Judge Matthew C. Braner, Case Number: 37-2022-00037382-CU-BC-CTL, Date: 2024-05-24 Tentative Ruling

Judge: Matthew C. Braner, Case: 37-2022-00037382-CU-BC-CTL, Date: 2024-05-24 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - May 23, 2024

05/24/2024 09:00:00 AM C-60 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Matthew C. Braner

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Civil - Unlimited Breach of Contract/Warranty Demurrer / Motion to Strike 37-2022-00037382-CU-BC-CTL MAK CONSTRUCTION INC VS INSURANCE COMPANY OF THE WEST [IMAGED] CAUSAL DOCUMENT/DATE FILED:

Defendant Insurance Company of the West's demurrer to the first amended complaint is SUSTAINED.

The court will reserve ruling on the parties' discovery motions until it has heard from the parties regarding whether to sustain Defendant's demurrer with or without leave to amend. In the event the demurrer is sustained with leave to amend, the court is inclined to stay discovery until the pleadings have been resolved.

Demurrer The parties' requests for judicial notice are granted.

A demurrer shall be sustained if the complaint 'does not state facts sufficient to constitute a cause of action.' (Code Civ. Proc., � 430.10(e).) To test the sufficiency of a cause of action, the court treats as true 'all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.' (Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010.) The court may also consider matters that have been judicially noticed. (Id.) The court shall give the complaint a 'reasonable interpretation, reading it as a whole and its parts in their context.' (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Defendant demurs to the FAC on the grounds that Plaintiff lacks standing to bring its first cause of action for unfair business practices under Business & Professions Code section 17200, and Plaintiff has not adequately pled its second cause of action for breach of contract.

As to the first cause of action for unfair business practices, Plaintiff has not pled facts to establish standing under the UCL. More specifically, Plaintiff's allegations do not demonstrate it suffered injury in fact. '[I]n the aftermath of Proposition 64, only plaintiffs who have suffered actual damage may pursue a private UCL action. A private plaintiff must make a twofold showing: he or she must demonstrate injury in fact and a loss of money or property caused by unfair competition.' (Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1590.) In the FAC, Plaintiff alleges Defendant uses an unfiled and unlawful method of determining the Schedule Rating Modification ('SRM') portion of its workers compensation insurance rates, in contravention of its filed Schedule Rating Plans (which are allegedly a pretext) and the Insurance Code. (See Cal. Ins. Code �� 11658, 11735.) Plaintiff argues the FAC establishes its 'bargain' with Defendant was to have its rate determined lawfully and in accordance with its filed rate plans; thus, by receiving unlawfully determined Calendar No.: Event ID: TENTATIVE RULINGS

3117499 27 CASE NUMBER: CASE TITLE: MAK CONSTRUCTION INC VS INSURANCE COMPANY OF THE 37-2022-00037382-CU-BC-CTL rates, Plaintiff did not receive the benefit of its bargain, and thereby suffered an injury in fact. The court rejects this attempt to reframe the bargain inherent in every insurance contract: for the insured to pay the agreed upon and expected premium, and in return, to receive the expected insurance coverage.

Absent from the FAC are any allegations that the price or quality of the insurance coverage provided by Defendant differed from the expectations Plaintiff held when entering the contract. In the line of cases most relevant to this context, courts consistently refuse to find economic loss where a plaintiff did not allege 'they could have bought the same insurance for a lower price' or that 'they were dissatisfied with the insurance or were uninformed of its price.' (Peterson v. Cellco Partnership, supra, 164 Cal.App.4th at p. 1591-92; see also Lagrisola v. North American Financial Corp. (2023) 96 Cal.App.5th 1178, 1189 [no injury in fact where the plaintiffs 'do not allege that they did not want a loan in the first instance, that they paid any more for their loan than they otherwise would have, or that they could have obtained a loan at the same or lower price from another lender that was licensed.']; Demeter v. Taxi Computer Services, Inc. (2018) 21 Cal. App. 5th 903, 916-17 [no injury in fact where plaintiff did not show 'the service he purchased . . . was somehow not up to par' or that 'the amount he paid for his . . . membership was more than it was worth']; Hall v. Time Inc.(2008) 158 Cal.App.4th 847, 855 [no injury in fact where plaintiffs did not allege they 'did not want the book, the book was unsatisfactory, or the book was worth less than what the plaintiff paid for it.'); Medina v. Safe-Guard Prods., International, Inc. (2008) 164 Cal.App.4th 105, 114 [no injury in fact where plaintiff 'has not alleged that he didn't want wheel and tire coverage in the first place, or that he was given unsatisfactory service or has had a claim denied, or that he paid more for coverage than it was worth' because of the insurer unlicensed status).) The court is not persuaded that if Defendant's use of its proprietary tool was per se unlawful, then the injury in fact requirement has been satisfied. Plaintiffs do not, and cannot, allege the subject matter of the policy purchased from Defendant is itself illegal. (See Medina v. Safe-Guard Prods., International, Inc., supra, 164 Cal.App.4th at pp. 110-112 [distinguishing the 'object' of the contract from the legality of the contract].) Where the object of the product or service sold is legal, but the contract is flawed or arguably voidable, the purchaser does not automatically satisfy the economic loss requirement, as the court cannot infer the plaintiff would have paid less had the defendant complied with the law. Because the product can legally exist in the market, enforcing the contract may still convey the value the parties intended it to convey at a legally fair price. Thus, in order to allege an injury in fact, the plaintiff must sufficiently allege an economic loss by alleging dissatisfaction with the quality or price of the service or product. (Id. at p. 114 [placing the burden on the plaintiff to allege a lower value where insurance seller was unlicensed].) The FAC does not include such allegations, which is fatal to Plaintiff's UCL claim.

As to the second cause of action for breach of contract, Plaintiff has not adequately pled the element of damages. Plaintiff's theory of damages for breach of contract is effectively the same as its theory for injury in fact. The court remains unpersuaded by Plaintiff's effort to reframe the benefit of its bargain with Defendant concerning the insurance contract. Contract damages compensate a plaintiff for a lost expectancy interest, and thereby place the plaintiff in the same position they would have been in had the contract not been breached. (See, e.g., Coughlin v. Blair (1953) 41 Cal.2d 587, 603 ['Damages are awarded in an action for breach of contract to give the injured party the benefit of his bargain and insofar as possible to place him in the same position he would have been in had the promisor performed the contract.'].) Notwithstanding the extensive factual allegations concerning Defendant's purportedly unlawful conduct, the only reasonable inference that may be drawn from the FAC as pled is that Plaintiff got what it bargained for: workers compensation insurance coverage of the expected quality at the expected price.

Accordingly, Defendant's demurrer is sustained.

The court will hear from the parties regarding whether the demurrer should be sustained with or without leave to amend.

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