Judge: David B. Gelfound, Case: 24CHCV03294, Date: 2025-02-11 Tentative Ruling

Case Number: 24CHCV03294    Hearing Date: February 11, 2025    Dept: F49

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F49

DEMURRER WITH MOTION TO STRIKE

Motion filed: 10/31/24

MOVING PARTY: Defendant State Farm General Insurance Company

RESPONDING PARTY: Plaintiffs Nubar Karatas, Lerna Karatas, Karatas Nubar and Lerna Trust, and Karatas Family Trust

NOTICE: OK.

RELIEF REQUESTED: An order sustaining Defendant’s Demurrer as to the Second Cause of Action asserted in Plaintiffs’ Complaint.

TENTATIVE RULING: The Demurrer is SUSTAINED with 30-Day Leave to Amend. The Motion to Strike is GRANTED with 30-Day Leave to Amend.

BACKGROUND

This action arises from Defendant insurer’s alleged breach of contract in handling Plaintiffs’ claim for storm-related water damage to their residence.

On September 11, 2024, Plaintiffs Nubar Karatas, Lerna Karatas, Karatas Nubar and Lerna Trust, and Karatas Family Trust (collectively, “Plaintiffs”) filed a Complaint against Defendant State Farm General Insurance Company (“Defendant” or “State Farm”). The Complaint alleges two causes of action: (1) Breach of Contract, and (2) Breach of Implied Covenant of Good Faith and Fair Dealing.

On October 31, 2024, State Farm filed the instant Demurrer (the “Demurrer”) and a concurrently filed Motion to Strike (the “Motion”). Subsequently, Plaintiffs filed their Opposition on January 29, 2025, and State Farm submitted its Reply on February 4, 2025.

ANALYSIS

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.)

At the pleading stage, a plaintiff needs only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against them. (Semole v. Sansoucie (1972) 28 Cal.App.3d 714, 721.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law[.]” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525 (Berkley).) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

A.    Meet and Confer

A party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., section 430.41(a).) A failure to meet and confer does not constitute grounds to sustain or overrule a demurrer. (See Code Civ. Proc., sections 430.41 (a)(4).)

Here, State Farm’s good faith efforts to meet and confer were sufficient. (Gargalis Decl. ¶¶ 2-6.)

B.     Second Cause of Action – Breach of Implied Covenant of Good Faith and 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).

However, 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.)

            Here, State Farm contends that the Complaint does not allege the unreasonable conduct necessary to support a bad faith claim. (Mot. at p. 6.) It further argues that Plaintiffs’ conclusory allegations are insufficient and should be disregarded for the Court’s review of the Demurrer. (Id. at p. 8.)

            Plaintiffs oppose the Demurrer, arguing that the Complaint contains sufficient factual allegations to support their bad faith claim, including: (1) State Farm’s prolonged delay and inadequate investigation into their storm-related water loss; (2) delay in issuing its first payment; (3) intentionally withholding of information; (4) failure to conduct a fair review and cover the full extend of the damage. (Opp’n. at pp. 5-8.)

            The Court observes the following allegations in the Complaint. Plaintiffs and State Farm entered into a written insurance policy number 71-QK-6979-3, which provided coverage and benefits for all covered losses at Plaintiffs’ property located at 11547 Seminole Circle, Porter Ranch, California 91326 (the “Property”). (Compl. ¶¶ 4, 11.) On or about January 9, 2023, powerful storms/winds caused significant damage to the Property. (Id. ¶ 10.) Plaintiffs timely reported the incident and filed a claim number 75-44z3-33k with State Farm. (Id. ¶ 12.) On May 4, 2023, following an inspection conducted by a representative of State Farm, Ms. Mackey of State Farm (“Ms. Mackey”), issued a check of $3,016.86. (Id. ¶ 16.) On June 3, 2023, State Farm sent a letter informing Plaintiffs that a new inspection, to be conducted by a structural engineer from EFI Global, had been scheduled for June 8, 2023. (Id. ¶ 21.) On July 27, 2023, State Farm informed Plaintiff that a new adjuster had been assigned to their claim. (Id. ¶ 22.)

            On September 29, 2023, State Farm contacted Plaintiffs’ counsel, stating that no further coverage would be afforded by State Farm based on its review of the structural engineer’s report. Plaintiffs’ counsel requested a certified copy of the policy from State Farm’s underwriting department, as well as a copy of the EFI Global report along with a letter outlining State Farm’s position on coverage. (Compl. ¶ 24.) On October 16, 2023, Plaintiffs’ counsel sent State Farm a copy of the repair estimate provided by licensed contractor Rossmoyne Inc. (Ibid.) On November 3, 2023, State Farm sent a letter to Plaintiffs’ counsel stating that it would be in the process of reviewing the claim. (Id. ¶ 26.) On December 12, 2023, State Farm informed Plaintiffs’ counsel that it was unable to provide a certified copy of the policy pre-litigation but offered to resend a non-certified copy upon request. (Id. ¶ 30.) On February 12, 2024, State Farm issued a partial denial letter, explaining that certain damages were not covered under the policy. It also provided an additional payment of $10,263.54 for covered repairs. (Id. ¶ 31.)

            First, the Court finds the above allegations insufficient to state State Farm’s “bad faith” liability on the grounds of prolonged delays and inadequate investigation.

The Complaint alleges that State Farm conducted two investigations – one prior to May 4, 2024, and the other on June 9, 2024. Additionally, Plaintiffs provided State Farm a copy of the repair estimate from licensed contractor Rossmoyne Inc., outlining the costs to restore the property to the pre-loss condition for the covered damages caused by rain. (Compl. ¶ 24.) However, there are no allegations that State Farm unreasonably disregarded any material findings presented in Plaintiffs’ repair estimate. Nor does it include facts demonstrating that State Farm’s own investigations, including the structural engineer’s inspection by EFI Global, were only superficial, self-serving investigation. (See Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713.)

            Moreover, case law establishes that “there can be no ‘unreasonable delay’ until the insurer receives adequate information to process the claim and reach an agreement with the insureds. [Insurer] did not receive adequate information to process the claim until after Aimee submitted to examination under oath pursuant to the terms of the insurance policy.” (Globe Indemnity Co. v. Superior Court (1992) 6 Cal.App.4th 725, 731.)

Here, Plaintiffs allege that following the June 8, 2024, inspection, State Farm took additional weeks to review the findings and ultimately issue a partial denial letter. Even if the Court admits the allegations as true, they do not support an inference that State Farm’s review and resulting delay in determining coverage were unreasonable as a matter of law.

            Second, the Complaint insufficiently alleges that State Farm breached its duty to act fairly and in good faith by unreasonably withholding payments under the policy. (See Delos v. Farmers Group, Inc. (1979) 93 Cal.App.3d 642, 650.)

Here, Plaintiffs do not allege that additional payments were due under the policy and that State Farm unreasonably withheld them. Rather, the only factual allegation merely asserts that they disagreed with State Farm’s assessment of the coverage. (Compl. ¶ 24.)

Third, the Court determines that bad faith is not established by State Farm allegedly withholding information – specifically a certified copy of the insurance policy. State Farm declined to provide a certified copy pre-litigation but offered to resend a non-certified copy upon request. (Compl. ¶ 30.)

Here, Plaintiffs do not allege that the failure to provide a certified copy of the policy impeded their ability to evaluate coverage, submit their claim, or contest State Farm’s determination.

Plaintiffs' assertion that State Farm breached its duty of good faith and fair dealing by withholding a certified copy of the policy is not adequately supported by factual allegations. Plaintiffs acknowledge that State Farm provided an option to obtain a non-certified copy, and they fail to allege how the absence of a certified copy materially affected their ability to pursue their claim. Without facts showing that State Farm’s refusal was unreasonable, misleading, or prejudicial, this allegation does not support a claim for bad faith withholding of information.

Lastly, the Court finds that, apart from the general factual allegations, the Complaint’s Second Cause of Action consists primarily of conclusory statements, which are insufficient to support a claim.

Based on the foregoing, the Court SUSTAINS the Demurrer as to the Second Cause of Action.

C.    Motion to Strike

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike are that the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. (Code Civ. Proc., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

In its Motion to Strike, State Farm seeks to strike the following portions from the Complaint:

1.      "STATE FARM intentionally, maliciously and oppressively refused to consider claim information, in furtherance of its financial gain and in breach of the POLICY" (Compl., ¶ 33, p.12:23-25.)

2.      "STATE FARM'S conduct in refusing to honor its full POLICY obligations was outrageous, despicable, malicious and fraudulent as its conduct left PLAINTIFFS' PROPERTY in a damaged condition for over a year. Accordingly, PLAINTIFFS bring this action to recover damages, including punitive damages, for STATE FARM'S bad faith conduct arising from their handling of PLAINTIFFS' CLAIM. (Compl., ¶ 34.)

3.      "and maliciously" (Compl., ¶ 48, p. 15:6.)

4.      "In breach of the implied covenant of good faith and fair dealing, STATE FARM further intentionally, fraudulently, deceitfully, maliciously and oppressively failed and refused, and continues to fail and refuse to fully pay PLAINTIFFS the amount of benefits under the POLICY and claimed damages as a result of the subject CLAIM." (Compl., ¶ 50.)

5.      "Acting oppressively, maliciously and fraudulently in the handling of the CLAIM." (Compl., ¶ 51(j), p. 16:8.)

6.      "malicious, oppressive, deliberate, deceitful, vexatious and fraudulent" (Compl., ¶ 57, p. 17:4-5.)

7.      "Additionally, as a consequence of the foregoing conduct of STATE FARM, PLAINTIFFS are entitled to exemplary and punitive damages against STATE FARM in conformity with California Civil Code Section 3294, or as provided by law, in an amount according to proof to punish or set an example of STATE FARM and to deter such conduct in the future. STATE FARM'S adjusters, officers, directors and managing agents were personally informed and involved in the decision-making process with respect to the misconduct alleged herein and to be proven at trial." (Compl., ¶ 58.)

8.      "For exemplary and punitive damages according to proof." (Compl., Prayer [second cause of action] ¶ 3, p. 18:5.)

(1)   Punitive Damages

Punitive damages may be imposed where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) “Malice” is conduct intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on with a willful and conscious disregard of the rights or safety of others. (Civ. Code, § 3294, subd. (c)(1).) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.’ [Citation.]” (Lackner v. North (2006) 135 Cal.App.4th 1188, 1210.)

“As amended to include [despicable], the [Civil Code section 3294] plainly indicates that absent an intent to injure the plaintiff, ‘malice’ requires more than a ‘willful and conscious’ disregard of the plaintiffs’ interests. The additional component of ‘despicable conduct’ must be found.” (College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725.) The statute’s reference to despicable conduct represents a “new substantive limitation on punitive damage awards.” (Ibid.) Despicable conduct is “conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. Such conduct has been described as ‘having the character of outrage frequently associated with crime.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.) Further, “[t]here must be evidence that defendant acted with knowledge of the probable dangerous consequences to plaintiff’s interests and deliberately failed to avoid these consequences.” (Flyer’s Body Shop Profit Sharing Plan v. Ticor Title Ins. Co. (1986) 185 Cal.App.3d 1149, 1155.)

A motion to strike punitive damages is properly granted where a plaintiff does not state a prima facie claim for punitive damages, including allegations that defendant is guilty of oppression, fraud or malice. (Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 63.) “Mere negligence, even gross negligence, is not sufficient to justify such an award” for punitive damages. (Kendall Yacht Corp. v. United California Bank (1975) 50 Cal.App.3d 949, 958.)

            The Complaint asserts two causes of action: (1) Breach of Contract, and (2) Breach of Implied Covenant of Good Faith and Fair Dealing.

            It is well-established that punitive damages may not be awarded as relief in a breach of contract claim. (Civ. Code, § 3294, subd. (a); Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 516; Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316.) Consequently, any allegations seeking punitive damages under the First Cause of Action are subject to the Motion to Strike.

            Moreover, as the Court has sustained the Demurrer as to the Second Cause of Action, Plaintiffs no longer have a valid legal basis to seek punitive damages.

            Accordingly, the Court GRANTS the Motion to Strike.

D.    Leave to Amend

Generally, leave to amend is available when “the defect raised by a motion to strike or by demurrer is reasonably capable of cure . . . to give the plaintiff a chance to cure the defect in question.” (CLD Construction, Inc. v. City of San Ramon (2004) 120 Cal.App.4th 1141, 1146.) Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given. (McDonald v. Superior Court (1986) 180 Cal.App.3d 297, 304.)

In accordance with this principle, and finding that the Complaint does not demonstrate on its face that it is incapable of amendment, the Court GRANTS Plaintiff 30 days Leave to Amend.

CONCLUSION

Defendant State Farm General Insurance Company’s Demurrer to Second Cause of Action in the Complaint is SUSTAINED.

Plaintiffs are GRANTED 30-DAY LEAVE TO AMEND.

Defendant State Farm General Insurance Company’s Motion to Strike is GRANTED WITH 30-DAY LEAVE TO AMEND.

Moving party to give notice.