Judge: Christopher K. Lui, Case: 21STCV28878, Date: 2022-08-30 Tentative Ruling

Case Number: 21STCV28878    Hearing Date: August 30, 2022    Dept: 76

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the motion addressed herein.  As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue.  Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776.  If notice of intention to appear is not given and the parties do not appear, the Court will adopt the tentative ruling as the final ruling.

Plaintiff alleges that Defendant insurance company denied coverage for business interruptions caused by the COVID-19 pandemic and closure orders.

            Defendant General Star Indemnity Company demurs to the First Amended Complaint.                      

TENTATIVE RULING

Defendant General Star Indemnity Company’s demurrer to the First Amended Complaint is SUSTAINED with leave to amend as to the first, second, third and sixth causes of action and without leave to amend as to the fourth and fifth causes of action.

Plaintiff is given 30 days’ leave to amend.

ANALYSIS

Demurrer

Meet and Confer

            The Declaration of David A. Tartaglio reflects that Defendant’s counsel satisfied the meet and confer requirement set forth in CCP § 430.41.

Discussion

            Defendant General Star Indemnity Company demurs to the First Amended Complaint as follows:

1.         First Cause of Action (Breach of Contract).

            Defendant argues that no coverage is available under the policy for building and personal property coverage, business income and extra expense coverage, or civil authority coverage.

            Where the plain language of an insurance policy does not cover a loss, there is no breach of contract in refusing to pay benefits for such loss. (See Suarez v. Life Ins. Co. of N. Am. (1988) 206 Cal.App.3d 1396, 1402-07.)

            The First Amended Complaint alleges that Plaintiff purchased a commercial property insurance policy to protect against losses resulting from catastrophic events, such as the current unforeseen COVID-19 pandemic. (1AC, ¶ 1.) Plaintiff reasonably believed that their policy, which included business interruption coverage, would insure their businesses against losses resulting from any source of interruption. (Id.) Plaintiff alleges that, in breach of the insurance obligations that Defendant undertook in exchange for receipt of Plaintiff s premium payments, Defendants denied Plaintiff s insurance claims arising from the interruptions of Plaintiff s business caused by the COVID-l9 pandemic and the closure orders. (Id., ¶ 3.)

            Plaintiff alleges that the presence of COVID-19 on Plaintiff’s property caused a distinct, demonstrable, physical change and or tangible alteration which results in continuous physical loss and/or damage to the property and is hazardous to human health. (1AC, ¶ 33.) Plaintiff alleges that, as a result of physical loss and/or damage caused by COVID-l9 to property, due to its ability to attach to surfaces for prolonged periods, remain viable in indoor air, and render property unsafe for normal use, Governmental Orders were implemented to limit, restrict, or prohibit total or partial access to Plaintiff s properties. (Id., ¶ 41.) Plaintiff alleges that due to the closure orders, as well as the presence of COVID-19, Plaintiff has suffered and continues to suffer substantial lost business income and other financial losses totaling millions of dollars. (Id., ¶ 50.)

            Defendant allegedly wrongfully denied coverage under the comprehensive commercial liability and property insurance policy, which allegedly insured against business interruption. (1AC, ¶ 46.) Defendants denied Plaintiff s claims for coverage, taking the position that the corona virus outbreak did not cause direct physical loss of or damage to the property and denying civil authority coverage. (Id, ¶ 55.)

            Although a copy of the subject insurance policy is attached as Exhibit A. the first cause of action does not cite the provisions which Defendant allegedly breached.

            After the 1AC was filed in this action on November 16, 2021, the Second District published two decisions upholding demurrers to complaints which sought to recover for business losses caused by COVID-19 government closure orders under insurance policies: United Talent Agency v. Vigilant Ins. Co. (2022) 77 Cal.App.5th 821, and Musso & Frank Grill Co., Inc. v. Mitsui Sumitomo Ins. USA Inc. (2022) 77 Cal.App.5th 753.

            Plaintiff must specify the specific policy provisions which Defendant allegedly breached. Plaintiff will be given an opportunity to amend the complaint to so plead, especially in light of the United Talent Agency and Musso decisions.

            The demurrer to the first cause of action is SUSTAINED with leave to amend.

2.         Second Cause of Action (Breach of Covenant of Good Faith and Fair Dealing).

            Defendant argues that no coverage is available under the policy for building and personal property coverage, business income and extra expense coverage, or civil authority coverage.

            “As a general rule, there can be no breach of the implied covenant of good faith and fair dealing if no benefits are due under the policy.” (Brehm v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1235.)

            Because Plaintiff has not sufficiently pled that coverage is available under a specific policy provision, this cause of action also fails.

            The demurrer to the second cause of action is SUSTAINED with leave to amend.

3.         Third Cause of Action (Unfair Business Practices—B & P Code § 17200).

            Defendant argues that this claim fails, as it is derivative of the other causes of action.

            Defendant also argues that Plaintiff has not pled unlawful, unfair or fraudulent conduct.

            The gist of this cause of action is based on Defendant’s allegedly wrongful denial of Plaintiff’s insurance claim. (1AC, ¶ 89.) Further, this cause of action does not specify any Insurance Code sections Defendant allegedly violated. (Id.) “[S]tatutory causes of action must be pleaded with particularity.” (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.)

            The demurrer to the third cause of action is SUSTAINED with leave to amend.

4.         Fourth Cause of Action (Unjust Enrichment).

            Defendant argues that there is no cause of action for unjust enrichment in California. Moreover, an unjust enrichment claim cannot lie where an enforceable binding agreement exists defining the rights of the parties.  

“Unjust enrichment is not a cause of action, however, or even a remedy, but rather ‘ “ ‘a general principle, underlying various legal doctrines and remedies’ ” … . [Citation.] It is synonymous with restitution.’ ” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387 [20 Cal. Rptr. 3d 115].) Like the trial court, we will construe the cause of action as a quasi-contract claim seeking restitution.

“[A]n action based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter.” (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 203 [51 Cal. Rptr. 2d 622].) However, “restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.” (McBride v. Boughton, supra, 123 Cal.App.4th at p. 388.) Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by “alleg[ing in that cause of action] that the express contract is void or was rescinded.” (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. supra, at p. 203.) A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement. (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1389 [137 Cal. Rptr. 3d 293].)

(Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231.)

            Here, the cause of action fails because Plaintiff’s recovery depends upon an express contract, and Plaintiff does not allege that the contract is void or rescinded.           

            The demurrer to the fourth cause of action is SUSTAINED without leave to amend.

5.         Fifth Cause of Action (Negligent Misrepresentation).

            Defendant argues that a positive assertion is not pled, and negligent misrepresentation does not apply to implied misrepresentations.

            Defendant also argues that reasonable reliance is not pled.

            “The elements of negligent misrepresentation are ‘(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’ (Citation omitted.)” (National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50.)

            Moreover, “[t]o be actionable, a negligent misrepresentation must ordinarily be as to past or existing material facts. ‘[P]redictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud.’ (Citation omitted.)”  (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158.) There is no cause of action for a negligent false promise. (Id. at 159: “Simply put, making a promise with an honest but unreasonable intent to perform is wholly different from making one with no intent to perform and, therefore, does not constitute a false promise.”)

            Here, Plaintiff is essentially alleging a negligent false promise (1AC, ¶¶ 107, 108), which is not recognized in California.

            The demurrer to the fifth cause of action is SUSTAINED without leave to amend.

6.         Sixth Cause of Action (Declaratory Relief).

            Defendant argues that no coverage is available under the policy for building and personal property coverage, business income and extra expense coverage, or civil authority coverage.

“The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” (Civ. Proc. Code, § 1061.)

            Here, because Plaintiff has not sufficiently pled the policy provisions pursuant to which coverage is allegedly available, declaratory relief cannot be awarded.

            The demurrer to the sixth cause of action is SUSTAINED with leave to amend.

Plaintiff is given 30 days’ leave to amend.