Judge Salvatore Sirna, Case 22PSCV02838 2023-03-13 Tentative Ruling

Judge: Salvatore Sirna, Case: 22PSCV02838, Date: 2023-03-13 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 22PSCV02838 Hearing Date: March 13, 2023 Dept: G

Defendant Aspire General Insurance Company’s Demurrer to Plaintiff’s Complaint

Respondent: NO OPPOSITION

Defendant Aspire General Insurance Company’s Motion to Strike Portions of Plaintiff’s Complaint

Respondent: NO OPPOSITION

TENTATIVE RULING

Defendant Aspire General Insurance Company’s Demurrer to Plaintiff’s Complaint is OVERRULED.

Defendant Aspire General Insurance Company’s Motion to Strike Portions of Plaintiff’s Complaint is DENIED.

Defendant to answer the Complaint in twenty (20) days, on or before April 3, 2023.

BACKGROUND

This is a breach of contract action arising from an insurance policy. On November 12, 2020, Plaintiff Enedina Gonzalez purchased an automobile insurance policy from Defendant Aspire General Insurance Company. On August 1, 2021, while Plaintiff’s insurance policy was still active, Plaintiff was involved in an automobile accident in West Covina. After Plaintiff filed a claim with Defendant, Defendant issued Plaintiff a recission notice on March 25, 2022, purporting to rescind Plaintiff’s insurance policy on the grounds that Plaintiff had made false or misleading statements and concealed material facts in Plaintiff’s insurance application.

On December 12, 2022, Plaintiff filed a complaint against Defendant and Does 1-50, alleging the following causes of action: (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) declaratory relief, and (4) violation of Civil Code section 51.

On February 10, 2023, Defendant filed the present demurrer and motion to strike. Prior to filing on January 25, Defendant’s counsel met and conferred telephonically with Plaintiff’s counsel and was unable to reach a resolution. (Contreras Decl., ¶ 4.)

A hearing on the demurrer and motion to strike is set for March 13, 2023. A case management conference and OSC Re: Failure to File Proof of Service is also set for May 16.

ANALYSIS

Defendant demurs to Plaintiff’s first cause of action (breach of contract), second cause of action (breach of the covenant of good faith and fair dealing), and fourth cause of action (violation of Civil Code section 51). For the following reasons, the court OVERRULES Defendant’s demurrer in its entirety.

Legal Standard

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078 (Fox).) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “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.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “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, supra, at p. 747.)¿

Breach of Contract (First Cause of Action)

Defendant argues Plaintiff’s first cause of action for breach of contract fails to plead sufficient facts to state a claim. The court disagrees.

To state a cause of action for breach of contract, a plaintiff must be able to establish “(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.) If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) In some circumstances, a plaintiff may also “plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

In this case, Defendant argues Plaintiff fails to cite to the insurance policy contract, provides no copy of the policy, and does not establish what conditions were breached. However, failure to do so is “not fatal to [Plaintiff’s] breach of contract cause of action.” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 402.) Instead, the proper inquiry is whether Plaintiff sufficiently pled the legal effect of the insurance policy.

Plaintiff alleges that from November 12, 2020 to April 2022, Plaintiff purchased an automobile liability and collision insurance policy that provided coverage for bodily injury, property damage liability, and collision coverage. (Complaint, ¶ 10.) Plaintiff also alleges the insurance policy states any misrepresentation must “materially affect the risk the company assumes by issuing the policy.” (Complaint, ¶ 18.)

Defendant also argues that Plaintiff failed to establish Defendant’s recission of the insurance policy was improper. The Complaint alleges Defendant’s grounds for recission were that (1) Plaintiff’s vehicles were not garaged at the listed policy garaging addresses in violation of the underwriting guidelines and (2) Plaintiff claimed a marital discount when Plaintiff was not married. (Complaint, ¶ 15.) The Complaint alleges Plaintiff did not engage in any misrepresentations. (Complaint, ¶ 17.) However, Plaintiff also admits Plaintiff “did not at some point in time garage her vehicle at the reported address due to her living conditions.” (Complaint, ¶ 17.) Furthermore, while Plaintiff states “Plaintiff did not inform anybody that she was married” (Complaint, ¶ 17.), the insurance application lists Plaintiff as “Female/Married” (Complaint, Ex. A) and includes a signed proof of marriage certification dated November 12, 2020, that states Plaintiff is currently married. (Complaint, Ex. A.) “If the allegations in the complaint conflict with the exhibits, we rely on and accept as true the contents of the exhibits.” (SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 83.) Thus, the court finds Plaintiff’s allegation that Plaintiff made no misrepresentations is unsupported by Plaintiff’s own pleadings and exhibits.

Nonetheless, as alleged by Plaintiff and included in the “Applicant’s Certification” section of the insurance application, Defendant “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.” (Complaint, Ex. A.) Thus, because Plaintiff alleges these misrepresentations “in no way can be considered to ‘materially affect the risk the company assumes by issuing the policy,’” Plaintiff has sufficiently pled Defendant’s recission breached the insurance policy agreement. (Complaint, ¶ 18.)

Accordingly, Defendant’s demurrer to Plaintiff’s first cause of action is OVERRULED.

Breach of the Covenant of Good Faith and Fair Dealing (Second Cause of Action)

Defendant contends Plaintiff’s second cause of action for breach of the covenant of good faith and fair dealing fails to plead sufficient facts to state a claim. The court disagrees.

“[T]he factual elements necessary to establish a breach of the covenant of good faith and fair dealing are: (1) the parties entered into a contract; (2) the plaintiff fulfilled his obligations under the contract; (3) any conditions precedent to the defendant's performance occurred; (4) the defendant unfairly interfered with the plaintiff's rights to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant's conduct.” (Rosenfeld v. JPMorgan Chase Bank, N.A. (N.D. Cal. 2010) 732 F.Supp.2d 952, 968, citing BAJI No. 325.)

In this case, Defendant first contends Plaintiff cannot establish a cause of action for breach of the covenant of good faith and fair dealing because Defendant’s recission of the agreement was not unreasonable. However, as noted in the previous section, the court finds Plaintiff has adequately pled Defendant’s recission breached the insurance policy. Second, Defendant contends Plaintiff’s allegation that Plaintiff did not receive a refund of Plaintiff’s policy premiums is false. (See Complaint, ¶ 16.) The court rejects this argument as well as the properly pled allegations of a complaint are taken as true for the purposes of a demurrer. (Fox, supra, 185 Cal.App.4th at p. 1078.)

Accordingly, Defendant’s demurrer to Plaintiff’s second cause of action is OVERRULED.

Civil Code § 51 (Fourth Cause of Action)

Defendant maintains Plaintiff’s fourth cause of action for violation of Civil Code section 51 fails to plead sufficient facts to state a claim. The court agrees/disagrees.

Pursuant to Civil Code section 51 of the Unruh Civil Rights Act (UCRA), “All persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language, or immigration status are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.” (Civ. Code, § 51, subd. (b).)

Insurance Code section 679.71 states “No admitted insurer that is licensed to issue any policy of insurance covered by this chapter shall fail or refuse to accept an application for, or to issue a policy to an applicant for, that insurance . . . or cancel that insurance, under conditions less favorable to the insured than in other comparable cases, except for reasons applicable alike to persons of every characteristic listed or defined in subdivision (b) or (e) of Section 51 of the Civil Code; nor shall any of those characteristics, of itself, constitute a condition or risk for which a higher rate, premium, or charge may be required of the insured for that insurance.” (Ins. Code, § 679.71.)

In this case, Plaintiff alleges Defendant’s recission of the insurance policy on the basis of Plaintiff’s marital status is a violation of Insurance Code section 679.71 and the UCRA. (Complaint, ¶ 44.) However, the court notes the insurance policy was not rescinded because of Plaintiff’s marital status but rather because Plaintiff allegedly failed to accurately describe Plaintiff’s marital status in the first place. (Complaint, ¶ 15.) Nonetheless, Defendant’s recission letter also states, “Had you disclosed your true marital status, we would have written the policy at a substantially higher premium.” (Complaint, ¶ 15.) Plaintiff alleges Defendant is regulated by the Insurance Code. (Complaint, ¶ 43.) Furthermore, Plaintiff’s Complaint facially establishes Defendant sought to charge a higher premium for Plaintiff based on Plaintiff’s marital status. Thus, Plaintiff has sufficiently pled allegations establishing a violation of Civil Code section 51.

Accordingly, Defendant’s demurrer to Plaintiff’s fourth cause of action is OVERRULED.

Motion to Strike

Defendant also moves to strike portions of Plaintiff’s Complaint, including (1) the third cause of action for declaratory relief and (2) the prayer for exemplary damages. For the following reasons, the court DENIES Defendant’s motion.

Legal Standard

Upon a party’s motion or the court’s own motion, the court may strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also “[s]trike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Code Civ. Proc., § 436, subd. (b).) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437, subd. (a).)

Declaratory Relief (Third Cause of Action)

Defendant first argues the court should strike Plaintiff’s third cause of action for declaratory relief because prospective relief and equitable relief are not appropriate in the present action since it is a complaint for compensatory damages. The court disagrees.

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) “The courts do not issue advisory opinions about the rights and duties of the parties under particular agreements, if no actual, justiciable controversy has yet developed.” (Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 563.)

In this case, Defendant argues prospective relief is inappropriate because the contract at issue has already been rescinded and compensatory damages have been requested. However, “the mere fact that the contract has already been breached and a cause of action therefor (one of the traditional remedies) has accrued, does not necessarily deprive the court of the power to grant declaratory relief under the law.” (Ermolieff v. R.K.O. Radio Pictures (1942) 19 Cal.2d 543, 547.) In Warren v. Kaiser Foundation Health Plan, Inc. (1975) 47 Cal.App.3d 678, the court held a request for declaratory relief by an insured against an insurer was proper where although the insurer allegedly breached the contract, it had an ongoing relationship with the insured who was a member of the insurer’s coverage plan. (Id., at p. 684.) The court also noted declaratory relief on the extent of insurance coverage “is faster, more adequate, and better suited than would be an action for breach of contract.” (Ibid.)

Similarly, here, Plaintiff alleges an actual and present controversy between Plaintiff and Defendant over Defendant’s coverage obligations. (Complaint, ¶ 37-39.) While Defendant suggests there is no present controversy because the policy was rescinded, Plaintiff has sufficiently alleged that recission was not proper. Accordingly, the court DENIES Defendant’s motion to strike Plaintiff’s request for declaratory relief.

Exemplary Damages

Lastly, Defendant contends the court should strike Plaintiff’s request for exemplary damages because Plaintiff failed to meet the pleading requirements for exemplary damages.

Civil Code section 3294 allows punitive damages when a plaintiff establishes by clear and convincing evidence that a defendant is guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) For the purposes of determining punitive damages, malice is defined as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) Oppression is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” (Civ. Code, § 3294, subd. (c)(2).) Lastly, fraud is defined as “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code, § 3294, subd. (c)(3).) “In addition to the requirement that the operative complaint set forth the elements as stated in section 3294, it must include specific factual allegations showing that defendant's conduct was oppressive, fraudulent, or malicious to support a claim for punitive damages.” (Today’s IV, Inc. v. Los Angeles County Metropolitan Transportation Authority (2022) 83 Cal.App.5th 1137, 1193.) Furthermore, “[p]unitive damages may not be pleaded generally.” (Ibid.)

In this case, Defendant argues exemplary or punitive damages are inappropriate for the same reasons Defendant demurs to Plaintiff’s Complaint. Thus, because the court has overruled Defendant’s demurrer, the court rejects this argument as well. Instead, the court finds Plaintiff’s allegation that Defendant’s actions were designed to avoid paying policy benefits and based on discriminatory animus sufficient to establish oppression or malice. (Complaint, ¶ 34.) Accordingly, the court DENIES Defendant’s motion to strike Plaintiff’s prayer for exemplary damages.

CONCLUSION

Based on the foregoing, Defendant’s demurrer to Plaintiff’s Complaint is OVERRULED in its entirety. Furthermore, Defendant’s motion to strike portions of Plaintiff’s Complaint is DENIED.

Defendant to answer the Complaint in twenty (20) days, on or before April 3, 2023.