Case Number: 20TRCV00601    Hearing Date: April 5, 2023    Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

Honorable Gary Y. Tanaka                                                                                        Wednesday, April 5, 2023

Department B                                                                                                                            Calendar No. 11

PROCEEDINGS

Jean Pierre Khoury, et al. v. State Farm General Insurance Co., et al.     

20TRCV00601

1.      State Farm General Insurance Company’s Motion for Summary Judgment, or, in the Alternative, Summary Adjudication       

TENTATIVE RULING

            State Farm General Insurance Company’s Motion for Summary Judgment, or, in the Alternative, Summary Adjudication is denied.  

            Background

            Plaintiffs filed their Complaint on August 25, 2020. Plaintiffs’ First Amended Complaint was filed on May 3, 2021. Plaintiffs allege the following facts. On February 14, 2019, a pipe burst in Plaintiffs’ home. Defendant failed to inspect the property and failed to conduct a reasonable claims investigation. Ultimately, Defendant decided not to cover the damages stating that the claim was excluded based on faulty and unreasonable claims handling practices. Plaintiffs alleged causes of action for: 1. Breach of Contract; 2. Breach of the Implied Covenant of Good Faith and Fair Dealing. Plaintiffs alleged a prayer for punitive damages.

            Objections

            Plaintiffs’ Objections

            Declaration of Donna Blazewich –

            Objections 1-6, 9-13, and 15-17 are overruled. Objections 7, 8, and 14 are sustained.

            Motion for Summary Judgment or Summary Adjudication

            The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Adler v. Manor Healthcare Corp. (1992) 7 Cal. App. 4th 1110, 1119.)

            “On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.”  (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal. App. 4th 1510, 1519.)  A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.”  CCP § 437c(p)(2).  “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” CCP § 437c(p)(2).  “If the plaintiff cannot do so, summary judgment should be granted.”  Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal. App. 4th 463, 467.

            “A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once the plaintiff or cross-complainant has met that burden, the burden shifts to the defendant or cross-defendant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” Code Civ. Proc., § 437c(p)(1).

            “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.”  (Avivi, 159 Cal.App.4th at 467; CCP § 437c(c).)

            Defendant moves for summary judgment. Alternatively, Defendant moves for summary adjudication of the following purported issues:

            “ISSUE NO. 1: Defendant State Farm General Insurance Company is entitled to summary adjudication of Plaintiffs’ causes of action for Breach of Contract and Breach of Duty of Good Faith and Fair Dealing because Plaintiffs' claim was not covered under the policy. (See UMF 1-25.)

            ISSUE NO. 2: Defendant State Farm General Insurance Company is entitled to summary adjudication of Plaintiffs’ cause of action for Breach of Duty of Good Faith and Fair Dealing because it acted reasonably in evaluating and investigating Plaintiffs’ claim and there was a genuine dispute regarding whether benefits were owed. (See UMF 1-25.)

            ISSUE NO. 3: Defendant State Farm General Insurance Company is entitled to summary adjudication of Plaintiffs’ claim for punitive damages because it did not act with malice, oppression or fraud in handling Plaintiffs’ claim.”  (See UMF 1-25.)  (Defendant’s Notice of Motion, page 1, lines 11-21).

            Thus, as can be seen from above, Defendant moves for summary adjudication of the first and second causes of action.  As to the second cause of action, Defendant gives two separate reasons (lack of coverage and reasonable investigation) for why summary adjudication is allegedly appropriate.  These are not “issues” but grounds or reasons for summary adjudication of a cause of action. Defendant also moves for summary adjudication of the claim for punitive damages.

            Defendant has met its initial burden to show that an essential element of the first and second causes of action and the claim for punitive damages cannot be established and/or that there is a complete defense to the causes of action and claim for damages. However, Plaintiffs have met their burden to provide specific facts to show the existence of a triable issue of material fact as to their causes of action and claim for damages. (Plaintiffs’ Response to Defendant’s Separate Statement of Facts and Supporting Evidence, 12-25; Plaintiffs’ Separate Statement of Additional Material Facts and Supporting Evidence, 10, 13-29.)

            First Cause of Action for Breach of Contract

            “Establishing that claim [for breach of contract] requires a showing of (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” D'Arrigo Bros. of California v. United Farmworkers of America (2014) 224 Cal.App.4th 790, 800 (internal quotation omitted).

            Defendant moves for summary adjudication of the first cause of action on the ground that there could be no breach of contract because Plaintiffs were not covered under the policy for the loss. Thus, Defendant appears to challenge the second and third elements.

            Plaintiffs have met their burden to show the existence of a triable issue of material fact as to the existence of coverage for the loss. The basis for the coverage denial was that the loss was caused by wear and tear and/or deterioration of a copper pipe in the slab foundation.  (Defendant’s Separate Statement of Facts, 12.)  However, Plaintiffs submitted competent evidence to demonstrate that the loss could have stemmed from an immediate water leak event and not prior wear and tear.  (Plaintiffs’ Response to Defendant’s Separate Statement of Facts and Supporting Evidence, 12-25.)  Plaintiffs provided evidence that the loss was not “proximately caused by wear, tear, deterioration, or continuous, repeated seepage or leakage.”  (Decl., Christopher A. Croisdale, ¶ 5.)

            Thus, the motion for summary adjudication of the first cause of action is denied.

            Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

            “The [implied] covenant of good faith and fair dealing [is] implied by law in every contract. The covenant is read into contracts and functions as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract. The covenant also requires each party to do everything the contract presupposes the party will do to accomplish the agreement's purposes.” Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244 (internal citations and quotations omitted).

            “[I]n the context of the insurance contract, it has been held that the insurer's responsibility to act fairly and in good faith with respect to the handling of the insured's claim “‘is not the requirement mandated by the terms of the policy itself-to defend, settle, or pay. It is the obligation ... under which the insurer must act fairly and in good faith in discharging its contractual responsibilities.” Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 346. “[T]here are at least two separate requirements to establish breach of the implied covenant: (1) benefits due under the policy must have been withheld; and (2) the reason for withholding benefits must have been unreasonable or without proper cause.” Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151. “[A]n insurer may breach the covenant of good faith and fair dealing when it fails to properly investigate its insured's claim.” Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 817.

            Defendant argues that it is entitled to summary adjudication of the second cause of action, first, because there was no coverage. As to that argument, Plaintiffs have demonstrated the existence of a triable issue of material fact for the same reasons noted above.

            Defendant also argues that summary adjudication is appropriate because it acted reasonably in evaluating and investigating Plaintiffs’ claim and there was a genuine dispute regarding whether benefits were owed.  However, Plaintiffs submitted competent evidence to show the existence of a triable issue of material fact as to whether Defendant failed to adequately investigate the claim prior to making its coverage determination.  (Plaintiffs’ Response to Defendant’s Separate Statement of Facts and Supporting Evidence, 12-25; Plaintiffs’ Separate Statement of Additional Material Facts and Supporting Evidence, 10, 13-29).

            Plaintiff submitted evidence that Defendant chose to ignore evidence of a covered water loss.  (Decl., Maribeth Danko, ¶ 37.)  Claims adjuster Gari Bousman allegedly did not obtain a Non-Waiver Agreement during the site visit, or follow-up with a Reservation of Rights letter. Typically, these actions would occur in the event of potential coverage concerns.  (Id. at ¶ 29.)  Defendant’s claims notes do not provide sufficient information as to how the conclusion of non-coverage was obtained.  (Id., at ¶ 40.)  Then, Defendant issued letters which set forth unsupported and untrue information.  (Id., at ¶ 41-42.) Defendant disregarded documentation which showed that the loss did not come from wear and tear.  (Id., at ¶¶ 46-47.)

               Thus, Plaintiffs provided evidence wherein a trier of fact could reasonably determine that Defendant handled the claim in an unreasonable and unfair manner and denied the claim without proper investigation.  In addition, the trier of fact could determine that Defendant, without good cause, denied Plaintiffs proper benefits under the policy. Plaintiffs also submitted evidence that Defendant’s claims handling and communication was deceptive, false, and misleading.

            Thus, for the foregoing reasons, Defendant’s motion for summary adjudication of the second cause of action is denied.

            Claim for Punitive Damages

            Plaintiffs have submitted competent evidence to show the existence of a triable issue of material fact as to whether Defendant acted despicably with willful and conscious disregard for the rights of Plaintiffs. (Plaintiffs’ Response to Defendant’s Separate Statement of Facts and Supporting Evidence, 12-25; Plaintiffs’ Separate Statement of Additional Material Facts and Supporting Evidence, 10, 13-29).

            The evidence noted above, with respect to the second cause of action, provides sufficient evidence to show the existence of a triable issue of material fact as to the claim for punitive damages.  Defendant’s alleged acts in misleading and misrepresenting facts to Plaintiffs regarding the claims investigation, and alleged acts of deliberately ignoring information that could have demonstrated the existence of a covered loss provides the requisite evidence to demonstrate the potential for the recovery of punitive damages.

            Therefore, Defendant’s motion for summary adjudication of the claim for punitive damages is denied.

            Thus, for the foregoing reasons, Defendant’s motion for summary judgment and/or summary adjudication is denied.

            Plaintiffs are ordered to give notice of this ruling.