Judge: Melvin D. Sandvig, Case: 23CHCV00681, Date: 2025-01-30 Tentative Ruling

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Case Number: 23CHCV00681    Hearing Date: January 30, 2025    Dept: F47

Dept. F-47

Date: 1/30/25                                                             TRIAL DATE: N/A

Case # 23CHV00681

MOTION FOR SUMMARY JUDGMENT AND/OR ADJUDICATION

Motion filed on 10/31/2024.

MOVING PARTY:                Defendant State Farrm General Insurance Company

RESPONDING PARTY:       Plaintiffs Pamela and Imad Musleh

NOTICE: ok

RELIEF REQUESTED: Summary judgment and/or adjudication of Plaintiffs’ claims for (1) breach of contract and (2) breach of the covenant of good faith and fair dealing.

RULING:

Defendant’s motion is DENIED in its entirety.

SUMMARY OF ACTION & PROCEDURAL HISTORY

Plaintiffs Pamela and Imad Musleh (“Plaintiffs”) sued defendant State Farm General Insurance Company (“State Farm”) on March 9, 2023, asserting claims for breach of the parties’ home insurance contract and breach of the covenant of good faith and fair dealing.

Plaintiffs own the property located at 9339 Rhea Avenue in Northridge, California (“the Property”). At all relevant times, their home was insured under a State Farm home insurance policy (“the Policy”). Neither the fact of their coverage nor the terms of their contract are disputed.

Plaintiffs allege their home suffered water damage on two instances in September 2021. First, around September 1, 2021, a faulty hose spray under their kitchen sink, discharged water and damaged their floor (“the Sink Incident”). Then, on September 18, 2021, Plaintiffs suffered a “slab leak” in their family room (“the Slab Leak”), which caused similar floor damage.

Plaintiffs submitted a claim to State Farm based on the Slab Leak on September 18, 2021. State Farm denied their claim on October 22, 2021.

Although the Sink Incident occurred prior to the Slab Leak, Plaintiffs did not submit a claim for the Sink Incident to State Farm until November 2021, after consulting with a public claims adjuster. State Farm denied the claim related to the Sink Incident on February 1, 2022. Plaintiffs engaged counsel, who continued to negotiate coverage with State Farm. State Farm issued a final denial of the claim based on the Sink Incident on March 7, 2023.

Plaintiffs sued based on the denial of the Sink Incident claim.

State Farm moved for summary judgment and/or adjudication on October 31, 2024. It argues Plaintiffs’ claim based on the Sink Incident is not recoverable under the contract. Alternatively, State Farm argues Plaintiffs submitted their claim for the Sink Incident as an attempt to recover for damage actually caused by the Slab Leak – or at least that any damage caused by the Sink Incident cannot be extricated from uncovered Slab Leak damage. Because there is no coverage available under Plaintiffs’ policy, State Farm it cannot have denied coverage in bad faith, or at least that there is a genuine dispute. Lastly, it argues Plaintiffs cannot show they are entitled to punitive damages, even if they can show breach of contract and bad faith.

On January 10, 2025, Plaintiffs filed their opposition, and on January 24, 2025, State Farm replied.

ANALYSIS

Legal Standard

The function of a motion for summary judgment or adjudication is to enable summary dismissal without the need for trial where an opposing party cannot show evidentiary support for a pleading or claim. Aguilar v. Atlantic Ritchfield Co. (2001) 25 Cal.4th 826, 843. Summary judgment is granted when, after the Court’s consideration of the evidence set forth in the papers and all reasonable inferences accordingly, no triable issues of fact exist, and the moving party is entitled to judgment as a matter of law. Code of Civil Procedure Section 437c(c); Villa v. McFarren (1995) 35 Cal.App.4th 733, 741. Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.

A defendant may move for summary judgment/adjudication if it contends that the action or individual cause of action has no merit. Code of Civil Procedure Section 437c(a), (f).) The moving party has the initial burden of proof to demonstrate with admissible evidence the action or cause of action lacks merit.  Id. 437c(a).) A cause of action has no merit if either (1) one or more of the elements of the cause of action cannot be separately established, even if that element is separately pleaded or (2) defendant establishes an affirmative defense to that cause of action.” Id. 437c(o); Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 853.) Once the moving party has met the burden, the burden shifts to the opposing party to show via specific facts that a triable issue of material facts exists as to a cause of action or a defense thereto. Code of Civil Procedure Section 437c(o)(2).

Evidentiary Matters

Request for Judicial Notice

State Farm requests judicial notice of Plaintiffs’ complaint. The request is granted, though it is unnecessary.

Plaintiffs’ Objections to State Farm’s Evidence

As an initial matter: it is improper for Plaintiffs to direct their Objections Nos. 1-8 to State Farm’s Separate Statement, rather than its underlying evidence. A Separate Statement is not evidence subject to objection. Where possible, the Court construes the objections as directed to the evidence underlying each Statement, rather than the Statement itself.

Plaintiffs’ Objections Nos. 1-2 are sustained for lack of foundation or personal knowledge in the Blazewich declaration.

Plaintiffs’ Objection No. 3 is overruled, though the Court notes that the fact is disputed.

Plaintiffs’ Objections Nos. 4-5 are overruled. The alleged statements were made by an opposing party.

Plaintiffs’ Objections Nos. 6-8 are overruled. They cannot be properly addressed to the underlying evidence.

Plaintiffs’ Objections Nos. 9-11 are overruled.

Plaintiffs’ Objections Nos. 11-13 are sustained for lack of foundation. Conclusions “[b]ased on . . . review of the Faucet Leak Claim file” are not based on personal knowledge. Nor has State Farm shown to the Court’s satisfaction that narrative statements within the Claim File are subject to a business records exception to the hearsay rule.

            State Farm’s Objections to Plaintiffs’ Evidence

                        Declaration of Maria A. Giragossian

State Farm’s Objection No. 1 is sustained for hearsay and lack of foundation.

State Farm’s Objection No. 2 is overruled.

State Farm’s Objection No. 3 is sustained for hearsay and lack of foundation.

State Farm’s Objection No. 4 is sustained for improper conclusion and argument.

                        Declaration of Joe Astorian

State Farm’s Objection No. 1 is sustained to the extent Mr. Astorian offers expert opinion. Mr. Astorian does not need to have prior experience as an expert witness in order to testify as such. However, his declaration does not lay foundation for his expertise except to state he is licensed as an adjuster. Thus, State Farm’s Objections Nos. 2, 5, and 8 are also sustained for improper opinion.

State Farm’s Objections Nos. 3, 4, 6, and 7 are sustained for lack of foundation and hearsay.

                        Declaration of George Feliciano

State Farm’s Objection No. 1 is overruled. Mr. Feliciano’s thirty years’ experience in the field and work as an expert leak detector for State Farm claims establishes he is qualified to offer his expert opinion. Thus, State Farm’s Objections Nos. 2-7 and 9 are also overruled.

State Farm’s Objection No. 2 is sustained for lack of foundation and hearsay.

                        Declaration of Imad Musleh

State Farm’s Objection No. 1 is sustained to the extent Mr. Musleh offers his opinion on matters requiring expertise.

State Farm’s Objection No. 2 is overruled. The Court regards the statement as lay opinion based on personal observation of the incident.

State Farm’s Objection No. 3 is overruled.

State Farm’s Objection No. 4 is sustained for hearsay.

State Farm’s Objection No. 5 is sustained for improper conclusion or lack of foundation, except as to “I had all the flooring . . . (Plaintiffs [sic] Appendix #4).”

State Farm’s Objection No. 6 is sustained for relevance.

Discussion

First Cause of Action for Breach of Contract

To establish a cause of action for breach of contract, a Plaintiff must show: (1) the existence of a contract, (2) Plaintiff’s performance or excuse for nonperformance, (3) State Farms’ breach, and (4) resulting damage. Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.) Claims based on insurance policies rely on the same elements as any other contract claim. Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 400.

                        a. Terms of the Policy

The Policy contains the following language relevant to the parties’ dispute:

“SECTION I – LOSSES INSURED COVERAGE A – DWELLING / We insure for accidental direct physical loss to the property described in Coverage A, unless the loss is excluded or limited in SECTION I – LOSSES NOT INSURED or otherwise excluded or limited in this policy.”

(UMF 2.)

“SECTION I – LOSSES NOT INSURED

1.         We will not pay for any loss to the property described in Coverage A that is caused by one or more of the items below, regardless of whether the loss occurs abruptly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:

…f. wear, tear, decay, marring, scratching, deterioration, inherent vice, latent defect, or mechanical breakdown;

g. corrosion, electrolysis, or rust;

h. wet or dry rot;

…2. We will not pay for, under any part of this policy, any loss that is caused by one or more of the items below, regardless of whether the event occurs abruptly or gradually, involves isolated or widespread damage, occurs on or off the residence premises, arises from natural or external forces, or occurs as a result of any combination of these:

… c. Water, meaning:

…(8) water or sewage below the surface of the ground, including water or sewage that exerts pressure on, or seeps or leaks through a building structure, sidewalk, driveway, swimming pool, or other structure;

(9)        seepage or leakage of water, steam, or sewage that occurs or develops over a period of time:

(a)        and is:

(i)         continuous;

(ii)        repeating;

(iii)       gradual;

(iv)       intermittent;

(v)        slow; or

(vi)       trickling; and

(b)        from a:

(i)         heating, air conditioning, or automatic fire protective sprinkler system;

(ii)        household appliance; or

(iii)       plumbing system, including from, within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceilings, or floors.

We also will not pay for losses arising from condensation or the presence of humidity, moisture, or vapor that occurs or develops over a period of time…

However, we will pay for any accidental direct physical loss by fire, explosion, or theft resulting from water, provided the resulting loss is itself a loss insured.”

(UMF 4.)

Finally, the Policy states as a “CONDITION”:

“…2. Your Duties After Loss. After a loss to which this insurance may apply, you must cooperate with us in the investigation of the claim and also see that the following duties are performed:

…a. give immediate notice to us or our agent…

…b. protect the property from further damage or loss…”

(UMF 5.)

State Farm claims (1) they did not breach the parties’ contract because the contract does not apply to the Sink Incident, and/or (2) loss covered by the Sink Incident is duplicative of loss caused by the Slab Leak, which for purposes of this motion Plaintiffs do not dispute was properly denied.

As to breach, State Farm does not carry its burden. State Farm’s entire argument regarding breach relies on paragraphs 15-17 and 20 of the Blazewich Declaration, paragraph 12 of Plaintiffs’ complaint, and State Farm’s Exhibit 6. The cited portion of Plaintiffs’ complaint is irrelevant. The cited portion Blazewich Declaration does not address any factor that might determine coverage; it only discusses certain conclusions she drew about Plaintiffs’ claim and the way State Farm handled it. Exhibit 6, a report from Premier Leak Detection, is the only evidence that describes the nature of the incident. But State Farm does not connect the report to the Policy with any reasoned argument, nor does it appear to defeat Plaintiffs’ claim. The report was submitted to State Farm by Joe Astorian, Plaintiffs’ own adjuster.

Similarly – taking into account evidence State Farm does not cite in its Statement – photos of the damage do not reflect the character of the incident that caused the loss. Nor do Plaintiffs’ purportedly inflated damages claim show that no damages were covered under the Policy.

Because State Farm has not shown the damage fell outside the Policy, it has not defeated Plaintiffs’ claim that it breached the Policy.

State Farm also does not show Plaintiffs’ damages claim duplicates the Slab Leak damages. Even if the claims duplicated each other, that does not demonstrate whether the Slab Leak or the Sink Incident, or neither, or both, caused particular damages in question.

If State Farm had met its burden, the expert declaration of George Feliciano would carry Plaintiffs’ burden to raise a triable issue. He has laid foundation for his testimony as an expert, and he characterizes the Sink Incident in a manner that would be covered under the Policy. (State Farm offers no similar expert evidence.)

State Farm does not carry its initial burden to show, with admissible evidence, that it did not breach the parties’ insurance contract. If it had, Plaintiffs would raise a triable issue in response.

State Farm’s motion is denied as to Plaintiffs’ first cause of action.

Second Cause of Action for Breach of Covenant

“[W]hen the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.” Congleton v. National Union Fire Ins. Co. (1987) 189 Cal.App.3d 51, 58. “[T]he ultimate test of liability in the first party cases is whether the refusal to pay policy benefits was unreasonable.” Austero v. National Cas. Co. (1978) 84 Cal.App.3d 1, 32 [emphasis in original], overruled on other grounds in Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 824, fn. 7. “[W]here 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.” Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347. However, “[t]he genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured's claim. A genuine dispute exists only where the insurer's position is maintained in good faith and on reasonable grounds.” Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723 [emphasis in original]. 

State Farm carries its initial burden regarding Plaintiffs’ second cause of action. The exhibits show State Farm communicated with the insured and their adjuster about the cause of the claim and kept Plaintiffs’ file open over the course of years, despite their suspicion that Plaintiffs were attempting to duplicate their Slab Claim. To the extent Plaintiffs’ requests for damages are admissible, they show a marked similarity between the Slab Leak and Sink Incident claims. As an initial matter, this is sufficient to show State Farm reasonably withheld payment in good faith.

However, Plaintiff raises a triable issue. To begin with, Plaintiff Imad Musleh attests he was initially discouraged from submitting a claim for the Sink Incident by State Farm’s own agent. (Musleh Declaration, ¶ 7.) State Farm’s agents’ failure to conduct an in-person inspection suggests arbitrary denial. Plaintiffs’ adjuster attests he struggled to contact State Farm’s agents for them to consider the claim once it was submitted. (Astorian Declaration, ¶ 5.) Counsel who assisted Plaintiffs with their claim also attests State Farm permitted five months to elapse before providing a substantive response to her first correspondence. (Giragossian Declaration, ¶¶ 2-5.)

State Farm also has not shown the genuine dispute doctrine applies for the same reason it has not carried its burden on Plaintiffs’ first cause of action. The evidence in the record does not demonstrate the basis for State Farm’s denial of Plaintiffs’ claim. There is little, if any, evidence to establish the nature of the Incident and whether it falls within the Policy. Because there is no basis on which to determine whether coverage was owed, there is similarly no basis to determine whether the dispute over coverage was genuine.

State Farm’s motion is denied as to Plaintiffs’ second cause of action.

            Punitive Damages

Finally, State Farm argues Plaintiffs have not shown malice, fraud, or oppression sufficient to survive summary adjudication.

“[O]n a motion for summary adjudication with respect to a punitive damages claim, the higher evidentiary standard applies. If the plaintiff is going to prevail on a punitive damages claim, he or she can only do so by establishing malice, oppression or fraud by clear and convincing evidence. Thus, any evidence submitted in response to a motion for summary adjudication must necessarily meet that standard.” Basich v. Allstate Ins. Co. (2001) 87 Cal.App.4th 1112, 1121.

However, a plaintiff’s higher standard on a punitive damages claim does not shift the burden away from the moving party as an initial matter. A moving party must still initially negate the assertion that it acted with malice, oppression, or fraud. See Fadeeff v. State Farm General Insurance Co. (2020) 50 Cal.App.5th 94, 109.

Here, State Farm has made no showing that it did not act with malice, oppression, or fraud. State Farm’s limited evidence is directed only to the propriety of denying Plaintiffs’ claim – and it has not shown the denial was proper. Apart from that, it has shown only its adjusters communicated with Plaintiffs’ representatives multiple times. This does not bear sufficiently on the motivation for the denial that Defendant can prevail at summary adjudication

State Farm’s motion is denied as to punitive damages.

CONCLUSION

State Farm’s motion is denied in its entirety.