Judge: Alison Mackenzie, Case: 22STCV20172, Date: 2024-06-05 Tentative Ruling
Case Number: 22STCV20172 Hearing Date: June 5, 2024 Dept: 55
NATURE OF PROCEEDINGS:
Defendant’s Motion for Summary Judgment or, Alternatively, Summary Adjudication
of the First Cause of Action of the Complaint for Breach of Contract and/or the
Second Cause of Action for Breach of the Implied Covenant of Good Faith and
Fair Dealing and/or of Plaintiff’s Claim for Punitive Damages.
BACKGROUND
AKOP AGAZARIAN (“Plaintiff”) filed this case against MERCURY
INSURANCE COMPANY (“Defendant”), alleging that Defendant declined to cover
damages under Plaintiff’s automobile policy. Plaintiff had sought coverage for
damages after his brother, driving Plaintiff’s Corvette with permission on the
5 Freeway, hit construction materials debris that suddenly fell out of a pickup
truck, causing significant damage. The causes of action are (1) Breach of
Contract and (2) Breach of
Implied Covenant of Good Faith and Fair Dealing- Insurance Bad Faith.
Defendant brings a motion for summary judgment or
summary adjudication of the claims and punitive damages. Plaintiff opposes the
motion.
LEGAL STANDARD
The function of a motion for summary judgment or
summary adjudication is to allow a determination as to whether an opposing
party can show evidentiary support for a pleading. Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 843. “Summary judgment is proper only where there are no
triable issues of material fact and the moving party is entitled to judgment in
its favor as a matter of law.” Assad v. Southern Pacific Transportation Co.
(1996) 42 Cal.App.4th 1609, 1612. “[T]he role of the court in summary judgment
proceedings is not to weigh the evidence, but to determine whether there exists
a triable issue of material fact.” Habitat Trust for Wildlife, Inc. v. City
of Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1342.
EVIDENTIARY OBJECTIONS
The Court overrules Defendant’s evidentiary objections
numbers 1, 2 and 3, and sustains number 4. The Court overrules all of Plaintiff’s
evidentiary objections.
REQUEST FOR JUDICIAL NOTICE
The Court grants Plaintiff’s request for judicial
notice of the California Insurance Commissioner’s “Notice of Noncompliance” to
Mercury Insurance Group et al., as to the existence, but not the content as to
which Defendant objected. Reply, 3:6-13. E.g., Arce ex rel. Arce v. Kaiser
Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482 (judicial notice
of official acts and public records, does not include truth of assertions).
The Court grants Defendant’s request for judicial
notice (Plaintiff’s Complaint). E.g., Gentry v. eBay, Inc. (2002) 99
Cal.App.4th 816, fn. 9 (waiver by no objection to judicial notice).
ANALYSIS
1. Summary
Judgment- Breach of Contract and Breach of the Implied Covenant
Defendant contends that it is entitled to summary
judgment because it is undisputed that Defendant did not issue the insurance
policy to Plaintiff and there is no privity of contract between it and
Plaintiff.
“‘To yield their meaning, the provisions of a policy
must be considered in their full context….. Where it is clear, the language
must be read accordingly…. Where it is not, it must be read in conformity with
what the insurer believed the insured understood thereby at the time of
formation … and, if it remains problematic, in the sense that satisfies the
insured's objectively reasonable expectations.’” Travelers Cas. and Surety
Co. v. Transcontinental Ins. Co. (2004) 122 Cal.App.4th 949, 955.
Here, the policy declaration states as insurer, “CALIFORNIA
AUTOMOBILE INSURANCE COMPANY” (“CAIC”). E.g., Complaint, exhibit A. But “‘[e]ven
if a contract appears unambiguous on its face, a latent ambiguity may be
exposed by extrinsic evidence which reveals more than one possible meaning to
which the language of the contract is yet reasonably susceptible.’” Dore v.
Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391. Where contract
interpretation is an issue, and parol evidence is admissible and in conflict,
summary judgment must be denied. E.g., Wolf v. Superior Court (2004) 114
Cal.App.4th 1343, 1359, fn. 27
Ambiguities, and Plaintiff’s reasonable understanding
at the time of policy formation, are in evidence and dispute. For example, at
the time of contract formation, Plaintiff viewed documents stating “Mercury.” Agazarian
Decl., ¶ 2; Ex. A. And later the insurance claim letter and denial letter came
from Mercury. Ibid., ¶ 17; see also Def.’s NOL, Ex. 5.
Plaintiff contends that even if CAIC issued the policy
to Defendant, triable issues of fact exist regarding CAIC and Defendant being
alter egos of one another. Defendant argues that Plaintiff cannot argue alter
ego liability, because the Complaint failed to allege that theory.
Alternatively, Defendant asserts that Plaintiff’s evidence does not address
alter ego factors.
The law is flexible as to the requirements for
alleging alter ego liability in complaints. As to contract-based claims, the
alter ego doctrine is sufficiently alleged just by an allegation that defendant
made the contract involved. Los Angeles Cemetery Assoc. v. Superior Court
(1968) 268 Cal.App.2d 492, 494. “The alter ego issue is ordinarily raised by
the pleadings…. Nonetheless, even when not pleaded, that issue may be resolved
at trial….” Hennessey's Tavern v. Am.
Air Filter Co. (1988) 204 Cal.App.3d 1351, 1358. “[C]ourts have followed a
liberal policy of applying the alter ego doctrine where the equities and
justice of the situation appear to call for it rather than restricting it to
the technical niceties depending upon pleading and procedure.” First Western
Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 915.
As noted above and as reflected in several other documents
submitted by Defendant in its NOL, CAIC and Defendant are often named together
in referring to the insurance policy Plaintiff had for his car. Indeed, multiple
entities have been treated as being collectively Mercury Insurance, in past
cases. See, e.g., Mercury Ins. Co. v. Lara (2019) 35 Cal.App.5th 82, 86,
and fn. 5 (“the Insurance Commissioner of the State of California… filed a
notice of noncompliance against plaintiffs and respondents Mercury Insurance
Company, Mercury Casualty Company, and California Automobile Insurance Company
(collectively Mercury) alleging Mercury charged rates not approved by the
California Department of Insurance (CDI) and that the rates were unfairly
discriminatory in violation of Insurance Code sections….”).
Therefore, the Court determines that there are triable
issues of material fact, as to whether Defendant is the insurer, or
alternatively part of an insurance group or other cognizable business
arrangement as to which contract-based liability can attach.
2. Summary Adjudication - Breach of Implied
Covenant of Good Faith and Fair Dealing
Defendant contends that, even if CAIC is named as a
defendant in the case, summary adjudication of the bad faith claim is warranted.
Defendant contends that the undisputed facts show that a genuine issue existed
as to the merits of Plaintiff’s claim, and thus CAIC cannot, as a matter of
law, be found to have acted unreasonably as needed to establish a bad faith
claim.
Specifically, Defendant reasons that ample evidence
supports a reasonable and genuine dispute as to whether Plaintiff truthfully
reported the cause of the damage, including that Plaintiff has been associated
with suspicious people, businesses and activities, and the subject vehicle did
not record data of any impact. Plaintiff counters that there are triable issues
of material fact as to the reasonableness of the expert’s report, including Defendant’s
manufacturing genuine disputes, by routinely hiring experts to prepare biased reports.
E.g., Opposition, 2:20-25.
“The genuine dispute rule does not relieve an insurer
from its obligation to thoroughly and fairly investigate, process and evaluate
the insured’s claim. A genuine dispute exists only where the insurer’s position
is maintained in good faith and on reasonable grounds.” Wilson v. 21st
Century Ins. Co. (2007) 42 Cal.4th 713, 724. “‘[A]n insurer is not entitled
to judgment as a matter of law where, viewing the facts in the light most
favorable to the plaintiff, a jury could conclude that the insurer acted
unreasonably.’” Ibid. and Barickman v. Mercury Cas. Co. (2016) 2
Cal.App.5th 508, 521 (“[A]s is true in many bad faith cases, the reasonableness
of the insurer's claims-handling conduct was a question of fact to be resolved
following a trial.”).
In addition, “an expert’s testimony will not
automatically insulate an insurer from a bad faith claim based on a biased
investigation.” Chateau Chamberay Homeowners Ass'n v. Associated Int'l Ins.
Co. (2001) 90 Cal.App.4th 335, 348. Insurers may not insulate themselves
from liability for bad faith conduct by hiring experts to manufacture a
purportedly genuine dispute. Fadeeff v. State Farm Gen. Ins. Co. (2020)
50 Cal.App.5th 94, 103.
Here, Plaintiff denies having any suspicious
connections with people or businesses. Agazarian Decl., ¶¶ 4 and 8-10.
Additionally, Plaintiff denies doing any suspicious activities. Ibid.,
at ¶¶ 6-7 and 20-21.
Furthermore, the declaration from Plaintiff’s expert
contains statements that the Event Data Recorder of the subject vehicle would
not be expected to record an event for hitting debris on the roadway because
such an incident would not involve sufficient force. Lee Decl., Ex. A, last
page. Also, the expert concludes that, “[t]he undercarriage damage sustained
the Agazarian Chevy appear to be caused by driving over objects (construction
debris) at highway speeds.” Ibid.
Viewing such proof most favorably to Plaintiff,
factfinders reasonably could find that the insurer, in bad faith, ignored proof
showing coverage, while overemphasizing circumstantial indicators of
Plaintiff’s associations with people and businesses, and relying on its
expert’s report unsupportively based on the absence of a data recording and the
nature of the damage.
Hence, the Court determines that there are triable
issues of material fact as to the cause of action for insurance bad faith.
3. Punitive
Damages
Defendant objects to Plaintiff’s raising allegations
outside the scope of the Complaint, based on inadmissible hearsay— i.e., that
Defendant retained the expert to manufacture a genuine dispute, and that
employee Dean Springer improperly told Plaintiff that “a judge would find his
claim to lack credibility due to his young age and the cost of the car.”
Plaintiff states that the same evidence on bad faith, also supports punitive
damages. E.g., Opposition, 2:24-26 and 11:18-26.
“[F]actual issues presented in opposition to a motion
for summary judgment should be considered if the controlling pleading,
construed broadly, encompasses them. In making this determination, courts look
to whether the new factual issues present different theories of recovery or
rest on a fundamentally different factual basis.” Laabs v. City of
Victorville (2008) 163 Cal.App.4th 1242, 1257.
Insurers may be liable for punitive damages based upon
a showing of malice, without the need to prove insurer motive or evil intent. George
F. Hillenbrand, Inc. v. Ins. Co. of No. Amer. (2002) 104 Cal.App.4th 784,
816. Where insurers deny or delay benefits without any reasonable basis, and in
doing so were acting with malice, oppression or fraud, they may be exposed to
punitive damages. Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th
1062, 1073, 1080.
First, while the Complaint does not include facts
about a biased expert or dissuading insureds, the pleading broadly encompasses
such facts, by referencing the insurer’s deceptive practices to unreasonably
deny claims to further its own economic interests. E.g., Complaint, ¶ 26. Thus,
the Court considers Plaintiff’s evidence, without requiring an amended
Complaint.
Second, viewing the proof most favorably to Plaintiff,
factfinders reasonably could find that the insurer denied the insurance claim
without any reasonable basis, based upon falsely accusing Plaintiff of fraud, and
by ignoring evidence and relying on an arguably contrived and biased expert
report.
Thus, the Court determines that there are triable
issues of material fact as to punitive damages.
CONCLUSION
The Court denies the motion for summary judgment and
summary adjudication.