"To establish breach of the implied covenant, the insured must show that: (1) benefits due under the policy were withheld, and (2) such withholding was unreasonable." O'Keefe v. Allstate Indem. Co. , 953 F. Supp. 2d 1111, 1115 (S.D. Cal. 2013) (citing Love v. Fire Ins. Exchange , 221 Cal. App. 3d 1136, 1151, 271 Cal.Rptr. 246 (1990) ); see alsoR & R Sails, Inc. v. Ins. Co. , 610 F. Supp. 2d 1222, 1230โ31 (S.D. Cal. 2009) ("Under California law, in order to prevail on a claim for breach of the implied covenant of good faith and fair dealing, Plaintiff must establish that the Defendant's handling of the claim was unreasonable or without proper cause.") (citing Love , 221 Cal. App.3d at 1151, 271 Cal.Rptr. 246 ).
In any event, the Court notes that the cases Tesoro Corporation cites in support of its argument that a parent company can recover damages for losses suffered by a subsidiary are inapposite. First, R & R Sails, Inc. v. Insurance Company of State of Pennsylvania, 610 F.Supp.2d 1222 (S.D.Cal.2009) does not stand for the proposition, as Tesoro Corporation claims, that a parent corporation may sue for damages sustained solely by a subsidiary. (Doc. # 38 at 10.)
Thus, to state a claim for breach of the implied covenant of good faith and fair dealing in the denial of coverage context, which is sometimes referred to as a โbad faith claim, โ โthe plaintiff must show that: (1) benefits due under the policy were withheld; and (2) the reason for withholding benefits was unreasonable or without proper cause.โ Align Tech., Inc. v. Fed. Ins. Co., 673 F.Supp.2d 957, 965 (N.D. Cal. 2009) (quoting Love v. Fire Ins. Exch., 271 Cal.App.3d 1136, 1151 (1990)) (internal quotations omitted); see also R & R Sails, Inc. v. Ins. Co. of State of Pennsylvania, 610 F.Supp.2d 1222, 1230 (S.D. Cal. 2009) (Anello, J.); Major v. W. Home Ins. Co., 169 Cal.App.4th 1197, 1209 (2009) (quoting Gruenberg, 9 Cal.3d at 573-74). This requires โPlaintiff [to] establish that Defendant's actions both breached the contract and the actions, taken in bad faith, frustrated the actual benefits of the contract.โ
To state a claim "for breach of the implied covenant of good faith and fair dealing in the denial of coverage context, the plaintiff must show that: (1) benefits due under the policy were withheld; and (2) the reason for withholding benefits was unreasonable or without proper cause." Align Tech., Inc. v. Fed. Ins. Co., 673 F.Supp.2d 957, 965 (N.D. Cal. 2009) (quoting Love v. Fire Ins. Exch., 271 Cal. Rptr. 246, 255 (Cal. Ct. App. 1990)) (internal quotations omitted); see also R & R Sails, Inc. v. Ins. Co. of State of Pennsylvania, 610 F.Supp.2d 1222, 1230 (S.D. Cal. 2009). That is, "Plaintiff must establish that Defendant's actions both breached the contract and the actions, taken in bad faith, frustrated the actual benefits of the contract."
To state a claim โfor breach of the implied covenant of good faith and fair dealing in the denial of coverage context, the plaintiff must show that (1) benefits due under the policy were withheld, and (2) the reason for withholding benefits was unreasonable or without proper cause.โ Align Tech., Inc. v. Fed. Ins. Co., 673 F.Supp.2d 957, 965 (N.D.Cal.2009) (quoting Love, 221 Cal.App.3d at 1151, 271 Cal.Rptr. 246 ) (internal quotations omitted); see also R & R Sails, Inc. v. Ins. Co. of State of Pennsylvania, 610 F.Supp.2d 1222, 1230 (S.D.Cal.2009). In other words, โPlaintiff must establish that Defendant's actions both breached the contract and the actions, taken in bad faith, frustrated the actual benefits of the contract.โ
Accordingly, since the punitive damages issue is "somewhat dependent " on the issue of bad faith and NAC has not contested the factual sufficiency of Reata's bad faith claim, the Court cannot say as a matter of law that NAC did not act maliciously, oppressively, or fraudulently. See e.g., R & R Sails, Inc. v. Ins. Co. of State of Pennsylvania, 610 F. Supp. 2d 1222, 1234 (S.D. Cal. 2009) (denying defendant insurer's motion summary judgment on plaintiff's punitive damages claim: "Given that material issues of fact exist as to whether Defendant acted in bad faith, the Court cannot conclude as a matter of law that Defendant did not act with malice, oppression, or fraud in its handling of Plaintiff's claim."). Accordingly, NAC's motion for summary judgment on the Reata's punitive damage claim is denied.
A UCL claim predicated on California Insurance Code ยง790.03, a provision of Unfair Insurance Practices Act, would be barred by Moradi-Shalal v. Fireman's Fund Insurance Companies, 46 Cal.3d 287 (1988). See R & R Sails v. Insurance Company of State of Pennsylvania, 610 F.Supp.2d 1222 (S.D. Cal. 2009). Plaintiffs here do not plead such a basis for their claim. --------
'" Spinks, 171 Cal. App. 4th at 1053 (quoting Hannon Eng'g, Inc. v. Reim, 126 Cal. App. 3d 415, 431 (2d Dist. 1981)). While a breach of the implied covenant of good faith and fair dealing does not automatically entitle a plaintiff to punitive damages, see Silberq v. Cal. Life Ins. Co., 11 Cal. 3d 452, 462-63 (1974), it is difficult to imagine a factual scenario where evidence could support a finding of bad faith on behalf of an insurance company and yet foreclose the possibility of punitive damages, even where the plaintiff will have to meet the "clear and convincing" burden at trial, see, e.g., R & R Sails, Inc. v. Ins. Co. of Pa., 610 F. Supp. 2d 1222, 1234 (S.D. Cal. 2009) ("Given that material issues of fact exist as to whether Defendant acted in bad faith, the Court cannot conclude as a matter of law that Defendant did not act with malice, oppression, or fraud in its handling of Plaintiff's claim." (citing Nasiri v. Allstate Indem. Co., 41 F. App'x 76, 79 (9th Cir. 2002))); Metro. Bus. Mqmt., Inc. v. Allstate Ins. Co., No. CV 05-8306 CAS, 2009 WL 691192, at *5 (C.D. Cal. Mar. 16, 2009) (same); Back v. Allstate Ins. Co., Inc., No. S045 LKK/CMK, 2005 WL 1683885, at *10 (E.D. Cal. July 13, 2005) ("Because . . . the court cannot resolve the bad faith question, summary judgment as to punitive damages must also be denied.").
Opposition to Motion for Class Certification, p. 24, fn. 76. Defendant contends Plaintiff's UCL claim based on an alleged violation of Insurance Code ยง 790.03 is barred because the California Unfair Insurance Practices Act does not provide for a private cause of action, citing R & R Sails, Inc. v. Ins. Co. of Penn., 610 F.Supp.2d 1222, 1232 (S.D.Cal.2009). Opposition to Motion for Class Certification, p. 24.
Following Textron, numerous Federal Courts have refused to allow Section 17200 claims that were based on a Defendant's alleged violations of the UIPA. See e.g., R R Sails, Inc. v. Insurance Co. of State of Pennsylvania, 610 F.Supp.2d 1222, 1233 (S.D.Cal. 2009); Doyle v. Safeco Ins. Co. of America, 2008 WL 5070055, at *7-8 (E.D.Cal. 2008); AHO Enterprises, Inc. v. State Farm Mut. Auto. Ins. Co., 2008 WL 4830708, at 5 (N.D.Cal. 2008). In this action Plaintiff's Section 17200 claim is based on Defendant's alleged violations of the UIPA.