Judge: Robert B. Broadbelt, Case: 20STCV33459, Date: 2023-05-02 Tentative Ruling

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Case Number: 20STCV33459    Hearing Date: May 2, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                Defendant Integon National Insurance Company dba National General Insurance

RESPONDING PARTY:       Plaintiff Asmik Melkonyan

Motion for Summary Judgment or, in the Alternative, Summary Adjudication

The court considered the moving, opposition, and reply papers filed in connection with this motion.

LEGAL STANDARD

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.”  (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.)  A defendant or cross-defendant moving for summary judgment or summary adjudication “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 . . . cannot be established, or that there is a complete defense to the cause of action.”  (Code Civ. Proc., § 437c, subd. (p)(2).)  “Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.”  (Code Civ. Proc., § 437c, subd. (p)(2).)  “If the plaintiff cannot do so, summary judgment should be granted.”  (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)  “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.”  (Id. at p. 467; Code Civ. Proc., § 437c, subd. (c).)

DISCUSSION

1.     First Cause of Action for Breach of Contract

“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.”  (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

The court finds that Defendant has met its burden of showing that the first cause of action for breach of contract has no merit because Defendant has shown that an element of the cause of action (the existence of a valid contract) cannot be established since Defendant has shown that it was entitled to rescind the policy agreement between it and Plaintiff.

“When a policyholder conceals or misrepresents a material fact on an insurance application, the insurer is entitled to rescind the policy.”  (LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1266-1267; Ins. Code, §§ 331 [“Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance”], 359 [“If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false”].)  “‘A contract is extinguished by rescission.’  (Civ. Code, § 1688.)  The consequence of rescission is not only the termination of further liability, but also the restoration of the parties to their former positions by requiring each to return whatever consideration has been received.”  (Imperial Casualty & Indem. Co. v. Sogomonian (1988) 198 Cal.App.3d 169, 184.)

Defendant has presented evidence showing that (1) Plaintiff did not disclose all household members over the age of 14 years old on her insurance application, (2) these misrepresentations or concealment of facts were material, and (3) Defendant was therefore entitled to rescind the insurance policy, such that it cannot be held liable for breaching the terms thereof.  (LA Sound USA, Inc., supra, 156 Cal.App.4th at p. 1266 [“A policy void ab initio thus cannot be breached”].)

The application for insurance, dated May 8, 2019, asked Plaintiff to identify all household members aged 14 years and older.  (Undisputed Material Fact (“UMF”) No. 2; Def. Compendium of Evidence (“Def. COE”) Ex. 1, Pl. Insurance Application, p. 000058.)  In the application, Plaintiff (1) listed herself as the only driver under the “Driver and Household Member Information—(continued)” section, and (2) listed her marital status as “Single.”  (Def. COE Ex. 1, Pl. Insurance Application, p. 000058.)  Elsewhere on the application, Plaintiff confirmed that she had “disclosed all household members 14 years and older on the application[.]”  (UMF No. 6; Def. COE Ex. 1, Pl. Insurance Application, p. 000059.)  Further, the “Applicant’s Statement” section includes the following statements and recognitions by the signee:  “I agree all answers to all questions in this Application are true and correct.  I understand, recognize, and agree said answers are given and made for the purpose of inducing the Company to issue the policy for which I have applied.  I further agree that ALL household members 14 years and older, as well as ALL operators who regularly operate my vehicles and do not reside in my household, are shown above. . . .  I understand the Company may rescind this policy if said answers on this Application are false or misleading, and materially affect the risk the Company assumes by issuing the policy.  [¶]  Continuing Duty To Inform:  I understand that I have a continuing duty to notify the insurance company of any changes concerning the following: . . . (2) member(s) of my household age 14 years and older . . . .  I understand that the insurance company may rescind this policy and deny coverage if I fail to notify the company of these changes.”  (Def. COE Ex. 1, Pl. Insurance Application, p. 000059 [emphasis in original].)  Plaintiff signed the application on May 8, 2019.  (Def. COE Ex. 1, Pl. Insurance Application, p. 000060.)

Plaintiff reported an automobile accident claim to Defendant in June 2019.  (UMF No. 14.)  Defendant presents evidence showing that, upon investigating Plaintiff’s claim, Defendant discovered that Plaintiff’s household members included individuals over the age of 14.  During a conversation with Defendant on July 11, 2019, Plaintiff stated that her husband and three children had resided with Plaintiff at her address for the previous eight years.  (UMF No. 16; Def. COE Ex. 3, Claim File Report, pp. 000038-39 [notes in claim report stating that four undisclosed family members were discovered, and that Plaintiff confirmed they had lived with her for the past eight years at the same address]; Naziri Decl., ¶¶ 7-8.)  Defendant interviewed Plaintiff again on August 5, 2019, and Plaintiff confirmed that she had four household members in May 2019 that were not disclosed on the application.  (UMF Nos. 22-23; Def. COE Ex. 3, Claim File Report, p. 000054 [stating that, during the interview conducted by Defendant with Plaintiff and her attorney, Plaintiff confirmed that she lives at the policy address with her husband and three children].) 

Defendant also presents evidence establishing that the information regarding household members was material.  Defendant’s application (1) specifically requested the disclosure of household members above the age of 14 in its application, (2) required confirmation that disclosure of all household members had been made in two separate sections, and (3) notified Plaintiff of her ongoing obligation to inform Defendant of any changes concerning household members.  (UMF No. 2 [application asked to list all household members over the age of 14]; Def. COE Ex. 1, Pl. Insurance Application, pp. 000058, 000059.)  “‘Materiality is determined solely by the probable and reasonable effect which truthful answers would have had upon the insurer.  [Citations.]  The fact that the insurer has demanded answers to specific questions in an application for insurance is in itself usually sufficient to establish materiality as a matter of law.’”  (LA Sound USA, Inc., supra, 156 Cal.App.4th at p. 1268.)  Further, the insurance application states that all answers therein are “made for the purpose of inducing the Company to issue the policy” applied for, and therefore notified Plaintiff of the materiality of this information.  (Def. COE Ex. 1, Pl. Insurance Application, p. 000059.)  Finally, Defendant has presented argument and evidence establishing that this information was material because it would have affected Defendant’s “ability to assess the risks of each policy and determine whether to issue the policy and if so, on what terms and at what premium.”  (Chrustic Decl., ¶¶ 3-4; LA Sound USA, Inc., supra, 156 Cal.App.4th at p. 1269 [misrepresentation was material because it affected the insurance company’s “evaluation of risk and the amount of the premium charged”].)  Had Defendant received the information regarding the existence of Plaintiff’s husband, two adult daughters, and 16-year-old son, Defendant would have increased the premium from $1,653.88 to $2,606.88, reflecting an increase of $953.  (Chrustic Decl., ¶¶ 12-13.)

The court therefore finds that Defendant has met its burden to produce evidence showing that (1) Defendant was entitled to rescind the insurance policy agreement, (2) thereby making the insurance policy “‘extinguished’ ab initio, as though it had never existed[,]” and (3) Defendant thus cannot be held liable for any alleged breach of the agreement by denying coverage.  (Imperial Casualty & Indem. Co., supra, 198 Cal.App.3d at p. 184; LA Sound USA, Inc., supra, 156 Cal.App.4th at p. 1266; Compl., ¶¶ 35-37.)

The court finds that Plaintiff has not met her burden to show that a triable issue of material fact exists as to the element of a valid agreement between Plaintiff and Defendant because Plaintiff has not produced evidence showing that a triable issue of material fact exists as to (1) whether she disclosed the relevant information to Defendant, (2) whether Defendant waived its right to rescind Plaintiff’s policy agreement, and (3) whether the information sought was material.

First, Plaintiff contends that she disclosed the existence of her children and husband during the application process to Peter Tadevossian (“Tadevossian”), “who acted as agent of [Defendant] at the time of the application process.”  (Opp., p. 6:23.)

The court notes that, in support of its moving papers, Defendant has presented evidence showing that Tadevossian “was not authorized to bind insurance policies on behalf of [Defendant] and acted as a retail broker on behalf of [Plaintiff].”  (Chrustic Decl., ¶ 3; Naziri Decl., ¶ 4.)  In opposition, Plaintiff submits her declaration, in which she states that (1) she worked with Tadevossian during the application process; (2) Tadevossian stated that his agency, Opum Insurance Services, Inc, worked with several insurance companies, including Defendant; (3) she informed Tadevossian of her children and husband who resided with her; (4) she informed Tadevossian that they would not be driving her vehicle; (5) she provided the names and driver license numbers of her husband and children; and (6) she signed the documents sent to her by Tadevossian but did not request a review and explanation of the documents.  (Melkonyan Decl., ¶¶ 4-6, 9-11, 14, 19, 26; Melkonyan Decl., Ex. A [email listing names of three individuals and license numbers].)

The court finds that this evidence is insufficient to show that a triable issue of material fact exists as to (1) an agency relationship between Tadevossian and Defendant, and (2) Plaintiff’s disclosure of her household members to Defendant through Tadevossian.

“[I]n order to avert summary judgment the plaintiff must produce substantial responsive evidence sufficient to establish a triable issue of material fact on the merits of the defendant’s showing.”  (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)  Although Plaintiff has argued that Tadevossian was acting as an “agent” of Defendant, such that her disclosure of her household members was “deemed received by [Defendant]” since Tadevossian received this information, Plaintiff has not presented any evidence regarding Tadevossian’s relationship with Defendant.  The only evidence presented by Plaintiff concerning their relationship is Plaintiff’s statement that Tadevossian “told [her] that his agency works with several insurance companies, [Defendant] being one of such companies.”  (Melkonyan Decl., ¶ 6.)  However, this evidence is insufficient to show that Tadevossian was acting as agent of Defendant, because (1) Plaintiff’s evidence establishes that Tadevossian was a representative for Opus Insurance Services, Inc., and (2) Tadevossian only stated that he and his agency “work[ed] with” insurance companies such as Defendant, not that Tadevossian was working on behalf of Defendant as an agent, employee, or otherwise.  Plaintiff has not introduced any other evidence or argument establishing Tadevossian’s status as an agent of Defendant.

Thus, the court finds that Plaintiff has not met her burden to show the existence of a triable issue of material fact as to whether Tadevossian was acting as Defendant’s legal agent when assisting Plaintiff with her application for insurance, and therefore has not met her burden of showing the existence of a triable issue of material fact as to whether Tadevossian’s knowledge of Plaintiff’s household members can establish Defendant’s knowledge of this information.

Second, Plaintiff argues that Defendant has waived its right to rescind Plaintiff’s policy agreement by failing to investigate Plaintiff’s marital status and household members.

“‘An insurance company will be deemed to waive any ground which would otherwise entitle it to rescind a policy or treat it as forfeited when, despite knowledge of the facts giving it the option, it impliedly recognizes the continuing effect of the policy.’  [Citations.]  This test for waiver in the context of insurance contracts comports with the general rule for finding a waiver:  ‘ “In general, to constitute a waiver, there must be an existing right, a knowledge of its existence, an actual intention to relinquish it, or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished.” ’”  (DuBeck v. California Physicians’ Service (2015) 234 Cal.App.4th 1254, 1265 [internal citations omitted].)

Plaintiff contends that, because she provided Tadevossian with the names and driver license numbers of her household members, such information could have been discovered by Defendant if it had properly investigated her application.  (Melkonyan Decl., ¶¶ 4-6, 9-11, 14, 19, 26.)  The court finds that this evidence is insufficient to show the existence of a triable issue of material fact as to whether Defendant waived its right to rescind a policy based on her misrepresentations and concealed material information because Plaintiff has not presented any evidence or argument showing that (1) Defendant had “knowledge of the facts giving it the option” to rescind a policy or treat it as forfeited but instead “impliedly recognize[d] the continuing effect of the policy” since Plaintiff has not shown that she disclosed to Defendant, through Tadevossian or directly, information regarding her household members; (2) Defendant had an actual intent to relinquish its right to rescind the policy; or (3) Defendant’s “conduct was so inconsistent with the intent to enforce the right as to induce a reasonable belief that it ha[d] been relinquished.”  (DuBeck, supra, 234 Cal.App.4th at p. 1265 [internal quotations omitted].)

Thus, the court finds that Plaintiff has not met her burden to show that a triable issue of material fact exists as to whether Defendant waived its right to rescind her policy agreement.

Third, Plaintiff argues that any alleged misrepresentations or concealment of the information sought were not material.

Plaintiff asserts that “the disclosure would not have changed the risk exposure of [Defendant] because the children of the plaintiff and her husband were not drivers of the insured vehicle.”  (Opp., p. 10:19-21; Melkonyan Decl., ¶¶ 10-11 [Plaintiff informed Tadevossian that her husband and children would not be driving the vehicles].)  However, Plaintiff has not produced “substantial responsive evidence sufficient to establish a triable issue of material fact on the merits” of this issue (1) because Plaintiff has not submitted any evidence showing that this information would not have changed the terms or rate of her policy, and (2) Plaintiff has not submitted any evidence refuting Defendant’s evidence that this information is “material to [Defendant’s] ability to assess the risks of each policy and determine whether to issue the policy and if so, on what terms and at what premium.”  (Sangster, supra, 68 Cal.App.4th at pp. 162-163; Chrustic Decl., ¶¶ 3-4.)

Thus, the court finds that Plaintiff has not met her burden to show that a triable issue of material fact exists as to whether the misrepresentations or concealment of facts were material.

The court therefore finds that Plaintiff has not met her burden to show the existence of a triable issue of material fact as to whether there is a valid insurance contract between Plaintiff and Defendant since she has not shown the existence of a triable issue of material fact as to whether Defendant was permitted to rescind the insurance policy based on her concealment or misrepresentation of material facts.  (Imperial Casualty & Indem. Co., supra, 198 Cal.App.3d at p. 184 [“upon a recission of a policy of insurance, based upon a material concealment or misrepresentation, all rights of the insured thereunder (except the right to recover any consideration paid in the purchase of the policy) are extinguished”]; LA Sound USA, Inc., supra, 156 Cal.App.4th at pp. 1266-1267.)

The court therefore grants Defendant’s motion for summary adjudication as to the first cause of action for breach of contract.

2.     Second Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing

“Tort liability for breach of the implied covenant of good faith and fair dealing has been variously measured.  The primary test is whether the insurer withheld payment of an insured’s claim unreasonably and in bad faith.  [Citation.]  Where benefits are withheld for proper cause, there is no breach of the implied covenant.”  (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151 [internal citation omitted].)  “Thus, there are at least two separate requirements to establish breach of the implied covenant: (1) benefits due under the policy must have been withheld; and (2) the reason for withholding benefits must have been unreasonable or without proper cause.”  (Ibid.; Mosley v. Pacific Specialty Ins. Co. (2020) 49 Cal.App.5th 417, 435 [“to succeed on a claim for breach of the implied covenant, the insured must show that ‘the insurer acted unreasonably or without proper cause’”] [emphasis in original].)

The court finds that Defendant has met its burden of showing that the second cause of action for breach of the implied covenant of good faith and fair dealing has no merit because Defendant has shown that elements of the cause of action (that benefits were due under the policy and that Defendant acted unreasonably or without proper cause) cannot be established. 

As set forth above, Defendant has met its burden of submitting evidence showing that (1) it was entitled to rescind the insurance policy based on Plaintiff’s misrepresentations or concealment of material facts, such that the policy is “‘extinguished’ ab initio, as though it had never existed” and Plaintiff, “in law, never [was an] insured under a policy of insurance[,]” thereby showing that there were no “benefits due under the policy” to Plaintiff, and (2) Defendant acted reasonably in making the decision to rescind the insurance policy.  (Imperial Casualty & Indem. Co., supra, 198 Cal.App.3d at p. 184; Love, supra, 221 Cal.App.3d at p. 1151.)

The court finds that Plaintiff has not met her burden to show that a triable issue of material fact exists as to the element of (1) the existence of due and owing policy benefits to Plaintiff, or (2) Defendant’s withholding of benefits unreasonably or without proper cause.

First, as set forth above, Plaintiff has not met her burden to show the existence of a triable issue of material facts as to whether Defendant was entitled to rescind the insurance policy and therefore has not shown that a triable issue of material fact exists as to whether policy benefits were due and owing to her under the insurance policy.

Second, although Plaintiff argues that Defendant “went into a voyage of discovery to seek out any excuse to deny and rescind the policy” and abnormally “start[ed] the process of asking pre-policy background questions,” Plaintiff has not (1) provided any authority establishing that such conduct is unreasonable or improper, or (2) provided any evidence (i) setting forth Defendant’s conduct in investigating her claim, or (ii) establishing that its investigation was unreasonable or improper.  (Opp., p. 11:19-20, 11:14-18.)

The court therefore grants Defendant’s motion for summary adjudication as to the second cause of action for breach of the implied covenant of good faith and fair dealing.

3.     Claim for Punitive Damages

As set forth above, the court has granted summary adjudication on each cause of action alleged against Defendant.  The court therefore finds that Defendant’s motion for summary adjudication as to the issue of punitive damages is moot.

4.     Motion for Summary Judgment

Because the court has granted summary adjudication on all of the causes of action alleged against Defendant in Plaintiff’s Complaint, the court finds that all of the papers submitted show that there is no triable issue as to any material fact and that Defendant is entitled to judgment as a matter of law.  (Code Civ. Proc., § 437c, subd. (c).)  The court therefore grants Defendant’s motion for summary judgment on Plaintiff’s Complaint.

ORDER

The court grants defendant Integon National Insurance Company dba National General Insurance’s motion for summary judgment on plaintiff Asmik Melkonyan’s Complaint.

The court orders defendant Integon National Insurance Company dba National General Insurance to prepare, serve, and lodge a proposed judgment no later than 10 days from the date of this order.

The court orders defendant Integon National Insurance Company dba National General Insurance to give notice of this ruling.

IT IS SO ORDERED.

DATED:  May 2, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court