Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 1 of 14
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`KAREN TRINH, DDS, Inc., a California
`Corporation,
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`Plaintiff,
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`v.
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`STATE FARM GENERAL INSURANCE
`COMPANY, an Illinois Corporation doing
`business in California, and DOES 1 to 50,
`inclusive,
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`Defendants.
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`Case No. 5:20-cv-04265-BLF
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`ORDER GRANTING DEFENDANT’S
`MOTION TO DISMISS WITH LEAVE
`TO AMEND
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`[Re: ECF 27]
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`This case arises from a dispute over the interpretation of a business insurance policy
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`against the backdrop of recent public health orders attempting to curb the spread of COVID-19.
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`Karen Trinh, DDS, Inc. (“Plaintiff”) sues State Farm General Insurance Company (“Defendant”)
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`and unidentified Does 1 through 50 for denying an insurance claim for loss of business income.
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`Plaintiff asserts seven causes of action: (1) Breach of Contract; (2) Breach of Implied Covenant of
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`Good Faith and Fair Dealing; (3) Bad Faith Denial; (4) Declaratory Relief; (5) Unjust Enrichment;
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`(6) Unfair Competition under Cal. Bus. & Prof. Code § 17200 et seq.; and (7) Injunctive Relief
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`under Cal. Bus. & Prof. Code § 17200 et seq. Second Am. Compl. (“SAC”), ECF 26. Defendant
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`brings this Motion to Dismiss for failure to state a claim. Mot. to Dismiss Second Am. Compl.
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`(“Mot.”), ECF 27. Pursuant to Civil Local Rule 7-1(b), the Court found the Motion appropriate
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`for determination without oral argument on October 30, 2020. Order Vacating Hr’g, ECF 33.
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`Having considered the parties’ briefing as well as the rapidly evolving applicable law, the Court
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`GRANTS this Motion WITH LEAVE TO AMEND.
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` I.
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`BACKGROUND
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 2 of 14
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`A. Factual Allegations
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`Plaintiff is an active dental practice in Watsonville, California. SAC ¶ 4. To safeguard
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`against unexpected calamities, on April 1, 2019, Plaintiff obtained from Defendant a business
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`insurance policy (the “Policy”), which remains effective today. SAC ¶¶ 11-14. The Policy covers
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`loss of income and extra expenses for “accidental direct physical loss” to “Covered Property,”
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`subject to certain limitations, including a “Virus Exclusion.” SAC ¶ 19.
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`In March 2020, COVID-19 was recognized as a pandemic, prompting governments around
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`the world to enact laws tackling the crisis. SAC ¶¶ 21-22. To curb the spread of the virus,
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`counties across California, as well as the state itself, issued public health ordinances aimed to limit
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`transmission of the virus. See SAC ¶¶ 23-31. As a designated “essential business” under the
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`Order of the Santa Cruz County Health Officer to Shelter in Place (“Santa Cruz Order”), Plaintiff
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`continued operations but was limited to urgent care and emergency visits only, causing substantial
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`revenue reductions. SAC ¶¶ 32-33.
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`On April 1, 2020, Plaintiff contacted Defendant to determine whether the Policy covered
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`loss of income as a result of the health ordinances. SAC ¶ 43. Defendant promptly informed
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`Plaintiff that the Policy likely did not cover such loss but explained how to initiate a claim.
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`SAC ¶ 43. Plaintiff submitted a claim on April 3, 2020. Compl. ¶ 43. The next day, Defendant,
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`pointing to the Policy’s Virus Exclusion, informed Plaintiff that the claim was denied. SAC ¶ 43.
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`B. Procedural History
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`Plaintiff commenced this action on April 6, 2020, in the Superior Court of California,
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`County of Santa Cruz. Notice of Removal, Ex. A (“Compl.”), ECF 1-1. On May 22, 2020,
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`Plaintiff filed an amended complaint in state court. Notice of Removal, Ex. B (“FAC”), ECF 1-2.
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`Defendant filed a Notice of Removal on June 26, 2020. Notice of Removal, ECF 1. Defendant
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`moved to dismiss the First Amended Complaint on July 6, 2020, and the parties stipulated to
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`allowing Plaintiff to amend the complaint on August 19, 2020. See Mot., ECF 7; Stipulation, ECF
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`25. Plaintiff filed the Second Amended Complaint on August 24, 2020. See SAC. Defendant
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`again moved to dismiss on September 5, 2020. See Mot. Plaintiff filed its Opposition on
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`September 21, 2020. See Opp’n to Mot. to Dismiss (“Opp’n”), ECF 29. Defendant filed its Reply
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 3 of 14
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`on October 13, 2020. See Reply to Opp’n (“Reply”), ECF 29.
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` II. LEGAL STANDARD
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`A. Federal Rule of Civil Procedure 12(b)(6): Failure to State a Claim
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`“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a
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`claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation
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`Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d
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`729, 732 (9th Cir. 2001)). When considering such a motion, the Court “accept[s] factual
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`allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the
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`nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.
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`2008). While a complaint typically need not contain detailed factual allegations, it “must contain
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`sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
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`Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
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`570 (2007)). A claim is facially plausible when it “allows the court to draw the reasonable
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`inference that the defendant is liable for the misconduct alleged.” Id. However, the Court need
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`not “accept as true allegations that contradict matters properly subject to judicial notice” or
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`“allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable
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`inferences.” In re Gilead Sci. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation
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`marks and citations omitted). “Threadbare recitals of the elements of a cause of action, supported
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`by mere conclusory statements, do not suffice.” Id.
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`B. Federal Rule of Civil Procedure 15(a): Leave to Amend
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`Under Federal Rule of Civil Procedure 15(a), the Court should freely grant leave to amend
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`“when justice so requires,” keeping in mind Rule 15’s underlying purpose “to facilitate decision
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`on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127
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`(9th Cir. 2000) (en banc) (internal quotation marks and alterations omitted). When dismissing a
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`complaint for failure to state a claim, “a district court should grant leave to amend even if no
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`request to amend the pleading was made, unless it determines that the pleading could not possibly
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`be cured by the allegation of other facts.” Id. at 1130 (internal quotation marks omitted). A court
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`has discretion, however, to deny leave to amend where amendment is futile. Leadsinger, Inc. v.
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 4 of 14
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`BMG Music Pub., 512 F.3d 522, 532 (9th Cir. 2008) (citing Foman v. Davis, 371 U.S. 178, 182
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`(1962)).
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` III. DISCUSSION1
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`Relying on a flurry of recent cases across the country interpreting similar insurance claims,
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`Defendant argues that the Policy language plainly does not cover Plaintiff’s alleged losses,
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`meaning there is no breach of contract. See Mot. 1-3. And because there is no breach of contract,
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`the derivative contract claims necessarily fail. See Mot. 22-25. Plaintiff contends that its
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`insurance claim is covered, either by the Policy’s plain language or, alternatively, because of its
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`ambiguities. Opp’n 1-2.
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`In California, the interpretation of an insurance policy is a question of law for the court to
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`decide. Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 18 (1995). “Insurance policies are
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`contracts, and the ordinary rules of contract interpretation apply.” McMillin Homes Constr., Inc.
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`v. Nat’l Fire & Marine Ins. Co., 35 Cal. App. 5th 1042, 1050 (Cal. Ct. App. 2019). In interpreting
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`an insurance policy, the Court first examines the contract language to determine its plain or
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`ordinary meaning. Waller, 11 Cal. 4th at 18 (citation omitted). A policy is ambiguous if it is
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`“capable of two or more constructions, both of which are reasonable.” Id. Where a policy is
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`ambiguous, it must be interpreted “to protect the objectively reasonable expectations of the
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`insured.” Minkler v. Safeco Inc., 49 Cal. 4th 315, 321 (2010). Courts should not, however, “strain
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`to create an ambiguity where none exists.” Waller, 11 Cal. 4th at 18-19. If the insured shows that
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`a claim falls within the policy terms, the burden shifts to the insurer to demonstrate that an
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`exclusion applies. Id. at 16.
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`1 Defendant requests judicial notice of several public documents, including state and local health
`ordinances as well as recent district court rulings addressing similar insurance claims and policies.
`Mot. 1. n.1. Courts may take judicial notice of matters either that are “generally known within the
`trial court’s territorial jurisdiction” or that “can be accurately and readily determined from sources
`whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). Specifically, “a court
`may take judicial notice of matters of public record . . . as long as the facts noticed are not subject
`to reasonable dispute.” Intri-Plex Tech., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir.
`2007) (internal brackets and quotation marks omitted). Here, the documents for which Defendant
`requests judicial notice are matters of public record. See Exhibits 2-11, ECF 27; Notice, ECF 32;
`Notice, ECF 34; Notice, ECF 36; Notice, ECF 37. And their factual contents are not disputed.
`See generally Mot.; Opp’n.; Reply. Thus, the Court grants Defendant’s request.
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 5 of 14
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`With this framework in mind, the Court discusses Plaintiff’s claims.
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`A. Breach of Contract
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`In Claim One, Plaintiff alleges breach of contract for Defendant’s alleged failure to fulfill
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`its obligations under the Policy. SAC ¶¶ 49-55. Defendant argues that the breach of contract
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`claim should be dismissed as a matter of law because “[u]nder the plain language of the Policy,
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`Plaintiff’s claimed losses both do not meet the Policy’s terms of coverage and are subject to
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`exclusions, including the Policy’s Virus Exclusion.” Mot. 4-5. This Court agrees with Defendant.
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`1. Virus Exclusion
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`Defendant moves to dismiss first on the ground that the Policy excludes from its coverage
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`any loss caused by virus. Mot. 5. This Court agrees that Defendant has met its burden of showing
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`that the Virus Exclusion precludes coverage. See Waller, 11 Cal. 4th at 16.
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`To obtain relief, Plaintiff’s alleged losses must be covered under the Policy. See Mot. Ex.
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`A (“Policy”) Ex. A-16, § I.2 The Virus Exclusion states, in relevant part:
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`SECTION I — EXCLUSIONS . . .
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`2. We do not insure under any coverage for any loss caused by one or more of the
`following: . . .
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`i. Fungi, Virus Or Bacteria . . .
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`(2) Virus, bacteria, or other microorganism that induces or is capable of inducing physical
`distress, illness or disease . . .
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`Policy Ex. A-16, A-17 § I.2.i.(2), ECF 27-1. The language is plain and unambiguous—any loss
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`caused by virus that can induce physical distress, illness, or disease, such as COVID-19, is
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`excluded from coverage. See Waller, 11 Cal. 4th at 18. Courts in this circuit contemplating
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`comparable insurance policy exclusions agree. See, e.g., 10E LLC v. Travelers Indem. Co. of
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`2 Although a district court may generally not consider material beyond the pleadings in a motion
`to dismiss based on Rule 12(b)(6), it can consider extrinsic materials when their “authenticity . . .
`is not contested and the plaintiff’s complaint necessarily relies on them.” Lee v. City of Los
`Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (citation and quotation marks omitted). Here, Plaintiff
`does not contest the authenticity of the Policy provided by Defendant. And because Plaintiff seeks
`to recover under the Policy, the Second Amended Complaint necessarily relies on it. Thus, the
`Court “will consider the language contained directly in the Policy in resolving this [M]otion.” See
`Mark’s Engine Co. No. 28 Rest., LLC v. Travelers Indem. Co. of Conn., No. 2:20-cv-04423-AB-
`SK, 2020 WL 5938689, at *3 (C.D. Cal. Oct. 29, 2020).
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 6 of 14
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`Conn., No. 2:20-cv-04418-SVW-AS, 2020 WL 6749361, at *3 (C.D. Cal. Nov. 13, 2020)
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`(dismissing with prejudice because “the plain meaning of the virus exclusion does foreclose
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`coverage under the Policy”); Boxed Food Co., LLC v. Cal. Capital Ins. Co., No. 20-cv-04571-
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`CRB, 2020 WL 6271021, at *4-5 (N.D. Cal. Oct. 26, 2020) (finding no ambiguity in the virus
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`exclusion clause despite the absence of the word “pandemic”); Franklin EWC, Inc. v. Hartford
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`Fin. Serv. Grp., Inc., No. 20-cv-04434 JSC, 2020 WL 5642483, at *1-2 (N.D. Cal. Sept. 22, 2020)
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`(finding that the virus exclusion plainly and unambiguously does not cover business loss from
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`public health orders relating to the pandemic).
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`Furthermore, the facts alleged show that Plaintiff’s business revenue loss was “caused by”
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`COVID-19, i.e., virus. Cf. Mark’s Engine Co. No. 28 Rest., LLC v. Travelers Indem. Co. of
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`Conn., No. 2:20-cv-04423-AB-SK, 2020 WL 5938689, at *5 (C.D. Cal. Oct. 29, 2020) (finding
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`that the alleged loss or damage was caused by the novel coronavirus). The Second Amended
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`Complaint alleges that the various stay-at-home orders were “aimed at eliminating the possible
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`spread of virus through various transmission methods and community spread,” SAC ¶ 34, and that
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`government officials “were looking for any way to reduce the spread of the virus” by “reducing
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`droplet spread.” SAC ¶ 35. It further alleges that state and county health ordinances “suspend[ed]
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`normal, in-person, physical visitation of business properties to curb the threat of further spread and
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`transmission of COVID-19 by any of the currently-known modes of transmission.” SAC ¶ 42.
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`The Santa Cruz Order itself stated that its intent was “to ensure that the maximum number of
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`people self-isolate in their places of residences to the maximum extent feasible, while enabling
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`essential services to continue, to slow the spread of COVID-19 to the maximum extent possible.”
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`Mot. Ex. E-1 (“Santa Cruz Order”), ECF 27-5. And, according to the Second Amended
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`Complaint, it was because of the business shutdown that Plaintiff suffered “substantial revenue
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`reductions.” SAC ¶ 32.
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`Plaintiff seeks to evade the Virus Exclusion by claiming that respiratory droplets, not the
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`virus itself, are “the real focus” of public health ordinances. SAC ¶ 25-26. In making this claim,
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`Plaintiff creatively attempts to reframe the cause of the loss as the risk of droplets on building
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`surfaces rather than virus exposure at the building. See SAC ¶¶ 23-26. But this Court agrees with
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`Defendant and numerous other courts that there is no meaningful difference between the virus
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`itself and droplets that contain the virus. See Mot. 7. As Judge Gilliam recently explained in
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`addressing this same argument, “the stay-at-home ordinances plainly sought to prevent COVID-
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`19—a virus—from spreading,” and “[r]espiratory droplets are simply one mechanism through
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`which the virus can spread.” HealthNOW Med. Ctr., Inc. v. State Farm Gen. Ins. Co., No. 20-cv-
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`04340-HSG, 2020 WL 7260055, at *2 (N.D. Cal. Dec. 10, 2020); see also Founder Inst. Inc. v.
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`Hartford Fire Ins. Co., No. 3:20-cv-04466-VC, 2020 WL 6268539, at *1 (N.D. Cal. Oct. 22,
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`2020) (rejecting the same argument because it was merely “a different way of describing the same
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`thing,” i.e., that “the ordinances sought to prevent COVID-19 from spreading”).
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`California’s efficient proximate cause doctrine does not save Plaintiff’s claim either. See
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`Opp’n 15-16. An efficient proximate cause is “a cause of loss that predominates and sets the other
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`cause of loss in motion.” Boxed Food, 2020 WL 6271021, at *4 (citing Garvey v. State Farm Fire
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`& Cas. Co., 48 Cal. 3d 395, 402-03 (1989)). When loss is attributable to both a covered cause and
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`an excluded cause, the efficient proximate cause of the damage must be covered. Boxed Food,
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`2020 WL 6271021, at *4 (citing Garvey, 48 Cal. 3d at 403). Here, but-for COVID-19, the civil
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`authority orders would not exist, and Plaintiff would not have lost business revenue, making the
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`virus—an exclusion under the Policy—the efficient proximate cause of Plaintiff’s losses. See
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`Boxed Food, 2020 WL 6271021, at *4 (finding that COVID-19 was the efficient proximate cause
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`of the plaintiffs’ losses because “the Civil Authority Orders would not exist absent the presence of
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`COVID-19”).
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`Thus, this Court finds that the Plaintiff’s alleged loss is not covered because Defendant
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`has, as a matter of law, met its burden of showing that the Policy’s Virus Exclusion applies.
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`2. Accidental Direct Physical Loss
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`The Second Amended Complaint is also deficient for the independent reason that it fails to
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`allege an “accidental direct physical loss” to Covered Property. See Mot. 10; see also Policy Ex.
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`A-14; Mot. Ex. A (“Endorsement”) Ex. A-61 § 1.a. & 2.a., A-62 § 3.b. In California, a “physical
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`loss” is defined by its ordinary meaning, which is property damage “within the common
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`understanding of the term.” MRI Healthcare Center of Glendale, Inc. v. State Farm Gen. Ins. Co.,
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`187 Cal. App. 4th 776, 780 (Cal. Ct. App. 2010). Hence, physical loss is “widely held to exclude
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`alleged losses that are intangible or incorporeal, and, thereby, to preclude any claim against the
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`property insurer when the insured merely suffers a detrimental economic impact unaccompanied
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`by a distinct, demonstrable, physical alteration of the property.” Id. at 778-79 (internal citations
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`and quotation marks omitted). Some courts have read the definition of “direct physical loss” more
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`broadly as extending to physical loss of property, such as “the permanent dispossession of
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`something.” Total Intermodal Serv. Inc. v. Travelers Prop. Cas. Co. of Am., No. CV 17-04908
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`AB (KSx), 2018 WL 3829767, at *4 (C.D. Cal. July 11, 2018). In other words, the term “‘loss of’
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`contemplates that the property is unrecoverable.” Robert W. Fountain, Inc. v. Citizens Ins. Co. of
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`Am., No. 20-cv-05441-CRB, 2020 WL 7247207, at *4 (N.D. Cal. Dec. 9, 2020); see also Mudpie,
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`Inc. v. Travelers Cas. Ins. Co. of Am., No. 20-cv-03213-JST, 2020 WL 5525171, at *3-4 (N.D.
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`Cal. Sept. 14, 2020) (finding that the business shutdown, i.e., the loss of “use” of the property, did
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`not constitute a physical loss because neither the storefront nor the inventory was misplaced or
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`unrecoverable).
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`Here, the Second Amended Complaint fails to show that COVID-19 caused direct physical
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`loss to Covered Property, as there are no allegations of “distinct, demonstrable, physical
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`alteration” of Plaintiff’s dentistry, nor are there allegations that Plaintiff was permanently
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`dispossessed of anything. See generally SAC; Opp’n 8-9. Plaintiff suggests that the alleged
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`losses are not purely economic because human droplets containing COVID-19 have either
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`damaged the premises or pose a significant risk of damaging the premises. Opp’n 9; SAC ¶¶ 40-
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`41. But Plaintiff has not alleged that any covered property “damaged” by droplets containing the
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`virus is unrecoverable. See generally SAC. In other words, Plaintiff’s allegations of “direct
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`physical loss” do not even fall within an expansive interpretation of the phrase. See Long Affair
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`Carpet & Rug, Inc. v. Liberty Mut. Ins. Co., No. SACV 20-01713-CJC(JDEx), 2020 WL 6865774,
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`at *3 (C.D. Cal. Nov. 12, 2020) (explaining that the “more liberal interpretation” of “direct
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`physical loss” still requires the permanent dispossession of something); Mudpie, 2020 WL
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`5525171, at *4 (explaining that Total Intermodal’s more expansive interpretation of “direct
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`physical loss of property” considers allegations of a physical alteration of the property or
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 9 of 14
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`permanent dispossession).
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`Thus, Plaintiff’s Second Amended Complaint fails to allege facts demonstrating
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`“accidental direct physical loss” to Covered Property, which is a prerequisite to coverage.
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`3. Civil Authority
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`Plaintiff alternatively alleges that the Policy provides for loss of income under the Civil
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`Authority coverage. SAC ¶¶ 15-16, 18-19, 33, 53. Defendant argues that Plaintiff does not allege
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`facts to satisfy coverage under this section of the Policy. Mot. 16-17. The Civil Authority
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`provision states:
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`4. Civil Authority
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`a. When a Covered Cause Of Loss causes damage to property other than property at the
`described premises, we will pay for the actual “Loss Of Income” you sustain and necessary
`“Extra Expense” caused by action of civil authority that prohibits access to the described
`premises, provided that both of the following apply:
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`(1) Access to the area immediately surrounding the damaged property is prohibited by civil
`authority as a result of damage, and the described premises are within that area but are not
`more than one mile from the damaged property; and
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`(2) The action of the civil authority is taken in response to a dangerous physical condition
`resulting from the damage or continuation of the Covered Cause Of Loss that caused the
`damage, or the action is taken to enable a civil authority to have unimpeded access to the
`damaged property.
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`Endorsement Ex. A-62 § 4. This Court agrees with Defendant that Plaintiff’s Second Amended
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`Complaint fails to allege facts addressing several requirements under the Civil Authority
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`provision. See Mot. 16-17.
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`First, to trigger this provision, Plaintiff must allege a Covered Cause Of Loss.
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`Endorsement Ex. A-62 § 4. For the reasons discussed above, the Virus Exclusion applies,
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`meaning the alleged loss is not covered. See supra § III.A.1.; see also Boxed Food, 2020 WL
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`6271021, at *3-4 (finding that the plaintiff’s claim collapsed under the covered cause of loss
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`requirement of the civil authority provision because the policy’s virus exclusion applied); Franklin
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`EWC, 2020 WL 5642483, at *2 (finding that the civil authority provision did not apply because
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`the loss was a direct result of COVID-19, which was a cause of loss falling “squarely within the
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`Virus Exclusion”).
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`Second, Plaintiff has failed to allege damage that is “accidental direct physical loss” to
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`nearby property, i.e., property other than that at the described premises. Endorsement Ex. A-62
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`§ 4. As discussed above, the only “damage” to any property alleged is droplets containing virus,
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`which does not constitute an accidental direct physical loss. See supra § III.A.2.
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`Thus, Plaintiff has failed to allege coverage under the Civil Authority provision.
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`4. Other Provisions & Exclusions
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`Plaintiff alleges coverage under the Loss of Income, Extended Loss of Income, and Extra
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`Expense provisions. SAC ¶¶ 13, 16, 18. To trigger these provisions, the alleged loss must result
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`from a Covered Cause Of Loss. Endorsement Ex. A-61, A-62. As discussed above, the Virus
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`Exclusion takes Plaintiff’s insurance claim out of coverage. See supra § III.A.1. Furthermore,
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`coverage under these provisions occurs only where operations are suspended by “accidental direct
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`physical loss” to property during a “period of restoration.” See Endorsement Ex. A-61, A-62. As
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`explained, Plaintiff does not allege such loss. See supra § III.A.2. Thus, the pleadings fail to state
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`a claim for relief under the Loss of Income, Extra Expense, and Extended Loss of Income
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`provisions. See Pappy’s Barber Shops, Inc. v. Farmers Grp., Inc., No. 20-CV-907-CAB-BLM,
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`2020 WL 5500221, at *4-5 (S.D. Cal. Sept. 11, 2020) (dismissing an claim based on COVID-19
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`health orders under the business income and extra expense provision because it required direct
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`physical loss of or damage to property, which the plaintiffs did not allege).
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`In addition to alleging that Plaintiff’s claims are barred by the Virus Exclusion, Defendants
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`alternatively argue that Plaintiffs claims are barred by three other exclusions: (1) Ordinance Or
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`Law, (2) Acts Or Decisions, and (3) Consequential Loss. Mot. 20-22; see also Policy Ex. A-18,
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`A19. Plaintiff argues that the applicability of these three exclusions should not be decided at the
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`pleading stage. Opp’n 21-23. Since the Court has already found that Plaintiff’s Second Amended
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`Complaint fails to plead facts demonstrating coverage and supporting its breach of contract claim,
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`it is unnecessary to address these alternate arguments at this time. See HealthNOW, 2020 WL
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`7260055 (declining to reach identical claims raised in briefings at Docket Nos. 25, 28, 29, and 30).
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`5. Conclusion
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`In sum, Plaintiff fails to plead facts sufficiently demonstrating that the alleged loss is
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`covered under the Policy. And because there is no coverage, there is no breach of contract. While
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 11 of 14
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`it does not appear that Plaintiff can cure deficiencies in the Second Amended Complaint given the
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`nature of the claims, out of an abundance of caution the Court will grant Plaintiff the opportunity
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`to amend in accordance with its Rule 11 obligations. Thus, Defendant’s Motion as to Claim One
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`is GRANTED WITH LEAVE TO AMEND.
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`B. Other Contract-Based Claims
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`In Claims Two, Three, and Four, Plaintiff seeks relief for Defendant’s alleged breach of
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`the implied covenant of good faith and fair dealing, bad faith denial, and declaratory relief. SAC
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`¶¶ 56-77. Where a claim is necessarily premised upon finding coverage in an insurance policy and
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`no coverage exists, it fails. See Mark’s Engine, 2020 WL 5938689, at *5-6 (dismissing with
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`prejudice claims for declaratory relief, breach of contract, bad faith, and violation of the UCL
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`because the insurance policy did not provide coverage for the loss alleged). Here, because
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`Plaintiff’s alleged business loss is not covered under the Policy, there is no breach of contract,
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`meaning that Plaintiff’s other contract-based claims for breach of the covenant of good faith and
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`fair dealing, bad faith denial, and declaratory relief also fail. See Franklin EWC, 2020 WL
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`5642483, at *4 (dismissing the “contract-based claims for breach of contract, breach of covenant
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`of good faith and fair dealing, bad faith denial of an insurance claim, . . . and declaratory relief”
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`for failing to show that the alleged losses caused by business shutdowns from COVID-19 were
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`covered). Thus, Defendant’s Motion as to Claims Two, Three, and Four is also GRANTED
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`WITH LEAVE TO AMEND.
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`C. Unjust Enrichment
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`In Claim Five, Plaintiff alleges unjust enrichment for the policy payments made from 2019
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`to 2020. SAC ¶¶ 78-83. “[A]s a matter of law, a quasi-contract action for unjust enrichment does
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`not lie where . . . express binding agreements exist and define the parties’ rights.” Cal. Med.
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`Ass’n, Inc. v. Aetna U.S. Healthcare of Cal., Inc., 94 Cal. App. 4th 151, 172 (2001). Here, there is
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`an existing insurance policy defining the parties’ rights and obligations. See Policy. Plaintiff
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`concedes that unjust enrichment cannot lie in this case and therefore withdraws this claim. Opp’n
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`23. Thus, Defendant’s Motion as to Claim Five for unjust enrichment is GRANTED WITH
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`PREJUDICE.
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`Case 5:20-cv-04265-BLF Document 38 Filed 12/28/20 Page 12 of 14
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`D. California’s Unfair Competition Law (“UCL”) Claims
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`In Claims Six and Seven, Plaintiff alleges that Defendant engaged in unfair competition
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`and requests injunctive relief under Cal. Bus. & Prof. Code § 17200 et seq. SAC ¶¶ 84-98.
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`Defendant argues that the unfair business practices claim relies on and therefore falls with the
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`breach of contract claim, and that injunctive relief is inappropriate because there is an adequate
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`remedy at law. Mot. 23-24. Plaintiff reasserts that the insurance claim was wrongfully denied and
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`urges this Court to refrain from ruling on the issue of remedies until there is more certainty
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`regarding the extent to which the legal relief sought is “adequate.” Opp’n 23-24.
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`The UCL provides a cause of action for business acts or practices that are (1) unlawful,
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`(2) unfair, or (3) fraudulent. Cal. Bus. & Prof. Code § 17200. Each prong is uniquely defined and
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`therefore “captures a separate and distinct theory of liability.” Rubio v. Capital One Bank, 613
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`F.3d 1195, 1203 (9th Cir. 2010) (internal quotation marks omitted). “The UCL’s coverage is
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`sweeping, and its standard for wrongful business conduct intentionally broad.” Moore v. Apple,
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`Inc., 73 F. Supp. 3d 1191, 1204 (N.D. Cal. 2014) (internal quotation marks omitted). But because
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`a UCL action is equitable in nature, its remedies for private individuals “are limited to restitution
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`and injunctive relief.” Pom Wonderful LLC v. Welch Foods, Inc., No. CV 09-567 AHM (AGRx),
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`2009 WL 5184422, *2 (C.D. Cal. Dec. 21, 2009).
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`Here, Plaintiff bases the claims for violation of the UCL on Defendant’s alleged bad faith
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`denial of the insurance claim. See SAC ¶¶ 84-94. Plaintiff’s UCL claim, however, is tethered to
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`Defendant’s alleged breach of the Policy. See SAC ¶¶ 84-94. As discussed, the facts in the
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`pleading do not demonstrate such breach, meaning Plaintiff has not alleged fraudulent, unfair, or
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`unlawful conduct creating liability under the UCL. See SAC ¶¶ 84-94; see also 10E LLC v.
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`Travelers Indem. Co. of Conn., No. 2:20-cv-04418-SVW-AS, 2020 WL 5359653, at *6 (C.D. Cal.
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`Sept. 2, 2020) (dismissing the UCL claim, which was based on entitlement to coverage, because
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`the Policy did not provide coverage as a matter of law); Pappy’s Barber Shops, 2020 WL
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`5500221, at *6-7 (same); Mark’s Engine, 2020 WL 5938689, at *6 (same).
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`Furthermore, Plaintiff seeks an injunction requiring Defendant to (1) cease the a