Judge: Joseph Lipner, Case: 24STCV03006, Date: 2024-07-11 Tentative Ruling

Case Number: 24STCV03006    Hearing Date: July 11, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Plaintiff Creditors Adjustment Bureau, Inc. (“Plaintiff”) seeks leave to amend its Complaint against Defendant Universal Structural Building Corp. (“Defendant”) to add a prayer for treble damages.

The Court GRANTS Plaintiff’s motion.  Plaintiff shall file its amended complaint within 10 days.

Background

This is a collection case relating to an insurance policy obtained by Defendant. Plaintiff is a collection agency that has been assigned this matter by State Compensation Insurance Fund (“SCIF”).

SCIF issued two worker’s compensation insurance policies to Defendant. One policy (the “2021 Policy”) covered the period of June 10, 2021 through June 10, 2022. The second policy (the “2022 Policy”) covered the period of June 10, 2022 through June 10, 2023. Both policies were issued with premiums based on an initial quote, with the premiums subject to revision based on a physical audit of the insurance operation and relevant payroll records. Each policy includes terms and conditions explaining the audit process.

Plaintiff contends that Defendant failed to complete required audits for the 2021 Policy and the 2022 Policy. As a result, SCIF had to issue estimated invoices for both policies. Plaintiff contends that Defendant then failed and refused to make payments towards either of the estimated invoices, leading SCIF to assign the account balance to Plaintiff for collection purposes.

The 2022 Policy was canceled effective September 28, 2022. SCIF cancelled the 2022 Policy due to Defendant’s alleged failure to complete audits. Because of Defendant’s alleged failure to complete audits for the 2021 Policy, SCIF did not make the required number of audit requests under the governing statute allowing for treble damages in connection with the 2022 Policy.

Plaintiff filed this action on February 5, 2024, raising claims for (1) breach of contract; (2) open book account; (3) account stated; and (4) reasonable value.

Defendant answered on March 19, 2024.

On June 7, 2024, Plaintiff moved for leave to amend the Complaint. The hearing was scheduled for July 11, 2024. Plaintiff seeks to add a prayer for treble damages under Insurance Code, section 11760.1 on the basis that Defendant allegedly failed to complete a physical audit for the 2021 Policy.

On June 27, 2024, Defendant filed a Notice of Opposition and Request for Continuance, stating that on July 11, 2024, Defendant would request a 30-day continuance to file its opposition to Plaintiff’s motion.

On July 3, 2024, Plaintiff filed a reply.

Legal Standard

A complainant may obtain leave from the trial court to amend their pleading beyond the number of amendments allowed under Code of Civil Procedure section 472 (a) by filing a noticed motion. (Cal. Rules of Court, Rule 3.1324.) The motion must be accompanied by a declaration stating: (1) the effect of the amendment; (2) why the amendment is necessary and proper; (3) when the facts giving rise to the amended allegations were discovered; and (4) why the request was not made earlier.¿(Cal. Rules of Court, Rule 3.1324 (b).)

“Any judge, at any time before or after commencement of trial, in the furtherance of justice, and upon such terms as may be proper, may allow the amendment of any pleading or pretrial conference order.”¿(Code Civ. Proc., § 576.) In the absence of a showing of prejudice from the opposing side, the trial court ordinarily lacks discretion to deny a motion to amend a pleading. (Honig v. Financial Corp. of America (1992) 6 Cal.App.4th 960, 965.)          

Discussion

“If an employer fails to provide for access by the insurer or its authorized representative to its records, to enable the insurer to perform an audit to determine the remuneration earned by the employer's employees and by any of its uninsured subcontractors and the employees of any of its uninsured subcontractors during the policy period, the employer shall be liable to pay to the insurer a total premium for the policy equal to three times the insurer's then-current estimate of the annual premium on the expiration date of the policy. The employer shall also be liable, in addition to the premium, for costs incurred by the insurer in its attempts to perform an audit, after the insured has failed upon the insurer’s third request during at least a 90-day period to provide access, and the insured has provided no compelling business reason for the failure. This section shall only apply if the insurer elects to comply with the conditions set forth in subdivision (d).” (Ins. Code, § 11760.1, subd. (a).)

“‘Access’ shall mean access at any time during regular business hours during the policy period and within three years after the policy period ends. “Access” may also include any other time mutually agreed upon by the employer and insurer.” (Ins. Code, § 11760.1, subd. (b).)

“The insurer shall have and follow regular and reasonable rules and procedures to notify employers of their duty to provide for access to records, and to contact employers to make appointments during regular business hours for that purpose.” (Ins. Code, § 11760.1, subd. (c).)

“Upon the employer's failure to provide access after the insurer's third request during at least a 90-day period, the insurer may notify the employer through its mailing of a certified, return-receipt, document of the increased premium and the total amount of the costs incurred by the insurer for its attempts to perform an audit as described under subdivision (a). Upon the expiration of 30 days after the delivery of the notice, collection by the insurer of the amount of premium and costs described under subdivision (a), less all premiums previously paid by the employer for the policy, shall be fully enforceable and executable.” (Ins. Code, § 11760.1, subd. (d).)

Plaintiff sent Defendant a demand for compliance on March 11, 2023, requesting the treble damages. (Freed Decl., Ex. 1.)

Plaintiff sent a certified letter to Defendant on March 27, 2024 seeking payment of the treble damages under section 11760.1(a). (Freed Decl., Ex. 2.) The letter was delivered on March 28, 2024. (Freed Decl., Ex. 2.) More than 30 days have passed since that time.

Counsel for Defendant subsequently contacted SCIF and communicated that Defendant might cooperate with the audit requirement. (Jao Decl. ¶ 9.) SCIF sent a letter to Defendant on April 9, 2024 stating what records and information were required and how to submit them. (Jao Decl., Ex. 5.) SCIF followed up by sending a similar letter on April 23, 2024. (Jao Decl., Ex. 8.)

In its opposition, Defendant requests a continuance of this motion so that it can produce evidence that will show that the audits required under the 2021 Policy were completed. If Defendant believes that its records foreclose any dispute that it is liable for treble damages, its remedy is to seek summary adjudication under Code of Civil Procedure, section 438c, subd. (f)(1). However, Plaintiff may permissibly plead its entitlement to treble damages despite the existence of evidence to the contrary.

This is a factual issue not proper for resolution at the pleading stage. Furthermore, an opposition is not a proper vehicle to request continuance.

The Court therefore grants Plaintiff’s motion.