Judge: Lee W. Tsao, Case: 20NWCV00273, Date: 2023-04-20 Tentative Ruling
Case Number: 20NWCV00273 Hearing Date: April 20, 2023 Dept: C
RICO v. FARMERS
INSURANCE COMPANY
CASE NO.: 20NWCV00273
HEARING: 04/20/23
#7
TENTATIVE ORDER
Defendant FARMERS INSURANCE EXCHANGES’s Motion for Summary
Judgment is GRANTED. The alternative Motion for Summary Adjudication is MOOT.
Moving Party to give Notice.
Defendant’s Request for Judicial Notice is GRANTED. (Cal.
Ev. Code §452.)
This breach of contract action was filed by Plaintiffs JORGE
RICO and AUTO COLLISION GROUP, INC. (“Plaintiffs”) on May 11, 2020. On May 26,
2021, the operative Second Amended Complaint (“SAC”) was filed. The relevant
facts, as alleged, are as follows: “FARMERS issued an automobile insurance
policy to RICO… effective on January 9, 2019.” (SAC ¶4.) “FARMERS also issued
an Employment Practices Liability Policy to ACG… the retroactive date of this
policy was March 21, 2019.” (SAC ¶6.) “On August 7, 2019, a traffic collision
occurred wherein PLAINTIFF RICO was rear-ended by another driver…. On the same
day, August 7, 2019, PLAINTIFF RICO reported the SUBEJCT ACCIDENT to FARMERS
and requested that FARMERS pay for the repair of the SUBJECT VEHICLE….
Liability for the accident was never disputed by FARMERS on Mr. Schumacher.”
(SAC ¶11.) “PLAINTIFF RICO is the President, Chairman and shareholder of ACG,
an auto collision repair business…. [¶’ Within days of the SUBJECT ACCIDENT, on
or about August 31, 2019, PLAINTIFF RICO prepared and submitted a repair
estimate to FARMERS, along with photographs of the property damage and other
back-up documentation and again requested that FARMERS pay for the necessary
repairs to the SUBJECT VEHICLE. ACG had become Certified Repair Shop for
Maserati [sic]. The estimate was for $48,528.27.” (SAC ¶¶12-13.) “The SUBJECT VEHICLE
was used by RICO to commute to and from work. This J 4 vehicle was also used
extensively for RICO’s business dealings and as a ‘marketing tool’. RICO would
drive the vehicle to and from sales calls and would regularly lend the vehicle
out to preferred customers.” (SAC ¶14.) “Instead of simply paying to repair the
SUBJECT VEHICLE, FARMERS instead retained the law firm, Berger Kahn, and began
insisting that RICO undergo an Examination Under Oath. The firm also began
demanding that RICO provide them with photographs of the property damage,
accident scene and the police report for the SUBJECT ACCIDENT that had already
been provided to FARMERS months earlier. [¶] FARMERS finally paid to fix the
SUBJECT VEHICLE on March 9, 2020, seven months after the SUBJECT
ACCIDENT HAD occurred.” (SAC ¶¶21-22.)
The SAC asserts the following causes of action: (1) Breach
of Written Contract of Insurance; and (2) Breach of Implied Covenant of Good
Faith and Fair Dealing.
On August 12, 2021, this Court granted Defendant’s Motion to
Strike Plaintiff’s breach of contract claim as to Plaintiff’s auto claim
allegations without leave to amend.
Accordingly, the remaining claims at issue in this action
are: (1) Plaintiff’s claim for breach of contract relating to the employment
claim; (2) Plaintiff’s claim for breach of the implied covenant of good faith
and fair dealing relating to the payment of the auto claim; and (3) Plaintiff’s
claim for breach of the implied covenant of good faith and fair dealing
relating to the employment claim.
Breach of Contract and Breach of the Implied Covenant of
Good Faith and Fair Dealing – EPLI Claim
Here, it is undisputed that the Subject EPLI Policy
contained a retroactive date of “March 21, 2019.” (See SSMF No. 9.) The
evidence proffered shows that Navarro claimed that he was harassed, demoted,
and ultimately terminated prior to the retroactive date. (See SSMF Nos. 14-15.)
“[T]he insured has the burden of establishing that the
occurrence which forms the basis of the coverage claim is within the basic
scope of the insurance coverage.” (Travelers Cas. & Sur. Co. v. Sup. Ct.
(1998) 63 Cal.App.4th 1440, 1453.) Here, it is undisputed that Navarro’s demand
letter and complaint related to events which occurred before the EPLI’s
retroactive date. Thus, coverage is excluded.
Plaintiff does not address Defendants’ arguments pertaining
to the retroactive date exclusion in Opposition, seemingly in concession on the
merits.
Summary adjudication of the first and second causes of
action as to the EPLI claims is GRANTED.
Breach of the Implied Covenant of Good Faith and Fair
Dealing – Auto Claim
To establish insurer bad faith, a plaintiff must plead the
following elements; “(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.) Where benefits are due under an insurance policy, a lengthy delay
in processing the claim can constitute bad faith on the part of the insurer. (Id.
at 1151, n.10.) However, “[t]he mistaken [or erroneous] withholding of policy
benefits, if reasonable or if based on a legitimate dispute as to the insurer’s
liability under California law, does not expose the insurer to bad faith
liability….. [¶] Thus, before an insurer can be found to have acted tortiously
(i.e., in bad faith), for its delay or denial in the payment of policy
benefits, it must be shown that the insurer acted unreasonably or without
proper cause. However, where there is a genuine issue as to the insurer’s
liability under the policy for the claim asserted by the insured, there can be
no bad faith liability imposed on the insurer for advancing its side of that
dispute…. In other words, an insurer is entitled to give its own interests
consideration when evaluating the merits of an insured’s claim…. [¶] 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 is bad faith even though it might be liable for breach of
contract. [Citations Omitted.]” (Chateau Chamberay Homeowners Ass’n
(2001) 90 Cal.App.4th 335, 346-347.)
Defendant has shown that there was a genuine dispute as to
the amount of damages owed under the Policy. Rico submitted a repair estimate
in the amount of $48,582.27. (SSMF No. 33.) The “other driver” admitted to
rear-ending Rico, but stated that the Maserati was barely damaged, with only a
“light scratch” on the bumper and provided autographs of the damage. (SSMF No.
34.) Defendant noted discrepancies between Plaintiff Rico and the “other
driver’s” photos. (SSMF No. 36.) “Defendant’s investigator made an inquiry to
an accident reconstruction specialist… who told them… that the electronic data
recorder might have been tampered with.” (SSMF No. 39.) “Defendant then hired
an accident reconstruction specialist to analyze the accident and claimed
damages… in which he concluded that the accident happened as stated, but that
‘the property damage severity claimed as being attributed to this collision is
suspect.’” (SSMF No. 40.) “Based on Rico’s EUO testimony providing an
explanation to defendant’s concerns over the conflicting damage photographs,
and taking him at his word that he did not erase or modify the EDR data, on
February 28, 2020, defendant issued payment of the policy’s $1,000 loss of use
limit and payment of the $47,038.51 independent estimate, less plaintiff’s
$1,000 deductible” (SSMF NO. 57.)
In Opposition, Plaintiff argues that Defendant’s
investigation was unreasonable and constituted a stalling/harassing tactic
because Defendant was reluctant to pay for the repair of Plaintiff’s
exotic/expensive Maserati. Plaintiff maintains that it was unreasonable for
Defendant to have taken 7 months to pay out Plaintiff’s claim.
Summary adjudication is GRANTED. Plaintiff fails to produce
any evidence creating a triable issue of material fact that there was no
genuine dispute between the parties. The Court notes that the Declaration of
Allan E. Perry fails to raise a triable issue of material fact because it fails
to demonstrate how or why Defendant acted unreasonably by relying on
experts/photograph discrepancies to conduct a further investigation in
Plaintiff’s auto claim.
Consequently, the Motion for Summary Adjudication of
Plaintiff’s prayer for punitive damages is rendered MOOT.
Objections
to the separate statement are somewhat misplaced, as the Statement itself is
not the evidence, nor is Counsel’s characterization of the underlying evidence
cited therein.
Evidentiary
Objections to the Declaration of Jorge Rico
1.
Sustained
2.
Sustained
3.
Overruled
4.
Sustained
5.
Overruled
6.
Sustained
7.
Sustained
8.
Sustained
Evidentiary Objects
to the Declaration of Allan E. Perry
1.
Overruled
2.
Sustained
3.
Sustained
4.
Sustained
5.
Overruled
6.
Overruled
7.
Overruled
8.
Overruled
9.
Overruled