Judge: Melvin D. Sandvig, Case: 22CHCV01072, Date: 2023-06-20 Tentative Ruling

Case Number: 22CHCV01072    Hearing Date: January 24, 2024    Dept: F47

Dept. F47

Date: 1/24/24

Case #22CHCV01072

 

DEMURRER TO THE THIRD AMENDED COMPLAINT

 

Demurrer filed on 11/6/23.

 

MOVING PARTY: Defendant California Automobile Insurance Company

RESPONDING PARTY: Plaintiff Clean Initiative LLC

NOTICE: ok

 

Demurrer is to the entire Third Amended Complaint:

            1.  Breach of Contract

            2.  Tortious Bad Faith; Breach of Implied Covenant of Good Faith and Fair Dealing

 

RULING: The demurrer is sustained with 20 days leave to amend as to the 1st cause of action and without leave to amend as to the 2nd cause of action. 

 

SUMMARY OF FACTS & PROCEDURAL HISTORY

 

This action arises out of services Plaintiff Clean Initiative LLC (Plaintiff) performed for Defendant California Automobile Insurance Company’s (Defendant) insured Aaron Gbewonyo (Policy Holder). 

 

Plaintiff is in the business of providing inspection and, where necessary, repairs to the roofs of real property. (Third Amended Complaint (TAC) ¶2).  At the request of the Policy Holder, Plaintiff conducted a roof inspection at the Policy Holder’s home located at 10137 Amigo Avenue, Northridge, California (Insured Property).  Id.  Plaintiff alleges that it identified roof damage which required/requires repair so as to maintain the integrity, safety and/or durability of the roof.  Id. 

 

Thereafter, Plaintiff alleges it received an Assignment of Insurance Benefits (AOB) from the Policy Holder of Defendant’s insurance policy which covered the Insured Property and the damages sustained.  (TAC ¶2).  The AOB specifically provides:

 

“Client hereby assigns any and all insurance rights and proceeds under my property insurance policy up to the amount of the services provided by Service Provider Specialty. Client assigns all legal rights to recover any and all insurance proceeds owed by my insurance company regarding the loss including but not limited to the right to bring appropriate legal action up to the amount owed for the services rendered by Service Provider. Client also hereby directs, authorizes and unequivocally instructs direct payment of any benefit or proceeds for the services rendered by Service Provider to be made payable sole to Service Provider and shall be delivered directly and exclusively via a separate and individual payment to Service Provider. Client makes the assignment and authorization in consideration of Service Provider’s agreement to perform services and supply materials and otherwise perform its obligations under this contract, including not requiring full payment at the time of service. Client also hereby expressly and unequivocally instructs and directs my insurance carrier(s) to release any and all information requested by Service Provider, its representative, or its attorney solely for the direct purpose of obtaining actual benefits to be paid by my insurance carrier for services rendered. Service Provider shall be entitled to any and all recovery of costs and attorney’s fees associated with the collection of their invoice or estimate of service from Client’s Insurance Company. Client has the right to rescind the assignment agreement without a penalty or fees by submitting a written notice of rescission signed by Client to Service Provider within 3 days after the execution of the agreement.”

 

(TAC ¶6). 

 

After receiving the AOB, Plaintiff alleges that it submitted a claim for payment directly to Defendant (Submitted Claim) for payment for the inspection and for the cost of repairs associated with the insurable damage to the Insured Property.  (TAC ¶14).  Plaintiff alleges that:

 

“Defendant has denied the Submitted Claim and/or refused to honor and/or pay the Submitted Claim in breach of the insurance contract and without substantial justification, including but not necessarily limited to, by failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; by failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured; by not attempting in good faith to effectuate prompt, fair, and equitable settlement of the Submitted Claim where liability is reasonably clear; by delaying the investigation or payment of claims by requiring Plaintiff and/or the Policy Holder to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms both of which submissions contain substantially the same information; and/or by failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.”

 

(TAC ¶15).

 

As a result, on 11/4/22, Plaintiff filed this action against Defendant, erroneously sued as Mercury Insurance Services, LLC, for: (1) Breach of Contract and (2) Tortious Bad Faith; Breach of Implied Covenant of Good Faith and Fair Dealing.  On 2/14/23, Plaintiff filed its First Amended Complaint which alleged the same two causes of action.  After meet and confer efforts failed to resolve all of the issues Defendant had with the First Amended Complaint, on 3/22/23, Defendant filed and served a demurrer to the entire First Amended Complaint on the grounds that the 1st cause of action failed for uncertainty (CCP 430.10(f)) and the 2nd cause of action failed because Plaintiff had not alleged sufficient facts to state a cause of action, Plaintiff lacked standing and the cause of action was uncertain (CCP 430.10(e), (f)).  Plaintiff also filed and served a motion to strike which sought an order striking paragraph 20 in the 1st cause of action relating to attorney fees and paragraph 2 of the Prayer which sought the recovery of attorney fees.  On 6/20/23, this Court sustained the demurer and granted the motion to strike, both with leave to amend.  (See 6/20/23 Minute Order). 

 

In its 6/20/23 ruling, the Court found:

 

“that all of the terms of the AOB must be set forth, verbatim (i.e., with quotation marks), or a copy of the AOB must be attached as an exhibit to Plaintiff’s pleading (preferred method) in order for the Court to determine whether the assignment provides Plaintiff with standing to bring a claim for bad faith/breach of implied covenant of good faith and fair dealing. The Court finds that the exact wording including the punctuation contained in the AOB are necessary to make a determination.”

 

On 8/14/23, Plaintiff filed its Second Amended Complaint.  After meet and confer efforts regarding issues Defendant had with the Second Amended Complaint, the parties submitted a stipulation and order to allow for the filing of a Third Amended Complaint (TAC), which was granted on 9/29/23.  On 10/6/23, Plaintiff filed the subject Third Amended Complaint which, again, alleges causes of action for: (1) Breach of Contract and (2) Tortious Bad Faith; Breach of Implied Covenant of Good Faith and Fair Dealing.  After meet and confer efforts failed to resolve the issues Defendant had with the Third Amended Complaint, on 11/6/23, Defendant filed and served the instant demurrer to the entire Third Amended Complaint. 

 

The demurrer was originally scheduled for hearing on 12/19/23.  On 12/1/23, the Court served the parties with a Notice Re: Continuance and Order which continued the hearing to 1/24/24 and specifically stated that the opposition and reply were due to the 12/19/23 hearing date.  (See 12/1/23 Notice Re: Continuance and Order).  The opposition was not filed and served in compliance with the Court’s 12/1/23 order.  Rather, the opposition states that after receiving notice of the continuance, ‘[t]he parties discussed and agreed to move all deadlines associated with the Demurrer to the rescheduled hearing date.”  (See Opposition, p.2:5-7).  The parties are informed that they are not permitted to change court ordered filing deadlines without court approval.  When the Court sets such filing deadlines in its orders of continuance, it is to accommodate the court’s work schedule.

 

Despite the late filing and service of the opposition and reply, both were considered by the Court in ruling on the demurrer.  However, the parties are warned that failure to comply with court ordered filing deadlines in the future may result in late-filed papers not being considered. 

 

 

 

ANALYSIS

 

Defendant’s Request for Judicial Notice (RJN) is granted. 

 

If a third party is claiming to be an assignee, the complaint must allege the assignment of benefits to the plaintiff.  Emerald Bay Community Association (2005) 130 CA4th 1078, 1091.

 

Despite the Court’s statement in its 6/20/23 ruling that “that all of the terms of the AOB must be set forth, verbatim (i.e., with quotation marks), or a copy of the AOB must be attached as an exhibit to Plaintiff’s pleading (preferred method),” in order for the Court to determine Plaintiff’s standing, Plaintiff has done neither.  The AOB is not attached to the Third Amended Complaint and the terms of same are not set forth with quotation marks is the Third Amended Complaint.

 

Based on the wording of the allegations, it appears that paragraph 4 in the Third Amended Complaint consists of Plaintiff’s interpretation of the “material terms of the AOB” and paragraphs 5 and 6 are the actual terms of the AOB.  Plaintiff improperly relies on its interpretation rather than the actual terms of the AOB. 

 

The actual terms of the AOB, as alleged in paragraphs 5 and 6 of the Third Amended Complaint  are:

 

“5.  Agreement: By executing this agreement (“Agreement”), I, the Property Owner/Insured named above, and or its representative for the property located at the address listed above (hereinafter “Client”) hereby agrees and authorize Clean Initiative LLC (hereinafter “Service Provider”) to enter said property to perform services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property in accordance with accepted industry standards (“Property”). Client represents and warrants that Client intends to [ ? ] any and all rights, benefits, and proceeds for services rendered by Service Provider to be assigned solely and exclusively to Service Provider. Client agrees to fully cooperate with the insurance company as required by the subject policy of insurance and comply with all post-loss duties required by same. Client also accepts responsibility to protect any equipment left at the subject property for mitigation and remediation purposes.

 

6.  Assignment of Benefits and Direct Payment Authorization: Client hereby assigns any and all insurance rights and proceeds under my property insurance policy up to the amount of the services provided by Service Provider Specialty. Client assigns all legal rights to recover any and all insurance proceeds owed by my insurance company regarding the loss including but not limited to the right to bring appropriate legal action up to the amount owed for the services rendered by Service Provider. Client also hereby directs, authorizes and unequivocally instructs direct payment of any benefit or proceeds for the services rendered by Service Provider to be made payable sole[ly] to Service Provider and shall be delivered directly and exclusively via a separate and individual payment to Service Provider. Client makes the assignment and authorization in consideration of Service Provider’s agreement to perform services and supply materials and otherwise perform its obligations under this contract, including not requiring full payment at the time of service. Client also hereby expressly and unequivocally instructs and directs my insurance carrier(s) to release any and all information requested by Service Provider, its representative, or its attorney solely for the direct purpose of obtaining actual benefits to be paid by my insurance carrier for services rendered. Service Provider shall be entitled to any and all recovery of costs and attorney’s fees associated with the collection of their invoice or estimate of service from Client’s Insurance Company. Client has the right to rescind the assignment agreement without a penalty or fees by submitting a written notice of rescission signed by Client to Service Provider within 3 days after the execution of the agreement.”  (emphasis added).

 

Under the terms of the AOB, the Policy Holder assigned to Plaintiff the legal rights to recover any and all proceeds owed by Defendant for services actually rendered, not for services “to be rendered” as claimed by Plaintiff.  (See TAC ¶4; Opposition, p.4:16-20).  Plaintiff has failed to clearly allege that it has already rendered services to the Policy Holder.  In paragraph 2, Plaintiff alleges that it “performed an inspection of the roof” of the Policy Holder and “identified roof damage which required/requires repair… .”  (TAC ¶2).  In paragraph 3, Plaintiff alleges that “[a]fter conducting an inspection of the Insured Property, Plaintiff prepared an estimate of the necessary repairs which identified the estimate cost of repairs to be $59,341.76.”  (TAC ¶3).  Later, Plaintiff alleges that “Plaintiff performed roof inspection and/or repair services for the benefit of the Policy Holder. . .” and that “[i]nstead of paying Plaintiff directly for services rendered the Policy Holder assigned to Plaintiff… .”  (See TAC ¶¶12-13).  As such, it cannot be determined whether Plaintiff has standing to make a claim for breach of contract. 

 

Even if Plaintiff can amend its pleading to allege that it has already rendered services to the Policy Holder giving Plaintiff standing to make a breach of contract claim, the terms of the AOB establish that Plaintiff’s 2nd cause of action for tortious bad faith/breach of implied covenant of good faith and fair dealing fails as a matter of law.  As noted above, the AOB provides:

 

“Client assigns all legal rights to recover any and all insurance proceeds owed by my insurance company regarding the loss including but not limited to the right to bring appropriate legal action up to the amount owed for the services rendered by Service Provider.”

 

(TAC ¶6, p.3:15-18)

 

The Court finds that the foregoing term of the AOB limits Plaintiff’s recovery in a legal action to the amount owed for services rendered to the Policy Holder by Plaintiff, which are contract damages, not tort damages as sought in the 2nd cause of action. 

 

The Court also notes that the reply to the opposition includes arguments which are not included in the demurrer, specifically, that the Third Amended Complaint, is not pled with the required particularity and the Third Amended Complaint fails to address the uncertainty as to the amount of damages.  (See Demurrer, generally; Reply, p.3:27-p.5:16).  As such, these arguments were not considered in ruling on the demurrer. 

 

Further, the Court notes that Defendant failed to electronically bookmark the exhibits attached to the moving papers as required.  See CRC 3.1110(f)(4).  The parties are warned that failure to comply with this requirement in the future may lead to matters being continued so that papers may be re-filed in compliance, papers not being considered and/or the imposition of sanctions. 

 

CONCLUSION

 

The demurrer to the 1st cause of action for breach of contract is sustained with 20 days leave to amend.  The demurrer to the 2nd cause of action for tortious bad faith/breach of implied covenant of good faith and fair dealing is sustained without leave to amend.