Judge: Teresa A. Beaudet, Case: 21STCV34015, Date: 2022-10-10 Tentative Ruling

Case Number: 21STCV34015    Hearing Date: October 10, 2022    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Mary Jane Jones (“Plaintiff”) filed this action on September 15, 2021 against Defendants Allstate Insurance Company (“Allstate”) and California Earthquake Authority (“CEA”) (jointly, “Defendants”). The operative Second Amended Complaint (“SAC”) was filed on June 13, 2022, and asserts causes of action for (1) bad faith, (2) breach of contract, (3) fraud, (4) tortious interference with contract, (5) tortious interference with contract, and (6) infliction of emotional distress.  

CEA now demurs to the third and sixth causes of action of the SAC for failure to state facts sufficient to constitute a cause of action. CEA also moves to strike portions of the SAC. Plaintiff opposes both the demurrer and motion to strike.

Request for Judicial Notice

The Court grants CEA’s request for judicial notice.

Demurrer

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

Allegations of the SAC

Every year from 1996 through 2021, Plaintiff purchased earthquake insurance from Defendants covering the premises located at 3679 Roseview Avenue, Los Angeles, California 90065 (the “Premises”). (SAC, ¶ 7.) On or about December 29, 2019, Defendants issued to Plaintiff an earthquake insurance policy entitled Basic Earthquake Policy-Homeowners, No. 404 326 206 (“the Policy”). (SAC, ¶ 17.) 

On or about September 18, 2020, an earthquake struck Los Angeles County, which  caused substantial destruction to the Premises and destruction of Plaintiff’s property therein. (SAC, ¶ 18.) The Policy was in full force and effect when the earthquake took place on September 18, 2020. (SAC, ¶ 17.) Plaintiff submitted to Defendants proof of loss for damage resulting from the earthquake to the Premises in accordance with the terms of the Policy. (SAC,  ¶ 19.) However, despite Plaintiff’s demand for payment for losses under the terms of the Policy, Defendants have failed and refused, and continue to fail and refuse, to pay for Plaintiff’s losses. (SAC, ¶ 20.) Defendants assert that Plaintiff’s damages were not caused by the earthquake. (SAC, ¶ 26.) 

Plaintiff also alleges that “[t]he consequences of the many conflicts of interest and discrepancies engineered into the [CEA] include, but are not limited to, misleading advertising, publicity and marketing which obscures and conceals the predominant self-interest of the private insurance industry in the [CEA] and in the administration of its programs and claims processes; increased risk of nonpayment of claims in the event of a large quake due to collusive underfunding and the cutoff of access to insurance carriers’ much larger general premium pools from their overall sales of insurance; discrepancies between earthquake insurance contracts, insurance best practices, adjuster’s manuals, and claims adjustment processes; the systematic preparation, use, and misapplication of inherently biased and misleading engineering reports to wrongfully deny claims; wrongful and erroneous setting of earthquake insurance premium rates; higher premiums and higher deductibles; and a steep decline in the rate of payments from the [CEA’s] insurance fund to claimants for earthquake damage benefits – all to the damage of the earthquake policyholders and the homeowners of the State, including [Plaintiff].” (SAC, ¶ 14.)

            Third Cause of Action for Fraud

CEA contends that the fraud cause of action must fail because it does not allege an actionable misrepresentation of a past or existing fact. CEA cites to Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469, where the plaintiffs alleged that “prior to their August 2005 loan refinancing, defendants’ lending personnel represented that plaintiffs’ property was appreciating and that plaintiffs could obtain several years of appreciation in their property so that they could sell or refinance before having to make higher monthly payments or pay a future accumulated principal of $620,000.” (Internal quotations omitted.) The defendants “argue[d] that the alleged representations regard the future of the real estate market,” and as such, that they were “forecasts of future events and not actionable misrepresentations.” (Ibid.) The Court of Appeal agreed, noting that “[t]he law is well established that actionable misrepresentations must pertain to past or existing material facts. Statements or predictions regarding future events are deemed to be mere opinions which are not actionable.” (Id. at p. 1469 [internal citations omitted].)

CEA also cites to Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158, where the Court of Appeal found that “[p]redictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud.” (Id. at p. 158.) In Tarmann, “the gist of both Tarmann’s fraud and negligent misrepresentation claims [was] that State Farm said it would pay for her repairs immediately upon their completion, it failed to do so, Tarmann could not complete the repairs or redeem her vehicle, and she lost the use of it until State Farm settled the case.” (Ibid., emphasis in original.) The Court of Appeal found that “[t]he critical alleged misrepresentation as to immediate payment upon completion did not involve a past or existing material fact. Rather, it involved a promise to perform at some future time.” (Ibid.)

Similarly here, Plaintiff alleges that “[i]n order to induce Plaintiff to buy policies of insurance from Defendants…ALLSTATE insurance agents Gary C. Forillo and Evelyn Puerto…who were acting on behalf of and pursuant to the instructions of Defendants

ALLSTATE and CEA, stated orally to Plaintiff, both personally at ALLSTATE’s 20 E. Foothill Boulevard office and by telephone, and by written material, that Defendants ALLSTATE and CEA would process Plaintiff’s claims for damage caused by earthquake in good faith.” (SAC,     ¶ 38, emphasis added.) In addition, Plaintiff alleges that “Agents Gary C. Forillo and Evelyn Puerto also stated orally to Plaintiff…that Defendants CEA and ALLSTATE would provide the insurance benefits to Plaintiff as a public service organized and provided under the auspices of the State of California and, that if she would buy earthquake insurance policies from CEA and ALLSTATE, she could thereby rest secure that she would enjoy the impartiality and the equal protection of the State in the adjustment of her earthquake claims.” (SAC, ¶ 38, emphasis added.) Plaintiff alleges that Forillo and Puerto knew these statements to be untrue. (SAC, ¶ 38.)

            In the opposition, Plaintiff does not address the Cansino or Tarmann cases cited to by CEA. Moreover, Plaintiff does not address CEA’s argument that Plaintiff’s fraud cause of action does not allege an actionable misrepresentation of a past or existing fact.

Based on the foregoing, the Court sustains CEA’s demurrer to the third cause of action for fraud. The Court sustains the demurrer without leave to amend because the Court previously sustained CEA’s demurrer to the fraud cause of action in the FAC (See May 13, 2022 Order), and because Plaintiff has not proffered any basis for such amendment.  

Sixth Cause of Action for Intentional Infliction of Emotional Distress

In support of the sixth cause of action for intentional infliction of emotional distress (“IIED”), Plaintiff alleges that as a result of the “intentional and outrageous acts” committed by Defendants, Plaintiff has sustained “severe emotional and mental distress and anguish.” (SAC,   ¶ 50.) Plaintiff alleges that she “is just one of a vast number of victims of the Defendants’ assembly line of intentional deceit and systematic, industrial-scale denial of valid claims for redress; and the Defendants’ conduct is therefore so extreme and outrageous as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community.” (SAC, ¶ 50.) Plaintiff further alleges that “as a result of the seriousness of the damage to her house, and directly caused by the Defendants’ knowledge and reckless disregard for the probable consequences of their refusal to process and pay her claims for damages in good faith, conduct knowingly bound to cause injury, the Plaintiff is confronted with the constant, daily fear of imminent displacement, homelessness, injury, or even death, in the event that a new major earthquake comes to finally collapse and destroy what remains of the unrepaired structure of her house.” (SAC, ¶ 50.)

To prevail on an IIED claim, a plaintiff must prove: “(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.” Hughes v. Pair (2009) 46 Cal.4th 1035, 1050.) “[L]iability [for IIED] does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities, but only to conduct so extreme and outrageous as to go beyond all possible bo[u]nds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” (Alcorn v. Anbro Eng’g, Inc. (1970) 2 Cal.3d 493, 499, footnote 5 (internal quotations omitted).)

            CEA asserts that the IIED cause of action must fail because the SAC does not allege any conduct, aside from conclusions, that exceeds all bounds of that usually tolerated in a civilized community. As CEA notes, and previously noted in its demurrer to the FAC, “California courts have held that delay or denial of insurance claims is not sufficiently outrageous to state a cause of action for intentional infliction of emotional distress.” (Coleman v. Republic Indemnity Ins. Co. (2005) 132 Cal.App.4th 403, 417.) Plaintiff does not respond to Coleman in the opposition, nor does she cite to any legal authority in the opposition in support of the assertion that the IIED cause of action is sufficiently pled.

Accordingly, the Court sustains CEA’s demurrer to the sixth cause of action for IIED. The Court sustains the demurrer without leave to amend because the Court previously sustained CEA’s demurrer to the IIED cause of action in the FAC, and because Plaintiff has not proffered any basis for such amendment.  

Motion to Strike

A court may strike any “irrelevant, false, or improper matter inserted in any pleading” or any part of a 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.)

First, CEA also moves to strike paragraph 5 of the prayer for relief, in which Plaintiff seeks “exemplary and punitive damages in the sum of $5,000,000.00 or in an amount appropriate to punish the Defendants and to set an example for others.” (SAC, p. 23, ¶ 5.) A motion to strike may lie where the facts alleged do not rise to the level of “malice, oppression or fraud” required to support a punitive damages award. (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63-64.)

CEA asserts that Plaintiff fails to allege any facts to support that a CEA managing agent authorized or ratified any oppressive, malicious, or fraudulent conduct. Pursuant to Civil Code section 3294, subdivision (b), “[a]n employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.”

As CEA notes, Plaintiff alleges in the fourth cause of action for fraud that “CEA and ALLSTATE…ratified the misrepresentations and concealments of Mr. Forillo and Ms. Puerto year after year without ever taking remedial measures or attempting to assure that their agents were treating their customers ethically…” (SAC, ¶ 40.) As set forth above, the Court sustains CEA’s demurrer to the fraud cause of action. Plaintiff does not appear to allege anywhere else in the SAC that a CEA officer, director, or managing agent ratified any oppressive, malicious or fraudulent conduct; and Plaintiff does not point to any such specific allegation in the opposition.

Based on the foregoing, the Court grants CEA’s motion to strike the request for punitive damages in paragraph 5 of the prayer for relief, as to CEA. The Court grants the motion without leave to amend because the Court previously granted CEA’s motion to strike this provision in the FAC, and because Plaintiff has not proffered any basis for such amendment.  

CEA also seeks to strike paragraphs 8-15 of the SAC, which are a number of Plaintiff’s “general allegations.” (See CEA’s Notice of Motion at p. 1:8-4:21). CEA asserts that these allegations are “merely white noise designed to harass CEA and cause needless increase in the cost of litigation in order to effectuate a settlement. Moreover, these allegations of distorted history of the formation of the CEA have no bearing on the decision to deny the plaintiff’s claim due to there being no damages caused by an earthquake.” (Mot. at p. 4:4-8.) The Court does not find that the identified allegations in the “general allegations” portion of the FAC are irrelevant to Plaintiff’s claims or are improper. The Court thus declines to strike them.

Lastly, CEA moves to strike paragraphs 7 and 8 of the prayer for relief of the SAC. Paragraph 7 seeks “an order that the name of Defendant CALIFORNIA EARTHQUAKE AUTHORITY be changed and renamed by deleting the phrase ‘California Authority’ and the word ‘Authority,’ in order to prevent misleading the public into supposing that said organization is a public agency of the State of California.” (SAC, p. 23, ¶ 7.) Paragraph 8 seeks:

“an order establishing and mandating the organization of an oversight committee to be composed of policyholders of earthquake insurance issued by or on behalf of the CALIFORNIA EARTHQUAKE AUTHORITY; said committee to be elected at regular intervals of time by an electorate composed of the policyholders of earthquake insurance issued by or on behalf of the CALIFORNIA EARTHQUAKE AUTHORITY; and said committee to be empowered to oversee, review, approve, disapprove, structure, and amend the practices and courses of conduct of Defendants CALIFORNIA EARTHQUAKE AUTHORITY, ALLSTATE INSURANCE COMPANY, and EFI GLOBAL, INC. with respect to the operations of the CALIFORNIA EARTHQUAKE AUTHORITY under its present name or as it may be renamed or re-organized in the future.” (SAC, p. 23, ¶ 8.)

CEA asserts that paragraphs 7 and 8 of the prayer for relief seek to have the Court improperly re-write the statutes governing the operation of CEA. The Court agrees. CEA notes that Insurance Code section 10089.6, subdivision (a)(1) provides in pertinent part:

“There is hereby created the California Earthquake Authority, which shall be administered and governed by the governing board described in Section 10089.7 under the authority of the commissioner…The authority shall have the powers conferred by this chapter. The authority shall be authorized to transact insurance in this state as necessary to sell policies of basic residential earthquake insurance in the manner set forth in Sections 10089.26, 10089.27, and 10089.28. The authority shall have no authority to transact any other type of insurance business.”

CEA also notes that “[t]he powers of state government are legislative, executive, and judicial. Persons charged with the exercise of one power may not exercise either of the others except as permitted by this Constitution.” (Cal. Const., art. III, § 3.) In the opposition, Plaintiff indicates that “Plaintiff is willing to strike Prayers for Relief Nos. 7 and 8 from the Second Amended Complaint in order to expedite the progress of the principal action forward to discovery and trial.” (Opp’n at p. 12:12-14.)

Thus, the Court grants CEA’s motion to strike paragraphs 7 and 8 of the prayer for relief of the SAC, without leave to amend.

Conclusion

Based on the foregoing, CEA’s demurrer to the third and sixth causes of action is sustained without leave to amend.

CEA’s motion to strike is granted as to paragraphs 5, 7, and 8 of the prayer for relief, without leave to amend. CEA’s motion to strike is otherwise denied. 

The Court orders CEA to file and serve an answer to the SAC within 10 days of the date of this Order. 

CEA is ordered to give notice of this Order. 

DATED:  October 10, 2022                           ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court