Judge Edward B. Moreton, Jr, Case Number: 24SMCV03143, Date: 2024-09-19 Tentative Ruling

Judge: Edward B. Moreton, Jr, Case: 24SMCV03143, Date: 2024-09-19 Tentative Ruling

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

SARA CATHERINE FINLEY,

Plaintiff,

ON DEMAND INSURANCE AGENCY, LLC, et al.,

Defendants.

Case No.: 24SMCV03143

Hearing Date: September 19, 2024

order RE:

DefendantS on demand insurance

agency, llc and safelystay, inc.’s

DEMURRER to complaint

Plaintiff Sara Catherine Finley was injured while a guest of Lloyd Godson, a tenant of a property located at 9066 St. Ives Drive, West Hollywood, CA 90069 (“Property”). (Compl. ¶¶ 7, 9). The Property is owned by Defendant 9066 St. Ives, LP (“St. Ives”) and maintained by the property manager, The Maimon Group (“Maimon”). (Id. ¶¶ 5, 6). Plaintiff was injured when she tried to close a sliding glass door in an upstairs bedroom of the Property and the door detached from its tracks and fell, striking Plaintiff. (Id. ¶ 10).

Plaintiff also sues Defendants Safelystay, Inc. and On Demand Insurance Agency LLC (“Moving Defendants”). The Complaint alleges that Moving Defendants “issued a liability insurance policy that covered the Property, providing coverage for injuries to guests arising from negligence during the policy period.” (Id. ¶ 27).

The Complaint alleges a claim of negligence against Defendants St. Ives and Maimon for purportedly failing to properly maintain the sliding glass door on the Property and for failing to warn Plaintiff of its defective condition. (Id. ¶¶ 18, 19). In addition, Plaintiff asserts a cause of action against St. Ives and Maimon for premises liability for the negligent use or maintenance of the Property, creating a dangerous condition and failing to repair, remedy, or warn of the dangerous condition. (Id. ¶¶ 23, 24).

The Complaint also asserts causes of action directly against Moving Defendants for breach of contract and violation of the covenant of good faith and fair dealing. Specifically, the Complaint alleges that “Defendants [Safelystay and On Demand] issued a liability insurance policy that covered the Property, providing coverage for injuries to guests arising from negligence during the policy period.” (Id. ¶ 27). The Complaint further alleges that “Plaintiff, as an invitee injured on the Property due to a negligent condition, is a third-party beneficiary entitled to coverage under the policy issued by [Moving Defendants].” (Id. ¶ 28). The Complaint also alleges that Moving Defendants “owed a duty to act in good faith and fair dealing towards its policyholders and third-party beneficiaries like Plaintiff.” (Id. ¶ 32). Finally, the Complaint alleges that Moving Defendants “breached this duty by failing to investigate, assess, and settle Plaintiff’s claim in a timely and reasonable manner.” (Id. ¶ 34).

This hearing is on Moving Defendants’ demurrer to the Complaint. Moving Defendants argue that the law is well settled that an injured party cannot join an insurer as a party-defendant in the underlying action against the insured/tortfeasor.

Code Civ. Proc. § 430.41 requires that before the filing of a demurrer the moving party “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. § 430.41(a).) The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc. § 430.41(a)(2).) Thereafter, the moving party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc. § 430.41(a)(3).) Moving Defendants submit the Declaration of Phillip Frazee, which shows counsel attempted to meet and confer by telephone but Plaintiff’s counsel would not return his calls and would only respond to e-mails. This satisfies the meet and confer requirements of § 430.41. Plaintiff is admonished to comply with requests to meet and confer.

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 (in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents).) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”).) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Generally, an injured party may not join an insurer as a party-defendant in the underlying action against the insured/tortfeasor. (Royal Indemnity Co. v. United Enterprises, Inc. (2008) 162 Cal.App.4th 194, 205.) This is because the insurer’s duties flow to the insured alone and not to the injured third-party. (Shaolian v. Safeco Ins. Co. (1999) 71 Cal.App.4th 268, 271.)

“[E]ven though a third party making a liability claim against an insured will benefit from the insurer’s payment under the policy, the benefit is only incidental, and the claimant is not a third-party beneficiary of the contract.” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1600.) The injured third party is not in privity of contract with the liability insurer and, therefore, generally lacks standing to sue the insurer for failure to settle a claim under the liability policy. (Royal Indemnity, 162 Cal.App. 4th at 211.)

There are, however, several exceptions to the general rule. Plaintiff argues that this case falls within the exception articulated in Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1086. There, the plaintiff was injured in a slip and fall accident on property owned by the insured under a policy issued by defendant insurer. After the plaintiff lost a suit against the insured, the plaintiff named the insurer as the defendant in a new suit, claiming that the insurer breached the insurance contract and the implied covenant of good faith and fair dealing when it refused to pay her medical bills despite a provision covering medical expenses for bodily injury caused by an accident on premises owned by the insured, “regardless of fault”.

The trial court granted summary judgment against the plaintiff on the ground that she was neither a party to the insurance contract nor a third-party beneficiary. The court of appeal reversed, relying upon Cal. Civ. Code § 1559, which provides: “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.” The Court held that by including a provision in the insurance contract calling for payment for bodily injury incurred on the insured’s property, regardless of the insured’s fault, the insurer undertook a separate and direct obligation to benefit the plaintiff.

Harper is distinguishable because there, the insurance policy provided for payment for bodily injury “regardless of fault” while the policy in this case only covers injury as a result of negligence. This distinction was significant to the court in Harper which noted: “The express language of [the insurance policy] plainly indicates it is meant to directly confer a benefit upon third parties who are injured on the owner’s property. The payment is premised on the happening of the event and is¿not¿premised on fault. Thus, the insurer undertook¿a separate and direct obligation to pay for the medical expenses of any persons injured on the owner’s property regardless of its insured’s negligence. Accordingly, the payments were plainly intended to directly benefit plaintiff and were not incidental or remote.” (Id. at 1090 (emphasis in original).)

On this basis, the Harper court distinguished its holding from earlier cases like Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal. App. 4th 1717, 1722-1725, which reached a contrary result: Jones¿is distinguishable from the case at bench because “the medical payment language at issue here is not a liability provision but a direct and separate obligation in the policy to pay the medical expenses of persons injured on its insured's property. The provision specifically states the defendant will pay ‘without regard to fault.’ Therefore, because plaintiff was injured on the property, she is a member of the class of persons protected under the policy.” (Id. at 1091.)

Harper also recognized that the medical payment provisions at issue there were a recognized exception to the general rule: “Although there are no California cases which have addressed the specific issue raised in this appeal, a number of other authorities have concluded medical payment provisions of the type presently before us provide exceptions to the general rule barring actions against the insurer for liability. This is because the¿medical coverage provisions provide direct obligations on the part of the insurer to the intended beneficiaries … Such provisions are not dependent upon the liability of the insured and are considered to be separate contractual obligations from the rest of the policy.”

The Harper court reasoned: “Medical provisions of liability, or homeowner’s, policies are a form of minimal group accident insurance provided at minimal cost with a named insured as the entity through whom¿the coverage is issued. . . . Generally, medical payment clauses are considered to constitute separate accident insurance coverage. Such coverage is divisible from the remainder of the policy, and creates a direct liability to the contemplated beneficiaries. The purpose is to grant peace of mind and create a fund for the payment of medical services so that those injured will not necessarily be contemplating how to impose liability upon the insured. … Such provision is the separate obligation of the insurer, independent of its obligation to pay sums of money as damages under the liability features of the contract.” (Id. at 1089-1090, citing 8A, Appleman & Appleman, Insurance Law and Practice,¿supra, § 4902, pp. 228-230, fns. omitted).)

Unlike in Harper, this case does not involve a medical payment provision. Accordingly, it does not fall within the exception articulated in Harper.

In sum, this case does not fit within any exceptions to the general rule that an injured party cannot sue the insurer directly, and the Court sustains the demurrer to the third cause of action for breach of contract against Moving Defendants.

Breach of Covenant of Good Faith and Fair Dealing

Moving Defendants argue that because there is no contract between them and Plaintiff, there is nothing on which to imply a covenant of good faith and fair dealing. The Court agrees.

“The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract.” (Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 49.) Without a contractual underpinning, there is no independent claim for breach of the implied covenant of good faith and fair dealing. (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1153 (the implied covenant of good faith and fair dealing is auxiliary and supplementary to express contractual obligations and has no existence separate from the contractual obligations).)

Since, as discussed above, Plaintiff cannot bring her cause of action against the Moving Defendants for breach of contract, her cause of action for breach of the implied covenant of good faith and fair dealing must, likewise, fail. Therefore, this Court sustains the demurrer as to Plaintiff’s fourth cause of action for breach of the implied covenant of good faith and fair dealing against Moving Defendants.

If there is a reasonable possibility that defects in a complaint can be cured by amendment, then a plaintiff should be given leave to amend its complaint after a court sustains a demurrer. However, the burden is on the plaintiff to demonstrate the manner in which the complaint can be amended so as to cure the defects. (Hendy v. Losse (1991) 54 Cal.3d 723, 742.) Moreover, if there can be no liability as a matter of law, leave to amend should not be granted. (Ramirez v. USAA Cas. Ins. Co. (1991) 234 Cal.App.3d 391, 397.) Here, Plaintiff has not specified how she could amend her Complaint to fall within any recognized exceptions for suing an insurer directly. Accordingly, the Court will sustain the demurrer without leave to amend.