Judge Randolph M. Hammock, Case Number: 20STCV40149, Date: 2024-10-18 Tentative Ruling

Plaintiff Marco Aiello owns a condominium unit in North Hollywood. Plaintiff alleges the premises suffered a sewer back-up incident causing excessive damages. Plaintiff also alleges the Association acted in bad faith by promulgating proposed rule changes harmful to Plaintiff and in violation of applicable laws. Plaintiff asserts claims against 4220 Bellflower, Inc., the association’s president, and the property manager for (1) negligence, (2) violation of Davis-Stirling Common Interest Development Act, (3) Violation of CC&Rs, (4) intentional interference with contract, (5) declaratory relief, (6) intentional concealment, (7) breach of contract, and (8) breach of the implied covenant of good faith and fair dealing.

The Declaration of attorney Sue H. Kim reflects that Defendant made multiple attempts to meet and confer with Plaintiff’s counsel before filing this motion. Plaintiff did not respond to those attempts.

While this demonstrates the absence of any substantive meet and confer, the court considers Defendant’s obligations satisfied and will proceed to address the demurrer on the merits. The parties are admonished to comply with any meet and confer obligations going forward.

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.)

4820 Bellflower, Inc. (the “HOA”), is a homeowner’s association for condo units located at 4820 Bellflower Avenue, in North Hollywood, California. (FAC ¶ 13.) Plaintiff owns Unit 208 in 4820 Bellflower. (Id. ¶ 12.) Defendant Truck is the HOA’s insurer; it issued insurance policy number 60487-14094, covering the HOA as the named insured, and defendants Coro Community Management and Consulting, LLC as an additional insured, and Linda Abruzzo, the HOA’s president, pursuant to its directors & officer liability coverage. (Id. ¶¶ 21, 109-110.)

Plaintiff alleges that the property was defectively constructed, including problems where Unit 208’s pipes connected to the HOA’s common area pipes. (Id. ¶ 25.) Because fixing the plumbing defects would be cost prohibitive, the HOA decided to periodically clean out the pipes. (Id. ¶ 28.) From December 2019 through July 2019, Plaintiff’s unit showed signs of sewer backup, and he made repeated requests to have the pipes cleaned. (Id. ¶ 31.) Defendants failed to take any action. (Id. ¶ 31(d) and (g).) Then, on July 11, 2019, there was a backup causing damage to plaintiff’s unit. (Id. ¶ 32.) Truck paid the HOA $21,700.96, in connection with the damage to plaintiff’s unit, but he alleges that the HOA allegedly held the money to hurt plaintiff, simply “because they could.” (Id. ¶ 34.)

Plaintiff alleges that, in an effort to avoid liability and further single him out, the Building Defendants insisted that the plumber’s invoices for the repairs be revised to reflect that the blockage was in the vertical pipes, and not the horizontal pipes. (Id. ¶¶ 45-47.) Plaintiff also alleges the Building Defendants also requested that ServePro modify its documents to evade liability. (Id. ¶¶ 52-53.) Finally, plaintiff contends that Defendants intentionally delayed and frustrated the repair process for his unit. (Id. ¶¶ 54-59.)

Plaintiff asserts causes of action for breach of contract (Seventh) and breach of the implied covenant of good faith and fair dealing (Eighth) against Defendant Truck. In support, Plaintiff alleges he “is a third-party beneficiary of the Condo/Townhome Premier Insurance Policy contract, policy number 60487-14-94, underwritten by Truck Insurance Exchange…with named insured 4820 BELLFLOWER HOA, i.e., Defendant ASSOCIATION and additional insured CORO.” (Id. ¶ 109.) Following the water damage at the property, Plaintiff alleges that Defendant Truck has “materially breached the Premier Insurance Policy contract by failing to pay Plaintiff’s insured damages, and continuing to challenge liability.” (Id. ¶ 116.)

In support of the demurrer, Defendant Truck argues that “Plaintiff has no standing to enforce defendants’ insurance policy, nor can he state a claim based on the implied covenant of good faith and fair dealing in a policy that he is not a party to.” (Mtn. 3: 18-20.) “[B]eing a member of the HOA,” Defendants argues, “is insufficient to confer standing on plaintiff, who is not a named insured in the policy and a non-insured cannot sue the carrier directly for breach of contract, unless and until he obtains a judgment against the HOA.” (Id. 3: 20-22.)

In opposition, Plaintiff maintains that as a unit owner in the building, he is a third-party beneficiary of Truck’s policy insuring the other Defendants. Plaintiff jumps through hoops to distinguish Defendant’s authorities but misses the point.

“[U]nder California's third party beneficiary doctrine, a third party — that is, an individual or entity that is not a party to a contract — may bring a breach of contract action against a party to a contract only if the third party establishes not only (1) that it is likely to benefit from the contract, but also (2) that a motivating purpose of the contracting parties is to provide a benefit to the third party, and further (3) that permitting the third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties.” (Goonewardene v. ADP, LLC (2019) 6 Cal. 5th 817, 821.)

Here, there are simply no facts alleged to support Plaintiff’s position that he is an intended third-party beneficiary of the policy. Owning a unit in the building is not enough to confer this status. This is consistent with settled law that “[g]enerally, an insurer may not be joined as a party-defendant in the underlying action against the insured by the injured third party. The fact that an insurer has agreed to indemnify the insured for any judgment rendered in the action does not make the insurer a proper party. Liability insurance is not a contract for the benefit of the injured party so as to allow it to sue the insurer directly.” (Royal Surplus Lines Ins. Co. v. Ranger Ins. Co. (2002) 100 Cal. App. 4th 193, 200.)

If Plaintiff’s creative theory is valid, that would mean that anyone injured in an auto accident, could have a direct cause of action against the other driver’s insurance company, since any potential injured party was a “third party beneficiary” of the insurance contract between the other driver and his/her insurance carrier. It is well settled that this is not the law. See, e.g., Harper v. Wassau Ins. Co. (1997) 56 Cal.App.4th 1079. [“As a general rule, absent an assignment of rights or a final judgment, a third party claimant may not bring a direct action against an insurance company on the contract because the insurer's duties flow to the insured.”]

Therefore, Plaintiff does not have a cause of action against Truck at this time—but that could change. If and once Plaintiff obtains a judgment against the other Defendants Plaintiff could be considered a third party beneficiary of the policy. “[B]y virtue of [Insurance Code] section 11580, a judgment creditor of an insured enjoys third party beneficiary status and rights under the policy…” (Hughes v. Mid-Century Ins. Co. (1995) 38 Cal. App. 4th 1176, 1185, emphasis added; see also Insurance Code § 11580.2(b).) But “[l]acking a final judgment,” plaintiffs do “not enjoy the status of judgment creditor beneficiaries under section 11580. [Citation.]” (Id.)

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.