Judge: Joseph Lipner, Case: 23STCV20182, Date: 2025-04-22 Tentative Ruling

Case Number: 23STCV20182    Hearing Date: April 22, 2025    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Residence Mutual Insurance Company (“Defendant”) moves for summary adjudication as to the second claim for breach of the implied covenant of good faith and fair dealing and the claim for punitive damages in the Complaint filed by Plaintiff Everett Lee (“Plaintiff”).

The Court tentatively GRANTS the motion for summary adjudication.

However, the Court requests argument on the following question.  The “genuine dispute” between Plaintiff and Defendant on which Defendant relies appears to be one of fact, not of law, notwithstanding Defendant’s assumption in the reply brief that it is one of law.  Assuming the Court characterizes the dispute as one of fact, does Plaintiff’s claim of “failure to investigate” render the genuine dispute doctrine inapplicable?

Background

This is an insurance dispute. The following facts are taken from the parties’ separate statements. The Court resolves disputes of fact in favor of the nonmoving party.

This insurance dispute arises out of the death of Plaintiff’s nephew, who was living in Plaintiff’s house at the time. Plaintiff owns and lives in a two-story residence in Lancaster (the “Property”). The Property was covered by an insurance policy (the “Policy”) issued by Defendant, with Plaintiff named as the insured.

In 2018, Plaintiff allowed his nephew, David Collins (“David”) to move into the Property. (The Court uses first names for clarity only, and means no disrespect.) David occupied the master suite, which includes a bedroom and bathroom and is located on the second story of the house. Plaintiff occupied one of the other bedrooms in the house. David spent a great deal of time alone in the master suite, and Plaintiff sometimes would not see David for several days at a time.

For a few days prior to Friday, April 21, 2023, Plaintiff did not see David. During that time period, Plaintiff began to notice a foul odor in the house, which gradually became stronger.

On Friday, April 21, 2023, Plaintiff discovered that David had passed away when he discovered David’s body in the master bathroom tub. Plaintiff called the Sheriff’s Department upon discovering David’s body, and personnel from the Coroner’s Division removed David’s body from the tub and then the house.

When Plaintiff found David’s body, the liquid in the bathtub was dark brown and had substances floating in it. When the Coroner’s personnel removed David’s body, some of the brown liquid spilled onto various surfaces inside the bathroom, including portions of the carpet.

The Sheriff’s Department gave Plaintiff contact information for Sterile Pros, LLC (“Sterile Pros”), which provides clean-up services. Plaintiff also called David’s brother, Marvin Collins (“Marvin”), who arrived after the Sheriff’s Department left. Plaintiff’s nephew Marvin contacted Sterile Pros and made arrangements for Sterile Pros to send personnel to Plaintiff’s home the morning of April 22, 2023.

On Saturday, April 2022, 2023, personnel from Sterile Pros arrived at the Property. Plaintiff signed an agreement which provided, among other things, that Sterile Pros would remove and dispose of bio-hazardous waste, including tissue, blood, or other bodily fluids, as well as any property contaminated with any bio-hazardous waste. (Undisputed Fact (“UF”) 20.) It is undisputed that Sterile Pros’ work included removal of the brown liquid in the bathtub, removal of the bathtub, removal of some drywall and insulation, removal of the bathroom’s carpet and padding, removal of some of the plywood sheathing from the subfloor, and cleaning of other building components that remained in place. (UF 25.)

Marvin called Defendant in the morning on April 22, 2023 and left a voicemail explaining what had happened at the Property. Michael Spagon (“Spagon”), an adjuster for Defendant, called Plaintiff and Marvin around 10:00 a.m. on April 22, 2023, while the clean-up work was underway. Spagon did not state that he or another employee of Defendant intended to go to the Property to assess the property damage. Spagon did not tell Plaintiff or Marvin to direct Sterile Pro’s employees to stop or pause the clean-up work. (Additional Fact (“AF”) 5.) Although Plaintiff alleges that Spagon confirmed that the clean-up would be covered, Spagon disputes this fact. (UF 24.)

After completing the work, Sterile Pros emailed Defendant an invoice for $16,185.95. (UF 26.) This invoice did not include the cost of replacing removed components. Sterile Pros provided Defendant with various photographs that Sterile Pros personnel had taken before starting the work. (UF 28.) Some of the photos showed dark brown liquid floating in the bathtub, as well as some substances floating in the liquid in the tub. (UF 29.)

Initially, Defendant denied coverage for (1) the cost of the cleanup and demolition work conducted by Sterile Pros, and (2) the cost of replacing the building components of which Sterile Pros had disposed. (UF 30.)

The Policy covers accidental direct physical loss to the Property, but excludes, inter alia, “microbial contamination or pathogenic organism.” (UF 31, 32.) The Policy provides that “ ‘[m]icrobial contamination’ means any contamination, either airborne or surface, which arises out of or is related to the presence of mold, fungus, spores or any other pathogenic organism.” (UF 33.) The Policy provides that “ ‘pathogenic organism’ means any bacteria, yeast, mildew, virus, fungi, mold or other spores, mycotoxins or other metabolic products.” (UF 34.)

After Defendant denied coverage, Sterile Pros recorded a mechanic’s lien based on its invoice.

After Defendant denied coverage, Plaintiff filed this case.

After Plaintiff filed suit, Defendant issued three checks totaling $41,351.45. (UF 40.) When Defendant issued the checks, it stated in writing that it did not believe that the Policy actually covered the claimed damage. (UF 41-42.)  Defendant issued a check for the full amount of Sterile Pros’ invoice. (UF 42.) Defendant requested that a licensed general contractor inspect the master bedroom suite. The contractor inspected the suite at a time when no repairs had been made. The contractor prepared a written estimate that the repairs would cost $25,665.50. (UF 47.) Defendant issued two checks totaling $25,165.50 after applying the Policy’s $500.00 deductible. (UF 48.) Plaintiff submitted various repair estimates, but Defendant did not believe that those estimates accurately represented the cost of returning the Property to its pre-loss condition. (UF 53.) Those estimates included the cost of installing tile flooring in the master bathroom and bedroom (those rooms had previously had carpet flooring) and included costs of replacing carpet and padding well in excess of the square footage of the area. (UF 54-57.)

Plaintiff filed this action on August 23, 2023, raising claims for (1) breach of contract; and (2) breach of the covenant of good faith and fair dealing.

Defendant moved for summary adjudication on January 10, 2025. Defendant filed an opposition and Plaintiff filed a reply.

Request for Judicial Notice

The Court grants Defendant’s request for judicial notice and takes notice of the submitted public records.

Evidentiary Objections

The Court overrules Defendant’s objection.

Legal Standard

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 843.) “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if 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.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) 

“In ruling on the motion, the court must consider all of the evidence and all of the inferences reasonably drawn therefrom [citation] and must view such evidence [citations] and such inferences [citations] in the light most favorable to the opposing party.” (Aguilar, supra, at pp. 844-845 [quotation marks omitted].) 

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) A defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.” (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 the 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.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)

Discussion

Breach of the Covenant of Good Faith and Fair Dealing

In the insurance context, “there are at least two separate requirements to establish breach of the implied covenant: (1) benefits due under the policy must have been withheld; and (2) the reason for withholding benefits must have been unreasonable or without proper cause.” (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.)

“It is now settled law in California 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.” (Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347.) “While many, if not most, of the cases finding a genuine dispute over an insurer's coverage liability have involved legal rather than factual disputes, [courts] see no reason why the genuine dispute doctrine should be limited to legal issues.” (Id. at p. 348.) “That does not mean, however, that the genuine dispute doctrine may properly be applied in every case involving purely a factual dispute between an insurer and its insured. This is an issue which should be decided on a case-by-case basis.” (Ibid.) “It is only necessary for [courts] to determine that, in light of the record as a whole, [the insurer’s] position with respect to the disputed points was reasonable or that [the insurer] had proper cause to assert the positions that it did.” (Id. at p. 350.)

“[A]n insurer cannot reasonably and in good faith deny payments to its insured without fully investigating the grounds for its denial.” (Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 214.)

Defendant has met its initial burden on summary adjudication of demonstrating a reasonable investigation and a genuine dispute with its insured.  After receiving the evidence in the record, Defendant  declined insurance coverage based on the policy exclusions for damage caused by any “microbial contamination,” “pathogenic organism” or “waste.”  (UF 36.)  The undisputed facts presented to Defendant before it made this determination established that facts giving rise to these exclusions were present because there was bio-hazardous waste being removed.  (UF 13, 14, 17, 20, 25, 28, 29.)  These establish a reasonable investigation and, at a minimum, a genuine dispute between Defendant and its insured.

The burden therefore shifts to Plaintiff to show issues of disputed fact.  Plaintiff has not done so. Plaintiff does not, in his opposition, deny that, if there was human material being removed, the insurance exclusions would apply.  The only factual argument made is that the insurer “failed to go to Mr. Lee’s home. . . on April 22, 2023 or at any point between April 22, 2023 and May 4, 2023 to assess the situation and perform any and all testing and sampling necessary to see if there was ‘microbial contamination’ or a ‘pathogenic organism’ in Mr. Lee’s home or ‘waste.’”  (Opp. at 5:7-11.)  But Plaintiff provides no facts as to why such a visit was required or further testing was required.  Defendant had a basis to conclude that the materials involved microbial contamination and pathogenic organisms because Marvin informed Defendant of the nature of the events requiring the clean-up and Sterile Pros provided Defendant with photographs of the bathtub from before it began the work. A reasonable fact finder could not find that Defendant was not reasonable in concluding that the brown liquid in the bathtub involved microbial contamination, based on the presence of David’s body, the photographs provided to Defendant, and the nature of the work that it is undisputed that Sterile Pros conducted. Plaintiff has not shown any facts in opposition to the summary adjudication that further investigation was required or that Defendant’s position was not reasonable.

Although Plaintiff states that he disputes a number of facts in the separate statements, he provides no citations to the record. His argument that Defendant did not act in good faith is predicated on the lack of an investigation.

The Court therefore grants summary adjudication as to this claim.

Punitive Damages

Punitive damages are appropriate when a defendant acted with malice, oppression, or fraud. (Civ. Code, § 3294, subd. (a).) “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others. (Turman v. Turning Point of Cent. Cal., Inc. (2010) 191 Cal.App.4th 53, 63.) “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights. (Ibid.) “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury. (Ibid.)

A claim for punitive damages must be proven by clear and convincing evidence. (Am. Airlines, Inc. v. Sheppard Mullin Richter & Hampton (2002) 96 Cal.App.4th 1017, 1049.) Thus, for a punitive damages claim to survive summary judgment, a reasonable fact finder must be able to find that clear and convincing evidence supports punitive damages.

Here, Plaintiff has not presented evidence that Defendant acted with malice, oppression, or fraud. At most, Defendant failed to investigate the claim as completely as it could have, and then issued checks for the entirety of the cleanup costs and almost the entirety of (Defendant’s  estimate of) the repair costs. The Court does not determine that Defendant did not breach the Policy. However, a jury could not reasonably find malice, oppression, or fraud based on this conduct.

The Court grants summary adjudication as to the claim for punitive damages.