Judge Teresa A. Beaudet, Case 21STCV08265 2023-01-31 Tentative Ruling

JOSE LUIS ANGUIANO, Plaintiff, vs. NATIONAL GENERAL INSURANCE COMPANY, et al., Defendants.	Case No.:	21STCV08265
	Hearing Date:	January 31, 2023
	Hearing Time:	2:00 p.m.
	[TENTATIVE] ORDER RE: DEFENDANT INTEGON NATIONAL INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION; DEFENDANT NATIONAL GENERAL INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

Plaintiff Jose Luis Anguiano (“Plaintiff”) filed this action on March 3, 2021, against defendants National General Insurance Company (“NGIC”), Integon National Insurance Company (“Integon”), Freeway Insurance Services, Inc. (“Freeway Insurance”), Freeway Insurance Services America, LLC (“Freeway Insurance America”), All Star General Insurance Agency (“All Star”), Stonewood Insurance Services Inc. (“Stonewood”), and Robert Perez (“Perez”). Plaintiff’s Complaint asserts causes of action for breach of contract against Integon and NGIC, breach of the duty of good faith and fair dealing against Integon and NGIC, and professional negligence against Freeway Insurance, Stonewood, All Star and Perez.

Integon now moves for an order granting summary judgment or, in the alternative, summary adjudication in its favor on the Complaint.

NGIC also moves for an order granting summary judgment or, in the alternative, summary adjudication in its favor on the Complaint.

“[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¿Civil Code section 3294, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” (Code Civ. Proc., § 437c(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, 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).)

In his Complaint, Plaintiff alleges that on July 9, 2018, he went to the offices of Perez, Freeway Insurance America [1], Stonewood, and All Star to purchase an automobile insurance policy to insure his operation of a 2006 Pontiac GTO (the “Vehicle”). (Compl., ¶ 16.) Plaintiff alleges that Integon issued the subject policy, and that NGIC underwrote and issued the policy. (Compl., ¶¶ 3-4.)

Perez assisted Plaintiff with the application for the policy. (Compl., ¶ 18.) Perez asked Plaintiff if anyone else drove the vehicle, and Plaintiff advised Perez he resided with his older brother and his mother, but indicated they had their own vehicles and insurance and did not drive the Vehicle. (Ibid.) Plaintiff alleges he believed the members of his household were not required to be listed on any paperwork, and asserts the application was confusing, ambiguous, and misleading. (Complaint, ¶¶ 18, 21.) Plaintiff alleges Perez failed to identify his brother or mother on the application despite knowing that they were household members. (Compl., ¶ 22.)

Plaintiff alleges the Vehicle was stolen on August 13, 2018. (Compl., ¶ 29.) Plaintiff subsequently reported the loss and made a claim to his insurers. (Compl., ¶ 30.) Plaintiff alleges he received a notice of rescission of his policy on August 28, 2018, and a letter on October 4, 2018 from NGIC indicating that no coverage exists and that all of his claims were denied. (Compl., ¶¶ 32, 33.) Plaintiff alleges that NGIC indicated in an October 22, 2018 letter that during its investigation, it was discovered that two household members were living with Plaintiff at the time of his policy application, and that Plaintiff’s statement of loss which revealed the previously undisclosed household members contradicted his signed application where he indicated he was the sole person residing in his household. (Compl., ¶ 36.) Plaintiff’s policy was rescinded to inception, and as a result Plaintiff’s claim was denied as there was no coverage in force on the referenced date of loss. (Ibid.)

Integon asserts that it is entitled to summary adjudication on Plaintiff’s first cause of action for breach of contract because Plaintiff made material misrepresentations on his application for insurance and the policy was properly rescinded. “The standard elements of a claim for breach of contract are (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.” ((Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178 [internal quotations omitted].)

In the first cause of action for breach of contract, Plaintiff alleges that he “demanded that Defendants INTEGON and NATIONAL GENERAL provide comprehensive and collision coverage to cover the theft and total destruction of Plaintiff’s vehicle, and Defendants INTEGON and NATIONAL GENERAL have refused and denied any coverage pursuant to THE POLICY.” (Compl., ¶ 57.) Plaintiff alleges that Integon and NGIC “breached the contract of insurance, and violated California Law, by unreasonably refusing to pay and by continuing to withhold benefits now due and payable under the Insurance Contract and under California Law.” (Compl., ¶ 58.)

Integon cites to LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1263, where “Plaintiffs LA Sound USA, Inc. (LA Sound), LSY Trading Development, Inc. (LSY), Ancle Hsu, and David Ji (collectively, plaintiffs) appeal[ed] from a judgment entered in favor of defendant St. Paul Fire & Marine Insurance Company (St. Paul) on plaintiffs’ complaint and St. Paul’s cross-complaint.” The Court of Appeal found that “[t]he court correctly entered judgment in favor of St. Paul on plaintiffs’ complaint for breach of an insurance policy issued by St. Paul. Plaintiffs contend St. Paul failed to pay all their defense and settlement costs in an underlying action. But LA Sound made material misrepresentations on the insurance application, entitling St. Paul to rescind the policy. Thus, St. Paul had no duty to defend or indemnify plaintiffs at all.” (Ibid. .)

The LA Sound Court noted that “[w]hen a policyholder conceals or misrepresents a material fact on an insurance application, the insurer is entitled to rescind the policy. ‘Each party to a contract of insurance shall communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract … .’ (Ins. Code, § 332.) Concealment, which is the ‘[n]eglect to communicate that which a party knows, and ought to communicate’ (§ 330), ‘entitles the injured party to rescind insurance’ (§ 331). Similarly, ‘[i]f a representation is false in a material point … the injured party is entitled to rescind the contract from the time the representation becomes false.’ (§ 359.) ‘[A] rescission effectively renders the policy totally unenforceable from the outset so that there was never any coverage and no benefits are payable.’” ((Id. at pp. 1266-1267.) The LA Sound Court also noted that “[c]oncealment, whether intentional or unintentional, entitles the injured party to rescind insurance.’ (§ 331.) ‘Courts have applied Insurance Code sections 331 and 359 to permit rescission of an insurance policy based on an insured’s negligent or inadvertent failure to disclose a material fact in the application for insurance…Therefore, misstatement or concealment of ‘material’ facts is ground for rescission even if unintentional. The insurer need not prove that the applicant-insured actually intended to deceive the insurer.’” (Id. at p. 1269-1270 [emphasis in original].)

Integon asserts that similarly here, because the subject policy was rescinded, Plaintiff’s entire complaint (for breach of contract, bad faith and punitive damages) fails.

Integon provides evidence that on July 9, 2018, Plaintiff went to Freeway Insurance Services, Inc. (“Freeway”) where Perez assisted him in completing an application for an automobile insurance policy. (Integon’s Undisputed Material Fact (“UMF”) No. 1.) Integon issued the policy to Plaintiff. (UMF No. 19.) The application for insurance asked Plaintiff certain questions, including: “1. Have you disclosed all household members 14 years and older on the application?” (UMF No. 8; Naziri Decl., ¶ 12, Ex. 1.) Plaintiff responded “yes” to this question. (Ibid.) In addition, the application contained a certification providing: “APPLICANT’S CERTIFICATION…I agree all answers to all questions in this Application are true and correct...I further agree that ALL household members 14 years and older...are shown above.” (Naziri Decl., ¶ 12, Ex. 1.) Plaintiff signed and dated below the certification and understood that the answers had to be true and correct. (UMF No. 13, Naziri Decl., ¶ 12, Ex. 1.)

However, at the time Plaintiff completed the application for insurance he lived in an apartment in Oakland with his mother (Maria Montes) and brother (Rodrigo Anguiano), both of whom were over the age of 14 years. (UMF No. 9.) Neither Plaintiff’s mother nor his brother were listed as drivers, excluded users, or anywhere else on the application. (UMF No. 10.)

Integon asserts that Plaintiff thus made misrepresentations on the application, and that such misrepresentations were material. “Material misrepresentation or concealment of such facts are grounds for rescission of the policy, and an actual intent to deceive need not be shown. Materiality is determined solely by the probable and reasonable effect which truthful answers would have had upon the insurer. The fact that the insurer has demanded answers to specific questions in an application for insurance is in itself usually sufficient to establish materiality as a matter of law.” ((Thompson v. Occidental Life Ins. Co. (1973) 9 Cal.3d 904, 916 [internal citations omitted].) As set forth above, the application asked whether Plaintiff disclosed all household members 14 years and older on the application. (UMF No. 8.)

Integon also indicates that the application for insurance asks questions that Integon has determined are material to its ability to assess the risks of each policy and determine whether to issue the policy and if so, on what terms and at what premium. (Saephanh Decl., ¶ 5.) Integon states that had Plaintiff disclosed all household members, including his mother and brother, the premium would have increased by 138%. (Saephanh Decl., ¶ 11.) Integon indicates that it determined there were misrepresentations in the application that were material to its assessment of the risk and decision to issue the policy, and rescinded Plaintiff’s policy. (Naziri Decl., ¶ 17.) Integon issued a check returning the premiums. (Ibid.)

Based on the foregoing, the Court finds that Integon has met its burden of demonstrating that Plaintiff’s first cause of action for breach of contract is without merit. As set forth above, Plaintiff did not file an opposition to Integon’s motion. Thus, the Court finds that Plaintiff has failed to raise a triable issue of material fact as to his first cause of action.

Next, Integon asserts that even if Plaintiff could state a cause of action for breach of contract, his claim for bad faith fails because Integon’s conduct was reasonable. Integon also asserts that “[b]ecause the policy was rescinded (as if it never existed) Anguiano’s entire complaint (for breach of contract, bad faith and punitive damages) fails.” (Mot. at p. 8:27-28.)

Integon notes that “there are at least two separate requirements to establish breach of the implied covenant: (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.)

With regard to the threshold requirement that benefits due under the policy must have been withheld, the Court notes that, as discussed above, “[a] rescission effectively renders the policy totally unenforceable from the outset so that there was never any coverage and no benefits are payable.” ((LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co., supra, 156 Cal.App.4th at p. 1267.) As discussed, Integon asserts that Plaintiff “cannot establish a claim for breach of contract against any entity because the contract was rescinded and no benefits were due under the policy.” (Mot. at p. 15:16-18.) The Court finds that Integon met its burden of demonstrating that the first cause of action is without merit on those grounds. Accordingly, the Court finds that summary adjudication of the second cause of action is also warranted, because the threshold requirement that “benefits due under the policy must have been withheld” is absent here. ((Love v. Fire Ins. Exchange, supra, 221 Cal.App.3d at p. 1151.)

In Love v. Fire Ins. Exchange, supra, at page 1153, the Court of Appeal noted that “[o]ur conclusion that a bad faith claim cannot be maintained unless policy benefits are due is in accord with the policy in which the duty of good faith is rooted. The covenant of good faith and fair dealing is implied in law to assure that a contracting party refrain[s] from doing anything to injure the right of the other to receive the benefits of the agreement. In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract. Thus, when benefits are due an insured, delayed payment based on inadequate or tardy investigations, oppressive conduct by claims adjusters seeking to reduce the amounts legitimately payable and numerous other tactics may breach the implied covenant because it frustrates the insured’s primary right to receive the benefits of his contract -- i.e., prompt compensation for losses. Absent that primary right, however, the auxiliary implied covenant has nothing upon which to act as a supplement, and should not be endowed with an existence independent of its contractual underpinnings.” (Internal quotations, citations, and emphasis omitted.)

Integon also argues that here, “Aguiano disagreed as to whether there was a misrepresentation and it was material. Anguiano testified the insurer’s adjusters conduct was professional. (UMF 31.) Aside from the disagreement, Aguiano does not establish Anguiano’s insurer’s investigation was unreasonable. (UMF 1-32).” (Mot. at p. 23:14-17.) As discussed, Plaintiff does not oppose the motion and thus does not dispute that Integon’s conduct was reasonable.

Lastly, Integon asserts that it is entitled to summary adjudication on Plaintiff’s punitive damages claim because it did not act with malice, oppression, or fraud. As set forth above, the Court finds that Integon has demonstrated that summary adjudication is warranted as to Plaintiff’s causes of action against it for breach of contract and breach of the duty of good faith and fair dealing. Thus, the Court finds that Integon has demonstrated that summary adjudication of Plaintiff’s punitive damages claim is also warranted.

In its motion, NGIC asserts that it is entitled to summary judgment because it did not issue any insurance policy to Plaintiff.

NGIC provides evidence that Integon issued the policy (policy number GSP90275100) to Plaintiff. (NGIC’s Undisputed Material Fact (“UMF”) No. 19.) NGIC indicates that the policy issued to Plaintiff was underwritten by Integon and not NGIC, and that NGIC is not the parent company of Integon. (Jauhar Decl., ¶¶ 6-7.) NGIC further indicates that “National General” and “National General Insurance” are brand names that are used by all of the separate wholly owned subsidiaries under the “National General Management Corp.” and “National General Holdings Corp.” umbrellas. (Jauhar Decl., ¶¶ 1, 10.) NGIC states that “National General” and “National General Insurance” are not actual companies, and the use of these brand names by any two or more subsidiaries does not indicate any connection between those companies with regard to individual insurance policies or claims. (Jauhar Decl., ¶ 10.)

NGIC asserts that accordingly, Plaintiff cannot establish a contract between him and NGIC, and that NGIC is entitled to summary judgment on Plaintiff’s complaint in its entirety.

As set forth above, “[t]he standard elements of a claim for breach of contract are (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.” ((Wall Street Network, Ltd. v. New York Times Co., supra, 164 Cal.App.4th at p. 1178 [internal quotations omitted, emphasis added].) In addition, “there are at least two separate requirements to establish breach of the implied covenant: (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, supra, at p. 1151, emphasis added.)

Plaintiff did not file an opposition to NGIC’s motion and thus does not present any evidence to raise a triable issue of fact as to whether NGIC issued the policy. Based on the foregoing, the Court finds that NGIC has met its burden of demonstrating that Plaintiff’s causes of action against NGIC for breach of contract and breach of the duty of good faith and fair dealing are without merit.

NGIC also asserts that it is entitled to summary adjudication on Plaintiff’s claim for punitive damages because it did not act with malice, oppression, or fraud. Because NGIC has demonstrated that summary adjudication of Plaintiff’s causes of action for breach of contract and breach of the duty of good faith and fair dealing are warranted, the Court also finds that summary

In addition, based on the foregoing, NGIC’s motion for summary judgment is granted. The Court orders the Integon and NGIC to file and serve a proposed judgment within 10 days of the date of this Order.

[1]Plaintiff alleges that Freeway Insurance merged with Freeway Insurance America and caused Freeway Insurance America to be the surviving company. (Complaint, ¶ 6.)

Superior Court of California

County of Los Angeles

Department 50