The Federal District Court denied two plaintiffs' claims for breach of the policy and for bad faith because they were not insureds under the policy. Tu v. Dongbu Ins. Co., 2017 U.S. Dist. LEXIS 115200 (N.D. Calif. July 24, 2017).

    Dongbu, a Hawaii insurance company, issued a two-year policy to Plaintiff Ken Tu for his business. He was the only named insured under the policy. 

    The waste system at Plaintiffs' restaurant failed, causing fumes to impact neighboring tenants and waste to contaminate the underlying soil. Plaintiffs were forced to close the restaurant. A claim was tendered for damage and repair, loss of business income, and other insured losses. Dongbu denied coverage.

    Plaintiffs sued for breach of contract and bad faith. Dongbu moved to dismiss Plaintiffs Sonnie and Eric Tu because they failed to state claims for either breach of contract or breach of the covenant of good faith and fair dealing. The motion was granted.

    Sonnie and Eric Tu were not parties to the policy, so there was no contract between them and Dongbu. Therefore, these Plaintiffs did not have a breach of contract claim.

    The duty of good faith and fair dealing arose from and existed solely because of the contractual relationship between the parties. Because there was no contract, the covenant of good faith and fair dealing did not apply.