Judge: Elaine Lu, Case: 20STCV24073, Date: 2022-12-22 Tentative Ruling

Case Number: 20STCV24073    Hearing Date: December 22, 2022    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background

            On June 25, 2020, Plaintiff Rita Kahlenberg (“Kahlenberg”) filed the complaint in this action for breach of insurance contract arising out of the denial of an insurance claim for severe water damage.  On July 16, 2021, Plaintiff Kahlenberg filed the operative Second Amended Complaint (“SAC”) against defendants Bamboo Ide8 Insurance Services, LLC[1] (“Bamboo Ide8”), Catlin Insurance Company, Inc. (“Catlin”), and Demian Insurance & Financial Services, Inc. (“Demian”).  The operative Second Amended Complaint asserts five causes of action for (1) Breach of Contract against Defendant Catlin, (2) Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing against Defendant Catlin, (3) Financial Elder Abuse against Defendant Catlin, (4) Breach of Fiduciary Duty against Defendant Demian, and (5) Professional Negligence against Defendant Demian.

            On July 29, 2020, Cross-Complainant Catlin filed a cross-complaint.  On September 1, 2021, Cross-Complainant Catlin filed the operative Second Amended Cross-Complaint against Cross-Defendants Kahlenberg, Heidi Smith (“Smith”), and Demian asserting that Kahlenberg and Smith misrepresented uninsurable conditions at the Property and seeking indemnity against Demian.  Catlin’s Second Amended Cross-Complaint asserts eight causes of action for (1) Recission against Kahlenberg and Smith, (2) Declaratory Relief against Kahlenberg and Smith, (3) Breach of Contract to Defend, Indemnify, and Hold Harmless against Demian, (4) Express Indemnity against Demian, (5) Implied/Equitable Indemnity against Demian, (6) Declaratory Relief re: Duty to Defend against Demian, (7) Declaratory Relief re: Duty to Indemnify against Demian, and (8) Contribution against Demian.

            On July 20, 2022, Cross-Complainant Demian filed a cross-complaint against Cross-Defendants Catlin, Bamboo Insurance Services, Inc., Bamboo Ide8, and Kahlenberg.  Demian’s cross complaint asserts six causes of action for (1) Implied Equitable Indemnity against Catlin, Bamboo Insurance Service, Inc., and Bamboo Ide8; (2) Declaratory Relief: Duty to Defend against Catlin, Bamboo Insurance Service, Inc., and Bamboo Ide8; (3) Declaratory Relief: Duty to Indemnify against Catlin, Bamboo Insurance Service, Inc., and Bamboo Ide8; (4) Contribution against Catlin, Bamboo Insurance Service, Inc., and Bamboo Ide8; (5) Implied Equitable Indemnity against Kahlenberg; and (6) Contribution against Kahlenberg. 

            On September 26, 2022, Cross-Defendants Catlin and Bamboo Ide8 (jointly “Cross-Defendants”) filed the instant demurrer to Demian’s cross-complaint.  On December 9, 2022, Demian filed an opposition.  On December 15, 2022, Cross-Defendants filed a reply.

Allegations of the Operative Complaints

            The SAC alleges that:

            On April 25, 2019, Plaintiff Kahlenberg sustained a serious head injury requiring rehabilitation and due to medical costs caused Plaintiff and her late husband to take out a mortgage on their home at 12760 Kahlenberg Lane, Valley Village, CA 91607 (“Subject Property”).  (SAC ¶¶ 5, 14.)  The mortgage company required that Plaintiff and her late husband obtain additional insurance to cover the Subject Property and arranged for Demian to submit an application for insurance to Catlin on July 24, 2019 in response to which Catlin issued an insurance policy the same day.  (SAC ¶¶ 11, 14.)  On July 30, 2019, Plaintiff’s late husband passed away.  (SAC ¶ 14.) 

            On September 6, 2019, Plaintiff Kahlenberg was discharged from rehabilitation and began residing back at the Subject Property.  (SAC ¶ 16.)  On September 22, 2019, Plaintiff discovered a pipe leak that flooded the entire interior of the house with water.  (SAC ¶ 17.)  Plaintiff timely notified Catlin of the losses sustained by the September 22, 2019 water leak and submitted a claim.  (SAC ¶ 22.)  Plaintiff fully cooperated with Catlin’s claim investigation.  (SAC ¶¶ 22-26.)  On May 8, 2020, Catlin wrongly denied the insurance claim on the grounds that Plaintiff was not occupying the Subject Property at the relevant time period and that the damage was excluded as wear and tear and as a continuous leak or seepage.  (SAC ¶ 26.)  On June 4, 2020, Defendant sent Plaintiff a notice of non-renewal of the insurance policy.  (SAC ¶ 29.)  In October 2020, Catlin “informed Plaintiff, during the course of litigation, that it was rescinding the Policy based on alleged misrepresentations in the insurance application, all of which Defendant had known since at least September 24, 2019, and which constituted some of the bases for the claim denial. That insurance application was completed and submitted by Demian, and never shown to Plaintiff or her husband or signed by either of them.”  (SAC ¶ 30.) 

            Demian provided inaccurate information in Kahlenberg’s insurance application to Catlin, and Catlin is now using Demian’s inaccurate information as the basis for its rescission of the policy and to avoid responsibility for Kahlenberg’s claim.  (SAC ¶¶ 51-65.) 

            The Demian Cross-Complaint alleges in relevant part that:

            The insurance application for Kahlenberg “was presented to Catlin through software systems and online services provided by [Cross-Defendants Catlin, Bamboo Insurance Services, Inc., and Bamboo Ide8]. Demian is informed and believes that the software and/or online services employed by Catlin and the [Bamboo Insurance Services, Inc., and Bamboo Ide8] auto-populated numerous data fields on the application form, and software systems and online services used by Catlin and the [Bamboo Insurance Services, Inc., and Bamboo Ide8] determined whether a risk was acceptable based on the information provided in the application, and if so, the software automatically bound the risk and caused the new policy to issue.”  (Demian Cross-Complaint ¶ 11.)  Demian’s involvement in the issuance of the insurance policy to Kahlenberg was limited to taking information from Kahlenberg and her late husband – or their authorized representative – and entering an application on Bamboo Insurance Services, Inc., and Bamboo Ide8’s website after which a policy from Catlin was automatically issued.  (Demian Cross-Complaint ¶ 12.)

Legal Standard

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. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, courts “give the complaint a reasonable interpretation, and read it in context.”  (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.  (Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.)  “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”  (Hahn, supra, 147 Cal.App.4th at 747.) 

Meet and Confer Requirement

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring 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.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension.  (CCP § 430.41(a)(2).)  The demurring party must also file and serve a declaration detailing the meet and confer efforts.  (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading.  (Id.¿at (a).) 

Here, Cross-Defendants have fulfilled the meet and confer requirements.  (Morrow Decl. ¶¶ 3-6, Exh. 1.)

Discussion

            Cross-Defendants demurrer to the first and fourth causes of action for implied equitable indemnity and contribution.

First Cause of Action: Implied Equitable Indemnity

            Cross-Defendants contend that the first cause of action of Demian’s cross-complaint fails because Cross-Defendants are not joint tortfeasors as to Plaintiff Kahlenberg’s claims against Demian.

            “[I]ndemnity refers to ‘the obligation resting on one party to make good a loss or damage another party has incurred.’ ” (Prince v. Pacific Gas & Electric Co. (2009) 45 Cal.4th 1151, 1157.)  “There are two basic types of indemnity: express indemnity, which relies on an express contract term providing for indemnification, and equitable indemnity, which embraces ‘traditional equitable indemnity’ and implied contractual indemnity.”   (Jocer Enterprises, Inc. v. Price (2010) 183 Cal.App.4th 559, 573.) “ ‘ “The elements of a cause of action for [equitable] indemnity are (1) a showing of fault on the part of the indemnitor and (2) resulting damages to the indemnitee for which the indemnitor is ... equitably responsible.” ’ [Citation.] ”  (C.W. Howe Partners Inc. v. Mooradian (2019) 43 Cal.App.5th 688, 700.)

            “ ‘The basis for the remedy of equitable indemnity is restitution. “ ‘ “[O]ne person is unjustly enriched at the expense of another when the other discharges liability that it should be his responsibility to pay.” ’ ” [Citations.] [¶] California common law recognizes a right of partial indemnity under which liability among multiple tortfeasors may be apportioned according to the comparative negligence of each.’  [Citation.] The test for indemnity is thus whether the indemnitor and indemnitee jointly caused the plaintiff's injury.”  (AmeriGas Propane, L.P. v. Landstar Ranger, Inc. (2010) 184 Cal.App.4th 981, 989, [italics added].) 

            “ ‘At the heart of the doctrine [of equitable indemnity] is apportionment based on fault. At a minimum equitable indemnity “requires a determination of fault on the part of the alleged indemnitor....” ’ [Citations.]”  (Heritage Oaks Partners v. First American Title Ins. Co. (2007) 155 Cal.App.4th 339, 348.)  Thus, “‘unless the prospective indemnitor and indemnitee are jointly and severally liable to the plaintiff there is no basis for indemnity.’ [Citations.]”  (Ibid.)  “Thus, no indemnity may be obtained from an entity that has no pertinent duty to the injured third party [Citation], that is immune from liability [Citation], or that has been found not to be responsible for the injury [Citation.]”  (Jocer Enterprises, Inc., supra, 183 Cal.App.4th at pp.573–574.)

            As the Supreme Court has noted, “[i]t is not sufficient, for purposes of indemnification, for a defendant simply to claim someone else caused all or part of the plaintiff's damages. To state a claim for indemnification, a defendant must allege that the same harm for which he may be held liable is properly attributable—at least in part—to the alleged indemnitor.”  (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1127 [superseded by statute on other grounds as noted in Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854 Fn. 19.].)  “If a defendant believes the plaintiff's injuries were the result of a different harm altogether, he may argue the point to the jury and escape liability if successful. Absent some claim of mutual liability for the same harm, however—under joint-and-several or vicarious liability principles, for example—an indemnification action will not lie.”  (Ibid.) 

            Here, Plaintiff’s claims against Demian in the SAC are for negligence and breach of fiduciary duty.  These claims arise out of Demian’s having provided inaccurate information in Kahlenberg’s insurance application and affirming said application to Catlin, which Catlin is now claiming is a basis for recission of the insurance agreement.  (SAC ¶¶ 51-65.)  Demian’s cross-complaint adds the further allegation that the failure to provide accurate information in the online insurance application was due to the online application service auto-populating numerous data fields on the application form and then automatically issuing a new policy.  (Demian Cross-Complaint ¶¶ 7-11.) 

            At least for the claim for negligence against Demian in the SAC, Demian sufficiently alleges in its cross-complaint a basis for joint and several liability.  Demian’s cross-complaint does not merely claim that Catlin caused all or a part of Plaintiff’s damages by way of some other harm.  Instead, Demian’s cross-complaint alleges that the harm caused from Demian incorrectly filling out the Catlin insurance application was caused by Cross-Defendants’ online insurance application service auto-populating certain fields of the insurance application and then automatically issuing the insurance policy.  (Demian Cross-Complaint ¶¶ 11, 15.)  The alleged harm is the same – i.e., an inaccurate insurance policy application.  Further, there is no indication that Cross-Defendants owed no duty of care to Plaintiff or is immune from liability.  (See e.g., Prince, supra, 45 Cal.4th 1151, [Cross-Defendant who was immune from liability and owed no duty to the underlying plaintiff under Civil Code section 846 found not liable for indemnity.].)  Rather, as alleged, Cross-Defendants would have a duty to parties such as Plaintiff Kahlenberg to ensure that the online application service for insurance auto-population does not unreasonably cause insurance applications to be inaccurate.  (Tarasoff v. Regents of University of California (1976) 17 Cal.3d 425, 434–435, [“As a general principle, a ‘defendant owes a duty of care to all persons who are foreseeably endangered by his conduct, with respect to all risks which make the conduct unreasonably dangerous.’”].)  Thus, as alleged at least with respect to the claim for negligence, Demian’s cross-complaint sufficiently alleges that Cross-Complainants and Demian were joint tortfeasors. 

            Though there are no allegations that would support imposing a fiduciary duty to Cross-Defendants in Demian’s cross-complaint, a demurrer does not lie to part of a cause of action and can only be granted for an entirety of a cause of action. (See Olson v. Hornbrook Community Services Dist. (2019) 33 Cal.App.5th 502, 522, Fn. 9.)  Therefore, Cross-Defendants’ demurrer to the first cause of action of Demian’s cross-complaint is OVERRULED.

Fourth Cause of Action: Contribution

            Cross-Defendants contend that the fourth cause of action for contribution fails because Demian’s cross-complaint fails to allege that the parties are joint tortfeasors.

            “[Contribution] arises where ‘one of several joint tortfeasor judgment debtors has paid more than a pro rata share of a judgment.’”  (State Ready Mix, Inc. v. Moffatt & Nichol (2015) 232 Cal.App.4th 1227, 1235, Fn. 4.)

            As discussed above, Demian sufficiently alleges that Cross-Defendants are joint tortfeasors – at least as to the claim for negligence.  Accordingly, Cross-Defendants’ demurrer to the fourth cause of action of Demian’s cross-complaint is OVERRULED.

Conclusion and Order

Based on the foregoing, Cross-Defendants Catlin Insurance Company, Inc. and Bamboo Ide8 Insurance Services, LLC’s demurrer to Cross-Complainants Demian Insurance & Financial Services, Inc. is OVERRULED.

Cross-Defendants are to file and serve an answer to the Cross-Complaint no later than January 23, 2023.

An OSC re filing of Cross-Defendants’ answer is set for January 27, 2023 at 8:30 am.

            Moving Parties are to provide notice and file proof of service of such.

DATED: December 22, 2022                                                 ___________________________

                                                                                          Elaine Lu

                                                                                          Judge of the Superior Court