Judge Thomas D. Long, Case 20STCV44920 2023-02-02 Tentative Ruling

On November 23, 2020, Plaintiffs Jamison Pawley and Ashley Pawley filed this action against Defendant California Automobile Insurance Company.

Sustained. The declaration is electronically “signed” via a plain text font that is not unique or capable of verification. The electronic signature does not comply with California Rules of Court, rule 2.257(b)(1), which provides: “If the declarant is not the electronic filer, the electronic signature must be unique to the declarant, capable of verification, under the sole control of the declarant, and linked to data in such a manner that if the data are changed, the electronic signature is invalidated.” Defendant focuses on Plaintiffs’ failure to demand production of the original signed document under California Rules of Court, rule 2.257(b)(2). (Reply at p. 3.) But in light of Plaintiffs’ Opposition’s evidentiary challenge to the declaration, Defendant also does not prove that the declarant did physically sign a printed form of the document in compliance with this alternative rule subsection.

Nos. 1-25: Overruled. The declarant sets forth the documents she reviewed and the basis for her expert opinion.

As of September 30, 2018, Plaintiffs owned or had an insurable interest in the property located at 801 Mountain Lane in Glendora, California, and Defendant insured the property. (Undisputed Material Facts “UMF” 1-2.)

After a water supply line burst at the property on September 30, 2018, on October 3, 2018, Plaintiffs advised Defendant that they were staying at a Holiday Inn hotel. (UMF 5; see UMF 3.) Plaintiffs retained Rainbow International to perform water mitigation. (See UMF 4; Response to UMF 8.)

Defendant inspected the premises on October 9, 2018. (See UMF 7.) Defendant reinspected the premises in the presence of Ashley Pawley on October 29, 2018, along with Rainbow, QualWood, and Construction 911. (UMF 12.) Defendant and others also reinspected the premises on November 8, 2018. (UMF 16.)

Defendant received Rainbow’s estimate for removal of the cabinetry on November 26, 2018. (UMF 19.) Defendant prepared a revised dwelling repair estimate and payment on December 20, 2018. (UMF 25-26.) Defendant also reinspected and issued payments in January 2019. (UMF 27-30.)

Defendant retained Construction 911 on January 25, 2019, and the first cabinets were removed from February 6 to 11, 2019, revealing mold. (UMF 31-32, 35.) Mold remediation began on March 21, 2019. (UMF 43.)

In February 2019, Defendant decided to replace the tile floor, which would take three to four months to complete, and it sent Plaintiffs a check. (UMF 37-38, 40.)

Defendant received Plaintiffs’ contractor's repair estimate of $518,489.52 on April 3, 2019. (UMF 45.) On May 8, 2019, QualWood provided Defendant with its repair estimate to repair and refinish the cabinets. (UMF 49.)

Defendant retained Tad Lister with J.S. Held on June 19, 2019 to review Plaintiffs' and Defendant’s respective repair estimates, and Defendant added items back to the J.S. Held estimate on July 24, 2019. (UMF 50-51.) On July 29, 2019, Defendant sent a check for $335,545.19 under Coverage A to Plaintiffs, noting that among the items still outstanding was an inspection of Plaintiffs’ personal property items. (UMF 53.) Defendant reinspected the premises on August 9, 2019 and September 17, 2019. (UMF 54-55.)

On October 24, 2019, Plaintiffs’ counsel advised Defendant that certain appliances were damaged due to the water loss, and others were contaminated by unremediated mold. (UMF 56.) Plaintiffs submitted a new estimate from Grady Construction in the amount of $725,000. (UMF 57.) Defendant would not issue a supplemental payment without an estimate of repairs identifying loss-related damage and a breakdown detailing the material and labor costs. (UMF 58.) Defendant did not pay for the six discarded appliances because it could not inspect them. (UMF 59.)

On November 8, 2019, Defendant prepared a revised repair estimate in the amount of $492,543.96 for dwelling repairs, which included electrical code upgrades totaling $27,824.09. (UMF 60.) On November 14, 2019, CAIC prepared a revised estimate in the amount of $575,816.62 for dwelling repairs and including additional code upgrades, appliance costs and a charge for a custom closet. (UMF 61.) Defendant issued payments to Plaintiff on December 30, 2019 and January 14, 2020. (UMF 62-63.)

On January 28, 2020, Plaintiffs demanded payment of in the amount of $1,075,128.70 with an estimate for building restoration in the amount of $862,114.73. (UMF 64.) On March 3, 2020, Defendant issued payment of $34,638.32 to Plaintiffs for their drywall and stucco repairs, bringing the total dwelling replacement cost value to $573,907.16. (UMF 65.) On May 18, 2020, Defendant issued payment for personal property total loss items and cleaning of soft goods. (UMF 67.)

Defendant reinspected the property on June 4, 2020. (UMF 68.) Plaintiffs had spent $817,709.50 on repairs and remodels. (UMF 69.) On July 9, 2020, Defendant prepared a revised estimate of $715,081.80. (UMF 70.) Plaintiff’s piano was inspected, and Defendant issued a payment for its repairs. (UMF 72-73.)

On December 1, 2020, Defendant advised Plaintiffs that it was closing the file relating to the water loss claim. (UMF 74.)

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 complaint alleges two causes of action: (1) breach of written contract and (2) breach of the implied covenant of good faith and fair dealing. Defendant moves for summary adjudication of the second cause of action and the request for punitive damages.

To establish a breach of the covenant of good faith and fair dealing for insurance claims, a plaintiff must establish that (1) benefits due under the policy were withheld, and (2) the reason for withholding benefits was unreasonable or without proper cause. (Love v. Fire Insurance Exchange (1990) 221 Cal.App.3d 1136, 1151.)

Defendant argues that there was no delay in investigation and no unreasonable withholding of policy benefits because there was a genuine dispute over the scope of damage. (Motion at pp. 63-70.) “[B]efore an insurer can be found to have acted tortiously (i.e., in bad faith), for its delay or denial in the payment of policy benefits, it must be shown that the insurer acted unreasonably or without proper cause. [Citations.] However, where there is a genuine issue as to the insurer’s liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute. [Citation.]” (Chateau Chamberay Homeowners Ass’n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347.) “The genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured’s claim.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723 (Wilson).) “[A]n insurer is entitled to summary judgment based on a genuine dispute over coverage or the value of the insured’s claim only where the summary judgment record demonstrates the absence of triable issues (Code Civ. Proc., § 437c, subd. (c)) as to whether the disputed position upon which the insurer denied the claim was reached reasonably and in good faith.” (Id. at pp. 724.) “A genuine dispute exists only where the insurer’s position is maintained in good faith and on reasonable grounds.” (Id. at p. 723.) “Ordinarily, reasonableness is a factual issue to be decided by a jury.” (Fadeeff v. Sate Farm General Ins. Co. (2020) 50 Cal.App.5th 94, 102 (Fadeeff).)

Defendant primarily relies on the Declaration of Edith Fuerte. As noted in Plaintiffs’ evidentiary objections, the declaration is not personally signed and features Edith Fuerte’s name typed in a plain text font. Plaintiffs challenged the veracity of this electronic signature, particularly in light of Defendant’s other non-filer declarants providing handwritten signatures. Plaintiffs further explain that in her December 9, 2022 deposition, Edith Fuerte did not recall drafting or signing the 19-page declaration in June 2022. (Opposition at p. 8 & Ex. 8.) A reasonable jury could therefore question the credibility of Edith Fuerte and her declaration. Defendant contends this deposition testimony lacks authentication, but it did not formally object to the exhibit and does not dispute its authenticity. (Reply at pp. 2-3.)

Even if accepting Edith Fuerte’s declaration and accompanying exhibits, Plaintiffs provide evidence that creates disputed facts.

Defendant argues that its delay in inspecting the premises, from the September 30, 2018 loss to October 9, 2018, was due to Plaintiffs’ vacation. (Motion at p. 63.) But Plaintiffs provide evidence that Defendant was informed on October 4, 2018 that Plaintiffs wanted the property inspected sooner. (Villareal Decl. ¶ 4 & Ex. 1.)

According to Defendant, through October 2018 Rainbow advised that the kitchen cabinets might not need to be removed. (Motion at p. 64; UMF 14.) ServPro reinspected in November 2018 and advised that the cabinets did need to be removed. (Motion at p. 64; UMF 16.) On November 27, 2018, Defendant sent payment to Plaintiffs for cabinet removal. (Motion at p. 64; UMF 20.) Rainbow provided a revised estimate in December 2018, and Defendant paid that amount three days later. (Motion at p. 64; UMF 26.) But Plaintiffs provide evidence that at Defendant’s initial inspection on October 9, 2018, a lead technician at Rainbow personally advised Ms. Furete that the cabinets were wet and needed to be removed. (Villareal Decl. ¶ 7; Plaintiffs’ Ex. 10.)

Construction 911 provided a mold abatement bid on March 15, 2019, and the remediation began on March 21, 2019. (Motion at pp. 64-65; UMF 41, 43.) According to Defendant, the only mold remediation was due to the delay in removing the cabinetry, which was caused by Plaintiffs’ delay in choosing a cabinet vendor. (Motion at p. 65.) But Plaintiffs provide evidence that, despite the October 9, 2018 advisement to remove the cabinets, Defendant did not provide Rainbow with authority to remove them. (Villareal Decl. ¶ 7; Plaintiffs’ Ex. 10.) Instead, Defendant insisted on drilling holes to dry the wall from under the cabinets—an improper procedure for drying out areas of property where moisture could be trapped and lead to mold growth. (Villareal Decl. ¶ 7; see Plaintiffs’ Ex. 10.) Rainbow was restricted in its efforts because Defendant, through Ms. Fuerte, would not authorize prompt removal of the cabinets. (Villareal Decl. ¶ 10.)

Defendant argues that a genuine dispute existed over the scope of damage caused by the plumbing leak, and it “consistently considered new information as to the scope of damages when those additional damages have been brought to [Defendant]'s attention and each of [Defendant]'s estimates were prepared based upon input received from consulting contractors.” (Motion at pp. 65, 68.)

The initial November 9, 2018 payment did not include costs associated with tile flooring and cabinetry. (Motion at p. 65; UMF 17.) Another estimate included ITEL pricing for carpet and pad. (Motion at p. 65; UMF 21.) But the November 30, 2018 estimate was not paid until July 9, 2020. (Opposition at p. 15; Plaintiffs’ Ex. 6 at pp. CF 00020 – CF 00021, CF 00801 – CF 00805.)

In February 2019, Defendant paid for replacing the tiling. (Motion at p. 66; UMF 37-38.) Plaintiffs’ contractor/estimator provided an initial estimate of $518,489.52 on April 3, 2019. (Motion at p. 66; UMF 45.) By July 29, 2019, Defendant agreed to a replacement cost value for the dwelling repairs in the amount of $452,983.75, and it issued a supplemental payment. (Motion at p. 66; UMF 51, 53.) On October 24, 2019, Plaintiffs provided a new estimate from Grady Construction, but Defendant would not issue a supplemental payment without an estimate of repairs identifying loss-related damage and a breakdown detailing the material and labor costs. (Motion at p. 67; UMF 57-58.) But Plaintiffs contend that Defendant refused to further investigate this invoice, did not show that Defendant reviewed it, and did not contact the expert who drafted the estimate. (Opposition at p. 14.)

Defendant contends that it could not pay for the six appliances that were discarded before Defendant could inspect them. (Motion at p. 67.) But the appliances were not discarded until June 25, 2019, after Defendant had inspected the property at least eight times, and there were photographs of them in the claim file. (Opposition at p. 6; Plaintiffs’ Ex. 6 at pp. CF 00036, CF 000941 – CF 000942.)

Defendant contends that it attempted to negotiate a lease of four to five months based on a belief that the repairs would not take more than six months, but Plaintiffs were in China. (Motion at p. 69.) Defendant refused to pay a one-year lease because it reasonably believed that reconstruction would not take a full year. (Motion at pp. 69-70.) Plaintiffs expressed interest in moving into a certain property, but Defendant believed that the mold remediation would take only two weeks. (Motion at p. 70.) According to Defendant, after Ashley Pawley viewed a rental property, she advised Defendant that she wanted to stay in the current rental. (Motion at p. 70.) This limited argument and evidence are unclear and insufficient to meet Defendant’s initial burden.

Even if Defendant met its burden, Plaintiffs provide additional evidence that creates triable issues about the fair rental value to which Plaintiffs were entitled during the construction. In opposition, Plaintiffs provide evidence that they had to stay in two rooms of a hotel for five weeks with their three kids and no kitchen. (Pawley Decl. ¶¶ 15, 46-47.) The only other rental option that Defendant approved was a house as small as where Plaintiffs’ family was now living, and under high-powered tension lines. (Pawley Decl. ¶ 48.) In October 2018, a fair rental value of Plaintiffs’ home was appraised at $17,080 or $6,759 per month, but Defendant made Plaintiffs agree to only $3,500 per month. (Moriarty Decl. ¶¶ 20-21; Plaintiffs’ Ex. 6 at pp. CLAIM FILE_04682-04683.)

In sum, Plaintiffs have provided evidence creating triable issues regarding whether Defendant maintained its position in good faith and on reasonable grounds. Defendant has not shown that the facts are undisputed and that only inference to be drawn is that it did not act unreasonably. The reasonableness must be decided by a jury. (See Wilson, supra, 42 Cal.4th at pp. 723-724; Fadeeff, supra, 50 Cal.App.5th at p. 102.) Furthermore, Defendant does not clearly address all alleged grounds for the breach of the implied covenant of good faith and fair dealing. (See Complaint ¶ 72.)

Defendant argues that Plaintiffs are not entitled to punitive damages because Plaintiffs do not have any evidence of fraud, malice, or oppression. (Motion at pp. 71-72.) Summary judgment law “continues to require a defendant moving for summary judgment to present evidence, and not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854, footnote omitted.) Defendant must therefore “present evidence that the plaintiff does not possess, and cannot reasonably obtain, needed evidence—as through admissions by the plaintiff following extensive discovery to the effect that he has discovered nothing.” (Id. at p. 855.) Defendant did not cite any such evidence. Instead, Defendant provides only the conclusory assertions that “there is no evidence of malice, fraud or oppression on the part of [Defendant],” “the declarations of Edith Fuerte, Scott McHargue, and Katie Peterson-Graf establish that just the opposite is true,” “there is no evidence of a pattern or practice by [Defendant],” “[t]here is no evidence of malicious intent,” and “the plaintiffs have no evidence which could support the recovery of punitive damages against [Defendant].” (Motion at p. 72.) That is insufficient to meet Defendant’s burden.

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