Judge Ralph C. Hofer, Case Number: 24NNCV00844, Date: 2024-08-16 Tentative Ruling

Plaintiffs Seryozha Poghosyan and Khachik Salamyan allege that plaintiffs operated a vehicle insured by defendant Farmers Specialty Insurance Company (Farmers), and that the policy covering the vehicle was in full force and effect at the time of the loss.

The complaint alleges that on April 20, 2022, plaintiff Salamyan was driving the vehicle in Desert Hot Springs when another vehicle turned left in front of plaintiff and collided with plaintiffs’ vehicle, and the driver of the other vehicle fled the scene and plaintiff could not obtain any identifying information. Plaintiff immediately attempted to contact local police. The complaint alleges that as a result of the incident, plaintiff Salamyan sustained personal injury and was injured in the accident, and that plaintiff Poghosyan, the owner of the vehicle, sustained property damage.

The complaint alleges that plaintiff Salamyan submitted his injury claim to Farmers for payment under the Uninsured Motorist coverage, and plaintiff Poghosyan submitted a claim for repairs to his vehicle under the collision coverage. Plaintiffs allege that once Farmers was exposed to substantial payout, Farmers began investigating plaintiffs’ claim under a reservation of rights with unreasonable delay and bad faith to avoid paying a legitimate claim. Plaintiffs allege that they fully complied with all requests made by the carrier and provided relevant information without objection, and submitted to examinations under oath, which Farmers delayed without explanation. Farmers eventually denied plaintiffs’ claim on June 14, 2023, by alleging misrepresentations, inconsistencies, and relying on an undisclosed expert’s opinion, with Farmers stating that the collision did not take place.

Defendant Farmers Specialty Insurance Company (Farmers) files this demurrer to the complaint as brought by plaintiff Khachik Salamyan only. Defendant indicates in the demurrer that the other plaintiff in the action, Seryozha Poghosyan, is not making a claim for uninsured motorist benefits, but for failing to pay a property damage claim, so that defendant “is not challenging that plaintiff’s claim.”

Defendant argues that plaintiff Salamyan is making a claim for uninsured motorist (UM) benefits, which claims are governed by Insurance Code section 11580.2, but plaintiff Salamyan fails to allege in the complaint that plaintiff has complied with the Insurance Code section requirements.

“(i)(1) No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within two years from the date of the accident:

(C) The insured has formally instituted arbitration proceedings by notifying the insurer in writing sent by certified mail, return receipt requested. Notice shall be sent to the insurer or to the agent for process designated by the insurer filed with the department.”

Defendant relies on Kortmeyer v. California Ins. Guarantee Assn. (1992) 9 Cal.App.4th 1285, in which the Second District addressed the issue of whether the insolvency of an insured’s auto insurance carrier abrogates the insured’s duty to preserve a cause of action against the uninsured motorist as required by a former version of Insurance Code section 11580.2, subdivision (i) (which imposed a one-year time limitation, as opposed to the current two-year period). In determining that the insolvency did not affect the insured’s duty to comply with that subdivision, the Second District discussed the rationale and effect of the statutory requirement, and the case law construing it:

“The statutory scheme creating the uninsured motorist coverage provides the mechanism by which the insured's insurer may recover losses paid under this coverage. Section 11580.2, subdivision (g) provides, in pertinent part, that: “The insurer paying a claim under an uninsured motorist endorsement or coverage shall be entitled to be subrogated to the rights of the insured to whom the claim was paid against any person legally liable for the injury or death to the extent that payment was made.”

The rationale behind the existence of 11580.2, subdivision (i) is that the insurer is able to recoup the losses expended in uninsured motorist claims by suing the tortfeasor, but this recovery is only possible where the insured has preserved that right by complying with 11580.2, subdivision (i).

Section 11580.2, subdivision (i) provides that: “No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless one of the following actions have been taken within one year from the date of the accident: [¶] (1) Suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction. [¶] (2) Agreement as to the amount due under the policy has been concluded. [¶] (3) The insured has formally instituted arbitration proceedings.”

The courts have followed this statutory mandate. In Pacific Indem. Co. v. Ornellas (1969) 269 Cal.App.2d 875, 877 [75 Cal.Rptr. 608], the court held that the one-year period for the filing of suit against the uninsured motorist was not tolled by Code of Civil Procedure section 351 where the uninsured motorist was absent from the state. In that case, suit was filed against the uninsured motorist one year and five days following the accident; an arbitration proceeding was commenced against the uninsured motorist about a year and a half following the accident. In denying the relief sought by plaintiff, the court stated that “the Insurance Code subsection defines timely suit, agreement or arbitration as absolute conditions precedent to enforcement of uninsured motorist coverage.” (Id., at p. 877.)

Similarly, the court in Pacific Indemn. Co. v. Superior Court (1966) 246 Cal.App.2d 63, 72 [54 Cal.Rptr. 470], found no exception permitting a minor to pursue arbitration beyond the one-year statutory period and stated: “As we read the pertinent statute before us, it imposes a condition precedent effective against all persons claiming its benefits; it makes no mention of minors nor does it establish any exception on their behalf.”

The one-year limitation provision of section 11580.2, subdivision (i) “creates a condition for the preservation of a potential cause of action under an insurance policy and does not fix the time for instituting a civil suit against the insurer after a cause of action has accrued.” (Williams v. Los Angeles Metropolitan Transit Authority (1968) 68 Cal.2d 599, 605 [68 Cal.Rptr. 297 [440 P.2d 497].) In other words, this provision is not one which tolls a statute of limitations but is a condition precedent to accrual of a cause of action.

In Firemen's Ins. Co. v. Diskin (1967) 255 Cal.App.2d 502 [63 Cal.Rptr. 177], the court held that the insured must comply with section 11580.2, subdivision (i) in order to acquire a claim against his own insurer. In so holding, the court noted that the liability of the insurer is “contingent on the insured's right to legal recovery against the tortfeasor.” (Id., at p. 506.)”

Here, defendant argues that plaintiff has failed to allege that he has reached an agreement with defendant, but alleges that defendant has denied the claim, taking the position that there was no collision with the other car. [Complaint, paras. 12, 13].

Defendant also argues that plaintiff has not alleged that plaintiff has sued the uninsured motorist, and defendant argues there could not be such an action as the allegations are that the collision was a hit and run. [Complaint, para. 9]. The complaint alleges that “The tortfeasor fled the scene, and Plaintiff could not obtain any identifying information. Plaintiff immediately attempted to contact local police.” [Complaint, para. 9]. Defendant points out that there is no claim brought in this action for motor vehicle negligence against any party.

Defendant argues that accordingly, the only way for plaintiff to have complied here would have been to demand arbitration by certified mail, return receipt requested, and plaintiff has not alleged he did so. Defendant argues that any general allegations that plaintiff complied with any conditions precedent to his claim are not sufficient to state a cause of action because they contradict the more specific, controlling allegations which show that there has been no compliance. Defendant argues that plaintiff seeks relief based on defendant denying his claim in June of 2023, that plaintiff had until two years after the incident, until April 20, 2024, to comply with the statute, but failed to do so.

Defendant in the demurrer also relies on Gordon Building Corp v. Gibraltar Savings & Loan Ass’n (1966) 247 Cal.App.2d 1, 6, evidently for the argument that the satisfaction of a condition precedent must be alleged specifically in the complaint. Gordon Building involved allegations in an amended cross-complaint, and the sustaining of a demurrer directed to, among other claims, a breach of contract cause of action, which the court of appeal found was defective primarily because the cross-complaint failed to show that cross-complainant was a party to the contract, but also for failure to allege that cross-complainant performed conditions precedent.

“[I]nsofar as breach of contract is concerned, Gordon's cross-complaint is fatally defective, not only because it fails to show that Gordon was a party to the contract, but it further fails to allege that Gordon duly performed all conditions precedent to the alleged breach of obligation on the part of Gibraltar. In order to state a cause of action for breach of contract, the performance of conditions precedent must be alleged either generally or specifically. (Code Civ. Proc., § 457; Eddy v. Louis M. Hickman, 136 Cal.App. 103 [28 P.2d 66]; Byrne v. Harvey, 211 Cal.App.2d 92 [27 Cal.Rptr. 110].)”

Gordon was not a case involving the statutory condition precedent in Insurance Code section 11580.2, subdivision (i), and appears to expressly recognize that allegations of the performance of conditions precedent may be alleged “generally.” Gordon, at 6.

“In pleading the performance of conditions precedent in a contract, it is not necessary to state the facts showing such performance, but it may be stated generally that the party duly performed all the conditions on his part, and if such allegation be controverted, the party pleading must establish, on the trial, the facts showing such performance.”

Defendant does not cite any case law interpreting the subdivision of the UM Insurance Code section which holds that there is a pleading requirement to allege compliance with subdivision (i) with specificity.

Plaintiffs here allege that “All Conditions required for Farmers’ performance had occurred.” [Complaint, para. 18]. The complaint also alleges, “PLAINTIFFS have duly performed every condition of the insurance policy issued by Farmers under which it is obligated to perform, including timely payments of their premiums.” [Complaint, para. 26].

“(3) The doctrines of estoppel, waiver, impossibility, impracticality, and futility apply to excuse a party's noncompliance with the statutory timeframe, as determined by the court.”

It is not clear from the pleading that there may not be some excuse for non-compliance, and this requirement does not appear to be a proper issue to be determined at the pleading stage, particularly in the absence of authority requiring specificity in addressing the issue.

Moreover, it should be noted that under Insurance Code section 11580.2 (k), there is an obligation on the part of the insurer to notify the insured in writing concerning the deadlines at least 30 days before the expiration of the limitations period, and if there is a failure to notify, the period during which the insured must meet one of the three alternative prerequisites for an action to accrue is extended until 30 days after the notice was given.

“(k) Notwithstanding subdivision (i), any insurer whose insured has made a claim under his or her uninsured motorist coverage, and the claim is pending, shall, at least 30 days before the expiration of the applicable statute of limitation, notify its insured in writing of the statute of limitation applicable to the injury or death. Failure of the insurer to provide the written notice shall operate to toll any applicable statute of limitation or other time limitation for a period of 30 days from the date the written notice is actually given. The notice shall not be required if the insurer has received notice that the insured is represented by an attorney.”

In sum, the court is not satisfied that the allegations of the complaint concerning conditions precedent being satisfied are insufficient to satisfy the pleading requirements. The demurrer accordingly is overruled.

Defendant argues that since the cause of action for breach of contract fails, and plaintiff is time-barred from pursuing any claim to policy benefits, plaintiff cannot establish that policy benefits are due, so that the cause of action for insurance bad faith also cannot be stated. See Love v. Fire Insurance Exchange (1990) 221 Cal.App.3d 1136 (“a bad faith claim cannot be maintained unless policy benefits are due.”).

However, as discussed above, the court finds that the breach of contract cause of action has been sufficiently stated to survive demurrer on the grounds urged by defendant. The demurrer is overruled in its entirety.

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