Judge: Gregory Keosian, Case: 21STCV23231, Date: 2024-02-22 Tentative Ruling
Case Number: 21STCV23231 Hearing Date: February 22, 2024 Dept: 61
Defendant Liberty Mutual Fire
Insurance Company’s Motion for Summary Judgment or Adjudication is DENIED.
Plaintiff to provide notice.
I.
OBJECTIONS
Defendant Liberty
Mutual’s objections to the declaration of Gene L. Goldsman, counsel for
Plaintiff Sherif Loza, are SUSTAINED as to Objections No. 1 and 2, which
concern background facts of Plaintiff’s case for which Goldsman lacks personal
knowledge. While Goldsman possesses knowledge of the deposition of Defendant’s
medical expert and his testimony before the arbitrator, Objection No. 3 to his
testimony concerning the reliability of Venuto’s unproduced report is also
SUSTAINED. Objection No. 5 to Goldsman testimony concerning the contents of the
arbitrator’s ruling is SUSTAINED as violating the rule against oral testimony
concerning the contents of a writing. (Evid. Code § 1523.) Objections No. 9 and
10 are SUSTAINED as to Goldsman’s speculation concerning Defendant’s internal
motivations. The remaining objections to the Goldsman declaration are
OVERRULED, as Goldsman possesses personal knowledge concerning Defendant’s
settlement offers, communications, and payments to Plaintiff in the underlying
arbitration, or the lack thereof.
It is unnecessary to rule
upon Defendant’s objections to the declarations of Gus Gunderman, as his
declaration is not material to the disposition of the motion. (Code Civ. Proc.
§ 437c, subd. (q).)
II.
SUMMARY
JUDGMENT
A party may move for summary judgment “if it
is contended that the action has no merit or that there is no defense to the
action or proceeding.” (Code Civ. Proc.
§ 437c, subd. (a).) “[I]f 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,” the moving
party will be entitled to summary judgment.
(Adler v. Manor Healthcare Corp.
(1992) 7 Cal.App.4th 1110, 1119.) A motion for summary adjudication may be made
by itself or as an alternative to a motion for summary judgment and shall
proceed in all procedural respects as a motion for summary judgment. (Code Civ. Proc. § 437c, subd. (f)(2).)
The moving party bears an initial burden of
production to make a prima facie showing of the nonexistence of any triable
issue of material fact, and if he does so, the burden shifts to the opposing
party to make a prima facie showing of the existence of a triable issue of
material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850;
accord Code Civ. Proc. § 437c, subd. (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 that cause of action or a
defense thereto. (Aguilar, supra, 25 Cal.4th at 850.)
The plaintiff may not rely upon the mere allegations or denials of its
pleadings to show that a triable issue of material fact exists but, instead,
shall set forth the specific facts showing that a triable issue of material
fact exists as to that cause of action or a defense thereto. (Ibid.)
To establish a triable issue of material fact, the party opposing the motion
must produce substantial responsive evidence.
(Sangster v. Paetkau (1998) 68
Cal.App.4th 151, 166.)
Defendant Liberty
Mutual Fire Insurance Company (Defendant) moves for summary judgment or
adjudication on Plaintiff Sherif Loza’s claims for breach of insurance
contract, breach of the covenant of good faith and fair dealing, and promissory
fraud, on the grounds that a genuine dispute existed as to the value of
Plaintiff’s claims,
Defendant relies on
the following facts. Plaintiff suffered a car accident in April 2016 while
covered under a policy with Defendant. (Plaintiff’s Separate Statement of
Undisputed Material Facts (PUMF) No. 1, 2, 6.) Plaintiff settled his liability
claim against the at-fault driver for $25,000, the driver’s policy limits.
(PUMF No. 7.) Plaintiff thereafter sought payment from Defendant for
underinsured motorist (UIM) benefits under the policy in a letter dated March
5, 2018. (PUMF No. 8.)
The matter proceeded
to arbitration on October 20 and 21, 2020. (Kuttel Decl. Exh. D.) Plaintiff
sought $650,000 in damages from the accident, in part consisting of prospective
costs for a spinal fusion surgery estimated to cost between $300,000 and
$350,000. (PUMF No. 10–12.) On October 16, 2020, four days before arbitration,
Defendant offered a $20,000 settlement, which in connection with the $25,000
received from the at-fault driver, would yield a total payment of $45,000.
(PUMF No. 13, 14.) Plaintiff rejected the offer. (PUMF No. 15.) The arbitrator
issued an award determining that Plaintiff’s total damages amounted to
$100,000, with a $25,000 offset for the amount already received from the
at-fault driver. (PUMF No. 17–19.)
The
elements of a breach of contract claim are “(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.)
“California law
recognizes in every contract, including insurance policies, an implied covenant
of good faith and fair dealing. In the insurance context the implied covenant
requires the insurer to refrain from injuring its insured's right to receive
the benefits of the insurance agreement. The covenant is implied as a
supplement to the express contractual covenants, to prevent a contracting party
from engaging in conduct that frustrates the other party's rights to the
benefits of the agreement.” (Brehm v.
21st Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1235, internal citations
and quotation marks omitted.)
“It is well established a
breach of the implied covenant of good faith is a breach of the contract, and
that breach of a specific provision of the contract is not a necessary
prerequisite to a claim for breach of the implied covenant of good faith and
fair dealing.” (Carson v. Mercury Ins. Co. (2012) 210 Cal.App.4th 409,
429, internal citation omitted.) “When benefits are due an insured, delayed
payment based on inadequate or tardy investigations, oppressive conduct by
claims adjusters seeking to reduce the amounts legitimately payable and
numerous other tactics may breach the implied covenant because’ they frustrate
the insured's right to receive the benefits of the contract in prompt
compensation for losses.” (Brehm v. 21st Century Ins. Co. (2008) 166
Cal.App.4th 1225, 1236, internal quotation mars omitted.
“[A]n insurer denying or delaying
the payment of policy benefits due to the existence of a genuine dispute with
its insured as to the existence of coverage liability or the amount of the
insured's coverage claim is not liable in bad faith even though it might be
liable for breach of contract.” (Id.
at p. 1237, alterations omitted.) The covenant of good faith and fair dealing
may “be breached for objectively unreasonable conduct, regardless of the
actor’s motive,” and “[n]ot only is subjective bad faith unnecessary to establish a bad faith cause of action, it is also insufficient to do so.” (Bosetti v. U.S. Life Ins. Co. in City of New
York (2009) 175 Cal.App.4th 1208, 1236.) The “genuine dispute” doctrine “enables
an insurer to obtain summary adjudication of a bad faith cause of action by establishing
that its denial of coverage, even if ultimately erroneous and a breach of
contract, was due to a genuine
dispute
with its insured.”
(Bosetti v. United States Life Ins. Co. in City of New York (2009) 175
Cal.App.4th 1208, 1237.)
Defendant relies on the case Rappaport-Scott v.
Interinsurance Exchange of the Automobile Club (2007) 146 Cal.App.4th 831. That
case involved another insured, Rappaport-Scott, who was injured in an accident
caused by an underinsured motorist:
Rappaport–Scott
sued the underinsured motorist and settled the action for $25,000, which was
the applicable policy limit under the underinsured motorist's automobile
insurance policy. Rappaport–Scott then submitted a claim to Interinsurance for
benefits under her underinsured motorist coverage.
Rappaport–Scott
made a demand for arbitration of her claim against Interinsurance[.] . . . She
requested an arbitration award in the amount of $75,000, calculated by
deducting the $25,000 paid by the underinsured motorist from the $100,000
coverage limit. She also made what she characterizes as a “settlement demand”
on Interinsurance for payment in that amount. Interinsurance offered her only
$7,000 on the claim. Rappaport–Scott and Interinsurance participated in a
mediation prior to the arbitration hearing, but failed to settle the claim.
At the arbitration
hearing in August 2003, the parties . . . disputed only the amount payable on
the claim. The arbitrator found that Rappaport–Scott had suffered damages of
$15,000 for medical expenses, $3,000 for loss of earnings, and $45,000 for
pain, suffering, and future medical care, for a total of $63,000. The
arbitrator reduced the total amount by $25,000 for the settlement with the
underinsured motorist and $10,000 for medical expenses benefits previously
paid, and awarded a net amount of $28,000. The parties corrected the $10,000
figure to reflect the actual prior payment of benefits of only $5,000, and
agreed that Rappaport–Scott was entitled to $33,000 under the award.
(Id.
at p. 834.) The plaintiff sued for insurance bad faith, alleging that the
insurer “failed to negotiate with her in good faith to resolve her
claim” and “refused to engage in settlement discussions [with her] and/or
present a reasonable counteroffer to her demand for $75,000.” (Id. at p.
835.)
The trial court sustained a
demurrer to the claim, and the appellate court affirmed. The court reasoned
that the plaintiff’s claims for “unreasonable delay in paying benefits due
under the policy” was defective because “a genuine dispute existed as to the
amount payable on the claim.” (Id. at p. 839.) The court stated: “Despite
the difference between the $7,000 offered by Interinsurance and the $33,000
later determined to be payable on the policy, the vast difference between the
$346,732.34 in losses claimed by Rappaport–Scott and the $63,000 in actual
losses as determined by the arbitrator demonstrates, as a matter of law,
that a genuine dispute existed as to the amount payable on the claim.” (Id. at p. 839.)
Here, Defendant argues that Rappaport-Scott is
applicable. Just as in the above case, Plaintiff sought a large amount of
damages, Defendant made a pre-arbitration settlement offer, and the ultimate
arbitration award substantially undercut Plaintiff’s demand, indicating the
existence of a genuine dispute.
Plaintiff in opposition cites the case Maslo v.
Ameriprise Auto & Home Ins. (2014) 227 Cal.App.4th 626, in which the
court distinguished the Rappaport-Scott case and reversed an order sustaining
a demurrer to an insurance bad faith claim, even though the amount sought by
the insured was greater than that ultimately awarded in arbitration.
Here, the insurer cannot rely upon the genuine
dispute rule, as the SAC alleged that the insurer failed to comply with its
common law and statutory obligations to thoroughly and fairly investigate,
process, and evaluate appellant's claim. Specifically, the SAC alleged that the
insurer was promptly apprised of the claim, provided with the LAPD traffic collision
report showing the uninsured motorist was solely responsible for the accident,
and provided with medical documentation of the injuries sustained by appellant
and the nature and cost of his medical treatment. The SAC further alleged that
the insurer neither interviewed appellant's treating physicians, nor conducted
its own medical examination or review. The SAC alleged that despite being
provided with “all documents concerning liability and damages ... needed to
fully and fairly evaluate the case,” the insurer failed to promptly and
properly investigate and handle appellant's claim. Specifically, it failed to
respond in good faith to appellant's settlement demand, made no settlement
offer, failed to provide a reason for withholding payment, refused appellant's
offer to participate in mediation, and provided appellant no opportunity to
negotiate a settlement. Our Supreme Court has made clear that there can be no
genuine dispute in the absence of a thorough and fair investigation.
(Id.
at p. 636–637.) The court distinguished Rappaport-Scott on the grounds
that in that case, “the insurer made an offer of settlement and participated in
meditation prior to arbitration.” (Id. at p. 637.) “In contrast, here,
the SAC alleged that the insurer failed to investigate appellant's claim,
failed to respond in good faith to appellant's settlement demand, failed to
make its own settlement offer, refused to accept appellant's offer to mediate,
and provided no explanation for withholding payment.” (Ibid.)
Defendant
has not demonstrated the absence of any triable issues of fact in its motion. It’s
motion is based solely on the “valuation discrepancy application of the genuine
dispute doctrine,” and does not address the theory asserted in the First Amended
Complaint that it failed to conduct a prompt and thorough investigation or
respond to Plaintiff’s settlement overtures. (FAC ¶ 31(a)–(g).) Indeed, the
settlement offer that Defendant cites was only offered to Plaintiff four days
before arbitration was set to commence, more than two years after Plaintiff’s
initial demand.
Neither Defendant’s motion nor reply contain any discussion
or defense of its investigation into Plaintiff’s claims. Rather, Defendant
argues in reply that the court need not consider its investigation, given the
sizable discrepancy between Plaintiff’s demand and the ultimate arbitration
award. (Reply at 8–9.) But this argument takes ill account of Plaintiff’s
claims, which are expressly based on Defendant’s failure to investigate or engage
in settlement, and the Maslo decision, which expressly repudiated this
position. Defendant contends this decision did not address a defense based on
“discrepancy” between an insured’s demand and an arbitration award (Reply at p.
, but this is exactly what Maslo addressed: an insurance company’s
contention that it could “avoid liability for breaching its common law and
statutory duties so long as the ultimate award is less than the insured's
initial demand,” a position that the court found “at odds with California
common law and the statutory requirements of the Insurance Code.” (Maslo,
supra, 227 Cal.App.4th at p. 637.) Here, it is undisputed
that Defendant delayed its settlement negotiations until mere days before
arbitration. Moreover, Plaintiff challenges without rebuttal the qualifications
of Defendant’s medical expert to opine on Plaintiff’s spinal injuries, whose
opinion evidently furnished the sole basis for Defendant’s settlement position.
(Goldsman Decl. Exh. 4; Opposition at p. 6.) Triable issues exist as to whether
Defendant conducted a reasonable investigation and complied with the covenant
of good faith and fair dealing.
Defendant’s
arguments as to the other claims are unavailing. Its argument as to promissory
fraud is based solely on its ultimate payment of benefits following the
arbitration award, coupled with the proposition that “an insurer’s full payment
of benefits to the insured constitutes conclusive evidence of the insurer’s
intention to perform the promises contained in the policy.” (Motion at p. 14.)
No case is quoted for this proposition. Although Defendant cites Bosetti v.
United States Life Ins. Co. in City of New York (2009) 175 Cal.App.4th
1208, 1241 fn. 30, this court did not hold for the broad proposition that
Defendant advances. The court in that case held that a genuine dispute existed
as to the reasonableness of an insurer’s cutting off of disability payments
after the expiration of a two-year limitation in which all benefits had been
paid, in reliance on then-applicable case authority. (Id. at p. 1239.) That
case held that the same facts that rebutted an inference of unreasonable
conduct also rebutted an inference of intent to defraud. (Id. at p. 1241.)
Here, the inverse is true.
Likewise,
Defendant’s argument as to the breach of contract claim is unpersuasive. As
noted in overruling Defendant’s earlier demurrer, a breach of the covenant of
fair dealing constitutes a breach of the contract itself. (Carson, supra, 210 Cal.App.4th
at p. , 429.) Thus triable issues on the breach of covenant claim constitute a
breach of the contract.
The motion is therefore DENIED.