Judge: Melvin D. Sandvig, Case: 21CHCV00312, Date: 2023-03-01 Tentative Ruling
Case Number: 21CHCV00312 Hearing Date: March 1, 2023 Dept: F47
Dept. F47
Date: 3/1/23
Case #21CHCV00312
DEMURRER TO THE
FOURTH AMENDED COMPLAINT
Demurrer filed on 12/28/22.
MOVING PARTY: Defendants State Farm General Insurance
Company, Jerry Neglia and Robert Garza
RESPONDING PARTY: Plaintiffs Dennis Cho and Heather Cho
NOTICE: ok
Demurrer is to the 3rd, 4th and 5th
causes of action:
1. Breach of Contract (against State Farm)
2. Bad Faith Breach of the Implied Covenant of
Good Faith and Fair Dealing (against State Farm)
3. Negligent Misrepresentation (against Neglia)
4. Violation of the Unruh Civil Rights Act
(against State Farm)
5. Unfair Business Practices (against State Farm,
Neglia and Garza)
RULING: The demurrer is sustained without leave to
amend. Answer is due within 30 days.
FACTUAL SUMMARY & PROCEDURAL HISTORY
This action arises out of two insurance claims made by
Plaintiffs Dennis Cho and Heather Cho (Plaintiffs) to Defendant State Farm
(State Farm). One claim is for damage to
Plaintiffs’ home caused by a water heater and the other is for damage to their
home caused by smoke and soot from a wildfire.
Plaintiffs contend that State Farm did not pay them all of what is owed
on the claims. As a result, on 4/22/21,
Plaintiffs filed this action against State Farm, only, for: (1) Breach of
Contract, (2) Breach of Implied Covenant of Good Faith (Insurance Bad Faith);
(3) Negligence and (4) Unfair
Competition (Business & Professions Code 17200, et seq.). On 5/21/21, State Farm answered the complaint
and filed a Notice of Removal to Federal Court.
The federal court granted Plaintiffs’ motion for leave to
file a First Amended Complaint, which added Robert Garza (Garza), a State Farm
adjuster/employee, and Jerry Neglia (Neglia), an employee of State Farm, as
defendants among other things, and remanded the matter back to this Court. (See Notice of Remand filed 7/15/21). On 1/24/22, Plaintiffs filed their First
Amended Complaint for: (1) Breach of Contract against State Farm; (2) Breach of Implied Covenant of Good Faith (Insurance Bad
Faith) against State Farm; (3) Negligence against State Farm, Garza and Neglia;
(4) Unfair Competition (Business & Professions Code 17200, et seq. against
State Farm and (5) Negligent Misrepresentation against Garza and Neglia.
On 6/14/22, Plaintiffs filed a motion for leave to amend
their Second Amended Complaint. On
7/11/22, another order pursuant to the stipulation of the parties was entered
allowing Plaintiffs to file their Third Amended Complaint for: (1) Breach of
Contract against State Farm; (2) Bad Faith Breach of Implied Covenant of Good
Faith and Fair Dealing against State Farm; (3) Negligent Misrepresentation
against Neglia; (4) Unruh Civil Rights Act – Civil Code 51, et seq. against
State Farm and (5) Unfair Competition (Business & Professions Code 17200,
et seq. against State Farm and Neglia. Although
referenced in the Third Amended Complaint, Garza was no longer named as a
defendant in the Third Amended Complaint (TAC).
(See TAC ¶6).
The original Complaint and the First Amended Complaint
were filed by Dennis Cho (one of the plaintiffs) on behalf of both Plaintiffs
through his law office, The Law Offices of Dennis Cho. On 12/1/21, Plaintiffs substituted in their
current counsel who filed their Second and Third Amended Complaints on their
behalf.
On 11/9/22, State Farm and Neglia’s demurrer to the 3rd,
4th and 5th causes of action in the Third Amended
Complaint was sustained with leave to amend.
On 11/28/22, Plaintiffs filed the
subject Fourth Amended Complaint alleging the following causes of action: (1)
Breach of Contract against State Farm, (2) Bad Faith Breach of the Implied
Covenant of Good Faith and Fair Dealing against State Farm, (3) Negligent
Misrepresentation against Neglia, (4) Unruh Civil Rights Act – Civil Code 51,
et seq. against State Farm and (5) Unfair Competition – Business &
Professions Code 17200, et seq. against all Defendants.
After meet and confer efforts failed to resolve the
issues Defendants had with the Fourth Amended Complaint, the instant demurrer
to the 3rd, 4th and 5th causes of action was
filed and served. Plaintiffs have
opposed the demurrer. Defendants have
filed and served and reply to the demurrer.
MEET & CONFER
The parties dispute whether Defendants adequately met and
conferred pursuant to CCP 430.41 before filing and serving the instant
demurrer. The Court finds that defense
counsel met the initial burden regarding meet and confer efforts. The Court also finds that counsel for both
parties could have made more of an effort to determine whether an automatic
extension under CCP 430.41(a)(2) applied under the circumstances. However, regardless of whether the parties
failed to adequately meet and confer or whose fault any such failure was, a
determination that the meet and confer process was insufficient is not grounds
to overrule or sustain a demurrer. CCP
430.41(a)(4). Based on the foregoing
coupled with the fact that Plaintiffs dispute all arguments in the demurrer,
except as to Garza, the Court will rule on the merits of the demurrer.
ANALYSIS
A demurrer may be based on the ground that a complaint
fails to allege sufficient facts to state a cause of action and/or that a cause
of action is uncertain. See CCP
430.10(e), (f).
3RD CAUSE OF ACTION – NEGLIGENT
MISREPRESENTATION
The elements of a negligent misrepresentation cause of
action are: (1) the representation of a past or existing material fact, (2)
without reasonable ground for believing it to be true, (3) with intent to induce
another’s reliance on the fact misrepresented, (4) justifiable reliance on the
misrepresentation, and (5) resulting damage. Apollo Capital Fund LLC (2007) 158
CA4th 226, 243. As with an intentional
misrepresentation (fraud) claim, negligent misrepresentation must be pleaded
with factual specificity. Charnay
(2006) 145 CA4th 170, 179, 185, fn. 14; Cadlo (2004) 125 CA4th 513, 519;
Lazar (1996) 12 C4th 631, 644-645.
As such, Plaintiffs must allege facts showing how, when, where, to whom,
and by what means the representations were made. Lazar, supra.
This cause of action is based on Neglia’s purported
representation on 6/3/20, in response to Plaintiff Dennis Cho’s and his Public
Adjuster’s question, that Additional Living Expenses (ALE) were covered under
Plaintiffs’ policy. (4AC ¶¶13, 66). Such a representation cannot form the basis
of a negligent misrepresentation claim because the subject insurance policy
which is attached to and incorporated into the Fourth Amended Complaint provides
with regard to “Additional Living Expense” that “When a Loss Insured causes the
resident premises to become uninhabitable, we will cover the necessary increase
in cost you incur to maintain your standard of living for up to 24 months.” (See 4AC ¶7, p.4 “COVERAGE C – LOSS OF
USE”). Plaintiffs do not allege that
Neglia specifically stated or guaranteed that a future claim for Additional
Living Expenses by Plaintiffs would be paid.
Rather, Plaintiffs seemingly surmise that the reason Neglia stated that
ALE was covered was “to permit Plaintiffs to vacate the property during the
time of repair and remediation.” (4AC
¶66). While that may have been the
reason Plaintiff and/or their Public Adjuster asked the question, Plaintiffs do
not specifically allege that Neglia represented that their claim for additional
living expenses would be paid. A general
statement that additional living expenses were covered under the policy is not
a misrepresentation because the subject policy does provide for such
payment.
The allegations in the Fourth Amended Complaint are also
insufficient to support a finding that Neglia made the representation with the
intent to induce Plaintiffs’ reliance on it.
There is no allegation that Plaintiffs informed Neglia that they
intended to vacate the residence based on the representation and/or that they
were doing so based solely on the general representation made by Neglia. (See 4AC ¶¶67-68).
4TH CAUSE OF ACTION – VIOLATION OF THE
UNRUH CIVIL RIGHTS ACT
To state a cause of action for violation of the Unruh Civil
Rights Act based on race or national origin discrimination, a plaintiff must
allege facts showing: (1) the plaintiff was denied full
and equal accommodations, advantages, facilities, privileges or services by a
business establishment; (2) a substantial motivating reason for the denial was
the plaintiff’s race or national origin, or the race or national origin of a
person with whom the plaintiff associated; (3) the plaintiff was harmed; and (4)
the denial was a substantial factor in causing the harm. See CACI 3060.
To satisfy the
second element, “substantial motivating reason,” Plaintiffs must state facts
showing that the discrimination was intentional. Munson (2009) 46 C4th 661, 671; Cullen
(N.D. Cal. 2012) 880 F.Supp.2d 1017, 1024; Smith (2021) 64 CA5th 138,
154.
Plaintiffs have, again, failed to allege sufficient facts
to constitute a cause of action for violation of the Unruh Civil Rights Act. CCP 430.10(e). Plaintiffs base this cause of action on their
belief that Neglia and Garza had an “implicit bias and prejudice” against
Plaintiff Dennis Cho and the public adjuster Plaintiffs used, Mr. Park, because
they are of Asian, specifically Korean, descent. (4AC ¶¶32, 34, 39, 74-76). As a result of this alleged implicit bias and
prejudice, Plaintiffs claim that they were discriminated against in the
handling of their water heater leakage claim. (4AC ¶¶32, 34, 39, 70, 72, 75). Plaintiffs allege that they were
intentionally treated differently than non-Asians and/or non-Koreans. (4AC ¶¶32, 34, 36, 39). However, Plaintiffs have still failed to
allege specific facts to support their conclusory allegations.
Plaintiffs have still not alleged any facts to show
insureds or public adjusters of non-Korean descent were treated any differently
than Plaintiffs. While Plaintiffs allege
that State Farm did not take reasonable steps to protect Plaintiffs and those
similarly situated from discrimination based upon implicit bias,” they go on to
allege that they will conduct discovery into conduct of [Neglia and Garza] and
Does 3-100 to demonstrate additional evidence of Plaintiffs’ deprivation of
Civil Rights by Defendants.” (4AC ¶¶76-77). Neglia and Garza’s conduct forms the bases of
Plaintiffs’ discrimination claim against State Farm. Therefore, Plaintiffs’ need to conduct
discovery as to these individuals’ conduct reinforces the lack of facts
pled.
Further, the only facts pled in support of Plaintiffs’
claim of bias/prejudice toward them is that Garza and/or Neglia referred to
Plaintiffs’ Public Adjuster as “shrill,” “combative,” and demanding “Cadillac
repairs.” (4AC ¶35). Plaintiffs’ then conclude, without any
supporting facts, that “such description of the PA is inaccurate and mere
prejudice.” (4AC ¶35). Plaintiff go on to allege that Garza’s notes
regarding his interactions with Plaintiffs’ Public Adjuster “further detail
Garza’s racial bias.” (4AC ¶36). However, the excerpts from Garza’s notes
referenced in the Fourth Amended Complaint merely record the disagreement
between Garza and the Public Adjuster as to what was covered by the policy
and/or how repairs should be made and whether or not Garza was required to
provide the written guidelines he was relying on for his assessment of the
claim. (4AC ¶36). Plaintiffs then conclude, again without any
factual support, that Garza’s refusal to provide the written guidelines “is
demonstrative of intentionally racist conduct” because Garza purportedly
“disliked [the Public Adjuster’s] speech, tone, accent (the way he sounds),
behavior, requests et cetera and thus determined him to be ‘shrill’ and
‘combative’ when in fact he was not, nor was that his intention.” (See 4AC ¶¶37, 39).
In Plaintiffs’ fifth iteration of their complaint, they
have still failed to plead specific facts to show that they were treated any
differently than claimants who are not Asian.
5TH CAUSE OF ACTION – UNFAIR BUSINESS
PRACTICES
"The Unfair Business Practices Act defines ‘unfair
competition’ as any ‘unlawful, unfair or
fraudulent business practice and unfair, deceptive, untrue or misleading
advertising ....” Business &
Professions Code 17200. A plaintiff
alleging a claim for unfair business practices under Business & Professions
Code 17200, et seq. must state with reasonable particularity the facts
supporting the statutory elements of the violation. See Khoury (1993) 14 CA4th 612,
619.
While Plaintiffs have incorporated all of the prior
allegations and causes of action into their unfair business practices claim,
the particular facts alleged in the cause of action indicate that it is based
on violations of California Code of Regulations (Cal. Code of Regs. Title 10
§2695.7) and California Insurance Code 790.03(h) and Plaintiffs’ claims of
discrimination based on race, color, ancestry, national
origin, or primary language. (4AC
¶¶82-83).
A private party cannot bring an unfair competition claim
based on the Unfair Insurance Practices Act (UIPA) set forth in Insurance Code
790.03, et seq. Zhang (2013) 57
C4th 364, 368, 384. California Code of
Regulations, Title 10, §2695.7 is a derivative of Insurance Code
790.03(h). See California Code of
Regulations, Title 10, §2695.1. Even if
the claim is not based on Insurance Code 790.03, as noted above, Plaintiffs
have failed to allege sufficient facts to support a finding that they were
discriminated against based on race, color, ancestry, national origin, or
primary language. Plaintiffs have also
failed to allege sufficient facts to support a finding that Neglia made any
misrepresentation to them on which he intended them to rely.
The Court finds Plaintiffs’ general incorporation of all
of the preceding allegations into this cause of action to be insufficient to
support a finding that the claim is based on Plaintiffs’ breach of contract and
bad faith claims which have not been challenged by Defendants because the
particular allegations show that the claim is based on alleged statutory
violations which cannot form the bases of an unfair competition cause of action
and deficient allegations of discrimination and misrepresentation.
Despite Garza being named as a defendant in the caption
of the Fourth Amended Complaint, Plaintiffs state that he is not a defendant in
the operative complaint. (See
Opposition, p.12, fn.4). Plaintiffs have,
again, failed to allege sufficient facts to establish that either State Farm or
Neglia committed any unlawful, unfair and/or fraudulent conduct to support a
claim for unfair business practices.
CONCLUSION
Plaintiffs have now had five opportunities to plead their
claims against Defendants and have failed to adequately do so. Therefore, the demurrer is sustained without
leave to amend.