Judge: Armen Tamzarian, Case: 22STCV11040, Date: 2023-08-30 Tentative Ruling
Case Number: 22STCV11040 Hearing Date: August 30, 2023 Dept: 52
Defendant CSE Safeguard Insurance
Company moves for summary judgment of plaintiff Robin Kashani’s complaint or
for summary adjudication of both causes of action and plaintiff’s claim for
punitive damages.
Legal Standard
Courts
grant summary judgment where there are no triable issues of fact and the moving
party shows that an action must be decided in its favor as a matter of
law. (CCP § 437c(f)(1); Villa v. McFerren (1995) 35 Cal.App.4th
733, 741.) A moving defendant must show
“that one or more elements of the cause of action… cannot be established, or
that there is a complete defense to the cause of action.” (CCP § 437c(p)(2).) Once the moving party does so, the burden
shifts to the opposing party to show a triable issue of at least one material
fact. (Aguilar v. Atlantic Richfield
Co. (2001) 25 Cal.4th 826, 849.)
Evidentiary Objections
Plaintiff makes many evidentiary
objections, none of which are numbered as required under California Rules of
Court, rule 3.1354(b). Without
consecutively numbered objections, the court cannot make rulings that clearly
indicate what evidence is excluded.
Plaintiff primarily objects based
on Evidence Code sections 1152 and 1154.
These objections have no merit.
Section 1152, subdivision (a) provides that evidence of settlement
offers and negotiations are “inadmissible to prove [the offeror’s] liability
for the loss or damage or any part of it.”
Defendant is not offering its statements or offers to prove either party
is liable. It is doing the opposite. Section 1152, subdivision (b) also includes an exception for
settlement offers “in an action for breach of the covenant of good faith and
fair dealing or violation of subdivision (h) of Section 790.03 of the Insurance
Code.” This is such an action.
Evidence Code section 1154,
meanwhile, provides that evidence “a person has accepted or offered or promised
to accept a sum of money … in satisfaction of a claim, as well as any conduct
or statements made in negotiation thereof, is inadmissible to prove the
invalidity of the claim or any part of it.”
Plaintiff accepted numerous payments, but not “in satisfaction of a
claim.” He has repeatedly maintained
that the claim remains unsatisfied. For
example, in an email on August 14, 2020, plaintiff wrote, “We have deposited
the check on August 3 ‘under protest.’ ”
(Williams Decl., Ex., M, p. 2.) In
his opposing separate statement, he repeatedly states he ”has continued to
pursue [this] litigation and has continued to assert that the claim is
underpaid.” (Opp. UMF Nos. 41, 42.)
Moreover, Evidence Code sections
1152 and 1154 do “not preclude the introduction of settlement negotiations if
offered not to prove liability for the original loss but to prove failure to
process the claim fairly and in good faith.”
(White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 887.) This evidence is admissible here because
defendant offers it to prove it did process the claim fairly and in good faith.
As for his own communications,
plaintiff objects to statements that are not offers to compromise. (UMF Nos. 35, 48, 49, 54. Williams Decl., Ex.
U [demanding total of $435,000], ¶ 36 [plaintiff demanded $250,000 in ALE
payments].) “If the statement was not
intended as a concession but as an assertion of ‘ “all that he deemed himself
entitled to,” ’ it is not an offer of compromise.” (Volkswagen of America, Inc. v. Superior
Court (2006) 139 Cal.App.4th 1481, 1494; accord Arave v. Merrill Lynch,
Pierce, Fenner & Smith, Inc. (2018) 19 Cal.App.5th 525, 535 [initial
demand letter was not an offer to compromise because it demanded more money
than plaintiff’s lawsuit].)
Plaintiff also makes these
objections to evidence that plaintiff did not make certain
communications. (E.g., UMF Nos. 41, 42,
47.) The absence of a communication is
not an offer to compromise.
Plaintiff’s objections are overruled.
Undisputed Facts
Plaintiff suffered water damage to
a portion of his home’s wood floor. Plaintiff
ultimately claimed two types of coverage under his insurance policy: (1)
property damage caused by water intrusion and (2) cost of alternative living
expenses (ALE). The court finds triable
issues of material fact on the property damage claim preclude summary
judgment. The court therefore declines
to reach the issues arising from ALE coverage.
On November 17, 2019, plaintiff
submitted a claim to defendant for the water damage. (Williams Decl., Ex. B.) Defendant sent a third-party adjuster to
inspect the property on November 21. (Id.,
Ex. D.) On December 23, the adjuster
submitted a loss report recommending benefits of $3,3554.15. (Id., Ex. F.) On January 22, 2020, defendant paid plaintiff
$3,006.58 for water mitigation services.
(Id., Ex. H.)
On February 11, 2020, the adjuster
issued a revised loss report finding repairs would cost $11,075.85. (Williams Decl., Ex. I.) After accounting for the prior payment and
the $5,000 deductible, defendant approved payment of $7,521.55 on April
24. (Id., Ex. J.) Defendant paid plaintiff that amount on June
4. (Id., Ex. K.)
On July 3, 2020, plaintiff
submitted a far higher estimate for repairs totaling $145,595.40. (Williams Decl., Ex. L.) The primary reason for the disparity is that defendant’s
estimate only covered repairs to the damaged portion of the floor. Plaintiff’s estimate, however, was for
replacing the wood on nearly the entire first floor of the house. Plaintiff claims doing so was required because
he has “premium flooring” that “is ‘uniform, consistent, continuous, glued to
the concrete slab, and within line of sight.’ ”
(UMF No. 35 [counsel’s demand letter dated April 26, 2021].) After asking for and receiving more
information from plaintiff (including current photos), defendant ultimately
paid plaintiff another $58,790.24 on December 15, 2020. (Id., Ex. Q.)
On January 11, 2021, plaintiff’s
counsel wrote a demand letter to defendant.
(Williams Decl., Ex. R.) Over the
next several months, defendant requested more information. (Id., Exs. S-U.) Defendant then had a company named ITEL
Laboratories analyze a sample of plaintiff’s wood floor to determine the cost
of replacing it. On May 20, 2021, ITEL
completed a “wood price evaluation report.”
(Id., Ex. V.) The report
identifies a “benchmark,” with a comment stating, “the overall thickness of the
selection(s) listed above may vary slightly from the sample tested.” (Williams Decl., Ex. V.) It further states, “WOOD MATCH RESULT:
Matching products were not found.” (Id.,
p. 2.)
On May 27, 2021, defendant approved
payment of another $30,436.22 for repairs based on the cost of wood as ITEL
determined. (Williams Decl., Ex. X.) The payment “did not include replacing the
flooring in the rooms unaffected by the water leak.” (Id., ¶ 25.) Defendant did not pay to replace the flooring
in other rooms because of a purported “already existing change in pattern
starting in the hallway.” (Ibid.) On July 29, 2021, defendant approved an
additional payment of $30,718.14 to cover the cost of replacing the wood
flooring on the entire first floor. (Id.,
Exs. Y-Z.) On June 30, 2022, defendant
paid plaintiff another $5,226.72 in property damage benefits. (Id., ¶ 28.)
First Cause of Action: Breach of Contract
Triable
issues of material fact preclude summary adjudication of this cause of
action. Defendant argues it could not
have breached the contract because it paid more than it owed under the policy. Even if it had done so, paying the benefits
owed does not necessarily mean the insurer did not breach its duties under the
contract. “Unreasonable delay in paying
policy benefits or paying less than the amount due is actionable withholding of
benefits which may constitute a breach of contract as well as bad faith giving
rise to damages in tort.” (Intergulf
Development LLC v. Superior Court (2010) 183 Cal.App.4th 16, 20.)
For
reasons discussed below with respect to the second cause of action, a
reasonable factfinder could conclude defendant unreasonably delayed paying
policy benefits. If so, that would
constitute a breach of the insurance contract.
Defendant also argues it paid more than it owed under the
policy, so plaintiff cannot prove he suffered any damages. Plaintiff presents sufficient evidence to
establish a triable issue on damages. In
his declaration, he states, “As a
result of CSE's delay in payment, required repairs and materials exceed what benefits
CSE has paid for my water loss.”
(Kashani Decl., ¶ 10.) He
includes a contractor’s estimate for the repairs totaling $175,951.61 (id.,
Ex. A), about $30,000 higher than the initial estimate from 2021. Based on this evidence, a reasonable
factfinder could determine defendant unreasonably delayed payment and therefore
caused these additional damages.
Second Cause of Action: Breach of Implied
Covenant of Good Faith and Fair Dealing
Triable issues of material fact
preclude summary adjudication of this cause of action. “[T]o establish the insurer’s ‘bad faith’
liability, the insured must show that the insurer has (1) withheld benefits due
under the policy, and (2) that such withholding was ‘unreasonable’ or ‘without
proper cause.’ ” (Major v. Western
Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1209 (Major).)
A. Unreasonable Delay and Genuine
Dispute
On
this record, the court cannot conclude that, as a matter of law, defendant’s
delay in paying benefits was reasonable.
“The actionable withholding of benefits may consist of the denial of
benefits due [citation]; paying less than due [citation]; and/or unreasonably
delaying payments due.” (Major,
supra, 169 Cal.App.4th at p. 1209.) “If the insurer ‘without proper cause’ (i.e.,
unreasonably) refuses to timely pay what is due under the contract, its conduct
is actionable as a tort.” (Id. at
p. 1210.)
“[A]n insurer denying or delaying
the payment of policy benefits due to the existence of a genuine dispute with
its insured as to the existence of coverage liability or the amount of the
insured’s coverage claim is not liable in bad faith.” (Chateau Chamberay Homeowners Ass'n v.
Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347 (Chateau).) “While the reasonableness of an insurer’s
claims-handling conduct is ordinarily a question of fact, it becomes a question
of law where the evidence is undisputed and only one reasonable inference can
be drawn from the evidence.” (Ibid.)
That defendant’s dispute was
genuine and its delay was reasonable is not the only inference one could draw
from the evidence. Plaintiff submitted
his estimate of about $145,000 to replace the floor in July 2020. He offered to provide “a sample of the
flooring” on August 14, 2020. (Williams
Decl., Ex. M, p. 2.) Defendant did not
analyze a sample of the wood until May 2021, nine months later. (Id., Ex. V.) Defendant attempts to explain its delay, at
least in part, by blaming plaintiff. For
example, defendant asserts that plaintiff refused to allow an adjuster to
examine the house in the summer of 2020.
(UMF Nos. 23, 24; Williams Decl., Ex. N.) A jury may find this explanation persuasive,
but that is not the only reasonable inference one could draw. Defendant’s evidence that plaintiff caused
the delay is not unassailable.
Defendant’s reliance on experts is also
not dispositive. “[W]here an insurer … is
relying on the advice and opinions of independent experts, then a basis may
exist for invoking the [genuine dispute] doctrine and summarily adjudicating a
bad faith claim in the insurer’s favor.”
(Chateau, supra, 90 Cal.App.4th 335, 348.) But “an expert’s testimony will not automatically
insulate an insurer from a bad faith claim based on a biased investigation.” (Ibid.) A bad faith claim should not be summary
adjudicated if “(1) the insurer was guilty of misrepresenting the nature of the
investigatory proceedings [citation]; (2) the insurer’s employees lied during
the depositions or to the insured; (3) the insurer dishonestly selected its
experts; (4) the insurer’s experts were unreasonable; and (5) the insurer
failed to conduct a thorough investigation.”
(Id. at pp. 348-349.)
A
factfinder could conclude ITEL Laboratories was unreasonable and that
defendant’s reliance on ITEL’s report was unreasonable. A regulation applicable to replacing or
repairing damaged property provides, “When a loss requires replacement of items
and the replaced items do not match in quality, color or size, the insurer
shall replace all items in the damaged area so as to conform to a reasonably
uniform appearance.” (10 Cal. Code
Regs., tit. 10, § 2695.5(a)(2).)
ITEL’s report noted “the overall
thickness of the selection(s) listed above may vary slightly from the sample
tested.” (Williams Decl., Ex. V.) It further states, “WOOD MATCH RESULT:
Matching products were not found.” (Id.,
p. 2.) One could conclude it was
unreasonable for defendant to believe using cheaper wood that does not “match”
plaintiff’s preexisting flooring would suffice to make the floor conform to a
reasonably uniform appearance.
When viewing the evidence in the
light most favorable to plaintiff, the court cannot conclude that, as a matter
of law, defendant acted reasonably and its delay arose from a genuine dispute. A jury could find defendant resisted paying
additional benefits to plaintiff in bad faith.
B. Damages
Defendant again argues plaintiff
cannot prove he suffered any damages. In
addition to the evidence discussed above regarding the increased costs of
repairing the property damage, plaintiff may succeed in showing another
category of damages for this cause of again. “In a tort action against an insurance company for breach of the duty of
good faith and fair dealing, an insured may recover as damages those attorney
fees that are incurred in the same action and are attributable to the
attorney’s efforts to recover policy benefits that the insurer has wrongfully
withheld.” (Essex Ins. Co. v. Five
Star Dye House, Inc. (2006) 38 Cal.4th 1252, 1255.)
It is undisputed that plaintiff retained counsel by January
11, 2021. (UMF No. 30.) The undisputed facts show that after
plaintiff hired an attorney, defendant paid plaintiff an additional $120,000 in
benefits. (UMF. Nos. 38-40, 45.) When viewing the facts in the light most
favorable to plaintiff, a reasonable factfinder could conclude defendant’s delay
was unreasonable and caused plaintiff to incur attorney’s fees to pursue benefits
under his insurance policy.
Punitive Damages
Defendant is entitled to summary
adjudication of plaintiff’s claim for punitive damages. Plaintiff must present sufficient evidence to show a
triable issue of fact under “the higher evidentiary standard” of “establishing
malice, oppression or fraud by clear and convincing evidence.” (Basich v. Allstate Ins. Co. (2001)
87 Cal.App.4th 1112, 1121.) “Under the clear
and convincing standard, the evidence must be so clear as to leave no
substantial doubt and sufficiently strong to command the unhesitating assent of
every reasonable mind.” (Butte Fire Cases (2018) 24 Cal.App.5th 1150, 1158,
internal quotes omitted.)
That an insurer denied benefits in bad faith does not
necessarily permit an award of punitive damages. “[T]he evidence required to support an award of
punitive damages for breach of the implied covenant of good faith and fair
dealing is ‘of a different dimension’ from that needed to support a finding of
bad faith.” (Shade Foods, Inc. v.
Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847,
909 (Shade).)
Plaintiff
argues he has sufficient evidence of “malice” or “oppression.” He offers no evidence that defendant intended
to harm him. Absent that, “malice” and
“oppression” require “despicable conduct.”
(Civ. Code, § 3294(c)(1), (2).) “Used in its ordinary sense, the adjective
‘despicable’ is a powerful term that refers to circumstances that are ‘base,’
‘vile,’ or ‘contemptible.’ ” (College
Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725.) “[A]bsent an intent to injure the plaintiff,
‘malice’ requires more than a ‘willful and conscious’ disregard of the
plaintiffs’ interests.” (Ibid.) “ ‘Despicable conduct’ is
defined … as ‘conduct which is so vile, base, contemptible, miserable, wretched
or loathsome that it would be looked down upon and despised by ordinary decent
people.’ Such conduct has been described
as ‘[having] the character of outrage frequently associated with crime.’ ” (Tomaselli v. Transamerica Ins. Co.
(1994) 25 Cal.App.4th 1269, 1287 (Tomaselli).)
The
Court of Appeal’s analysis in Shade is instructive. There, the court held a jury’s award of punitive
damages was not supported by substantial evidence. It reasoned, “[W]hen initially presented with
the claim, [defendant] unreasonably failed to assess first-party coverage and
greatly overestimated the strength of its defenses to the point of concluding
that there was no potential for coverage. In the course of the negotiations following
its denial of coverage, it never took any meaningful action to reassess its
ill-advised denial of first-party coverage; and after the complaint was filed,
it waited a full year to offer to pay the defense costs of [plaintiff]. Underlying [defendant’s] conduct, the jury
could reasonably perceive a careless disregard for the rights of its insured
and an obstinate persistence in an ill-advised initial position. We think that this conduct might conceivably
support a finding that the insurer acted ‘with a willful and conscious
disregard of the rights ... of others’ within the definition of ‘malice’ or
that the insurer ‘subject[ed] a person … to cruel and unjust hardship in
conscious disregard of that person's rights’ within the definition of ‘oppression.’
” (Shade, supra, 78 Cal.App.4th
at p. 892.)
The court continued, “But we still must take into
account the extreme complexity of the coverage issues and the purely economic
character of the losses in assessing the level of opprobrium that it merits. In our opinion, the record falls well short of
establishing by clear and convincing evidence the sort of contemptible conduct
that could be described by the term ‘despicable.’ Unreasonable and negligent as it may have
been, [defendant’s] conduct falls within the common experience of human
affairs, both with respect to its careless initial evaluation and its stubborn
persistence in error.” (Shade, supra,
78 Cal.App.4th at p. 892.)
Here, the evidence similarly shows, at most, careless
evaluation of plaintiff’s claim and stubborn persistence in defendant’s
position. Defendant’s delay may have
been unreasonable and negligent, but it was not despicable. Stubbornly refusing to pay to replace the
entire first story’s wood flooring may constitute bad faith, but it is not base,
vile, or contemptible. Not only is this
within the common experience of human affairs, but a reasonable person would
expect an insurer to initially balk at paying $145,000 to replace the entire
floor of a house that suffered water damage in one room. Defendant’s conduct does not approach the character
of outrage associated with a crime.
The record also includes no evidence of as pattern
of misconduct. The Court of Appeal has
noted that “punitive damages have been assessed against insurance companies
most commonly where a showing has been made of a continuous policy of
nonpayment of claims.” (Tomaselli,
supra, 25 Cal.App.4th at p. 1287.)
Plaintiff relies on only two cases
holding that evidence supported an award of punitive damages against an
insurer. In Egan v. Mutual of Omaha
Ins. Co. (1979) 24 Cal.3d 809, the California Supreme Court held
substantial evidence supported a jury’s award of punitive damages. There, the insurer’s employee “called
plaintiff a fraud and told him that he sought benefits only because he did not
want to return to work” and “advised plaintiff he was not entitled to any
further payments and that past benefits received were also unwarranted, despite
plaintiff’s bona fide claim of accidental injury.” (Id. at p. 821.) “When plaintiff expressed his concern
regarding the need for money during the approaching Christmas season and offered
to submit to examination by a physician of Mutual’s choice, McEachen only
laughed, reducing plaintiff to tears in the presence of his wife and child.” (Ibid.) The insurer’s employees also knew “that
plaintiff had a 12-year-old child and a totally disabled wife.” (Id. at p. 822.) Here, there is no evidence of anything remotely
like this sort of cruelty.
Plaintiff also relies on Gentry v. State Farm
Mut. Auto. Ins. Co. (E.D. Cal. 2010) 726 F.Supp.2d 1160 (Gentry),
which is not binding authority. The
court does not find Gentry persuasive.
There, the court denied summary adjudication of a claim for punitive
damages. It stated, “Plaintiff asserts
that defendant’s conduct amounts to a ‘conscious disregard’ for plaintiff’s
rights because defendant ‘unreasonably delay[ed] the investigation,’ creating
an investigation ‘ “not fair” to plaintiff,’ and failed to accord plaintiff ‘interest
at least equal weight to its own.’
[Citation.] While a jury might
conclude that plaintiff failed to make a case for punitive damages the court
cannot say that a reasonable jury could not find there was a conscious
disregard of plaintiff’s right to have his [underinsured motorist] claim
resolved in a timely manner.” (Id.
at p. 1171-1172.)
The court’s analysis did not account for the
requirement that the defendant’s conduct must be despicable, as the Court of
Appeal discussed in Shade. The
court quoted the statutory definitions of “malice” and “oppression,” which
include the requirement of intentional harm or “despicable conduct,” but did
not apply that standard to the evidence.
(Gentry, supra, 726 F.Supp.2d at pp. 1171-1172.)
Disposition
Defendant CSE Safeguard Insurance
Company’s motion for summary adjudication of plaintiff Robin Kashani’s first
and second causes of action is denied.
Defendant’s
motion for summary adjudication of plaintiff’s claim for punitive damages is granted.