Judge Teresa A. Beaudet, Case 20STCV44977 2022-08-04 Tentative Ruling

Plaintiff Petros Ter-Saakian (“Plaintiff”) filed this action on November 23, 2020 against Defendant Interinsurance Exchange of the Automobile Club (“Defendant”). The Complaint alleges causes of action for (1) breach of contract and (2) breach of the implied covenant of good faith and fair dealing.

Defendant now moves for summary judgment, or in the alternative, summary adjudication. Plaintiff opposes.

“[A] motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” ((Code Civ. Proc., § 437c, subd. (c).) “A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” (Code Civ. Proc., § 437c, subd. (f)(1).) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Ibid.)

The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. ((Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) If the moving party carries this burden, the burden shifts to the opposing party to make a prima facie showing that a triable issue of material fact exists. ((Ibid.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” ((Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

When a defendant seeks summary judgment or summary adjudication, he/she must show either (1) that one or more elements of the cause of action cannot be established; or (2) that there is a complete defense to that cause of action. ((Code Civ. Proc., § 437c, subd. (p)(2).) “If the defendant fails to make this initial showing, it is unnecessary to examine the plaintiff’s opposing evidence, and the motion must be denied.” (Powell v. Kleinman (2007) 151 Cal.App.4th 112, 121.)

In the Complaint, Plaintiff alleges that prior to November 6, 2019, he entered into a contract of insurance with Defendant (the “Policy”). (Compl., ¶ 6.) The number of Plaintiff’s Policy is CHO 106961251. (Compl., ¶ 6.) The Policy provides in pertinent part that Defendant would insure and indemnify Plaintiff from damage to and loss of his residential property and home located at 16918 Marlin Pl., Van Nuys, CA 91406 (the “Property”). (Compl., ¶ 6.) Throughout the period of the Policy, Plaintiff regularly paid premiums and performed each act required on Plaintiff’s part to keep the Policy in full force and effect. (Compl., ¶ 7.)

On or about November 6, 2019, Plaintiff’s Property was damaged as a result of vandalism. (Compl., ¶ 8.) Plaintiff notified Defendant of the loss and made a claim for benefits. (Compl., ¶ 8.) Plaintiff alleges that Defendant refuses to pay Plaintiff the benefits owed under the Policy, despite Plaintiff’s demand. (Compl., ¶ 10.)

“A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” (Careau & Co . v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) Here, Plaintiff alleges that Defendant breached the Policy by, inter alia, refusing to reimburse Plaintiff for the reasonable cost of replacing property damage. (Compl., ¶¶ 11, 12.)

Defendant contends that Plaintiff’s breach of contract cause of action has no merit because Defendant paid all damages owed under the Policy. It is undisputed that the Policy issued to Plaintiff is written on a “named perils” (or “specified perils”) basis. (Defendant’s Undisputed Material Fact (“UMF”) No. 4.) It is undisputed that covered losses under the Policy include “Vandalism or Malicious Mischief” and “Theft.” (UMF No. 5.) It is also undisputed that losses that are not covered under the Policy include loss to property that is caused by, resulting from, contributed to or consisting of “wear and tear, marring, deterioration.” (UMF No. 6.)

Defendant asserts that it paid for all damages that were conceivably caused by vandalism, and that most of the damages Plaintiff contends Defendant failed to pay were determined to be the result of “wear and tear” or “hard living” by the tenants, and thus not covered under the Policy.[1] Defendant requested independent adjuster John Crittenden of CIS Claim Services to inspect the Property, and Mr. Crittenden memorialized his findings in a report he sent to Defendant on November 23, 2019. (UMF Nos. 17, 39.) The report indicated whether Mr. Crittenden believed the claimed damages were considered vandalism, or whether he believed the damages were attributable to “wear/tear” or “hard living.” (UMF No. 43.) Mr. Crittenden prepared an $4,375.54 estimate for the items he considered vandalism. (UMF No. 44.) Defendant paid Plaintiff $3,375.54 on November 25, 2019, based on Mr. Crittenden’s estimate minus the insured’s $1,000 deductible. (UMF No. 59.) Defendant also issued a $301.95 supplemental payment to Plaintiff on February 11, 2020. (UMF No. 78.)

Plaintiff asserts that there are several triable issues of fact as to whether certain damages claimed by Plaintiff are the result of vandalism. The Court agrees. For instance, Mr. Crittenden indicated in his report that “[m]any of the doors in the home have been ‘modified’ for locks, filling in parts with wood filler, and other, but we do not consider this vandalism.” (UMF No. 47; Crittenden Decl., ¶ 4, Ex. F.) This is disputed by Plaintiff. In support of the opposition, Plaintiff submits the Declaration of Hayk Badalayan, a public adjuster that has been involved in Plaintiff’s claim against Defendant, who prepared an estimate for the repair to the damages at the Property. (Badalayan Decl., ¶¶ 1-2, 4.) Mr. Badalayan asserts that the damage to the doors claimed by Plaintiff were the result of vandalism, and that the areas where the door knobs and locks are located all appear to have suffered intentional breakage. (Response to UMF No. 47.) Mr. Crittenden also did not consider the holes drilled into the windows vandalism since the apparent purpose was to keep the windows shut. (UMF No. 49.) This is disputed by Plaintiff. Mr. Badalayan asserts that the screws drilled into the windows are not normal wear and tear and constitute an act of destruction and vandalism. (Response to UMF No. 49.) Mr. Crittenden also did not include replacing the cabinet doors in his estimate because he did not consider replaced/missing cabinetry vandalism. (UMF No. 55.) Plaintiff counters that the cabinet doors were ripped off by force damaging the hinges, the assembly, and the cabinet doors themselves, constituting vandalism. (Response to UMF No. 55.) As another example, Mr. Crittenden did not believe the damage to the floor, floor heater, or the drywall damage in the bathroom was vandalism. (UMF No. 56.) Plaintiff disputes this, asserting that the wood floors have various deep scratches and gashes that are the result of vandalism, and that the drywall by the toilet in the bathroom has been cut and ripped out, which is also the result of vandalism. (Response to UMF No. 56.)

Defendant also notes that losses excluded under the Policy include “the illegal manufacturing, production, operation, or processing of chemical, biological, or plant materials.” (UMF No. 6.) Defendant contends that “[m]any of the alleged damages are consistent with the property being used as a drug house including drilling the windows closed and modifying the interior doors.” (Mot. at p. 16:3-5.) But noted by Plaintiff, Defendant fails to provide competent evidence in support of this assertion.

“[T]here are at least two separate requirements to establish breach of the implied covenant [of good faith and fair dealing]: (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.” (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.)

Defendant first argues that there can be no bad faith where there is no breach of the contract. However, the Court has found that a triable issue of material fact exists as to the breach of contract cause of action.

Next, Defendant contends that Plaintiff’s cause of action for bad faith has no merit, because there is no genuine issue as to whether Defendant improperly withheld benefits due under the Policy.[2] Defendant notes that “an insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured’s coverage claim is not liable in bad faith even though it might be liable for breach of contract.” (Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347.) “The genuine issue rule in the context of bad faith claims allows a [trial] court to grant summary judgment when it is undisputed or indisputable that the basis for the insurer’s denial of benefits was reasonable—for example, where even under the plaintiff’s version of the facts there is a genuine issue as to the insurer’s liability under California law…. On the other hand, an insurer is not entitled to judgment as a matter of law where, viewing the facts in the light most favorable to the plaintiff, a jury could conclude that the insurer acted unreasonably.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 724.)

Defendant argues that “[a]s demonstrated herein, [Defendant’s] interpretation of terms ‘vandalism’ and ‘wear and tear’ is consistent with California case law and the language of the policy. The [Defendant] reviewed and considered the contrary arguments of Plaintiff, and as indicated by the arguments made on this motion, the [Defendant] believed and continues to believe those arguments have no merit.” (Mot. at p. 17:18-21.) Defendant also asserts that “[t]he genuine dispute doctrine applies here because the Defendant relied upon the opinions of experts who examined the property to determine the cause of the damage to the same.” (Mot. at p. 6:6-8.) “The ‘genuine dispute’ doctrine may be applied where the insurer denies a claim based on the opinions of experts.” (Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co., supra, 90 Cal.App.4th 335, 347, emphasis added.)

Plaintiff counters that “the underlying facts (ie whether the tenant vandalized the [Property] or not) are disputed, the evidence is disputed, Mr. Crittenden’s claims, opinions and conclusions are disputed. Because the parties dispute the underlying facts, this Court cannot determine this issue as a matter of law. The factual issues presented in this action must be determined by a jury.” (Opp’n at p. 8:14-18.) As noted by Plaintiff, “[w]hile the reasonableness of an insurer’s claims-handling conduct is ordinarily a question of fact, it becomes a question of law where the evidence is undisputed and only one reasonable inference can be drawn from the evidence.” (Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001) 90 Cal.App.4th 335, 346.)

As set forth above, Court has found that a triable issue of fact exists as to whether Defendant paid all damages owed to Plaintiff under the Policy. The Court does not find that Defendant has demonstrated that it is undisputed or indisputable that the basis for Defendant’s denial of benefits was reasonable. Thus, Defendant’s motion for summary adjudication as to Plaintiff’s cause of action for breach of the implied covenant of good faith and fair dealing is denied.

Lastly, Defendant contends that Plaintiff’s claim for punitive damages has no merit.

Punitive damages are allowed only where “it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (a).) Defendant cites to Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1080, where the Court of Appeal noted that “…it will not be enough to show, by a preponderance of the evidence, that [defendant] had engaged in bad faith claims-handling practices. [Plaintiff], in order to recover punitive damages, must also demonstrate by clear and convincing evidence that [defendant] acted with malice, oppression or fraud as these terms are used in Civil Code section 3294, subdivision (a) and have been construed and applied in relevant case law.” (Internal citation omitted.) In addition, “[p]unitive damages are appropriate if the defendant’s acts are reprehensible, fraudulent or in blatant violation of law or policy. The mere carelessness or ignorance of the defendant does not justify the imposition of punitive damages. … Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.” (Food Pro Internat., Inc. v. Farmers Ins. Exchange (2008) 169 Cal.App.4th 976, 994 [internal quotations omitted].)

Defendant contends that it has “presented the history of the handling of Plaintiff’s claim, its various responses to Plaintiff’s requests, and sending the claim out for re-evaluation by an expert to insure a correct resolution of the claim. The [Defendant’s] actions were not evil, criminal, intended to injure or done with a reckless disregard of Plaintiff’s rights.” (Mot. at p. 19:20-24.)

It is undisputed that Mr. Crittenden inspected the Property on behalf of Defendant on

November 19, 2019, and that he memorialized his findings in a report he sent to Defendant on November 23, 2019. (UMF Nos. 19, 39.) Defendant contends that Mr. Crittenden’s report included detailed descriptions of the claimed damages which he reviewed during his inspection. (UMF No. 42.) It is undisputed that Defendant paid Plaintiff $3,375.54 on November 25, 2019, based on Mr. Crittenden’s estimate minus the insured’s $1,000 deductible. (UMF No. 59.) It is undisputed that on January 13, 2020, Plaintiff sent Defendant an $81,710.55 repair estimate from the Badalyan Group Inc. (UMF No. 63.) Defendant asked Mr. Crittenden to review the estimate on January 14, 2020. (UMF No. 64; Crittenden Decl., ¶ 8.) It is undisputed that Mr. Crittenden reviewed the estimate and did not recommend Defendant issue a supplemental payment based on the estimate. (UMF Nos. 65, 66.) It is also undisputed that Defendant prepared a supplemental estimate dated February 11, 2020 in the sum of $4,677.49, which included an aluminum window in the garage. (UMF No. 77.) It is undisputed Defendant issued a $301.95 supplemental payment to Plaintiff on February 11, 2020. (UMF No. 78.)

In the opposition, Plaintiff cites to Fadeeff v. State Farm General Ins. Co. (2020) 50 Cal.App.5th 94 in support of the assertion that summary adjudication on the punitive damages claim must be denied. In Fadeeff, the Court of Appeal considered whether the trial court erred in summarily adjudicating a punitive damage claim in the defendant (State Farm’s) favor. (Id. at p. 108.) The Court indicated that “[i]n the first instance, the burden is on State Farm to show that the Fadeeffs cannot prove that State Farm acted with malice, oppression or fraud. Then the burden shifts to the Fadeeffs to establish evidence supporting punitive damages with the clear and convincing standard of proof. State Farm has not met its burden. The fact that an individual plaintiff may not believe that the people at State Farm ‘wanted to harm you or hurt you intentionally’ does not conclusively answer the question whether State Farm intentionally misrepresented or concealed a material fact, or acted with knowing disregard of the rights of others. Nor is the fact that the Fadeeffs may have relied on their public adjuster to review materials enough to shift the burden to the Fadeeffs to rebut a showing of no malice, oppression or fraud by State Farm.” (Id. at p. 109 [internal citations omitted].)

Defendant contends that Fadeeff is distinguishable. As the parties note, Defendant does not rely on any testimony from Plaintiff that Plaintiff did not believe Defendant wanted to harm or hurt him intentionally to support Defendant’s assertion that the punitive damages claim has no merit.[3] Defendant asserts that it “has put forth affirmative proof that it carried out a complete and thorough investigation—reviewing the results of its expert’s reports on multiple occasions, communicating with the insured, relying upon the expert’s opinions as to what is ‘wear and tear’ and what is vandalism.” (Reply at p. 9:1-4.) In addition, as Defendant notes, Plaintiff does not point to any facts in the opposition that Defendant acted with malice, oppression, or fraud here.

The Court finds that Defendant has met its burden of demonstrating that it did not act with malice, oppression, or fraud in its handling of Plaintiff’s insurance claim, and that Plaintiff has failed to raise a triable issue of fact thereto. Thus, Defendant’s motion for summary adjudication as to Plaintiff’s claim for punitive damages is granted.

Based on the foregoing, Defendant’s motion for summary judgment is denied. Defendant’s motion for summary adjudication as to Plaintiff’s causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing is denied. Defendant’s

motion for summary adjudication as to Plaintiff’s claim for punitive damages is granted.

[1]As an initial matter, the Court notes that Defendant extensively relies on Jihan, Inc. v. Amco Ins. Co. (S.D.Cal. 2021) 539 F.Supp.3d 1070 in support of this point and additional points made in the motion and the reply. As noted by Plaintiff, this federal authority is nonbinding.

[2]As an initial matter, Plaintiff notes that in the section of the motion entitled “Plaintiff’s Cause Of Action For Bad Faith Has No Merit Because There Is a Genuine Dispute as to Coverage,” Defendant does not cite to any undisputed material facts. However, Defendant’s separate statement lists facts and supporting evidence in support of this issue. (Defendant’s Separate Statement, pp. 47:13-70:4.)

[3]In Fadeef, State Farm cited certain deposition testimony, i.e., that plaintiff was asked, “‘Did you ever get a feeling from any of your interactions with people at State Farm that they wanted to harm you or hurt you intentionally?’ She answered, ‘No.’” (Fadeeff v. State Farm General Ins. Co., supra, 50 Cal.App.5th 94, 109.)

PETROS TER-SAAKIAN, et al., Plaintiff, vs. INTERINSURANCE EXCHANGE OF THE AUTOMOBILE CLUB, et al., Defendants.	Case No.:	20STCV44977
	Hearing Date:	August 4, 2022
	Hearing Time:	2:00 p.m.
	[TENTATIVE] ORDER RE: DEFENDANT INTERINSURANCE EXCHANGE OF THE AUTOMOBILE CLUB’S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION

Superior Court of California

County of Los Angeles

Department 50