Duran v. National Interstate Insurance Company

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Richard Duran, No. CV-19-04779-PHX-DJH 10 Plaintiff, ORDER 11 v. 12 National Interstate Insurance Company, 13 Defendant. [14] 15 Pending before this Court is Defendant’s Motion to Dismiss (Doc. 7) the Complaint 16 (Doc. 1).1 Plaintiff filed a Response (Doc. 8), and Defendant filed a Reply (Doc. 9). 17 Plaintiff Richard Duran (“Plaintiff”) brought this action against National Interstate 18 Insurance Company (“Defendant”) for an alleged breach of the implied duty of good faith 19 and fair dealing. Plaintiff’s Complaint (“Complaint”) alleges Defendant acted in bad faith 20 in relation to an ongoing workers’ compensation case currently pending in the California 21 Division of Workers Compensation. 22 I. Background 23 Plaintiff is an Arizona Resident who was hired as a truck driver by Peoplease, LLC, 24 (“Peoplease”) a California Company. (Doc. 1). Defendant is a foreign insurer that issued 25 Peoplease’s workers’ compensation insurance policy (“Policy”). (Id.) The Policy only 26 provided workers’ compensation coverage in the state of California. (Doc. 7-3 at 7). In [27] 1 Plaintiff requested oral argument on this matter. The Court denies the request because the 28 issues have been fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b). 1 June 2017, Plaintiff suffered an on the job injury while working in Missouri and 2 subsequently filed a claim for workers’ compensation benefits. (Doc. 1). Defendant 3 accepted Plaintiff’s claim and provided coverage for various health care treatments. (Id.) 4 In July 2017, Plaintiff filed a claim with the Industrial Commission of Arizona (“Arizona 5 Claim”). (Id.) Defendant filed a Notice of Claim Status, denying coverage over the Arizona 6 Claim because the Policy only covered California workers’ compensation claims. (Doc. 7, 7 Ex. 5-2 at 2). Soon after the denial, Plaintiff filed a claim in California’s Division of 8 Workers’ Compensation (“California Claim”). (Id.) Plaintiff’s California Claim is 9 ongoing. (Id.) During the California Claim process, Plaintiff argued that Defendant acted 10 in bad faith by delaying and denying coverage. (Id.) Plaintiff filed this action alleging 11 further bad faith actions by Defendant, such as refusing to pay reimbursement for travel, 12 relying on an incomplete investigation of the claim, and directing care with an eye toward 13 saving money. (Doc. 1). 14 II. Legal Standards 15 A. Subject-Matter Jurisdiction 16 Federal Rule of Civil Procedure (“Rule”) 12(b)(1) authorizes a court to dismiss a 17 claim if the court lacks subject-matter jurisdiction. Fed. R. Civ. P. 12(b)(1). A Rule 18 12(b)(1) challenge may be either facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 19 1035, 1039 (9th Cir. 2004). In a facial attack, the court may dismiss a complaint when the 20 allegations and documents attached to the complaint are insufficient to confer subject21 matter jurisdiction. See Savage v. Glendale Union High Sch. Dist. No. 205, 343 F.3d 1036 , 22 1039 (9th Cir. 2003). In this context, all allegations of material fact are taken as true and 23 construed in the light most favorable to the nonmoving party. Fed’n of African Am. 24 Contractors v. City of Oakland, 96 F.3d 1204 , 1207 (9th Cir. 1996). 25 B. Motion to Dismiss Standards 26 A motion to dismiss pursuant to Rule 12(b)(6) challenges the legal sufficiency of a 27 complaint. Fed. R. Civ. P. 12(b)(6). A complaint must contain a “short and plain statement 28 showing that the pleader is entitled to relief[.]” Fed. R. Civ. P. 8(a)(2). Rule 8 requires 1 “more than an unadorned, the defendant-unlawfully-harmed-me accusation.” Ashcroft v. 2 Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 , 555 3 (2009)). To avoid a rule 12(b)(6) dismissal, a complaint must plead “enough facts to state 4 a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570 . 5 “A complaint has facial plausibility when the plaintiff pleads factual content that 6 allows the court to draw the reasonable inference that the defendant is liable for the 7 misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556 ). “The 8 plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a 9 sheer possibility that defendant has acted unlawfully.” Id. A complaint providing “[l]abels 10 and conclusions” or “a formulaic recitation of the elements of a cause of action will not 11 do.” Twombly, 550 U.S. at 555 . The court must interpret the acts alleged in the complaint 12 in the light most favorable to the plaintiff, accepting all well-pleaded factual allegations as 13 true. Shwarz v. United States¸ 234 F.3d 428, 435 (9th Cir. 2000). 14 III. Analysis 15 Plaintiff’s Complaint contains a single claim that Defendant breached the implied 16 duty of good faith and fair dealing during the handling of Plaintiff’s workers’ compensation 17 claim. (Doc. 1). Defendant argues that this Court lacks subject matter jurisdiction over 18 Plaintiff’s bad faith claim because California law controls Plaintiff’s workers’ 19 compensation claim, and California law dictates that its workers’ compensation system is 20 the exclusive remedy for a workers’ compensation claim, and it prohibits a bad faith 21 workers’ compensation claim. (Doc. 7). Plaintiff, however, argues that he can 22 simultaneously pursue his workers’ compensation claim in California and this bad faith 23 action. (Doc. 8). In other words, Plaintiff does not dispute that California law would bar 24 his bad faith claim, rather he argues that Arizona law, not California law, should govern 25 this bad faith claim here. (Id.) Plaintiff and Defendant engage in an extensive choice of law 26 analysis; however, the Court finds that such analysis is unnecessary because both Arizona 27 and California law prohibit Plaintiff’s bad faith claim. 28 Unlike in California, Arizona’s workers’ compensation system allows an employee 1 to bring an independent common-law claim for workers’ compensation bad faith actions. 2 See Hayes v. Continental Ins. Co., 872 P.2d 668 (Ariz. 1994). Pursuant to Arizona law, 3 “the law of the state in which an employee’s workers’ compensation is paid determines the 4 assignment rights of the employer and employee.” Jackson v. Eagle KMC L.L.C., 431 P.3d 5 1197, 1198 (Ariz. 2019); see also Osborn v. Liberty Mut. Ins. Co., 725 P.2d 725, 726 (Ariz. 6 Ct. App. 1986); Quiles v. Heflin Steel Supply Co., 699 P.2d 1304, 1309 (Ariz. Ct. App. 7 1985). In other words, an employee’s rights under a workers’ compensation system is 8 determined by the state providing the workers’ compensation benefits. See Osborn, 725 9 P.2d at 726 (holding Indiana law governed an Arizona resident’s workers’ compensation 10 claim when he was receiving benefits under Indiana workers’ compensation, resulting in 11 the Indiana Industrial Board being the exclusive remedy available); Quiles, 699 P.2d at 12 1308 (holding that California law governed an employee’s workers’ compensation claim 13 because the employee sought and received workers’ compensation in California). 14 California Labor Code establishes California’s workers’ compensation system as 15 the exclusive remedy available to an employee for a cause of action that arises from a 16 compensable workplace injury. King v. CompPartners, Inc., 423 P.3d 975, 981 (Cal. 2018). 17 In determining whether exclusivity bars a cause of action against an employer or insurer, 18 California courts initially determine whether the alleged injury falls within the scope of the 19 exclusive remedy provisions. Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund, 14 20 P.3d 234, 243 (Cal. 2001). California courts have “consistently held that injuries arising 21 out of and in the course of the workers’ compensation claims process fall within the scope 22 of the exclusive remedy provisions because this process is tethered to a compensable 23 injury.” Id. at 246 . Accordingly, California has “barred all claims based on disputes over 24 the delay or discontinuance of workers’ compensation benefits, including those claims 25 seeking to recover economic or contractual damages caused by the mishandling of a 26 workers’ compensation claim.” Id. (internal citations and quotation omitted). 27 Plaintiff sought and received benefits under California workers’ compensation, thus 28 pursuant to Arizona law, California workers’ compensation scheme determines his rights || with regards to his bad faith claim. As Plaintiff is continuing to pursue benefits under || California workers’ compensation and the crux of Plaintiff's bad faith claim is that 3 || Defendant mishandled his works’ compensation claim, pursuant to Arizona law, this Court 4|| finds that California’s workers’ compensation scheme governs. See Osborn, 725 P.2d at || 726. 6 Accordingly, because California’s workers’ compensation law makes the rights and remedies granted therein to the employee exclusive, and Plaintiff sought and received 8 || benefits under California workers’ compensation, he cannot pursue his bad faith action 9|| here. Although leave to amend a complaint should be freely given, amending Plaintiffs || Complaint would be futile as Plaintiff cannot plead facts to demonstrate that this Court 11 |} would have subject matter jurisdiction over Plaintiff's bad faith claim. See Jackson v. Bank 12|| of Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990). As a result, the Court will grant 13 || Defendant’s Motion to Dismiss with prejudice. 14 Accordingly, 15 IT IS ORDERED that Defendant’s Motion to Dismiss (Doc. 7) is GRANTED and Plaintiff's case is dismissed with prejudice. The Clerk of Court is respectfully directed to || enter judgment accordingly and close this case. 18 Dated this 17th day of March, 2020. [19] 20 oC. . foe _ 21 norable' Diang4. Huretewa 02 United States District Judge [28] _5-