United States District Court, D. Nevada
STEPHEN C. SCHMID, Plaintiff,
SAFECO INSURANCE COMPANY OF ILLINOIS, et al., Defendants.
J. DAWSON, UNITED STATES DISTRICT JUDGE
before the Court for consideration is Defendants Safeco
Insurance Company of Illinois' and Safeco Insurance
Company of America's Joint Motion to Dismiss (#5).
Plaintiff Stephen Schmid filed a response in opposition (#7)
to which both Safeco entities replied (#8).
purchased an insurance policy, identified as policy no.
A3118256, from Safeco of Illinois on March 19, 2016. Compl.
2, ECF 1-1. About two months later on May 17, 2016, Schmid
suffered injuries from an automobile accident caused by an
allegedly underinsured person. Id. On December 6,
2017, Schmid notified Safeco of Illinois of the inadequate
insurance coverage and submitted a claim against his own
policy under his uninsured or underinsured motorist benefits.
Id. The complaint does not allege denial of the
claim; however, it does allege that Safeco has failed to make
a payment. Id. at 2. Having received no payments
from Safeco, Schmid filed suit in the Clark County District
Court, Nevada on September 17, 2018. Id. at 1.
Safeco timely removed to this Court and now moves to dismiss.
Notice of Removal 1, ECF 1; Mot. to Dismiss 1, ECF 5.
may dismiss a plaintiff's complaint for “failure to
state a claim upon which relief can be granted.”
Fed.R.Civ.P. 12(b)(6). A properly pled complaint must provide
“a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed.R.Civ.P.
8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007). While Rule 8 does not require detailed factual
allegations, it demands more than “labels and
conclusions or a formulaic recitation of the elements of a
cause of action.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). “Factual allegations must be enough to
raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555. Thus, “[to] survive
a motion to dismiss, a complaint must contain sufficient
factual matter to ‘state a claim for relief that is
plausible on its face.'” Iqbal, 556 U.S.
Iqbal, the Supreme Court clarified the two-step
approach district courts are to apply when considering
motions to dismiss. First, a district court must accept as
true all well-pled factual allegations in the complaint;
however, legal conclusions or mere recitals of the elements
of a cause of action, supported only by conclusory
statements, are not entitled to the assumption of truth.
Id. at 678. Second, a district court must consider
whether the factual allegations in the complaint allege a
plausible claim for relief. Id. at 679. A claim is
facially plausible when the plaintiff's complaint alleges
facts that allow the court to draw a reasonable inference
that the defendant is liable for the alleged misconduct.
Id. at 678.
where the complaint does not permit the court to infer more
than the mere possibility of misconduct, the complaint has
“alleged-but it has not show[n]-that the pleader is
entitled to relief.” Id. at 679 (internal
quotation marks omitted). Thus, when the claims in a
complaint have not crossed the line from conceivable to
plausible, the complaint must be dismissed. Twombly,
550 U.S. at 570. Moreover, “[a]ll allegations of
material fact in the complaint are taken as true and
construed in the light most favorable to the non-moving
party.” In re StacElecs. Sec. Litig., 89 F.3d
1399, 1403 (9th Cir. 1996).
brings four causes of action against the Safeco entities: 1)
breach of contract; 2) breach of fiduciary duty; 3) breach of
duty of good faith and fair dealing (“bad
faith”); and 4) declaratory relief. Defendants move to
dismiss each claim against Safeco of America because it is
not a party to the contract between Schmid and Safeco of
Illinois. The parties have agreed to dismiss Schmid's
fiduciary duty claim, and the Court does so. Finally, Safeco
of Illinois did not challenge the breach of contract claim in
the motion to dismiss, therefore the Court will not discuss
it at this time.
Safeco of America
Safeco entities argue that Safeco of America should be
dismissed from the case because it is not a party to the
insurance policy. A certified copy of the policy is attached
to the motion to dismiss as an exhibit. Mot. to Dismiss, Ex.
1, ECF No. 5. The policy indicates that the contract is
between Safeco of Illinois and Schmid. Safeco of America is
correct that it is not a party to the contract. In fact,
Safeco of America does not appear in the policy whatsoever.
However, before the Court will consider the policy as
extrinsic evidence, it must determine if it should convert
the motion to dismiss into a motion for summary judgment.
the court will not consider evidence outside of the complaint
in a motion to dismiss, but there are exceptions to that
rule. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d
988, 998 (9th Cir. 2018). Relevant here is the doctrine of
incorporation-by-reference, which allows the court to
“[treat] certain documents as though they are part of
the complaint itself.” Id. at 1002. This is
appropriately applied to cases where the document referenced
by the complaint “forms the basis of the
complaint.” Id. (quoting U.S. v.
Ritchie, 342 F.3d 903, 907 (9th Cir. 2003)). The purpose
of this doctrine is to “[prevent] plaintiffs from
selecting only portions of documents that support their
claims, while omitting portions of those very documents that
weaken-or doom-their claims.” Id.
should exercise caution when incorporating outside documents,
however, because the “overuse and improper
application” of this doctrine “can lead to
… harmful results.” Khoja, 899 F.3d at
998, 1003 (the content of incorporated documents may be
assumed to be true for the purposes of a 12(b)(6) motion,
and, appropriately, ought to be “approached with
caution”). As a result, the court should refrain from
incorporating documents by reference in circumstances ...