Judge Teresa A. Beaudet, Case Number: 22STCV00778, Date: 2023-05-25 Tentative Ruling

Plaintiff 11640 Woodbridge Condominium Homeowners’ Association (“Plaintiff”) filed this action on January 7, 2022 against Defendants Farmers Insurance Exchange (“FIE”) and Local Roofer LLC. The Complaint asserts causes of action for (1) breach of the contractual duty to pay a covered insurance claim, (2) breach of the implied covenant of good faith and fair dealing, and (3) negligence.[1]

On April 20, 2022, Nelson Bardales dba Local Roofer (erroneously sued as Local Roofer LLC) (herein, “Local Roofer”) filed an answer to the Complaint. In addition, on April 20, 2022, Local Roofer filed a Cross-Complaint against Roes 1 through 50.

FIE now moves for an order granting summary judgment, or in the alternative, for summary adjudication in favor of FIE and against Plaintiff. 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¿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 the Complaint, Plaintiff alleges that in September 2021, Plaintiff retained Local Roofer to undertake a roof replacement project on Plaintiff’s complex of luxury condominiums in Studio City. (Compl, ¶ 8.) On two separate occasions, the first on or around October 4, 2021 and the second on or around October 25, 2021, storms hit the area, resulting in two separate incidents where the building’s roof was damaged, ultimately resulting in water intrusion to the walls and its interior. (Compl., ¶ 10.) Plaintiff alleges that many of the complex’s 31 units suffered collapsed ceilings and water-logged walls, forcing the residents to move out. (Compl., ¶ 11.)

Plaintiff’s building was insured under a Condo/Townhome Premier Insurance Policy, number 0094336412, underwritten by FIE (herein, the “Policy”). (Compl., ¶ 12.) Plaintiff promptly notified FIE of the loss, and a claim was opened and assigned file number 5013930332-1-1. (Compl., ¶ 15.) Plaintiff alleges that “[i]nstead of undertaking the full, fair and thorough claim investigation that it is obligated to conduct under California law, [FIE] devised a denial of coverage by unreasonably misconstruing Policy language.” (Compl., ¶ 16.)

Plaintiff alleges that FIE sent a claim denial letter to Plaintiff on November 1, 2021, which gave the following reasons for denying the claim: “[w]hile the roof was tarped, and a section of the tarp blew off the roof, the blowing of a tarp off a roof does not create an opening in the roof. Instead, the roof sheathing with or without a tarp is not a roof and the opening in the roof was caused by the roofers replacing the roof, not wind. Further, Local Roofer did not meet the standard of care in their roofing processes. Thus, the removal of roof surfacing in addition to not being accidental, excludes faulty workmanship. Unfortunately, your E3422-3 Condominium Property Coverage Form excludes water in any form, and negligent work. There is no coverage for the loss sustained.” (Compl., ¶ 18, emphasis omitted.)

Plaintiff alleges that “[i]n denying [Plaintiff’s] claim, [FIE] knowingly and intentionally misconstrued the Policy’s exclusions it relied on to deny coverage, including the exceptions to those exclusions. [FIE] created its own definitions not found in the Policy, ignored applicable California law and deceived [Plaintiff] so as to induce [Plaintiff’s] acquiescence to the claim denial.” (Compl., ¶ 28.)

B. First Cause of Action for Breach of the Duty to Pay a Covered Insurance Claim

In support of the first cause of action for breach of the duty to pay a covered insurance claim, Plaintiff alleges that “[Plaintiff] purchased the Policy from [FIE]. The Policy protected

[Plaintiff’s] structures and property in the event of a loss.” (Compl., ¶ 30.) Plaintiff alleges that it incurred a covered loss, but FIE “refused to pay [Plaintiff] for the loss and withheld from [Plaintiff] the Policy proceeds.” (Compl., ¶¶ 31, 33.)

FIE asserts that the first cause of action fails because there is no coverage for the alleged loss under the subject Policy. FIE asserts that “only a failure to pay a covered first-party loss is a breach of contract” (Mot at p. 18:8-9) citing to Isaacson v. California Ins. Guarantee Assn. (1988) 44 Cal.3d 775, 791, which provides that “[a]n insurance company bears a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy. Wrongful failure to provide coverage or defend a claim is a breach of contract.” (Internal quotations and citations omitted.)

FIE asserts that here, two exclusions apply to prevent coverage, (1) a water damage exclusion, and (2) a faulty workmanship exclusion.

In support of the motion, FIE provides the Declaration of Taylor von Ahlefeld, a Senior General Adjuster for FIE. (von Ahlefeld Decl., ¶ 2.) The subject Policy is attached as Exhibit A to Mr. von Ahlefeld’s Declaration. (von Ahlefeld Decl., ¶ 2, Ex. A.) FIE cites to Section B.1.f (1)(a) of the Policy, on page 13 of the “Condominium Property Coverage Form,” which provides that “[w]e will not pay for loss or damage caused directly or indirectly by any of the following: (a) Water, in any form…” (Ibid.) FIE also cites to Section B.1.f (2)(b)(i), which provides: “(2) However, we will pay for loss or damage, not otherwise excluded, but not for any other resulting damage, caused by:…(b) Water damage to the interior of any building or structure caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, if: (i) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters…” (von Ahlefeld Decl., ¶ 2, Ex. A, “Condominium Property Coverage Form,” p. 13.)

FIE asserts that the exclusion for water damage in Section B.1.f (1)(a) applies, and that the exception to the exclusion set forth in Section B.1.f (2)(b)(i) does not apply, because rain did not enter through damage to the roof caused by a “Covered Cause of Loss.”

FIE cites to the following testimony from the deposition of Nelson Bardales: “Q So you started the job on September 29, and it rained on October 4. That’s a period of six days. Can we agree on that? A Yes.” (Cooper Decl., ¶ 2, Ex. C (Bardales Depo.) at p. 73:6-9.) FIE also cites to the following testimony: “During that six days, is it correct that you removed the roof membrane? Correct? A Yes. Q And that would be on 80 percent of the roof; correct? A Yes.” (Id. at p. 73:10-15.)

In addition, FIE cites to the following testimony from Mr. Bardales’s deposition: “[o]n the first rain, Mr. Bardeles, do you know how the insulation got wet? A It got wet from the rain. Q…But did it get wet prior to the time that you put the tarps over as a temporary protection? A Yes.” (Cooper Decl., ¶ 2, Ex. C (Bardales Depo.) at p. 126:13-19.) FIE also indicates that Mr. Bardales testified that it is his recollection that on October 21 there was a heavy rain. (Id. at p. 120:16-18.) Mr. Bardales was asked “[a]t that point in time were there any tarps being used for temporary protection of the roof?” to which Mr. Bardales responded, “Yes.” (Id. at p. 120:22-24.) Mr. Bardales was also asked, “[w]hat was left undone as of October 21, 2021, that required tarping?” to which Mr. Bardales responded, “I’d say probably 30 or 40 percent. It’s not tar, but it was felted and tarped.” (Id. at pp. 120:25-121:3.) Mr. Bardales also testified that “[t]he felt is not waterproof.” (Id. at p. 99:19.) FIE also cites to the following testimony from Mr. Bardales’s deposition: “My question is, in the way you described a roof, were there particular places where the water was able to penetrate, that is -- did it penetrate between the seams of the felt or at the edges? Can you describe for me where it was penetrating? A On the edges. Q How about the center areas of the felt? A Yes. We see some water there too.” (Id. at p. 122:8-15.)

FIE asserts that “the water did not enter the building through damage first caused by a covered cause as the narrow exception to the exclusion requires. In the first rain event, the water entered through the sheathing exposed by Bardelas’ removal of the entire roof at once. It rained while the roof was off. In the second rain event, the water entered through gaps between tarps placed as temporary covering over unwaterproofed areas of the incomplete roof. Covered by a tarp or not, there was no damage to the building through which the rain entered. The rain entered through openings intentionally created by Bardelas.” (Mot. at p. 6:19-27, emphasis omitted.)

In the opposition, Plaintiff asserts that “because Local Roofer’s negligence was the efficient proximate cause of the loss, the water loss exclusion does not apply.” (Opp’n at p. 5:17-19.) Plaintiff cites to State Farm Fire & Casualty Co. v. Von Der Lieth (1991) 54 Cal.3d 1123, 1131, where the Court of Appeal noted that “[w]hen a loss is caused by a combination of a covered and specifically excluded risks, the loss is covered if the covered risk was the efficient proximate cause of the loss.”

Plaintiff asserts that FIE has admitted that the efficient proximate cause of the loss was Local Roofer’s negligence. Plaintiff notes that FIE’s motion argues that “there is no dispute that [Local Roofer] was negligent and that his negligence caused rainwater to penetrate to the interior of the building. All of Plaintiff’s damages were thus caused by the faulty workmanship of Plaintiff’s own contractor, and thus fall squarely within the exclusion from coverage under the Woodbridge Policy.” (Mot. at p. 9:28-10:3.) Plaintiff contends that “[w]ater entered through an opening in the building caused by Local Roofer’s negligence, which is a covered cause of loss.” (Opp’n at p. 7:9-10.) However, Plaintiff does not appear to cite any evidence or legal authority to support this assertion. In addition, as discussed below, the Court finds that FIE has met its burden of demonstrating that the subject “faulty workmanship” exclusion applies here.

As set forth above, Section B.1.f (2)(b)(i) of the Policy provides: “(2) However, we will pay for loss or damage, not otherwise excluded, but not for any other resulting damage, caused by:…(b) Water damage to the interior of any building or structure caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, if: (i) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters . . .” (von Ahlefeld Decl., ¶ 2, Ex. A, Condominium Property Coverage Form,” p. 13.) The Court notes that Section B.1.f (2)(b)(i) refers to a “Covered Cause of Loss” in capital letters, such that it appears to be a defined term in the Policy. However, neither party indicates whether the Policy defines what a “Covered Cause of Loss” includes.

In the reply, FIE cites to Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1185-1186, where the California Supreme Court noted that “[i]n this case, we must decide whether, in an action seeking indemnity under a standard commercial general liability insurance policy (formerly called a comprehensive general liability insurance policy), the insured or the insurer bears the burden of proving that a claim comes within the ‘sudden and accidental’ exception to the general pollution exclusion. The Court of Appeal concluded that once the insurer carries its burden of proving that the exclusion applies, the insured bears the burden of proving the exception. We agree with the Court of Appeal’s conclusion and, therefore, affirm its judgment.”

Based on the foregoing, the Court finds that FIE has met its burden of demonstrating that the exclusion set forth in Section B.1.f (1)(a) of the Policy applies to the alleged loss here.[2] The Court does not find that Plaintiff has raised a triable issue of fact as to whether the exception to the exclusion set forth in Section B.1.f (2)(b)(i) applies here.

As to the faulty workmanship exclusion, FIE cites to Section B.3 of the Policy on page 15 of the “Condominium Property Coverage Form,” which provides that “3. We will not pay for loss or damage caused by or resulting from any of the following B.3.a. through B.3.c. But if an excluded cause of loss that is listed in B.3.a. through B.3.c. results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.” (von Ahlefeld Decl., ¶ 2, Ex. A.) Section B.3.c provides, “Negligent Work…Faulty, inadequate or defective: (1) Planning, zoning, development, surveying, siting; (2) Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction; (3) Materials used in repair, construction, renovation or remodeling; or (4) Maintenance; of part or all of any property on or off the described premises.” (Ibid.)

FIE asserts that “Bardelas’ work was faulty, inadequate and defective in at least the following ways: by planning to remove the entire roof all at once rather than one section at a time; by workmanship in removing entire roof all at once yet failing to protect against water penetration in the event of rain knowing the sheathing was not impervious to such penetration by itself; by failing to timely repair the wet insulation; by constructing the lower layers of the roof without protection of the building from water penetration; and by using inadequate materials used in repair and construction in that the tarps used were inadequate to protect the building from water penetration.” (Mot. at p. 19:3-9, emphasis in original.)

FIE asserts that Plaintiff admits that Mr. Bardelas was negligent in removing the entire roof in a single day rather than in sections. FIE cites to Plaintiff’s second amended response to FIE’s Special Interrogatory No. 9, which provides, inter alia, “[t]he physical damage first sustained to the building and walls through which the rain entered the building was from the methods and construction, and flawed process undertaken by Local Roofer in removing the entire top layer of the building’s roof down to the roof decking instead of removing it part by part. Wind also blew off the temporary roof coverings put in place by Local Roofer.” (Cooper Decl., ¶ 4, Ex. E.) FIE also cites to Plaintiff’s response to FIE’s Special Interrogatory No. 5, which provides, inter alia, “[i]n September 2021, Woodbridge retained Local Roofer to undertake a roof replacement project on the property. Local Roofer removed the entire top layer of the building’s roof down to the roof decking instead of removing it part by part. Because the processes employed by Local Roofer during the project were faulty, the roof was not fully protected from the elements.” (Cooper Decl., ¶ 6, Ex. G.)

In the opposition, Plaintiff asserts that the “faulty workmanship” exclusion does not apply. Plaintiff relies heavily on Allstate Ins. Co. v. Smith (9th Cir. 1991) 929 F.2d 447, 448, a Ninth Circuit Court of Appeals case, where “Dwight H. Smith, M.D. (Smith) appeal[ed] from the district court’s declaratory judgment, finding that Allstate Insurance Co. (Allstate) was not required to reimburse Smith pursuant to his ‘all risk’ insurance policy for damage to his business equipment and improvements, and for his loss of earnings.” The Ninth Circuit Court of Appeals reversed.

In Allstate, “Smith rented space in a Los Angeles office building for his medical practice. In the fall of 1988, he bought an ‘all risk’ insurance policy from Allstate covering his business property for ‘loss or damage resulting from direct physical loss’ with certain enumerated exclusions including those for losses caused by faulty workmanship and rain. On December 18, 1988, a roofing contractor was working on the building…During the day, the contractor removed most of the roof but did not put a temporary cover over the exposed premises. Unfortunately, that night it rained and Smith’s office equipment and improvements were damaged. Subsequently, Smith filed a claim with Allstate for the repair and replacement of his business property and for his lost earnings due to disruption of business. Allstate filed a declaratory judgment action, requesting that the court find that Smith’s losses were not covered by his policy. The district judge, based on a stipulated factual record, ruled that Allstate had no duty to reimburse Smith because his losses were caused by ‘faulty workmanship.’ Smith timely appealed.” (Allstate Ins. Co. v. Smith, supra, 929 F.2d at pp. 448-449.)

In Allstate, the “policy’s relevant exclusion clause” stated “3. We do not cover any loss or damage caused by any of the following. However, any ensuing loss not excluded or excepted in this policy is covered…c. Faulty, inadequate or defective:… ii. design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction; . . .” (Id. at p. 449.) “Smith contend[ed] that ‘faulty workmanship’ is susceptible to at least two different interpretations: (1) the flawed quality of a finished product, or (2) a flawed process. Failing to put a temporary cover over the exposed premises would not be ‘faulty workmanship’ under the flawed product interpretation as that interpretation necessarily requires the presence of an object to evaluate. As the roofer had not completed any portion of the new roof when the damage occurred, there is no object to evaluate to determine whether the workmanship was faulty. Under the flawed process interpretation, however, failing to put a temporary cover on while replacing a roof may constitute ‘faulty workmanship.’” (Ibid.) The Ninth Circuit Court of Appeals concluded that “in light of the circumstances of this case, we find the term ‘faulty workmanship’ ambiguous, and consequently apply the construction most favorable to the insured. Under the flawed product interpretation, the exclusion does not apply because Smith’s losses were not caused by a flawed product, but by failure to protect the premises during the roof repair process.” (Id. at p. 450 [internal citation omitted].)

Plaintiff asserts that “[t]his is exactly what happened here.” (Opp’n at p. 10:6.) Plaintiff

cites to the following testimony from Mr. von Ahlefeld’s deposition: “Q This is not a situation where Local Roofer was hired to provide a new roof and the roof that they provided did not operate for its intended purpose; correct? A. Correct. Q. What happened here is that Local Roofer did not follow the right process or method of construction in that they demolished 90 percent of the roof and that they could not complete retarring it within a one- or two-day period, leaving it exposed to rain; correct? A. Correct.” (Corby Decl., ¶ 1 Ex. A (von Ahlefeld Depo.) at p. 60:13 -24.)

As FIE notes, Allstate is not binding on this Court. As noted by FIE, “decisions of the federal courts interpreting California law are persuasive but not binding.” (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 299.) FIE also cites to binding California authority which it contends contradicts Allstate.

FIE cites to, inter alia, Freedman v. State Farm Ins. Co. (2009) 173 Cal.App.4th 957, 959, where “[a] contractor remodeling a bathroom in Bernard and Gail Freedman’s home drove a nail through a pipe while hanging new drywall. The nail in the pipe apparently caused no leak at the time and went unnoticed until years later, when corrosion around the nail caused a leak and extensive water damage. The Freedmans’ insurer, State Farm Insurance Company, denied their claim. The Freedmans filed suit, and the parties filed cross-motions for summary judgment on the basis of jointly stipulated facts. The superior court granted State Farm’s motion, denied the Freedmans’, and entered judgment for the defense. The Freedmans timely appealed…”

The Court of Appeal in Freedman “reject[ed] the Freedmans’ argument because the third party negligence provisions in their policy clearly exclude the perils of contractor-negligence-induced corrosion and contractor-negligence-induced water leaks.” (Freedman v. State Farm Ins. Co., supra, 173 Cal.App.4th at p. 963.) The policy at issue in Freedman provided, inter alia, that “[w]e do not insure for loss described in paragraphs 2., 3. and 4. immediately above regardless of whether one or more of the following: (a) directly or indirectly cause, contribute to or aggravate the loss; or (b) occur before, at the same time, or after the loss or any other cause of the loss:…a. conduct, act, failure to act, or decision of any person, group, organization or governmental body whether intentional, wrongful, negligent, or without fault;…b. defect, weakness, inadequacy, fault or unsoundness in:…(2) design, specifications, workmanship, construction, grading, compaction;…of any property (including land, structures, or improvements of any kind) whether on or off the residence premises…” (Id. at p. 960 [internal quotations and emphasis omitted].)

FIE also cites to Brodkin v. State Farm Fire & Casualty Co. (1989) 217 Cal.App.3d 210, 212, where the “sole issue presented by [the] appeal is whether the corrosion of a house foundation due to soil contamination is a covered peril under an ‘all-risk’ homeowners insurance policy. The trial court found that it was excluded under the terms of the policy and granted summary judgment in favor of the insurer.” The Court of Appeal “agree[d] and affirm the judgment.” (Ibid.) The Court of Appeal noted that “[t]hird, the Brodkins suggest the damage may be due to negligent construction. If the proximate cause of the damage is attributable to negligent construction, the claim is barred under that part of the policy which excludes claims for any ‘defect, weakness, inadequacy, fault or unsoundness in . . . planning, zoning, development surveying, siting . . . design, specifications, workmanship, construction, grading, [or] compaction.’ Again, the exclusion is clear and unambiguous and expressly covers the damage claimed here.” (Id. at pp. 217-218.)

In addition, FIE cites to Murray v. State Farm Fire & Casualty Co. (1990) 219 Cal.App.3d 58, 60-61, where “plaintiffs Leonard and Mary Murray discovered a water leak in their home caused by a break in a one-half inch conventional L grade copper pipe carrying hot water from the hot water heater in their garage to a bathroom in the house…As a result of the leak, the ground underneath the pipe settled, causing a crack in the slab perpendicular to the pipe. Experts agreed that the leak was caused by a process known as electrolysis, precipitated when the pipe was exposed to a combination of moisture and acidic soil…The process resulted first in a pinhole and later in a serious rupture of the pipe.” The Murray Court noted that “[w]hen State Farm persisted in its contention that the loss was not covered under the terms of the policy, the Murrays filed this action seeking general and punitive damages on contract and tort theories. State Farm successfully moved for summary judgment relying on certain exclusionary provisions of the policy.” (Id. at p. 61.) The Court of Appeal affirmed the judgment. (Id. at p. 66.)

The Court of Appeal in Murray found that “[i]n another portion of the Sabella opinion, the Supreme Court concluded there was coverage because the ‘efficient proximate cause’ of the damage was the negligence of a third party (i.e., the builder) which was not excluded by the terms of the policy. Here, one might similarly argue that the predominating cause of the loss was the negligence of the individual or company who installed the copper pipe with insufficient protection against electrolysis. The Murrays’ policy, however, specifically excludes coverage for any ‘defect, weakness, inadequacy, fault or unsoundness in . . . design, specifications, workmanship, construction [or] materials used in construction . . . of any property.’ Thus, neither of the theories addressed in Sabella can be invoked in favor of the Murrays here.” (Murray v. State Farm Fire & Casualty Co., supra, 219 Cal.App.3d at p. 64, fn. 2 [internal citation omitted].)

Plaintiff asserts that the California cases cited by Plaintiff “do not interpret the phrase ‘faulty workmanship’ in the specific factual context involved in this case and in Allstate, that is, where the loss arises before the project is finished and from a faulty ‘process.’” (Opp’n at p. 14:15-17, emphasis in original.) But as noted by FIE, “Plaintiff cites no California case supporting that when applying the faulty workmanship exclusion, there is any distinction between completed products versus products in progress.” (Reply at p. 7:1-3.) In addition, as discussed, Allstate is not binding on this Court.

The Court finds that the California Court of Appeal cases discussed above support FIE’s position that the subject exclusion set forth in Section B.3.c is unambiguous and excludes, inter alia, “[f]aulty, inadequate or defective” “[d]esign, specifications, workmanship, repair, construction, renovation, remodeling, grading [and] compaction…” (von Ahlefeld Decl., ¶ 2, Ex. A.) Plaintiff acknowledges in the opposition that “Local Roofer’s negligence was the efficient proximate cause of the loss…” (Opp’n at p. 5:18.) Plaintiff also states in the opposition that “[FIE’s] own expert concluded that the loss was caused by Local Roofer’s breach of the standard of care with respect to his roofing process or methods in construction.” (Opp’n at p. 21:7-9.)

Based on the foregoing, the Court finds that FIE has met its burden of demonstrating that Plaintiff’s alleged loss is excluded from coverage under the exclusions set forth in Section B.1.f (1)(a) and Section B.3.c of the subject Policy. The Court does not find that Plaintiff has raised a triable issue of fact on this issue. Accordingly, the Court finds that FIE has demonstrated that Plaintiff’s first cause of action fails.

C. Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

In support of the second cause of action for breach of the implied covenant of good faith and fair dealing, Plaintiff alleges that “[FIE] breached its duty of good faith and fair dealing owed to [Plaintiff] and deprived it of the benefit of the Policy” through certain specified “unreasonable conduct.” (Compl., ¶ 35.)

FIE Asserts that “Plaintiff’s cause of action for bad faith fails because there can be no tort liability in the absence of coverage.” (Mot. at p. 18:12-13.) FIE cites to Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1078, where the Court of Appeal noted that “it is important to make clear that in order for Jordan to recover on her remaining claim of bad faith, it will be necessary for her to first establish a basis for coverage…An insurer’s failure to investigate, upon which Jordan’s claim of bad faith entirely rests, is not separately actionable if there is no coverage. If there is no coverage, then any failure by Allstate to properly investigate would not have caused Jordan any damage.” (Internal emphasis omitted.)

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.)

As set forth above, the Court finds that FIE has met its burden of demonstrating that Plaintiff’s alleged loss is excluded from coverage under the exclusions set forth in Section B.1.f (1)(a) and Section B.3.c of the subject Policy. Thus, based on the foregoing authority, the Court finds that FIE has demonstrated that Plaintiff’s second cause of action also fails.

Lastly, FIE asserts that Plaintiff’s claim for punitive damages fails. (See Compl., ¶ 40.)

As set forth above, the Court finds that FIE has demonstrated that Plaintiff’s first and second causes of action fail. Thus, the Court finds that FIE has demonstrated that summary adjudication of Plaintiff’s punitive damages claim is also warranted.

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

[1]The first and second causes of action of the Complaint are alleged against FIE, and the third cause of action is alleged against Local Roofer.

[2]As set forth above, Section B.1.f (1)(a) of the Policy provides that “[w]e will not pay for loss or damage caused directly or indirectly by any of the following: (a) Water, in any form…” (von Ahlefeld Decl., ¶ 2, Ex. A.)

11640 WOODBRIDGE CONDOMINIUM HOMEOWNERS’ ASSOCIATION, Plaintiffs, vs. FARMERS INSURANCE EXCHANGE, et al., Defendants.	Case No.:	22STCV00778 [c/w 22STCV34287; 22BBCV00612]
	Hearing Date:	May 25, 2023
	Hearing Time:	10:00 a.m.
	[TENTATIVE] ORDER RE: MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, FOR SUMMARY ADJUDICATION
AND RELATED CROSS-ACTION

Superior Court of California

County of Los Angeles

Department 50