Judge: Daniel S. Murphy, Case: BC723434, Date: 2025-06-13 Tentative Ruling

Case Number: BC723434    Hearing Date: June 13, 2025    Dept: 32

I. BACKGROUND

            a. The Complaint

On September 27, 2018, Plaintiff Poonam Dua filed this action against Stillwater Insurance Company, alleging (1) breach of contract and (2) breach of the implied covenant of good faith and fair dealing. The case was initially assigned to Judge Keosian in Department 61.

            According to the complaint, Plaintiff had an insurance policy with Defendant that was in effect from May 2015 to May 2016. In March 2016, Plaintiff was sued in a dog attack case (Peroff Action), and she alleges that Defendant failed to properly investigate the claim, failed to tender a defense, and failed to indemnify Plaintiff. Plaintiff ultimately settled the Peroff Action for $15,528.13 and also incurred attorneys’ fees.

            b. First Summary Judgment

            On June 9, 2021, Judge Keosian granted Defendant’s motion for summary judgment on the grounds that an exclusion in the policy precluded coverage. The exclusionary clause at issue exempted claims for damages caused by: (i) an animal at an insured premises; or (ii) an animal owned by, or in the care, custody, or control of the insured. Defendant successfully argued on summary judgment that the only way Plaintiff could have been found liable in the Peroff Action was through facts that also triggered the animal exclusion in the policy. Specifically, Defendant argued that the Peroffs would have needed to prove that Plaintiff owned or had custody or control of the offending dogs, facts which would have necessarily triggered the policy exclusion. Therefore, Judge Keosian held that Defendant had no duty to defend as a matter of law. This led to a judgment in favor of Defendant on June 16, 2021.

            c. Appeal

            Plaintiff appealed the judgment, and in a published opinion issued on May 5, 2023, the Court of Appeal reversed and remanded. (Dua v. Stillwater Ins. Co. (2023) 91 Cal.App.5th 127, 127.) The California Supreme Court subsequently denied review. (Dua v. Stillwater Insurance Co. (July 12, 2023, No. S280415) 2023 Cal. LEXIS 3920, at *1.)

The Court of Appeal rejected Defendant’s argument because it conflates Defendant’s duty to indemnify with its duty to defend. (Dua, supra, 91 Cal.App.5th at p. 138.) The Court of Appeal held that even if the Peroffs’ complaint was frivolous and could not have resulted in liability for Plaintiff—meaning Defendant did not have to indemnify the claim—Defendant may have still been required to defend Plaintiff. (Ibid.) This is because “[t]he duty to defend is broader than the duty to indemnify.” (Ibid.) “The duty to defend exists where extrinsic facts, both disputed and undisputed, that the insurer knows or becomes aware of from any source at the time of the inception of the third party lawsuit or at the time of tender, suggest there may be coverage.” (Id.at p. 137.) The Court of Appeal found that the Peroffs’ claims—in light of the facts known to Defendant at the time, i.e., Plaintiff’s denial that she owned or controlled the dogs—“did not come within the animal liability exclusion” and “created at least a possibility of coverage.” (Id. at p. 138.)    

d. Cross-Complaint

In response to the decision in Dua, Defendant paid Plaintiff the attorney’s fees and costs incurred in defending the Peroff Action, with interest. Defendant also paid Plaintiff the settlement amount but reserved its right to seek reimbursement.    

On February 2, 2024, Defendant filed a cross-complaint for declaratory relief, seeking to establish that it had no duty to indemnify Plaintiff for the Peroff settlement based on the animal exclusion clause. By its action, Defendant seeks to claw back the amount it paid to Plaintiff for the settlement.   

e. The Instant Motion

On May 23, 2024, Defendant filed the instant motion for summary judgment or adjudication of Plaintiff’s complaint. Plaintiff filed an opposition on May 16, 2025. Defendant filed a reply on May 30, 2025.

II. LEGAL STANDARD

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) 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.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382.)

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); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.) Once the defendant has met that burden, the burden shifts to the plaintiff 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.) 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.)

III. DISCUSSION

a. Breach of 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.) “Contractual damages are ‘the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.’” (Amato v. Mercury Casualty Co. (1997) 53 Cal.App.4th 825, 831.)

            Here, Defendant acknowledges that as a result of the Dua decision, it had a contractual duty to defend Plaintiff. Of course, it is undisputed that Defendant did not in fact defend Plaintiff. Thus, Defendant effectively concedes that it breached the policy by failing to defend. Defendant maintains that it had no duty to indemnify. However, Defendant argues that its payment of both the costs of defending the Peroff Action and the cost of the settlement negates Plaintiff’s damages and moots the breach of contract claim regardless of whether there was a duty to indemnify.  

            Damages are an essential element of breach of contract. In her complaint, Plaintiff alleges that her damages consisted of: (a) attorney’s fees; (b) the settlement; and (c) general damages in an amount to be proved at trial. (Compl. ¶ 25.) It is undisputed that Defendant has paid Plaintiff the costs and attorney’s fees incurred in defending the Peroff Action, with interest, and has also paid the settlement amount. (Def.’s Stmt. of Undisputed Facts (UF) 27-29, 36-37.) However, Defendant did not pay interest on the settlement amount and made the payment conditional. (UF 37-38.) Under these facts, a reasonable jury may conclude that Defendant did not fully reimburse Plaintiff’s damages.

Defendant argues that it had no duty to indemnify in the first place and thus had no obligation to pay the settlement amount. However, the settlement amount may be considered a “proximate result of the wrongful refusal to defend.” (See Amato, supra, 53 Cal.App.4th at p. 829.) Damages should compensate for “all the detriment proximately caused” by wrongdoing. (Id. at p. 831.) A reasonable jury may find that Plaintiff’s payment of the settlement was a detriment proximately caused by Defendant’s failure to defend. For example, Plaintiff may have incurred a lesser settlement, or no liability at all, if Defendant had tendered a defense. Thus, there are triable issues over Plaintiff’s damages from the failure to defend regardless of the duty to indemnify.

In sum, there are triable issues over whether Defendant failed to defend Plaintiff and over Plaintiff’s resulting damages. Therefore, summary adjudication is not warranted on the first cause of action.

            b. Implied Covenant of 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.) In the insurance context, “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 v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.)

As discussed above, Defendant effectively concedes that it withheld a defense in breach of the policy. At the very least, there is a triable issue. Thus, the remaining question is whether Defendant acted in bad faith. Defendant argues that it could not have acted in bad faith because there was a genuine dispute over its liability given the state of the law prior to the decision in Dua. After all, a trial court initially granted summary judgment in Defendant’s favor, and the matter had to be clarified by the Court of Appeal in a published decision.

However, “[t]he genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured’s claim.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723.) Here, the adjuster who handled Plaintiff’s claim testified that her practice was to reject all dog bite claims under the animal exclusion clause unless the insured purchased an additional animal coverage. (Plntf.’s Ex. B at 122:4-9, 129:6-10.) The adjuster’s testimony suggests that she did not consider the facts which would have taken Plaintiff’s claim outside of the animal exclusion clause, i.e., that Plaintiff did not own or control the offending dogs. (Id. at 136:2-24.) This suggests that Defendant did not evaluate the claim in good faith. In other words, “Dua has introduced facts giving rise to a material dispute of fact as to whether Stillwater unreasonably or improperly failed to defend when it was presented with facts suggesting that the animal liability exclusions did not apply.” (Dua, supra, 91 Cal.App.5th at p. 139.)  

Because there are triable issues over whether Defendant investigated and evaluated the claim in good faith, summary adjudication is not warranted on the second cause of action.

CONCLUSION

            Defendant’s motion for summary judgment is DENIED. Defendant’s alternative motion for summary adjudication is DENIED.