Judge: Anne Richardson, Case: 20STCV00805, Date: 2024-10-04 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 20STCV00805    Hearing Date: October 4, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

Plaintiffs JNP Enterprise, Inc., Eileen Panosian, and Armen Panosian (Plaintiffs, also Cross-Defendants) sue Defendants Suzanne Yee, Elena Chang, Robert Ip, RT Property Management Services Corp., (Landlord Defendants) Am Trust Financial, Inc., Security National Insurance Company, and Does 2 to 20 (Defendants) pursuant to a First Amended Complaint (FAC) alleging claims of (1) Negligence – Premises Liability, (2) Breach of Contract, (3) Negligent Misrepresentation, (4) Fraud in the Inducement, (5) Nuisance, (6) Breach of Contract, and (7) Breach of Covenant of Good Faith and Fair Dealing.

The claims are grounded in allegations that Plaintiffs rented from the Landlord Defendants commercial real property located at 2498 Colorado Blvd., Pasadena, CA 91107 (Subject Property), from which Plaintiffs operated a dry cleaning business, and that, due to the Landlord Defendants’ negligent maintenance of the roof on the Subject Property, during a time of heavy rains, the roof collected and pooled a heavy amount of rainwater, later collapsing on January 17, 2019 and pouring rainwater into the bathroom, attic, and other work areas of Plaintiffs’ business, destroying two pressing machines and causing significant water damage that led to mold, as well as a total loss of most of Plaintiffs’ equipment and loss of business.

Landlord Defendants/Cross-Complainants Susanne Yee, Elena Chang, Robert Ip, and RT Property Management Services Corp. in turn sue Plaintiffs JNP Enterprise and Eileen and Armen Panosian pursuant to a First Amended Cross-Complaint (FAXC) alleging claims of (1) Breach of Contract, (2) Breach of Implied Covenant of Good Faith and Fair Dealing, (3) Loss Rents, (4) Negligence – Premises Liability, (5) Equitable Indemnity, (6) Apportionment and Contribution, (7) Comparative Fault of Plaintiff, and (8) Declaratory Relief. The claims are based, in part, on allegations that Plaintiffs made structural alterations or utility installation to the Subject Property—including roof penetrations, installation of equipment on the roof, ceiling punctures, and removal of existing windows—as well as Plaintiffs’ failure to pay rent on the Subject Property between November 2019 and November 2020.

B. Motion Before the Court

On June 5, 2024, Defendant Security National Insurance Company (Security National) filed an application for determination of good faith of a settlement entered with Plaintiff. Security National agreed to pay Plaintiffs $47,500 for a full and final settlement and a dismissal of the action with prejudice.

On June 25, 2024, Landlord Defendants Suzanne Yee, Elena Chang, Robert Ip, RT Property Management Services Corp., and Legacy Realty Advisory, Inc filed the instant motion to contest Security National’s Application for Determination of Good Faith Settlement.

Landlord Defendants contest Security National’s Application for Determination of Good Faith Settlement on the grounds that the settlement entered between Security National and Plaintiffs was not made in good faith. (Code Civ. Proc., § 877.6 subd. (a)(2); Tech-Bilt, Inc. v. Woodward-Clyde & Assoc. (1985) 38 Cal.3d 488 (Tech-Bilt).) The Landlord Defendants argue that the Plaintiffs are settling for a fraction of their alleged damages and Security National’s liability is far greater than the settlement amount.  

II. Motion

A. Legal Standard

California Code of Civil Procedure section 877.6, subdivision (a)(1), provides, in relevant part, that, on noticed motion, “[a]ny party to an action wherein it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff . . . and one or more alleged tortfeasors or co-obligors . . . .” “A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” (Code Civ. Proc., § 877.6, subd. (c).) Although a determination that a settlement was in good faith does not discharge any other party from liability, “it shall reduce the claims against the others in the amount stipulated” by the settlement. (Code Civ. Proc., § 877, subd. (a).) 

In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499 (Tech-Bilt, Inc.), the California Supreme Court identified the following nonexclusive factors courts are to consider in determining if a settlement is in good faith under section 877.6: “a rough approximation of plaintiffs’ total recovery and the settlor's proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants.” 

“The party asserting the lack of good faith, who has the burden of proof on that issue (§ 877.6, subd. (d)), should be permitted to demonstrate, if he can, that the settlement is so far ‘out of the ballpark’ in relation to these factors as to be inconsistent with the equitable objectives of the statute. Such a demonstration would establish that the proposed settlement was not a ‘settlement made in good faith’ within the terms of section 877.6.” (Id. at pp. 499-500.) 

B. Analysis

The Landlord Defendants argue that the Plaintiffs, as tenants, were obligated to maintain an insurance policy and name the Landlord Defendants as an additional insured. They argue that Plaintiffs’ failure to hold Security National accountable puts them at risk for damages that are not their responsibility. (Mot. p. 8.) The Landlord Defendants argue that the settlement is disproportionate to National Security’s potential liability because the Plaintiffs allege damages exceeding $1,000,000.00 but have agreed to settle with National Security for only $47,500.00. Further, the Landlord Defendants argue that they are unable to fully evaluate all the Tech-Bilt factors because Security National did not attach a copy of the settlement agreement to the application.

Security National argues that the Landlord Defendants are included as additional insureds under a “Blanket Additional Insured Endorsement” to the insurance policy, but that critically, the insurance policy does not provide coverage for the claim at issue. (Garcia Decl. ¶ 2, Ex. 1, National Security Policy) Under the insurance policy, “managers, owners, or lessors of premises or land” are included as additional insureds. (Garcia Decl. ¶ 2, Ex. 1, National Security Policy, “Blanket Additional Insured Endorsement”.) The insurance policy also does not cover loss or damage caused by or resulting from rain, a quality in the property that causes it to damage itself, or negligent maintenance. (Opp. pp. 3-4, Garcia Decl. ¶ 3, Ex. 3, p. 2.)

Security National argues that, with respect to the first two Tech-Bilt factors, the settlement, the Plaintiffs’ maximum potential recovery from Security National is the $300,000 policy limit. The $47,500 settlement agreement is reasonable considering the coverage exclusions in the insurance policy. (Opp. p. 7; see also Garcia Decl. ¶ 2, Ex. 1, National Security Policy, “Property Coverage Limits of Insurance” [stating that the limit of insurance is $300,000]; see also Garcia Decl. ¶ 3, Ex. 3, p. 2 [relevant policy exclusions related to the claim].)

Regarding the third Tech-Bilt factor, as Plaintiff JNP Enterprise is a California corporation whose chief executive is Plaintiff Eileen Panosian, the spouse of Plaintiff Armen Panosian, there is no issue concerning allocation of settlement proceeds among plaintiffs.

Security National argues that the fourth Tech-Bilt factor, recognizing that a settlor should pay less in settlement than it would if it were found liable after a trial, “militates in favor of Security National in light of the fact that it has no liability in this matter.” (Opp. p. 7:13-14.) 

As to the fifth and sixth Tech-Bilt factors, financial conditions and insurance policy limits of settling defendants, Security National argues that these are non-issues “because its liability is limited to the above-discussed $300,000 policy limit.” (Opp. p. 7:15-16.) 

            Finally, Security National argues that there is no collusion intended to harm the Landlord Defendants because the claim is not actually covered under the insurance policy.

            The Landlord Defendants argue that there is evidence of collusion because Security National did not notify them that the coverage had been denied. However, they do not provide any authority that indicates that Security National was obligated to do so simply because the Landlord Defendants owned the property, where Plaintiffs were the policy holders and Plaintiffs submitted the insurance claim. Additionally, Security National’s failure to provide the Landlord Defendants with notice of the denial at the time the claim was denied in September 2019, does not indicate that Security National and Plaintiffs colluded to injure the Landlord Defendants interests.

Accordingly, the Landlord Defendants have failed to meet their burden to provide enough evidence to show that the settlement was not entered in good faith. 

III. Conclusion

Therefore, the motion to Contest Application for Determination of Good Faith Settlement is DENIED.