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Insurance Law

Relatedness of Claims is Not Properly Addressed on a Motion to Dismiss Where it Involves a Factual Inquiry

Originally published in California Insurance Law Review - 2015 11.03.15

In Rancho Tehama, the district court held that, under the facts of the case before it, relatedness of claims could not be properly addressed on a motion to dismiss because it entailed a premature factual inquiry.

The insured, which operated as a homeowners association, had directors and officers liability coverage under a 2012-13 policy and a 2013-14 policy issued by the insurer. The underlying plaintiff sued the insured during the 2013-14 policy period, but had previously threatened a lawsuit in a letter sent during the prior policy period. The insured tendered the underlying action to the insurer for defense and indemnity under the 2013-14 policy. The insurer took the position that earlier demand and the subsequent lawsuit were related and constituted a single claim first made during the 2012-13 policy period. The carrier therefore denied coverage on the ground that the insured failed to timely report the claimant’s earlier demand. The insured filed a complaint for declaratory relief, breach of the insurance contract, and breach of the implied covenant of good faith and fair dealing. The insurer moved to dismiss.

The district court denied the insurer’s motion, finding that the issue of whether the earlier letter and the underlying action were “Related Claims” involved a factual inquiry that was premature for the court to conduct on a motion to dismiss. According to the court, it would have to determine the scope of each claim in order to determine whether they were related. However, the court could not determine the scope of either claim based solely on the allegations and documents attached to and referenced in the complaint.

Rancho Tehama Ass’n v. Fed. Ins. Co., 2015 U.S. Dist. LEXIS 69999 (E.D. Cal. May 28, 2015), [subscribers can access an enhanced version of this opinion: | Lexis Advance].

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