Judge: Gregory Keosian, Case: BC611607, Date: 2023-09-26 Tentative Ruling
Case Number: BC611607 Hearing Date: September 26, 2023 Dept: 61
I. MOTION FOR JNOV
“The court,
before the expiration of its power to rule on a motion for a new trial, either
of its own motion, after five days' notice, or on motion of a party against
whom a verdict has been rendered, shall render judgment in favor of the
aggrieved party notwithstanding the verdict whenever a motion for a directed
verdict for the aggrieved party should have been granted had a previous motion
been made.” (Code Civ. Proc., § 629, subd. (a).)
“The trial
judge's power to grant a judgment notwithstanding the verdict is identical to
his power to grant a directed verdict. The trial judge cannot weigh the
evidence or judge the credibility of witnesses. If the evidence is conflicting
or if several reasonable inferences may be drawn, the motion for judgment
notwithstanding the verdict should be denied. A motion for judgment
notwithstanding the verdict of a jury may properly be granted only if it
appears from the evidence, viewed in the light most favorable to the party
securing the verdict, that there is no substantial evidence to support the
verdict. If there is any substantial evidence, or reasonable inferences to be
drawn therefrom, in support of the verdict, the motion should be denied.” (Hauter
v. Zogarts (1975) 14 Cal.3d 104, 110, internal quotation marks and
citations omitted.)
Plaintiff, Defendant, and Cross-Defendant California Capital
Insurance Company (CCIC) moves for judgment notwithstanding the verdict against
Plaintiffs, Defendants, and Cross-Defendants Dallaswhite Corporation
(Dallaswhite) and 328 Maple Limited Partnership (Maple) in three separate
motions. In the first motion, CCIC argues that the verdict in favor of Maple in
the amount of $357,071.83 on its breach of contract and insurance bad faith
claim is without basis, as CCIC had already paid more than $1.7 million more
than the value of the appraised costs, and as such no policy benefits could be
owed under the contract. (Motion at pp. 7–8, 15–17.) CCIC further argues that
there was no evidence at trial that Maple actually incurred the costs of the
sprinkler system. (Motion at pp. 8–13.) Relatedly, CCIC argues that the jury’s
verdict finding that Maple owed no money to CCIC for its overpayments is
unsupported, as it is undisputed that CCIC paid more than the appraisal
amounts, and the jury found unjust enrichment. (Motion at pp. 5–10.)
CCIC relies on authority standing
for the proposition that “because a contractual obligation is the underpinning
of a bad faith claim, such a claim cannot be maintained unless policy benefits
are due under the contract.” (Waller v. Truck Ins. Exchange, Inc. (1995)
11 Cal.4th 1, 35.) CCIC reasons that because a contractual appraisal award
determined the value of Maple’s losses to be $1.7 million less than the amounts
that CCIC paid, CCIC has necessarily paid more than the policy requires,
including the $357,071.83 in sprinkler costs the jury ultimately awarded Maple.
(Motion at pp. 7–8, citing Devonwood Condominium Owners Assn. v. Farmers
Ins. Exchange (2008) 162 Cal.App.4th 1498, 1505 [stating the binding effect
of appraisal arbitrations].)
CCIC’s argument is unpersuasive. Maple’s contract and bad
faith claims against CCIC rested not merely on the claim that CCIC owed money
for costs associated with the sprinkler, but upon the contention that CCIC
failed to adequately investigate the repairs and expenses that it caused Maple
to initiate and incur, before reneging on the promise to pay for them —
effectively, that CCIC induced Maple and Dallaswhite to incur the costs for
which it paid, and for which it now seeks repayment. This argument was raised
during trial and supported by expert testimony. “Even an insurer that pays the
full limits of its policy may be liable for breach of the implied covenant if
improper claims handling causes detriment to the insured.” (Brehm v. 21st Century Ins. Co. (2008)
166 Cal.App.4th 1225. 1236, internal quotation marks and alterations omitted.)
And “[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.) The jury could
have determined that CCIC was not entitled to credit or recoupment for the
payments already made, when CCIC by its own unreasonable conduct caused the
payments to be necessary.
CCIC argues that under the policy, Plaintiff is entitled only
to “the full replacement cost reasonably paid” for the sprinklers, and that
there was no proof at trial that Plaintiff paid the appraised cost. (Motion at
pp. 8–9.) CCIC relies on case authority upholding such provisions limiting the
recovery of insureds to costs actually expended. (See Janney v. CSAA Ins.
Exchange (2021) 70 Cal.App.5th 374, 394; Everett v. State Farm General
Ins. Co. (2008) 162 Cal.App.4th 649, 659; Stephens &
Stephens XII v. Fireman’s Fund Ins. Co. (2014) 231 Cal.App.4th
1131.) But the cases that CCIC cites, to the extent they found no basis for
awards of costs actually incurred, did so on the grounds that the amount of
costs sought was supported only by an expert’s conclusion offered with “no
explanation” (Everett, supra, 162 Cal.App.4th at p.
659), or was sought “before [the insured] makes the actual repairs.” (Stephens
& Stephens XII, supra, 231 Cal.App.4th at p. 1148.)
Here, by contrast, it is undisputed that the sprinklers have actually been
installed in Maple’s building. And the amount of damages awarded, representing
the actual cost of these sprinklers, is supported by the appraisal award, which
was introduced into evidence. The jury thus had substantial basis for finding
the damages that it did.
CCIC argues that the appraisal award in its favor
established that there was a genuine dispute as to insurance coverage, meaning
there could be no finding of bad faith. (Motion at pp. 17–19.) It is true that
“an 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.” (Behnke v. State
Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1470.) However, as Maple
notes in opposition, “[t]he genuine dispute rule does not relieve an insurer
from its obligation to thoroughly and fairly investigate, process and evaluate
the insured's claim.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th
713, 723.) As noted above, Maple provided evidence at trial that CCIC’s
negligent investigation and handling of the claims contributed to the necessity
of the costs for which it now seeks reimbursement. Furthermore, evidence was
presented that CCIC never paid the sprinkler expenses that the appraiser
awarded.
CCIC’s argument as to the jury’s adverse verdict on its
claim for restitution is that although the jury marked “yes” on the form for
the proposition that Maple was unjustly enriched, it marked “$0” for the amount
of money that Maple was to repay. (Motion at pp. 5–6.) CCIC contends that for
the verdict to be consistent with the evidence, the court must enter judgment
directing Maple to pay back the amount that CCIC paid in excess of the
appraiser’s award. (Motion at pp. 5–9.) However, this argument is essentially
that advanced against Maple’s breach of contract claim, and fails for the same
reason. The jury had substantial basis for finding that even if the payments
were in excess of the appraisal award, it was CCIC’s failure to diligently
investigate the claim that precipitated the work for which the payments were
made. (Opposition at pp. 6–7.)
CCIC’s motions as to Maple are therefore DENIED.
CCIC next argues that the verdict in favor of Dallaswhite
should be set aside for several reasons. First, Dallaswhite’s claims center on
a Work Authorization contract, which was ratified by an adjuster without
authority to contract. (Motion at pp. 7–13.) CCIC argues that Dallaswhite
cannot obtain recovery of $183,290.65 for amounts that were paid to Maple, as
CCIC contends that Dallaswhite’s remedy for this amount lies in suit against
Maple, not itself. (Motion at pp. 13–14.) CCIC also argues that Dallaswhite is
not entitled to claim damages for demobilization work, since CCIC never
authorized such work to be performed. (Motion at pp. 14–16.) And CCIC finally
argues that Dallaswhite should not be able to obtain recovery for demolition
services, since those services were beyond the ambit of the Work Authorization.
(Motion at pp. 16–17.)
“[I]t is incumbent upon the party seeking to charge the
principal for the acts of its agent to show (1) existence of the agency
relationship, and (2) authority of the agent to bind the principal to the
transaction upon which the action is brought.” (California Viking Sprinkler
Co. v. Pacific Indem. Co. (1963) 213 Cal.App.2d 844, 850.) CCIC relies upon
the testimony of adjuster Philip Henry, who stated that in assenting by email
to Dallaswhite’s work authorization, that he did not intend or have the
authority to bind CCIC to pay for work beyond that permitted by the insurance
policy, and further that if any such contract were proposed, he would run the
proposal up to the vice president of claims. (Motion at p. 8.) However,
Dallaswhite presented contrary evidence of the adjusters’ practice of hiring
contractors and consultants at CCIC’s expense, as well as the course of
practice and payment that followed Henry’s assent to the contract at issue.
(Opposition at pp. 6–9.)
CCIC’s argument as to Invoice No. 2 is also unpersuasive.
CCIC states that it attempted to interplead the $183,290.65, sought by both
Maple and Dallaswhite, but its cross-complaint was rejected, so it paid Maple
the funds. (Motion at pp. 13–14.) Although Dallaswhite and Maple have settled
their claims against one another, CCIC does not present evidence that
Dallaswhite has been paid the amount owed for this work, or that Dallaswhite
possesses a viable claim against Maple for the payment, as opposed to CCIC, for
which a contract for payment was found to exist.
CCIC further argues that Dallaswhite ought not be able to
claim damages for demobilization, as such work was not authorized. (Motion at
pp. 14–16.) However, Dallaswhite’s rebuttal in opposition is persuasive: CCIC
implicitly authorized payment for demobilization — removal of Dallaswhite’s
personnel and equipment upon the completion of the job — when it authorized
mobilization for the job in question. (Opposition at p. 10.)
CCIC finally argues that no damages should be awarded for
demolition work. (Motion at pp. 16–17.) However, Dallaswhite’s opposition is
persuasive for the proposition that demolition costs were not awarded in the
verdict: the jury’s award rather included awards of $183,290.65 under Invoice
No. 2 and $119,306.72 in demobilization costs. (Opposition at p. 3.)
Accordingly, CCIC’s motions for judgment notwithstanding
the verdict are DENIED.