Judge: Mark E. Windham, Case: 23STLC04142, Date: 2023-12-07 Tentative Ruling

Case Number: 23STLC04142    Hearing Date: December 7, 2023    Dept: 26

Interinsurance Exchange v. Vannata, et al.

DEMURRER; MOTION TO STRIKE

(CCP §§ 430.31, et seq., 435, et seq.)

TENTATIVE RULING:

Cross-Defendant Interinsurance Exchange of the Automobile Club’s Demurrer to the Cross-Complaint is SUSTAINED WITHOUT LEAVE TO AMEND.

Cross-Defendant Interinsurance Exchange of the Automobile Club’s Motion to Strike Portions of the Cross-Complaint is PLACED OFF CALENDAR AS MOOT.

ANALYSIS:

Plaintiff Interinsurance Exchange of the Automobile Club (“Cross-Defendant”) filed the instant action for breach of contract and unjust enrichment against Defendants Dolores Vannata, Sarah Toutounchian, and Rochelle Toutounchian (“Cross-Complainants”) on June 30, 2023. Cross-Complainants filed a Cross-Complaint for breach of contract, insurance bad faith, and declaratory relief against Cross-Defendant on August 31, 2023.

Cross-Defendant filed the instant Demurrer to, and Motion to Strike Portions of, the Cross-Complaint on October 11, 2023. Cross-Complainants filed and served an opposition to the Demurrer on November 21, 2023 and Cross-Defendant replied on November 28, 2023.

Discussion

Allegations in the Complaint and Cross-Complaint

This action arises out of a written contract of automobile liability insurance between Cross-Defendant and Cross-Complainant Vannata. (Compl., ¶6.) The policy provided coverage for medical services and included a reimbursement provision. (Ibid.) The reimbursement provision provided that if a covered person obtains any settlement or judgment from any person or organization legally responsible for their bodily injury, Cross-Defendant is entitled to reimbursement of the payment it made to the covered person. (Ibid.) Following an automobile accident in September 2016, Cross-Defendant paid medical services benefits to Cross-Complainants under the policy in the amount of $12,715.00. (Id. at ¶¶7-8.) Thereafter, Cross-Complainants recovered money damages from another person, organization and/or insurance company for the same injuries for which Cross-Defendant paid them medical benefits. (Id. at ¶9.) Cross-Defendant is entitled to reimbursement in the amount of $5,000.00 from Cross-Complainant Vannata, $2,715.00 12 from Cross-Complainant Sarah, and $5,000.00 from Cross-Complainant Rochelle. (Id. at ¶10.) Cross-Complainants have refused to reimburse Cross-Defendant in accordance with the reimbursement policy in breach of the policy and have, therefore, been unjustly enriched at Cross-Defendant’s expense. (Id. at ¶¶10-20.)

Cross-Complainants allege in response that they were paid medical benefits under the insurance policy from Cross-Defendant. (Cross-Compl., p. 2:8-21.) Upon settlement of the case concerning the subject automobile accident, Cross-Complainants’ counsel wrote a letter to Cross-Defendant in response to its request for reimbursement. (Id. at p. 2:22-25.) The letter stated that Cross-Complainants had not been made whole and that under the “made whole rule” an insurer cannot enforce its rights to subrogation until the insured has been made whole by any recovery. (Id. at pp. 2:26-3:3.) Cross-Defendant did not respond to Cross-Complainants request to waive its subrogation rights and, instead, filed this action in June 2023. (Id. at p. 3:3-11.) The action is brought to harass Cross-Complainants for not renewing their policies with Cross-Defendant. (Id. at p. 3:11-16.) By refusing to honor its insurance obligations to Cross-Complainants, Cross-Defendant breached the insurance policy providing medical payment coverage. (Id. at ¶6.) As a result, Cross-Complainants have suffered damages, including attorney’s fees and costs, aggravation, worry, and emotional distress. (Id. at ¶7.) Also, by demanding reimbursement from Cross-Complainants, Cross-Defendant has breached its duty of good faith and fair dealing. (Id. at ¶¶9-10.) Cross-Complainants demand a judicial determination regarding whether the medical benefit payments are reimbursable, and whether they are reimbursable if Cross-Complainants have not been made whole. (Id. at ¶¶14-16.)

Demurrer to Cross-Complaint

Cross-Defendant demurs to the Cross-Complaint for failure to allege facts sufficient to state a cause of action. (Citing Code Civ. Proc., § 430.10, subd. (e).) The Demurrer is accompanied by a meet and confer declaration as required by Code of Civil Procedure section 430.41. (Demurrer, Nguyen Decl., ¶¶3-4.)

The elements of a cause of action for breach of contract are “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (D'Arrigo Bros. of California v. United Farmworkers of America (2014) 224 Cal.App.4th 790, 800.) Cross-Defendant demurs to this cause of action on the grounds that no breach of any specific provision of the insurance policy is alleged, and no facts are alleged to support such a breach. The Cross-Complaint does not cite to any specific provision of the insurance policy. It alleges that Cross-Defendant breached the insurance policy by demanding reimbursement of the medical payment benefits but does not cite any language from the policy that prohibits a demand for reimbursement. Although Cross-Complainants allege that Cross-Defendant refuses to honor its obligations, they also admit that they were paid the medical benefits. (See Cross-Compl., p. 2:8-21 and ¶6.) Therefore, the Cross-Complaint does not allege facts showing that the demand for reimbursement breaches the terms of the insurance policy. The Demurrer to the first cause of action for breach of contract is sustained.

The second cause of action for insurance bad faith requires allegations that an insurer withheld policy benefits unreasonably or without proper cause. (Waller v. Truck Ins. Exch. (1995) 11 Cal.4th 1, 36.) Again, the Cross-Complaint simply alleges that Cross-Defendant’s demand for reimbursement is a breach of the implied covenant of good faith and fair dealing. (Id. at ¶10.) It is not enough to allege that Cross-Defendant did not provide evidence that the medical payments were reimbursable. Or that Cross-Complainants’ counsel disputed reimbursement under the “make whole” rule. Cross-Complainants must allege that benefits were withheld and that such withholding was unreasonable, which they have not done. Also, Cross-Defendant points out that case law has established there is no claim for bad faith when an insurer seeks reimbursement of medical benefit payments. (Citing 21st Century Ins. Co. v. Superior Court (Quintana) (2009) 47 Cal.4th 511, 526-27.) Cross-Complainants do not address this binding authority in opposition. The Demurrer to the second cause of action is also sustained.

Finally, Cross-Defendant demurs to the third cause of action for declaratory relief as duplicative of the claims in its Complaint. Cross-Complainant does not show that the request for declaratory relief is necessary; they admit that it will assist in resolving the dispute over the enforceability of the medical payment provision, which is the dispute raised by the Complaint. Cross-Complainants go on to argue they lack access to the policy provisions and have a contractual right of access. It is unclear why this lack of access requires an action for declaratory relief and cannot be reached by discovery into the claims raised by Cross-Defendant’s Complaint. The demurrer to the third cause of action for declaratory relief, therefore, is also sustained.

Cross-Complainants’ remaining arguments about Cross-Defendant’s right of reimbursement under the law do not demonstrate the existence of proper cross-claims by Cross-Complainants. Rather, they pertain to the propriety of the claims brought by Cross-Defendant and have no bearing on the instant Demurrer.

Motion to Strike Portions of Cross-Complaint

Cross-Defendant moves to strike the allegations in support of, and the request for, attorney’s fees, emotional distress for breach of contract, and punitive damages. The Court having sustained Cross-Defendant’s Demurrer to the Cross-Complaint, the Motion to Strike is deemed moot.

Leave to Amend

Leave to amend must be allowed where there is a reasonable possibility of successful amendment, however, the burden is on the complainant to show the Court that a pleading can be amended successfully. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Cross-Complainants contend they have not previously been given a chance to amend but should be given a chance to assert a cause of action for unfair business practices. Yet the opposition does not cite what facts must be alleged for such a cause of action and how those are supported by their allegations. (Opp., pp. 10:26-11:1.) Therefore, leave to amend is denied.

Conclusion

Cross-Defendant Interinsurance Exchange of the Automobile Club’s Demurrer to the Cross-Complaint is SUSTAINED WITHOUT LEAVE TO AMEND.

Cross-Defendant Interinsurance Exchange of the Automobile Club’s Motion to Strike Portions of the Cross-Complaint is PLACED OFF CALENDAR AS MOOT.

Moving party to give notice.