Judge: David B. Gelfound, Case: 22CHCV00895, Date: 2024-08-08 Tentative Ruling

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Case Number: 22CHCV00895    Hearing Date: August 8, 2024    Dept: F49

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F49

MOTION FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION OF ISSUES

Motion filed: 2/5/24

MOVING PARTY: Defendant American Family Connect Property and Casualty Company, erroneously sued as American Family Connect Insurance Agency, Inc. (“Connect”)

RESPONDING PARTY: Plaintiffs Simon Simonyan, Petros Simonyan, Mary Simonyan, and David Ayrapetov (“Plaintiffs”)

NOTICE: OK.

RELIEF REQUESTED: An order granting Connect’s Motion for Summary Judgment on Plaintiffs’ Complaint, or in the alternative, granting summary adjudication on both of Plaintiffs’ causes of action and their prayer for punitive damages.

EVIDENTIARY OBJECTIONS: Plaintiffs’ evidentiary objections are OVERRULED.

TENTATIVE RULING: The motion is GRANTED.

BACKGROUND

This case arises from a dispute concerning insurance claims and compensations related to Plaintiffs’ 2015 BMW 335i (the “Vehicle) which was determined to be a total loss after a collision.

On October 14, 2022, Plaintiffs filed their Complaint against Defendant Connect, alleging (1) Breach of Contract, (2) Bad Faith Breach of Covenant of Good Faith & Fair Dealing. Subsequently, on September 28, 2023, Defendant Connect filed its Answer to the Complaint.

On February 5, 2024, Connect filed the instant Motion for Summary Judgment (the “Motion”). Subsequently, on April 22, 202, at Connect’s request, the Court reset the hearing on the Motion to July 22, 2024.

On April 8, 2024, Plaintiffs filed their Opposition to the Motion. Subsequently, Connect replied on April 17, 2024.

On April 29, 2024, Connect filed Proof of Service, indicating reservice of the Motion papers was done on April 26, 2024. Subsequently, Plaintiffs refiled their Opposition on July 31, 2024.

ANALYSIS

“A party may move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc., § 437c, subd. (a)(1).)

“The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining if the papers show that there is no triable issue as to any material fact, the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).) 

“[I]f the moving papers establish a prima facie showing that justifies a [ruling] in the [plaintiff's] favor, the burden then shifts to the [opposing party] to make a prima facie showing of the existence of a triable material factual issue.”' (Citation.)" (See's Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889, 900, quoting Rehmani v. Superior Court (2012) 204 Cal.App.4th 945, 950.) “The defendant or cross-defendant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).) 

A.    Motion for Summary Judgment

1)      First Cause of Action – Breach of Contract

             The elements of a cause of action for breach of contract are (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach or anticipatory breach, and (4) the resulting damage to the plaintiff. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830; Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1387.)

            Here, it is undisputed that at all relevant times, Plaintiffs’ Vehicle was insured under an automobile insurance policy by Connect (the “Policy”). (UMF, No. 2.) Connect further presents the pertinent terms of the Policy, including that “[i]n the ‘Limit of Liability’ Section, the Policy provides: ‘“Our limit of liability shall not exceed the lesser of: 1. The amount necessary to repair or replace the property, at the time of loss, or any of its parts with replacement parts and equipment which may be new, reconditioned, remanufactured or used, including but not limited to: a. Original manufacturer parts or equipment; and b. Non-original manufacturer parts or equipment. ... 2. The “actual cash value” of the “insured vehicle”. An adjustment for “depreciation” and physical condition will be made in determining “actual cash value” at the time of loss. 3. The “actual cash value” of the custom parts or equipment, not to exceed the “actual cash value” of the vehicle.’” (UMF, No. 4.)

            Furthermore, Connect proffers the following evidence to demonstrate that there is no triable issue as to its performance under the Policy.

“On June 20, 2018, a Connect claim handler contacted the insurer of the other vehicle involved in the accident to inquire whether that insurer would acknowledge that their driver was at fault. The claim handler also contacted plaintiffs’ counsel to find out whether they wanted to pursue recovery from the other driver’s insurer or from their Connect Policy.” (UMF, No. 8.)

“On July 13, 2018, Connect obtained an estimate for the cost to repair the Vehicle. The total of the estimate was $9,732.98. On July 16th, Connect sent the estimate to plaintiffs. On July 17, Connect issued payment to Mary Simonyan and David Ayrapetov (the named insureds under the Policy) in the amount of $8,732.98, which was the estimated repair cost less the Policy’s $1,000 deductible.” (UMF, No. 9.)

            “Connect received the shop’s supplemental estimate on September 7, 2018. Connect arranged for its own appraiser to reinspect the Vehicle and, on September 11th, Connect received its appraiser’s supplemental estimate showing a total estimated repair cost of $27,255.13. Based on the substantial increase in repair cost, Connect determined the Vehicle was a ‘total loss.’ On September 13, 2018, Connect sent plaintiffs a letter explaining its determination and enclosing a Vehicle Valuation Report and the appraisal.” (UMF, No. 11.)

“On October 12, 2018, Connect sent plaintiffs a check in the amount of $6,000 as payment for reasonable storage charges for the Vehicle.” (UMF, No. 14.)

“After plaintiffs confirmed they intended to retain the Vehicle, Connect determined the value of the salvage to be $9,515. On December 6, 2018, Connect issued a check in the amount of $10,711.96 payable to Mary Simonyan, David Ayrapetov and BMW Financial Services (the lessor). This constituted the value of the Vehicle at the time of loss ($28,167) plus credits for tax and license, minus: (i) the prior payment of $8,732.98 (based on the initial repair estimate); (ii) the salvage value ($9,515); and (iii) the $1,000 deductible.” (UMF, No. 15.)

            “Connect was able to obtain a partial recovery from the insurer of the other driver, and, on May 3, 2019, Connect reimbursed plaintiffs their $1,000 deductible.” (UMF, No. 17.)

“On June 28, 2019, and August 15, 2019, Connect notified plaintiffs that its records showed that the December 2018 check for $10,711.96 had not been cashed. On January 31, 2020, Connect notified plaintiffs that its records showed that the May 2019 check for $1,000 (the return of their deductible) had not been cashed.” (UMF, No. 18.)

“Connect was contacted by BMW Financial Services on December 22, 2021. The BMW representative stated that the company had settled with plaintiffs but was still owed approximately $12,000. Connect then reissued the $10,711.96 check, which had never been cashed, and sent it to BMW Financial Services.” (UMF. No. 20.)

            Given that Plaintiffs do not contest and agree that these facts are undisputed, the Court finds that Connect has met its burden to show that there is no triable issue as to any material fact regarding Connect’s performance of its contractual obligations. The evidence has shown that Connect contacted Plaintiffs (UMF No. 8), conducted appraisal and evaluation (UMF Nos. 9, 11), and issued four checks: one for $8,732.98 based on the initial repair estimate (UMF, No. 9), one for $6,000 as payment for reasonable storage charges for the Vehicle  (UMF, No. 14), one for $10,711.96 as an adjusted payment for the total-loss (UMF, No. 15), and one for $1,000 as reimbursement for Plaintiffs’ deductible (UMF, No. 17). Lastly, it is undisputed that, after discovering that the previous check had never been cashed, Connect reissued a check in the amount of $10,711.96 in December 2021 following contact from BMW Financial Services earlier that month. (UMF, No. 20.)

            Based on these findings, the Court determines that Connect has met its burden to establish a prima facie showing that justifies summary adjudication in its favor on the first cause of action. The burden now shifts to Plaintiffs to demonstrate the existence of a triable material factual issue.

            Here, Plaintiffs do not dispute any of the above facts. Instead, they contend that the reissuance of the $10,711.96 check in December 2021 constituted a delayed payment, thereby breaching the contract. (Opp’n. at p. 5.)

However, Plaintiffs have not demonstrated that the Policy explicitly stipulates the timing for reissuing a check, thereby failing to establish a triable issue as to whether Connect breached an express term of the contract. Consequently, Plaintiffs have failed to meet their burden of setting forth any factual evidence showing that a triable issue of material fact exists as to the first cause of action.

Therefore, the Court GRANTS the Motion as to the breach of contract claim.

2)      Second Cause of Action – Bad Faith Breach of Covenant of Good Faith & Fair Dealing

The law implies a covenant of good faith and fair dealing in every contract, including insurance policies. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720 (Wilson).) The obligations imposed by the implied covenant are imposed by law to govern the manner in which the express contractual obligations must be discharged – i.e., fairly and in good faith. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573; California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 54; Chateau Chamberay Homeowners Ass’n v. Associated Int’l Ins. Co. (2001) 90 Cal.App.4th 335, 346.)

            “(T)he essence of the implied covenant of good faith and fair dealing is that [t]he insurer must refrain from doing anything that will injure the right of the insured to receive the benefits of the [insurance] agreement, the terms and conditions of which define the duties and performance to which the insured is entitled.” (Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1514-1515.)

To establish the insurer's “bad faith” liability, the insured must show that the insurer has (1) withheld benefits due under the policy, and (2) that such withholding was “unreasonable” or “without proper cause.” (Gruenberg v. Aetna Ins. Co., supra, 9 Cal.3d at pp. 573–574.) The actionable withholding of benefits may consist of paying less than due (Neal, supra, 21 Cal.3d at p. 921); and/or unreasonably delaying payments due (Waller v. Truck Ins. Exchange (1995) 11 Cal.4th 1, 36).

A delay in payment of benefits due under an insurance policy gives rise to tort liability only if the insured can establish the delay was unreasonable. (Wilson, supra, 42 Cal.4th at p. 723.) “[I]t has been said that ‘an insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured's coverage claim is not liable in bad faith even though it might be liable for breach of contract.” (Ibid.)

“[B]reach of a specific provision of the contract is not a necessary prerequisite to a claim for breach of the implied covenant of good faith and fair dealing[.]” (Schwartz v. State Farm Fire & Casualty Co. (2001) 88 Cal.App.4th 1329, 1339.)

Here, Connect contends that Plaintiffs cannot prove that Connect breached the implied duty by refusing to pay the full amount Plaintiffs owed on the lease for the vehicle, commonly referred to as a “gap” coverage payment. Connect argues that it is undisputed that the Policy covers only limited liability and does not include “gap” coverage. (Mot. at p. 10, UMF, No. 4.)

Furthermore, Connect asserts that Plaintiffs cannot establish that it breached the implied duty on the alternative grounds that the vehicle’s actual cash value was calculated unreasonably low. (Mot. at p. 10.) Connect maintains that the existence of a “genuine dispute” over the coverage amount demonstrates that its actions were not unreasonable, citing Rappaport-Scott v. Interinsurance Exch. of the Automobile Club (2007) 146 Cal. App. 4th 831, 837.

The established case law sets forth, “an insurer is entitled to summary judgment based on a genuine dispute over coverage or the value of the insured's claim only where the summary judgment record demonstrates the absence of triable issues [citation] as to whether the disputed position upon which the insurer denied the claim was reached reasonably and in good faith.” (. (Wilson, supra, 42 Cal.4th at p. 724.) Connect’s position is supported by undisputed evidence. Specifically, Connected undertook multiple, thorough steps to ascertain the Vehicle’s actual cash value, including securing an initial repair estimate and a supplemental estimate from the repair shop (UMF, No. 10), arranging for its own appraiser to reinspect the Vehicle (UMF, No. 11), and ordering a vehicle valuation report. (Ibid.)

Additionally, the Court finds that undisputed facts establish prima facie showing that the reissuance of the check in December 2021 does not constitute an unreasonable withholding of benefits due. It is undisputed that Connect made the first $10,711.96 check on December 6, 2018, payable to Mary Simonyan, David Ayrapetov, and BMW Financial Services. (UMF, No. 15.) Subsequently, Connect has repeatedly reminded Plaintiffs that its records showed that the $10,711.96 check, among other checks issued by it, had not been cashed. (UMF, No. 18.) Finally, after being contacted by BMW Financial Services on December 22, 2021, and learning that BMW Financial Services had settled with Plaintiffs but was still owed approximately $12,000, Connect reissued the $10,711.96 check on December 29, 2021. (UMF, No. 20.)

Upon reviewing the evidence presented by Connect, the Court finds that Connect has met its burden of demonstrating that it acted reasonably and in good faith concerning the calculation of the Vehicle’s actual cash value and the timeliness of payments to Plaintiffs. In line with established precedent, including those set in Wilson, supra, the Court is satisfied with Connect’s prima facie showing that it is entitled to a summary adjudication as a matter of law on the Second Cause of Action.

Although Plaintiffs contend that Connect has failed to meet its burden of proof, thereby asserting that they need not introduce evidence of a prima facie case (Opp’n. at p. 5), they have not provided legal analysis to support this contention, which is also contrary to the Court’s finding.

The Court has previously found that Connect’s undisputed evidence sufficiently shows that Plaintiffs cannot prove that Connect acted unreasonably – an essential element for the Second Cause of Action. Plaintiffs’ contrary assertions are considered unpersuasive and do not overcome the Court’s earlier findings. Consequently, the burden now shifts to Plaintiffs to demonstrate the existence of a triable issue.

Here, Plaintiffs argue that Connect “only properly paying the final benefits three-and-a-half years after the Insured’s vehicle loss (collision) occurred,” and that “it delayed so long to pay lienholder BMW Financial, as specifically directed by the Insureds 2 years earlier.” (Opp’n. at p. 7.) Plaintiffs assert that the lengthy delay in proper payment by Connect is a material issue of fact on the breach of the implied covenant of good faith. (Ibid.)

The Court notes that Plaintiffs have not presented separate evidence, and their assertions contradict the undisputed facts as previously discussed. These undisputed facts include:

(1)   Connect issued the first $10,711.96 check on December 6, 2018, payable to Mary Simonyan, David Ayrapetov, and BMW Financial Services (UMF, No. 15) (Underlines added),

(2)   On February 20, 2019, Connect’s claim handler explained to Plaintiff David Ayrapetov (“Ayrapetov”) that the Policy does not provide “gap” coverage, in response to Ayrapetov’s request for Connect to pay BMW Financial Services the balance Plaintiffs owe on their lease for the Vehicle (UMF, Nos. 16, 23).

(3)   On June 28, and August 15, 2019, Connect repeatedly notified Plaintiffs that its records showed that the December 2018 check for $10,711.96 had not been cashed (UMF, No. 18).

(4)   (4) after being contacted by BMW Financial Services on December 22, 2021, and learning that BMW Financial Services had settled with Plaintiffs but was still owed approximately $12,000, Connect reissued the $10,711.96 check on December 29, 2021 (UMF, No. 20).

In reviewing a Motion for Summary Judgment, the Court is required to view the evidence in the light most favorable to the party opposing summary judgment. (See Avivi v. Centro Medico Urgent Med. Ctr. (2008) 159 Cal.App.4th 463, 467; see also Code Civ. Proc., § 437c, subd. (c).) After reviewing the undisputed material facts and drawing all reasonable inferences in favor of Plaintiffs as the opposing party, the Court concludes that Plaintiffs have failed to meet their burden to demonstrate that a triable issue of material fact exists regarding whether Connect’s reissuance of the $10,711.96 check was unreasonably delayed or lack of good faith.

Accordingly, the Court GRANTS the Motion as to the Second Cause of Action.

3)      Statute of Limitations as Applied to the Second Cause of Action

"Claims for breach of the implied covenant of good faith and fair dealing may sound in either contract or tort, depending on the remedies being sought. A contract claim limits the plaintiff to contract remedies only, while a tort claim permits recovery of non-contract damages, such as emotional distress, punitive damages, and attorney's fees." Blue Shield of California Life & Health Ins. Co. v. Superior Court (2011) 192 Cal. App. 4th 727, 730 fn. 1.]

"A bad faith action in tort against an insurer for breach of the implied covenant of good faith and fair dealing is governed by the two-year limitations period which Code of Civil Procedure section 339, subdivision 1[.]” (Archdale v. American Int'l Specialty Lines Ins. Co. (2007) 154 Cal. App. 4th 449, 472 (Archdale) [internal citation omitted])

“A defendant moving for summary judgment based on the affirmative defense of the statute of limitations carries its burden by presenting evidence establishing that the plaintiff's claim is time-barred. [Citation.]” (Genisman v. Carley (2018) 29 Cal.App.5th 45, 49 (Genisman).) If the defendant meets this initial burden, the burden shifts to the plaintiff “to show that a triable issue of one or more material facts exists as to” the defense. (Code Civ. Proc., § 437c, subd. (p)(2).) “That is, the plaintiff must submit evidence that would allow a ‘reasonable trier of fact [to] find in plaintiff[’s] favor on the statute of limitations issue.’ [Citations.] ‘If defendant[] presented evidence establishing the defense and plaintiff[] did not effectively dispute any of the relevant facts, summary judgment was properly granted. [Citation.]’ [Citation.]” (Genisman, supra, at p. 49.)

“Critical to applying a statute of limitations is determining the point when the limitations period begins to run. Generally, a plaintiff must file a suit within a designated period after the cause of action accrues. [Citation.] A cause of action accrues ‘when [it] is complete with all of its elements’ – those elements being wrongdoing, harm, and causation. [Citation.]” (Pooshs v. Philip Morris USA, Inc. (2011) 51 Cal.4th 788, 797.) An insurer breaches the implied covenant of good faith and fair dealing when it unreasonably withholds policy benefits. (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1072 (Jordan).)

Here, the Complaint seeks remedies of punitive and exemplary damages, thus the bad faith breach claim is sounding in tort and subject to a two-year statute of limitations. (Archdale, supra, 154 Cal. App. 4th at p. 472.)

Connect argues that the limitation period ran from December 2018 when the claim was fully adjusted and all payments had been made. (Mot. at p. 8, Reply, at p. 4.) It further contends that the issuance of the 2021 check to BMW Financial did not involve any additional adjustment of the claim and thus should not toll the limitations period. (Reply, at p. 5.)

Despite Connect’s assertion, the Court finds the argument that the limitations period commencing in December 2018 to be conclusory. Consistent with the principles outlined in Jordan, the limitations period should be considered to have started in December 2021, the point at which Plaintiffs allege that Connect breached the implied covenant of good faith and fair dealing, which forms the gravamen of the case.

Consequently, the action was initiated on October 14, 2022, falling within the two-year statute of limitations.

Therefore, the Court concludes that Connect is not entitled to the summary adjudication on the Second Cause of Action based on the alternative grounds that this claim is time-barred. This decision does not affect the Court’s granting of the Motion based on other grounds as previously analyzed.

4)      Punitive Damages

Connect further argues that Plaintiffs cannot make the showing necessary to support their prayer for punitive damages. (Mot. at p. 10.) The Court addresses this issue below.

"To justify an award of punitive damages, the defendant must be guilty of oppression, fraud or malice. It must act with intent to vex, injure or annoy, or with a conscious disregard of plaintiff's rights." (Beck v. State Farm Mut. Auto. Ins. Co. (1976) 54 Cal. App. 3d 347, 355)

In reviewing Connect’s motion for summary adjudication on the punitive damages claim, the burden is on Connect to show that Plaintiffs cannot prove that it acted with malice, oppression, or fraud. (Civ. Code § 3294, subd. (a).) Then the burden shifts to the Plaintiffs to establish evidence supporting punitive damages with a clear and convincing standard of proof. (See Basich v. Allstate Ins. Co. (2001) 87 Cal.App.4th 1112, 1118-1119.)

            Here, Connect bases its argument on the identical asserted undisputed facts upon which it sought summary judgment on the Breach of Contract and Bad Faith Breach of Implied Covenant of Good Faith & Fair Dealing claims. (Mot. at pp. 10-11.)

Having determined that there are no triable issues of material fact with respect to both causes of action, the Court must also conclude that Plaintiffs have failed to establish a triable issue of fact concerning their request for punitive damages. This conclusion is grounded in the principle that without an underlying cause of action, there can be no damages.

Based on the foregoing, the Court GRANTS the Motion for Summary Judgment.

CONCLUSION

The Motion for Summary Judgment filed by Defendant American Family Connect Property and Casualty Company is hereby GRANTED.

Moving party to provide notice.