O'Keefe v. Allstate Indemnity Co.
953 F. Supp. 2d 1111
S.D. Cal.2013Background
- Plaintiffs allege breach of contract, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation against Allstate.
- Allstate moves to dismiss the implied covenant claim under Rule 12(b)(6).
- Christopher’s prior injuries led to DMV suspension; he later had license reinstated and intended to drive the new Mini Cooper with Joni as owner.
- Agent told Christopher and Joni that Christopher would be the primary driver once license reinstated; Christopher relied on those statements.
- Claim denial occurred after accident; the policy defined Christopher as an excluded driver at loss time; court dismisses the implied covenant claim with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is there a viable implied covenant claim given a written policy excluding Christopher at the time of the loss? | O’Keefe | Allstate | No, benefits not owed under policy as written; no implied cov. claim. |
| Were benefits withheld under the policy as written to support bad faith? | O’Keefe | Allstate | No breach; coverage not due under policy terms. |
| Can an oral binder or agent assurances create retroactive coverage for bad faith claims? | O’Keefe | Allstate | Oral binders cannot create retroactive bad-faith liability; do not override written terms. |
| Do agent statements (e.g., “good to go”) support implied covenant claim or reformation? | O’Keefe | Allstate | Insufficient to establish bad faith; reinforces contract and misrepresentation claims but not implied covenant. |
Key Cases Cited
- Gasnik v. State Farm, Ins. Co., 825 F. Supp. 245 (N.D. Cal. 1992) (implied covenant supplements, benefits must be due under policy as written)
- R & B Auto Ctr., Inc. v. Farmers Group, Inc., 140 Cal. App. 4th 327 (Cal. Ct. App. 2006) (no bad-faith claim where no coverage under policy; retroactive coverage not required)
- California State Auto. Ass’n Inter-Ins. Bureau v. Super. Ct., 184 Cal. App. 3d 1428 (Cal. Ct. App. 1986) (coverage must exist under express terms before implied cov. applies)
- Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136 (Cal. Ct. App. 1990) (unreasonable withholding when benefits due under policy; bad faith requires lack of proper cause)
- Skyways Aircraft Ferrying Serv., Inc. v. Stanton, 242 Cal. App. 2d 272 (Cal. Ct. App. 1966) (oral binder binding where agent has authority; Skyways not an implied covenant case)
- Parlier Fruit Co. v. Fireman’s Fund Ins. Co., 151 Cal. App. 2d 6 (Cal. Ct. App. 1957) (parol contracts may bind insurer regarding coverage; indicators of authority)
- Cronin v. Coyle, 6 Cal. App. 2d 205 (Cal. Ct. App. 1935) (agent binding acts within ordinary scope of business)