Judge Elaine W. Mandel, Case 21SMCV01051 2022-10-26 Tentative Ruling

Judge: Elaine W. Mandel, Case: 21SMCV01051, Date: 2022-10-26 Tentative Ruling

Case Number: 21SMCV01051 Hearing Date: October 26, 2022 Dept: P

Tentative Ruling
Revello Drive v. Certain Underwriters at Lloyd’s London, Case No. 21SMCV01051
Hearing Date October 26, 2022
Defendant Lloyd’s Motion for Summary Judgment/Summary Adjudication

Plaintiff Revello Drive was covered under an insurance policy issued by defendant Certain Underwriters at Lloyd’s covering loss for collapse of all or part of the home. Compl. ¶ 16. On April 3, 2019, part of the balcony collapsed; plaintiff moved to support the non-collapsed portion in compliance with policy requirements to act to prevent further damage. Compl. ¶ 17. Defendant paid over $1 million but denied coverage relating to the non-collapsed portion of the balcony. Compl. ¶ 19-21. Plaintiff alleges the non-collapsed portion of the balcony remained in place because of the supports it installed; once those supports were removed, the remaining portion collapsed. Compl. ¶ 20. Plaintiff sues for: (1) breach of the implied covenant of good faith and fair dealing; (2) declaratory relief; (3) forfeiture; and (4) breach of contract. Defendant Lloyd’s moves for summary judgment or summary adjudication.

Defendant objects to the declaration of plaintiff’s expert structural engineer Gharibans, arguing it lacks foundation and is vague and ambiguous. These objections are OVERRULED.

The court takes judicial notice of the fact that the complaint and answer were filed (Evid. Code § 452(d)), but not the facts alleged therein.

Breach of Contract

Defendant Lloyds argues the breach of contract claim fails because plaintiff lacks evidence to show the policy’s collapse provision is ambiguous or that Lloyd’s breached the policy.

“Language in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract.” County of San Diego v. Ace Prop. & Casualty Ins. Co. (2005) 37 Cal.4th 406, 415. “Courts will not strain to create an ambiguity where none exists.” Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal. 4th 1, 18-19. “[A]ny exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect.” State Farm Mut. Auto. Ins. Co. v. Jacober (1973) 10 Cal.3d 193, 201 (internal quotations omitted). Such limitations of coverage provisions must be “conspicuous, plain and clear.” Steven v. Fidelity & Casualty Co. (1962) 58 Cal.2d 862, 878.

Defendant’s policy covered 12/21/18 to 12/21/19. See UMF Nos. 1, 7, 13, 19, 25; Exhs. B, F. The policy defined “collapse” as “an abrupt falling down or caving in of a building or any part of a building with the result that the building cannot be occupied for its current intended purpose.” See UMF Nos. 2, 8, 14, 20, 26; Exh. B Policy, Section I – Perils Insured Against, Subsection A, (BATES stamped UND00070), Section I – Property Coverages, Subsections A (BATES stamped UND00065) and E (BATES stamped UND00067 and UND-00069). The policy excluded the following from the definition of “collapse”:

(2) A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse.

(3) A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building.

(4) A building or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion. (Id.)

Following investigation, defendant denied coverage for part of the balcony, finding it did not “collapse” as defined by the policy. See UMF Nos. 3-4, 9-10, 15-16, 21-22, 27-28; Compendium of Evidence Exhs. C, D, J.

Plaintiff argues the non-collapsed portion of the balcony was in a state of collapse; the reason the remaining portion of the balcony did not collapse was temporary shoring plaintiff installed to preserve the remaining portion of the balcony and to comply with policy requirements that it do so. See PMF Nos. 3-5; Culotti Decl. ¶¶ 5-6; Gharibans Decl. ¶¶ 5, 7. Plaintiff argues that without the additional shoring, that remaining portion of the balcony would have collapsed due to earth movement. PMF Nos. 9-11; Gharibans Decl. ¶¶ 5-7; Salehipour Decl. ¶ 6. In its attempts to comply with the policy, plaintiff spent $835,940.57 for shoring. See PMF No. 12; Salehipour Decl. ¶¶ 5-7; Gharibans Decl. ¶ 5; Culotti Decl. ¶ 8. Further, plaintiff argues the policy language is ambiguous because defendant is using plaintiff’s attempts to shore (in compliance with policy requirements to prevent further damage) to “bootstrap” and thereby preclude coverage. This renders the collapse coverage ambiguous and illusory, argues plaintiff.

The policy states loss for collapse is only covered in certain instances. See Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal. 2d 423, 432 (holding an insurance provider “has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected”); see also Vargas v. Athena Assurance Co. (2001) 95 Cal.App.4th 461, 467. “[A]lthough exclusions are construed narrowly and must be proven by the insurer, the burden is on the insured to bring the claim within the basic scope of coverage, and (unlike exclusions) courts will not indulge in a forced construction of the policy's insuring clause to bring a claim within the policy’s coverage.” Collin v. American Empire Ins. Co. (1994) 21 Cal. App. 4th 787, 803.

To comply with the policy, plaintiff was required to – and did -- take action to prevent further damage. As a result of plaintiff’s efforts, a portion of the patio did not immediately collapse. Defendant then denied coverage because that portion of the of the structure had not yet collapsed, based on its own policy definition. Defendant’s policy created a catch -22 situation.

Defendant relies on Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070 for the proposition that courts are not in the business of “rewrite[ing] any provision of any contract, including the standard policy underlying any individual policy, for any purpose.” Id. at 1078. This case distinguishable. In Rosen, a collapse did not occur; plaintiff Rosen made repairs to a portion of his property that was in danger of collapsing. Id. at 1073.

Revello’s balcony did collapse, but Lloyd’s denied coverage because plaintiff complied with its obligations under the policy. There remain triable issues of material fact as to whether there is an ambiguity in the policy’s language and whether defendant breached the terms of the policy by denying coverage for the remainder of the balcony. DENIED.

Derivative Claims

Defendant argues the other claims fail, as they are derivative claims of the breach of contract.

“[T]here can be no claim under an implied covenant of good faith and fair dealing or for bad faith unless the policy benefits are due under the contract.” Waller, supra, 11 Cal.4th at 35. “The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject.” City of Cotati v. Cashman (2002) 29 Cal. 4th 69, 79. Similarly, a forfeiture claim occurs only whether there is a breach of the duty of good faith and fair dealing where the conduct was meant to mislead the insured. See Chase v. Blue Cross (1996) 42 Cal.App.4th 1142, 1149.

As the breach of contract claim survives, so do the derivative claims, including breach of the covenant of good faith and fair dealing, forfeiture and declaratory relief. DENIED.