Judge Thomas D. Long, Case 20STCV28704 2022-08-02 Tentative Ruling

On July 29, 2020, Plaintiff Brian Kennedy filed this action against Defendants United States Liability Insurance Company Inc. and Schifrin, Gagnon & Dickey Inc.

On May 24, 2022, United States Liability Insurance Company Inc. (“Defendant”) filed a motion for summary judgment, or in the alternative, summary adjudication.

Defendant’s request for judicial notice of the Complaint, Answer, and Quitclaim Deed is granted.

Plaintiff sought insurance coverage for a vacant building without renovation, located at 15430 Roscoe Blvd, Van Nuys, California 91406. (See Undisputed Material Facts “UMF” 12, 41, 70, 99, 128, 157, 177.) Plaintiff’s application form represented that the plumbing in the property was made of copper. (UMF 1, 30, 59, 88, 117, 146.) Defendant then issued Plaintiff commercial property insurance for the property that provided coverage for vandalism and theft, subject to several exclusions. (UMF 2, 31, 60, 89, 118, 147.) The policy was numbered CP 1708191 with effective dates of August 24, 2019 through February 24, 2020. (UMF 10, 39, 68, 97, 126, 155.) One exclusion stated that there was no coverage for “Loss or damage to copper, including but not limited to wiring, piping, air-conditioner coils or roofs, and loss or damage to the described premises caused by or resulting from damage by theft, attempted theft or vandalism” (“Copper Exclusion”). (UMF 15, 44, 73, 102, 131, 160.)

Sometime between October 25, 2019 and December 3, 2019, the property was damaged, with interior walls cut, glass partitions broken, and the interior vandalized with graffiti. (UMF 3, 32, 61, 90, 119, 148, 180.) Human feces were also present in multiple areas. (UMF 3, 32, 61, 90, 119, 148.) Plaintiff notified Defendant of the loss on December 30, 2019. (UMF 181.) Defendant’s adjuster inspected the property on January 3, 2020, and she took 137 photographs and a video recording. (UMF 4, 33, 62, 91, 120, 149.) She observed evidence of vandalism and theft. (UMF 22, 51, 80, 109, 138, 167.)

Thereafter, the adjuster prepared a 21-page Estimate and loss analysis, which provided a total Replacement Cost Value of $54,321.89, a total depreciation amount of $812.49, and an Actual Cost Value of $53,509.40. (UMF 5, 34, 63, 92, 121, 150.) The Estimate tabulated a net claim in the initial amount of $48,509.40 after subtracting the $5,000 policy deductible. (UMF 5, 34, 63, 92, 121, 150.) Defendant paid this amount to Plaintiff. (UMF 21, 50, 79, 108, 137, 166.)

The Estimate specifically noted that the claim did not include “theft of electrical components, wiring or stolen plumbing components.” (UMF 6, 35, 64, 93, 122, 151.) The Estimate explained: “THIS ESTIMATE IS FOR VANDALISM WHICH INCLUDES PAINTING OVER GRAFFITI, REPLACING BROKEN WINDOW GLASS, CLEAN UP OF DEBRIS TO INSPECT ALL FLOOR FINISHES, TEMPORARY POWER INCLUDED TO ALLOW THE PAINTING AND VANDALISM REPAIRS TO TAKE PLACE SINCE THE BUILDINGS ELECTRICAL WIRING AND COMPONENTS WERE STOLEN. PLEASE NOTE THAT THIS ESTIMATE DOES NOT INCLUDE THEFT OF ELECTRICAL COMPONENTS, WIRING OR STOLEN PLUMBING COMPONENTS. THIS ESTIMATE IS ONLY FOR VANDALISM NOT THEFT.” (UMF 6, 35, 64, 93, 122, 151.) Defendant’s coverage position letter stated there was no coverage for loss of or damage to copper materials, including wiring, plumbing, and air conditioner coils, as well as loss or damage to the premises caused by or resulting from the vandalism, theft, or attempted theft of such items, and no coverage for additional costs due to asbestos, lead, and organic pathogens including human waste. (UMF 21, 50, 79, 108, 137, 166.)

On February 14, 2020, the adjuster inspected the lobby bathrooms of the property and took an additional 26 photographs, including photographs of the bathrooms and surrounding areas. (UMF 8, 37, 66, 95, 124, 153.) A February 20, 2020 Supplemental Estimate provided an additional Replacement Cost Value of $1,177.18, an additional depreciation amount of $30.22, and an additional Actual Cost Value of $1,146.96. (UMF 8, 37, 66, 95, 124, 153.) Defendant issued a supplemental payment to Plaintiff on February 21, 2020 of $1,146.96, and then closed Plaintiff’s claim. (UMF 8-9, 37-38, 66-67, 95-96, 124-125, 153-154.)

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.)

The first cause of action alleges that Defendant breached its contract with Plaintiff by refusing to pay for the majority of Plaintiff’s losses. Defendant relies on the Copper Exclusion, which excludes from coverage “Loss or damage to copper, including but not limited to wiring, piping, air-conditioner coils or roofs, and loss or damage to the described premises caused by or resulting from damage by theft, attempted theft or vandalism.” (Motion at p. 12.) According to Defendant, it paid all of the losses that were not excluded by the Copper Exclusion. (Id. at pp. 12-13.)

“[W]hen an insurer seeks summary judgment on the ground the claim is excluded, the burden is on the insurer to prove that the claim falls within an exclusion.” (Brodkin v. State Farm Fire & Casualty Co. (1989) 217 Cal.App.3d 210, 216.) “To satisfy its burden, an insurer need not ‘disprove every possible cause of the loss’ and once the insurer establishes the claim is excluded, the burden shifts to the insured to show a triable issue of material fact exists.” (Roberts v. Assurance Co. of America (2008) 163 Cal.App.4th 1398, 1406.)

Defendant primarily relies on the Declaration of Telma L. Dorcey, who visited the property and conducted a site inspection. (Motion at pp. 12-14; see Dorcey Decl. ¶ 9.) She walked around the exterior and examined the interior, including the lobby, showroom, interior offices, and both the first and second floors of the two interior garages. (Id. at ¶ 9.) She observed graffiti spray-painted on the exterior walls and throughout the interior, broken glass, carpet stained with human waste, holes cut in drywall, insulation removed from the walls, tiles removed from the ceiling, and the remaining cut ends of copper wiring protruding from holes in the walls and the ceiling. (Id. at ¶ 10.) In the garage, she observed wall-mounted utility panels and electrical boxes that were opened, with ends of cut copper wiring visibly protruding from the bottom, and a water heater on the floor. (Id. at ¶ 11.) Based on Dorcey’s experience, it “appeared to [her] that the thieves were running a ‘chop shop’ operation, whereby they would remove copper wiring from the walls and ceilings of the property, bring the wiring to these countertops, use tools to strip the insulation off of the wires, bag and steal the stripped copper wire segments, and discard the stripped insulation on the floor.” (Id. at ¶ 12.)

Defendant has not met its initial burden of showing that Plaintiff’s claim is excluded by the Copper Exclusion. Dorsey’s statements that the damage was “resulting from the theft or attempted theft of the copper wiring inside the Property,” that holes were cut “in order to access copper wiring,” and conduits “had been pulled from the wall in order to access copper wiring, and any copper wiring that used to be within those conduits had been removed” are speculative as to the motives resulting in damage. (Dorcey Decl. ¶¶ 10-11.) Defendant also provides an opinion from an electrical engineering expert who reviewed the photographs and concluded that the wiring must have been copper due to historical industry standards and repairs to the property’s wiring within the previous twenty years. (Motion at pp. 14-15; Roshanian Decl. ¶ 6.) Although this opinion suggests copper wiring, it does not show that the only reasonable conclusion is that the wiring was copper. Additionally, even if Defendant had met its initial burden, Plaintiff provides evidence further supporting the speculative and inconsistent nature of Defendant’s witnesses’ opinions. (See Opposition at pp. 9-14.)

Defendant also did not cite evidence regarding the plumbing, the theft of which was excluded from the Estimate. (See, e.g., UMF 6.) Plaintiff provides evidence from a construction materials expert who physically inspected the property and confirmed that the plumbing was galvanized and not copper. (Franklin Decl. ¶ 5.) Dorcey, Defendant’s adjuster, admitted that she did not know if all the plumbing was copper or galvanized. (White Decl., Ex. 3 [“Dorcey Depo.”] at pp. 73.) Defendant’s expert also admitted that the plumbing appeared to be galvanized. (White Decl., Ex. 6 [“Roshanian Depo.”] at pp. 184-185.) Therefore, there are triable issues of fact regarding whether the Copper Exclusion applies to all of the losses that Defendant did not pay.

B. Third Cause of Action – Breach of Implied Covenant of Good Faith and Fair Dealing

The third cause of action alleges breach of the implied covenant of good faith and fair dealing through Defendant’s denial of Plaintiff’s claim and failure to conduct a full, objective, and unbiased investigation. “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350.)

Defendant argues there was a genuine dispute regarding the Copper Exclusion. (Motion at p. 17.) “The mistaken withholding of policy benefits, if reasonable or if based on a legitimate dispute as to the insurer’s liability under California law, does not expose the insurer to bad faith liability.” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1280-1281.) “[T]he reasonableness of the insurer’s decisions and actions must be evaluated as of the time that they were made; the evaluation cannot fairly be made in the light of subsequent events that may provide evidence of the insurer’s errors.” (Chateau Chamberay Homeowners Ass’n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347 (Chateau Chamberay).) “A trier of fact may find that an insurer acted unreasonably if the insurer ignores evidence available to it which supports the claim. The insurer may not just focus on those facts which justify denial of the claim.” (Mariscal v. Old Republic Life Ins. Co. (1996) 42 Cal.App.4th 1617, 1623.) “While the reasonableness of an insurer’s claims-handling conduct is ordinarily a question of fact, it becomes a question of law where the evidence is undisputed and only one reasonable inference can be drawn from the evidence.” (Chateau Chamberay, supra, 90 Cal.App.4th 335 at p. 346.)

Defendant relies on the fact that it applied the plain language of the Copper Exclusion and “promptly and thoroughly investigated the claim, and the adjuster which [Defendant] hired performed two site inspections at the Property.” (Motion at pp. 17-18.) This is insufficient to show as a matter of law that Defendant acted reasonably and that there is only one inference to be drawn. Furthermore, as discussed above, there is evidence that Defendant ignored evidence of galvanized, not copper, plumbing that could have supported some of Plaintiff’s claim. This raises triable issues as to whether Defendant failed to conduct a full, objective, and unbiased investigation.

The first cause of action seeks a declaration of Plaintiff’s rights under the policy and a declaration that coverage exists for the alleged losses. Defendant argues this cause of action is duplicative of the other causes of action because it “is wholly subsumed by the complaint’s other two causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing,” and “[t]he issue of whether Plaintiff’s unpaid losses are covered under the Policy must necessarily be determined in order to decide Plaintiff’s claims for breach of contract and bad faith.” (Motion at p. 18.)

“The remedy of declaratory relief is cumulative and does not restrict other remedies. (Code Civ. Proc., § 1062.) . . . The mere fact that another remedy is available will not suffice as sufficient grounds for a court to decline a declaration, because declaratory relief is not intended to be exclusive or extraordinary.” (Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau (2011) 193 Cal.App.4th 49, 59.)

As discussed above, Defendant has not shown that it is entitled to adjudication of the causes of action for breach of contract and bad faith. Accordingly, Plaintiff’s rights under the policy and the existence of coverage remain in dispute.

Defendant seeks summary adjudication with respect to damages occurring from a December 18, 2020 fire. (Motion at pp. 18-19.) Defendant argues that Plaintiff could not have sustained any loss and cannot recover damages from Defendant because Plaintiff did not own the property at that time. (Id. at p. 19.)

“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 [as specified in Civil Code section 3294], or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).) Civil Code section 3294 governs the availability of punitive damages. There is no authority for adjudication of a portion of or limitation on Plaintiff’s damages.

In reply, Defendant attempts to reframe this issue as one seeking adjudication of whether Defendant owed a duty. (Reply at pp. 9-10.) That is not the ground raised in the notice of motion or argued in the motion. (See Motion at p. 3 [Notice of Motion: “As to Plaintiff’s claim for damages related to the fire that occurred at the subject property in December 2020, the material facts are undisputed and USLI is entitled to summary adjudication as a matter of law that Plaintiff could not have sustained any damage resulting from the fire to the property because Plaintiff no longer owned the property at the time of the fire.”].)

The motion for summary judgment, or in the alternative, summary adjudication 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. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court