Judge: Daniel S. Murphy, Case: 23STCV10128, Date: 2023-10-23 Tentative Ruling

Case Number: 23STCV10128    Hearing Date: October 23, 2023    Dept: 32

BACKGROUND

            On May 5, 2023, Plaintiffs Boghos Tovmassian and Marguerite Tovmassian filed this action against Defendants Hippo Insurance Services, Spinnaker Insurance Company, and Patrick Hix, alleging (1) breach of insurance contract, (2) breach of the covenant of good faith and fair dealing, and (3) elder abuse.

            According to the complaint, Plaintiffs own a home located in Tujunga, California. (Compl. ¶ 1.) The home was insured by a homeowners insurance policy issued by Defendant Hippo Insurance Services, which is owned and underwritten by Defendant Spinnaker Insurance Company. (Ibid.) In December 2021, the home suffered wind and water intrusion, leading Plaintiffs to make a claim. (Ibid.) Plaintiffs allege that Defendants failed to conduct a full and fair investigation, which resulted in an insufficient payout. (Id., ¶ 3.)

            On September 18, 2023, Defendant Hippo Insurance Services filed the instant demurrer to the complaint. Plaintiffs filed their opposition on October 9, 2023. Defendant filed its reply on October 16, 2023.

LEGAL STANDARD

A demurrer for sufficiency tests whether a pleading states a cause of action or defense. (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. (Code Civ. Proc., § 430.30, subd. (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. (Ibid.) The only issue involved in a demurrer hearing is whether the pleading, as it stands, unconnected with extraneous matters, states a cause of action or defense. (Hahn, supra, 147 Cal.App.4th at 747.)

MEET AND CONFER

Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc., §§ 430.41, 435.5.) The Court notes that Defendant has complied with the meet and confer requirement. (See Santos Decl.)

DISCUSSION

I. Breach of Contract

            a. The Complaint Sufficiently Alleges the Legal Effect of the Contract

To establish breach of contract, a plaintiff must show: (1) the contract existed, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff. (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.) A breach of contract can be alleged by simply “plead[ing] the legal effect of the contract rather than its precise language.” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 402.) Notably, a “plaintiff's failure either to attach or to set out verbatim the terms of the contract [is] not fatal to his breach of contract cause of action” because in haec verba is only “one available method of pleading the contract,” not “the exclusive means of pleading a contract.” (Ibid.)

Defendant’s insistence that Plaintiffs must attach the contract or plead its terms verbatim is unsupported by Defendant’s cited caselaw. For example, Holly Sugar Corp. v. Johnson (1941) 18 Cal.2d 218, 225 describes how to plead a contract in haec verba as an alternative to pleading “its legal effect.” This means that pleading the legal effect of the contract is an acceptable method in addition to in haec verba. Similarly, Twaite v. Allstate Ins. Co. (1989) 216 Cal.App.3d 239, 252 states that contract terms may be pled “either in haec verba or according to legal effect.”

Here, the allegations in the complaint sufficiently set forth the legal effect of the contract, i.e., that the contract is an insurance policy that requires a payout for home damage, including water or wind intrusion. Defendants allegedly breached this contract by failing to pay the full amount that Plaintiffs were entitled to under the policy. This places Defendant on sufficient notice of the nature of the claim. Therefore, the complaint adequately alleges breach of contract.

b. The Complaint Sufficiently Alleges that Defendant is a Party to the Contract

Defendant argues that it cannot be liable on the breach of contract claim because it is not a party to the contract. Defendant contends that its co-defendant, Spinnaker, issued the policy instead. Defendant attempts to prove this through the declaration of Steve Wilson. However, the Court does not consider extrinsic evidence on a demurrer. (SKF Farms, supra, 153 Cal.App.3d at p. 905.) A demurrer is only concerned with the allegations in the complaint. (Ibid.) Here, Plaintiffs have alleged that the property was “insured by a homeowners insurance policy issued by Defendant Hippo Insurance Services.” (Compl. ¶ 1.) This must be taken as true.

Defendant cites nonbinding federal law for the proposition that it is entitled to introduce documents upon which the complaint relies in order to show that the documents do not support Plaintiffs’ claim. (Dem. 12:8-28.) A demurrer under California law is distinct from a motion to dismiss under federal law. California law is clear that extrinsic evidence may not be considered on a demurrer, and there is no exception for contract claims. Defendant is not entitled to introduce extrinsic evidence of the purported contract just because Plaintiffs did not attach the contract to their complaint. As discussed above, attaching the contract is not required.  

II. Good Faith and Fair Dealing

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-50.) “When the insurer engages in unreasonable conduct in connection with an insured’s insurance claim, the insurer is said to have tortiously breached the implied covenant.” (Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 948.)

Defendant argues that it could not have denied policy benefits in bad faith if it was not even a party to the contract. However, as discussed above, the complaint sufficiently alleges that Defendant is a party to the contract. The complaint otherwise sufficiently alleges that Defendant engaged in bad faith by failing to perform a fair investigation, including relying on obviously inaccurate expert reports and ignoring evidence supporting the claim. (Compl. ¶ 24.) Therefore, the complaint sufficiently alleges a breach of the implied covenant of good faith and fair dealing.

III. Elder Abuse

“Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following: takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both. (Welf. & Inst. Code, § 15610.30.)

Defendant again argues that this claim fails because there is no contract between Plaintiffs and Defendant. Since this argument is unavailing, the elder abuse claim survives. Plaintiffs have adequately alleged that Defendant retained money (the policy benefits) that Plaintiffs were entitled to, whilst knowing that doing so would harm Plaintiffs. (Compl. ¶ 36.)

CONCLUSION

            Defendant Hippo Insurance Services’ demurrer is OVERRULED.