FlorExpo LLC v. Travelers Property Casualty Company of America

— 1 — — 2 — — 3 — — 4 — — 5 — — 6 — — 7 — 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA — 10 — 11 FLOREXPO LLC and KENDAL Case No.: 20-CV-1024 JLS (DEB) FLORAL SUPPLY, LLC, — 12 — ORDER GRANTING DEFENDANT’S Plaintiffs, 13 MOTION TO DISMISS v. — 14 — (ECF No. 5) TRAVELERS PROPERTY CASUALTY — 15 — COMPANY OF AMERICA, — 16 — Defendant. — 17 — 18 Presently before the Court is Defendant Travelers Property Casualty Company of 19 America’s Motion to Dismiss Plaintiffs’ Complaint pursuant to Federal Rule of Civil 20 Procedure 12(b)(6) (“MTD,” ECF No. 5). Plaintiffs filed an Opposition to the Motion 21 (“Opp’n,” ECF No. 15), and Defendant filed a Reply in support of its Motion (“Reply,” 22 ECF No. 19). The Court decides the matter on the papers submitted and without oral 23 argument pursuant to Civil Local Rule 7.1(d)(1). See generally ECF No. 17. Having 24 carefully reviewed Plaintiffs’ Complaint (“Compl.,” ECF No. 1), the Parties’ arguments, 25 and the relevant law, the Court GRANTS Defendant’s Motion to Dismiss. 26 BACKGROUND 27 Plaintiffs FlorExpo, LLC (“FlorExpo”) and Kendal Floral Supply, LLC 28 (collectively, “Plaintiffs”) are leading importers and distributors of fresh-cut flowers from 1 South America. See Compl. ¶ 7. FlorExpo purchased commercial property insurance from 2 Defendant Traveler’s Property Casualty Company of America (“Defendant”) with “the 3 Deluxe Property Coverage” for itself and its subsidiary, Plaintiff Kendal Floral Supply, 4 LLC, for the 2020 to 2021 year (the “Policy”). Id. ¶ 11. The Policy provided coverage for 5 loss or damages to “stock,” including Plaintiffs’ cut flowers, kept at various storage 6 locations. Id. ¶¶ 12, 14. Plaintiffs allege that between March 16 and March 22, 2020, 7 government authorities prevented Plaintiffs from entering two of their warehouses 8 containing their flower stock, and the inability to access the warehouses led to a total loss 9 of the stock at these locations. See id. ¶¶ 16, 19. On or about April 21, 2020, Plaintiffs 10 tendered the loss and damage claim to Defendant for loss of the stock (the “Coverage 11 Claim”), and on April 30, 2020, Defendant denied Plaintiffs’ claim. See id. ¶¶ 22–23. 12 Plaintiffs filed suit for breach of contract, breach of the implied covenant of good 13 faith and fair dealing, and declaratory relief. See generally Compl. Plaintiffs bring these 14 claims against Defendant based on the following allegations: (1) Defendant breached its 15 obligations under the Policy when it failed to confirm and pay the Coverage Claim; (2) 16 Defendant breached its duty to act fairly and in good faith by failing to investigate properly 17 the Coverage Claim; and (3) Plaintiffs are entitled to declaratory relief and seek a 18 declaration as to the existence and extent of coverage for the Coverage Claim. See id. 19 ¶¶ 32, 36, 39, 41. On August 20, 2020, Defendant filed this Motion to Dismiss Plaintiffs’ 20 Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). See ECF No. 5. 21 LEGAL STANDARD 22 Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the 23 defense that the complaint “fail[s] to state a claim upon which relief can be granted,” 24 generally referred to as a motion to dismiss. The Court evaluates whether a complaint 25 states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil 26 Procedure 8(a), which requires a “short and plain statement of the claim showing that the 27 pleader is entitled to relief.” Although Rule 8 “does not require ‘detailed factual 28 allegations,’ . . . it [does] demand more than an unadorned, the-defendant-unlawfully1 harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 2 Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, “a plaintiff’s obligation to 3 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 4 conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 5 Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A 6 complaint will not suffice “if it tenders ‘naked assertion[s]’ devoid of ‘further factual 7 enhancement.’” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 557 ). 8 To survive a motion to dismiss, “a complaint must contain sufficient factual matter, 9 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting 10 Twombly, 550 U.S. at 570 ); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible 11 when the facts pled “allow the court to draw the reasonable inference that the defendant is 12 liable for the misconduct alleged.” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 13 556). That is not to say that the claim must be probable, but there must be “more than a 14 sheer possibility that a defendant has acted unlawfully.” Id. Facts “‘merely consistent 15 with’ a defendant’s liability” fall short of a plausible entitlement to relief. Id. (quoting 16 Twombly, 550 U.S. at 557 ). This review requires context-specific analysis involving the 17 Court’s “judicial experience and common sense.” Id. at 675 (citation omitted). “[W]here 18 the well-pleaded facts do not permit the court to infer more than the mere possibility of 19 misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is 20 entitled to relief.’” Id. 21 Where a complaint does not survive 12(b)(6) analysis, the Court will grant leave to 22 amend unless it determines that no modified contention “consistent with the challenged 23 pleading . . . [will] cure the deficiency.” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655 , 24 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 25 1393, 1401 (9th Cir. 1986)). 26 ANALYSIS 27 Defendant moves to dismiss Plaintiffs’ breach of contract and declaratory relief 28 claims for failure to state a claim on the following grounds: (1) the alleged loss of flower 1 stock falls within the Policy’s acts or decisions “of any . . . governmental body” exclusion 2 (the “Acts of Decisions Exclusion”); and (2) Plaintiffs fail to plead a plausible alternative 3 for coverage for that loss under the Policy. See MTD at 13. Defendant further moves to 4 dismiss Plaintiffs’ breach of the implied covenant of good faith and fair dealing claim based 5 on Plaintiffs’ inability to plead a loss covered by the Policy. Id. at 17. In response, 6 Plaintiffs firstly argue that the Policy exclusion relied upon by Defendant is limited to acts 7 or decisions that were “the sole or direct cause” of the physical damages. Opp’n at 5. 8 Plaintiffs secondly argue that, even if the government orders were the direct cause of the 9 loss, Defendant relies on an improperly broad interpretation of the Acts or Decisions 10 Exclusion. Id. at 9. 11 I. Breach of Contract 12 A. California Insurance Law 13 “While insurance contracts have special features, they are still contracts to which the 14 ordinary rules of contractual interpretation apply.” N. Am. Building Maint., Inc. v. 15 Fireman’s Fund Ins. Co., 40 Cal. Rptr. 3d 468, 479 (Cal. Ct. App. 2006). A court must 16 interpret a contract “to give effect to the mutual intention of the parties as it existed at the 17 time of contracting.” Cal. Civ. Code § 1636 . For written contracts, “the intention of the 18 parties is to be ascertained from the writing alone, if possible.” Id. § 1639; see also Haynes 19 v. Farmers Ins. Exch., 89 P.3d 381, 385 (Cal. 2004) (applying § 1639 to an insurance 20 contract). The contract’s language, therefore, determines the contract’s interpretation “if 21 the language is clear and explicit.” Cal. Civ. Code § 1638 ; see also Bank of the W. v. 22 Superior Court, 833 P.2d 545, 551 (Cal. 1992); Blackhawk Corp. v. Gotham Ins. Co., 63 23 Cal. Rptr. 2d 413 , 418 (Cal. Ct. App. 1997) (“[W]here the language of a contract is clear, 24 we ascertain intent from the plain meaning of its terms and go no further.”). The contract’s 25 words “are to be understood in their ordinary and popular sense . . . unless used by the 26 parties in a technical sense, or unless a special meaning is given to them by usage.” Cal. 27 Civ. Code § 1644; see also MacKinnon v. Truck Ins. Exch., 73 P.3d 1205, 1213 (Cal. 28 2003). 1 In addition to these general policy interpretation principles, “[p]articular rules apply 2 to the interpretation of insurance policy exclusions.” N. Am. Building Maint., 40 Cal. Rptr. 3 3d at 479. “[A]n exclusion limits or takes back some of the insurance coverage granted by 4 the insuring clause.” Essex Ins. Co. v. City of Bakersfield, 65 Cal. Rptr. 3d 1, 10 (Cal. Ct. 5 App. 2007 ). “Therefore, ‘exclusions serve to limit coverage granted by an insuring clause 6 and thus apply only to hazards covered by the insuring clause.’” Id. (quoting Old Republic 7 Ins. Co. v. Superior Court, 77 Cal. Rptr. 2d 642, 652 (Cal. Ct. App. 1998)) (emphasis in 8 original). “[E]xclusionary clauses are strictly construed against the insurer and in favor of 9 the insured.” N. Am. Building Maint., 40 Cal. Rptr. 3d at 479 (citation omitted). 10 Accordingly, “although the insured has the burden of proving the contract of insurance and 11 its terms, the insurer bears the burden of bringing itself within a policy’s exclusionary 12 clauses.” Id. (citation omitted). 13 In deciding an insurance coverage dispute, “[t]he determination whether the insurer 14 owes a duty to defend is made in the first instance by comparing the allegations of the 15 complaint with the terms of the policy.” Montrose Chem. Corp. v. Superior Court, 861 16 P.2d 1153 , 1157 (Cal. 1993) (quoting Horace Mann Ins. Co. v. Barbara B., 846 P.2d 792 , 17 795 (Cal. 1993)). “[T]he insured need only show that the underlying claim may fall within 18 policy coverage; the insurer must prove it cannot.” Id. at 1161 (emphasis in original). “An 19 insurer may rely on an exclusion to deny coverage only if it provides conclusive evidence 20 demonstrating that the exclusion applies.” Atl. Mut. Ins. Co. v. J. Lamb, Inc., 123 Cal. 21 Rptr. 2d 256, 272 (2002) (emphasis in original). 22 B. The Insurance Policy 23 The root of the Parties’ dispute is whether the Policy covers Plaintiffs’ loss alleged 24 in the Coverage Claim. The relevant parts of the Policy are reproduced here: 25 A. COVERAGE We will pay for direct physical loss of or damage to — 26 — Covered Property caused by or resulting from a Covered 27 Cause of Loss. *** — 28 — 2. Extra Expense 1 Edexstcrari bEexdp einn sae. ,m be. aannsd rce.a sboenloawbl et haantd y nouec ienscsuarr yd uexripnegn sthees — 2 — “period of restoration” that would have not incurred if 3 there had been no direct physical loss of or damage to property caused by or resulting from a Covered Clause of — 4 — Loss. 5 *** B. COVERED CAUSES OF LOSS — 6 — Covered Causes of Loss mean RISKS OF DIRECT 7 PHYSICAL LOSS unless the loss is: 1. Excluded in Section C., Exclusions — 8 — 2. Limited in Section D., Limitations 9 3. Excluded or limited in the Declarations or by endorsement — 10 — C. EXCLUSIONS 11 *** 3. We will not pay for any loss or damage caused by or — 12 — resulting from any of the following, 3.a. through 3.c., but 13 if an excluded cause of loss that is listed in 3.a. and 3.b. below results in a Covered Cause of Loss, we will pay for — 14 — the loss or damage caused by the Covered Cause of Loss. 15 *** b. Acts or decisions, including failure to act or decide, of — 16 — any person, group, organization or governmental body 17 except as provided in the Additional Coverage – Ordinance or Law Coverage. — 18 — 19 Compl. Ex. A at 24, 41, 48, 62,1 ECF No. 1-2.2 — 20 — — 21 — 1 Pin citations refer to the CM/ECF page numbers electronically stamped at the top of each page. — 22 — 2 As a general rule, a district court cannot rely on evidence outside the pleadings in ruling on a Rule — 23 — 12(b)(6) motion without converting the motion into a Rule 56 motion for summary judgment. See United 24 States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003) (citing Fed. R. Civ. P. 12(b); Parrino v. FHP, Inc., 146 F.3d 699 , 706 n.4 (9th Cir. 1998)). “A court may, however, consider certain materials—documents 25 attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice—without converting the motion to dismiss into a motion for summary judgment.” Id. at 908 26 (citing Van Buskirk v. CNN, 284 F.3d 977, 980 (9th Cir. 2002); Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994); 2 James Wm. Moore et al., Moore’s Federal Practice § 12.34[2] (3d ed.1999)). As — 27 — the Policy was attached as an exhibit to the Complaint and both parties relied to a significant extent on 28 the Policy in their briefing on the Motion, the Court will consider the Policy in ruling on the present 1 C. The Parties’ Arguments 2 There are three main claims for coverage under this portion of the Policy. First, the 3 Policy provides coverage for physical loss of or damage to Covered Property caused by or 4 resulting from a Covered Cause of Loss. A Covered Cause of Loss is defined under the 5 Policy as risk of “direct physical loss” unless otherwise excluded (“Covered Loss”). Ex. 6 A at 41. The exclusion at issue is the Acts or Decisions Exclusion, specifically by a 7 governmental body. Second, under the “Extra Expenses” provision, the Policy provides 8 coverage for expenses incurred during the “period of restoration” resulting from the 9 Covered Loss. Id. at 62. Third, if an excluded cause of loss (“Excluded Loss”) results in 10 a Covered Loss, the Policy provides coverage. Id. at 41. Plaintiffs contend that the Policy 11 covers the loss of their flower stock for all of these reasons. 12 First, Plaintiffs argue that the damage to their flower stock resulted from a “Covered 13 Loss,” thereby triggering coverage under the “direct physical loss” provision. Compl. ¶ 21. 14 Additionally, Plaintiffs seek coverage under the “Extra Expenses” provision for related 15 costs of disposal of the flower stock and other mitigation efforts. Id. In response, 16 Defendant asserts that the cause of loss to the flower stock was not a Covered Loss, but a 17 loss attributable to governmental action and thereby an Excluded Loss based on the Acts 18 or Decisions Exclusion. See MTD at 10–11. Plaintiffs argue that, in order for the Acts or 19 Decisions Exclusion to apply, Defendant would need to prove the loss is “limited to the 20 government directly ordering or undertaking the destruction of the stock” or that “all actual 21 possible direct causes of the physical damage to the stock are excluded.” Opp’n at 6. 22 Second, Plaintiffs argue that even if the government action was an Excluded Loss, 23 it still resulted in a Covered Loss, thereby triggering coverage under Section C(3) of the 24 Policy. Because both of Plaintiffs’ claims for coverage are dependent upon the loss or 25 damage being caused by a Covered Loss under the Policy, the determination rests on 26 whether the losses alleged by Plaintiffs are Covered Losses. 27 /// 28 /// 1 D. Analysis 2 Here, Plaintiffs must first demonstrate that the underlying claim potentially falls 3 within the scope of the insurance coverage. Horace Mann Ins. Co., 846 P.2d at 795 . 4 Plaintiffs argue that “under the ‘all perils’ Policy form, all causes of loss are covered unless 5 specifically excluded.” Opp’n at 6 (emphasis omitted). Plaintiffs allege that the “direct 6 physical loss” of the flower stock resulted from a Covered Loss, specifically that the stock 7 “could not be maintained and distributed,” “had all perished,” and “was disposed,” 8 triggering coverage under the Policy. Opp’n at 6–7. The Court finds these causes could 9 potentially fall under the Covered Loss of the Policy. 10 But it is not determinative that the underlying action falls within the scope of 11 coverage. An exclusion may still apply that limits or excludes coverage under the policy. 12 In order to rely on an exclusion to deny that coverage, Defendant must provide conclusive 13 evidence that the exclusion applies, Atl. Mut. Ins. Co., 123 Cal. Rptr. 2d at 272, and the 14 Court will strictly construe the exclusionary clause in favor of Plaintiffs, N. Am. Building 15 Maint., 40 Cal. Rptr. 3d at 479 . Here, Defendant relies on the Acts or Decisions Exclusion 16 to argue that Plaintiffs’ loss was instead caused by an “excluded risk, which by definition, 17 is not a Covered Cause of Loss.” MTD at 11. More specifically, Defendant argues that 18 that loss of stock “falls squarely within the Policy’s acts or decisions ‘of any . . . 19 governmental body’ exclusion.” Id. at 13. 20 Defendant contends that the Acts or Decisions Exclusion “bars coverage for property 21 damage, loss, and expense that is caused by or results from any decision, act or failure to 22 act or decide, by an insured or any third party—including, specifically, any ‘governmental 23 body.’” Id. at 16. Plaintiffs state that they were unable to access their flower stock due to 24 government authorities’ involvement. See Compl. ¶ 16. Due to Plaintiffs’ inability to 25 access their stock, Plaintiffs’ flowers perished, resulting in the loss they seek relief for 26 under the Policy. Id. ¶ 19. According to Defendant, that government action is an Excluded 27 Loss under the Acts or Decisions Exclusion that caused the loss of Plaintiffs’ flower stock. 28 See MTD at 17. Defendant argues that this brings the claim under the Acts or Decisions 1 Exclusion, and that because Plaintiffs established no other Covered Loss for the loss of 2 stock, the Policy affords no coverage. Id. If correct, this failure to establish a Covered 3 Loss would make Plaintiffs’ Coverage Claim properly excluded by Defendant. 4 Plaintiffs contend that, in order for the Acts or Decisions Exclusion to apply, the act 5 or decision must be the “sole and direct” cause of the physical damage. See Opp’n at 5. A 6 policy exclusion for coverage may apply when the cause of loss was not a “separate and 7 independent” act from the excluded loss. Jernigan v. Nationwide Mut. Ins. Co., No. C 048 5327 PJH, 2006 WL 463521 , at *11 (N.D. Cal. Feb. 27, 2006). Plaintiffs rely on 9 Boardwalk Condominium Ass’n v. Travelers Indemnity Co. of Illinois, Case No. 03-cv10 505, 2007 WL 1989656 (S.D. Cal., July 3, 2007), to support their argument. In Boardwalk, 11 inadequate ventilation systems caused excessive condensation of moisture in the roof and 12 wall cavities of a structure, resulting in mold and water damages. Id. at *9. Per the 13 defendant’s policy, lack of ventilation constituted an excluded loss, while condensation 14 constituted a covered loss. Id. The policy contained a similar clause that provided 15 coverage if an excluded loss resulted in a covered loss. Id. at *8. This Court determined 16 that the condensation was “separate and independent” from the lack of ventilation, and thus 17 a separate, excluded loss—the lack of ventilation—resulted in a covered loss—the 18 condensation—which then caused the damage. Id. at *9. The Court rejected the 19 defendant’s motion for summary judgment in part because the defendant failed to show 20 that the damage “was caused solely by the lack of ventilation,” and thus failed to show the 21 plaintiff’s claim could not fall under the policy coverage. Id.; see Montrose Chem. Corp., 22 861 P.2d at 1161. 23 Boardwalk is distinguishable from this case for two reasons. First, the causal chain 24 of events in Boardwalk has an additional cause nonexistent in the present matter. In 25 Boardwalk, the Court found the lack of ventilation was an excluded loss, which resulted in 26 the condensation, a covered loss. Only then did the covered loss cause the mold and water 27 damage. The identified covered loss of condensation was both separate from the excluded 28 loss and also distinguishable from the loss itself, that is the mold and water damage. In 1 this case, Plaintiffs argue that the “actual direct causes of the stock loss” are that the stock 2 could “not be maintained,” “perished,” and “was disposed” of. Opp’n at 6–7 (emphasis in 3 original). These causes are not separate, Covered Losses but are in fact the loss itself. 4 Second, the government action of restricting access to Plaintiffs’ warehouses was 5 not “separate and independent” from the loss of the stock, as no intervening cause, such as 6 the condensation in Boardwalk, exists. In Boardwalk, the plaintiff provided a number of 7 alternative covered causes of loss, including “roof leaks, window leaks and leaks around 8 the fireplaces.” 2007 WL 1989656 , at *9. Here, Plaintiffs have not pled a plausible 9 alternative to the government action that caused their loss of stock. The stock perishing 10 and being disposed of is not a “new hazard or phenomenon, separate and independent” 11 from the government action to restrict access. Id. at *2. As stated in the Complaint, 12 Plaintiffs were “prevented by government authorities from accessing the [warehouses]” 13 and, upon re-obtaining access, “there had been a total loss of the remaining stock.” Comp. 14 ¶¶ 16, 19. Plaintiffs identify no other independent, Covered Losses that resulted in the loss 15 to the flower stock. Thus, the Court is not persuaded by Plaintiffs’ argument that the 16 government action was not the sole and direct cause of the loss. 17 Alternatively, Plaintiffs argue that, even if the government action was the direct 18 cause of loss, the Acts or Decisions Exclusion should be read to include only negligent or 19 improper acts or decisions, because the “idea is to exclude improper acts and decisions, 20 e.g., the type of actions and decisions that properly put the responsibility for loss on the 21 negligence of the policy holder or a third-party (instead of the insurer).” Opp’n at 9–10. 22 Plaintiffs go on to argue that “at a minimum, the exclusion is ambiguous.” Id. at 13. 23 Because an ambiguous exclusion clause in an insurance contract is less likely to be 24 enforceable, the Court will first address Plaintiffs’ ambiguity argument. 25 “To be enforceable, a coverage exclusion must be ‘conspicuous, plain and 26 clear.’” Haynes v. Farmers Ins. Exch., 32 Cal. 4th 1198, 1204 , (2004); see also Ausmus v. 27 Lexington Ins. Co., 414 F. App’x 76 (9th Cir. 2011) (affirming district court’s grant of 28 motion to dismiss because applicable exclusion was conspicuous and clear). An insurance 1 contract is “ambiguous if the court finds that the language is subject to different 2 interpretations.” Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1341 (9th Cir. 3 1989). Here, the Acts or Decisions Exclusion is plainly stated and free of jargon. 4 Additionally, the Acts or Decisions Exclusion is similar to standard insurance policy 5 exclusions multiple courts have previously analyzed and found unambiguous. See Tzung, — 6 — 873 F.2d at 1341 (holding that a similar policy exclusion “unambiguously” excludes the 7 loss in the claim); Cuevas v. Allstate Ins. Co., 872 F. Supp. 737, 739 (S.D. Cal. 1994) 8 (finding an exclusion for “[c]onduct, act, failure to act, or decision of any person, group, 9 organization or governmental body” unambiguous); Stephens v. Liberty Mut., No. C 0510 0213 PJH, 2008 WL 480287 , at *14 (N.D. Cal. Feb. 19, 2008) (“Courts have previously 11 found [acts or decisions] policy language to be unambiguous in situations involving third12 party negligence.”); Landmark Hospitality, LLC v. Continental Cas., Co., 2002 WL 13 34404929, at * 2 (C.D. Cal. July 2, 2002) (finding the policy’s exclusion for “acts or 14 decision, including the failure to act or decide, or any person, group, organization or 15 governmental body” unambiguous). But see Mettler v. Safeco Ins. Co. of Am., Case No. 16 12-cv-5163, 2013 WL 231111 , at *6 (W.D. Wash. Jan. 22, 2013) (finding a similar acts or 17 decisions clause ambiguous based on the term “any”). The Court joins the majority of 18 courts analyzing similar clauses and finds that the language of this exclusion is 19 unambiguous, and thus the Court will interpret the exclusion based on its plain language. 20 Under the plain language of the Acts or Decisions Exclusion, the Court finds 21 Plaintiffs’ reading of a negligence requirement inapplicable and unnecessarily restrictive. 22 Defendant argues the Court should find the clause covers “loss or damage caused by both 23 the intentional acts and careless omissions of third parties.” MTD at 15 (citations omitted). 24 The Court agrees. To read a negligence or intent requirement into the Acts or Decisions 25 Exclusion would go beyond the plain language of the Policy. The Exclusion states that 26 losses are excluded when caused by “acts or decisions . . . of any person, group, or 27 organization or governmental body,” yet Plaintiffs assert that the Policy should be limited 28 to include only “improper” or negligent acts. Opp’n at 9. However, none of the cases that 1 Plaintiffs rely on to make this argument read a negligence requirement into an insurance 2 policy’s acts or decisions exclusion. See Stephens v. Liberty Mut., No. C 05-0213 PJH, — 3 — 2008 WL 480287 , at *20 (N.D. Cal. Feb. 19, 2008) (finding that the “exclusion barring 4 coverage for ‘acts or decisions’ of ‘any person [or] group’ logically includes ‘acts or 5 decisions’ of third parties” (alterations in original)); Jernigan v. Nationwide Mut. Ins. Co., 6 No. C 04-5327 PJH, 2006 WL 463521 , at *11 (N.D. Cal. Feb. 27, 2006) (noting that an 7 “intentional act by a person” would fall under such an exclusion, but nowhere requiring 8 negligence). While courts have applied similar acts or decisions exclusions to instances 9 where a third party acted negligently, this is not the same as limiting the exclusion to 10 negligent acts. See, e.g., Duarte & Witting, Inc. v. Universal Underwriters Ins. Co., No. 11 C-05-1315 MHP, 2006 WL 2130743 , at *11 (N.D. Cal. July 27, 2006) (determining third 12 party’s negligent acts may have “cause[d] some of the damage” in a multi-causation 13 analysis, but nowhere limiting exclusion clause with similar language to only negligent 14 acts). Thus, the plain language of the Acts or Decisions Exclusion, as well as the common 15 interpretation of such exclusions, does not limit the exclusion to instances of negligence. 16 Further, this interpretation is of particular importance with respect to the acts or 17 decisions of a governmental body. Plaintiffs contend that the “purpose” of the exclusion 18 is to limit coverage to improper or negligent conduct by the government, and that they “do 19 not allege that the government preventing access to the warehouses was a negligent or 20 improper act or decision.” Opp’n at 9. Under Plaintiffs’ interpretation, the only 21 government acts that fall under the exclusion would be when the government acts 22 negligently in its mandate or orders the mandate with the intention of causing the specific 23 loss. This would remove a vast majority of government actions from the Policy’s 24 exclusion. There is nothing in the Policy’s Acts or Decisions Exclusion language 25 demonstrating intent to limit its application to such narrow circumstances, or to necessitate 26 an assessment of the government actor’s state of mind. Plaintiffs also provide no evidence 27 that the Parties’ intended such a purpose in the Policy. Plaintiffs’ interpretation would 28 require the Court to rewrite the insurance policy to require “negligence” or “intentional” 1 government acts, which the Court will not do. See Rosen v. State Farm Gen. Ins., 30 Cal. 2 4th 1070, 1072 (2003) (“[W]e do not rewrite any provision of any contract, for any 3 purpose.”). Because no such language or evidence of intended purpose exists, the Court 4 will not read a negligence requirement into the Acts or Decisions Exclusion. 5 Thus, while Plaintiffs successfully have shown there may be a potential claim for 6 coverage under the Policy, the Court finds that the Acts or Decisions Exclusion applies to 7 exclude Plaintiffs’ claim for two reasons. First, the governmental action was the direct 8 cause of the loss for which Plaintiffs seek relief in the Coverage Claim, bringing the claim 9 within the Acts or Decisions Exclusion. Second, the Court refuses to read a negligence 10 limitation into the Exclusion, where such language does not exist and where courts 11 interpreting similar exclusions have not limited the clause to only negligent acts. 12 Defendant has conclusively demonstrated the Exclusion applies. See Atl. Mut. Ins. Co., 13 123 Cal. Rptr. 2d at 272. Defendant’s rejection of the Coverage Claim was justified based 14 on the Acts or Decisions Exclusion, and Plaintiffs fail to state an alternative claim for 15 coverage under the Policy. Therefore, the Court GRANTS Defendant’s Motion to Dismiss 16 Plaintiffs’ claim for breach of contract. 17 II. Breach of the Implied Covenant of Good Faith and Fair Dealing 18 “In order to establish a breach of the implied covenant of good faith and fair dealing 19 under California law, a plaintiff must show: (1) benefits due under the policy were 20 withheld; and (2) the reason for withholding benefits was unreasonable or without proper 21 cause.” Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001). A court can 22 conclude as a matter of law that “an insurer’s denial of a claim is not unreasonable, so long 23 as there existed a genuine issue as to the insurer’s liability. An insurer is liable for breach 24 of the implied coverage of good faith and fair dealing if it acted unreasonably in denying 25 coverage.” Lunsford v. Am. Guar. & Liab. Ins. Co., 18 F.3d 653, 656 (9th Cir. 1994) 26 (citations omitted). 27 /// 28 /// 1 Plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing 2 relies on Defendant’s failure to properly investigate Plaintiffs’ Coverage Claim for their 3 loss. Compl. ¶¶ 41–42. Given that Defendant based its denial of coverage under the Policy 4 on the Acts or Decisions Exclusion discussed above, see supra Section I, the Court finds 5 no breach of the implied covenant of good faith and fair dealing. Defendant’s denial of 6 coverage was justified under a valid exclusion. Further, Plaintiffs do not plead sufficient 7 facts to suggest Defendant’s actions in denying coverage were “willful or malicious.” 8 Compl. ¶¶ 41–42. Because the Court finds Defendant’s actions in denying coverage based 9 on the exclusion were in accord with the Court’s interpretation of the Policy, Plaintiffs 10 failed to show that Defendant’s reason for withholding benefits under the policy was 11 unreasonable or without proper cause. As such, the Court GRANTS Defendant’s Motion 12 to Dismiss the Plaintiffs’ claim for breach of the covenant of good faith and fair dealing. 13 III. Declaratory Judgment 14 Plaintiffs’ final claim is for declaratory relief, asserting that it “is necessary and 15 appropriate” to determine the rights and obligations under the Policy and to declare the 16 existence and extent of coverage for the Coverage Claim. Compl. ¶ 32. “Declaratory relief 17 should be denied when it will neither serve a useful purpose in clarifying and settling the 18 legal relations in issue nor terminate the proceedings and afford relief from the uncertainty 19 and controversy faced by the parties.” United States v. Washington, 759 F.2d 1353 , 1357 20 (9th Cir. 1985); see also Newcal Indust., Inc. v. Ikon Office Solution, 513 F.3d 1038 , 1056– 21 57 (9th Cir. 2008). Plaintiffs are not entitled to declaratory relief because, as noted supra 22 in Sections I–II, the Policy exclusion applies and does not cover their loss. Thus, there is 23 no useful purpose that would be served in granting relief. Accordingly, the Court 24 GRANTS Defendant’s Motion to Dismiss the Plaintiffs’ claim for declaratory relief. 25 CONCLUSION 26 For the reasons stated above, the Court GRANTS Defendant’s Motion to Dismiss 27 as to all of Plaintiffs’ asserted claims. Accordingly, the Court DISMISSES WITHOUT 28 /// 1 || PREJUDICE Plaintiffs’ Complaint. Plaintiffs may file an amended complaint within 2 || thirty (30) days of the date on which this Order is electronically docketed. 3 IT IS SO ORDERED. 4 ||Dated: March 8, 2021 . tt 5 jen Janis L. Sammartino 6 United States District Judge — 7 — — 8 — — 9 — — 10 — — 11 — — 12 — — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —