Judge Thomas D. Long, Case Number: 20STCV06506, Date: 2024-01-29 Tentative Ruling

On February 14, 2020, Plaintiffs Alex Livshetz and Regina Livshetz filed this action against Defendant Federal Insurance Company.

On July 14, 2023, Plaintiffs filed a second amended complaint (“SAC”). The SAC alleges (1) breach of insurance contract; (2) breach of the implied covenant of good faith and fair dealing; (3) unfair business practices in violation of the Unfair Competition Law (“UCL”); and (4) breach of contract.

On July 20, 2023, Defendant filed an answer to the SAC and a first amended cross-complaint (“FACC”). The FACC alleges (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) intentional misrepresentation; (4) concealment; (5) rescission of contract; (6) declaratory relief; and (7) unfair business practices in violation of the UCL.

On July 24, 2023, the Court set a schedule for the parties’ motions for summary adjudication. On October 23, 2023, the parties timely filed their motions.

Plaintiffs seek summary adjudication of their SAC’s fourth cause of action. Plaintiffs also seek summary adjudication of Defendant’s FACC’s second, third, fourth, fifth, and seventh causes of action.

Defendant seeks summary adjudication of the SAC’s second, third, and fourth causes of action, the claim for punitive damages, and Defendant’s sixth and nineteenth affirmative defenses. Defendant also seeks summary adjudication of its FACC’s fifth cause of action.

The documents filed in connection with these motions contain numerous deficiencies.

Under the Court’s First Amended General Order for electronic filing, the table of contents and all attachments, including exhibits, must be bookmarked. (General Order No. 2019-GEN-014-00, at ¶¶ 6(b)-(d); California Rules of Court, rule 3.1110(f)(4).)

The parties’ pleadings do not comply with these requirements. For example, Defendant’s Motion and Opposition exhibits are each a single document with no bookmarks, making it incredibly difficult to navigate the 871 pages of 74 exhibits for each motion.

“Separate statements are required not to satisfy a sadistic urge to torment lawyers, but rather to afford due process to opposing parties and to permit trial courts to expeditiously review complex motions for [summary adjudication] and summary judgment to determine quickly and efficiently whether material facts are undisputed.” ((United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 335 (United Community Church).) “The separate statement ‘provides a convenient and expeditious vehicle permitting the trial court to hone in on the truly disputed facts.’ [Citation.]” (Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252 (Nazir).) “[I]t is no answer to say the facts set out in the supporting evidence and memorandum of points and authorities are sufficient. ‘Such an argument does not aid the trial court at all since it then has to cull through often discursive argument to determine what is admitted, what is contested, and where the evidence on each side of the issue is located.’” (United Community Church, supra, 231 Cal.App.3d at p. 335.) “The due process aspect of the separate statement requirement is self-evident—to inform the opposing party of the evidence to be disputed to defeat the motion.” (Id. at p. 337.)

Of the unique facts in Plaintiffs’ separate statement for their MSA, many are unnecessary and are not, in fact, material to the claims or defenses. Additionally, what a party said or perceived is not a “material fact”; rather, it is evidence of a fact. (Reeves v. Safeway Stores, Inc. (2004) 121 Cal.App.4th 95, 106 (Reeves).) “The separate statement should include only material facts and not any facts that are not pertinent to the disposition of the motion.” (California Rules of Court, rule 3.1350(d)(2).) “[T]rial courts have the inherent power to strike proposed ‘undisputed facts’ that fail to comply with the statutory requirements and that are formulated so as to impede rather than aid an orderly determination whether the case presents triable material issues of fact. If such an order leaves the required separate statement insufficient to support the motion, the court is justified in denying the motion on that basis.” (Reeves, supra, 121 Cal.App.4th at p. 106.)

Although the Court will not strike non-material portions of Plaintiffs’ separate statement here, counsel is cautioned to include only facts that are truly material to the motion. And when including facts, counsel should include all material facts. As demonstrated by this order’s Factual Background section, the separate statement is a disjointed and incomplete presentation of the facts. The Court will rely only on the separate statement’s material facts to determine whether Plaintiffs meet their moving burdens.

In response to Plaintiffs’ MSA’s separate statement, Defendant inappropriately rewrote the facts that it admitted were undisputed. For example, in response to P-UMF 28 (“Slutsky had been remodeling his home for some time, which included substantial changes.”), Defendant responded, “Undisputed that Dr. Slutsky’s home was an uninhabitable construction zone at the time that Plaintiffs’ lease began on May 1, 2019.” A fact is either disputed (with citations to the contrary evidence) or undisputed. The Court will ignore Defendant’s qualified responses when Defendant conceded that the facts are undisputed.

With their replies, Plaintiffs filed a 161-page Reply to Defendant’s Separate Statement, and Defendant filed a 178-page Reply to Plaintiffs’ Separate Statement. “There is no provision in the statute for this.” (Nazir, supra, 178 Cal.App.4th at p. 252.)

Defendant’s 20-page Opposition to Plaintiffs’ Motion states, “Federal incorporates by reference the background section of its Memorandum of Points and Authorities in Support of Federal’s October 23, 2023 Motion for Summary Adjudication (Fed. Mot.) at pages 3 through 12.” (Opposition to Plaintiffs at p. 3.) Supporting memoranda must contain a statement of facts. (California Rules of Court, rule 3.1113(b).) An opposition to a motion for summary adjudication may not exceed 20 pages. (California Rules of Court, rule 3.1113(d).) Defendant’s omission of a standalone statement of facts and its incorporation by reference of 10 additional pages is therefore an improper method of exceeding the 20-page limit.

Similarly, Defendant improperly exceeded the 10-page limit for its Reply to its MSA. (See California Rules of Court, rule 3.1113(d).) The reply is a full ten pages, but it includes many arguments within 19 footnotes in tiny font size, resulting in a reply that contains more than 28 lines per page and exceeds the substantive page limit. (See California Rules of Court, rule 2.104 [font size must not be smaller than 12 points].)

Plaintiffs’ request for judicial notice of the SACC, Defendant’s answer, and Defendant’s FACC is denied as unnecessary. These documents are already part of this case’s record.

Defendant’s Objection Nos. 1-2 are sustained for lack of personal knowledge/foundation.

Plaintiffs’ Objection No. 1 (Defendant’s Exhibit 86) is sustained as hearsay.

Plaintiffs’ Objection No. 2 (Defendant’s Exhibit 88) is sustained. A responding party cannot use their own interrogatory responses as evidence. (See Code Civ. Proc., § 2030.410.)

Plaintiffs’ Objection No. 3 is sustained as hearsay, to the extent that it is confirming and incorporating by reference Defendant’s interrogatory responses.

On May 9, 2018, a fire occurred at Plaintiffs’ home. (Plaintiffs’ Undisputed Material Facts “P-UMF” 1.) Defendant’s expert hygienist confirmed that Plaintiffs’ home suffered smoke damage and recommended cleaning. (P-UMF 2.) Plaintiffs’ friends, the Leonovs, lived nearby, and Plaintiffs elected to rent from them. (P-UMF 4.) Plaintiffs represented to Defendant that they had agreed to pay $1,000 per night to rent the property at Hercules Drive beginning May 15, 2018 while their house was being cleaned and remediated. (Defendant’s Undisputed Material Facts “D-UMF” 3.) The Leonovs continued to live at the Hercules Drive property while Plaintiffs stayed there. (D-UMF 8.)

The Leonovs never cashed the $44,000 in checks that Plaintiffs wrote to Julia Leonov, and Plaintiffs never gave the Leonovs any check for the other $8,000 that Defendant paid Plaintiffs. (D-UMF 6.) At the time, Defendant had no reason to believe that Plaintiffs did not give rent checks to the Leonovs. (P-UMF 66.)

Defendant’s adjuster Vincent Van Meter was responsible for Plaintiffs’ claim until his departure from the company in October 2018. (P-UMF 5.) During Van Meter’s handling of the claim, Plaintiffs submitted an estimate for contents cleaning. (P-UMF 10.)

Plaintiffs’ public adjuster submitted one check to Defendant for the Hercules Drive house. (P-UMF 12.) At the time the check was submitted to Defendant, Plaintiffs did not know the check would not be cashed. (P-UMF 13.) When Mrs. Livshetz learned the checks were not cashed, she gave her friend a diamond tennis bracelet valued in excess of the rental amount. (P-UMF 14.) Thereafter, a dispute arose regarding the scope and amount of dwelling repairs needed and the main issue was whether matching floor tile was available. (P-UMF 16.)

In February 2019, Defendant’s building consultant prepared a repair estimate for the home, which included a repair time of twelve months. (P-UMF 17.) At this point, rather than pay the undisputed amount for repairs and continue to adjust the claim, the parties’ adjusters considered a global settlement. (P-UMF 18.) On February 20, 2019, Defendant began negotiations with Plaintiffs for a global resolution of all claims, both on the policy and in tort, related to Plaintiffs’ fire loss. (P-UMF 19.) Defendant requested additional documentation, including Plaintiffs’ lease, to support a settlement payment. (P-UMF 20.) Defendant agrees the solicited documentation reflects “forward-looking information.” (P-UMF 21.) Defendant’s adjuster also advised that Defendant “will need a signed release” when an agreement is reached. (P-UMF 22.)

On March 12, 2019, Echterling and the PA met in person in Los Angeles. (P-UMF 23.) The purpose of the meeting was to discuss the specific dollar amounts Plaintiffs claimed and the documentation that Defendant needed to support the amounts claimed. (P-UMF 24.) They agreed during this meeting that the PA would provide a written lease to give an idea of where the insureds would stay and how much it would cost. (P-UMF 25.) Echterling knew that Plaintiffs could not begin process of beginning repairs until they received money from Defendant and reached an agreement with Defendant. (P-UMF 26.)

In response, Plaintiffs provided a signed one-year lease for a home owned by a friend, Dr. Jacob Slutsky. (P-UMF 27.) Plaintiffs represented that they had leased a luxury house in Bel Air on Linda Flora Drive from Slutsky starting May 1, 2019 for $80,000 per month for a total of $1 million, and they had paid $80,000 for first month’s rent and $40,000 for the security deposit. (D-UMF 10.) Slutsky had been remodeling his home for some time, which included substantial changes. (P-UMF 28.) Defendant acknowledges the Linda Flora lease includes a provision that allows Plaintiffs to move in at a later date if the house is not ready. (P-UMF 60.) Plaintiffs asked Slutsky to wait to cash the checks until Defendant issued payment. (P-UMF 31.)

On March 4, 2019, Plaintiffs submitted a list of contents and advised the contents were in the home and available for inspection. (P-UMF 32.) On March 14, 2019, Plaintiffs submitted the same list of contents with estimated purchase information and corresponding photographs. (P-UMF 33.)

Plaintiffs demanded $4.5 million to settle, and Defendant advised it needed time to review. (P-UMF 34.) Defendant sent the list of contents to its contents expert, Enservio, for evaluation “for discussion purposes only.” (P-UMF 36.) Defendant later noted that Enservio’s evaluation supported the negotiated settlement payment. (P-UMF 37.)

On April 16, 2019, Defendant obtained up to $4 million in settlement authority. (P-UMF 38.) On April 17, 2019, Defendant’s adjuster and Plaintiffs’ representative agreed to a gross payment of $3.1 million in exchange for Plaintiffs executing a written release of all claims against Defendant. (P-UMF 40.) On April 22, 2019, Defendant reiterated these terms in writing: if Plaintiffs agreed to execute a full release, Defendant would issue a net payment of $2,595,892.70, representing the $3.1 million lump sum less prior payments on their claim. (P-UMF 42.) Plaintiffs accepted these terms in writing and asked Defendant to forward the conditional release for execution “per our agreement.” (P-UMF 45.) Plaintiffs’ public adjuster repeatedly reminded Defendant about Plaintiffs’ acceptance and asked again that the release be sent for Plaintiffs’ signatures. (P-UMF 49.)

Defendant admits that once an agreement was reached, Plaintiffs would not be obligated to incur any of the expenses submitted for payment. (P-UMF 59.)

Defendant’s denial letter set forth all fraud that Defendant believed Plaintiffs committed at that time, after conducting a full and thorough investigation. (P-UMF 52.)

Plaintiffs’ policy with Defendant contained a “Concealment or fraud” provision that stated: “We do not provide coverage if you or any covered person has intentionally concealed or misrepresented any material fact relating to this policy before or after a loss.” (D-UMF 1.) The ALE provision in Plaintiffs’ policy covered only the “reasonable” “increase in [Plaintiffs’] normal living expenses” while their own home was uninhabitable. (D-UMF 2.)

Plaintiffs move for summary adjudication of Defendant’s FACC’s second, third, fourth, fifth, and seventh causes of action. Defendant also seeks summary adjudication of the fifth cause of action.

For each claim in the complaint, the defendant moving for adjudication must satisfy the initial burden of proof by showing that one or more elements of a cause of action cannot be established or that there is a complete defense to a cause of action. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520 (Scalf).) Then the burden shifts to the plaintiff to show that a triable issue of material fact exists as to that cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf, supra, 128 Cal.App.4th at p. 1520.) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

A. Defendant Cannot Bring a Claim for Breach of the Implied Covenant Against Plaintiffs (Second Cause of Action).

Defendant’s second cause of action alleges that Plaintiffs breached the implied covenant of good faith and fair dealing by submitting false and inaccurate information for their claim, breaching the insurance contract. (FACC ¶ 85; see FACC ¶¶ 78, 82.)

Plaintiffs argue that an insurer may not bring a tort cause of action for its insured’s alleged breach of the covenant of good faith and fair dealing, and this claim is duplicative of the first cause of action for breach of contract. (Plaintiffs Motion at pp. 10-11.)

The scope of the insured’s duty of good faith and fair dealing is confined by the express contractual provisions of the policy. (Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 405.) “Because an insured’s breach of the covenant does not sound in tort, the insured’s contractual breach of an express policy provision cannot be raised by the insurer as a defense in a bad faith action brought against it by the insured. It would be illogical to allow the insurer in such a suit to instead interpose as a defense the insured’s contractual breach of an implied policy provision (i.e., the covenant of good faith and fair dealing) based on those same express policy terms.” (Ibid.)

Plaintiffs have met their initial burden of showing that Defendant cannot establish the requirements of this cause of action.

In opposition, Defendant argues about the general ability to bring concurrent claims for breach of contract and breach of the implied covenant. (Opposition to Plaintiffs at pp. 16-17.) However, Defendant does not address Plaintiffs’ argument and authority regarding the insurer’s inability to assert this cause of action against the insured.

Summary adjudication of the FACC’s second cause of action is granted in favor of Plaintiffs.

B. Defendant Cannot Bring Its Fraud Claims Against Plaintiffs (Third and Fourth Causes of Action).

Defendant’s third cause of action alleges intentional misrepresentation, and the fourth cause of action alleges concealment. (See FACC ¶¶ 89, 97-98.)

Plaintiffs argue that these causes of action are duplicative of the first cause of action for breach of contract. (Plaintiffs Motion at pp. 11-12.) Defendant alleges that Plaintiffs “breached the contract by submitting false and inaccurate information as part of the Claim.” (FACC ¶ 78.) The fraud causes of action are similarly based on this submission of allegedly false information or withholding of material information.

“A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations. Instead, ‘“‘[c]ourts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies.”’ [Citation.]” (Aas v. Superior Court (2000) 24 Cal.4th 627, 643.)

Plaintiffs have met their initial burden of showing that Defendant cannot establish the requirements of this cause of action.

Defendant’s opposition argument is combined with its argument for the second cause of action. (Opposition to Plaintiffs at pp. 16-17.) Defendant does not show any triable issue about the third and fourth causes of action being solely based on contractual obligations and breaches, which are not recoverable in tort.

Summary adjudication of the FACC’s third and fourth causes of action is granted in favor of Plaintiffs.

C. There Are Triable Issues for Recission of Contract (Fifth Cause of Action).

Defendant’s fifth cause of action seeks recission of the settlement agreement due to Plaintiffs’ misrepresentations that induced Defendant into the settlement. (FACC ¶¶ 106-112.)

“‘“[A] party to a contract cannot rescind at his pleasure, but only for some one or more of the causes enumerated in section 1689 of the Civil Code.”’ [Citation.]” (Nmsbpcsldhb v. County of Fresno (2007) 152 Cal.App.4th 954, 959.) One of these grounds is fraud that induces consent to the agreement. (Civ. Code, § 1689, subd. (b)(1).) “One seeking rescission on account of fraud must be actually deceived by misrepresentation of a material fact and the other party must have intended to deceive by a misrepresentation of such material fact. Further, the party seeking to rescind must rely upon the fraudulent representation to his injury and damage before he can have the contract rescinded.” (Contra Costa County Title Co. v. Waloff (1960) 184 Cal.App.2d 59, 65.)

1. Plaintiffs Have Not Met Their Moving Burden for All Alleged Misrepresentations, and There Are Triable Issues.

Defendant alleges eight misrepresentations: (1) Plaintiffs paid the Leonovs $52,000 to rent the Hercules Drive house; (2) Plaintiffs had in fact stayed at the Leonovs’ house for 52 days; (3) Plaintiffs entered into an agreement that obligated them to pay $40,000 as a security deposit and $80,000 in first month’s rent to live at the Linda Flora house beginning on May 1, 2019; (4) the Linda Flora house was ready to move in at the beginning of the lease on May 1, 2019; (5) Plaintiffs paid, and Dr. Slutsky received, $40,000 for the security deposit at the Linda Flora house; (6) Plaintiffs paid, and Dr. Slutsky received, $80,000 for the first month’s rent; (7) the Linda Flora house was a habitable dwelling worth $80,000 per month as of May 1, 2019; (8) Plaintiffs had incurred $63,693.70 to clean certain contents and that $756,212 worth of contents was a total loss. (FACC ¶ 107.)

Plaintiffs argue that there were no misrepresentations and Defendant did not justifiably rely on any representations because the solicited documentation reflects “forward-looking information. (See Plaintiffs Motion at pp. 13-17.)

For Misrepresentation Nos. 1-2, Plaintiffs contend that Defendant has no evidence, and cannot reasonably obtain evidence, to show that those representations were false. (Plaintiffs Motion at pp. 14-15.) Under California law, the moving party may not simply point out that the opponent “does not possess, and cannot reasonably obtain, evidence that would allow such a trier of fact to find any underlying material fact more likely than not.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 845 [distinguishing the California standard from the federal standard under Celotex Corp. v. Catrett (1986) 477 U.S. 317].) Our summary judgment law “continues to require a [party] moving for summary judgment to present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.” (Id. at p. 854, footnote omitted.) Here, Plaintiffs must “present evidence that [Defendant] does not possess, and cannot reasonably obtain, needed evidence—as through admissions by [Defendant] following extensive discovery to the effect that he has discovered nothing.” (Id. at p. 855.) Plaintiffs have not done so.

For Misrepresentation Nos. 3-4 and 7, Plaintiffs provide evidence that they did not make the alleged misrepresentations. (See Plaintiffs Motion at pp. 15-16.) Defendant’s adjuster knew that the Linda Flora home needed repairs. (P-UMF 64; Plaintiffs Motion, Ex. 1 at pp. 49-50.) He was told that Plaintiffs “needed to fully prepare when it was going to start, when the lease would have to begin, and when it would end.” (P-UMF 64; Plaintiffs Motion, Ex. 1 at p. 50.) However, these alleged misrepresentations do not resolve the entire cause of action.

For Misrepresentation Nos. 5-6 and 8, Plaintiffs argue that Defendant requested only estimates of expenditures, but this fact is disputed. (Plaintiffs Motion at pp. 15-17; P-UMF 20.)

Additionally, Defendant presents evidence that some of Plaintiffs’ representations and omissions may have been false. For example, even if the documentation reflected “forward-looking information,” Defendant provides evidence that Plaintiffs still live in the house with the same contents, Plaintiffs offer the house as a vacation rental, and Plaintiffs have not repaired or disposed of the claimed damaged items. (P-UMF 21; Response to P-UMF 21; D-UMF 17-19.) A trier of fact could therefore find that the claimed losses were not accurate and that Plaintiffs inflated their estimates, which could have affected Defendant’s settlement value.

Summary adjudication of the FACC’s fifth cause of action is denied for Plaintiffs.

Defendant argues that Plaintiffs committed fraud during the claims process and settlement negotiations, and this fraud rendered unenforceable the policy and any alleged settlement. (Defendant Motion at p. 12.)

According to Defendant, Plaintiffs represented that they agreed to pay $1,000 per night to rent the entire Hercules property. (Defendant Motion at p. 13.) Defendant cites the lease, but no specific provision—and the Court cannot ascertain any provision that makes this representation. Additionally, the lease identifies the Hercules Drive address as the place for making rent payments and serving notices on Julia Leonov. (Defendant Motion, Ex. 21 at p. 2-002, ¶ 5; id. at p. 2-005, ¶ 28.) With respect to the cited deposition testimony (D-UMF 3), this testimony confirms the $1,000 per day for the rental, but it does not state that Plaintiffs were renting the entire property.

Defendant argues that Plaintiffs represented that they incurred $52,000 in rent to stay at the Hercules property, but they never incurred the costs because the checks were not cashed. (Defendant Motion at pp. 13-14.) In addition to citing the lease, Defendant cites a June 7, 2018 letter from Defendant’s adjuster about a payment of approximately $31,000 for May 15 to June 15. (D-UMF 4; Defendant Motion, Ex. 22.) Defendant also cites emails dated August 8 and 9, 2018 from Plaintiffs’ adjuster to Defendant’s adjuster. (D-UMF 4; Defendant Motion, Ex. 24.) The emails confirm that “[t]he $21,000.00 check covers 21 days that were incurred by the customer for the remainder of their stay and is the final payoff, per Lease Contract you have on file.” These exhibits do not contain any representation from Plaintiffs. Defendant cites only the checks, Plaintiffs’ testimony that they knew that the Leonovs did not cash the checks, and Plaintiffs’ testimony that they did not inform Defendant about the uncashed checks. (D-UMF 6-7.) It may be that, with more evidence, this nondisclosure could be viewed as fraudulent. But at this stage, Defendant cites no evidence showing that Plaintiffs intended to deceive Defendant about the rent payments.

Defendant also argues that “Linda Flora was an uninhabitable construction site when Plaintiffs said they were going to be living there. The habitability of the property and whether Plaintiffs would actually be paying to live there was fundamental to whether $80,000 per month was a reasonable rent and whether it was reasonable to pay $1 million.” (Defendant Motion at p. 14.) Defendant cites partial deposition testimony from Luke Echterling, its adjuster, confirming that he “understood that this lease that is being submitted was being submitted in order for the parties to reach a global settlement.” (D-UMF 10; Defendant Motion, Ex. 71 at p. 161.) Echterling was further asked if he “expect[ed] the Livshetzes to move into the property on May 1st.” (Defendant Motion, Ex. 71 at p. 161.) Defendant omits the next pages with Echterling’s response, but Plaintiffs submit a more complete transcript. After some clarification, Echterling was asked, “So when you received it, you looked at it; right? . . . Okay. At that point, did you have a belief that a global settlement would be reached sufficiently in advance of May 1st so that the insurance [sic, possibly insured?] could hire a contractor and move into a new property?” (Plaintiffs Motion, Ex. A at p. 162.) Echterling responded that Yuri Adeshelidze, Plaintiffs’ adjuster, “explained to me that they would have enough time to bring the materials, start the work, and . . . they were out of the country—or they would be traveling out of the country and then coming back. I don’t know if they were going to move in there on May 1st. He didn’t tell me that they would move in on May 1st.” (Plaintiffs Motion, Ex. A at p. 162.) Therefore, even if Defendant could meet its burden, there are triable issues about whether Plaintiffs would actually be moving into the Linda Flora property on May 1 and whether the amount of rent is reasonable.

For Plaintiffs’ contents claim, Defendant argues that “[t]he entire justification for the contents claim—Ms. Livshetz’s supposedly uncontrolled ‘Reactive Airway disease’ and asthma—was false.” (Defendant Motion at p. 16.) Plaintiffs provided a doctor’s letter to Defendant on January 18, 2019. (Defendant Motion, Ex. 30; D-UMF 14.) In the letter, the doctor noted that Regina’s Reactive Airway disease had been in remission for several years, but in 2018 her symptoms returned, with asthma exacerbation following the fire.

Defendants contend that this was a misrepresentation because Plaintiffs’ interrogatory responses did not identify any physical injuries or medical treatment. (Defendant Motion at pp. 16-17; see D-UMF 15.) But as Plaintiffs note (Response to D-UMF 15), the interrogatory responses objected to the term “incident” and responded “with the understanding that the phrase ‘incident’ is intended to refer to all facts and allegations which form the basis of this litigation.” (Defendant Motion, Ex. 59.) Defendants also contend that Plaintiffs “fail[ed] to identify asthma or Reactive Airways disease when describing how Plaintiffs determined contents were damaged beyond repair” and “fail[ed] to identify doctor’s note when identifying documents showing contents were damaged beyond repair.” (Defendant Motion at pp. 16-17; see D-UMF 15.) However, Defendant clearly received this information through other discovery. (See Defendant Motion, Ex. 30.) Defendant does not explain how Plaintiffs’ identification (or lack thereof) of documents in interrogatory responses demonstrates that Regina did not suffer from Reactive Airway disease or that it was not a true reason for Plaintiffs’ contents claim.

Summary adjudication of the FACC’s fifth cause of action is denied for Defendant.

D. Defendant Cannot Bring Its Unfair Competition Claim Against Plaintiffs (Seventh Cause of Action).

Defendant’s seventh cause of action alleges that Plaintiffs violated the UCL through their misrepresentations. (FACC ¶¶ 120-132.)

Plaintiffs argue that they were not engaged in a business or business practice. (Plaintiffs Motion at pp. 18-19.) The UCL includes any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising. (Bus. & Prof. Code, § 17200.) The UCL embraces “anything that can properly be called a business practice and that at the same time is forbidden by law.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) “By proscribing any unlawful business practice, section 17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.” (Ibid.)

Plaintiffs have met their initial burden of showing that Defendant cannot establish the requirements of this cause of action.

Defendant argues that it can bring a UCL claim against individuals, and making and settling insurance claims are business acts and practices. (Opposition to Plaintiffs at p. 18.) According to Defendant, “there is ample evidence that Plaintiffs use insurance fraud as a business.” (Ibid.) Defendant provides no admissible evidence or relevant authority to show that Plaintiffs are engaged in a business.

Summary adjudication of the FACC’s seventh cause of action is granted in favor of Plaintiffs.

Plaintiffs and Defendant move for summary adjudication of the SAC’s fourth cause of action for breach of contract arising from the alleged April 2019 settlement agreement and Defendant’s January 31, 2020 refusal to pay. (See SAC ¶¶ 47-53.) Defendant also moves for summary adjudication of the second cause of action for breach of the implied covenant of good faith and fair dealing, third cause of action for unfair business practices, prayer for punitive damages, and its sixth and nineteenth affirmative defenses.

A. There are Triable Issues for Breach of Contract (Fourth Cause of Action).

A plaintiff moving for summary adjudication must satisfy the initial burden of proof by proving each element of a cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) Then the burden shifts to the defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(1).)

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.)

Defendant argues that no settlement was formed because there was no meeting of the minds as to the release and the condition precedent of a signed release never occurred. (Opposition to Plaintiffs at p. 15.) Plaintiffs argue that the failure to formalize the settlement and its release does not make the settlement unenforceable, relying on a case with facts that “are virtually identical to the instant case.” (Plaintiffs Motion at pp. 6-7.)

In CSAA Ins. Exchange v. Hodroj (2021) 72 Cal.App.5th 272 (Hodroj), the plaintiff proposed a settlement “as long as certain conditions were fulfilled,” including that the defendant could condition its acceptance on the plaintiff signing a written release of all bodily injury claims. (Id. at pp. 274-275.) The defendant accepted and sent a written release of all claims for the plaintiff to sign. (Id. at p. 275.) The next day, the plaintiff reneged on the settlement because the release “introduces significant and material new, additional and different terms and conditions.” (Ibid.) The Court of Appeal was “confident that an objective observer would conclude from those communications that the parties intended to settle [the plaintiff’s] bodily injury claim for the amount of the insurance policy limits ($100,000) and to later memorialize those terms in a formal document. That the proposed document contained terms materially different from what had been agreed to does not change the binding effect of the initial agreement. [The plaintiff] was under no obligation to sign a release that was inconsistent what he agreed to. But a proposed writing that does not accurately reflect the terms of an agreement does not unwind the entire deal. The contract formed by the parties’ offer, acceptance, and consideration is still enforceable.” (Id. at p. 277.)

That is what happened here. Plaintiffs have provided evidence of an offer, acceptance, and consideration. Echterling, Defendant’s adjuster, testified that as of February 20, 2019, it was Defendant’s intent to reach a global settlement with Plaintiffs. (Plaintiff Motion, Ex. 1 at pp. 138-139.) Echterling “requested information on reasonable settlement amounts so that we can discuss,” because Defendant “would have to have all amounts in order to have that global amount discussed.” (Id. at p. 140.) On April 22, 2019, Echterling sent an email to Yuri Adeshelidze. (Plaintiff Motion, Ex. 25.) He “put together a document under our letterhead to assist in reviewing settlement under release with [Plaintiffs]. [¶] This is being discussed under the terms and conditions of the signed waiver.” (Ibid.) The email also stated, “The payment with signed release will break down as follows,” and it set forth the amount of payment for each category. (Ibid.) The email also attached a PDF showing a summary of the financials. Later that night, Adeshelidze emailed Echterling, stating that the “proposed settlement has been approved and accepted” by Plaintiffs. (Plaintiff Motion, Ex. 19.) Although the exact terms of the release were not yet presented, the parties understood the release to be a global release. Similar to the parties in Hodroj, Plaintiffs and Defendants had agreed on the material terms, although the exact language of the release was not yet memorialized.

However, even if Plaintiffs have met their initial burden as to the existence of the settlement agreement and all other required elements, Defendant presents triable issues regarding its defenses. (See Code Civ. Proc., § 437c, subd. (p)(1).)

1. There Are Triable Issues Regarding Defendant’s Defense Based on Plaintiffs’ Fraud.

Defendant argues that Plaintiffs committed fraud that rendered the settlement void, unenforceable, and rescinded. (Defendant Motion at pp. 12-18; Opposition to Plaintiffs at pp. 4-12.) Defendant’s argument is the same in its opposition to Plaintiffs’ motion, in support of its own request for adjudication of the SAC’s fourth cause of action, and in support of its request for adjudication of the FACC’s fifth cause of action for rescission of contract. (Defendant Motion at p. 12 [“The Court should grant summary adjudication to Federal on Plaintiffs’ claim for breach of the alleged settlement agreement and Federal’s crossclaim and defenses of rescission and breach of the policy’s anti-fraud provision.”].)

For the reasons discussed with the FACC’s fifth cause of action, there are triable issues regarding the settlement agreement’s enforceability and ability to be rescinded due to fraud. Those factual disputes prevented adjudication of the FACC’s fifth cause of action in favor of either party, and they equally raise triable issues to preclude adjudication of the SAC’s fourth cause of action.

Summary adjudication of the SAC’s fourth cause of action is denied for Plaintiffs because Defendant raises a triable issue of one or more material facts for a complete defense to Plaintiffs’ cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).).

Summary adjudication of the SAC’s fourth cause of action is denied for Defendant because it did not establish that Plaintiffs’ fraud and Defendant’s claim for rescission are “a complete defense to the cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).)

2. There Are Triable Issues Regarding Defendant’s Defense Based on Statute of Limitations.

Plaintiffs argue that Defendant’s affirmative defense of statute of limitations has no merit. (Plaintiff Motion at pp. 9-10.) Defendant argues that there are triable issues of fact regarding its affirmative defense, and “the factual dispute over when Plaintiffs’ breach of contract claim accrued precludes summary adjudication.” (Opposition to Plaintiffs at p. 13.)

The statute of limitations for breach of written contract is four years. (Code Civ. Proc., § 337, subd. (a).) Defendant argues that the statute of limitations began to run in April 2019, when a settlement was not finalized—more than four years before Plaintiffs first asserted this claim. (Opposition to Plaintiffs at p. 13; see Response to P-UMF 44-45.)

Plaintiffs’ February 14, 2020 complaint and March 12, 2020 first amended complaint did not contain a cause of action for breach of contract based on the settlement agreement, nor do they mention a settlement at all. (See Complaint ¶ 21 [“Federal failed to fully indemnify Plaintiffs for the losses suffered as required under the terms of the Policy.”]; FAC ¶ 23 [“Federal failed to fully indemnify Plaintiffs for the losses suffered as required under the terms of the Policy.”].) This cause of action for breach of the settlement agreement was added only with the SAC, filed on July 14, 2023. Plaintiffs do not argue that the amendment relates back to the original filing date, and it appears that there is no basis to do so.

Plaintiffs argue that they “had no reason to file suit until after January 30, 2020,” when Defendant repudiated the contract. (Plaintiffs Motion at p. 10; Plaintiffs Reply at p. 6.) However, on April 27, 2019, Adeshelidze emailed Echterling, stating that “[t]he settlement offer as stated below has been approved and confirmed with the insureds Mr/Mrs. Livshetz. [¶] Please send the release based on the summary received that you emailed as attached below . . . in view of the 1 year claim statute of limitation approaching on the 8th of May, 2019 for the lawsuit filing. . . . The insured otherwise will have no choice but to file a lawsuit next week to protect the file status . . . .” (Plaintiffs Motion, Ex. 25; see Response to P-UMF 45.) Additionally, on April 30, 2019, Adeshelidze emailed Echterling indicating that Plaintiffs had not received the release and “there is no real claim closure as of today.” (Plaintiffs Motion, Ex. 26.) Plaintiffs’ adjuster continued: “[B]ased on the above at this time I am left with no choice but to refer your insureds to an attorney of their choice so that a lawsuit could be initiated and filed in order to protect this claim . . . . Also, if Chubb is unwilling to follow through with the Chubb proposed settlement offer and claim closure, please advise. Based on absence of communication it looks like it.” (Plaintiffs Motion, Ex. 26; see Response to P-UMF 45.)

These communications raise triable issues about whether Plaintiffs, or their adjuster as their representative, knew or should have known that the settlement agreement had been breached by April 2019 and that a lawsuit may be necessary at that time—thus starting the clock on the limitations period.

Therefore, Defendant has raised triable issues of one or more material facts for its statute of limitations defense, precluding adjudication of the SAC’s fourth cause of action in Plaintiffs’ favor.[1] (Code Civ. Proc., § 437c, subd. (p)(1).)

B. There Are Triable Issues for Defendant’s Sixth and Nineteenth Affirmative Defenses.

Defendant moves for adjudication of its sixth affirmative defense (Violation of Concealment or Fraud Condition) and nineteenth affirmative defense (Recission), but it does not cite authority for such a motion. (See Defendant Motion at pp. 12-18.)

Under section 437c, subdivision (f)(1), “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.”

Defendant is not asking the Court to determine that “there is no affirmative defense to the cause of action” or “that there is no merit to an affirmative defense.” Rather, Defendant argues that Plaintiffs’ cause of action for breach of contract “has no merit” because it is barred by affirmative defenses.

For the reasons set forth above, there are triable issues of fact for Defendant’s affirmative defenses of Violation of Concealment or Fraud Condition and Recission.

Summary adjudication of Defendant’s sixth and nineteenth affirmative defenses to the SAC is denied.

C. There Are Triable Issues Regarding Causation for Bad Faith (Second Cause of Action).

The SAC’s second cause of action alleges breach of the implied covenant of good faith and fair dealing through its investigation, handling, and denial of Plaintiffs’ insurance claim. (See SAC ¶ 35.)

To establish a claim for bad faith investigation and denial of an insurance claim, a plaintiff must prove, inter alia, that the defendant’s failure to properly investigate the claim was a substantial factor in causing the plaintiff’s harm. (CACI 2332.)

Defendant argues that Plaintiffs cannot prove causation because they cannot prove that a reasonable investigation would have eliminated any reasonable basis or proper cause to deny the claim. (Defendant Motion at pp. 19-20.) According to Defendant, “Plaintiffs cannot establish causation as a matter of law, as the undisputed facts establish that further investigation into Plaintiffs’ claim would not have exonerated Plaintiffs, nor would it have otherwise eliminated any reasonable basis or proper cause for Federal’s determination that Plaintiffs committed fraud.” (Id. at p. 19.) Defendant contends that discovery “confirms that further investigation into Plaintiffs’ claim would have only uncovered more evidence of Plaintiffs’ fraud during the claims process—this time in connection with Plaintiffs’ contents claim,” which “would have only reinforced the reasonableness of Federal’s decision to deny coverage.” (Id. at pp. 19-20.)

For all the reasons set forth above, there are triable issues of fact regarding whether Plaintiffs committed fraud or made material misrepresentations to Defendant. Because that remains unresolved, there are triable issues about the reasonableness of Defendant’s denial based on fraud and whether proper handling of the claim would have changed the result.

Summary adjudication of the SAC’s second cause of action is denied for Defendant.

D. The Third Cause of Action and Punitive Damages Derive from a Claim that Is Still at Issue.

Defendant argues that both the third cause of action for violation of the UCL and the claim for punitive damages fail because they are entirely based on the second cause of action. (Defendant Motion at p. 20.)

Because the Court denies summary adjudication of the second cause of action, summary adjudication of the SAC’s third cause of action and punitive damages is also denied for Defendant.

Plaintiffs’ motion for summary adjudication of the FACC’s second, third, fourth, and seventh causes of action is GRANTED. Plaintiffs’ motion for summary adjudication of the FACC’s fifth cause of action is DENIED.

Plaintiffs’ motion for summary adjudication of the SAC’s fourth cause of action is DENIED.

Defendant’s motion for summary adjudication of the FACC’s fifth cause of action is DENIED.

Defendant’s motion for summary adjudication of the SAC’s second, third, and fourth causes of action; punitive damages; and sixth and nineteenth affirmative defenses is DENIED.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. If all parties in the case submit on the tentative ruling, no appearances before the Court are required unless a companion hearing (for example, a Case Management Conference) is also on calendar.

Hon. Thomas D. Long

Judge of the Superior Court

[1] Curiously, Defendant’s motion did not include statute of limitations as an argument for why the fourth cause of action has no merit. (See Code Civ. Proc., § 437c, subd. (f)(1).) Although Defendant successfully defeated Plaintiffs’ motion by raising a triable issue about when the statute of limitations began to run (and thus whether its defense might have merit), the start of the limitations period may not actually be a triable issue if presented in a different procedural posture. Indeed Defendant might have been entitled to summary adjudication of the claim on the settlement agreement based on the statute of limitations defense had it brought such a motion. Instead, Defendant moved for summary adjudication of this cause of action only on the grounds that “any such agreement was void, unenforceable, and rescinded by Federal due to Plaintiffs’ fraud.” (See Defendant Notice of Motion.) “Only the grounds specified in the notice of motion may be considered by the trial court. [Citation.] This rule has been held to be especially true in the case of motions for summary adjudication of issues.” (Gonzales v. Superior Court (1987) 189 Cal.App.3d 1542, 1545.)