Judge: Donald F. Gaffney, Case: Loya v. Alliance United Insurance Company, Date: 2022-10-26 Tentative Ruling
TENTAIVE RULING:
Defendant Alliance moves to strike allegations related to punitive damages from the complaint. Defendant Adriana filed joinder in Alliance’s motion. For the reasons set forth below, the motion is GRANTED with leave to amend.
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; Cal. Civ. Code § 3294(a); See also, Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255 (“In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff”).)
“‘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.” Cal. Civ. Code § 3294(c)(1). “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” Cal. Civ. Code § 3294(c)(2). “‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” Cal. Civ. Code §3294(c)(3).
“‘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. “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.)
To hold a corporation liable for punitive damages, the following applies:
An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.
(Cal. Civ. Code §3294(b).)
“In the insurance policy setting, an insured may recover damages not otherwise available in a contract action, such as emotional distress damages resulting from the insurer's bad faith conduct [citation] and punitive damages if there has been oppression, fraud, or malice by the insurer [citation].” (Chu v. Old Republic Home Protection Company, Inc. (2021) 60 Cal.App.5th 346, 354.)
For example, in Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal. 3d 809, the California Supreme Court held punitive damages could be awarded against an insurance company based on tortious acts of its claims representatives. In doing so it rejected the insurance company's claim that the employees were not ‘managerial employees' engaged in ‘high-level policy making.’ (Id. at p. 822.) The high court held that “[t]he determination whether employees act in a managerial capacity ... does not necessarily hinge on their ‘level’ in the corporate hierarchy. (Ibid.) Rather, the critical inquiry is the degree of discretion the employees possess in making decisions that will ultimately determine corporate policy. (Ibid.) When employees dispose of insureds' claims with little if any supervision, they possess sufficient discretion for the law to impute their actions concerning those claims to the corporation.” (Id. at pp. 822–823.)
“It must be remembered that we are here concerned with an insurance company ..., not just any corporation.” (Id. at 823; accord Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1219.)
Manifestly, to plaintiff, [the claims representative's] actions were actions of defendant. [The claims representative] personally managed the most crucial aspects of his employer's relationship with its policyholders. Defendant should not be allowed to insulate itself from liability by giving an employee a nonmanagerial title and relegating to him crucial policy decisions.
(Egan, supra, 24 Cal.3d at p. 823.)
In the insurance context, therefore, willful delays and refusals to investigate, bad-faith denials, and lax corporate policies that provided no oversight of claims agents is sufficient to constitute oppressive conduct for which there is a “conscious disregard of the rights” of the insured. (Egan, supra, 24 Cal.3d at p. 823; Major, supra, 169 Cal.App.4th at p. 1219.)
Under these legal standards, Plaintiff is correct that a bad-faith denial of Plaintiff’s insurance claim may be a sufficient basis for punitive damages. Ultimately, the extent of Defendants’ corporate policies and the facts and circumstances behind Defendants’ denials (and whether or not those actions rise to the level of “oppression”) are evidentiary questions of fact for discovery to uncover. (See e.g., Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1080 [“While it is not obvious from the record before us that such clear and convincing evidence exists, we will not foreclose Jordan from an opportunity to put on evidence of Allstate's malice, oppression or fraud.”] Further, whether or not the claims agent who denied Plaintiff’s claims is a “managing agent” or had the requisite authority is also an evidentiary question of fact (and one that is within the Defendants’ exclusive knowledge and control at this time). Generally, therefore, the pleading stage only requires the ultimate facts for a claim under which punitive damages is available. Plaintiff cannot generally be expected to know these facts until discovery has proceeded.
In this specific case, however, the basis of Plaintiff’s claim for punitive damages is unclear. In the complaint, it appears that merely the denial of the claim (without further allegations as to a corporate policy of bad faith denials and/or a failure to investigate) was the “oppressive” act. In her opposition, however, Plaintiff argues that it was due to a racial animus and wrongful accusation that she was involved in the theft—a contention that does not appear in the complaint. Further, Plaintiff names the claims agent in her opposition, but he (and his role) is not named in the complaint. The totality of the ultimate facts based upon which Plaintiff claims Defendants’ conduct was “oppressive” is unclear such that Defendants’ do not have sufficient notice of why punitive damages are being sought against them.
The motion is, therefore, GRANTED with leave to amend.
Should Plaintiff desire to file an amended complaint that addresses the issues in this ruling, Plaintiff shall file and serve the amended complaint within 30 days of service of notice of this ruling.
Defendants to give notice.