Judge: Stephen P. Pfahler, Case: 22STCV10568, Date: 2024-03-08 Tentative Ruling


Case Number: 22STCV10568    Hearing Date: March 8, 2024    Dept: 68

Dept. 68

Date: 3-8-24 c/f 1-18-24

Case # 22STCV10568

Trial Date: 5-28-24

 

SUMMARY JUDGMENT/SUMMARY ADJUDICATION

 

MOVING PARTY: Defendant, State Farm Mutual Automobile Insurance Company

RESPONDING PARTY: Plaintiffs, Henghame Abaghi

 

RELIEF REQUESTED

Motion for Summary Judgment/Summary Adjudication

·         1st Cause of Action: Breach of Duty of Good Faith and Fair Dealing

·         2nd Cause of Action: Breach of Contract

·         Claim for Punitive Damages

 

SUMMARY OF ACTION

On February 23, 2021, the home of plaintiff Henghame Abaghi located at 23910 Stagg St., West Hills, suffered damage as a result of a “pressurized water supply line located under the concrete slab of a downstairs bedroom” apparently ruptured. Plaintiff submitted an insurance claim on the homeowner policy with defendant State Farm Mutual Automobile Insurance Company. On April 3, 2021, the claim was denied. Plaintiff alleges defendant failed to adequately investigate the cause of the leak, and therefore improperly denied coverage under the terms of the policy.

 

On March 28, 2022, Plaintiff filed a complaint for Breach of Duty of Good Faith and Fair Dealing, and Breach of Contract. Defendant answered the complaint on May 13, 2022. On December 20, 2023, the court granted Defendant’s motion to bifurcate trial into the first phase for liability, and the second part for the punitive damages claim.

 

RULING: Granted in Part/Denied in Part.

Evidentiary Objections

·         Declaration of Jeffrey Nodd, Appendix of Exhibits, Ex. E, Janaury 28, 2021 Letter: Overruled (Code Civ. Proc., 437c, subd. (q))

·         Declaration of Jeffrey Nodd, Appendix of Exhibits, Ex. G, Declaration of David Spiegel: Overruled.

 

Defendant State Farm Mutual Automobile Insurance Company (State Farm) moves for summary judgment/Summary adjudication on the complaint of Henghame Abaghi as to the Breach of Duty of Good Faith and Fair Dealing, Breach of Contract causes action, and the claim for punitive damages. State Farm moves for summary judgment/summary adjudication on grounds of no breach or bad faith arising insufficient payment of policy benefits. Plaintiff in opposition maintain State Farm improperly denied the claim due to inadequate investigation and therefore a factually and legally flawed conclusion. State Farm in reply reiterates compliance with the policy terms and basis for denial, challenges Plaintiff’s interpretation for any covered loss, and therefore denies any liability for bad faith. State Farm also reiterates the lack of any basis for the recovery of punitive damages.

 

The pleadings frame the issues for motions, “since it is those allegations to which the motion must respond. (Citation.)”  (Scolinos v. Kolts (1995) 37 Cal. App. 4th 635, 640-641; FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 382-383; Jordan-Lyon Prods., LTD., v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1472.) 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. Atl. 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 moving for summary judgment “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.”  (Code Civ. Proc., § 437c, subd. (p)(2).)  “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.”  (Ibid.) 

 

“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 inference that may be drawn form that evidence, in the light most favorable to the party opposing summary judgment.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467; see also Code Civ. Proc., § 437c, subd. (c).)  “An issue of fact can only be created by a conflict in the evidence.  It is not created by speculation, conjecture, imagination or guesswork.”  (Lyons v. Security Pacific National Bank (1995) 40 Cal.App.4th 1001, 1041 (citation omitted).) 

 

2nd Cause of Action: Breach of Contract

State Farm maintains the loss constitutes a non-covered event, in that the water leak was the result of normal wear and tear of the household plumbing water supply system. Plaintiff counters the denial was made without any independent investigation of the cause, and therefore an erroneous factual and legal conclusion based solely on the report from on-site plumber. State Farm in reply maintains its conclusion was based on its own investigation and determination following review of the plumbing report.

 

“‘While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply.’ (Citation.) ‘The principles governing the interpretation of insurance policies in California are well settled. “Our goal in construing insurance contracts, as with contracts generally, is to give effect to the parties' mutual intentions.”’ (Citation.) “‘Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Citation.) The “clear and explicit” meaning of these provisions, interpreted in their “ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ (Citation), controls judicial interpretation. (Citation.)’” (Citation) “‘If contractual language is clear and explicit, it governs.’”

 

“‘If the terms are ambiguous [i.e., susceptible of more than one reasonable interpretation], we interpret them to protect “‘the objectively reasonable expectations of the insured.’” (Citation.) This rule stems from the principle that “‘[i]f the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it.’” (Citation.) “‘Only if these rules do not resolve a claimed ambiguity do we resort to the rule that ambiguities are to be resolved against the insurer....’ The ‘tie-breaker’ rule of construction against the insurer stems from the recognition that the insurer generally drafted the policy and received premiums to provide the agreed protection.” (Citation.) “[L]anguage in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract.... Courts will not strain to create an ambiguity where none exists. [¶] ‘The insured has the burden of establishing that a claim, unless specifically excluded, is within basic coverage, while the insurer has the burden of establishing that a specific exclusion applies.’ (Citation.) The principles of contractual interpretation, as applied to insurance policies ‘do not include using public policy to redefine the scope of coverage.’” (Inns-by-the-Sea v. California Mutual Ins. Co. (2021) 71 Cal.App.5th 688, 697–698.)

 

The parties agree the coverage determination was based on a report from the plumber, whereby a pinhole leak in copper pipe embedded in the slab caused the water damage. [Declaration of Karen Swenson, Appendix of Exhibits and Evidence, Ex. 10-11.] The “wear and tear” exclusion also remains undisputed. The court quotes the undisputed, relevant section of the policy:

 

“SECTION I - LOSSES INSURED

COVERAGE A – DWELLING We insure for accidental direct physical loss to the property described in Coverage A, except as provided in SECTION I -LOSSES NOT INSURED. …

COVERAGE B – PERSONAL PROPERTY We insure for accidental direct physical loss to property described in Coverage B caused by the following perils. except as provided in SECTION I – LOSSES NOT INSURED: … 12. Sudden and accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or from within a household appliance. ...

 

SECTION I - LOSSES NOT INSURED

1. We do not insure under any coverage for any loss consisting of the items in paragraphs 2., 3., 4. or 5. below. This exclusion does not apply if the loss is caused by a peril which is not otherwise excluded.

2. We do not insure for any loss to the property described in Coverage A which is caused by one or more of the items below, regardless of whether the loss occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these: ... g. wear, tear, marring, scratching, deterioration, inherent vice, latent defect or mechanical breakdown; h. corrosion, electrolysis or rust; ... However, we do insure for any resulting loss from items a. through m. unless the resulting loss is itself a Loss Not Insured by this Section.

 

The policy endorsement, FE-3422, amends the policy as follows:

FE-3422 HOMEOWNERS POLICY ENDORSEMENT (California) Item 4.c. is replaced by the following:

4. We do not insure under any coverage for any loss which is caused by one or more of the items below, regardless of whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:

c. Water, meaning: (3) water below the surface of the ground, including water which exerts pressure on, or seeps or leaks through a building, side-walk, driveway, foundation, swimming pool or other structure; (5) continuous or repeated seepage or leakage of water or steam from a: (a) heating, air conditioning or automatic fire protective sprinkler system; (b) household appliance; (c) plumbing system, including from within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceilings or floors. However, we do insure for any direct loss by fire, explosion or theft resulting from water, provided the resulting loss is itself a Loss Insured.” [Declaration of Karen Swenson, Appendix of Exhibits and Evidence, Ex. 3: Policy; Declaration of Sean Moore.]

 

Wear and tear, and other forms of corrosion exclusions, remain valid terms for insurance contracts. (Murray v. State Farm Fire & Casualty Co. (1990) 219 Cal.App.3d 58, 63.) Even if the leak constituted a covered event, State Farm offers additional citation to the language in the policy endorsement regarding continuous or repeated seepage from a leaking pipe. This type of exclusion also finds support. (Freedman v. State Farm Ins. Co. (2009) 173 Cal.App.4th 957, 964.)

 

Rather than challenge the policy terms, Plaintiff squarely frames the dispute as a battle of experts. State Farm in support of its interpretation of the policy cites to its expert Michael Clark, as at least part of the basis for the coverage decision. [Declaration of Karen Swenson, Appendix of Exhibits and Evidence, Ex. 4: Declaration of Michael Clark.] Clark reviewed the reports and records provided by State Farm. Clark first determines that the water supply line was unprotected from the concrete barrier, and the location of the water supply line in the home slab combined with lack of any signs of external force applied to the pipe, precludes any finding of a sudden event causing the damage. Clark concludes that the existence of the unprotected pipe within the concrete barrier caused a potential corrosive reaction over time, thereby leading to the leak. The subsequent water damage was the result of systematic and continuous leaking. [Id., ¶¶ 5-11.] For purposes of summary judgment, the court finds State Farm shifts the burden of proof in regards to the lack of coverage for the event based on the determination of the cause of the loss. (Code Civ. Proc. § 437c, subd. (p)(2).)

 

Plaintiff contests the conclusion of wear and tear. Plaintiff seeks to establish triable issues of material fact on the cause of the leak, as one potentially caused by a covered event, rather than the single determination of corrosion and systematic leakage by Clark. Factual support for the challenge comes from the counter declaration of David Spiegel. The declaration relies on both independent determinations, as well as disagreement with the methods and information relied upon by Clark. [Declaration of Jeffrey Nodd, Appendix of Exhibits and Evidence, Ex. G: Declaration of David Spiegel.]

 

Spiegel, a restoration expert, with multiple licenses, including a general contractors license, like Michael Clark [Clark Decl., ¶ 2], concurs with the water pipe source of damage, but addresses other possibilities for the cause of the pinhole leak. Spiegel identifies potential manufacturing defects, fluctuating pressures from municipal water supply causing stress, and/or chemicals in the water supply. Spiegel concedes to the necessity of shielding for copper pipes coming into contact with concrete, but offers no specific response to the claimed use of unprotected pipe in the Clark declaration. [Spiegel Decl., ¶ 13.] Spiegel additionally challenges the underlying evidence relied upon by Clark, due at least in part, the lack of personal inspection or forensic testing determining the actual cause of the pinhole leak to appear. [Id., ¶¶ 14, 18, 36, 41.] Spiegel also notes the lack of other extrinsic factors such as mold and decay indicating, thereby indicating a more systematic leak. [Id., ¶¶ 15-17, 34.] The Spiegel directly disagrees with the conclusions of Clark. [Spiegel Decl., ¶¶ 23-24, 26-33, 37-40, 42-43.]

 

The qualified, admissible expert disagreements over the origin, and basis of the water intrusion supports a finding of triable issues of material fact on the breach of contract claim. [Clark and Spiegel Decl.; Policy.] Argument in reply regarding the definition of continuous or repeated lacks support within the plain language of endorsement. The existence of a “sudden” event versus a continuous, systematic outpouring remains within the domain of the experts, rather than a temporal event determined by definition as a matter of law in the instant motion. (Brown v. Mid-Century Ins. Co. (2013) 215 Cal.App.4th 841, 852.)

 

 The motion for summary judgment is therefore denied in that total relief cannot be accorded on the action, and the motion for summary adjudication as well.

 

1st Cause of Action: Breach of Covenant of Good Faith and Fair Dealing

State Farm depends on the breach of contract cause of action for the argument that Plaintiff also lacks a valid bad faith claim in that the denial of the claim on the interpretation of contractual terms and determination of the cause constituted a reasonable decision. (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.) Plaintiffs counter that the disputed investigation, as documented in the Spiegel declaration, in and of itself supports triable issues. To the extent Sate Farm unsuccessfully challenges the breach of contract cause of action on the basis of both the cause and duration of the leak, the court also finds a lack of support for the argument against a valid bad faith claim. (Carma Developers (Cal.), Inc. v. Marathon Dev. California, Inc. (1992) 2 Cal.4th 342, 373; Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347; McMillin Scripps North Partnership v. Royal Ins. Co. (1993) 19 Cal.App.4th 1215, 1222; Racine & Laramie, Ltd. v. California Dept. of Parks & Rec. (1992) 11 Cal.App.4th 1026, 1031-1032; Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395; Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1153.) Triable issues of material fact on the same basis as the breach of contract claim.

 

Punitive Damages

State Farm lastly challenges the basis of punitive damages. Plaintiff counters that the circumstances demonstrate support for punitive damages.

 

Civil Code section 3294, subdivision (c) authorizes punitive damages upon a showing of malice, oppression, or fraud, which are defined as follows:

 

(1) “Malice” means 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.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

(3) “Fraud” means 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.

 

“[Simple breach of contract, no matter how willful and hence tortious, is not a ground for punitive damages. Such damages are accessible only upon a showing that the defendant ‘act[ed] with the intent to vex, injure, or annoy.’” (Citation.) [¶] Punitive damages for failure to pay or properly administer an insurance claim are ordinarily, as in this case, based on ‘malice’ or ‘oppression,’ rather than on the third possible ground for the award, ‘fraud.’ Both ‘malice’ and ‘oppression’ are defined in Civil Code section 3294 as involving ‘despicable conduct, which in the case of malice ‘is carried on by the defendant with a willful and conscious disregard of the rights or safety of others,’ and as to oppression is ‘conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.’” [¶] “[I]t is significant that the Legislature amended Civil Code section 3294 in 1987 to add the requirement that punitive damages be proved by ‘clear and convincing evidence.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1286–1287; Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 909–910.)

 

While triable issues remain on the bad faith claim, the circumstances fail to meet the demonstrate oppressive or malicious conduct under heightened factual standard required for punitive damages. State Farm clearly demonstrates its reasonable reliance on the conclusions of the investigation. Delays were partially the result of Plaintiff’s own failure to earlier provide information, which in no way reflects on State Farm handling practices. [Clark Decl., Spiegel Decl., Swenson Decl., Declaration of JoAnna Moore.] Again the dispute between the experts on the cause of the subject claim demonstrates a genuinely valid dispute over the origin of the damage on otherwise undisputed contractual terms and circumstances both constituting covered or uncovered events. The motion for summary adjudication on the punitive damages claim is therefore granted.

 

In summary, the motion for summary judgment, and alternative motions for summary adjudication on the breach of contract and bad faith causes of action are DENIED. The motion for summary adjudication on the punitive damages claim is GRANTED.

 

Motion to Quash scheduled for March 20, 2024. Trial remains set for May 28, 2024.

 

State Farm to give notice.