prejudice because the plaintiffs knew Federal had reserved the right to assert fraud-related claims, no trial date had been set, and additional discovery could be addressed.

Disposition

The court granted Federal’s motion for leave to file an amended pleading. The order permitted Federal to add the proposed breach-of-contract defense and counterclaim and common-law fraud counterclaim. It did not enter judgment on those claims or decide the ultimate merits of the insurance dispute.