Judge: Deirdre Hill, Case: 22TRCV00814, Date: 2023-01-31 Tentative Ruling

Case Number: 22TRCV00814    Hearing Date: January 31, 2023    Dept: M

Hearing Date:                         January 31, 2023

Moving Parties:                      Defendant Travelers Property Casualty Company of America

Responding Party:                  Plaintiff Behrens and Associates, Inc.

Motion to Strike Portions of First Amended Complaint

            The court considered the moving, opposition, and reply papers.

RULING

            The motion to strike is DENIED.  Defendant is ordered to file an answer within ten days.

BACKGROUND

            On September 16, 2022, plaintiff Behrens and Associates, Inc. filed a complaint against Travelers Property Casualty Company of America for (1) declaratory relief, (2) breach of contract, (3) breach of the duty of good faith and fair dealing, (4) equitable contribution, (5) equitable/partial/total indemnity, and (6) equitable subrogation.

            On October 25, 2022, plaintiff filed a FAC for (1) declaratory relief, (2) breach of contract, (3) breach of the duty of good faith and fair dealing.

LEGAL AUTHORITY

“The court may, upon a motion . . . , or at any time in its discretion, and upon terms it deems proper:  (a) Strike any irrelevant, false, or improper matter inserted in any pleading.  (b) Strike out 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.”  CCP §436(b).

            CCP §431.10 states:  “(a) A material allegation in a pleading is one essential to the claim or defense and which could not be stricken from the pleading without leaving it insufficient as to that claim or defense. 

(b) An immaterial allegation in a pleading is any of the following:  (1) An allegation that is not essential to the statement of a claim or defense.  (2) An allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense.  (3) A demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint. 

(c) An ‘immaterial allegation’ means ‘irrelevant matter’ as that term is used in Section 436.”

The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice.  CCP §437.

Civil Code §3294 authorizes the recovery of punitive damages in non-contract cases where “the defendant has been guilty of oppression, fraud, or malice . . . .”  The Court in Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-95, found that “[s]omething more than the mere commission of a tort is always required for punitive damages.  There must be circumstances of aggravation or outrage, such as spite or ‘malice,’ or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that his conduct may be called willful or wanton.”

“’Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.”  Civil Code §3294(c)(1).  

As the Court noted in College Hospital v. Superior Court (1994) 8 Cal.4th 704, 713, Section 3294 was amended in 1987 to require that, where malice is based on a defendant’s conscious disregard of a plaintiff’s rights, the conduct must be both despicable and willful.  The Court in College Hospital held further that “despicable conduct refers to circumstances that are base, vile, or contemptible.”  Id. at 725 (citation omitted).

DISCUSSION

            Defendant Travelers Property Casualty Company of America requests that the court strike paragraph 50 under the 3^rd cause of action and the prayer for punitive damages in the FAC.

            The FAC alleges that defendant Travelers issued two policies to plaintiff.  FAC, ¶8.  Plaintiff provided acoustical consulting and environmental noise control service on a construction project in the city of Los Angeles known as the Venice Pumping Plant Dual Force Main Project.  Plaintiff was a subcontractor to Vadnais Trenchless Services, Inc., who was the general contractor on the project.  Id., ¶10.  A nearby property owner sued the city of Los Angeles and Vadnais for damages allegedly sustained to his property from cement splattering and damages due to vibrations from heavy construction equipment and other sources as well as damages for other claims and injuries.  The nature of plaintiff’s business does not involve the use of any equipment of the type capable of causing any of the damages in question.  Id., ¶11.  Vadnais cross-complained against plaintiff and others for indemnity.  Id., ¶12.  At the time of the incident in question, plaintiff had three policies of insurance from two separate carriers.  One policy was with Admiral Insurance Company, which covered professional negligence and error or omissions by plaintiff as a professional consultant.  The other two were with Travelers.  Id., ¶13.

            The FAC further alleges that when plaintiff was served with the cross-complaint, plaintiff timely tendered defense of the action to both carriers.  Admiral expressed the opinion that coverage under their policy did not extend to the types of claims made by Vadnais; however, Admiral answered the complaint and has been provide a defense to plaintiff.  Travelers, on the other hand, declined to provide coverage or to provide a defense of the case on the theory that there was an exclusion in their policies for issues of professional negligence, in spite of the fact that the claim was not one for professional negligence, but was a claim primarily for property damage for physical injuries and for indemnity.  Id., ¶14. 

The FAC further alleges that Travelers first denied coverage by means of correspondence Ian Lauer, Claims Professional, dated October 2, 2020.  Id, ¶15.  Plaintiff’s counsel wrote to Travelers and Lauer on October 6, 2020, requesting that Travelers reconsider the coverage issues and retract their denial.  Id., ¶16.  Travelers again declined coverage.  Id., ¶17.  Plaintiff’s counsel wrote again to Travelers on January 11, 2021, demanding that Travelers reconsider the coverage issue and repeal their denial.  Id., ¶18.  No response was received from Travelers.  Plaintiff’s counsel appealed the denial again on March 29, 2022.  Travelers again failed or refused to respond.  Id., ¶19.  Plaintiff’s counsel sent a fourth letter on May 18, 2022, with the same result, no response.  The letter was a very detailed examination of the facts and the law.  Id., ¶20.  Plaintiff’s counsel sent a fifth letter dated August 1, 2022, and to which Travelers again failed to reply.  Id., ¶21.

Plaintiff also alleges that Travelers’ denial was wrongful and in bad faith, as it has failed to properly investigate the insured’s claims and determine that there is a potential for coverage under the policies with no applicable exclusionary language.  Defendants have failed to establish undisputed facts in or extraneous to the pleadings that conclusively establish no potential for coverage under defendants’ policies, and they have incorrectly and wrongfully applied exclusions of coverage.  It is clear from both the language of the policies and the allegations of the cross-complaint in the “Benbassat Lawsuit,” as well as the application of reason and logic, that plaintiff is entitled to both defense and indemnity from Travelers.  Id., ¶25.

            Defendant argues that the allegations are insufficient to support a claim for punitive damages because “Travelers’ interpretation of the professional services exclusion was objectively reasonable and made in good faith” and that Travelers “fully investigated, consider, and reconsidered the facts bearing on application of the Policy’s professional services exclusion, and made a coverage determination consistent with the manner in which such exclusions are interpreted in California.” 

            In opposition, plaintiff argues that it sufficiently alleged a claim in support of punitive damages.

            The court rules as follows:  The court notes that plaintiff adequately stated a cause of action for insurance bad faith, which is a sufficient basis for punitive damages.  Punitive damages are properly sought in connection with an insurance bad faith claim.  Egan v. Mutual of Omaha Co. (1979) 24 Cal. 3d 809, 820; Baron v. Fire Insurance Exchange (2007) 154 Cal. App. 4^th 1184.  “In simple terms, an insurer’s tortious bad faith conduct is conduct that is unreasonable.”  Howard v. American National Fire Ins. Co. (2010) 187 Cal. App. 4^th 498, 528-29 (citation omitted). 

Plaintiff alleges unreasonable and bad faith withholding of payments while knowing plaintiff’s claim to be valid; unreasonable and bad faith failure to pay plaintiff’s full claims when defendants had insufficient information within its possession to justify such failure; unreasonable and bad faith failure to reasonably investigate and process plaintiff’s claim; unreasonable and bad faith failure to attempt to effectuate a prompt, fair, and equitable settlement of plaintiff’s claims when liability had become reasonably clear; unreasonable withholding of benefits and delaying payments; failure to promptly provide a reasonable explanation of the basis relied in the policies; failure to thoroughly investigate plaintiff’s claim; and failing to evaluate plaintiff’s claim; and interpreting the policies in an unduly restrictive manner, and more.  See FAC, ¶39.

Defendant’s position that it reasonably interpreted the exclusion and thus did not act in bad faith is of no import at the pleading stage as the allegations in the FAC are assumed to be true.  See Clauson v. Superior Court (1998) 67 Cal. App. 4^th 1253, 1255.

The motion is DENIED.

            Plaintiff is ordered to give notice of the ruling.