Pennington v. US Assure Insurance Services of Florida, Inc.

Background

Thomas and Kelli Pennington alleged that they sought a builder’s-risk insurance quote for remodeling their Oakland, California home. They submitted the request through the website of John M. Brown Insurance Agency, Inc. Brown sent them a proposal for a “Builders Risk and Installation” policy presented by US Assure. The policy was issued by Zurich American Insurance Company.

After a November 23, 2022 fire damaged the property’s garage, the Penningtons learned that the policy covered new construction rather than remodeling. Zurich denied their claim and canceled the policy. The Penningtons alleged that the garage repairs would cost more than $150,000 and sued US Assure and Brown under California law for negligent failure to obtain insurance coverage, negligent misrepresentation, violation of California’s Unfair Competition Law, and violation of the False Advertising Law.

US Assure moved to dismiss all claims against it under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not adequately state a legally recognized claim. US Assure also moved under Rule 12(f) to strike references to emotional-distress damages, attorney’s fees, disgorgement of profits, and general damages.

Requests for Judicial Notice

The court declined to consider US Assure’s policy exhibit because the Penningtons disputed its authenticity and argued that it was an unsigned, incomplete draft. The court granted the Penningtons’ request to take judicial notice of their grant deed because it was an undisputed public record showing their joint ownership of the property.

Motion to Dismiss

The court rejected US Assure’s argument that the policy itself defeated the claims. The court explained that the Penningtons’ theory was not that US Assure breached the policy, but that conduct before the purchase allegedly misled them into believing the policy would cover remodeling.

The court also rejected US Assure’s argument that Kelli Pennington lacked standing because Thomas Pennington was allegedly the only named insured. The court stated that the alleged injury was being left uninsured after the property was damaged and that the pleadings supported an inference that both plaintiffs were harmed as joint owners.

Negligent failure to obtain insurance coverage. The complaint did not provide enough facts to support an inference that US Assure owed the Penningtons a duty to obtain remodeling insurance. The complaint alleged only that US Assure was licensed to do business in California and “presented” the policy that Brown delivered. The court said the Penningtons might be able to amend the complaint to allege facts supporting a duty or another theory, such as ratification. The court granted dismissal of this claim with leave to amend.

Negligent misrepresentation. The court held that the claim, as pleaded, appeared to be based on negligence rather than fraud, so the heightened pleading requirements that can apply to fraud claims did not apply. Even under the ordinary pleading standard, however, the complaint did not identify a false representation made by US Assure or explain why US Assure would lack reasonable grounds for believing such a representation was true. The court granted dismissal of this claim with leave to amend.

Unfair Competition Law claim. The complaint did not identify another law serving as the basis for its allegation that US Assure acted unlawfully. It also did not adequately allege a causal connection between US Assure’s conduct and the Penningtons’ injury under the unfairness theory. The court granted dismissal of the Unfair Competition Law claim with leave to amend.

False Advertising Law claim. The court found that the complaint did not allege that US Assure made a false statement or that any false advertising by US Assure caused the Penningtons’ harm. The court granted dismissal of this claim with leave to amend.

Motion to Strike

The court denied US Assure’s motion to strike. It relied on Ninth Circuit precedent holding that Rule 12(f) does not authorize striking damages claims merely because the requested damages may be unavailable as a matter of law. The court declined to treat the motion to strike as an alternative motion to dismiss because it had already granted US Assure’s motion to dismiss the complaint in its entirety.

Disposition

The court granted US Assure’s motion to dismiss all claims against it with leave to amend. The court denied the motion to strike. The Penningtons were granted leave to file an amended complaint as to US Assure by May 14, 2025. The order did not resolve the claims against Brown.