Judge: Barbara M. Scheper, Case: 19STCV06278, Date: 2022-08-31 Tentative Ruling
Case Number: 19STCV06278 Hearing Date: August 31, 2022 Dept: 30
Dept. 30
Calendar No.
Tagvoryan vs. Dowlati,
et. al., Case No. 19STCV06278
Tentative Ruling re:
Defendant’s Motion for Summary Judgment, or in the alternative, Summary
Adjudication of Issues
Defendant Pacific Specialty
Insurance Company (Defendant) moves for summary judgment, or, in the
alternative, summary adjudication against Plaintiff Sofik Tagvoryan (Plaintiff)
as to the third and fourth causes of action and the prayer for punitive damages
in the First Amended Complaint. Summary judgment is granted in favor of
Defendant.
Plaintiff’s claims in this action
arise out of a dispute over residential property insurance issued by Defendant
to Plaintiff. Defendant is an admitted insurer selling homeowners’ insurance
policies in California. (UMF 1.) Plaintiff owns the property located at 489
Avocado Place, Camarillo, California (the Property). (UMF 13.)
On October 23, 2012, a “Notice of
Default and Election to Sell Under Deed of Trust” was recorded against the
Property by Plaintiff’s lender, Bank of America. (UMF 15; Defendant’s Exhibits
(DE), Ex. 22.) On June 18, 2014, a Notice of Rescission as to the 2012 Notice
of Default was recorded against the Property. (UMF 17; DE Ex. 23.)
On September 18, 2015, Plaintiff,
through her son Andranik Tagvoryan (Andranik), applied for an HO-3 Preferred
Homeowners’ Insurance Policy from Defendant through insurance broker Shahla
Dowlati, doing business as Good News Insurance Services (Good News). (UMF 18;
DE Ex. 33; Andrade Decl. ¶ 16.) Good News had entered into a “Personal Lines
Producer Agreement” in September 2010 with McGraw Insurance Services, L.P.
(McGraw), the underwriting arm for Defendant. (UMF 3; DE Ex. 2; Andrade Decl.
¶¶ 1, 6, 8.) Under that Agreement, Good News is granted access to Defendant’s
online portal, through which Good News may obtain quotes and submit
applications for insurance on behalf of clients. (Ibid.)
To obtain a policy from Defendant,
potential insureds must submit an application that includes eleven “Underwriting
Questions.” (UMF 20, DE Ex. 6, p. 8.) Question 10 asks, “Has the applicant had
foreclosure proceedings initiated against an owned property anytime within the
last three years?” (UMF 26; DE Ex. 6, p. 8.) The applicant must also sign a
statement reading in part, “I hereby apply to Pacific Specialty Insurance
Company (‘PSIC’) for an Insurance Policy as set forth in this application on
the basis of the statements contained herein. I agree if such information is
false or misleading or would materially affect acceptance of the risk by PSIC,
or if my check to PSIC (or its representative) is returned for insufficient
funds, or if my credit/debit card transaction to PSIC (or its representative)
is denied, that such policy will be null and void and no coverage shall be afforded.”
(UMF 38; DE Ex. 6 p. 8.)
Good News submitted the insurance
application on behalf of Plaintiff through Defendant’s online portal. (UMF 32;
DE Ex. 6.) In response to Question 10, Good News answered “No.” (UMF 20, DE Ex.
6, p. 8.) Following submission of the application, on September 18, 2015,
Defendant issued Policy Number ENG 0601516-00 to Plaintiff. (UMF 39; DE Ex. 7; Andrade
Decl. ¶ 19.) The policy covered the period from September 18, 2015 to September
18, 2016. (Ibid.)
Had Good News answered “Yes” to
Question 10, the online portal would have presented a warning that the answer
caused a prohibited risk, and Good News would not have been able to proceed
with the application. (UMF 41; DE Ex. 11; Andrade Decl. ¶ 25.) Defendant’s
Underwriting Guidelines provide that “Unacceptable Risks” include “Risks where
the applicant has had foreclosure proceedings initiated against an owned
property anytime within the last three (3) years,” and Defendant would not have
issued the policy to Plaintiff had the answer to Question 10 been “Yes.” (UMF
42-43; DE Ex. 4, p. 13.)
In January 2016, Defendant received
a letter from the mortgage company indicating that the Property was vacant.
(UMF 44; DE Ex. 9.) On January 27, 2016, Defendant requested information from
Plaintiff to confirm the occupancy of the Property or the policy “may be subject to conditioned or non-renewal,”
but never received a response from Plaintiff. (UMF 45-46; DE Ex. 10; Andrade
Decl. ¶¶ 22-23.)
On March 14, 2016, Defendant
received notice of a water loss at the Property. (UMF 47; DE Ex. 16.) Plaintiff
signed an authorization for Andranik to handle the claim on her behalf. (UMF
50.) In investigating the claim, Defendant discovered a 2009 water loss on the
Property that was referred to the National Insurance Crime Bureau, and based on
that and other information referred the claim to its Special Investigations
Unit (SIU). (UMF 54; Massey Decl. ¶¶ 9-10.) The SIU investigation revealed
multiple notices of default recorded on the Property between 2010 and 2013,
including the Notice recorded October 24, 2012. (UMF 55; Massey Decl. ¶ 11.)
In Defendant’s subsequent
investigations, Plaintiff’s public adjuster told Defendant that the house had
not been in foreclosure, and that the Notice of Default was issued as part of a
loan modification. (UMF 63; Massey Decl. ¶ 17.) In a recorded statement from
Plaintiff dated April 18, 2016, Plaintiff denied that the Property had ever
been in foreclosure, denied missing payments on her loan, and stated that any
loan modification would have been handled by Andranik. (UMF 64-65; DE Ex. 24;
Massey Decl. ¶ 19.) Defendant also contacted Farid Almasi of Good News, who
stated that Andranik had requested the policy from him over the phone, and that
Almasi asked Andranik the underwriting questions for the application. (UMF 68;
Massey Decl. ¶ 20.) Almasi emailed the application to Andranik and Andranik
returned a signed copy. (Ibid.) In a recorded statement from Andranik,
he stated that he called Almasi but did not remember filling out the
application, denied knowledge of any foreclosure proceedings, and stated that he
applied for a loan modification for Plaintiff in 2008-2010. (UMF 70-71; DE Ex.
25; Massey Decl. ¶ 21.) Around this time, Good News emailed Andranik requesting
that he have Plaintiff sign and return a backdated copy of the policy
application. (Plaintiff’s Exhibits, Ex. D.)
On May 18, 2016, Defendant sent
Plaintiff a letter notifying her that Defendant was rescinding the policy
“based on material misrepresentations on the application and the unacceptable
nature of the risk,” referring specifically to Plaintiff’s answer to Question
10 and the October 23, 2012 Notice. (UMF 80; DE Ex. 12.)
The
function of a motion for summary judgment or adjudication is to allow a
determination as to whether an opposing party can show evidentiary support for
a pleading or claim and if not to enable an order of summary dismissal without
the need for trial. (Aguilar v. Atlantic Richfield
Co. (2001) 25 Cal.4th 826, 843 (Atlantic Richfield).) Code of Civil
Procedure Section 437c, subdivision (c) “requires the trial judge to grant
summary judgment if all the evidence submitted, and ‘all inferences reasonably
deducible from the evidence’ and uncontradicted by other inferences or
evidence, show that there is no triable issue as to any material fact and that
the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7
Cal.App.4th 1110, 1119.)
As to
each claim as framed by the complaint, the defendant moving for summary
judgment must satisfy the initial burden of proof by presenting facts to negate
an essential element, or to establish a defense. (Code Civ. Proc, § 437c, subd.
(p)(2).) Courts “liberally construe the evidence in support of the party
opposing summary judgment and resolve doubts concerning the evidence in favor
of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)
Once the
moving party has met that burden, the burden shifts to the opposing party to
show that a triable issue of one or more material facts exists as to that cause
of action or a defense thereto. To establish a triable issue of material fact,
the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68
Cal.App.4th 151, 166.)
The Court’s “role on summary
judgment is simply to decide whether the parties possess evidence requiring the
fact-weighing procedures of a trial. (Soto v. County of Riverside (2008)
162 Cal.App.4th 492, 496.) “The purpose of the summary judgment procedure is not
to try the issues, but merely to determine whether there are issues to
be tried.” (Orser v. George (1967) 252 Cal.App.2d 660, 668.)
As in initial matter, there are several
significant problems with Plaintiff’s opposition. First, it is well over the page limit without
Court permission. The memorandum of
points and authorities does not cite to a single case or statute. Plaintiff’s proposed order on evidentiary
objections does not comply with CRC 3.1354 and is virtually unintelligible. To
the extent the Court is able to understand the objections, they are overruled. The
response to Defendant’s statement of undisputed facts does not comply with the
CCP and the CRC in multiple respects.
For instance, many of the responses purport to dispute the Defendant’s
fact but fail to cite to any evidence or simply objects to Defendant’s
facts. Many of the responses assert that
Plaintiff does not have sufficient knowledge to respond to the fact cited. This leads to the Court’s supposition that
Plaintiff is arguing that the motion must be denied or continued pursuant to
CCP Section 437c(h) even though nowhere does Plaintiff affirmatively make that
request.
CCP Section 437c(h) provides: “If it appears from the affidavits submitted
in opposition to a motion for summary judgment or summary adjudication, or
both, that facts essential to justify opposition may exist but cannot, for
reasons stated, be presented, the court shall deny the motion, order a
continuance to permit affidavits to be obtained or discovery to be had, or make
any other order as may be just.”
The
declaration or affidavit in support of the request to continue must describe
the discovery that is necessary to resist the motion. (See Frazee v. Seeley (2002) 95
Cal.App.4th 627, 634-635.) It
is not sufficient merely to indicate that further discovery or investigation is
contemplated. (Bahl v. Bank of
America (2001) 89 Cal.App.4th 389, 396-397.) The declaration or affidavit must also make a
good faith showing demonstrating that a continuance is necessary to obtain
essential facts to oppose the motion.
The declaration should show (1) facts that establish a likelihood that
controverting evidence may exist and why the information sought is essential to
opposing the summary judgment motion, (2) specific reasons why this evidence
cannot be presented at the present time, (3) an estimate of the time necessary
to obtain this evidence, and (4) the specific steps or procedures that the
party opposing the summary judgment motion intends to use to obtain this
evidence. (Johnson v. Alameda County.
Med. Ctr. (2012) 205 Cal.App.4th 521, 532.)
In
exercising discretion under CCP Section 437c(h), a judge may properly consider
the extent to which the requesting party’s failure to secure the contemplated
evidence results from this party’s lack of diligence. (Rodriquez v. Oto (2013) 212 Cal.App.4th
1020, 1038.) A good faith showing that
further discovery is needed to oppose summary judgment requires some
justification as to why this discovery was not completed sooner. (Cooksey v. Alexakis (2004) 123
Cal.App.4th 246, 257; Bushling v. Fremont Med. Ctr. (2004)
117 Cal.App.4th 493, 511-512; Braganza v. Albertson’s LLC (2021)
67 Cal.App. 5th 144, 156.)
Plaintiff does not meet the
requirements of Section 437c, subdivision (h) to obtain a continuance because her
counsel’s declaration fails to explain the specific facts to be obtained, why
they are essential, and why they cannot be presented at this time. Plaintiff argues that the deposition of Kara
Holzwarth is necessary because she wrote the letter rescinding coverage. In light of the undisputed evidence submitted
by Defendant as discussed below, it does not appear to the Court that Ms. Holzwarth’s
testimony would be relevant. Moreover,
Plaintiff has utterly failed to establish diligence. The Court is aware of and would excuse any
delay resulting from Plaintiff’s counsel’s medical condition in the Spring of
2022. But Plaintiff’s counsel has been
involved in this matter and knew of Ms. Holzwarth’s involvement in the claims
process since 2016 and filed the instant action on May 15, 2018. There is no explanation at all as to why this
witness was not deposed between 2019 and 2021.
Plaintiff has asserted two causes of action
against Defendant for Breach of Insurance Contract and Breach of the
Implied Covenant of Good Faith and Fair Dealing.
Third Cause of Action for Breach of Contract
The essential elements of a cause of action for breach of
contract are: (1) the contract, (2) the plaintiff’s performance of the contract
or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting
harm to the plaintiff. (Careau & Co. v. Sec. Pacific Bus. Credit, Inc. (1990)
222 Cal.App.3d 1371, 1388.)
“The
interpretation of an insurance policy is a question of law. [Citation.] We ‘look
first to the language of the contract in order to ascertain its plain meaning
or the meaning a layperson would ordinarily attach to it.’ [Citation.]” (Duarte v. Pacific Specialty Ins. Co. (2017) 13 Cal.App.5th 45, 54.)
Insurance Code § 359 provides, “If a
representation is false in a material point, whether affirmative or promissory,
the injured party is entitled to rescind the contract from the time the
representation becomes false.” Thus, “[w]hen a policyholder conceals or misrepresents a material fact on an insurance
application, the insurer is entitled to rescind the policy. ‘Each party to a
contract of insurance shall communicate to the other, in good faith, all facts
within his knowledge which are or which he believes to be material to the
contract.’” (LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co.
(2007) 156 Cal.App.4th 1259, 1266 [citing Ins. Code, § 332].) Under section 359, an insurer need not prove
that the misrepresentation was willful, and so may rescind based on a negligent
or unintentional misrepresentation. (Mitchell v. United National Ins. Co.
(2005) 127 Cal.App.4th 457, 473.)
“Materiality is determined
solely by the probable and reasonable effect which truthful answers would have
had upon the insurer. [Citations.] The fact that the insurer has demanded
answers to specific questions in an application for insurance is in itself
usually sufficient to establish materiality as a matter of law. [Citations.]” (Thompson
v. Occidental Life Insurance Co. (1973) 9 Cal.3d 904, 915-916.) “The test
for materiality is whether the information would have caused the underwriter to
reject the application, charge a higher premium, or amend the policy terms, had
the underwriter known the true facts.” (Mitchell, 127 Cal.App.4th at 474.)
The undisputed
evidence shows that the application submitted by Good News on behalf of
Plaintiff contained a material misrepresentation and so was subject to
recission by Defendant. Defendant’s evidence shows that Plaintiff answered “no”
to Question 10, whether foreclosure proceedings had been initiated against an
owned property within the last three years of the application dated September
18, 2015. (UMF 26; DE Ex. 6, p. 8.) However, a Notice of Default had been
recorded against the Property on October 23, 2012, within three years of the
application. (UMF 15; Ex. 22.) The fact that the application was submitted through
Good News and not Plaintiff herself is irrelevant: “As a matter of law, ‘if [an
insurance] application was prepared by an insurance broker (the agent of the
insured), the application's contents are the insured's responsibility.’
[Citations.]” (LA Sound USA, Inc., 156 Cal.App.4th at 1268.)
This misrepresentation was
material; if Good News answered “Yes” to Question 10, it would not have been
able to proceed with the online application based on the prohibited risk. (UMF
41; DE Ex. 11; Andrade Decl. ¶ 25.) Defendant’s Underwriting Guidelines and the
statements from its Underwriting Department confirm that Defendant would not
have issued the policy if the answer in Plaintiff’s application accurately
reflected the foreclosure proceedings. (UMF 42-43; DE Ex. 4, p. 13, Ex. 11.)
Accordingly, Defendant has met its burden to show the existence of a material
misrepresentation in Plaintiff’s application justifying recission. (See Duarte,
13 Cal.App.5th at 57 [no triable dispute as to materiality where insurer
offered the declaration of its Senior Vice President of Underwriting, who
stated that the policy would not have been issued if applicant answered “yes”
to questions].)
Plaintiff has failed
to produce evidence showing a triable dispute as to Defendant’s right to
rescind the contract. Plaintiff argues that her answer to Question 10 was not a
misrepresentation because the October 23, 2012 Notice of Default was rescinded
on June 18, 2014. (UMF 17; DE Ex. 23.) However, the Question 10 asks whether
the applicant has had foreclosure proceedings initiated against an owned
property anytime within the last three years. (UMF 26; DE Ex. 6, p. 8.) The
June 2014 recission does not negate the fact that foreclosure proceedings were initiated
against the Property. Based on the plain language of the policy, Plaintiff’s
answer to Question 10 constituted a material misrepresentation.
Plaintiff also points out that Defendant has not submitted any
evidence from Kara Holzwarth, Defendant’s Director of Compliance at the time of
the recission and the employee who issued the May 18, 2016 recission letter to
Plaintiff. (DE Ex. 12.) The absence of evidence from Holzwarth does not raise a
triable issue of material fact. As discussed above, Defendant’s evidence is
sufficient to meet its initial burden.
“[A] rescission effectively
renders the policy totally unenforceable from the outset so that there was
never any coverage and no benefits are payable.” (LA Sound USA, Inc. v. St.
Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1266.)
“A policy void ab initio thus cannot be breached.” (Ibid.) Because
Defendant’s rescission of the policy was valid, no coverage exists, and so Plaintiff’s
claim for breach of contract fails.
Cause of Action for Breach
of the Implied Covenant of Good Faith and Fair Dealing
The elements of an action for the
breach of the implied covenant of good faith and fair dealing in the insurance
context are: (1) the insurer is obligated under the policy to the first or
third party; (2) implied duty; (3) unreasonable breach of that duty; and (4)
causation. (Love v. Fire Exchange (1990) 221 Cal.App.3d 1136,
1151; Waters v. United Services Auto. Ass’n (1996) 41 Cal.App.4th 1063,
1079.)
In insurance
contexts, there are at least two separate requirements to establish breach of
the implied covenant: (1) benefits due under the policy must have been
withheld; and (2) the reason for withholding benefits must have been
unreasonable or without proper cause.¿(Love, supra,¿221 Cal.App.3d
at¿1151–1152.)¿
“Bad faith claims
are based on the contractual covenant of good faith and fair
dealing.¿[Citation.]¿Where a breach of contract cannot be shown, there is no
basis for a finding of breach of the covenant.¿[Citation.]”¿(San Diego
Housing¿Com'n¿v. Industrial¿Indem. Co.¿(1998) 68 Cal.App.4th 526, 544; California
State Auto. Assn. Inter-Ins. Bureau v. Superior Court¿(1986)
184 Cal.App.3d 1428, 1433¿[no
award for bad faith can be made “without first establishing that coverage
exists”].)
As discussed above, the undisputed
evidence shows that Defendant had the right to rescind the insurance policy
based on a material misrepresentation in the application and that Defendant
exercised its right to rescind. As the contract has been rescinded, no coverage
exists. Plaintiff therefore cannot
maintain a claim for bad faith against Defendant.