Judge: Gregory Keosian, Case: 21STCV29883, Date: 2023-10-05 Tentative Ruling

Case Number: 21STCV29883    Hearing Date: October 5, 2023    Dept: 61

Defendant State Farm Mutual Automobile Insurance Company’s Motion for Summary Judgment or Adjudication is DENIED.

I.                   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 State Farm Mutual Automobile Insurance Company (Defendant) moves for summary judgment or adjudication of Plaintiff Araik Kostandyan’s (Plaintiff) first and second causes of action for breach of insurance contract and breach of the implied covenant of good faith and fair dealing. Defendant argues that there are no triable issues as to whether Plaintiff was entitled to benefits under the policy, because Plaintiff failed to cooperate with Defendant’s investigation as required under the policy, and further that the evidence establishes that the damage to the subject vehicle was not for the reasons that Plaintiff claims. (Motion at pp. 16–18.) For the same reason, Defendant claims that Plaintiff cannot prevail on the breach of covenant claim, as there was a genuine dispute as to coverage in which Defendant was permitted to rely on the advice of its experts. (Motion at pp. 18–23.)

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.)

“[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.)

The undisputed facts are these. Plaintiff was insured by Defendant. (Plaintiff’s Separate Statement of Undisputed Material Facts (PUMF) No. 1.) The policy requires Defendant to pay for loss or destruction of property “caused by accident resulting from the ownership, maintenance or use of your car.” (PUMF No. 35.) The policy states that “[t]he insured shall cooperate with us and, when asked, assist us in: (1) making settlements; (2) securing and giving evidence; (3) attending and getting witnesses to attend depositions, hearings, and trials.” (PUMF No. 36.) The policy prohibits coverage “if you or any other person insured under this policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy.” (PUMF No. 37.)

Plaintiff reported that on December 25, 2019, his nephew Gevork George Ayrapetyan (Ayrapetyan) was driving Plaintiff’s vehicle with his permission, and was involved in a motor vehicle collision with a vehicle being driven by Anicento Garcia-Montalvo (Garcia-Montalvo). (PUMF No. 2.) Defendant obtained photographs and statements from the two drivers. (PUMF No. 4–6.) There was a conflict as to who was at fault for the accident, so Defendant retained Akerson & Miller, Consulting Engineers, Inc. (AMCE), an accident reconstruction expert, to investigate the collision. (PUMF No. 9.)

The AMCE report, dated March 11, 2020, states as follows in the “Analysis” section:

According to the drivers of the BMW [Ayrapetian] and Hyundai [Garcia-Montalvo] there was mutual contact on a freeway. The BMW driver reported he was in the process of making a lane change to the left and when he returned his attention to the roadway the Hyundai was stopped. The Hyundai driver reported contract occurred as he was driving 60 to 70 miles per hour.

The Hyundai has damage that is offset to the left side at the rear of the car. The BMW has damage that is offset to the front right side. The damage would suggest that when mutual contact occurred the BMW was offset to the left of the Hyundai. However, the damage to the Hyundai quarter panel was primarily from contact by a narrow horizontal object. There is no horizontal narrow object on the right front of the BMW that is compatible with the Hyundai quarter panel damage. The Hyundai has scuffing that is compatible with the Hyundai quarter panel damage. The Hyundai has scuffing damage or black transfer on the rear bumper left side return that is horizontal. There is no feature that is black on the BMW that is compatible with the nature of the Hyundai bumper return damage.

Distortion occurred to the leading edge of the BMW right front door from contract at approximately mid-panel height. There is no corresponding feature on the Hyundai that matches the nature and height of the BMW right front door leading edge damage.

Overall the nature of the damage to the left rear of the Hyundai is incompatible with the nature of the damage to the right front of the BMW. The physical evidence denies mutual contact occurred as claimed.

(Motion Exh. 13.) Under the “CONCLUSION” heading, the report stated, “It is our opinion that the physical evidence denies mutual contact occurred between the BMW and Hundai as claimed by the drivers.” (Ibid.)

Defendant retained Lloyd Michaelson as legal counsel on March 11, 2023, to investigate the claims. (PUMF No. 13.) Michaelson requested documents and an examination from Ayrapetyan on May 18, 2023. (PUMF No. 19.) Arapetyan submitted to an examination under oath on June 15, 2020. (PUMF No. 21.) Michaelson repeatedly requested records from Plaintiff and Ayrapetyan, including the phone number of Ayrapetyan’s ex-girlfriend, whom he had claimed picked him up after the accident, as well as his cell phone records for the days surrounding the accident. (PUMF No. 25, 27, 28.) Ayrapetyan did not produce his cell phone records, did not produce his ex-girlfriend phone number, and did not execute his sworn statement transcript. (PUMF No. 29.)[1]

On August 20, 2020, Defendant notified Plaintiff that it had concluded its investigation and was denying Plaintiff’s claim, based on a breach of the insured’s duty to cooperate and on misrepresentation of facts presented in the claim. (PUMF No. 34.)

Defendant argues that there are no triable issues as to whether it breached the insurance contract, because Plaintiff himself failed to cooperate with the investigation by turning over all documents requested. Additionally, Defendant argues that the report of its expert established a basis for the denial of coverage, namely the fact that the nature of the incident and damage was misrepresented. (Motion at pp. 16–18.)

Plaintiff in opposition argues that there was no failure to cooperate with Defendant, because all alleged failures of cooperation were on the part of Ayrapetian, not himself, who is the named insured under the policy. (Opposition at pp. 16–17.) Plaintiff also argues that Defendant’s investigation concluded that there was no connection between Plaintiff or Ayrapetian and the other driver, and thus Defendant had no basis for believing the accident was a collusive event. (Opposition at pp. 17–20.)

Triable issues of fact prevent the adjudication of Plaintiff’s claim for breach of contract, specifically as to the issue of Plaintif’s cooperation and as to the facts of the underlying collision. Although Defendant makes much of Ayrapetian’s failure to supply relevant information, it makes no attempt to show the second necessary element of its lack-of-cooperation defense, namely that it was prejudiced by any such lack of cooperation: “Under California law, an insured's breach of a notice provision or a cooperation clause does not excuse the insurer's performance unless the insurer can show that it suffered prejudice.” (Belz v. Clarendon America Ins. Co. (2007) 158 Cal.App.4th 615, 625.) Defendant makes no argument as to any prejudice suffered by it as a result of Ayrapetian’s failure to cooperate.

Moreover, triable issues exist as to whether Plaintiff engaged in misrepresentation or fraud, for the simple reason that both Plaintiff and Ayrapetian deny that any such fraud took place. Plaintiff denies knowing the other driver prior to the accident and denies colluding with his nephew or anyone else to make it happen. (Kostandyan Decl. ¶¶ 10–12.) Ayrapetian presents a declaration attesting to his narrative of the accident and denying any fraud or collusion. (Ayrapetian Decl. ¶¶ 5–15.)[2] Thus triable issues exist as to whether Defendant breached the policy by denying Plaintiff benefits owed.

Triable issues further exist as to the bad faith breach of covenant claim. Although Defendnat cites its reliance on its AMCE expert report, “an expert's testimony will not automatically insulate an insurer from a bad faith claim based on a biased investigation.” (Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 348.) An insured may rebut an insurer’s reliance on experts by showing:

(1) the insurer was guilty of misrepresenting the nature of the investigatory proceedings; (2) the insurer's employees lied during the depositions or to the insured; (3) the insurer dishonestly selected its experts; (4) the insurer's experts were unreasonable; and (5) the insurer failed to conduct a thorough investigation.

(Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 348–349, internal citations and quotation marks omitted.)

Triable issues exist here as to whether Defendant’s reliance on the AMCE report was reasonable. The ACME relied solely on points of inconsistency between the damage suffered by the vehicles, namely that, although both sustained damage to the relevant quadrants as described by both drivers, the Hyundai had sustained “narrow horizontal” damage and damage to its bumper inconsistent with the features evident on the BMW, and that the BMW had sustained damage to its right-front door inconsistent with any feature on the Hyundai. (Motion Exh. 13.) The investigation was conducted by reference to the statements offered by the drivers and the post-accident photos submitted thereby. (Ibid.) Yet when Defendant denied the claim, it had no basis for believing that Plaintiff was connected with the driver of the Hyundai, who otherwise corroborated the testimony of Ayrapetian that a traffic collision had caused the damage. Although Defendant contends that there were other indicators of fraud, it presents no evidence to support the contention that any of the underlying indicators existed, or that it reasonably relied upon their existence. (Motion Separate Statement No. 3.) Triable issues therefore exist as to whether Defendant reasonably relied upon its expert report, and thus whether a genuine dispute existed.

The motion is therefore DENIED.