Judge Robert S. Draper, Case 22STCV25199 2023-05-23 Tentative Ruling

Judge: Robert S. Draper, Case: 22STCV25199, Date: 2023-05-23 Tentative Ruling

Case Number: 22STCV25199 Hearing Date: May 23, 2023 Dept: 78

Superior Court of California

County of Los Angeles

Department 78

CLEAN INITIATIVE LLC,

Plaintiff,

vs.

MERCURY INSURANCE SERVICES, LLC, et al.,

Defendant. Case No.: 22STCV25199

Hearing Date: May 23, 2023

[TENTATIVE] RULING RE:

DEFENDANT CALIFORNIA AUTOMOBILE INSURANCE COMPANY’S DEMURRER TO THE FIRST AMENDED COMPLAINT; DEFENDANT CALIFORNIA AUTOMOBILE INSURANCE COMPANY’S MOTION TO STRIKE.

Defendant California Automobile Insurance Company’s Demurrer to the First Amended Complaint is OVERRULED.

Defendant California Automobile Insurance Company’s Motion to Strike is GRANTED. Plaintiff is granted five days leave to file and serve the Second Amended Complaint attached to its filing.

Defendant must file and serve an answer within 20 days after service of the Second Amended Complaint.

Moving party to provide notice and to file proof of service of such notice within five court days after the date of this order.

FACTUAL BACKGROUND

This is an action for breach of an insurance contract. The operative First Amended Complaint (“FAC”) alleges as follows.

Plaintiff Clean Initiative LLC (“Plaintiff”) provides roofing inspection and repair services. (FAC ¶ 2.) Plaintiff performed an inspection of the roof of real property (the “Insured Property”) belonging to non-party Zhenrong Chen (the “Insured”). (Ibid.) Plaintiff discovered damage to the roof of the Insured Property that required repair. (Ibid.) Upon discovering these necessary repairs, Plaintiff received an Assignment of Benefits (“AOB”) from the Insured which covered the Insured Property and the damages sustained. (Ibid.)

The AOB provided that the Insured assigned Plaintiff “all insurance rights, benefits, and proceeds under the property insurance policy up to the amount of the services provided or to be provided by Plaintiff.” (FAC ¶ 3.) The Insured assigned these benefits to Plaintiff in consideration for Plaintiff’s agreement to repair the roof of the Insured Property. (Ibid.)

Defendant California Automobile Insurance Company, Inc., erroneously sued as Mercury Insurance Services (“Defendant”), issued the insurance policy (the “Policy”) covering the Insured Property. (FAC ¶ 5.) The Policy covered the necessary repairs to the Insured Property. (Ibid.) Plaintiff submitted a claim for payment to Defendant (the “Submitted Claim”) for the cost of the inspection and necessary repairs. (FAC ¶ 11.) Defendant denied the Submitted Claim without justification and in bad faith. (FAC ¶ 12.)

PROCEDURAL HISTORY

On August 4, 2022, Plaintiff filed the Complaint asserting four causes of action:

1. Tortious Breach of Covenant of Good Faith and Fair Dealing – Bad Faith;

2. Breach of Contract;

3. Bad Faith (First Party) Failure to Properly Investigate Claim; and,

4. Violation of California Insurance Code § 790.03.

On September 12, 2022, Defendant filed a Demurrer to the Complaint.

On November 2, 2022, Plaintiff filed the operative First Amended Complaint asserting two causes of action:

1. Breach of Contract; and,

2. Tortious Bad Faith Breach of Covenant of Good Faith and Fair Dealing.

On November 16, 2022, the Court took Defendant’s Demurrer to the Complaint off calendar as a First Amended Complaint had been filed before the hearing on the matter.

On January 4, 2023, Defendant filed the instant Demurrer to the FAC with Motion to Strike.

On March 21, 2023, Plaintiff filed an Opposition.

On March 24, 2023, Defendant filed a Reply.

DISCUSSION

I. DEMURRER

Defendant demurs to the Second Cause of Action for Breach of the Covenant of Good Faith and Fair Dealing.

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) As is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

A. Second Cause of Action – Bad Faith Breach of the Covenant of Good Faith and Fair Dealing.

Defendant demurs to the Second Cause of Action for Bad Faith Breach of the Covenant of Good Faith and Fair Dealing on three grounds: Plaintiff fails to allege facts sufficient to state a cause of action, Plaintiff lacks standing to bring this cause of action, and the Second Cause of Action is fatally uncertain.

A. Failure to Allege Sufficient Facts

First, Defendant contends that Plaintiff fails to allege facts sufficient to state a cause of action for Bad Faith Breach of the Covenant of Good Faith and Fair Dealing.

“The law implies in every contract, including insurance policies, a covenant of good faith and fair dealing.” (Maslo v. Ameriprise Auto & Home Ins. (2014) 227 Cal.App.4th 626, 633.) “The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the agreement's benefits.” (Id.) “To fulfill its implied obligation, an insurer must give at least as much consideration to the interests of the insured as it gives to its own interests.” (Id.) “When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.” (Id.) (The insured has a duty to not unreasonably withhold benefits due under the policy and an unreasonable delay or failure to pay benefits due subjects the insurer to tort liability). While the insurer is not required to pay any claim an insured makes, the insurer cannot deny a claim without fully investigating the grounds for the denial. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720-21 (denial of a claim that is unfounded on the facts known to the insurer or contradicted by known facts may be deemed unreasonable and the trier of fact can determine an insurer acted unreasonably by ignoring evidence and the focus cannot just be on facts supporting the denial of the claim).

Here, Plaintiff alleges that Defendant “breached the covenant of good faith and fair dealing, and thus engaged in tortious bad faith, by failing unreasonably to conduct a full, fair, prompt, and/or thorough investigation of all the bases of the Submitted Claim.” (FAC ¶ 24.) Additionally, Plaintiff alleges that “Defendant further breached the covenant of good faith and fair dealing . . . when it denied the Submitted Claim and refused to honor and/or pay the Submitted Claim without substantial justification, including but not necessarily limited to, by failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies . . .” (Id. ¶ 25.)

The Court finds that these allegations are sufficient to state a cause of action for Breach of the Covenant of Good Faith and Fair Dealing.

B. Standing

Next, Defendant contends that Plaintiff does not have standing to assert a Breach of the Covenant of Good Faith and Fair Dealing cause of action against Defendant as the AOB did not confer such a right to Defendant.

To have standing to maintain a bad faith insurance action, a plaintiff must have a contractual relationship with the defendant insurer. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 676.) An insured claimant can always assign his or her bad faith action to a third party, even if the language in the insurance policy expressly precludes such an assignment. (Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 941.)

Here, Defendant contends that in the First Amended Complaint, Plaintiff alleges that the AOB assigned Plaintiff the right to seek damages for breach of contract only, limited by the “insurance proceeds owed by my insurance company regarding this loss.” (Demurrer at pp. 8-9.) Indeed, as Defendant notes on Reply, Plaintiff alleges in the FAC that pursuant to the AOB, the “Policy Holder assigns to Plaintiff all insurance rights, benefits, and proceeds under the property insurance policy up to the amount of the services provided or to be provided by Plaintiff.” (FAC ¶ 3) (emphasis added.)

In Opposition, Plaintiff contends that the AOB’s limitation on damages “up to the amount of the services provided or to be provided by Plaintiff” limits only Plaintiff’s ability to collect proceeds under the insurance policy; Plaintiff argues that this limitation is separate and apart from the Insured’s assignment of his rights and benefits under the Policy, which include an assignment of the Insured’s right to file a claim for Breach of the Covenant of Good Faith and Fair Dealing.

Considering the Court’s obligation to read all allegations in the Complaint in the light most favorable to Plaintiff, the Court must rule for Plaintiff in this regard. A reasonable trier of fact could find that the limitation on damages in the amount of the services Plaintiff provided modifies only Plaintiff’s right to collect proceeds under the Policy, but does not modify the assignment of the Insured’s rights and benefits to Plaintiff under the Policy, which include his right to bring a bad faith cause of action against Defendant.

C. Uncertainty

Finally, Defendant demurs to the second cause of action on the basis of uncertainty, arguing that as Plaintiff is limited to collecting damages in the amount of the services Plaintiff provided, and as Plaintiff does not allege the value of its services provided in the FAC, the FAC is fatally uncertain as to potential damages.

However, as the Court found that Plaintiff is not as a matter of law limited to damages in the amount of services rendered, this argument fails.

Accordingly, Defendant’s Demurrer to the First Amended Complaint is OVERRULED.

II. MOTION TO STRIKE

Next, Defendant moves to strike Plaintiff’s prayer for attorney’s fees as to the First Cause of Action for Breach of Contract, arguing that Plaintiff does not allege that the Policy contains an attorney’s fees provision and does not attach a copy of the Policy to the FAC.

In Opposition, Plaintiff concedes that there is no basis for attorney’s fees related to the First Cause of Action, but proffers a Second Amended Complaint that clarifies Plaintiff only seeks attorney’s fees related to the Second Cause of Action.

On Reply, Defendant acknowledges that, should Defendant’s Demurrer be overruled, Plaintiff’s proffered Second Amended Complaint resolves the matters addressed in the Motion to Strike. The Court agrees.

Accordingly, Defendant’s Motion to Strike is GRANTED.

DATED: May 23, 2023

____________________________

Hon. Jill T. Feeney

Judge of the Superior Court