BIGELOW, P. J.
Appellants insured their multi-million dollar home in Bel-Air with American International Insurance Company of California, Inc. (AIICC), an affiliate of American International Group, Inc. (AIG). This dispute stems from AIICC's alleged mishandling of appellants' claim when the home suffered extensive water damage. In addition to suing AIICC, appellants also brought suit against AIG, its affiliates and their employees on theories of alter ego liability, aiding and abetting and conspiracy. All of the defendants with the exception of AIICC have been dismissed on demurrer. We are called to determine whether appellants have stated a cause of action against any of these defendants. We conclude they have not and affirm the judgment.
Appellants in this matter are Margot and Neil Shekhter (the Shekhters) and 2156 Stratford Circle LLC, a limited liability company set up by the Shekhters to hold title to the property at issue. In 2005, the Shekhters began to build a 23,000 square foot custom home at 2156 Stratford Circle in Los Angeles (2156 Stratford). During construction, the Shekhters lived next door at 2158 Stratford, in an 11,000 square foot home they had owned since 1995. The Shekhters hired All Powerful Plumbing (All Powerful) to install plumbing fixtures at the new home. They insured 2156 Stratford with AIICC in February 2007. The policy had a coverage limit of $10 million for damage to the home and "unlimited" loss of use.
When the Shekhters began to move in to their new home, they discovered a large amount of water on the first floor. A component of the plumbing system had failed, causing extensive water damage. It appeared that the system failure was caused by work done by All Powerful. AIICC was notified of the loss and it inspected the property shortly thereafter.
The adjuster encouraged the Shekhters to continue living in the house next door while repairs were made to 2156 Stratford. AIICC estimated it would take approximately 10 months for the repairs to be completed. Neil Shekhter advised the adjuster that he was interested in selling the home they were currently living in and was concerned that market values were on a downward trend and "he is losing money the longer he delays selling."
Appellants brought suit against AIICC on June 5, 2008, in connection with the purported mishandling of their claim on 2156 Stratford.
Appellants further alleged that AIICC was merely a shell of AIG and worked with other AIG-affiliated companies to cause them damage. As a result, appellants also sued the following, who are the respondents on appeal:
Before most of the defendants' responsive pleadings were due, appellants filed a notice of intent to amend the complaint under Code of Civil Procedure section 472 on September 16, 2008.
The first amended complaint was filed on September 30, 2008, alleging 13 causes of action against each defendant for: (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) violation of Insurance Code section 10103.5, (4) fraud, (5) negligent misrepresentation, (6) intentional interference with insurance contract, (7) negligent interference with contract, (8) intentional infliction of emotional distress, (9) illegal dissemination of private data, (10) breach of fiduciary duty, (11) reformation, (12) violation of Business and Professions Code section 17200 and (13) unjust enrichment. Contending that all the defendants engaged in actionable conduct against them, appellants alleged the defendants were "in reality a single integrated entity, and that all of the entities under the AIG umbrella are essentially alter-egos of each other." Appellants also alleged that AIG performed managerial and related functions for the insuring entities, including AIICC, Lexington and National Union. These insuring entities were purportedly mere shells, without employees, or tangible property and were grossly undercapitalized.
The defendants filed, either singly or jointly, demurrers and motions to strike the first amended complaint. All of the demurrers, with the exception of AIICC's, challenged the sufficiency of the alter ego and single enterprise theories of recovery. The defendants argued that each entity was separate and distinct from one another and thus, there were no grounds to impose liability against them for AIICC's alleged conduct.
The trial court issued its ruling on February 13, 2009. Among other things, it found that appellants had failed to allege facts to support their alter ego theory because they failed to allege facts as to any injustice that would result if appellants were to pursue an action against AIICC only; "[appellants] allude to undercapitalization and AIICC being a mere `shell,' but no facts to support these claims are alleged." As a result, the demurrers were sustained with leave to amend with regard to the alter ego theory of recovery.
As to individual causes of action, the court sustained without leave to amend the claims for violation of Insurance Code section 10103.5, breach of fiduciary duty, violation of the UCL and unjust enrichment. It was noted that appellants withdrew the reformation cause of action against all defendants. As to the remaining causes of action, the trial court identified weaknesses in each of the claims but allowed appellants the opportunity to amend. Pursuant to defendants' motion, the trial court also struck "the allegations concerning the statutory requirements under the Ins. Code and applicable insurance regulations, the `conflict of interest' allegations, the allegations regarding statements made during mediation, the allegations that certain policy provisions are `illegal and unenforceable,' the `loss of use' allegations, the `profit and overhead' allegations, and Plaintiffs' claim for loss in market value."
On December 18, 2008, AIG and AIICC filed a petition to compel appraisal. AIG and AIICC also filed a motion to stay the proceedings based on the doctrine of primary jurisdiction, which authorizes the Insurance Commissioner to make any determinations as to undercapitalization of an insurance company. The trial court granted the petition to compel binding appraisal and stayed all proceedings. The motion for primary jurisdiction was taken under submission and the court ordered additional briefing on the issue. Appellants subsequently indicated to the court that they would omit the undercapitalization allegations from the second amended complaint.
The second amended complaint was filed on March 20, 2009, alleging the same 13 causes of action. Appellants refiled all causes of action, notwithstanding the fact that the trial court sustained a demurrer without leave to amend as to four of the claims. The second amended complaint continued to assert liability based on alter ego, conspiracy, aiding and abetting and joint venture.
The second amended complaint generally attributed all conduct to all the defendants without distinguishing which entity or individual did what.
The second amended complaint also contained detailed allegations of correspondence between Elliot and employees of AIG Private Client Group, stating that he had decided to delay mitigation efforts in the event it impaired defendants' subrogation rights even though Neil Shekhter expressed his concerns regarding the sale of the old home. Appellants further alleged that defendants attempted to subrogate the claim by meeting with All Powerful and National Union without appellants' knowledge. Letters seeking subrogation from All Powerful were sent on behalf of Lexington and AI Recovery. Bush from AIG Domestic Claims was alleged to have discussed a policy limit demand made by defendants against All Powerful. No references were made about Cuzzola, Piotrowski or AIG Marketing in the second amended complaint as they were "doed in" to the complaint.
Not surprisingly, another flurry of demurrers and motions to strike were filed by the defendants, primarily repeating their attack on appellants' alter ego theory of liability. In its ruling, the trial court noted that striking the complaint in its entirety was warranted since the majority of the second amended complaint remained unchanged from the first amended complaint and it was untimely. Nevertheless, the trial court issued an extensive ruling which provided a detailed analysis of the deficiencies found in the second amended complaint as to each defendant.
With respect to the claims for alter ego liability against respondents, the trial court held that appellants'"allegations were insufficient because there were no facts as to any injustice that would result if Plaintiffs were to pursue an action against AIICC only. In the FAC, Plaintiffs alluded to undercapitalization and AIICC being a mere `shell,' but no facts were alleged to support these claims. Plaintiffs have not cured this defect in the SAC. In fact, the allegations about undercapitalization have been removed from the SAC. Accordingly, Plaintiffs have failed to adequately plead facts to support their alter ego theory against the AIG Entity Defendants . . . [¶] As to the sixth and seventh causes of action [for intentional and negligent interference with insurance contract], which are the only causes of action that Plaintiffs are alleging against the AIG Entity Defendants on an independent basis, Plaintiffs still have not alleged what acts by these Defendants interfered with their contract with AIICC. The most that they allege is that Defendants `falsely document[ed] the claim file" (SAC, ¶ 191A), but exactly what they did is unclear. Despite this Court's clear directive to identify the torts that Defendants allegedly perpetrated, Plaintiffs have not done so." As a result, the trial court dismissed the claims against respondents. The allegations against the individual defendants were also sustained without leave to amend because "no facts as to what any of these individuals did has been alleged."
Two judgments were entered dismissing all defendants except for AIICC. The only defendant remaining in the matter is AIICC. Appellants filed a motion for reconsideration and acceptance of a third amended complaint on August 21, 2009. Appellants then made a "Motion for New Trial," on September 11, 2009, also challenging the sustention of the demurrer. These motions were denied on November 23, 2009. Appellants timely appealed.
Of the 13 causes of action, appellants challenge the trial court's ruling on all but two — the 11th cause of action for reformation and the 13th for unjust enrichment. Appellants also contend the trial court improperly struck certain allegations from the second amended complaint. We review the allegations supporting the remaining 11 causes of action as they apply to the nine respondents.
The second amended complaint against respondents rests on alternate theories of liability. One, appellants allege respondents are liable for AIICC's conduct primarily as a result of aiding and abetting or conspiring with AIICC or because they are alter egos of one another. Two, appellants contend respondents' own actions resulted in liability because they interfered with appellants' contract with AIICC. We find the allegations insufficient to support liability under either theory. As described in our recitation of the allegations, there are few, if any, allegations relating to what respondents did.
"In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. `We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) With these principals in mind, we address each of appellants' causes of action.
Appellants' breach of contract claim rests on their allegations of secondary liability because appellants' insurance contract was with AIICC and not any of the respondents. Appellants' bad faith claim, asserted by the breach of the implied covenant of good faith and fair dealing causes of action, similarly relies on theories involving secondary liability such as alter ego, conspiracy and aiding and abetting.
As to appellants' alter ego theory, the second amended complaint alleged as follows:
Appellants also alleged, "On one hand, one hollow shell under the AIG umbrella insured the Shekhters. On the other hand, another hollow shell within the single entity, i.e., National Union insured All Powerful. AIG California and National Union had access to the same data and no effort was made to protect private and confidential data provided or gleaned about the Shekhters [sic] in conjunction with their first party claim from being accessed, used and/or exploited by National Union. [Capitalization of names omitted]"
To further support their alter ego theory, appellants described how an attorney "wrote to an adjuster for All Powerful advising that he had been hired by `AIG as subrogee of Neil and Margot Shekther [sic]." This attorney sent correspondence regarding the subrogation of appellants' claim on behalf of Lexington and "under the direction of James Winters from AI Recovery." Subsequently, a new law firm represented AI Recovery and not Lexington in its correspondence with appellants' counsel. Appellants also refer to internal communications by their adjuster regarding their claim to members of the AIG Private Client Group and to individuals with "@AIG.com" email addresses.
"The alter ego doctrine arises when a plaintiff comes into court claiming that an opposing party is using the corporate form unjustly and in derogation of the plaintiff's interests." (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300.) Accordingly, appellants must allege facts sufficient to establish two elements: (1) that there is such unity of interest and ownership that the two corporate forms cease to exist as separate entities and (2) that, if the acts are treated as those of AIICC alone, an inequitable result will follow. (Id. at p. 300.) As to the second requirement, caselaw has established that inequity or injustice results if there exists an abuse of the corporate form, such as inadequate capitalization or misrepresentation of the corporate structure to creditors. (Minton v. Cavaney (1961) 56 Cal.2d 576, 579; American Home Ins. Co. v. Travelers Indemnity Co. (1981) 122 Cal.App.3d 951.) A court will pierce the corporate veil only where failure to do so "would be to defeat the rights and equities of third persons." (Kohn v. Kohn (1950) 95 Cal.App.2d 708, 720.) Thus, "abuse of the corporate privilege by itself does not require that a court disregard the separate identity of a corporation. There must be some equitable purpose which will be served by ignoring the corporate form." (Shapoff v. Scull (1990) 222 Cal.App.3d 1457, 1471, overruled on other grounds by Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 521, fn. 10.)
The gist of appellants' second amended complaint regarding alter ego liability appears to be that AIG was an umbrella company which directed, managed and controlled the activities of its subsidiaries, AIICC and the AIG-affiliates. Moreover, appellants alleged that the respondents shared employees, places of business, signage, electronic databases and systems and marketing efforts with one another. Leaving aside whether this is sufficient to show a unity of interest or ownership, we find that appellants have failed to allege what inequity would result if the corporate veil were cast aside as to the AIG-affiliates, who were, at most, sister companies to AIICC. Appellants have similarly failed to allege what inequity would result if AIG, as the parent corporation, were not held liable for its subsidiary's actions. Indeed, "[i]t is well recognized that the law permits the incorporation of businesses for the very purpose of isolating liabilities among separate entities." (Pacific Landmark Hotel, Ltd. v. Marriott Hotels, Inc. (1993) 19 Cal.App.4th 615, 628; Friedman, Cal. Practice Guide: Corporations (The Rutter Group 2006) ¶ 2:52.7, quoting Cascade Energy and Metals Corp. v. Banks (10th Cir. 1990) 896 F.2d 1557, 1576.) Alter ego liability can never be based on the mere fact of the parent-subsidiary relationship (United States v. Bestfoods (1998) 524 U.S. 51, 61-62) or on the mere existence of common directors and officers.
Appellants have not alleged what equitable goal would be served by imposing alter ego liability against respondents. Appellants have removed the allegation that AIICC is undercapitalized and make no allegations in the second amended complaint that AIICC is not fully able to respond to any damages or punitive award appellants may recover in this action.
Appellants instead argue, "Here every Respondent, and AIG Inc. in particular, actively participated in the `common undertaking' designed to deprive Appellant of both first and third party benefits. Under the circumstances of this claim, it would be inequitable to allow respondents, and AIG, Inc. in particular, to participate at a high level and to control the investigation and the claim, and then claim that it should be insulated. This would sanction a fraud, promote injustice and would deprive a plaintiff from redress against a party primarily responsible for damages." We disagree. Based on the allegations, the party "primarily" responsible for appellants' damages is their insurer, AIICC. Even if we accept appellants' contentions that respondents participated in the sale, administration and adjustment of appellants' insurance policy, those allegations relate to whether there was a unity of interest and ownership, not to whether an inequity would result from a court's refusal to pierce the corporate veil.
In Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269 (Tomaselli), the court specifically addressed the type of evidence on which appellants rely. There, plaintiffs introduced the 1990 Annual Report of Transamerica Corporation in support of an award of punitive damages. Transamerica Corporation was the parent corporation of the defendant company, Transamerican Insurance Company. (Id. at p. 1283.) Plaintiffs asserted that the entities were alter egos, citing the use of forms and letterhead bearing the umbrella name of "Transamerica Insurance Group" and a claims representative indicating she was representing "Transamerica Insurance Group" in her correspondence with the plaintiffs. The plaintiffs also seized on passages in the annual report as allegedly demonstrating that the various entities commingled funds, represented themselves as being a single entity, and shared some common officers and directors. The court found that "the plaintiffs misapprehend the true import of these passages. For example, the language they cite as evidence of `commingling' merely reflects that the parent company receives money from subsidiaries in the form of dividends and interest on loans, and reinvests some portion of those funds in the subsidiaries. These are precisely the kinds of transactions which would occur among entities which respect the corporate separateness among entities." (Id. at p. 1284, fn. 12.)
The court held that these facts did not constitute a "significant showing of unity of interest." (Tomaselli, supra, at 1285.) More importantly, it held there was "nothing to suggest how an `injustice' would befall Tomasellis if the punitive damage award were limited to a percentage of appellant's value rather than that of the parent company." (Id. at pp. 1285-1286.) It reversed the punitive damages award that had been entered on the basis of this evidence as a result. (See also Wady v. Provident Life and Accident Ins. Co. (2002) 216 F.Supp.2d 1060.)
Appellants' reliance on Tran v. Farmers Group, Inc. (2002) 104 Cal.App.4th 1202 (Tran) and Delos v. Farmers Group Insurance (1979) 93 Cal.App.3d 642 (Delos) is unavailing because both involved a unique corporate structure called an interinsurance exchange not applicable here. In Tran, the insured owned a grocery store that was firebombed by an arsonist along with three other grocery stores in the area. (Tran, supra, 104 Cal.App.4th at p. 1207.) The insured had previously increased her coverage on a commercial insurance policy for an annual premium of $13,505, partly paid to Truck Insurance and partly to Fire Insurance Exchange. She did not receive a copy of her policy but relied on the insurance agent's representation that her business was adequately covered. After a two-month delay, a single Truck Insurance policy was made out to the insured, which retroactively altered her premium to $9,279 annually and reduced her coverage by over $400,000.
The insured sued Truck Insurance as well as Farmers Group, Truck Underwriters Association and Fire Insurance Exchange. The allegations described the unique structure under which these insurance companies operated. Known as a reciprocal insurer or insurance exchange, the insureds pooled their premiums to insure one another. An attorney-in-fact was designated to administer the policies, including managing and handling all of the claims. Farmers Group and Truck Underwriters were alleged to be the attorneys-in-fact to the exchanges. (Tran, supra, at pp. 1210-1212.) The defendants successfully demurred and moved for summary judgment on the ground that they issued no policies to the insured. (Id. at pp. 1207-1208.)
On appeal, the court found that the insured presented evidence to create a triable issue of fact as to whether Farmers Group and Truck Underwriters was involved in the issuance and management of her policy. (Tran, supra, at p. 1216.) The insured presented evidence that the defendants shared employees and were so inter-related that they all owed her a fiduciary duty and a duty of good faith and fair dealing. (Id. at p. 1210.) Although it was undisputed that the exchanges had adequate capital, the court concluded that the facts stated in the complaint supported a cause of action for breach of the fiduciary duty owed to the insured by the attorney-in-fact under an alter ego theory.
The court held, "Tran has raised a triable issue as to whether it would be offensive to the interests of justice to allow respondents to shift all contractual liability to the exchanges. Respondents were managerial agents without whom the exchanges could not transact their business. Farmers Group, apparently acting through Truck Underwriters Association in some instances, made the critical decisions regarding Tran's policy for her and for the exchanges, manipulating the exchanges as parts of a single enterprise. When a reciprocal insurer functions as a mere instrumentality of an attorney-in-fact in the conduct of a unified insurance business, it would be inequitable to permit the attorney-in-fact to escape liability for breach of the covenant of good faith and fair dealing. [Citations.]" (Tran, supra, 104 Cal.App.4th at p. 1220.) In essence, it would be unfair and inequitable to allow the entity responsible for backdating the policy, administering the policy and adjusting the claim to escape liability and force the subscribers (i.e., the insureds) to bear the burden of its misconduct.
Similarly, Delos involved an interinsurance exchange whose attorney-in-fact sought to disclaim liability for the insurer's bad faith failure to compensate plaintiffs for their injuries suffered in a car accident. (Delos, supra, 93 Cal.App.3d at p. 649.) Without discussing alter ego liability, the court described an attorney-in-fact under an interinsurance exchange scheme as one who was empowered to exchange insurance contracts for the subscribers but also "`exercise[d] all other functions of an insurer, e.g., to set rates, to settle losses, to compromise claims, to cancel contracts.'" (Id. at p. 652.) Thus, the attorney-in-fact was the party "primarily responsible for damages." (Ibid.)
Under both Delos and Tran, the inequity resulted from forcing an innocent party, the insureds or subscribers that make up the exchange, to bear the burden of the attorney-in-fact's misconduct. Here, there is no similar innocent party. AIICC is alleged to have mishandled appellants' claim and thus, is the primary party responsible for their damages.
Appellants concede that an insured cannot pursue a cause of action for bad faith under a conspiracy theory. (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 509.) However, they urge us to modify this rule "where an insurer is controlled by an entity like AIG, Inc., that the controlling entity is a proper Defendant in a cause of action for tortuous breach of the implied covenant." We decline to do so. A cause of action for civil conspiracy may not arise if the alleged conspirator, though a participant in the agreement underlying the injury, was not personally bound by the duty violated by the wrongdoing. (Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 44.) Here, respondents were not parties to the insurance agreement and were not subject to an implied duty of good faith and fair dealing. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 576.)
Appellants also concede that whether the respondents can be liable for aiding and abetting bad faith is a case of first impression. "Appellants assert that there is no[] reason why a person or entity should not be held responsible for aiding and abetting a breach of the implied covenant." Appellants must do more. It is appellants' duty to provide the legal authority for its contentions. (McComber v. Wells (1999) 72 Cal.App.4th 512, 522-523.) This court is not inclined to extend liability to third parties without ample reason.
Appellants urge us to find, in the alternative, that the allegations support the contention that the relationship between the respondents and AIICC was that of joint venturers, and that this is a viable basis for a charge of breach of contract that is also sufficient to uphold a breach of the duty of good faith and fair dealing. A joint venture exists where there is an "`agreement between the parties under which they have a community of interest, that is, a joint interest, in a common business undertaking, an understanding as to the sharing of profits and losses, and a right of joint control.'" (Bank of California v. Connolly (1973) 36 Cal.App.3d 350, 364.) Appellants contend that maladjusting the claim and stealing third party proceeds constitute the community of interest element of a joint venture between AIICC and respondents. We disagree. There are no factual allegations of a joint venture in the second amended complaint. Appellants' proposed third amended complaint, which is appended to their motion for reconsideration, contains no additional allegations of a joint venture. Indeed, appellants' counsel helpfully set out the allegations he added to the proposed third amended complaint in bold and the words "joint venture" appear no where in the proposed allegations much less any facts related to such. Indeed, any allegation of joint venture contradicts appellants' previous pleadings that the entity defendants are affiliated corporations, not partners or joint venturers. Accordingly, appellants fail to state a cause of action under a joint venture theory.
Appellants claim that the respondents
The Insurance Information and Privacy Act "establish[es] standards for the collection, use and disclosure of information gathered in connection with insurance transactions . . . [and] to limit the disclosure of information collected in connection with insurance transactions . . ." (Ins. Code, § 791, et seq.) Among these, section 791.13 subdivision (c)(2) permits disclosure of private information "[t]o an insurance institution, agent, insurance-support organization or self-insurer, provided the information disclosed is limited to that which is reasonably necessary . . . [¶] . . . (2) For either the disclosing or receiving insurance institution, agent or insurance-support organization to perform its function in connection with an insurance transaction involving the individual."
Appellants allege that the respondents violated section 791 by disseminating their confidential information to All Powerful and its insurer, National Union, in an attempt to subrogate appellants' claim. Though not alleged in the second amended complaint, appellants further contend that All Powerful "placed highly sensitive and personal data into the Court file." First, there can be no liability under section 791 as to All Powerful since it is not a party and is not an "insurance institution, agent or insurance-support organization." (Ins. Code, § 791.) Moreover, there is no allegation that National Union was anything more than a recipient of the information. The only defendant alleged to have disseminated any information is AIICC, whose demurrer on this cause of action was overruled. Appellants do not allege that any of the respondents disseminated their private information in violation of Insurance Code section 791. Accordingly, the demurrer was properly sustained on this cause of action against the respondents.
Appellants further allege causes of action for fraud and negligent misrepresentation against the respondents. In particular, the second amended complaint alleges that AIG and its affiliates engaged in fraud in the performance and in the inducement of the insurance contract, misrepresenting or concealing the following facts:
There are no specific allegations that any of the respondents made any representations to appellants, false or otherwise, or that they had a duty to disclose information to appellants which they concealed. (Civ. Code, § 1710; Crayton v. Superior Court (1985) 165 Cal.App.3d 443, 451.) Instead, the second amended complaint contains allegations that appellants notified AIICC of the claim and that an adjuster came out to inspect the property and made certain representations to the Shekhters which were false.
As a result, appellants contend that their fraud and negligent misrepresentation claims rest on theories of aiding and abetting and conspiracy. Relying on Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 47 (Doctors' Co.) and Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 511 (Younan), appellants contend an insurer's agents and employees are personally liable for fraud under a conspiracy theory even if they were not parties to the contract. Neither Doctors' Co. nor Younan support appellants' claim.
In Doctors' Co., the court examined whether an attorney and an expert witness hired by an insurance company in connection with the handling of a claim can be held liable for conspiracy to violate Insurance Code section 790.03, which prohibits an insurer from refusing to attempt a prompt and fair settlement of a claim after liability has become reasonably clear. (Doctors' Co., supra, at p. 41.) The Doctors' Co. court confirmed that "`[a]gents and employees of a corporation cannot conspire with their corporate principal or employer where they act in their official capacities on behalf of the corporation and not as individuals for their individual advantage. [Citations.]'" (Id. at p. 45, quoting Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 72.)
In Younan, supra, 111 Cal.App.3d at page 498, the plaintiff alleged a conspiracy among his insurer and two of the insurer's agents to deprive him of disability insurance benefits by falsely representing that plaintiff would be examined by a medical doctor who would objectively consider plaintiff's claim for benefits when in fact the examination was to be conducted by a psychiatrist who had agreed, by prearrangement with the insurer, to render a false report to provide a plausible excuse for denying the benefits. (Id. at pp. 504-505.) The agents were held subject to liability for conspiracy to commit actual fraud since they had a duty to abstain from injuring the plaintiff through express misrepresentation, independent of the insurer's implied covenant of good faith and fair dealing. (Id. at p. 511.) But they were held not liable for constructive fraud since that charge rested on a fiduciary duty of disclosure which was owed plaintiff only by the insurer itself. (Id. at pp. 516-517.)
Here, there are no allegations that any of the respondents have independent duties to appellants which were breached. Unlike the agents in Younan, there are no allegations that any of the respondents made any express misrepresentations to appellants. Nor are there any allegations that the respondents acted for their individual advantage as discussed in Doctors' Co. Indeed, there are no allegations that show any independent action by the respondents which would support a conspiracy or aiding and abetting theory.
Appellants contend that, to the extent we find they have not adequately pled derivative or secondary liability, we must necessarily find they have plead a valid interference with contract claim on the ground that AIG and its affiliates cannot "have their cake" and "eat it too." We do not agree that the second amended complaint presents such an either/or proposition.
California recognizes a cause of action against noncontracting parties who interfere with the performance of a contract. (Woods v. Fox Broadcasting Sub. Inc. (2005) 129 Cal.App.4th 344.) The elements necessary to plead a cause of action for intentional interference with contract are: "(1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage." (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.) Appellant has not plead what acts were committed by the respondents which were designed to induce a breach or disruption of the insurance contract between appellants and AIICC, much less that the acts were intended to do so.
As to appellants' claim for negligent interference with contract, the Supreme Court has held that there is no such cause of action in California. (Fifield Manor v. Finston (1960) 54 Cal.2d 632, 636.)
Appellants' eighth cause of action for intentional infliction of emotional distress fails for lack of allegations of "extreme or outrageous conduct." (Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 155, fn. 7 (Cole).) "Behavior may be considered outrageous if a defendant (1) abuses a relation or position which gives him power to damage the plaintiff's interest; (2) knows the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally or unreasonably with the recognition that the acts are likely to result in illness through mental distress." (Ibid.) In Fletcher v. Western National Life Ins. Co. (1970) 10 Cal.App.3d 376, for example, an insurer was found liable for "outrageous and deplorable" conduct where it refused to pay benefits under the injury provisions of a policy, accused plaintiff of misrepresentation, demanded return of benefits paid, and impliedly threatened expensive litigation in the face of evidence that the injury was covered. (Cole, supra, 43 Cal.3d at p. 155.) Unlike in Cole, there are no allegations showing such similar outrageous conduct by the respondents.
Appellants, however, continue to insist that their conduct was outrageous simply because it was alleged to violate Penal Code section 550.
Appellants also contend the second amended complaint alleged facts showing that the respondents knew Neil Shekhter was "especially susceptible" to emotional distress and that he suffered extreme headaches and sleep disturbance as a result of the outrageous conduct. We find no such allegations in the second amended complaint. Further, there are no allegations that any of the defendants received medical reports of Neil Shekhter's mental health or that they somehow knew he suffered extreme headaches or sleep disturbances.
In the second amended complaint, Appellants' breach of fiduciary claim stems from the alleged unlawful dissemination of their information to National Union and All Powerful. According to appellants, that information fell within the attorney-client privilege because it could be used in a litigation context. There is no merit to this claim.
In their reply brief, appellants further contend that the respondents colluded with a disloyal fiduciary (i.e., AIICC) to breach its fiduciary duty to them. (Certified Grocers of California, Ltd. v. San Gabriel Valley Bank (1983) 150 Cal.App.3d 281.) Even if appellants had sufficiently alleged how the respondents colluded with AIICC, which they do not, there is no legal basis for this argument because an insurer is not itself a fiduciary. (Vu v. Prudential Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142, 1151 ["`fiduciary-like duties arise because of the unique nature of the insurance contract, not because the insurer is a fiduciary.'"].)
In their 12th cause of action, appellants sought relief not only for themselves but for a class of people who received "an insurance policy issued by AIG [entities, including AIICC] at any time in the last four years." Appellants complained that the insurance policy issued by the respondents contained a subrogation clause that was contrary to California law.
Appellants' insurance policy, attached to the second amended complaint, contained the following subrogation clause: "If the insured person has rights to recover all or part of any payment we have made under this policy, those rights are transferred to us. The insured person must do nothing after loss to impair such rights of recovery. At our request, the insured person will bring suit or transfer those rights to us and help us enforce them." A similar subrogation clause is found in Sapiano v. Williamsburg Nat. Ins. Co. (1994) 28 Cal.App.4th 533, 535-536 (Sapiano): "`Transfer of Rights of Recovery Against Others to Us: If any person or organization to or for whom we make payment under this Coverage Form has rights to recover damages from another, those rights are transferred to us. That person or organization must do everything necessary to secure our rights and must do nothing after "accident" or "loss" to impair them.'" In Sapiano, the court found that the subrogation clause at issue did not override the general rule that an insurer is not entitled to recover under subrogation until the insured is "made whole" for his or her loss. (Id. at p. 536.) While parties could specifically contract to give the insurer priority in a subrogation provision, the clause in Sapiano failed to do so. (Id. at p. 537.)
It would appear that the subrogation clause in appellants' policy contradicts the holding in Sapiano. However, appellants' policy expressly provides that "[a]ny provision of this policy, which is in conflict with state or local law, is amended to conform to the law." Appellants admit that all of the AIG policies are "identical." To the extent the subrogation clause fails to conform to California law, as it appears to do, this provision specifically amends it. (Cal-Farm Ins. Companies v. Fireman's Fund American Ins. Companies (1972) 25 Cal.App.3d 1063, 1069.) The trial court properly sustained the demurrer on this cause of action.
We also hold the trial court properly sustained the demurrers as to the individual defendants for the same reasons no claims have been sufficiently alleged against respondents. Appellants contend in their briefs that Cuzzola and Piotrowski were at the highest level of management and each personally participated in, consented to, had knowledge of or ratified the malfeasance of the various AIG corporate entities. However, no such allegations appear in the second amended complaint. There are similarly no allegations against Bush showing his participation in the alleged mishandling of the claim.
Directors or officers of a corporation do not incur personal liability for torts of the corporation merely by reason of their official position, unless they participate in the wrong or authorize or direct that it be done and benefit therefrom. (See Wise v. Southern Pacific Co., supra, 223 Cal.App.2d at p. 72.) Nothing in the second amended complaint supports a claim that the individual defendants were personally liable to appellants by reason of the performance of their corporate duties. (Sanchez v. Lindsey Morden Claims Services, Inc. (1999) 72 Cal.App.4th 249, 253 [independent adjuster engaged by insurer is not liable to insured for negligent handling of claim that causes only economic loss]; United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 595.)
Appellants propose to insert additional vague allegations into a third amended complaint that the individual defendants participated in the supervision and handling of claims against AIG insurers, such as AIICC. In particular, Cuzzola and Piotrowski established a plan whereby various AIG entities would "avoid paying for additional living expenses, profit and overhead and other covered forms of loss and would attempt to circumvent Plaintiffs' rights to pursue third parties by pursuing subrogation (even though a subrogation waiver was in effect) in order to exhaust all of available insurance proceeds of key third party defendants, All Powerful." For his part, Bush "specifically participated in establishing a plan whereby, among other things, the role and conflict of National Union—as a liability insurer for All Powerful—would be concealed and whereby Plaintiffs would be induced into waiving subrogation rights, even though a subrogation waiver applied." These allegations are insufficient to state a cause of action against the individual defendants, because nowhere is it alleged nor may it be inferred from the facts alleged that the individual defendants were acting for their own individual advantage rather than in their roles as corporate managers. (See Wise v. Southern Pacific Co., supra, 223 Cal.App.2d at p. 72.)
Appellants also complain that the trial court abused its discretion when it sustained the demurrers without leave to amend, particularly with respect to Cuzzola, Piotrowski, and AIG Marketing because they were "doed in" to the second amended complaint. We find no abuse of discretion. In its ruling on the first amended complaint, the trial court helpfully identified the elements for each cause of action and expressly directed appellants to identify "what exactly did each Defendant do?" This same deficiency—the failure to specify what each defendant did that caused damages to appellants—applies to Cuzzola, Piotrowski and AIG Marketing. (Pacific Coast Refrigeration, Inc. v. Badger (1975) 52 Cal.App.3d 233, 249 [allegations against doe defendants must show how or why they should be charged].) Appellants were warned of the defects in their complaint and failed to correct them. The proposed third amended complaint continues that trend.
The allegations which appellants seek to insert again attribute misconduct to all of the "defendants" in general and fail to state any facts which show the role each defendant played in the handling of appellants' claim. For example, appellants allege in the proposed third amended complaint that "[d]efendants continued to conceal their intent not to adjust the claim fairly and to do whatever they could to avoid paying benefits to Sheckhter" and "[d]fendants knew that they have no right to subrogate . . . ." These allegations not only fail to state "what exactly did each Defendant do" but also failed to state any facts. The proposed third amended complaint remains insufficient. On appeal, appellants have not identified what allegations they would include or amend to correct the defects. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) Accordingly, the trial court did not abuse its discretion when it refused leave to amend.
Finally, appellants contend the trial court improperly struck certain allegations concerning "the statutory requirements under the Ins. Code and applicable insurance regulations, the `conflict of interest' allegations, the allegations regarding statements made during mediation, the allegations that certain policy provisions are `illegal and unenforceable,' the `loss of use' allegations, the `profit and overhead' allegations, and Plaintiffs' claim for loss in market value." We need not address the stricken matters because we find plaintiffs have failed to state a cause of action against respondents and our conclusion would be no different even if these matters were not stricken from the second amended complaint.
The judgment of dismissal in favor of respondents AIG, AIG Marketing, Cuzzola, Piotrowski, Bush, AIG Domestic Claims, National Union, American International Recovery and Lexington is affirmed. Respondents are to recover their costs on appeal.
RUBIN, J. and GRIMES, J., concurs.
In its opposition to appellants' request for judicial notice of AIICC's complaint, AIG, among others, moved to strike portions of appellants' reply brief referencing the request and its contents. That motion is denied.
On July 12, 2011, appellants also requested we take judicial notice of a separate complaint they filed against AIICC, styled 2156 Stratford Circle LLC, et al. v. American International Insurance Company of California, Inc., No. BC458323 (March 29, 2011), in which they alleged that AIICC eventually made some payment on the water damage to 2156 Stratford, but "short-changed Plaintiffs by approximately $2,000,000 or other amount according to proof." That complaint also has no relevance to this action. Appellants' request is denied.
