Judge: Anne Richardson, Case: 23STCV23370, Date: 2024-06-27 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: 23STCV23370    Hearing Date: June 27, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

Plaintiff Kimberley Gaither sues Defendants AFLAC, Brenda Douglas, and Does 1 through 50 pursuant to a September 27, 2023, Complaint alleging claims of (1) Breach of Contract, (2) Bad Faith Breach of Implied Covenant of Good Faith and Fair Dealing, and (3) Declaratory Relief.

The Complaint arises from the following allegations. Kimberley Gaither was insured under an AFLAC Accident Insurance Policy, policy number A8792900 (the policy). Defendant Douglas was the AFLAC insurance agent who sold Kimberley Gaither the policy. (Attached to the Complaint as Exhibit A.) The policy provided accident coverage and hospitalization benefits for Kimberley Gaither’s late spouse, Dwayne Gaither, who died on February 23, 2022, at Kaiser Permanente Hospital (KPH) because of the negligence of KPH and its staff. During the policy period, Dwayne Gaither suffered loss of vision, removal of a testicle, ICU confinement, a hospitalization stroke, and dismemberment, all injuries covered under the policy. Kimberley Gaither timely filed a claim for these injuries with AFLAC, which AFLAC denied despite Kimberley Gaither complying with all conditions precedent to receipt of benefits under the policy.

B. Motion Before the Court

On June 27, 2024, Defendant Douglas filed a demurrer challenging the Complaint’s three causes of action as alleged against her.

On June 13, 2024, Plaintiff Kimberley Gaither filed an opposition, and on June 20, 2024, Defendant Douglas filed a reply.

Defendant Douglas’s demurrer is now before the Court.

II. Demurrer: SUSTAINED.

A. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[E]ach evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) Courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

A demurrer may only be used to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

B. Analysis

1. Parties’ Arguments

Defendant Douglas’s demurrer contends that the Complaint’s three causes of action are defectively alleged against her as follows. The policy is attached to the Complaint as Exhibit A. The policy as attached shows that the only named parties to the policy are Plaintiff and AFLAC, contradicting and superseding the facts alleged in the body of the Complaint to the effect that Defendant Douglas was a party to the policy. As the Complaint alleges, Brenda Douglas was an agent who sold the AFLAC insurance product to Plaintiff. Because Defendant Douglas is not a party to the policy, she cannot be liable for breach of contract or breach of the covenant of good faith and faith dealing—both of which depend on the existence of a contract—and a declaration of rights, a derivative claim, is unnecessary.

Plaintiff Kimberley Gaither’s opposition contends that Defendant Douglas is a party to the policy because the coverages promised to Kimberley Gaither by Defendant Douglas were recited in the contract or because Defendant Douglas became a party to the policy when AFLAC paid Douglas for the procurement of Kimberley Gaither as an insured. Plaintiff contends that a breach of the policy against Defendant Douglas arises from AFLAC denying each and every claim made by Kimberley Gaither despite these coverages being outlined by Defendant Douglas to Kimberley Gaither when the policy was procured.

Defendant Douglas’s reply addresses why her procurement of the policy did not make her a party to the policy and why an agent cannot be vicariously liable for the torts of the agent’s principal.

2. Court’s Determination

The Court finds in favor of Defendant Douglas.

The Complaint fails to allege the existence of a contract between Plaintiff and Defendant Douglas.

The policy, which is attached to the Complaint, shows that only Plaintiff and AFLAC are parties to that agreement. (Complaint, Ex. A., p. 3 [“This policy is a contract between you and AFLAC].) Defendant Douglas is not mentioned in the policy.

To determine that Defendant Douglas’s procurement of the policy for Plaintiff Kimberley Gaither did not make Defendant Douglas a party to the policy, the Court relies on Filippo Industries, Inc. v. Sun Ins. Co. of New York (1999) 74 Cal.App.4th 1429, 1443 (Filippo), rejected on other grounds in Morris v. Paul Revere Life Ins. Co. (2003) 109 Cal.App.4th 966, 976. In Filippo, the court of appeal determined that an underwriting agent for the insurer, as an agent of the disclosed principal, was not a party to the insurance contract at issue, and thus could not be held liable for breach of insurance contract or the concomitant duty of good faith. (Filippo, supra, at p. 1443.) This authority alone supports sustaining the demurrer as to Complaint’s breach of contract and good faith claims (the first and second causes of action) as alleged against Defendant Douglas, as well as the declaratory relief claim alleged against Defendant Douglas, which is derivative of the first and second causes of action.

The Court rejects the argument that Defendant Douglas’s participation in procuring the policy for AFLAC and AFLAC paying Douglas for that procurement makes Douglas a third-party beneficiary to the policy. Beyond AFLAC paying Defendant Douglas, it is not clear how Defendant Douglas benefits from the policy, how benefitting Douglas was a motivating purpose for Plaintiff to obtain insurance as she did, or how permitting Plaintiff to enforce the contract against Defendant Douglas is consistent with the objectives and reasonable expectations of the contract. (See Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.)

Last, the Court notes that agents are not vicariously liable for the torts or contractual breaches of their principals. (Heringer v. Schumacher (1928) 88 Cal.App. 349, 352 (Heringer) [“Where an agent acts on behalf of a disclosed principal, his acts and contracts, within the scope of his authority, are generally considered as the acts and contracts of the principal, and in the absence of an agreement otherwise, involve no personal liability, on the part of the agent, to a third person, except in an action for tort,” citation and quotation marks omitted]; accord Peredia v. HR Mobile Services, Inc. (2018) 25 Cal.App.5th 680, 692 [same for torts].) Here, the Complaint alleges that Defendant Douglas acted as an AFLAC agent in procuring the policy and that AFLAC later breached the policy by denying benefits. (Complaint, ¶¶ 3, 12, Ex. D [denial of claim].) Under these circumstances, Plaintiff is seeking to hold an agent liable for a contractual breach of the principal, which is undermined by Heringer. To the extent the Complaint alleges that all Defendants are one another’s agents (Complaint, ¶ 5), the Court notes that this general allegation is contradicted and rendered uncertain by more specific allegations in the Complaint framing Defendant Douglas as an agent of AFLAC and not vice versa.

Finally, the arguments of plaintiff to the effect that a principal is liable to third parties for the acts of his agents, and the plea to continue the case against “AFLAC and Douglas” (see Opp’n, p. 4) miss the mark. Obviously, AFLAC remains a defendant in this lawsuit, and has filed an Answer. This demurrer is only on behalf of Defendant Douglas.

Based on this reasoning, the Court SUSTAINS Defendant Douglas’s demurrer to the Complaint’s three causes of action, as alleged against Douglas, all defective based on failure to allege a contract on which to ground the first and second causes of action or the derivative third cause of action.

The Court will discuss leave to amend with the parties at oral argument.

As currently alleged, the Court does not have grounds to believe that the defects in the Complaint as to Defendant Douglas are curable, i.e., it is not clear how an amended pleading would allow Plaintiff to allege that Douglas is a party to the policy.

It is worth noting that Plaintiff Kimberley Gaither’s opposition frames the liability against Defendant Douglas as arising in part false representations regarding the coverage under the policy by promising coverage that was later denied by AFLAC. (Opp’n, p. 7.) However, no fraud claim is before the Court. Moreover, it is not clear that the opposition arguments even amount to a fraud allegation. The fraud argument in the opposition relies on the premise that Defendant Douglas either knowingly or negligently misrepresented coverage under the policy, as shown by AFLAC’s subsequent denial of Plaintiff’s claim for coverage. This argument is faulty because it fails to state the basis for knowing that Defendant Douglas had foreknowledge or should have had foreknowledge that AFLAC would deny Plaintiff’s claim. Thus, even if the Court were inclined to grant leave to amend for Plaintiff to allege a fraud claim against Defendant Douglas, the alleged facts before the Court do not support fraud liability against Defendant Douglas, undermining such leave.

The Court will hear arguments from the parties as to leave. 

III. Conclusion

Defendant Brenda Douglas’s Demurrer to Plaintiff’s Complaint [Res ID # 1425] is SUSTAINED.

The Court will discuss leave to amend with counsel at oral argument.