Judge: Latrice A. G. Byrdsong, Case: 24STLC01344, Date: 2024-05-28 Tentative Ruling

Case Number: 24STLC01344    Hearing Date: May 28, 2024    Dept: 25

Hearing Date:                         Tuesday, May 28, 2024

Case Name:                             IRINA PALACIOS, an individual v. AMERICAN GENERAL LIFE INSURANCE COMPANY; and DOES 1-20 

Case No.:                                24STLC01344

Motion:                                   Demurrer with Motion to Strike

Moving Party:                         Defendant American General Life Insurance Company 

Responding Party:                   Plaintiff Irina Palacious 

Notice:                                    OK 

 

 

 

Recommended Ruling:           Defendant American General Life Insurance Company’s Demurrer is SUSTAINED in part and OVERRULED in part.

 

It is overruled as to the first cause of action, but sustained with 30 days leave to amend as to the second through fourth causes of action.

 

Defendant’s Motion to Strike is GRANTED with 30 days leave to amend.

 

 

 

BACKGROUND 

 

On February 26, 2024, Plaintiff Irina Palacios (“Plaintiff”) filed a complaint against Defendant American General Life Insurance Company (“Defendant”), and Does 1 through 20 for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) bad faith, and (4) financial elder abuse.

 

The complaint alleges that Plaintiff held a Disability Income Plan policy with Defendant, and was the insured. On or about June 29, 2020, Plaintiff was injured when she fell on her back at her home and was taken to the Emergency Room. Plaintiff severely sprained the ligaments of her cervical spine, lumbar spine, and thoracic spine, and experienced myositis, an inflammatory condition that causes muscle fatigue, weakness, and pain. Plaintiff filed a claim for disability benefits under the Policy with Defendant, on June 29, 2020. Subsequently, Defendant denied the claim.  Plaintiff attempted to obtain a certified copy of the Policy from Defendant, but was ignored by Defendant and never received a copy. On or about June 2, 2023, Plaintiff’s counsel wrote a letter to Defendant again requesting a certified copy of the Policy. On July 6, 2023, Defendant sent a letter to Plaintiff’s counsel refusing to produce a certified copy of the Policy. Now, Defendant demurs to the first through fourth causes of action and moves to strike the complaint.

 

MOVING PARTY POSITION

Defendant demurs to the complaint, arguing that Plaintiff’s claims are either time barred or otherwise fail to state facts sufficient to constitute a cause of action.

Defendant argues that Plaintiff’s breach of contract claim omits key terms of the agreement, including whether the contract is oral or written. There likewise is a dearth of basic key facts such as when the contract was entered into, the policy number, and the alleged monetary amount owed under the contract.

Defendant claims the third cause of action is superfluous to the second cause of action. A breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself,’ and it has been held that ‘“[b]ad faith implies unfair dealing rather than mistaken judgment....” Congleton v. National Union Fire Ins. Co. (1987) 189 Cal.App.3d 51, 59.

Defendant contends Plaintiff’s complaint impermissibly seeks bad faith tort damages based on time-barred claims. The purported claim arose on June 29, 2020. A tort bad faith claim has a two-year statute of limitation. Plaintiff did not file this matter until February 26, 2024. The bad faith claims therefore are untimely. To the extent Plaintiff attempts to plead an estoppel theory (Complaint, ¶ 38), the general rule is that estoppel must be specifically “pleaded in the complaint with sufficient accuracy to disclose the facts relied upon.”

Defendant argues the elder abuse claim suffers from pleading deficiencies. First, Plaintiff does not plead the most basic requirement for this claim: her age. Accordingly, she fails to show, on the face of the Complaint, that she is eligible for any relief under the elder abuse statute. Moreover, Plaintiff also fails to sufficiently plead any “taking” has occurred. The consideration Plaintiff paid for the contract (i.e., premium payments) is not a “taking.” Next, the claim impermissibly seeks relief based on a purported breach of contract, and is therefore barred by the economic loss rule.

Defendant also moves to strike the claim for punitive damages, arguing they are based solely on conclusory allegations of malice, oppression or fraud.

OPPOSITION

In opposition, Plaintiff argues that although Plaintiff specifically alleges that Defendant “refused to provide a certified copy of the Policy” to Plaintiff, Defendant now takes Plaintiff to task for purportedly failing to “include key terms of the supposed agreement” in the Complaint, i.e., failing to plead “key terms” from the very agreement Defendant withheld from Plaintiff.

Regardless, Defendant’s arguments lack merit. Indeed, Defendant’s argument that Plaintiff failed to plead whether the contract was oral or written is frivolous. Plaintiff obviously alleges that the contract was written since she alleges that she attempted to obtain a “copy” of the Policy. Compl. ¶¶ 12, 16. Moreover, Plaintiff did plead the relevant terms of the contract according to their legal effect. For example, Plaintiff alleges that “Plaintiff entered into an agreement with Defendant according to which, in consideration for payment of insurance premiums to Defendant, Plaintiff would receive disability benefits in the event of a covered loss, injury and/or disability.” Compl. ¶ 21. This is all that is necessary to plead a breach of contract. Plaintiff is not required to plead the date the contract was entered into, the policy number or the policy benefit amount. Rather, she is merely required to plead the legal effect of the contract, which she has done. Defendant’s argument that Plaintiff fails to plead damages is also without merit. Plaintiff is not required to plead a specific amount of damages. Plaintiff has sufficiently pleaded that as a result of Defendant’s breach of contract “Plaintiff was proximately harmed in an amount to be determined at trial according to proof, plus interest at the legal rate.” Compl. ¶ 26. Plaintiff’s prayer for relief requests “an award of general damages according to proof” on “all causes of action,” including the breach of contract claim.

As to the statute of limitations argument, Plaintiff contends that she has alleged acts occurring well within the statute of limitations that support Plaintiff’s claim, including that on “July 6, 2023, AGLI sent a letter to Plaintiff’s counsel refusing to produce a certified copy of the Policy and requesting a signed letter from IRINA or a durable power of attorney.” Compl. ¶ 14. Further, Plaintiff alleges that subsequently “AGLI still refused to provide a certified copy of the Policy to IRINA or her counsel.” Compl. ¶ 16.

As to the third cause of action, Plaintiff argues it is not superfluous to her breach of covenant of good faith and fair dealing claim. Further, the doctrine of equitable estoppel bars Defendant from asserting the statute of limitations. A defendant may be equitably estopped from asserting a statutory or contractual limitations period as a defense if the defendant's act or omission caused the plaintiff to refrain from filing a timely suit and the plaintiff's reliance on the defendant's conduct was reasonable. Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 384–385; Vu v. Prudential Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142, 1152–1153; Spray, Gould & Bowers v. Associated Internat. Ins. Co. (1999) 71 Cal.App.4th 1260, 1268–1269. Insurance Code section 395 creates a duty to provide a copy of the policy to Plaintiff, and Defendant’s failure to comply with that duty gives rise to an equitable estoppel. See also Salloum Foods & Liquor, Inc. v. Parliament Ins. Co. (1979) 69 Ill. App. 3d 422) (insurer's unjustified and unexplained refusal to provide insured with copy of policy, which occasioned insured's delay in filing suit, estopped insurer to raise contractual limitation period as defense to insured's action on policy); Union Fire Ins. Co. of Paris, France, v. Stone (1930) 41 Ga. App. 49, 152 S.E. 146, 146 (accord).

As to the fourth cause of action for elder abuse, Plaintiff argues Defendant’s own authority undermines its position. In Paslay, the court specifically addressed “whether a merely incorrect denial of policy funds under the circumstances shown here may constitute a ‘wrongful use’ of those funds, for purposes of an elder abuse claim.” Paslay v. State Farm Gen. Ins. Co. (2016) 248 Cal. App. 4th 639, 657. The court held that “under subdivision (b) of 15610.30, wrongful conduct occurs only when the party who violates the contract actually knows that it is engaging in a harmful breach, or reasonably should be aware of the harmful breach.” Id. Here, Plaintiff specifically alleged that “Defendant intended to defraud Plaintiff” out of benefits she was due under the Policy. Compl. ¶ 44.

Finally, Plaintiff argues her claim is not barred by the economic loss rule because the rule does not apply to “actions that constitute the breach violate a social policy that merits the imposition of tort remedies.” Aas v. Superior Ct., (2000) 24 Cal. 4th 627, 643. Thus, the “conduct amounting to a breach of contract becomes tortious when it also violates a duty independent of the contract arising from principles of tort law.” Id. Here, Defendant’s conduct clearly violates the duties underlying the elder abuse statute, such as the “social policy” of protecting elders from fraud and abuse.

As to the motion to strike, Plaintiff argues that a plaintiff alleging bad faith denial of benefits may obtain punitive damages if Plaintiff can establish that Defendant “not only denied or delayed the payment of policy benefits unreasonably or without proper cause, but, in doing so, was guilty of malice, oppression or fraud.” Jordan v. Allstate Ins. Co. (2007) 148 Cal. App. 4th 1062, 1080. The standard is virtually the same for Plaintiff’s elder abuse claim. Country Villa Claremont Healthcare Ctr., Inc. v. Superior Ct. (2004) 120 Cal. App. 4th 426, 432.

REPLY

None filed as of May 23, 2024.

 

ANALYSIS

 

As an initial matter, Plaintiff’s opposition is untimely.  Plaintiff’s opposition was filed on May 20, 2024.  Plaintiff’s Opposition was due nine court days before the May 28, 2024 hearing date, which was May 14, 2024.  Code Civ. Proc., § 1005, subd. (b). However, the Court will exercise its discretion in considering the merits of the opposition.

 

I.                   Demurrer

 

A.    Legal Standard 

 

A demurrer for sufficiency tests whether the complaint states a cause of action. Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747. When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994; Weil & Brown, Civ. Pro. Before Trial (The Rutter Group 2011) ¶7:8. “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed (430.30, 430.70). The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” Hahn 147 Cal.App.4th at 747.  A complaint will be upheld against a demurrer if it pleads facts sufficient to place the defendant on notice of the issues sufficient to enable the defendant to prepare a defense.  Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 549-50

 

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.  The burden is on the complainant to show the Court that a pleading can be amended successfully. Id.  

 

B.     Meet and Confer Requirement  

 

The meet and confer requirements have been met. (Burnite Decl.)

 

1.      First Cause of Action for Breach of Contract

 

Defendant argues that Plaintiff’s Complaint does not include key terms of the purported agreement, including whether the contract is oral or written. Defendant argues there likewise is a dearth of basic key facts such as when the contract was entered into, the policy number, and the alleged monetary amount owed under the contract.

 

The elements for a breach of contract cause of action are: (1) the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) resulting damages.¿ Reichert v. General Ins. Co.¿(1968) 68 Cal.2d 822, 830;¿Hale v. Sharp Healthcare¿(2010) 183 Cal.App.4th 1373, 1387. Further, the complaint must indicate whether the contract is written, oral, or implied by conduct. Code Civ. Proc. § 430.10(g). Although a written contract is usually pleaded by alleging its making and attaching a copy which is incorporated by reference, a written contract can also be pleaded by alleging the making and the substance of the relevant terms. Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199; Perry v. Robertson (1988) 201 Cal.App.3d 333, 341.

  

Here, the complaint alleges “Plaintiff entered into an agreement with Defendant according to which, in consideration for payment of insurance premiums to Defendant, Plaintiff would receive disability benefits in the event of a covered loss, injury and/or disability.” Compl. ¶ 21. “Plaintiff was insured under a valid policy in effect on the date the loss occurred.” Id., ¶ 23. “Defendant failed to perform under the parties’ agreement in denying coverage for disability benefits to which Plaintiff was entitled, as well as by failing to provide Plaintiff a certified copy of the insurance Policy.” Id., ¶ 24.

 

The allegations indicate that the complaint was written as Plaintiff requested a copy of the policy. As to Defendant’s argument that Plaintiff has not alleged the policy number, the date the contract was entered into, and the amount owed under the contract, Defendant cites to no authority which requires Plaintiff to plead those details. All that is required is to plead the substance of the key terms. Other than arguing that Plaintiff has not alleged whether the contract was written or oral, Defendant identifies no other relevant terms that are missing. Accordingly, the demurrer is OVERRULED as to the first cause of action.

 

2.      Statute of Limitations as to the Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing and Third Cause of Action for Bad Faith

 

Defendant next argues that Plaintiff’s complaint impermissibly seeks bad faith tort damages based on time-barred claims.

 

“A bad faith action in tort against an insurer for breach of the implied covenant of good faith and fair dealing is governed by the two year-limitations period [in] Code of Civil Procedure section 339.”  Archdale v. American Internat. Specialty Lines Ins. Co. (2007) 154 Cal.App.4th 449, 472.  The statute of limitations begins to run when there is a “complete denial of the claim.”  State Farm Fire & Casualty Co. v. Superior Court (1989) 210 Cal.App.3d 604, 609.

Here, the complaint alleges that Plaintiff filed a claim on June 29, 2020, which was subsequently denied. However, it alleges that Defendant ignored Plaintiff’s request for a copy of the policy. It also alleges that Defendant refused to provide a copy of the policy to Plaintiff’s attorney on July 6, 2023. Compl., ¶¶ 10, 11, 12, 13, 16. The complaint also alleges that Defendant should be equitably estopped from denying coverage due to its conduct and bad faith. Id., ¶ 39.

“An estoppel against a limitations defense usually arises as a result of some conduct by the defendant, relied on by the plaintiff, which induces¿the belated filing of the action.” Spray, Gould & Bowers v. Assoc. Int’l Ins. Co. (1999) 71 Cal.App.4th 1260, 1267–68. 

 

“Four elements must ordinarily be proved to establish an equitable estoppel: (1) The party to be estopped must know the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had the right to believe that it was so intended; (3) the party asserting the estoppel must be ignorant of the true state of facts; and, (4) he must rely upon¿the conduct to his injury.” Spray, supra, at p. 1268.

 

“The absence of affirmative conduct here does not end the inquiry, however. An estoppel¿may¿arise from silence where there is a duty to speak.” Id.

 

“A defendant may be equitably estopped from asserting a statutory or contractual limitations period as a defense if the defendant's act or omission caused the plaintiff to refrain from filing a timely suit and the plaintiff's reliance on the defendant's conduct was reasonable. The act or omission must constitute a misrepresentation or nondisclosure of a material¿fact, rather than law. The defendant need not intend to deceive the plaintiff to give rise to an equitable estoppel.” Super. Dispatch, Inc. Ins. Corp. of New York (2010) 181 Cal.App.4th 175, 186, emphasis and citations omitted.

 

“A nondisclosure is a cause of injury if the plaintiff would have acted so as to avoid injury had the plaintiff known the concealed fact. The plaintiff's reliance on a nondisclosure was reasonable if the plaintiff's failure to discover the concealed fact was reasonable in light of the plaintiff's knowledge and experience. Whether the plaintiff's reliance was reasonable is a question of fact for the trier of fact unless reasonable minds could reach only one conclusion based on the evidence. The fact that a plaintiff was represented by counsel and the¿scope and timing of the representation are relevant to the question of the reasonableness of the plaintiff's reliance.” Id., at p. 187–88.) 

 

The Court finds that the complaint fails to allege sufficient facts to show the doctrine of equitable estoppel applies. It only alleges that Defendant’s failure to provide a copy of the policy was in violation of Insurance Code 395. There are no allegations relating to whether Plaintiff failed to timely file suit due to the nondisclosure of the policy, or any facts to show this was reasonable. The Court observes that the complaint alleges that in June 2023 Plaintiff’s counsel wrote a letter to Defendant to produce a copy of the policy. If Plaintiff was not represented until  June 2023, this should all be alleged in order for the court to determine whether plaintiff’s failure to file suit earlier based on the reliance of nondisclosure was reasonable.

 

As a result, the demurrer as to the second and third causes of action is SUSTAINED with 30 days leave to amend.

 

3.      Fourth Cause of Action for Financial Elder Abuse

Defendant argues Plaintiff’s claim for elder abuse fails because she has not alleged her age. Defendant also argues Plaintiff also fails to sufficiently plead any “taking” has occurred.

Pursuant to Welfare & Institutions Code § 15610.30, financial elder abuse occurs when a person does any of the following: “(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both; [¶] (2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both; [¶] (3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 1575 of the Civil Code.” Welf. & Inst. Code §15610.30(a).

 

A person is “deemed to have taken, secreted, appropriated, obtained, or retained property for a wrongful use if, among other things, the person or entity takes, secretes, appropriates, obtains, or retains the property and the person or entity knew or should have known that this conduct is likely to be harmful to the elder or dependent adult.” Id. subd. (b). “[A] person or entity takes, secretes, appropriates, obtains, or retains real or personal property when an elder or dependent adult is deprived of any property right, including by means of an agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder or dependent adult.” Id. subd. (c).

 

Moreover, “statutory causes of action must be pleaded with particularity.” (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.)

 

Plaintiff alleges she was an elder at the time of the loss. Compl. ¶ 43. Defendant allegedly took premiums from Plaintiff. Id. Plaintiff further alleges Defendant intended to defraud Plaintiff. (Id., ¶ 44.)

 

The court agrees that a bad faith claim may support a cause of action for financial elder abuse. Paslay v. State Farm General Ins. Co. (2016) 248 Cal.App.4th 639, 658 [“[U]nder subdivision (b) of [Welf. & Inst. Code section] 15610.30, wrongful conduct occurs only when the party who violates the contract actually knows that it is engaging in a harmful breach, or reasonably should be aware of the harmful breach”]. However, statutory causes of action must be pled with particularity. Plaintiff alleges fraud. In California, fraud must be pled with specificity.  (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)  “The particularity demands that a plaintiff plead facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) The complaint is missing this particularity. The demurrer is SUSTAINED with 30 days leave to amend on this ground.

 

            Defendant additionally argues the cause of action for elder abuse is barred under the economic loss rule.

 

“‘A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.’” Stop Loss Insurance Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4th 1036, 1041 (quoting Aas v. Superior Court (2000) 24 Cal.4th 627, 643). “‘Instead “[c]ourts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.’” Id. (alteration in original).

 

“‘[T]he same wrongful act may constitute both a breach of contract and an invasion of an interest protected by the law of torts.’” Erlich v. Menezes (1999) 21 Cal.4th 543, 551 (quoting North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 774). “‘[A] contractual obligation may create a legal duty and the breach of that duty may support an action in tort.’” Id.  “[H]owever, conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” Id. 

 

“Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury [citation]; for breach of the covenant of good faith and fair dealing in insurance contracts [citation]; for wrongful discharge in violation of fundamental public policy [citation]; or where the contract was fraudulently induced. [citation]” Erlich, supra, 21 Cal.4th at 551-52. “In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” Id. at 552.

 

However, Plaintiff alleges she was harmed as a result of Defendant’s wrongful use of the insurance premium benefits. Compl., 45; prayer 1. This harm is separate and apart from “economic loss.”

 

II.        Motion to Strike 

 

Any party, within the time allowed to respond to a pleading, may serve and file a motion to strike the whole or any part thereof – i.e., even single words or phrases. (Code. Civ. Proc. § 435(b)(1)); Warren v. Atchison, Topeka & Santa Fe Ry. Co. (1971) 19 Cal App.3d 24, 40. A motion to strike lies either: (1) to strike any “irrelevant, false or improper matter inserted in any pleading”; and/or (2) to strike any pleading or part thereof “not drawn or filed in conformity with the laws of this state, a court rule or order of court.” (Code. Civ. Proc. § 436); Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 528; As with demurrers, the grounds for a motion to strike must appear on the face of the pleading, or from any matter which the court may judicially notice. (Code Civ. Proc. § 437.) 

Defendant also moves to strike allegations relating to punitive damages, arguing they are based solely on conclusory allegations of malice, oppression or fraud.

To support a claim for punitive damages, a plaintiff must allege facts and circumstances showing conduct constituting malice, fraud or oppression.¿¿Grieves v. Superior Court¿(1984) 157 Cal. App. 3d 159, 166. The predicate acts to support a claim for punitive damages must be intended to cause injury or must constitute “malicious conduct,” defined as “despicable conduct” carried on by Defendant with a willful and conscious disregard of the rights of others. Code Civ. Proc. § 3294(a). Oppressive conduct is defined as “despicable conduct” that subjects a person to cruel and unjust hardship in conscious disregard of a person’s rights. Code Civ. Proc. § 3294(c).¿¿Plaintiff must allege facts demonstrating that “the defendant acted in such an outrageous and reprehensible manner that the jury could infer that he knowingly disregarded the substantial certainty of injury to others."¿Dawes v. Superior Court (1980) 111 Cal. App. 3d 82, 90. Moreover, a claim for punitive damages cannot be pleaded generally and allegations that a defendant acted "with oppression, fraud and malice" toward plaintiff are insufficient legal conclusions to show that the plaintiff is entitled to an award of punitive damages. Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872. Rather, specific factual allegations are required to support a claim for punitive damages. Id.

 

            As noted above, Plaintiff has alleged fraud, which requires particularity. No such particularity has been provided in the complaint. The complaint alleges in a conclusory fashion that Defendant intended to defraud Plaintiff. Thus, Defendant’s Motion to Strike is GRANTED with 30 days leave to amend.

 

 Conclusion

 

Accordingly, Defendant’s Demurrer is SUSTAINED in part and OVERRULED in part.

 

It is overruled as to the first cause of action, but sustained with 30 days leave to amend as to the second through fourth causes of action. T

 

 

The Motion to Strike is GRANTED with 30 days leave to amend.

 

Plaintiff to give notice.