Judge Michael Small, Case 22STCV21904 2023-05-09 Tentative Ruling

Judge: Michael Small, Case: 22STCV21904, Date: 2023-05-09 Tentative Ruling

Inform the clerk if you submit on the tentative ruling. If moving and opposing parties submit, no appearance is necessary.

Case Number: 22STCV21904 Hearing Date: May 9, 2023 Dept: 57

California Automobile Insurance Company ("Cal. Auto"), which asserts that it was erroneously sued as Mercury Insurance Services, has demurred to the two causes of action, one for breach of contract to provide property insurance coverage, the other for bad faith denial of coverage, in the First Amended Complaint ("FAC") of Plaintiff Clean Initiative LLC. Citing Code of Civil Procedure Section 425.10(a)(2), Cal. Auto's demurrer argues that both claims are uncertain insofar as the FAC fails to plead the amount of damages that Clean Initiative is seeking. Additionally, Cal. Auto's demurrer argues that the FAC fails to state a claim for bad faith because Clean Initiative, which is an assignee of the policyholder through an Assignment of Insurance Benefits ("AOB"), lacks standing under the AOB to assert a bad faith claim. Cal. Auto also has filed a motion to strike the prayer for relief in the FAC, and associated allegations, for attorney's fees on the breach of contract claim.

The Court's tentative rulings are as follows.

First, Cal. Auto's demurrer is overruled as to the argument that the FAC lacks certainty on account of the failure of the FAC to plead the amount of damages that is being sought on both claims. To be sure, Section 425.10 provides that a complaint shall contain the amount of damages demanded and the FAC does not set forth the amount of damages that Clean Initiative is demanding. However, "the absence of a specific amount [of damages] from the complaint is not necessarily fatal as long as the pleaded facts entitle the plaintiff to relief." (Furia v. Helm (2003) 111 Cal.App.4th 945, 957.)_In the Court's view, the pleaded facts in the FAC entitle Clean Initiative to relief on both claims. The Court's ruling on this aspect of the demurrer is academic because Clean Initiative stated in its brief in opposition to the demurrer that it intends to file a Second Amended Complaint ("SAC") that sets forth the amount of damages that it is seeking. More fundamentally, because (as set forth below), the Court is granting the motion to strike with leave to amend, Clean Initiative will have to file an amended complaint anyway.

.4Second Cal. Auto's demurrer is overruled as to the argument that Clean Initiative lacks standing under the AOB to assert a bad faith claim. As alleged in the FAC, the pertinent language of the AOB provides that the policyholder assigned to Clean Initiative "all insurance rights, benefits, and proceeds under the property insurance policy up to the amount of the services provided or to be provided" by Clean Initiative. (The AOB is not attached to the FAC.) The FAC alleges that the services that Clean Initiative provided to the policy holder involved the inspection of the roof on the policy holder's property to identify roof damage that needed repairs, which Clean Initiative proposed to undertake. The FAC further alleges that Clean Initiative submitted a claim to Cal. Auto for the cost of the inspection of the roof and the necessary repairs to the roof, which Cal. Auto denied. According to Cal. Auto, the AOB's assignment of "all insurance rights, benefits, and proceeds under the property insurance policy up to the amount of the services provided or to be provided" does not manifest an assignment to Clean Initiative of the policy holder's right to assert a claim for bad faith denial of coverage. Rather, Clean Initiative is limited by the AOB to recovering the costs of the services it provided or would provide. Clean Initiative contends that the AOB can be read to encompass the assignment of the right to assert a bad faith claim, and that the phrase "up to the amount of services provided or to be provided" does not deprive Clean Initiative of that right. The Court concludes that, at the demurrer stage, the AOB (as it is described in the FAC) is sufficiently ambiguous such that it is reasonably susceptible of the interpretation that Clean Initiative advances. (Hervey v. Mercury Casualty Co. (2010) 184 Cal.App.4th 954, 961-963 [setting forth rules of construction of insurance contracts at the demurrer stage].) And under that interpretation, Clean Initiative can pursue a bad faith claim against Cal. Auto.

Third, Cal. Auto's motion to strike is granted, albeit with leave to amend. The FAC does not contain sufficient allegations to support the notion that Clean Initiative is entitled to an award of attorney's fees if it prevails on its breach of contract claim.

Clean Initiative shall have 14 days from today's hearing to file its SAC.