Judge Jill Feeney, Case Number: 19STCV45113, Date: 2023-08-28 Tentative Ruling

Plaintiff filed this action against Defendants Travelers Property Casualty Company of America (“Travelers”) as well as Auto Data Processing, Inc., ADP Payroll Services, Inc., Automatic Data Processing Insurance Agency, Inc., Automatic Data Processing, Inc. and ADP, Inc. (the “ADP Defendants”).

Plaintiff’s Fifth Amended Complaint (“FAC”) alleges the following causes of action (1) breach of contract against the Travelers Defendants; (2) breach of contract against Travelers Defendants and ADP Defendants; and (3) breach of implied covenant of good faith and fair dealing against Travelers Defendants and ADP Defendants.

Plaintiff Purushottam Patel (“Plaintiff”) operates the Welcome Inn. Plaintiff hired ADP Defendants to perform payroll services for the business. (FAC, ¶10(I).) Plaintiff’s Agreement with ADP Defendants required ADP Defendants to obtain worker’s compensation coverage for Plaintiff’s business (FAC, ¶10(iii).) ADP Defendants contracted with Travelers to provide worker’s compensation coverage for the Welcome Inc. (FAC, ¶10(ix).) ADP Defendants told Plaintiff that the Welcome Inn would have workers’ compensation insurance, so long as its payroll was processed by ADP Defendants. (FAC, ¶11.)

In January 2016, Plaintiff’s entire staff quit. Plaintiff had no employees from February 1, 2016 to July 31, 2016. (FAC, ¶14.) ADP Defendants told Plaintiff that, so long as he continued to pay a bimonthly minimum payment to ADP Defendants, his worker’s compensation coverage would continue when he hired new employees. (FAC, ¶15.) Plaintiff continued to pay these minimums and understood that his coverage continued. (FAC, ¶¶16-19.)

In April 2016, Plaintiff received from Travelers a notice of intent to cancel for nonpayment of insurance premiums. (FAC, ¶22.) When Plaintiff contacted Travelers, Travelers informed Plaintiff that he would have to speak with ADP Defendants. (FAC, ¶22.) When Plaintiff spoke with ADP Defendants, ADP Defendants informed Plaintiff that this was Travelers’ mistake. (Ibid.)

In April 2017, Plaintiff informed ADP Defendants and Travelers that a worker’s compensation claim had been filed by a former Welcome Inn employee. (FAC, ¶39.) ADP Defendants and informed Plaintiff that they did not have a record of Plaintiff being covered during the relevant time, but they would defend Plaintiff in the worker’s compensation action, because the lack of coverage had been due to clerical error. (FAC, ¶44.) On December 15, 2017, Travelers refunded $967 to Plaintiff but did not inform him that they were cancelling his coverage and would not defend him in the worker’s compensation action. (FAC, ¶46.) Travelers has not defended Plaintiff in the worker’s compensation action. (FAC, ¶46.)

On May 4, 2022, the Court struck Plaintiff’s First Cause of Action, sustained Travelers’ and ADP’s Demurrers to the Second and Third Causes of Action as to both Defendants with leave to amend sustained the demurrer to the Fourth Cause of action as to both Defendants without leave to amend.

On October 14, 2022, ADP Defendants and Travelers Defendants demurred to the FAC and moved to strike portions of it. The Court sustained Travelers Defendants’ demurrer to the first cause of action without leave to amend and overruled Travelers Defendants’ and ADP Defendants’ demurrers to the other causes of action. The Court also granted the motion to strike.

On August 24, 2023, ADP Defendants submitted a Stipulation and Order setting aside the default against Defendants ADP, Inc. (erroneously sued as ADP Payroll Services, Inc.) and Automatic Data Processing Insurance Agency, Inc. (erroneously sued as Auto Data Processing) and allowing them to file a single, consolidated answer to the FAC.

On August 28, 2023, Defendants ADP, Inc. (f/k/a ADP LLC and erroneously sued as ADP Payroll Services, Inc.), Automatic Data Processing Insurance Agency, Inc. (erroneously sued as Auto Data Processing), Automatic Data Processing, Inc. and Auto Data Processing, Inc. and ADP Payroll Services, Inc. filed a consolidated answer to the FAC per the August 4, 2023 Stipulation.

On October 27, 2023, Defendants ADP, Inc. f/k/a ADP, LLC (erroneously sued as ADP Payroll Services, Inc.), Automatic Data Processing Insurance Agency, Inc. (erroneously sued as Auto Data Processing), Automatic Data Processing, Inc., Auto Data Processing, Inc. and ADP Payroll Services, Inc. filed the instant motion for summary judgment, or in the alternative summary adjudication.

The hearing on ADP Defendants’ motion was scheduled for February 8, 2024. Plaintiff’s counsel requested a continuance of that hearing via a declaration filed on February 7, 2024, the day before the hearing. The request was granted and the motion was continued to March 29, 2024, the same date as the Travelers motion was scheduled.

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).) A Defendant moving for summary judgment may meet its initial burden, inter alia, by proving that for each cause of action alleged, Plaintiff cannot establish at least one element of the cause of action. (Code Civ. Proc. § 437c(p)(2).) What this means in practice is that if a cause of action, such as fraud, for example, requires proof of five elements, one of which is reliance, and if Defendant sets forth a prima facie case that reliance cannot be proven (either by citation to plaintiff’s deposition testimony, written discovery responses or other means), then Defendant has met its burden.

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.)

ADP Defendants argue Plaintiffs’ causes of action against Auto Data Processing, Inc., ADP Payroll Services, Inc. and Automatic Data Processing, Inc. fail as a matter of law because Plaintiff is not in privity of contract with these defendants. ADP Defendants argue the contract produced by Plaintiff in support of his contract claims only identifies ADP, Inc. (“ADP”) and Automatic Data Processing Insurance Agency, Inc. (“Agency”) as parties. ADP Defendants argue the remaining ADP Defendants are not named as parties and therefore cannot be held liable on the contract. ADP Defendants argue the mere fact that ADP Defendants are affiliated with one another would not alone make them liable for the contractual obligations of each entity.

ADP Defendants argue ADP and Agency also did not breach the agreement as a matter of law. ADP Defendants argue ADP and Agency were obligated and authorized under the agreement to debit Plaintiff’s account for payment of insurance premiums. ADP Defendants argue that was precisely what ADP and Agency did. ADP Defendants argue ADP nor Agency were expressly relieved of any obligation to procure insurance or make insurance available for Plaintiff.

ADP Defendants argue Plaintiff also failed to notify ADP or Agency in writing of the change in his insurance coverage. ADP Defendants argue the contract specifically states that if Plaintiff required any changes to the policy, changes to the payment terms or wanted to terminate its policy, Plaintiff was required to provide ADP and Agency with notice. ADP Defendants argue failure to adhere to this condition precedent negates any allegation of breach of contract.

ADP Defendants argue their alleged breach was not a substantial factor in causing Plaintiff’s damages. ADP Defendants argue it was not their alleged breach that deprived Plaintiff of worker’s compensation insurance covering the subject worker’s compensation action. ADP Defendants argue they had no duty to obtain worker’s compensation coverage for Plaintiff. ADP Defendants also argue Travelers refused to confirm that it would have renewed Plaintiff’s policy had the premiums been received. ADP Defendants argue even if such a policy had been renewed, it would not have covered the subject worker’s compensation action because of the employee’s legal status and Plaintiff’s admission that the individual was not an employee and not on payroll.

ADP Defendants argue the breach of implied covenant of good faith and fair dealing cause of action fails for the same reason as the breach of contract claim. ADP Defendants argue they were under no legal obligation to secure worker’s compensation for Plaintiff, only to debit Plaintiff’s account for payment of insurance premiums, which ADP and Agency did.

ADP Defendants argue any assertion that there was an oral agreement is barred by the two-year statute of limitations under CCP §339. ADP Defendants argue Plaintiff admits he received Notice of Cancellation of the insurance policy on April 25, 2017. ADP Defendants argue Plaintiff did not file this action until December 13, 2019, more than two years after the breach.

2. Based on the undisputed facts, Auto Data Processing, Inc., ADP Payroll Services, Inc. and Automatic Data Processing, Inc. are not parties to the contract sued upon in the second cause of action for breach of contract or the third cause of action for breach of implied covenant of good faith and fair dealing. The motion for summary judgment on behalf of Auto Data Processing, Inc., ADP Payroll Services, Inc. and Automatic Data Processing, Inc. is GRANTED.

Auto Data Processing, Inc., ADP Payroll Services, Inc. and Automatic Data Processing, Inc. establish that they were not parties to the contract upon which Plaintiff bases his second cause of action for breach of contract and third cause of action for breach of implied covenant of good faith and fair dealing. The only agreement identified between Plaintiff and any of the ADP Defendants is the ADP Insurance Services Addendum, attached as Exhibit B to the FAC. (Defendants’ RJN, Ex. A, FAC, Ex. B.) Plaintiff identified that same agreement as the basis for the breach of contract and breach of implied covenant of good faith and fair dealing causes of action against ADP Defendants. (Defendants’ Appendix of Exhibits, Ex. C, Plaintiff’s Responses to Special Interrogatories, 2:8-10; Ex. E, Plaintiff’s Responses to RFPs, 2:4-5; Defendant’s RJN, Ex. A, FAC, Ex. B.) The ADP Insurance Services Addendum is between ADP, Agency and Plaintiff. (Defendant’s RJN, Ex. A, FAC, Ex. B, p. 1.)

ADP Defendants negate the existence of an enforceable agreement between Plaintiff and Auto Data Processing, Inc., ADP Payroll Services, Inc. and Automatic Data Processing, Inc. ADP Defendants therefore negate an essential element of Plaintiff’s breach of contract and breach of implied covenant of good faith and fair dealing causes of action against them. (Reichert v. General Ins. Co. of America (1968) 68 Cal.2d 822, 830 (elements of a cause of action for breach of contract are existence of contract, plaintiff’s performance or excuse for nonperformance; defendant’s breach and the resulting damages to the plaintiff); CACI 325 (elements of breach of implied covenant of good faith and fair dealing (1) plaintiff and defendant entered into a contract; (2) plaintiff did all, or substantially all of the significant things that the contract required plaintiff to do or was excused from doing those things; (3) that all conditions required for defendant’s performance occurred or were excused; (4) that defendant engaged in conduct that prevented the plaintiff from receiving benefits under the contract; (5) that by doing so, defendant did not act fairly or in good faith; and (6) that plaintiff was harmed by defendant’s conduct).)

In response, Plaintiff argues that Automatic Data Processing, Inc. is a wholly owned subsidiary and alter ego of ADP, Inc. Even if Automatic Data Processing, Inc. is a wholly owned subsidiary of ADP, Inc., it is not a party to the 2015 insurance policy between Plaintiff, ADP, and Agency. Plaintiff fails to explain how Automatic Data Processing, Inc.’s status as a subsidiary would make it a party to the 2015 insurance policy. Additionally, although Plaintiff argues Automatic Data Processing, Inc. is an alter ego of ADP, Inc., Plaintiff merely provides a recitation of cases on alter ego liability and fails to provide any evidence or analysis in support of this argument. Plaintiff fails to meet his burden of proving a triable issue of material fact remains over whether an enforceable agreement exists between Plaintiff and the remaining ADP entities.

Based on Plaintiff’s FAC, ADP and Agency were contractually obligated to procure and maintain worker’s compensation insurance for Plaintiff and to pay the premiums for this insurance by automatically debiting Plaintiff’s account and forwarding the payment to Travelers. (FAC, ¶¶74-83.) Plaintiff alleges ADP and Agency agreed that Plaintiff would have workers’ compensation insurance, so long as Plaintiff’s paid insurance premiums. (FAC, ¶74.). Plaintiff alleges ADP and Agency breached their contractual obligations by failing to provide insurance for the period from August 1, 2016 to August 1, 2017, even though Plaintiff paid the premium for that period through ADP and Agency. (FAC, ¶¶84, 88, 89.) Plaintiff alleges Travelers accepted his October 3, 2016 premium payment in the amount of $967 through ADP and Agency, but ultimately denied there was a 2016-2017 policy that would cover the claim of one Daniel Hernandez. (FAC, ¶89.)

According to Defendants ADP and Agency, they were not obligated to provide insurance or obtain or procure insurance for Plaintiff. However, the sections of the contract cited by Defendants ADP and Agency do not clearly establish that they were not obligated under the ADP Insurance Services Addendum to obtain or procure insurance for Plaintiff or to ensure that Plaintiff was covered by worker’s compensation insurance so long as ADP and Agency were processing premiums on Plaintiff’s behalf.

ADP Defendants rely on ¶¶2, 3 and 6 of the ADP Insurance Services Addendum as evidence that their obligations to Plaintiff did not include ensuring that Plaintiff had worker’s compensation coverage. However, none of these paragraphs clearly state that ADP and Agency’s contractual obligations to Plaintiff did not include ensuring that there was no lapse in coverage, or that their contractual obligations were limited to payment of premiums, even where the policy for which the premiums were being paid had lapsed. In fact, ¶3 states, “Client acknowledges that Agency has and/or may in the future assist Client with obtaining insurance from insurance carriers. Client understands that neither ADP nor Agency is making this insurance available to Client…” (Defendant’s RJN, FAC, Ex. B, ¶3.) At best, ¶3 is ambiguous as to what Agency’s duties are under the ADP Insurance Services Addendum and whether it included the obligation to ensure there was no lapse in Plaintiff’s coverage, to determine whether there was a lapse in coverage or to inform Plaintiff of any lapse in coverage.

Exacerbating the ambiguity of ADP and Agency’s obligations under the ADP Insurance Services Addendum is the failure of the portion of the agreement cited to define “Pay-by-Pay Services.” The ADP Insurance Services Addendum defines the services to be provided in ¶1 therein: “The Services. Subject to the following terms and conditions, ADP will provide Client with ADP’s Pay-By-Pay services for worker’s compensation insurance and any other insurance products supported by the Pay-By-Pay Premium Payment Program. The Agency will provide Client with certain services as an insurance agent.” (RJN, FAC, Ex. B, ¶1.)

“Pay-by-Pay Services” is not defined. Moreover, ¶1 expressly states that Agency would serve as Plaintiff’s insurance agent, which goes beyond merely debiting premium payments from Plaintiff’s account. Finally, the Addendum is merely an addendum, and it states that it “supplements the agreement between [Plaintiff] and ADP that governs your payroll services.” (RJN, FAC, Ex. B, ¶1.) Standing alone, the Addendum fails to negate Plaintiff’s allegations of ADP and Agency’s breach of contract.

In fact, ADP and Agency’s evidence raises questions of fact regarding whether they breached the Addendum by failing to pay premiums as agreed. ADP and Agency’s SSUMF No. 10 states that “Travelers converted Plaintiff’s workers compensation insurance policy to the Standard Premium Payment Plan pursuant to the ADP Insurance Services Addendum,” citing to Plaintiff’s responses to Defendants’ Special Interrogatories as support. (Defendant’s SSUMF No. 10.) Plaintiff’s full response to SI No. 1 regarding Section 2 of the Addendum claims ADP and Agency refused to pay for Plaintiff’s worker’s compensation insurance: “On or about April 19, 2016, Travelers converted policy IJUB-3F39239-3-15 as Standard Premium Payment plan pursuant to the agreement and demanded full payment of insurance premium form [ADP/Agency] but [ADP/Agency] refused to make a full payment of worker’s compensation premium and said that policy would be on ‘hold’ for six months.” (Defendant’s Appendix of Exhibits, Ex. C, 3:20-23.) ADP and Agency’s evidence also establishes that Travelers issued a notice of cancellation based on nonpayment of the premium on May 9, 2016. (Defendant’s SSUMF No. 13.)

Again, this evidence relied upon by ADP and Agency does not clearly establish that ADP and Agency were not in breach of their contractual obligations. Even if their contractual obligations were limited to payment of premiums, SSUMF Nos. 10 and 13 raise questions as to whether ADP and Agency performed that obligation.

ADP and Agency submitted supplemental evidence in support of its motion for summary judgment. Specifically, ADP submitted the declaration of Beth Daniewicz, a Regional Controller for Travelers. Daniewicz confirms that Plaintiff’s insurance policy was set to expire in November 2016, but was cancelled as of May 9, 2016. (Daniewicz Decl., ¶4.) Travelers did not receive a premium payment from Plaintiff in March or April 2016. (Id., ¶17.) Travelers issued a notice of cancellation for nonpayment of premiums in April 2016 with a cancellation date of May 9, 2016. (Id.) In August 2016, Agency disputed the post-cancellation audit of the policy because the audit was too high because actual payroll was less than believed. (Id., ¶23.) Although Travelers issued a partial refund of the final premium, the insurance policy was still canceled, and Travelers refused to accept further payments from Plaintiff. (Id., ¶¶24-25.) The remaining exhibits include a notice of cancellation, communications between Agency and Travelers, a premium adjustment notice, and screen shots of a claim notice. (Connor Decl., Exhs. T-W.)

Again, ADP and Agency’s evidence does not clearly establish that ADP and Agency were not in breach of their contractual obligations. ADP and Agency argue that there was no coverage for the worker’s compensation claim filed by Plaintiff’s former employee because the 2015 policy had been canceled or would have expired on the date of the employe’s injury. The newly submitted evidence from Travelers shows Travelers cancelled the policy after they received no premium payments in March and April 2016. The evidence is ambiguous as to whether ADP had a contractual obligation to ensure that Plaintiff had worker’s compensation insurance at all times when Plaintiff was processing its payroll through the ADP Defendants.

The new evidence from ADP again fails to state what ADP and Agency’s obligations were under the agreement with Plaintiff. Even if the policy had been canceled or would have expired, an issue of fact remains over whether there was no policy in place at the relevant time period because of ADP and Agency’s failure to perform under the parties’ contract. Therefore, triable issues of material fact remain over whether ADP and Agency breached a contractual obligation to Plaintiff.

ADP and Agency fails to establish as a matter of law that they did not breach their contractual obligations under the ADP Insurance Services Addendum as alleged in Plaintiff’s FAC. ADP and Agency’s Motion for Summary Judgment or Adjudication based on lack of breach of duty is DENIED.

“The test for causation in a breach of contract…action is whether the breach was a substantial factor in causing the damages. Causation of damages in contract cases, as in tort cases, requires that the damages be proximately caused by the defendant's breach, and that their causal occurrence be at least reasonably certain. A proximate cause of loss or damage is something that is a substantial factor in bringing about that loss or damage. The term ‘substantial factor’ has no precise definition, but it seems to be something which is more than a slight, trivial, negligible, or theoretical factor in producing a particular result.” (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 909.)

ADP and Agency argue Plaintiff cannot establish that their conduct was a substantial factor in causing Plaintiff’s damage. According to ADP and Agency, their conduct was not a substantial factor in causing Plaintiff’s damages, because (1) they had no duty to ensure that Plaintiff had worker’s compensation insurance or there was no lapse in coverage; and (2) Travelers stated that there would not have been coverage had it received insurance premiums owed by Plaintiff and Hernandez’s legal status would not have allowed for coverage.

As discussed above, Defendants fail to establish as a matter of law that they had no duty to ensure Plaintiff had worker’s compensation coverage. However, Defendants submit evidence that the Hernandez workers’ compensation claim would not have been covered under the Travelers’ workers’ compensation policy for multiple reasons even if it had been in effect. Travelers stated in response to Plaintiff’s discovery that the Hernandez workers’ compensation claim would not have been covered, because (1) Hernandez was not injured or not injured in the course of his employment by Plaintiff; (2) Plaintiff knowingly employed Hernandez in violation of the law; and (3) Plaintiff’s failure to comply with the terms of the policy prior to filing this lawsuit. (Defendant’s Appendix of Exhibits, Ex. Q, 7:13-21.)

The statements are hearsay. But even if they were not, it does not resolve the issue here: whether the ADP Defendants had an obligation to ensure that Plaintiff had some type of worker’s compensation coverage whether it be through Travelers or some other insurance company. If the ADP Defendants contend that Hernandez’s claim would never have been covered by any policy, they have failed to provide evidence in this regard.

Pursuant to Code of Civil Procedure §437c(f)(1), a party may properly seek summary adjudication of one or more causes of action, one or more affirmative defenses, the issue of punitive damages or the issue of duty. (Code of Civil Procedure §437c(f)(1).) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim of damages or an issue of duty.” (Id.)

Defendants argue the second and third causes of action for breach of contract and breach of implied covenant of good faith and fair dealing are barred by the 2-year SOL under CCP §339, which applies to actions on oral agreements. As moving party, Defendants have the burden to show that undisputed facts support each element of the affirmative defense. (Sumner v. Simpson University (2018) 27 Cal.App.5th 577, 580 (defendants established each element of ministerial exception as a complete defense to tort claims but exception did not foreclose contract claims).)

Defendants fail to establish that the 2-year SOL under CCP §339 applies to Plaintiff’s claims. CCP §339 applies a 2-year SOL to “an action upon a contract, obligation or liability not founded upon an instrument of writing…” Plaintiff is alleging that ADP Defendants breached their obligations under ADP Insurance Services Addendum, a written agreement, not an oral agreement. (FAC, Caption, 1:16-18, “SECOND CAUSE OF ACTION: against Travelers and ADP…Breach of Written Contract”; 29:12-17, “Second Cause of Action for Breach of WRITTEN Contract” (emphasis in original).) CCP §339 would not apply or bar Plaintiff’s claims for breach of written contract.

There is one reference in the complaint to an “oral contract.” “Plaintiffs contend that Defendant Travelers…authorized ADP…to transaction business in California as a licensed agent of Travelers and to solicit, negotiate or effect contracts for various classes of insurance…per the said authorization ADP had an ability to bind Defendant Travelers Insurance by an oral contract upon paying insurance premium to Travelers through ADP so long as ADP processed the payroll for the insured.” (FAC, ¶88.) At best, Plaintiff alleges an oral contract binding on Defendant Travelers, not ADP Defendants.

ADP Defendants also fail to identify any oral agreement in their separate statement. Given Plaintiff’s express allegation that he is suing for breach of written contract, Defendants’ evidence that the claims are based on the ADP Insurance Services Addendum and Defendants’ lack of any evidence of an oral agreement, Defendants fail to establish that Plaintiff’s claims are barred as a matter of law by the 2-year SOL under CCP §339.

“In the usual case, the question of whether the defendant's conduct will support an award of punitive damages is for the trier of fact, since the degree of punishment depends on the peculiar circumstances of each case. But the issue may be resolved on summary judgment, giving due regard to the higher proof standard. While the clear and convincing evidentiary standard is a stringent one, it does not impose on a plaintiff the obligation to prove a case for punitive damages at summary judgment. However, where the plaintiff's ultimate burden of proof will be by clear and convincing evidence, the higher standard of proof must be taken into account in ruling on a motion for summary judgment or summary adjudication, since if a plaintiff is to prevail on a claim for punitive damages, it will be necessary that the evidence presented meet the higher evidentiary standard. Summary judgment on the issue of punitive damages is proper only when no reasonable jury could find the plaintiff's evidence to be clear and convincing proof of malice, fraud or oppression.” (Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 762; Pacific Gas and Electric Company v. Superior Court (2018) 24 Cal.App.5th 1150, 1158–1159.) The party moving for adjudication of a plaintiff’s punitive damages claim bears the initial burden of production. (CCP §437c(f)(1) and (2); Johnson & Johnson v. Supr. Ct. (2011) 192 Cal.App.4th 757, 761.)

ADP Defendants establish that no reasonable trier of fact could find that it was guilty of malice, fraud or oppression. Even accepting Plaintiff’s allegations as true, ADP Defendants at most failed to make timely premium payments or failed to ensure there was no lapse in worker’s compensation coverage. These actions, without more, would at best qualify as breaches of contract and do not qualify as malice, fraud or oppression in the context of the breach of implied covenant of good faith and fair dealing.

Moreover, recovery of punitive damages for tortious breach of the implied covenant of good faith and fair dealing has been allowed against an insurer in limited contexts, such as denial of insurance benefits after failing to undertake an adequate, good faith investigation and the insurer’s unreasonable refusal to accept a settlement offer in an attempt to exploit an insured’s exigent financial situation to force settlement favorable to the insurer. (2 Witkin, Summary of California Law (11th ed. 2017), Insurance, §343.) The conduct alleged against ADP Defendants and ADP Defendants’ evidence do not support a finding that ADP Defendants engaged in conduct akin to the bad faith denial of insurance benefits or subordination of an insured’s rights.

Plaintiff also filed a request for judicial notice. However, the request refers to entities who are not parties to this litigation, refers to exhibits that were not included in the opposition papers, and cites the Federal Rules of Evidence. Plaintiff requests that the Court take judicial notice of the fact that ADP, Inc. is a wholly owned subsidiary of Automatic Data Processing, Inc. This request is granted. Plaintiff’s remaining requests are denied.

Travelers also argues that the 2015 policy did not proximately cause Plaintiff’s damages because the policy would have expired before Plaintiff’s former employee filed his workers’ compensation claim. Travelers alleges the 2015 policy did not cover the injury to Plaintiff’s former employee because it did not occur during the effective period of the 2015 policy and the policy was cancelled by the time the injury took place.

Plaintiff originally obtained a workers’ compensation policy from Travelers in 2014 and renewed the policy in 2015. (Daniewicz Decl., ¶¶4-8.) The Automatic Data Processing Insurance Agency, INC (ADPIA) produced and bound the policy pursuant to an agreement between Travelers and ADPIA. (Id., ¶7.) The policies were valid contracts between Travelers and Plaintiff. (Id., ¶9.)

The terms of Plaintiff’s 2015 policy with Travelers state that Plaintiff was required to pay all premiums when due. (Travelers’ Exh. 1, TRA0019; Exh. 2, TRA0081.) The policy may be canceled for non-payment of premium. (Travelers’ Exh. 2, TRA0100.) If Travelers canceled the policy for non-payment, it would give Plaintiff 10 days advance written notice. (Id.) The policy period would end on the day and hour stated on the cancelation notice. (Id.) Once the premium was cancelled, Travelers would calculate a final, pro-rated premium. (Id., TRA0095.) Travelers did not receive a premium payment from Plaintiff in March or April 2016. (Daniewicz Decl., ¶17.) On April 19, 2016, Travelers issued a notice to Plaintiff stating the 2015 policy would be cancelled by May 9, 2016 for nonpayment. (Travelers’ Exh. 3.) On May 9, 2016, the policy was cancelled. (Daniewicz Decl., ¶19.) On April 20, 2017, Plaintiff’s former employee, Daniel Hernandez, filed a claim with the Workers Compensation Appeals Board (WCAB). (Travelers’ Exh. 11.)

Travelers’ insurance agreements with Plaintiff state that Plaintiff was required to pay premiums when due and that Travelers could cancel the policy for nonpayment of premiums after a notice period of 10 days. After Plaintiff failed to pay premiums, Travelers properly issued a cancellation notice and thereafter cancelled the policy. Because the cancellation comported with the terms agreed upon between Plaintiff and Travelers, the 2015 policy was properly cancelled. By the time Daniel Hernandez filed his workers’ compensation claim, the Plaintiff’s insurance policy with Travelers had already been cancelled. Additionally, no part of the 2014 or 2015 policies stated renewal was automatic. Therefore, Travelers meets its burden of showing it did not breach its contractual obligations with Plaintiff.

The burden shifts to Plaintiff. Plaintiff argues that Plaintiff had a contract with ADP/ADPIA to keep Plaintiff insured for workers’ compensation coverage so long as ADP was doing payroll for Plaintiff. However, the agreements between Travelers and Plaintiff state that Plaintiff was responsible to pay premiums when due. There is no evidence that the premiums were considered paid if paid to ADP.

An actual agent is someone who has in truth been appointed by the principal. Civil Code, section 2299. An ostensible agent is someone that a third party has been led to believe is empowered to act for the principal. Civil Code, §2300. That belief must be created by a negligent or intentional act of the principal, not the agent. Civil Code § 2300.

Here, Plaintiff cites the declaration of Keith Kantaria in support of this argument. Kantaria, an insurance broker retained as an expert, testifies that a producer for Travelers Workers’ Compensation Insurance policies would generate a policy naming the producer for the policy and Travelers would review before sending the policy to the insured. (Kantaria Decl., ¶(h).) At the time the broker or producer sends money to an insured’s Travelers account, the producer is required to enter the insured’s policy number. (Id., ¶(i).)

Plaintiff’s evidence does not show that ADP accepted payment on behalf of Travelers for purposes of meeting Plaintiff’s payment obligations under the insurance agreement. Kantaria’s testimony demonstrates that when an insured pays the producer or broker, the producer is required to pay the premium on the insured’s behalf by entering the policy number and making payment to the insured’s Travelers account. Thus, payment to Travelers is not made until the producer or broker pays the premium on the insured’s behalf. In this case, ADP was required to pay the premium on Plaintiff’s behalf. Because Travelers received no premium payments in March and April 2016, it was entitled to cancel the policy under the insurance agreement. There is no evidence that Travelers authorized ADP to accept premium payments on its behalf. Rather, ADP was required to pay the premiums to Travelers on Plaintiff’s behalf. Plaintiff thus fails to meet his burden of proving a triable issue of material fact remains over whether Travelers breached its contractual obligations to Plaintiff by cancelling Plaintiff’s insurance policy in 2016.

(2) The policyholder's failure to report payroll, to permit the insurer to audit payroll as required by the terms of the policy or of a previous policy issued by the insurer, or to pay any additional premium as a result of an audit of payroll as required by the terms of the policy or of a previous policy.

(4) A material change in ownership or any change in the policyholder's business or operations that materially increases the hazard for frequency or severity of loss, requires additional or different classifications for premium calculations, or contemplates an activity excluded by the insurer’s reinsurance treaties.

Here, Plaintiff argues that Travelers’ notice of cancellation was defective. Plaintiff argues no premium was due in April 2016 because Travelers refunded a portion of a previous premium payment. However, as Travelers pointed out in its motion, the August 2016 refund was issued because ADPIA disputed the result of the post-cancellation audit of Plaintiff’s insurance policy and argued that actual payroll was less than believed. (Daniewicz Decl., ¶23, Exh. 6.) After Travelers reviewed the audit, it found that the final total premium under the 2015 policy totaled $1,257 based on the lower payroll. (Id., ¶24, Exh. 7.) Because Plaintiff had already paid $1,291 toward the 2015 premium before it was canceled, Plaintiff had overpaid $34 and Travelers issued a refund. (Id.)

Nothing about the August 2016 refund indicates that no payment was due under the 2015 policy for April 2016. Rather, the refund was a final audit of the 2015 policy to ensure Plaintiff had only been charged for the portion of the time covered before the policy was canceled. The fact remains that Travelers did not receive Plaintiff’s insurance premium payments in March and April 2016. Therefore, the notice of cancellation was not defective. Plaintiff fails to meet his burden of proving a triable issue of material fact remains over whether Travelers’ notice of cancellation under Insurance Code, §676.8 was defective.

Plaintiff next argues that Travelers was required to automatically renew Plaintiff’s insurance policy. Plaintiff cites Insurance Code, §676.8(e)¸which provides that “any policy written for at term longer than one year, or any policy with no fixed expiration date, shall be considered as if written for successive policy periods of one year. Here, however, the 2015 insurance policy period was November 22, 2015 to May 9, 2016, which is less than one year. Because the policy was written for a term of less than one year and had a fixed expiration date, Insurance Code, §676.8(e) does not apply to Plaintiff’s 2015 policy.

Additionally, there is no evidence that Travelers was required to automatically renew Plaintiff’s policy. There was no provision in the 2014 or 2015 policies stating Travelers would automatically renew the policy at the end of each policy period. Plaintiff’s own expert testifies that Travelers’ policies are subject to an automatic renewal by operation of law unless the insured stops making payments or Travelers issues a notice of non-renewal. (Kantaria Decl., ¶j.) Thus, even if Travelers automatically renewed the policy, Travelers was entitled to decline renewal because it did not receive premium payments in March and April 2016. Plaintiff fails to meet his burden of proving a triable issue of material fact remains over whether Travelers was required to renew Plaintiff’s policy.

Here, the policy premium quote in Exhibit A-16 to the Kantaria Declaration appears to be the original quote for the 2015 policy. Nothing about the policy summary attached as A-16 shows Travelers reinstated the policy. Rather, it states the policy was expired. Although Plaintiff argues the policy was expired rather than cancelled, nothing about the summary states the policy was reinstated after it was cancelled in 2016. Exhibit M to the Fifth Amended Complaint is a letter from Travelers stating the $967 Plaintiff paid to Travelers was refunded. The letter does not show that the money was accepted as a late insurance premium payment as Plaintiff alleges. Rather, as Travelers points out, Travelers received this unsolicited payment in October 2016 and the funds went to a suspense account until it was refunded. (Daniewicz Decl., ¶24-27.) Because the funds were not accepted as a late premium payment and ultimately refunded because the 2015 policy had been cancelled, Plaintiff’s evidence fails to show that the policy was reinstated under Insurance Code §10350.4.

The remainder of Plaintiff’s opposition to Travelers’ motion for summary judgment is unintelligible or contains arguments pertaining to the ADP Defendants’ motion for summary judgment. Plaintiff fails to meet his burden of showing triable issues of material fact remain over whether Travelers breached its contractual obligations to Plaintiff. Travelers’ motion for summary judgment is granted as to the cause of action for breach of contract.

The elements for breach of the implied covenant of good faith and fair dealing are: (1) existence of a contract between plaintiff and defendant; (2) plaintiff performed his contractual obligations or was excused from performing them; (3) the conditions requiring defendant’s performance had occurred; (4) the defendant unfairly interfered with the plaintiff’s right to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant’s conduct. (Merced Irr. Dist. V. County of Mariposa (E.D. Cal. 2013) 941 F.Supp.2d 1237, 1280 (discussing California law).) Allegations must demonstrate defendant’s conduct for failure or refusal to discharge contractual responsibilities was a conscious and deliberate act, not an honest mistake, bad judgment or negligence. (Id.) “‘[T]he implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract and cannot be extended to create obligations not contemplated by the contract.’” (Ragland v. U.S. Bank Nat. Assn. (2012) 209 Cal.App.4th 182, 206 (quoting Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094).)

Here, as discussed above, Travelers’ evidence shows that it did not receive Plaintiff’s insurance premium payments in March and April 2016 and thereafter properly cancelled the policy according to the terms of the 2015 policy. Therefore, Travelers’ meets its burden of proving no triable issue of material fact remains over whether Travelers unreasonably interfered with Plaintiff’s right to receive the benefits of the contract. As discussed above, Plaintiff fails to meet his burden of proving a triable issue of material fact remains over whether Travelers improperly canceled the 2015 policy. Therefore, Travelers’ motion for summary judgment is granted as to this cause of action.

A party opposing a motion for summary judgment may file a declaration to continue the motion on opposition or by ex parte motion before the opposition to the motion is due. (Code Civ. Proc., §437c, subd. (h); Ambrose v. Michelin North America, Inc. (2005) 134 CA4th 1350, 1353.) The party must request the continuance through affidavits or declarations stating facts to justify opposition may exist. (Code Civ. Proc., §437c, subd. (h).) “To be entitled to a continuance, the party opposing the motion for summary judgment must show that its proposed discovery would have led to facts essential to justify opposition.” (Scott v. CIBA Vision Corp. (1995) 38 CA4th 307, 325-326.)

Here, Plaintiff does not meet the requirements of Code Civ. Proc., §437c, subd. (h). Plaintiff failed to file a declaration or ex parte motion to continue the motion before the opposition was due. Rather, Plaintiff filed a late, defective omnibus opposition to both motions for summary judgment and thereafter sought an ex parte motion to continue both motions. Plaintiff also failed to explain how deposing Travelers’ PMQ would lead to the discovery of facts essential to his defenses. Because Plaintiff failed to meet the requirements of Code Civ. Proc., §437c, subd. (h), Plaintiff’s request for a continuance of these motions is denied.

Plaintiff now contends in another late filed ex parte that he is entitled to more time to respond to Defendants ADP because the Court permitted Defendant ADP to submit some additional material in support of its motion. Normally, the Court would agree. However, the Court’s decision to deny the motion for summary judgment/summary adjudication as to the causes of action remains the same as it did when the Court posted its tentative decision on February 8, 2024. The additional evidence made no difference. The additional evidence did not go to the issue of punitive damages. The Court’s decision on that matter remains the same as before as well.

Any party may obtain discovery, subject to restrictions, by taking the oral deposition of any person, including any party to the action. (Code Civ. Proc., § 2025.010.) A party desiring to take an oral deposition shall give a notice in writing which states the specification of reasonably particularly of any materials to be produced by the deponent. (Code Civ. Proc., § 2025.220, subd. (a)(4).) A properly served deposition notice is effective to require a party to attend and to testify, as well as to produce documents for inspection and copying. (Code Civ. Proc., § 2025.280, subd. (a).) A party served with a deposition notice waives any error or irregularity unless that party promptly serves a written objection at least three calendar days prior to the date for which the deposition is scheduled. (Code Civ. Proc., § 2025.410, subd. (a).)

“If, after service of a deposition notice, a party to the action … without having served a valid objection … fails to appear for examination, or to proceed with it, or to produce for inspection any document, … described in the deposition notice, the party giving the notice may move for an order compelling the deponent's attendance and testimony, and the production for inspection of any document … described in the deposition notice.” (Code Civ. Proc., § 2025.450, subd. (a).)

Here, Travelers’ counsel testifies that he noticed Plaintiff Purushottam Patel’s deposition on December 13, 2023, setting a deposition date of December 27, 2023. (Graboff Decl., ¶9.) Plaintiff failed to appear at the deposition. (Id., ¶11.) Plaintiff’s counsel failed to respond to Travelers’ counsel’s communications regarding the missed deposition. (Id., ¶12.)