Judge: Nathan Vu, Case: 21-01209622, Date: 2022-08-29 Tentative Ruling

Motion for Summary Judgment or Summary Adjudication

The Motion for Summary Adjudication as to the first cause of action is GRANTED.

The Motion for Summary Judgment and the Motion for Summary Adjudication as to the second cause of action shall be continued to 10/31/2022 at 8:30 a.m. in Department N15.

Plaintiffs shall file and serve an amended opposition to the Motion, if any, by 10/10/2022.

Defendant shall file and serve an amended reply on the Motion, if any, by 10/19/2023.

Defendant California Automobile Insurance Company (CAIC) moves for summary judgment or, in the alternative, summary adjudication on the Complaint of Plaintiffs Matt Puccio and Lisa Puccio, individually and as trustees of the Puccio Family Trust dated September 5, 2007.

Plaintiffs are the insureds under Homeowners Insurance Policy No. CAHP0000367644 (Policy) Defendant, effective 05/10/2019 to 05/10/2020. Plaintiffs experienced water loss under their kitchen sink on 07/14/2019 and on reported the loss to CAIC shortly thereafter.

On 07/19/2019, CAIC physically inspected the loss and Plaintiffs claim that CAIC’s insurance adjuster approved coverage for the loss at that time.  CAIC assigned a content removal and storage vendor to assist the Plaintiffs, but Plaintiffs allege that on 08/01/2019, they advised CAIC that they did not wish to use CAIC’s removal and storage vendor.

On 08/15/2019, Plaintiffs received a letter from CAIC dated 08/14/2019 that denied Plaintiff’s insurance claims.  On August, 22, 2019, Plaintiffs sent CAIC a letter and requested CAIC reconsider its denial and on August 26, 2019, CAIC sent Plaintiffs a letter confirming that it was maintaining its decision to deny.

On 07/08/2021, Plaintiffs commenced this action.  On 04/15/2022, Plaintiffs filed a second amended complaint (SAC) alleging two causes of action: breach of contract and breach of the implied covenant of good faith and fair dealing – bad faith.

Defendant now moves for summary judgment or, or in the alternative, summary adjudication on Plaintiffs’ SAC, arguing that both of Plaintiffs’ causes of action are barred by the statute of limitations and because Plaintiffs cannot establish the essential elements of the claim.

Statute of Limitations

CAIC contends that the one-year statute of limitations contained in the Policy expired before Plaintiffs initiated the instant action. It is undisputed that the homeowner’s insurance policy at issue contains the following language:

SECTION I – CONDITIONS

H.  Suit Against Us

No action can be brought against us unless there has been full compliance with all of the terms under Section I of this policy and the action is started within one year after the date of loss.

(Connely Decl. ¶ 8, Exh. A [Policy].)  This limitation-of-action provision appears to be consistent with Insurance Code section 2071.

“The expiration of the applicable statute of limitations is [a] complete defense.” (Professional Collection Consultants v. Lauron (2017) 8 Cal.App.5th 958, 965, citations omitted.) The one-year limitations period on insurance actions has “‘long been recognized as valid in California.’” (Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674, 683, quoting C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1064.)

Plaintiffs commenced this action on 07/08/2021, nearly two years after the Plaintiffs suffered their loss.  While the limitations period is tolled “from the time an insured gives notice of the damage to his insurer, pursuant to applicable policy notice provisions, until coverage is denied,”(Prudential-LMI Com. Ins. v. Superior Ct. (1990) 51 Cal.3d 674, 693), CAIC denied Plaintiffs’ claim on 08/14/2019**. The limitations period was thus tolled by at most 30 days.  The filing of the complaint in this action was well beyond the one-year limitations period, even taking into account the tolled time.

The first cause of action for breach of contract alleges Defendants breached the Policy by refusing to abide by the policy’s terms by providing coverage and indemnification to the insureds. (SAC ¶ 35.) A straightforward reading of the policy language leads to the conclusion that the Plaintiffs’ first cause of action, which Plaintiffs allege is based on a breach of the Policy, is subject to the one-year limitation period contained in the Policy.

In response, Plaintiffs do not dispute the existence or meaning of the Suit Against Us provision in the Policy. Nor do Plaintiffs dispute CAIC’s contention that the one-year limitations period began to run on 07/14/2019, the date Plaintiffs experienced water loss under their kitchen sink, and that this action was instituted after the one-year limitations period had ended.

In fact, the court cannot find anywhere in their opposition where Plaintiffs dispute that their first cause of action is barred by the one-year limitations period.  Plaintiffs’ argument in opposition to the motion is that “Defendant’s bad faith conduct goes to the heart of Plaintiff’s Complaint and precludes the application of a 12-month statute” and that this action is not one “on the policy”. (Opp’n at p. 5:16-17 & 15:22-23.)  However, no bad faith is alleged in the first cause of action and the SAC specifically asserts that the first cause of action is based upon Defendant’s breaches of the Policy.  (See SAC, ¶¶ 33-36.)

As to the first cause of action, CAIC has met its initial burden and Plaintiffs have not met the shifted burden to show a triable issue of material fact.

In the second cause of action for breach of the implied covenant of good faith and fair dealing, Plaintiffs allege that Defendants breached their fiduciary duties by engaging in a pattern of conduct to intentionally and unreasonably delay and ultimately deny the benefits owed to Plaintiffs under the Policy. (SAC, ¶¶ 39-40.)

Plaintiffs contend that the statute of limitations does not apply because their bad-faith claim is not an action on the policy. Specifically, Plaintiffs argue that CAIC’s tortious conduct of denying coverage after Plaintiffs advised CAIC that they did not wish to use CAIC’s removal and storage vendor is not an action on the insurance policy itself. Plaintiffs cite to Murphy v. Allstate Ins. Co. (1978) 83 Cal.App. 3d 38 and Frazier v. Metro. Life Ins. Co. (1985) 169 Cal.App.3d 90 in support of the contention that a cause of action in tort for breach of the implied covenant of good faith and fair dealing does not arise under an insurance policy.

However, both Murphy and Frazier have been rejected in more recent cases to the extent they relied on the nature of the bad-faith cause of action as sounding in tort to conclude the cause of action did not arise under the policy. (See, e.g., Jang v. State Farm Fire & Casualty Co. (2000) 80 Cal.App.4th 1291, 1301 [“[t]o the extent that Murphy and Frazier stand for the proposition that an insured may avoid the policy’s statute of limitations by simply recasting contractual claims as claims sounding in tort . . . Murphy and Frazier were wrongly decided . . . . [T]he Frazier court’s reliance on the hybrid nature of bad faith actions in reaching its result has been thoroughly discredited by subsequent courts”].)

Since the decisions in Murphy and Frazier, courts have considered whether “the gravamen of the bad faith action pertained to the insurer’s handling of the initial claim for loss” and held “that where the bad faith action is based on allegations relating to the handling of a claim or the manner in which it is processed, it is an action ‘on the policy.’” (Velasquez v. Truck Ins. Exchange (1991) 1 Cal.App.4th 712, 719-720; see, e.g., Lawrence v. Western Mutual Ins. Co. (1988) 204 Cal.App.3d 565, 575.) If “the essence” of a cause of action “is an attempt to recover ‘[d]amages for failure to provide benefits under subject contract of insurance,’ “ the cause of action is “ ‘fundamentally a claim on the policy.’ “ (Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 1063.)

Thus, “[w]here denial of the claim in the first instance is the alleged bad faith and the insured seeks policy benefits, the bad faith action is on the policy.” (Velasquez v. Truck Ins. Exchange, supra, 1 Cal.App.4th at p. 721.) The fact the insured seeks damages other than policy benefits does not require a contrary finding. The inquiry is whether the damages sought are derived from the handling of the claim. (See Jang v. State Farm Fire & Casualty Co., supra, 80 Cal.App.4th at p. 1303 [action seeking damages recoverable under policy constitutes action on the policy and “the mere fact that appellant’s causes of action sound in tort, thereby entitling her to seek punitive damages, is insufficient to transform her action into an action outside of the policy”]; Velasquez v. Truck Ins. Exchange, supra, 1 Cal.App.4th at p. 722 [holding bad faith action based on denial of claim constituted action on policy even though insureds sought not just policy benefits but other damages because additional damages sought by insureds related to denial of their claim and wrongful cancellation of policy].)

Here, the gravamen of Plaintiffs’ cause of action for breach of the implied covenant of good faith and fair dealing appears to be CAIC’s handling of their claims under the Policy – specifically, CAIC’s delay in paying and refusal to pay policy benefits. (SAC ¶¶ 39-40.)

However, Plaintiff requests a continuance pursuant Civil Procedure Code section 437c(h) because facts essential to justify opposition to the motion may exist but cannot be presented due to delays in obtaining discovery.

Given the high stakes involved in summary judgment and summary adjudication motions, a continuance under Civil Procedure Code section 437c(h) is “virtually mandated upon a good faith showing by affidavit that a continuance is needed to obtain facts essential to justify opposition to the motion.” (Bahl v. Bank of America (2001) 89 Cal.App.4th 389, 398 (internal quotation marks omitted); see also Johnson v. Alameda County Medical Center (2012) 205 Cal.App.4th 521, 532 (“ When a party makes a good faith showing by affidavit demonstrating that a continuance is necessary to obtain essential facts to oppose a motion for summary judgment, the trial court must grant the continuance request.”).)

Counsel for Plaintiffs states in his declaration that CAIC owes Plaintiff responses to written discovery and that potentially critical depositions have not been obtained. (D. Puccio Decl. ¶¶ 3-4.) Discovery has been delayed while the parties explored a potential resolution. (Id., ¶ 3.)

Plaintiff has made a showing under Section 437c(h) that a continuance should be granted because facts essential to justify the opposition to this motion may exist but cannot be presented and the Court will grant said continuance as to the motion on the second cause of action.  (fn.1)

Defendant’s request for judicial notice is denied as unnecessary. (See Zucchet v. Galardi (2014) 229 Cal.App.4th 1466, 1474, fn. 5 [citing Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6] [court may deny request for judicial notice where material requested is not “necessary, helpful, or relevant”].)  The Court may consider prior filings made in this case without taking judicial notice.

Defendant shall give notice of this ruling.

(fn.1) As Plaintiffs have not stated any basis for opposing summary adjudication as to the first cause of action, it would be futile to grant a continuance of the motion as to that cause of action.