Judge: Michael Shultz, Case: 23STCV09598, Date: 2025-03-20 Tentative Ruling
Case Number: 23STCV09598 Hearing Date: March 20, 2025 Dept: 40
23STCV09598
Sonia Agresti, et al. v. Federal Insurance Company, et al.
Thursday,
March 20, 2025
[TENTATIVE] ORDER
I.
BACKGROUND
The
first amended complaint (“FAC”) alleges that Defendant, Federal Insurance Co.
(“Federal”), issued a homeowner’s policy to Plaintiffs, who sustained fire
damage to their property caused by the Woolsey fire that occurred on November
9, 2018. Federal agreed to pay $950,000 to
settle Plaintiffs’ insurance claim and agreed to waive its right to
subrogation. Plaintiffs filed a lawsuit against Southern California Edison
(“SCE”) for damage caused by the Woolsey fire. Plaintiffs allege that despite
waiving its right to subrogation, Federal also filed suit against SCE and
settled its subrogation claim. Federal’s settlement with SCE negatively
affected Plaintiffs’ settlement against SCE. Plaintiffs allege claims for
breach of contract and breach of the implied covenant of good faith and fair
dealing.
II.
ARGUMENTS
Federal
demurs to both claims because the allegations conclusively establish that
Plaintiffs did not suffer any damage for the alleged breach of contract.
Plaintiffs attempt to recover from Federal the value of insurance benefits
already received from Federal. Plaintiffs impermissibly seek a “double dip”
windfall which is not a damage. As the second cause of action for bad faith
requires a breach of contract, it also fails.
In
opposition, Plaintiffs argue that Federal fundamentally misunderstands the FAC.
By agreeing to waive its subrogation rights, Federal gave Plaintiffs the right
to collect a sum owed to Federal. Federal made an agreement to waive
subrogation rights, then pursued subrogation rights for itself, which cost
Plaintiff $3 million dollars because Plaintiff had to reduce its settlement
with SoCal by that amount.
In
reply, Federal argues that Plaintiffs admit they are seeking double recovery.
Plaintiffs seek from Federal the amount they already received from Federal in
settlement of their claim. Plaintiffs’ analogy that Federal’s waiver of
subrogation rights was akin to allowing Plaintiffs to collect on a promissory
note given to them by Federal misses the mark.
III.
LEGAL STANDARDS
A demurrer tests the sufficiency of a
complaint as a matter of law and raises only questions of law. (Schmidt
v. Foundation Health (1995) 35
Cal.App.4th 1702, 1706.) In testing the complaint’s sufficiency, the court must
assume the truth of the properly pleaded factual allegations as well as facts
that can be reasonably inferred from those expressly pleaded facts. The court
may also consider matters properly subject to judicial notice. (Blank
v. Kirwan (1985) 39 Cal.3d
311, 318.)
The court may not consider contentions,
deductions, or conclusions of fact or law. (Moore
v. Conliffe (1994) 7 Cal.4th
634, 638.) Plaintiff is required to allege facts sufficient to establish every
element of each cause of action. (Rakestraw
v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.) Where the complaint fails to state facts
sufficient to constitute a cause of action, courts should sustain the demurrer.
Code Civ. Proc., § 430.10(e); Zelig
v. County of Los Angeles
(2002) 27 Cal.4th 1112, 1126.)
A demurrer tests the legal sufficiency of
the allegations. It does not test their truth, the Plaintiff’s ability to prove
them, or the possible difficulty in making such proof. (Saunders
v. Superior Court (1994) 27
Cal.App.4th 832, 840.)
IV.
DISCUSSION
To state a cause of action for breach of
contract, plaintiff must allege and prove facts showing (1) the existence of
the contract, (2) the plaintiff's performance or excuse for nonperformance, (3)
the defendant's breach, and (4) resulting damages to the plaintiff. (Maxwell
v. Dolezal (2014) 231 Cal.App.4th
93, 97–98.)
To prevail on a claim for
breach of the implied covenant of good faith and fair dealing, the plaintiff
must first establish “the existence of a contractual relationship between the
parties, since the covenant is an implied term in the contract. Secondly,
benefits due under the contract must have been withheld, and the reason for
withholding benefits must have been unreasonable or without proper cause.” (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.)
Defendants
argue that Plaintiff is attempting to recover twice for the same injury by
settling with Federal and by attempting to recover from Federal what Plaintiffs
could not obtain from SCE. Plaintiffs cannot recover twice for the same injury
as a matter of law. (Dodds v. Bucknum (1963) 214 Cal.App.2d 206, 212.) Defendants argue that Plaintiffs allege
they alone have the right to subrogation or reimbursement from other parties.
(Dem. ¶ 13:16-24.)
Subrogation
in the insurance context gives the insurer the right to be put in the position
of the insured to pursue recovery from third parties legally responsible for
the insured’s loss, which the insurer has both insured and paid. (Church Mutual Ins. Co., S.I. v. GuideOne
Specialty Mutual Ins. Co. (2021)
72 Cal.App.5th 1042, 1066.) As
applied to the facts alleged, Defendant would have the right to recover from
SCE (the tortfeasor responsible for the Plaintiffs’ loss) the amount it paid to
its insured pursuant to the policy’s coverage provisions.
Plaintiffs
allege that Federal agreed to waive “any right to seek reimbursement by way of
subrogation or otherwise.” (FAC 5:8-13.) Based on these allegations, Federal
agreed not to recover from SCE, the tortfeasor, what it paid in insurance
benefits to Plaintiffs. (FAC ¶ 18.) Therefore, Plaintiffs sued SCE to damage
for their losses. (FAC ¶ 21.)
Defendants’
contention that Plaintiffs seek double recovery assumes that Federal paid the
full amount of losses Plaintiffs actually sustained. This interpretation is not
based on any allegations in the pleadings. Plaintiffs do not allege the value
of the full amount of their losses actually suffered. Plaintiffs allege that
they proposed settlement with SCE of $4,119,729 in economic damages, however,
the amount in settlement is not necessarily the full amount of damages
Plaintiffs actually suffered as a result of the fire. (FAC ¶ 27.)
The
FAC supports a reasonable interpretation that Plaintiffs were prevented from
being made whole because by breaching the agreement with Plaintiffs and filing
its subrogation action against SCE, Federal recovered $3,070,711.13 which is
the alleged value of the benefits paid to Plaintiffs. (FAC ¶ 21.) This figure
cannot be presumed to be the total amount of damages suffered, because the
insured’s recovery is limited by the policy’s coverage provisions the extent of
which Plaintiffs disputed, resulting in the settlement agreement with Federal.
(FAC ¶ 16-17.) Defendant confirms this: “Plaintiffs already received the full
amount of the ‘claim/loss’ available
under the Policy” which means Plaintiffs did not recover the full amount of
their actual loss as a result of the fire. (Dem. ¶ 13:11-12.)
Plaintiffs
allege that because Defendant ignored its agreement not to pursue subrogation,
and obtained from SCE $3,070,711.32, Plaintiff was required to offset that
amount from the settlement claim they submitted to SCE. (FAC ¶ 27.) Therefore, the FAC supports the
contention that the only party presumably made whole in this context was
Federal, not the homeowners.
Defendant’s
interpretation of the FAC that Plaintiffs are seeking “double recovery” is not
supported. Federal argues that “to the extent that Plaintiffs may seek recovery
from third parties for amounts other than their insurance claim, there is no
allegation that Federal is standing in their way.” (Dem. 13:13-15.) However,
that is exactly what Plaintiffs allege, that Federal breached its agreement. They seek recovery from SCE. Plaintiffs’
contention in opposition that Federal fundamentally misunderstands the alleged
claims is well taken. (Opp. 2:3-5.)
Finally,
Defendant’s contention that the “subrogation waiver” was procured by fraud is
extrinsic to the pleading and not considered. (Dem. 7:27-28.)
V.
CONCLUSION
Based
on the foregoing, demurrer is OVERRULED. Defendant is ordered to file an answer
within 30 days.