Judge: Bruce G. Iwasaki, Case: 23STCV06769, Date: 2025-05-15 Tentative Ruling

Case Number: 23STCV06769    Hearing Date: May 15, 2025    Dept: 58

Judge Bruce G. Iwasaki

Department 58

Hearing Date:             May 15, 2025

Case Name:                Rumer v. Farmers Insurance Company, et al..

Case No.:                    23STCV06769

Matter:                        Motion for summary judgment, or in the alternative, motion for summary adjudication  

Moving Party:             Defendant Truck Insurance Exchange

             Plaintiff Lindsey Rumer (Plaintiff) alleges that Defendant Truck Insurance Exchange (Defendant) breached its contractual obligations by refusing to investigate and defend a loss claim presented by Plaintiff’s employer and Defendant’s policyholder, Richard Walker Restaurants, LLC (Insured) – resulting in damages to Plaintiff. Specifically, Defendants provided an Employment Practices Liability Insurance policy to the Insured (Policy), which Plaintiff alleges included a duty to defend and indemnify the Insured against claims made by Plaintiff against Richard Walker Restaurants in the underlying lawsuit (Employment Action). Defendant denied coverage for the claims made by Plaintiff in the underlying Employment Action, asserting that there was no potential coverage under the Policy. Plaintiff now sues Defendant Truck Insurance under Insurance Code section 11580 and an assignment of rights from the Insured.

The operative pleading, the Complaint, alleges three causes of action for: (1.) Breach of the Covenant of Good Faith and Fair Dealings, (2.) Breach of Contract, and (3.) Declaratory Relief.

Defendant Truck Insurance Exchange moves for summary judgment, or in the alternative, summary adjudication. Plaintiff opposes the motion for summary judgment and summary adjudication on the grounds that there exists a triable issue of material facts.

            The motion for summary judgment is granted.

            Defendants’ request for judicial notice of Exhibits A-J is granted. (Evid. Code, § 452, subd. (d).) Plaintiff’s objections to Defendant’s evidence are ruled as follows: Nos. 1-2, 5 are overruled, and Nos. 3-4 are sustained.

Legal Standard

            “The party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A triable issue of material fact exists if the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof. (Ibid.) 

            “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal. App. 4th 463, 467; Code Civ. Proc. § 437c, subd. (c).)

Discussion

Procedural Issues:

            In opposition, Plaintiff argues that the motion for summary judgment/adjudication is procedurally defective. In particular, Plaintiff argues that Defendant’s “27-page separate statement is not in the correct format because it put its facts in one column, and its evidence in another. Also, it moved for summary judgment and adjudication of four issues, but its separate statement does not differentiate among the 79 facts it listed, instead relying on facts 80-82 which purport to “incorporate[ ] herein by reference” the same 79 facts and evidence three more times for distinct issues (e.g., whether declaratory relief is available versus whether punitive damages are available).” (Opp., 16-21.) Based on the foregoing, Plaintiff argues the motion should be denied. 

Plaintiff is correct that the separate statement does not strictly comply with California Rules of Court, Rule 3.1350. However, this is not fatal.

A trial court’s authority to deny summary judgment or summary adjudication due to a defective separate statement is discretionary, not mandatory. (Code Civ. Proc., § 437c, subd. (b)(1) [failure to comply with separate statement requirements “may in the court's discretion constitute a sufficient ground for denying the motion”]; Brown v. El Dorado Union High School Dist. (2022) 76 Cal.App.5th 1003, 1019 [“ ‘The statute’ governing the format of summary judgment moving papers, ‘is permissive, not mandatory’ ”].)

Here, the facts material to the resolution of Defendants’ motion are readily ascertainable from the separate statement. Moreover, Plaintiff has failed to explain how the defects in Defendant’s separate statement “impaired [Plaintiff’s] ability to marshal evidence to show that material facts were in dispute” as to her claims. (Truong v. Glasser (2009) 181 Cal.App.4th 102, 118 [no abuse of discretion in declining to reject summary judgment motion based on the absence of headings in separate statement]; see also Brown v. El Dorado Union High School Dist., 76 Cal.App.5th at p. 1020.) Thus, the motion is not denied on this ground.

            Plaintiff also objects to the Defendant’s late served and filed Reply.

            Pursuant to newly enacted Code of Civil Procedure section 437c, subdivision (b)(4), a reply was required to be “served and filed by the moving party not less than 11 days preceding the noticed or continued date of hearing, unless the court for good cause orders otherwise.”

            Based on the foregoing, the Reply was to be filed and served on May 2, 2025. Instead, the Reply was not filed and served until May 8, 2025. Defendant acknowledges the lateness of the filing and assert that it was an error by the calendaring service it relies on, which apparently did not update to the new filing requirements of Section 437c, which only became effective on January 1, 2025. (Greer Decl., ¶¶ 2 -5.)  

            The Court has discretion to disregard late-filed papers. Plaintiff’s objection to Defendant’s late reply identified no prejudice from its untimeliness. Under the circumstances, the Court will consider the Reply.

Issue No. 1: As to the Second Cause of Action against Defendant for Breach of Contract, no triable issue of material fact exists, and Defendant is entitled to judgment as a matter of law.

“The elements of a cause of action for breach of an insurance contract are (1) the contract, (2) the insured’s performance or excuse for nonperformance, (3) the insurer’s breach, and (4) resulting damages.” (Gharibian v. Wawanesa Gen. Ins. Co. (2025) 108 Cal.App.5th 730, 737.)

            The first cause of action alleges “Defendants FARMERS and TRUCK breached their contract of insurance by failing to provide a defense in the underlying lawsuit and failing to indemnify the judgment entered against their insured.” (DSS 59 [Compl., ¶ 70].)

            In support of the motion for summary adjudication of this issue, Defendant argues there was no breach of contract because there was no potential coverage for the Employment Action under the Policy and, therefore, no duty to defend or indemnify the Insured ever existed.

The evidence shows that Defendant issued a policy to Insured Richard Walker Restaurant LLC for the period of January 18, 2020 to January 18, 2021 (Policy). (DSS 1.) The Policy provided Employment Practices Liability Insurance Coverage to the Insured with a limit of liability of $1 million for each “Insured Event.” (DSS 2.)

The Policy expressly excludes coverage for wage and hour claims. (DSS 17 [definition of “Insured Event”], 20.)

On June 1, 2020, Defendant was notified that a complaint had been filed in San Diego County Superior Court, Case No. 37-2020-00015608CU-WT-CTL, against its Insured by a former employee, Plaintiff (Employment Action).

Of all the causes of action in the original complaint in the Employment Action, only the sixth cause of action for Failure to Pay Expense Reimbursement (Violation of Cal. Labor Code § 2802) was not a wage and hour claim. (UMF Nos. 7- 14.)[1]

Defendants argues that the sixth cause of action for Failure to Pay Expense Reimbursement also fails to qualify as an “Insured Event” under the Policy.

The Policy defines an “Insured Event” as:

“Insured Event means actual or alleged acts of Discrimination, Harassment, and/or Inappropriate Employment Conduct, by an Insured against an Employee or former Employee or applicant for employment with an Insured entity occurring on or after the Retroactive Date as shown in the Declarations. Insured Event shall not include Claims for actual or alleged violation of any federal, state or local wage and hour laws or regulations.” (UMF No. 17.)

Further, the Policy contains the following definition of “Inappropriate Employment Conduct”:

“G. Inappropriate Employment Conduct means any of the following occurring on or after the Retroactive Date as shown in the Declarations

1.   actual or constructive termination of an employment relationship in a manner is alleged to have been against the law or wrongful or in breach of an implied employment contract or breach of the covenant of good faith and fair dealing in the employment contract;

2.  allegations of wrongful demotion, or wrongful discipline; allegations of misrepresentation made by an Employee, a former Employee or an applicant for employment which arise from an Insured's employment decision to hire, fire, promote or demote;

3.  allegations of misrepresentation made by an Employee, a former Employee or an applicant for employment which arise from an Insured’s employment decision to hire, fire, promote or demote; 

4. allegations of infliction of emotional distress, mental injury, mental anguish, shock, sickness, disease or disability made by an Employee, a former Employee or an applicant for employment which arise from an Insured's employment decision to hire, fire, promote or demote;

5.  allegations of false imprisonment, detention or malicious prosecution made by an Employee, a former Employee or an applicant for employment which arise from the Insured’s an employment decision to hire, fire, promote or demote;

6.  allegations of libel, slander, defamation of character or any invasion of right of    Privacy made by an Employee, a former Employee or an applicant for employment which arise from an Insured's employment decision to hire, fire, promote or demote; or

7. other personal injury allegations made by an Employee, a former Employee or an applicant for employment which arise from an Insured's employment decision to hire, fire, promote or demote. 

“Inappropriate Employment Conduct shall not include any allegations other than those set forth above.”  (DSS 18.)

Plaintiff’s sixth cause of action in the underlying action – for failure to reimburse expenses – is the only claim not expressly excluded as a wage and hour claim.

Defendant argues that the reimbursement claim is not an “Insured Event” because it does not fall within any of the definitions of “Inappropriate Employment Conduct.” There is no misrepresentation at issue in the Employment Action; no misrepresentations were alleged or raised in Plaintiff’s trial brief in the Employment Action; no testimony was offered of a misrepresentation by the Employer in the underlying deposition; and no misrepresentation by the Insured was found by the court-appointed referee Michael Balmages in the Statement of Decision filed in the Employment Action. (DSS 7-14 [Employment Action pleadings], 64-67.)

In opposition, Plaintiff argues that the Insured’s claims in the Employment Action were potentially covered by the Policy. Specifically, Plaintiff argues that “[g]iven the open-ended interpretations available for both “misrepresentations” and “other personal injury,” the insured was justified in reasonably interpreting the provisions to cover allegations of “failure to pay expense reimbursement” when the lawsuit was seeking “compensatory damages” related to that cause of action.” (Opp., 12:12-15.) Plaintiff also argues that an insurer has a duty to defend an entire “mixed” action (with non-covered claims as well as potentially covered claims) “as an obligation imposed by law in support of the policy.” (Buss v. Super. Ct. (1997) 16 Cal. 4th 35, 48-49.)

            The interpretation of an insurance policy is a pure question of law. (Waller v. Truck Ins. Exchange (1995) 11 Cal.4th 1, 18; Dolan–King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974.) When interpreting an insurance policy, the court reviews the policy's terms under the ordinary rules of contract interpretation. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) Accordingly, if the policy language is clear and explicit, it governs. (Ibid.) If the policy terms are in any respect ambiguous or uncertain, the court must attempt to determine whether coverage is consistent with the insured's objectively reasonable expectations. (Bank of the West, supra, 2 Cal.4th at p. 1265.) If this does not resolve the ambiguity, it must be resolved against the insurer. (Ibid.)

The words used must be interpreted according to the plain meaning a layman would ordinarily attach to them. (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807.) “Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists.” (Ibid.) Moreover, the language must be interpreted in the context of the policy as a whole, and in the circumstances of that case. It cannot be found to be ambiguous in the abstract. (Bank of the West, supra, 2 Cal.4th at p. 1265.)

            “The duty to defend is broader than the duty to indemnify, and it may apply even in an action where no damages are ultimately awarded. [Citation.] [¶] Determination of the duty to defend depends, in the first instance, on a comparison between the allegations of the complaint and the terms of the policy. [Citation.] But the duty also exists where extrinsic facts known to the insurer suggest that the claim may be covered. [Citation.] Moreover, that the precise causes of action pled by the third-party complaint may fall outside policy coverage does not excuse the duty to defend where, under the facts alleged, reasonably inferable, or otherwise known, the complaint could fairly be amended to state a covered liability.” (Scottsdale Ins. Co. v. MV Transportation (2005) 36 Cal.4th 643, 654.)

            “The defense duty arises upon tender of a potentially covered claim and lasts until the underlying lawsuit is concluded, or until it has been shown that there is no potential for coverage. [Citation.] When the duty, having arisen, is extinguished by a showing that no claim can in fact be covered, ‘it is extinguished only prospectively and not retroactively.’ ” (Scottsdale, supra, 36 Cal.4th at p. 655[citing Buss v. Superior Court (1997) 16 Cal.4th 35, 46].) As explained in Buss, “before, the insurer had a duty to defend; after, it does not have a duty to defend further.” (Scottsdale, supra, 36 Cal.4th at p. 657.)

“On the other hand, ‘in an action wherein none of the claims is even potentially covered because it does not even possibly embrace any triggering harm of the specified sort within the policy period caused by an included occurrence, the insurer does not have a duty to defend. [Citation.] “This freedom is implied in the policy's language. It rests on the fact that the insurer has not been paid premiums by the insured for [such] a defense.... [T]he duty to defend is contractual. ‘The insurer has not contracted to pay defense costs’ for claims that are not even potentially covered.” ’ ” (Scottsdale, supra, 36 Cal.4th at p. 655.)

            Here, it is undisputed that none of the wage and hour claims in the original complaint in the Employment Action were potentially covered under the Policy. As noted above, the Policy expressly excludes wage and hour claims.

            Thus, the only claim (in the Complaint and First Amended Complaint) that was not expressly excluded was the failure to reimburse employee for expenses, which is the essence of a claim for violation of Labor Code 2802.

            Plaintiff identifies two alternative avenues for coverage with respect to this claim: the misrepresentation provision of Paragraph 3 of Part G., defining “inappropriate employment conduct,” and the provision for “other personal injury allegations” in Paragraph 7.

1.     The underlying Employment Action does not potentially fall within the misrepresentation coverage provision of the Policy.

            In an October 4, 2022 letter, Plaintiff asserted that Judgment in the Employment Action was covered because of the language in the Judgment stated: “Plaintiff Lindsey Rumer, testified, and ample evidence was received of Defendant's hiring policies and practices, wherein Defendant made  misrepresentation(s), to reimburse hired employees for their uniforms, but no such reimbursement occurred causing personal injuries to Plaintiff, class members (current and former), and aggrieved employees.” “[T]he Defendant's hiring conduct requiring uniform deposits (but not reimbursing employees) was an inappropriate employment conduct...” (DSS 44.)

            As preliminary matter, that language only appears in the Judgment which was submitted to the Court by Plaintiffs’ counsel. (DSS 42, 43, 44.) This language did not appear in the Statement of Decision filed by referee Michael Balmages, which reported the testimony of the witnesses and the documents submitted at the trial. Nor were these issues listed in the section of the Statement of Decision entitled “Issues that were Actually Tried.” (DSS 42, 66.) There was no mention of misrepresentation or “inappropriate employment conduct” in any of the pre-trial documents, including the original Complaint, First Amended Complaint, Plaintiff s’ Trial Brief in the Employment Action, the joint statement of Contested Facts to be Adjudicated in the Employment Action, or the joint statement of Stipulated Facts. (DSS 7-14, 34, 35, 38, 39, 40.)

This stray remark in the Judgment is insufficient to create coverage, or even the potential for coverage, particularly because the Judgment was rendered long after the insurance claim was submitted.

Of significance, a misrepresentation is not an element of a violation of Labor Code section 2802.  Pursuant to Section 2802, subdivision (a), an employer must “indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer.” “[T]o demonstrate that an employer has violated [section] 2802, a plaintiff must show that: (1) he or she is an employee; (2) he or she incurred necessary expenses either in the discharge of his or her duties or in obeying the employer's directions; and (3) the employer failed to reimburse the plaintiff for such expenses.” (Desimone v. Allstate Ins. Co. (N.D. Cal., Sept. 14, 1999, No. C 96-03606 CW) 1999 WL 33226248, at *1.)

The discussion in West Marine Products, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA (N.D. Cal. 2021) 572 F.Supp.3d 841 is instructive. In this case, the court dismissed West Marine’s insurance coverage claims on the grounds that the underlying wage and hour lawsuits—Adams Action and Wade Action—did not trigger coverage under the relevant insurance policies. Central to the court's reasoning was the absence of any covered misrepresentation under the policies.

In that case, the employment practices liability policy defined “Employment Practices Violation” (EPV) to include: “(5) employment-related misrepresentation(s) to an Employee of any Organization.” West Marine argued that the underlying Adams Action included employment-related misrepresentations, pointing to allegations regarding inaccurate wage statements and payroll records, as well as a general claim that the company “falsely represented” wages were fully paid. However, the court rejected this argument, holding that violations of  Labor Code section 226, subdivision (a), do not constitute “employment-related misrepresentations” because misrepresentation is not an essential element of those claims. (West Marine Products, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA (N.D. Cal. 2021) 572 F.Supp.3d at 850.) Further, general assertions that Wes Marine “falsely represented” it had paid all wages owed were treated as background allegations supporting statutory wage violations, not standalone claims for misrepresentation. (Ibid.) The court continued by noting that courts consistently interpret similar policy language narrowly and decline to find coverage where the misrepresentation is not a central, pleaded cause of action. (Ibid.)

Thus, the claim fails under Paragraph 3 of the Inappropriate Employment Conduct definition.

2.     The underlying action is not potentially covered under the “other personal injury” provision.

Citing Southern California Pizza Co., v. Certain Underwriters at Lloyd's, London etc. (2019) 40 Cal.App.5th 140, Plaintiff argues that a claim under Labor Code section 2808 is legally a tort cause of action and, thus, falls within the Policy under “other personal injury allegations.”

            Plaintiff relies extensively on the holding in Southern California Pizza Co., LLC. This case is inapplicable.

In California Pizza, the policy definition of “Inappropriate Employment Conduct” included “any other employment related workplace tort.” (California Pizza Co. LLC, supra, 40 Cal.App.5th at 152-153.)

            Contrary to the argument made by Plaintiff, California Pizza did not find that the Labor Code section 2802 claims were covered under the policy because such claims were personal injury claims. The opposition notes that the Policy here does not use the term “other bodily injury.” Neither however, does the Policy use the term “other tort injury.”

As the Policy here does not define “personal injury” the court would normally look the ordinary definition and case law to understand this term in context.[2]  

            However, the Court need not define “other personal injury” because the Policy significantly limits what may be included as “Inappropriate Employment Conduct.” As the Reply notes, “personal injury allegations” must “arise from an Insured’s employment decision to hire, fire, promote or demote.”[3] That is, the “arise out of” language requires the “other personal injury” allegations to “have been a part of or directly and proximately resulted” in the hiring, firing, promotion or demotion. (HS Services, Inc. v. Nationwide Mut. Ins. Co. (9th Cir. 1997) 109 F.3d 642, 647; Longs Drug Stores, CA, Inc. v. F.D.I.C. (N.D. Cal., Jan. 21, 2005, No. C 03-01746 JSW) 2005 WL 139175, at *7 [“[C]ourts are required to construe exclusionary phrases in insurance policies narrowly.”].)

Plaintiff offered no evidence of any conduct by the Insured that related to hiring, firing, promoting or demoting. By definition, a claim can only arise under Labor Code section 2802, after someone is hired because the statute only requires reimbursement for “employees.” Thus, there is nothing to suggest the reimbursement issue did or could have arisen from the insured’s “decision to hire.” Further, Plaintiff was not fired, promoted or demoted. Thus, nothing in the Employment Action could have arisen from a “personal injury” “decision to . . . fire, promote or demote.” (See Frank and Freedus v. Allstate Ins. Co. (1996) 45 Cal.App.4th 461, 475.)[4]

            The undisputed evidence is that nothing in the cause of action for failure to reimburse employee expenses potentially triggered coverage as an “Insured Event” or “Inappropriate Employment Conduct.”

Summary adjudication of this cause of action is warranted where the Policy did not cover the claims in the Employment Action and there was never any potential for coverage under the Policy.

Issue No. 2: As to the First Cause of Action against Defendant for Breach of the Covenant of Good Faith and Fair dealing, no triable issue of material fact exists, and Defendant is entitled to judgment as a matter of law.

            Defendant also moves for summary adjudication of the first cause of action for breach of the covenant of good faith and fair dealing.

Plaintiff’s first cause of action for bad faith against Defendant fails because there is no coverage. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36 [quoting Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1153 [“a bad faith claim cannot be maintained unless policy benefits are due”]; MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co. (2010) 187 Cal.App.4th 766, 784 [same].

The motion for summary adjudication of the first cause of action is granted.

Issue No. 3: As to the Third Cause of Action against Defendant for Declaratory Relief, no triable issue of material fact exists, and Defendant is entitled to judgment as a matter of law.

To prevail in an action seeking declaratory relief on the issue of the duty to defend, “the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot.” (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 300.)

The motion for summary adjudication of the third cause of action is granted.

Issue No. 4: Plaintiff’s claim for punitive damages, on the grounds that no triable issue of material fact requiring trial on the merits exists and Defendant is entitled to judgment as a matter of law.

            Defendant also moves for summary adjudication of the request for punitive damages on the grounds that the damages were not assignable, citing Murphy v. Allstate Ins. Co. (1976) 17 Cal. 3d 937.

            Given the Court’s ruling granting summary adjudication of the first, second, and third causes of action – this issue on damages is moot.

Conclusion

            The motion for summary judgment is granted.