Judge: Daniel M. Crowley, Case: 21STCV3123, Date: 2022-08-12 Tentative Ruling

Case Number: 21STCV3123    Hearing Date: August 12, 2022    Dept: 28

Defendant Liberty Mutual Insurance Co.’s Demurrer with Motion to Strike

Having considered the moving, opposing and reply papers, the Court rules as follows. 

BACKGROUND

On October 1, 2021, Plaintiff Robert Garza (“Plaintiff”) filed this action against Defendants Andy Lu (“Lu”), USB Leasing (“USB”) and Liberty Mutual Insurance Co. (“LMI”) for negligence and unfair business practices. 

On February 28, 2022, Plaintiff filed the FAC against Lu and LMI for negligence, breach of contract, misrepresentation and unfair business practices.

On May 31, 2022, Plaintiff filed the SAC against Lu and LMI for negligence, breach of third party beneficiary contract, negligent breach of contract, constructive fraud and unfair business practices.

On July 12, 2022, LMI filed a Demurrer to the SAC to be heard on August 12, 2022. On August 1, 2022, Plaintiff filed an opposition. On August 5, 2022, LMI filed a reply.

Trial is scheduled for April 3, 2023. 

PARTY’S REQUESTS

LBI requests the Court sustain the demurrer to the entire action on the basis that there is a no action clause, that judgment has not been secured against the insured, and that there is no contract or fiduciary relationship between LBI and Plaintiff.

LEGAL STANDARD

CCP § 430.10 states: “The party against whom a complaint or cross-complaint has been filed may object, by demurrer or answer as provided in Section 430.30, to the pleading on any one or more of the following grounds: (a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading; (b) The person who filed the pleading does not have the legal capacity to sue; (c) There is another action pending between the same parties on the same cause of action; (d) There is a defect or misjoinder of parties; (e) The pleading does not state facts sufficient to constitute a cause of action; (f) The pleading is uncertain. As used in this subdivision, “uncertain” includes ambiguous and unintelligible; and (g) In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.”

A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, 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.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.  (CCP § 430.30(a).)  A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.  (Id.)  The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.  (Hahn, 147 Cal.App.4th at 747.)

Under CCP § 452, judicial notice may be taken of any official acts of the judicial department of the United States (or any state of the United States) and of any records of any court of this state.

In order to pursue an action against an insurer under Insurance Code section 11580 (b)(2), final judgment must first be entered against the insured. (McKee v. National Union Fire Ins. Co. (1993) 15 Cal.App.4th 282, 286.) Insurance Code 11580 (b)(2) requires that all liability insurance policies issued within California must include a “provision that whenever judgment is secured against the insured in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment.”

DISCUSSION

Plaintiff’s SAC alleges that LMI breached its’ insurance policy contract in only covering what LMI claimed was the entire value of the vehicle. As discussed in the previous demurrer, there are insufficient allegations to bring forward this cause of action. LMI’s insurance policy only covers amounts agreed to in writing or determined by judgment after trial. Neither of these things have happened. Plaintiff’s complaint provides no allegations that LMI agreed, in writing, that Lu had an obligation to pay. Instead, Plaintiff’s complaint alleges that because LMI never contested Lu’s liability and agreed to issue payment, LMI is somehow liable for these claims.  This is an incorrect reading of the contract, which clearly outlines when LMI is liable for payment. Should Plaintiff be unsatisfied with the amount agreed to and offered by LMI, Plaintiff must seek judgment against Lu, not LMI. Whatever judgment is rendered will then be enforceable against LMI under LMI’s policy.

Plaintiff applies a similar argument to the cause of action for negligence performance of contract, constructive fraud, and violation of California Business & Professions Code § 17200. All of these causes of action fail for the issue outlined above; there is no means in which Plaintiff can seek direct damages against LMI for only paying the amount offered when LMI never explicitly stated Lu had an obligation to pay. In order to recover any additional damages against LMI, Plaintiff must obtain judgment against Lu as required by California Insurance Code § 11580 (b)(2). The burden shifts to Plaintiff.

Plaintiff argues that there are exceptions to CIC § 11580(b)(2) as provided in Harper v. Wausau Ins. Corp., (1997) 56 Cal.App.4th 1079. Harper held that when an insurance contract has special features that are clear and explicit, it governs. Thus, if LMI admitted Lu had an obligation to pay, Plaintiff should be allowed to pursue causes of action against LMI. This is not in contention. However, LMI never admitted Lu had an obligation to pay Plaintiff. LMI offered payment. The text of the contract is explicit in that it must be a written acknowledgement of the insured’s obligation to pay. None of the provided allegations or exhibits demonstrate this condition has been met. Plaintiff has failed to meet his shifted burden.

The Court sustains, without leave to amend.

CONCLUSION

Defendant Liberty Mutual Insurance Co.’s Demurrer is SUSTAINED without leave to amend.

            Moving party is ordered to give notice of this ruling.

Moving Party is ordered to file the proof of service of this ruling with the Court within five days.

The parties are directed to the header of this tentative ruling for further instructions.