Grammens v. Bankers Standard Insurance Company

Background

Edward Grammens and Joanne Powell owned a home that was damaged by fire on September 4, 2019. They alleged that Bankers Standard Insurance Company insured the property, hired American Technologies, Inc. to perform remediation work, and hired Madsen Kneppers and Associates, Inc. (MKA) to prepare repair estimates.

The plaintiffs alleged that Bankers and MKA falsely claimed that the plaintiffs had demolished portions of the home that were not fire-damaged and had directed work that Bankers had not approved. According to the plaintiffs, those positions led to repair estimates that covered only part of the damage and reduced the insurance payment. The plaintiffs brought fraud, conspiracy, and intentional interference with prospective economic advantage claims against MKA. They also brought four claims against Bankers, but this order addresses MKA’s motion and Bankers’s separate motion.

Legal standard

MKA moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which requires dismissal when a complaint does not state a legally sufficient claim for relief. Because the complaint alleged fraud, Federal Rule of Civil Procedure 9(b) also required the circumstances of the alleged fraud to be pleaded with particularity, including who made the statements, what was said, when and where it was said, and how it was fraudulent.

Fraud claim

The court held that the plaintiffs met Rule 9(b)’s particularity requirement. Their allegations identified Bankers and MKA as the participants, identified the alleged false conclusions about the demolition and approvals, and adequately described when and where the alleged misrepresentation occurred in the context of MKA’s estimate and Bankers’s payment decision.

The court nevertheless held that the plaintiffs had not adequately pleaded justifiable reliance, an element of fraud under California law. The plaintiffs said they relied on their insurer and its expert to handle and adjust the claim fairly, but the court explained that this did not show reliance on the alleged misrepresentation or that such reliance caused them damage. The complaint also did not allege, for example, that the plaintiffs spent money because Bankers paid less than they believed they were owed. The fraud claim was therefore dismissed with leave to amend.

Conspiracy claim

The court rejected MKA’s argument that civil conspiracy is not recognized under California law. The court explained that conspiracy is a legal doctrine imposing liability for participation in an independently wrongful act, rather than a standalone wrong without an underlying tort. A conspiracy between an insurer and its agent to commit fraud can be actionable.

Because the plaintiffs based their conspiracy claim on the alleged fraud, and the fraud claim was inadequately pleaded, the court dismissed the conspiracy claim with leave to amend as well.

Intentional interference claim

The plaintiffs’ intentional interference with prospective economic advantage claim required them to allege an independent wrongful act apart from the interference itself. The court stated that fraud or misrepresentation can supply that independent wrongful act, but the fraud must still satisfy Rule 9(b). Because the plaintiffs had not adequately pleaded fraud, the court dismissed the interference claim with leave to amend.

Opinion argument

MKA alternatively argued that its repair estimate was a non-actionable opinion. The court rejected that argument, explaining that the alleged misrepresentation concerned past and present facts—whether the plaintiffs had taken concrete actions affecting the appraisal price—not merely an opinion about future events.

Disposition

Judge William H. Orrick granted MKA’s motion to dismiss at Docket No. 28 with leave to amend. An amended complaint was due within 20 days. The court terminated Bankers’s motion to dismiss at Docket No. 7 as moot and vacated the hearing on that motion.