Insurance Claims & Pleading Punitive Damages Under California Law in Federal Court

Under Federal rule of Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” The Rule 8 pleading standard does not require detailed factual allegations, but “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Raisin Bargaining Ass’n v. Hartford Cas. Ins. Co. 715 F. Supp. 2d 1079, 1084 (E.D. Cal. 2010), citing Bell Atl. Corp. v. Twombly, 550 U.S. at 555. Twombly explains that mere labels and conclusions or a formulaic recitation of the elements of a cause of action will not do; rather, there must be “enough facts to state a claim to relief that is plausible on its face.” Id. In other words, the “complaint must contain sufficient factual matter, accepted as true, the state a claim to relief that is plausible on its face.” Ashcraft v. Iqbal, 556 U.S. at 677.

“A claim has facial plausibility when the plaintiff pleads factual content that allows the Court to draw the reasonable inference that the defendant is liable for the misconduct.” Iqbal, 556 U.S. at 678. Iqbal and Twombly make clear that the plausibility standard is not akin to a “probability requirement,” but it asked for more than a sheer possibility that a defendant has acted unlawfully. Id.

The Ninth Circuit has summarized the governing standard, in light of Iqbal and Twombly, as follows: “In some, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U. S. Secret Serv., 572 F. 3d 962, 969 (9th Cir. 2009) (internal quote omitted). Apart from factual insufficiency, a complaint is also subject to dismissal under rule 12(b)(6) where it lacks cognizable legal theory, or where the allegations on their face “ show that relief is barred” for some legal reason. Raisin Bargaining Ass’n, 715 F. Supp. 2d at 1084, citations omitted.

There is no question that under California law, plaintiffs in insurance bad faith cases are legally entitled to seek punitive damages. “The availability of punitive damages [in bad faith cases] is thus compatible with recognition of insurers’ underlying public obligations and reflects an attempt to restore balance in the contractual relationship.” 20th Century Ins. Co. v. Superior Court, 90 Cal. App. 4th 1247, 1265-1266, 109 Cal. Rptr. 2d 611, 625-626 (2001), Citing Egan v. Mutual of Omaha Ins. Co., 24 Cal. 3d 809, 820, 169 Cal. Rptr. 691, (1979).

In Clark v. State Farm Mut. Auto Ins. Co., 231 F.R.D. 405, 406-407 (C. D. Cal. 2005) the court denied the insurer’s motion to strike the plaintiffs’ punitive damages allegations in a bad faith case as too conclusory under state law standards, explaining:

While California law governs plaintiff’s substantive claim for punitive damages under California Civil Code section 3294, the Federal Rules of Civil Procedure govern the punitive damages claim procedurally with respect to the adequacy of pleadings. See Bureerong v. Uvawas, 922 F. Supp. 1450, 1480 (C.D. Cal. 1996) See also, Clark, 106 F. Supp. 2d at 1018 (“Where state law directly conflicts with applicable provisions of the Federal Rules of Civil Procedure, federal courts must apply the Federal Rules-not state law.”); Jackson v. East Bay Hosp., 980 F. Supp. 1341, 1353-54 (N.D. Cal. 1997) (“[D]espite section 3294’s specific requirement that a pleading alleging oppression, fraud, or malice, these may be averred generally’”) (, quoting Fed. R. Civ. P. 9(b)). Clark v. State Farm Mut. Auto .Ins. Co., 231 F.R.D. at 406-07

The Clark court noted that whether the plaintiff would ever be able to prove the allegations made in the complaint and recover punitive damages was a wholly distinct inquiry from whether the complaint properly sought the remedy. (Id, at 407). Here plaintiff’s allegations of malice, fraud or oppression in support of her punitive damage meet the standard set forth in Clark, and are sufficient under rule 9(b).

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