Judge: Sarah J. Heidel, Case: 23BBCV02683, Date: 2024-05-03 Tentative Ruling
Case Number: 23BBCV02683 Hearing Date: May 3, 2024 Dept: V
SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES – NORTHEAST DISTRICT
DEPARTMENT V
LEXHAM OLIVE, LLC, A DELAWARE LIMITED LIAIBLITY COMPANY,
Plaintiff,
vs.
THE CARVING BOARD, LLC, A CALIFORNIA LIMITED LIABILITY
COMPANY; WESCO INSURANCE COMPANY; RDCS SERVICE INC. DBA LJ CONSTRUCTION; DOE
CONTRACTOR INSURANCE COMPANY; and DOES 1 through 20, inclusive, Defendants.
Case No.: 23BBCV02683
Hearing Date: May 3,
2024
Time: 9:00 a.m.
[TENTATIVE] ORDER RE: DEMURRER OF DEFENDANT WESCO INSURANCE
COMPANY TO LEXHAM OLIVE, LLC’S COMPLAINT
MOVING PARTIES:
Defendant WESCO INSURANCE COMPANY
RESPONDING PARTY: Plaintiff LEXHAM OLIVE, LLC
The court considered the moving papers, opposition and
reply.
BACKGROUND
Plaintiff leased commercial space to defendant The Carving
Board, LLC (TCB). Plaintiff alleges that it suffered damages resulting from
faulty work performed by TCB’s contractor RDCS SERVICES INC. DBA LJ
CONSTRUCTION (RDCS). The Complaint alleges the causes of action for (1)
negligence (against The Carving Board and RDCS Services Inc., (2) breach of
written contract (against The Carving Board), (3) breach of insurance contract
(against Wesco Insurance Company
(Tenant/Landlord Insurer)), (4) breach of contract (against RDCS Service Inc.
and Doe Contractor Insurance Company), and (5) fraud (against The Carving
Board).
Defendant Wesco Insurance Company filed the demurrer on
February 7, 2024. Plaintiff opposes.
LEGAL STANDARD
A party may object to a complaint or cross-complaint the
party may file a demurrer, an answer, or both. (Code of Civ. Proc., § 430.30.)
The demurrer may be filed within 30 days after service of the complaint or
cross-complaint unless extended by stipulation or court order. (Code of Civ.
Proc. § 430.40(a).)
As a general matter, 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 pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc.
v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the
court assumes the truth of the complaint’s properly pleaded or implied factual
allegations. (Id.) The only issue a demurrer is concerned with is whether the
complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147
Cal.App.4th 740, 747.)
DISCUSSION
Defendant Wesco Insurance Company demurs to the third cause
of action for breach of insurance contract on the grounds that plaintiff failed
to state facts sufficient to constitute a cause of action against defendant.
Timeliness
Plaintiffs served the summons and complaint on December 8,
2023. Under Code of Civil Procedure section 430.40, Wesco had 30 days from the
date of service, in other words until January 8, 2024, to file the demurrer by.
Because Wesco filed on February 7, 2024, the demurrer is apparently untimely.
The court will nevertheless exercise its discretion and address the merits.
(Jackson v. Doe (2011) 192 Cal.App.4th 742, 750.)
A.
Meet and Confer
The parties must meet and confer in person, by telephone, or
by video conference prior to any party filing a demurrer. (Code Civ. Proc., §
430.41(a).) Here, the parties exchanged letters, which is technically
insufficient. However, failure to sufficiently meet and confer is not a basis
upon which the court may overrules or sustains the demurrer. (Code of Civ.
Proc., § 430.41(a)(4).) Therefore, the court will discuss the merits of the
demurrer.
Plaintiff has sufficiently alleged that it is an
insured of the defendant’s policy.
Defendant argues that plaintiff is a “beneficiary” of the
insurance policy and not an insured and is therefore cannot directly sue the
Wesco until it has obtained a judgment against the insured.
In its complaint, Plaintiff attached a certificate of
liability insurance stating that Lexham Olice, LLC is “included as additional
insured with respect to the premises rented or leased by the named insured.”
(Complaint, Exh. C.) The attached certificate of liability insurance also
defines an insured to include “any person or organization with whom you [the
named insured, The Carving Board] agreed, because of written contract or
written agreement to provide insurance but only with respect to. . . “property damage”
arising out of “your products” which are distributed or sold in the regular
course of the vendors business. . .” (Complaint, Exh. C.) The allegations are
sufficient to alleges that Plaintiff is an insured under the policy.
C.
Plaintiff failed to allege the material terms of
the Wesco Insurance Policy
To plead a breach of written contract cause of action, the
terms must be set out verbatim in the body of the complaint or a copy of the
written instrument must be attached and incorporated by reference. (Holly Sugar
Corp v. McColgan (1941) 18 Cal.2d 218, 225.)
The complaint did not
include the terms of the insurance policy nor was a copy of the insurance
policy attached. Plaintiff appears to concede this point but argues that
defendant has improperly failed to provide it with a copy of the policy. That
argument does not address the deficiency in the pleadings.
D.
Plaintiff failed to properly allege a bad faith
breach of contract claim.
In order to plead a bad-faith breach of contract cause of
action, plaintiff must plead that (1) there is a contractual relationship
between the parties, (2) the benefits are due under the terms of the policy,
and (3) the insurance company’s withholding of benefits is unreasonable.
i.
Contractual relationship
Defendant argues that the plaintiff’s only allegation is
based on information and belief that The Cutting Board purchased insurance for
the benefit of the plaintiff. Here, the plaintiff has provided sufficient
factual allegations that a contractual relationship exists between the
plaintiff and defendant because Lexham Olive, LLC is listed as an additional
insured with respects to the premises rented by the named insured, The Carving
Board, LLC on the certificate of liability insurance as discussed above. (Complaint,
Exh. C.
ii.
Benefits under the terms of the policy
Defendant argues that the complaint failed to include
fundamental allegations that benefits are due under the terms of the policy.
Plaintiff did not address whether their claim fell under the terms of the
policy because the plaintiff did not include the terms of the policy either in
the complaint. Here, the plaintiff did not provide sufficient factual
allegations to show the claim they submitted fell under the terms of the
policy.
iii.
Reasonableness of withholding
Defendant argues that the complaint failed to allege that
the denial of the claim was unreasonable. The complaint states that defendant
breached the policy by denying the claim, failing to pay the claim, failing to
investigate the claim, and failing to provide reasons for the denial.
(Complaint ¶ 34). Plaintiff attaches to the complaint the denial letter from
the insurer and alleges that the denial was in bad faith. The court agrees that
the complaint does not sufficiently allege that the withholding of the benefits
sought by plaintiff was unreasonable. Among other things, the letter attached
to the complaint tends to show that Wesco did investigate, in that it
“advise[s] that our investigation has determined that there is no coverage
available for this loss under our insured’s policy.” (Complaint, Exh. D). And
the bare allegation that the denial letter failed to provide reasons for the
denial is not enough to establish bad faith.
E.
The No-Action Clause
Defendant also argues the policy at issue has a “no-action”
clause that bars the plaintiff from suing defendant, the insurer, because
plaintiff is suing the named insured, The Carving Board, in the same action.
Defendant argues that the no-action clause would apply because plaintiff is not
the insured. The policy is not attached as part of the pleadings and the court
will not address this argument, which is speculative at this time.
Based on the
foregoing, the court SUSTAINS the demurrer with 20 days leave to amend