Judge Holly J. Fujie, Case Number: 24STCV17085, Date: 2024-12-31 Tentative Ruling

The Court has considered the moving and opposition papers. No reply brief has been filed. Any reply brief was due five court days before the hearing. (Code of Civil Procedure (“CCP”) § 1005(b).)

This action arises from an insurance coverage dispute. On July 10, 2024, Plaintiff filed a complaint against Defendants Kinsale Insurance Company (“Kinsale”), Van Long Silk & Crafts, LLC, AEG and Does 1 through 50 (collectively, “Defendants”). On September 6, 2024, Plaintiff filed the operative first amended complaint (the “FAC”) alleging causes of action for: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) negligence; (4) professional negligence; and (5) negligent misrepresentation.

On October 8, 2024, AEG filed the instant demurrer (the “Demurrer”). Plaintiff filed an opposition (the “Opposition”) to the Demurrer on December 16, 2024.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see CCP § 430.10, subd. (e).)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[E]ach evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) Courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

In order to state a claim for negligence, a plaintiff must allege the elements of (1) “the existence of a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in an injury.” (McIntyre v. Colonies-Pacific, LLC (2014) 228 Cal.App.4th 664, 671.) Professional negligence is defined as “a negligent action or omission . . . in the rendering of professional services.” (CCP, § 340.5) In Biakanja v. Irving, the California Supreme Court discusses that an action for negligence may be maintained against one not in privity with a plaintiff under certain circumstances. (see Biakanja v. Irving (1958) 49 Cal.2d 647) Factors to balance include: “the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm (Biakanja, supra (1958) 49 Cal.2d at 650.)

In this case, Plaintiff filed an insurance claim with its insurance company, Kinsale, for smoke damage resulting from a fire at a neighboring business. (FAC, ¶ 69.) Kinsale hired AEG to prepare an environmental assessment report to determine the extent of the smoke contamination. (FAC, ¶ 70.) Plaintiff argues that AEG owes Plaintiff a duty of care because the assessment report was intended to affect Plaintiff and it was foreseeable that Kinsale would rely on the findings in the report in determining whether Plaintiff’s insurance claim was covered. (Opp., pp. 4:15-5:11; FAC, ¶¶ 79-80.)

In the Demurrer, AEG argues that they do not owe a duty of care to Plaintiff because the assessment report was prepared solely to benefit Kinsale, not Plaintiff, and that Kinsale’s denying coverage for Plaintiff’s claim was not reasonably foreseeable. (Demurrer, pp. 7:10-8:23)

Based on the duty factors in Biakanja set forth above, Plaintiff has not established that AEG owes Plaintiff a duty of care. For groups of information-supplying professionals, liability is limited to those persons the information is intended to benefit. (see Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 408) Kinsale hired AEG to perform an environmental assessment to aid Kinsale in evaluating Plaintiff’s insurance claim. Plaintiff’s argument that AEG “knew Plaintiff would rely on the contamination assessment for inventory management and insurance-related decisions” is unavailing because the report was plainly intended to benefit Kinsale, not Plaintiff. (Opp. p. 7:13-15.) Plaintiff’s argument that the AEG assessment was meant to benefit Plaintiff is further undermined by the fact that Plaintiff could have, and in fact did, hire its own expert to perform an assessment. (FAC ¶ 27) “A broad rule of liability is of dubious benefit when an efficient means of self-protection is available.” (Bily, supra, 3 Cal.4th at 409)

The ‘foreseeability of harm’ and ‘degree of certainty’ Biakanja factors weigh in AEG’s favor as well. AEG was neither responsible for interpreting Plaintiff’s insurance policy nor determining the type of damage covered under the policy. In addition, the FAC alleges that Plaintiff’s insurance claim was denied not solely based on the environmental assessment report but also based on a pollution exclusion in the insurance contract. (FAC ¶ 32) Thus, there was not a ‘high degree of certainty’ that the outcome of the assessment report would cause Plaintiff’s injury. Accordingly, Plaintiff has not alleged facts that show that AEG owes Plaintiff a legal duty.

Thus, AEG’s Demurrer to the fourth cause of action is SUSTAINED, with leave to amend.

A negligent misrepresentation cause of action requires a plaintiff to allege that the defendant misrepresented a material fact that the plaintiff justifiably relied upon resulting in damage. (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 407-408; Borba v. Thomas (1977) 70 Cal.App.3d 144, 152.)

Plaintiff alleges that AEG misrepresented the extent of smoke contamination in the assessment report to Kinsale which Kinsale then relied upon in denying Plaintiff’s insurance claim. (FAC ¶¶ 90-93). This is insufficient to establish a cause of action for negligent misrepresentation because, although Plaintiff alleges harm resulting from a misrepresentation, the cause of action requires that Plaintiff—not a third party—justifiably relied on said misrepresentation. Whereas here, Plaintiff asserts that AEG misrepresented a material fact, and that Kinsale justifiably relied upon that fact. Thus, Plaintiff has not stated facts sufficient to establish a negligent misrepresentation cause of action against AEG.

Thus, AEG’s Demurrer to the fifth cause of action is SUSTAINED, with leave to amend.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court