Stack v. Progressive Select Insurance Company

Background

Tasha Stack brought a proposed class action concerning the valuation of damage to her 2009 Honda Civic after a February 2018 traffic accident. The opinion identifies United Financial Casualty Insurance Company as the insurer that issued the policy and handled the claim, although the case caption names Progressive Select Insurance Company and other defendants.

Stack alleged that United used valuation software developed by Mitchell International to reduce the actual cash value assigned to her vehicle. She asserted claims for fraud, negligent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of California’s Unfair Competition Law and Consumer Legal Remedies Act.

The policy allowed either side to demand an appraisal when the parties disagreed about the amount of a loss. It required each party to select an appraiser after an appraisal demand and stated that the insurer could not be sued unless all policy terms had been followed. United demanded an appraisal and designated its appraiser, but Stack did not designate one because she believed she was not required to do so.

United’s Motion to Dismiss

United moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court granted the motion.

The court held that the appraisal provision applied after United invoked it and that Stack had not complied with the appraisal requirement. The court treated compliance as a condition that had to occur before she could sue under the policy. The court rejected Stack’s arguments that the provision applied only to the contract claim, that appraisal was merely optional after United invoked it, and that the provision was unconscionable. The court said she did not explain how the provision was procedurally or substantively unfair.

The court also held that Stack did not plead fraud with the particularity required by Rule 9(b), which generally requires allegations to identify who made a misrepresentation, what was said, when and where it was said, and how it was fraudulent. In the court’s view, the allegations showed a dispute about valuation, not fraud or a particular misrepresentation. The court also found that Stack did not plead facts showing bad faith or explaining how United allegedly undervalued the vehicle beyond conclusory assertions.

The court rejected the Consumer Legal Remedies Act claim because that statute applies to transactions involving the sale or lease of goods or services, and the court held that insurance is not a good or service for this purpose. The court also held that the Unfair Competition Law claim was not actionable: the alleged fraud failed, and the alleged violations of California’s Unfair Insurance Practices Act and Total Loss Regulation could not serve as the required predicate violations for the claim.

Affiliated Defendants’ Motion

The affiliated entities moved under Rule 12(b)(1), which concerns subject-matter jurisdiction, arguing that Stack lacked standing, and under Rule 12(b)(2), which concerns personal jurisdiction, as to five defendants. The court held that Stack had not established standing or personal jurisdiction over the affiliates.

The court said the complaint’s allegations that the defendants operated as one and controlled underwriting, policy language, or claim handling were conclusions rather than factual allegations. They did not show that the affiliates were involved in Stack’s insurance dispute or establish the conditions for treating separate companies as one entity. The court noted that United wrote the policy and that the complaint did not establish involvement by the other entities.

For personal jurisdiction, the court held that Stack had not alleged facts showing that the affiliates had sufficient contacts with the forum or that the dispute arose from their forum-related activities. The court also noted that four defendants were holding companies that did not conduct insurance activity and that another did not write insurance or conduct business in California.

Disposition

The court granted the defendants’ motions to dismiss and stated that the claims failed on the grounds discussed above. It allowed Stack to file an amended complaint by October 1, 2020, if she could cure the identified deficiencies. If she did not file an amended complaint, the court stated that it would enter judgment for the defendants. The order disposed of ECF Nos. 46 and 47.