Vicki Laken v. American Modern Insurance Group, Inc., et al.

DEMURRER TO FIRST AMENDED COMPLAINT

 

MOVING PARTY: Defendant American Modern Home Insurance Company, Inc.  

RESPONDING PARTY(S): Plaintiff Vicki Laken

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

There are three related cases arising over the right to insurance proceeds from a mobile home located at 30473 Mulholland Highway, No. 104, Agoura, CA 91301, which was destroyed by the Woolsey Fire in November 2018. 

20STCP02196 (the “Interpleader Action”) is an interpleader action filed pursuant to Code of Civil Procedure § 386, by American Modern Home Insurance Group, Inc (“American”).  Respondents are Vicki Laken (“Laken”) and the Kent Sherwood 2011 Trust (“the Trust”) through its Trustee, Mihana Mitchell (“Mitchell”). On May 10 and 11, 2022, this court held the Phase One Non-Jury trial to determine which party is entitled to recovery of the interpleaded funds.  This court found that Laken is solely entitled to the interpleaded funds at issue, but that the funds are not to be released until there has been a final resolution or determination of the remaining claims.

20STCV39624 (the “Laken Action”) is an action filed by Vicki Laken against American and J.E. Brown & Associates based on the insurers’ failure to provide Plaintiff benefits under the insurance policy. Plaintiff alleges that American was not an innocent stakeholder in the interpleader action and asserts claims for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) negligence, (4) tort of another, and (5) declaratory relief. The action was stayed pending resolution of the Interpleader Action. 

23VECV02522 (the “Mitchell Action”) is an action filed by Mihana Mitchell, as trustee, also against American and J.E. Brown & Associates based on the insurers’ having added Laken to the insurance policy. Mitchell asserts causes of action for (1) professional negligence, (2) breach of implied covenant of good faith and fair dealing, (3) bad faith breach of insurance contract, (4) breach of contract, and (5) intentional interference with expected inheritance. 

Defendant American now demurrers to the First Amended Complaint. Plaintiff opposed. 

TENTATIVE RULING:

  

Defendant’s Demurrer to the First, Second, and Fifth Causes of Action is SUSTAINED.   Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) Because there is no reasonable possibility of amending, no leave to amend is given.

Defendant’s Demurrer to the Third and Fourth Causes of Action is OVERRULED.

Defendant is to file an Answer within 21 days.

Defendant is ordered to give notice, unless waived.

DISCUSSION:

Demurrer

I. Judicial Notice

Pursuant to Defendants’ request, the court takes judicial notice of Exhibits A through I. 

II. Meet and Confer

The Declaration of Attorney Nathaniel R. Lucey reflects that the meet and confer requirement was satisfied. (CCP § 430.41.)

III. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, courts read the allegations liberally and in context.  (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.  (CCP § 430.30(a).)  A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.  (Id.)  The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.  (Hahn, 147 Cal.App.4th at 747.)  

IV. Analysis

Defendant demurrers to each cause of action in the First Amended Complaint on the grounds they fail to state facts sufficient to constitute a cause of action.  Each is addressed in turn.

A. Background and Allegations in the FAC

Plaintiff filed her First Amended Complaint in this action on October 19, 2020. The case was then stayed pending resolution of the Interpleader Action. On May 10 and 11, 2022, this court held the Phase One Non-Jury trial in the Interpleader Action to determine which party is entitled to recovery of the interpleaded funds.  This court found that Laken is solely entitled to the interpleaded funds at issue, but that the funds are not to be released until there has been a final resolution or determination of the remaining claims.

Plaintiff alleges that, at the time of the fire loss, she was the only insured on the policy and that American Modem was obligated to “indemnify Plaintiff, and only Plaintiff, for the fire loss.” (FAC ¶ 17). Plaintiff alleges that on or about November 30, 2018, without Plaintiff’s knowledge or consent, American Modem amended the policy to name the Trust as an additional insured based on “false and inaccurate information from the Trust.” (Id. ¶ 20.) Plaintiff faults American Modern, Ehrmann and JEB for “fail[ing] to conduct any investigation into the validity of the Trust's allegations before making changes to the Policy based thereon.” (Id.) She asserts that if Defendants had conducted such an investigation, “they would have learned that the Trust had not paid all premiums for the Policy since Sherwood's death, that the Policy correctly identified Plaintiff as the sole named insured, and that Plaintiff did not consent to naming the Trust as an additional insured.” (Id.) Plaintiff alleges that “AMIG wrongfully and improperly withheld payment to Plaintiff for her personal property losses without the express written consent of the Trust, even though the Trust had no insurable interest in Plaintiff’s personal property.” (Id. ¶ 23.) 

B. First Cause of Action for Breach of Contract; Second Cause of Action for Breach of the Implied Covenant

Defendant argues the breach of contract and breach of implied covenant claims fail because it discharged its contractual obligations when it filed the interpleader action and deposited the insurance proceeds with the court. 

Plaintiff’s first cause of action for breach of contract alleges that Plaintiff, as life tenant, “had the exclusive right to the insurance money paid upon destruction of the insured property,” and that “AMIG breached the terms of the Policy by failing to issue policy benefits to which Plaintiff was, and is, contractually entitled.” (FAC ¶¶ 31, 34.) 

However, where an insurer possesses a good faith belief that it faces the possibility of multiple claims and institutes an interpleader action, the insurer does not breach the contract or the implied covenant by failing to pay the claimant the policy benefits. (Schwartz v. State Farm Fire & Cas. Co. (2001) 88 Cal. App. 4th 1329, 1341 [citing Minnesota Mut. Life Ins. Co. v. Ensley, 174 F.3d 977, 981 (9th Cir. 1999).) 

Accordingly, Defendant’s Demurrer to the First and Second Causes of Action is SUSTAINED, without leave to amend.

C. Third Cause of Action for Negligence

Next, Defendant argues it cannot be liable for negligence because it had no obligation to investigate and decide the competing claims. (See Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal. App. 4th 1489, 1508 [stating that a party who interpleads funds cannot “ ‘be held accountable in tort because it declined to resolve [a] problem and instead tendered the funds into court’ for resolution of competing claims to funds it held”].)

But here, Plaintiff’s negligence claim is not based on Defendant’s handling of the competing claims or the interpleader action. Rather, Plaintiff alleges that Defendants “breached their duties and obligations to Plaintiff by failing to use reasonable care and due diligence in the administration and underwriting of the Policy and by failing to obtain the requisite consent from Plaintiff before making material changes to the Policy by naming the Trust as an additional insured,” and by “failing to conduct an investigation into the validity of the Trust’s allegations of its right to be named in the Policy before making changes to the Policy based thereon.” (FAC ¶ 53.)

Thus, the negligence cause of action arises from Defendant’s alleged negligence in its administration of the policy, which ultimately led to a dispute over the proper beneficiary. Plaintiff has therefore stated a cause of action for negligence. 

Accordingly, Defendant’s Demurrer to the Third Cause of Action is OVERRULED.

D. Fourth Cause of Action for Tort of Another

Next, Defendant argues the Fourth cause of action fails with the negligence claim.

Under the “tort of another doctrine,” a person who “through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney's fees, and other expenditures thereby suffered or incurred.” (Gorman v. Tassajara Dev. Corp. (2009) 178 Cal. App. 4th 44, 79.)

Plaintiff alleges that as a “direct and proximate result of [Defendant’s] negligence and breach of duties, Plaintiff has been forced to defend against the Interpleader Action and litigate against the Trust to establish Plaintiff sole and exclusive right to benefits under the Policy.” (FAC ¶ 58.) In doing so, Plaintiff has “incurred, and will continue incur damages, including but limited to loss of time, attorneys’ fees, and litigation costs.” (Id.) 

Here, because the court concluded that the negligence claim survives, so too does the tort of another cause of action. 

Accordingly, Defendant’s Demurrer to the Fourth Cause of Action is OVERRULED.

E. Fifth Cause of Action for Declaratory Relief

Finally, Defendant contends the declaratory relief cause of action fails because there is no present controversy. 

Plaintiff alleges that “[a]n actual controversy has arisen and now exists between Plaintiff and AMIG concerning the rights and duties under the Policy, including but not limited to Plaintiff’s exclusive right to be the sole recipient of benefits paid under the Policy for damages arising from the Loss.” (FAC ¶ 60.) “Plaintiff desires a judicial determination of their rights and duties and a declaration as to Plaintiff’s exclusive right to be the sole recipient of benefits paid under the Policy for damages arising from the Loss based on the terms of the Policy as they existed on the date of the loss.” (Id. ¶ 61.) 

As Defendant correctly argues, this very declaration was already resolved by the interpleader action. In opposition, Plaintiff “does not contest the dismissal of her declaratory relief cause of action.” (Opp. 8: 25.) 

Accordingly, Defendant’s Demurrer to the Fifth Cause of Action is SUSTAINED, without leave to amend. 

Moving party is ordered to give notice.

IT IS SO ORDERED.

Dated:   September 23, 2024 ___________________________________

Any party may submit on the tentative ruling by contacting the courtroom via email at  Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing.  All interested parties must be copied on the email.  It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.