Applying California law, the United States District Court for the Southern District of California has held that a policyholder stated a claim against the claims administrator for a policy because the plaintiff had pleaded a plausible factual allegation that the claims administrator issued the policy, which was sufficient to survive a motion to dismiss. Reno v. Nat’l Union Fire Ins. Co., 2016 WL 4595955 (S.D. Cal. July 27, 2016).
An insured filed suit against an insurer and the insurer’s claims administrator for breach of contract and bad faith. In its complaint, the policyholder alleged that the name of the claims administrator appeared on coverage correspondence and was referenced throughout the policy. Thus, the policyholder asserted that it was unclear if the claims administrator issued the policy along with the underwriting entity identified in the policy. The claims administrator moved to dismiss the complaint for failure to state a claim because it did not issue the policy.
The court held that the policyholder stated a claim against the policy administrator for breach of contract and bad faith. Although an entity can only be sued for breach of the policy and breach of the policy’s implied covenant of good faith and fair dealing if it actually issued the policy, the court held that the policyholder sufficiently pled a claim that the claims administrator may have issued the policy because the claims administrator’s name appeared throughout the policy. In addition, the court rejected the argument that the complaint’s allegations should be ignored because they were contradicted by the policy, which was an exhibit to the complaint. The court held that it could not disregard the allegations in the complaint because there was no “inescapable” contradiction between the complaint and the exhibits concerning whether the claims administrator issued the policy.