Judge Ralph C. Hofer, Case Number: 23GDCV00499, Date: 2024-09-13 Tentative Ruling

Plaintiffs Mediterranean Best Foods, Inc., Arsen Kirakosyan and Meri Kirakosian allege that in February of 2019, a written agreement was made between plaintiff Mediterranean Best Foods, Inc. (Mediterranean Best Foods) and defendant Farmers Insurance Exchange, and that in April and May of 2019, defendant breached the agreement by making payments totaling $249,245.02 to Sona Akopian when the money was to be paid to the policy holders under the insurance agreement. Plaintiffs allege that defendant failed to adequately verify and failed to follow its own guidelines before payment of the claim, and that as a result defendant paid the money directly to Akopian, who in turn stole the money from plaintiffs. Plaintiffs allege that the policy holders/insureds, plaintiffs, never got the money owed to them from the insurance claim, and suffered damages legally caused by defendant’s breach of the agreement in the sum of $249,245.02.

The complaint alleges a fraud cause of action against defendant Akopian, alleging that defendant Akopian was a representative of defendant Mediterranean Best Foods during the insurance claim process that is the subject of this litigation, but did not have authority to accept money on behalf of plaintiffs. Plaintiffs allege that defendant Akopian provided her personal banking information to accept payment that was owed to plaintiffs, accepted the money, and took it for her own personal use.

The file shows that on February 14, 2024, plaintiffs filed a Request for Dismissal of the complaint without prejudice only as brought by plaintiff Meri Kirakosian. The dismissal was not entered as requested, the request for dismissal stating, “Plaintiff cannot dismiss other plaintiff.” The file does not reflect that the complaint as brought by Meri Kirakosian has been dismissed, so it is still pending.

Under CCP § 437c(p)(2) a defendant “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant... has met that burden, the burden shifts to the plaintiff... to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.”

Defendant Truck Insurance Exchange seeks summary judgment of the sole cause of action brought against it for breach of contract, arguing that the cause of action is time barred under the two-year contractual limitation period to file suit included in the agreement between the parties, in effect, that there is a complete defense to the complaint against defendant.

Defendant also argues that if summary judgment is not granted based on the time bar it is undisputed that plaintiff authorized Akopian to act as its agent in dealing with defendant Truck Insurance Exchange on the subject claim, and clothed Akopian with at least ostensible authority to handle the claim. Defendant argues that plaintiffs’ own conduct accordingly precludes defendant Truck Insurance Exchange from being liable to pay the claim a second time as a matter of law.

Defendant in the moving papers explains that certain references in the documents pertinent to this matter to “Farmers,” are made because Truck Insurance Exchange (sometimes “Truck”) is one of the insurance companies that operates under the service mark “Farmers Insurance.” Defendant indicates that while “Farmers” and “Truck” have been used interchangeably in this case, both names refer to Truck Insurance Exchange as the company that issued the subject policy.

Defendant Truck Insurance Exchange argues that this action is untimely under the commercial policy issued to defendant Mediterranean Best Foods, a bread/bakery business, covering defendant’s business operations during the period from January 10, 2019 to January 10, 2020, subject to stated limits, terms and exclusions (policy). [UMF No. 1, and evidence cited, Westergaard Decl., para. 2, Ex. A]. The policy contains a provision which states:

This provision is similar to a provision which is required to be included in fire insurance policies pursuant to Insurance Code section 2071, requiring that suit or action on the policy be commenced within 12 months next after inception of the loss. The California Supreme Court has found that such a provision is enforceable and appropriate, and that the contractual period runs from the inception of the loss but is equitably tolled during the period an insured’s claim is being adjusted. Prudential-LMI Commercial Ins. v. Superior Court (1990) 51 Cal.3d 674, 693.

“We conclude that proper resolution of the foregoing anomaly is to allow the one-year suit provision of section 2071 to run from the date of "inception of the loss," as defined above, but to toll it from the time an insured gives notice of the damage to his insurer, pursuant to applicable policy notice provisions, until coverage is denied.”

“(f) Except where a claim has been settled by payment, every insurer shall provide written notice of any statute of limitation or other time period requirement upon which the insurer may rely to deny a claim. Such notice shall be given to the claimant not less than sixty (60) days prior to the expiration date; except, if notice of claim is first received by the insurer within that sixty days, then notice of the expiration date must be given to the claimant immediately…. This subsection shall not apply to a claimant represented by counsel on the claim matter.”

Defendant argues that the two-year limitation here runs from the date of the loss but is tolled from the date the claim is made and while the claim is being investigated, until the claim is unequivocally denied. Defendant argues that here the final payment was made on June 11, 2019. Then, through plaintiffs’ counsel, plaintiffs demanded that Truck Insurance Exchange pay the claim again, and that demand was unequivocally denied on September 16, 2019 by a letter that quoted the two-year contractual limitation period, starting the two-year period running. Applying the tolling of the time to file suit due to the Covid 19 pandemic, defendant argues that the two-year period expired on March 14, 2022, but this action was not filed until March 10, 2023, nearly a year later.

Specifically, Truck Insurance Exchange submits evidence in a declaration from its Special Commercial Property General Adjuster assigned to adjust plaintiffs’ claim, Dean Westergaard, who indicates that the water loss claim for purchase and installation of used equipment was paid to an account at Chase Bank as directed by Akopian, and Truck Insurance Exchange separately paid for loss of business income by direct deposit to an account at Chase Bank as directed by Akopian, with the final payment having been made on June 11, 2019. [UMF Nos. 4, 5, and evidence cited, Westergaard Decl., para. 9]. These facts are not disputed by plaintiffs. [Response to UMF Nos. 4, 5, “Undisputed.”]

Westergaard indicates that on June 12, 2019 he received a copy of an email from attorney Alex Gilanians, who stated he was representing Mediterranean Best Foods and advised that Mediterranean Best Foods had not received the claim payment. [UMF No. 6, and evidence cited, Westergaard Decl., para. 10, Ex. C]. This fact is not disputed by plaintiffs. [Response to UMF No. 6, “Undisputed.”]

Westergaard indicates that on June 13, 2029, he sent an email to Gilanians requesting a signed letter of representation and further information, and Gilanians responded, attaching a retainer agreement, and the client’s Statement of Information filed with the Secretary of State, and attaches those emails to the Westergaard Declaration. [Westergaard Decl., paras. 10, 11, Ex. D]. The email from Gilanians sent June 13, 2019 states,

“Needless to say, MBF’s claim for the covered loss remains unpaid. While Farmers is investigating these events, consider this email as a demand for payment of the claim in full as was approved and remains unpaid to MBF. A demand is also made that all such payments should be made payable to Mediterranean Best Foods, Inc., and/or Alex Gilanians…”

“demanding that Farmers pay the sum of $249,145.95 directly to your clients, Arsen and Meri Kirakosian, the owners of the insured, Mediterranean Best Foods, Inc. (“MBF”), for a water damage claim that MBF submitted on February 3, 2019 to Farmers under its Businessowners Policy, No. 60506-80-03, in effect from January 10, 2019 to January 10, 2020.”

“At no time did the Kirakosians convey to Farmers that Akopian was not authorized to act on their behalf in connection with resolving the water damage and business income loss, and thus Farmers was justified in working with Akopian to resolve MBF’s claim, and acted reasonably in depositing the insurance proceeds into the account as instructed by Akopian. Accordingly, Farmers does not believe that it has any obligation to make any additional or duplicate payments under the policy in connection with the insured's water damage and business income loss claims.”

It appears that the two-year limitations period for this action, which plaintiffs have brought expressly based on an alleged breach of the insurance policy, and arising from the insurer’s alleged obligations under that policy, was originally triggered when demand was made for payment of the policy benefits again to a different account, and was tolled until that demand was unequivocally denied by the letter dated September 16, 2019, when the two year statute began to run.

Defendants cite legal authority which holds that an insurer’s letter refusing further payment constitutes an unequivocal denial. Migliore v. Mid-Century Ins. Co. (2002) 97 Cal.App.4th 592, 605. The Second District in Migliore held that, “A statement that the insurer is willing to reconsider does not render a denial equivocal,” and neither does the “fact that respondent invited further input from appellant.” Migliore, at 605. The Second District held in the case before it, “[t]he letter states that no further benefits will be provided beyond those previously paid. This is unequivocal language that no further payment on the claim would be made.” Migliore, at 605.

The California Supreme Court has also held that once the insurer unconditionally denies liability, this is sufficient to put the insured on notice that legal action would be required to cause the recognition of the insurance claim, where “all facts essential to the statement of a cause of action are within the knowledge of the aggrieved party.” Neff v. New York Life Ins. Co. (1947) 30 Cal.2d 165, 174-175.

In this case, not only was the denial unequivocal, but it included express notice of the two-year limitation included in the policy, quoting the language in the letter, which letter was addressed to counsel for plaintiffs. As set forth above, the notice regulations expressly do not apply to insureds/claimants “represented by counsel,” although notice was nevertheless given here.

Defendants also rely on case law under which it is held immaterial whether plaintiff understood the two-year limitation provision. Lawrence v. Western Mut. Ins. Co. (1988) 204 Cal. App.3d 565. In Lawrence, the Second District analyzed a commencement of suit provision under Insurance Code section 2071, and held:

“It is as irrelevant to the one-year commencement of suit provision as it is to the accrual of a cause of action “that the plaintiff is ignorant of his legal remedy or the legal theories underlying his cause of action.” (Gutierrez v. Mofid (1985) 39 Cal.3d 892, 898 [218 Cal.Rptr. 313, 705 P.2d 886].)

If the argument advanced by [the insured] were accepted, the practical effect would be to nullify the contractual one-year commencement of suit provisions. “Any plaintiff could simply allege ignorance of his or her legal rights against a particular defendant. This is not difficult. Most people do not know the legal answers to questions arising from certain circumstances.” (McGee v. Weinberg, supra, 97 Cal.App.3d at p. 804.) 573.

It would appear that any argument that plaintiffs did not understand the significance of the provision would be unavailing. The fact that plaintiffs were at the time represented by counsel further underscores the notice given of the existence and application of the two-year provision, and the need for a calculation of the time constraints by plaintiffs and counsel.

California Rules of Court Appendix 1 Emergency Rule 9, adopted by the Judicial Council on April 6, 2020, provides, in pertinent part, “(a) Nothwithstanding any other law, the statutes of limitations and repose for civil causes of action that exceed 180 days are tolled from April 6, 2020, until October 1, 2020.”

The file shows the complaint in this action was filed on March 10, 2023, so was nearly a year late. Each of the parties has argued in their memoranda that the action was filed on March 10, 2023. [See Motion, p. 1:22; Opposition, p. 6:9-10]. The opposition does not dispute defendant’s calculations.

Plaintiffs in opposition concede that the interpretation of a contract is a judicial function, with the court giving effect to the mutual intention of the parties which existed at the time the contract was executed, and that generally “the objective intent of the contracting parties is a legal question determined solely by reference to the contract’s terms.” Wind Dancer Production Group v. Walt Disney Pictures (2017, 2nd Dist.) 10 Cal.App.5th 56, 68-69.

Plaintiffs argue that the shortening of a limitations period must be reasonable, however, in further reliance on Fageol, in which the California Supreme Court recognized that the policy before it required action to be “commenced within twelve months after the happening of the loss,” and noted:

“Such a covenant shortening the period of limitations is a valid provision of an insurance contract and cannot be ignored with impunity as long as the limitation is not so unreasonable as to show imposition or undue advantage. One year was not an unfair period of limitation. (Tebbets v. Fidelity and Casualty Co., 155 Cal. 137 [99 Pac. 501]; Beeson v. Schloss, 183 Cal. 618 [192 Pac. 292].)”

Plaintiffs cite to Ellis v. U.S. Security Associates (2014) 224 Cal.App.4th 1213, 1222, for the proposition that a shorter limitations period is “reasonable” where “the shortened period nevertheless provides sufficient time to effectively pursue a judicial remedy.” Ellis, at 1222, citing Beeson, at 622-618.

The court of appeal in Ellis cited to Fageol as standing for the rule that “parties may agree to shorten the limitations period,” and, in considering whether a six-month shortened statute of limitations in an employment application was reasonable, provided the following framework:

“Various cases in various contexts recognize this rule, all of them emphasizing that the shortened limitation must be reasonable. As Witkin puts it, such provisions will be upheld if the shorter period is “reasonable, i.e., if it gives sufficient time for the effective pursuit of the judicial remedy.” (3 Witkin, Cal. Procedure, supra, Actions § 469, p. 595.) Interestingly, the author goes on, “[a]s a practical matter these [shortening] provisions are found only in contracts habitually drawn by the obligor, such as bills of lading, warehouse receipts, and insurance policies.” (Ibid.) This hardly describes Ellis's application for employment….

As the rule is generally described, “[a] contractually shortened limitation period, in order to be reasonable, must provide a party sufficient time to effectively pursue a judicial remedy. A contractual period of limitation is reasonable if the plaintiff has a sufficient opportunity to investigate and file an action, the time is not so short as to work a practical abrogation of the right of action, and the action is not barred before the loss or damage can be ascertained. On the other hand, a contractual limitation provision that requires the plaintiff to bring an action before any loss can be ascertained is per se unreasonable.” (51 Am.Jur.2d (2011) Limitation of Actions, § 81, p. 552, fns. omitted.)”

The court of appeal went on to find that the six-month period at issue in that case was not reasonable, given that where employment discrimination claims are involved, they are already subject to shortened statutes of limitations, and that because of EEOC filing requirements, and the EEOC maintaining exclusive jurisdiction over such matters during the 180 day reporting period, the effect of a six month limitations clause could “ultimately leave plaintiff without redress.” Ellis, at 1224.

The court of appeal also observed that the legislature, in extending the one-year personal injury statute and adopting a “two-year period,” it did so, “to ensure fairness to all parties,” to “reduce litigation,” because victims “will have the opportunity to fully evaluate and use other alternatives, rather than being forced to litigate prematurely,” suggesting that a two-year statute is reasonable, as a period of two years in length, “allows a victim time for development and investigation of a case, for assessment, for evaluation—and for the possibility of settlement.” Ellis, at 1225-1226, citations omitted.

Plaintiffs then argue vaguely that application of the two-year limitations clause here would not provide plaintiff with sufficient opportunity to investigate and file an action with respect to the issue of the insurer having released funds to an unauthorized person. It is not clear what facts or circumstances are relied upon here, as it would appear that plaintiffs have had more than sufficient time to investigate and pursue their claim against the insurer in the period from September 16, 2019 through March 14, 2022. This result appears particularly so in light of the fact that the correspondence sent by plaintiffs’ attorney on June 13, 2019 reports that Sona Akopyan, “offered to help… in putting together the claim package to submit” to the insurer, but was “never authorized or requested to follow up on the claim, make any representations to Farmers or communicate with Farmers,” and that “It now appears that without MBF’s permission or authority she made representations to Farmers and may have diverted the insurance proceeds from Farmers.” [Ex. D, para. 3, p. TIE 01347].

The letter rejecting any obligation on the part of the insurer to pay out policy benefits a second time, the September 16, 2019 letter, details the involvement of Akopian in the claims process, including meeting with the insurance adjuster, reporting on the condition of the equipment after repairs, advising the insurer that plaintiff had suffered business income loss, and providing requested business records. [Ex. E, pp. 2-3]. The letter details the instructions from Akopian concerning the payments to be made into what accounts. [Id.]. It is clear that upon receipt of the September 16, 2019 letter, plaintiffs had more than sufficient information to prompt an investigation into the matter, determine any liability on the part of the insurer, and had more than two years in which to accomplish that and seek a judicial remedy. This situation is not a case, as in Ellis, where the accrual date is not clear, or where there are pre-filing requirements to bring a judicial action which could effectively prevent the timely pursuit of a judicial action. This case has a recognized straightforward insurance policy provision, with a two-year limitation sufficient to permit a claimant to investigate, evaluate, and pursue settlement prior to the time the judicial action deadline would expire.

Plaintiffs also appear to make an argument that enforcing the statute of limitations provision would not be reasonable because plaintiff did not have sufficient opportunity to investigate and file an action because the limitations clause on its face applies from the date “on which the direct physical loss or damage occurred,” and is contained under the heading of “Property Loss Conditions,” and it is not reasonable to expect plaintiff to have read the clause and presume it applied to any and all contractual disputes between the parties.

With respect to the heading, the copy of the policy submitted with the moving papers and relied upon by both parties does not include the heading, although the separate statement does, and the provision as set forth there with the heading is “Undisputed” by plaintiffs. [See Ex. A; UMF No. 11, Response to UMF No. 11, “Undisputed.”].

In any case, this does not appear to be an argument that the time limitation was not “reasonable,” as the legal authorities cited focus on reasonableness of the time to investigate and bring an action, not on the reasonableness of an insured’s interpretation of the term. In addition, as cited above, defendant has cited legal authority under which an insured may not simply plead ignorance of a provision agreed to or argue that they did not understand what it meant. See Lawrence v. Western Mut. Ins. Co. (1988) 204 Cal. App.3d 565, 573. Moreover, the notice in this case of the time limitation was clearly served to the attorney more than two years before the time limitation ultimately expired.

The argument appears to be an argument that the two-year provision does not apply here because the provision does not apply to this action, which is not an action for property loss, or physical loss or damage, and does not stem from Truck Insurance Exchange’s denial of direct physical loss or damage but from the insured’s vested interest in actually receiving their rightful payment from Truck Insurance Exchange.

This action is brought as a breach of contract action, directly alleging that the insurer’s liability is based on an alleged breach of the obligations under the policy. [Complaint, paras. BC-1, BC-2]. Defendant has pointed out that under the case law, even had plaintiffs framed the issue here as other than a breach of contract claim, the limitations period agreed upon would nevertheless be properly applied to the dispute, which can override any statute.

Defendant cites to Jang v. State Farm Fire & Casualty Co. (2000) 80 Cal.App.4th 1291, in which the court of appeal affirmed a trial court decision granting summary judgment in favor of an insurer, based on a finding that the policy provision limiting actions for loss to one year after the loss barred the insured’s claim for bad faith, based on allegations that the manner in which the insurer had negotiated a settlement agreement to determine the appropriate insurance payments had been improper. The court of appeal reviewed the history of the case law on the issue of when a claim is subject to the statutory and agreed upon one year suit limitation, and found that the two cases permitting avoiding the policy’s statute of limitations by recasting contractual claims as claims sounding in tort had been wrongly decided, holding:

“Regardless of whether the insured elects to file a complaint alleging solely tort claims, we hold that an action seeking damages recoverable under the policy for a risk insured under the policy is merely a "transparent attempt to recover on the policy." ( Abari v. State Farm Fire & Casualty Co., supra, 205 Cal. App. 3d 530, 536 (Abari) cited with approval in Prudential, supra, 51 Cal. 3d at p. 692, original italics.) As such, it is subject to the policy's statute of limitations.”

Plaintiffs then argue that assuming arguendo that defendant can establish that the limitations clause is relevant here, plaintiffs rebut its application on the basis that the erroneous payment to Akopian constitutes noncompliance with the terms of the insurance policy. The argument seems to be that defendant cannot establish the condition in the limitations clause that “No one may bring a legal action against us under this insurance unless: a. There has been full compliance with all of the terms of this insurance.” Plaintiffs argue that the erroneous payment to Akopian constitutes non-compliance with the terms of the insurance policy, as Akopian was not the insured, not an agent or officer of the insured, and so any assertion by defendant that they have complied with the policy by paying money to a criminal is imprudent. Plaintiffs have cited no legal authority in support of this argument. As noted above, plaintiffs have deemed it undisputed that the insurer conducted a claims process, and paid the claims under the policy, and then conducted a second investigation concerning plaintiffs’ claim being paid a second time, concluded the investigation, and acted on that claim in denying it. [UMF Nos. 3-6, 8, and evidence cited, Response to UMFs Nos. 3-6, 8, “Undisputed.”].

Plaintiffs have failed to raise triable issues of material fact to defeat the bar of the two-year statute in connection with the alleged breach of contract cause of action here, the only cause of action asserted against moving defendant. The motion for summary judgment accordingly is granted on this ground.

Defendant Truck Insurance Exchange has established by undisputed evidence that the sole cause of action brought against the moving defendant for breach of contract based on an insurance policy was untimely brought under the commercial policy issued to defendant Mediterranean Best Foods, which policy contains a provision which states:

Defendant has established that the two-year limitation here runs from the date of the loss but is tolled from the date the claim is made and while the claim is being investigated, until the claim is unequivocally denied. See Prudential-LMI Commercial Ins. v. Superior Court (1990) 51 Cal.3d 674, 693; Migliore v. Mid-Century Ins. Co. (2002) 97 Cal.App.4th 592, 605.

Defendant establishes that the final payment of policy proceeds was made on June 11, 2019. [UMF Nos. 4, 5, and evidence cited, Westergaard Decl., para. 9; Response to UMF Nos. 4, 5, “Undisputed.”] Thereafter, through plaintiffs’ counsel, plaintiffs indicated they had not received the payments, and demanded that Truck Insurance Exchange pay the claim again. [UMF No. 6, and evidence cited, Westergaard Decl., para. 10, Ex. C; Response to UMF No. 6, “Undisputed.”] Defendant has established by undisputed evidence that the demand was unequivocally denied on September 16, 2019 by a letter that quoted the two-year contractual limitation period, starting the two-year period running. [UMF No. 8, and evidence cited, Westergaard Decl., para. 11, Ex. E; Response to UMF No. 8, “Undisputed.”].

Applying the tolling of the time to file suit due to the Covid 19 pandemic, defendant has further established that the two-year period from September 16, 2019 expired in March of 2022, but the file shows, and the parties each concede, that this action was not filed until March 10, 2023, nearly a year later. The action against defendant on the policy was accordingly not timely.

Request for Judicial Notice in Support of Motion of Defendant Truck Insurance Exchange is DENIED. The Request seeks judicial notice of “The filing date of the original complaint in this action of March 20, 2023.” The file shows that the filing date of the original, and only, complaint in this action was March 10, 2023. The Court on its own motion, pursuant to Evidence Code section 452(e), and based upon the parties’ respective memoranda each separately confirming as the date of filing March 10, 2023, takes judicial notice that the filing date of the complaint in this action was March 10, 2023. [See Motion, p. 1:22; Opposition, p. 6:9-10].