Judge Thomas Falls, Case 22PSCV00258 2022-09-02 Tentative Ruling

(1) Defendant Marine America Insurance Company’s Demurrer to First Amended Complaint

(2) Defendant Tokio Marine America Insurance Company’s Motion to Strike Portions of the Second Cause of Action of Plaintiffs’ First Amended Complaint for Punitive Damages

(1) Defendant Marine America Insurance Company’s Demurrer to First Amended Complaint is OVERRULED.

(2) Defendant Tokio Marine America Insurance Company’s Motion to Strike Portions of the Second Cause of Action of Plaintiffs’ First Amended Complaint for Punitive Damages is DENIED.

This is an insurance case. Plaintiffs Adelia Mancilla and Alfredo Mancilla (collectively, “Plaintiffs”) allege the following against Defendant Tokio Marine America Insurance Company (“Defendant” or “Petitioner”) and Does 1-10: On November 29, 2019, Plaintiffs’ property was insured by Defendant. The appraisal process commenced in July of 2020. During that time, Plaintiffs allege that Defendants failed to timely provide the full and fair amount for repairs. Furthermore, as a result of the unreasonable delays in Defendant adjusting the claim for twenty-eight (28) months, Plaintiffs are entitled to the additional living expenses (“ALE”), payment which Defendant continues to withhold.

On May 4, 2022, Defendant filed a Demurrer with a Motion to Strike. That same day, on May 4, 2022, Defendant also filed a ‘Petition to Confirm Arbitration (Appraisal) Award.’ On

On August 3, 2022, Defendant filed the instant Demurrer with a Motion to Strike.

A demurrer may be asserted on any one or more of the following grounds: (a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading; (b) The person who filed the pleading does not have legal capacity to sue; (c) There is another action pending between the same parties on the same cause of action; (d) There is a defect or misjoinder of parties; (e) The pleading does not state facts sufficient to constitute a cause of action; (f) The pleading is uncertain (“uncertain” includes ambiguous and unintelligible); (g) In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct; (h) No certificate was filed as required by CCP §411.35 or (i) by §411.36. CCP §430.10. Accordingly, a demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (CCP §430.30(a); Blank v. Kirwan, (1985) 39 Cal.3d 311, 318.)

The face of the pleading includes attachments and incorporations by reference (Frantz v. Blackwell, (1987) 189 Cal.App.3d 91, 94); it does not include inadmissible hearsay. (Day v. Sharp, (1975) 50 Cal.App.3d 904, 914.)

The sole issue on demurrer for failure to state a cause of action is whether the facts pleaded, if true, would entitle the plaintiff to relief. (Garcetti v. Superior Court, (1996) 49 Cal.App.4th 1533, 1547; Limandri v. Judkins, (1997) 52 Cal.App.4th 326, 339.) The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. (Marshall v. Gibson, Dunn & Crutcher, (1995) 37 Cal.App.4th 1397, 1403.) Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. (Vance v. Villa Park Mobilehome Estates, (1995) 36 Cal.App.4th 698, 709.)

Defendant demurs to the entirety of Plaintiffs’ Complaint on the grounds that both causes of action fail to allege facts sufficient to constitute a cause of action. (C.C.P. § 430.10(e).)

Defendant argues that it did not breach the contract because it (1) paid the full amount of the award, and that (2) ALE payments are not policy benefits.

As to Defendant’s first argument regarding the payment of benefits, the court is persuaded by Defendant’s argument. As a prefatory matter, the court notes that Defendant appears to conflate Plaintiffs’ allegation. Plaintiffs do not form the basis of their breach of contract cause of action on the basis that Defendant did not issue the value of the appraisal award within 60 days of its determination. Rather, Plaintiffs seem to allege that Defendant was untimely in commencing the appraisal process. That said, Plaintiffs have neither alleged that timely commencement of an appraisal process is a term of the contract nor has Plaintiffs’ Opposition provided authority to show otherwise.[1] Therefore, without pleading the existence of a contractual right, there can be no breach of said contractual right. (See Waller v. Truck Ins. Exchange (1995) 11 Cal.4th 1, 18 [“Thus, in determining whether allegations in a particular complaint give rise to coverage under a [] policy, courts must consider both the occurrence language in the policy, and the endorsements broadening coverage, if any, included in the policy terms . . .”].)

As to Defendant’s second argument regarding ALE, the court finds it contradicts Plaintiffs’ allegations. Specifically, Defendant argues that “should [Plaintiffs] be paid more for additional living expenses, they should allege it,” Plaintiffs have. (Demurrer p. 7.) However, Plaintiffs do allege that “[t]he Policy afforded temporary housing and TOKIO was required to pay ‘for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere.’” (FAC ¶6.) Thus, not only was payment for temporary housing was a policy benefit, but Plaintiffs also allege that they required housing only for the shortest and necessary time for repairs. (See FAC ¶16 [“Plaintiffs promptly commenced repairs and was able to complete the repairs within the six (6) months identified by the appraisal award.”].) Thus, to the extent that Defendant argues that it paid for ALE during the restoration period of 6 months, plus 4.5 months of ALE prior to the appraisal, and an additional 1.5 months after the appraisal (Reply p. 2), that does not address Plaintiffs’ concern with the additional months of ALE as it took 28 months to make the repairs.

Therefore, the court OVERRULES the demurrer as Plaintiffs have adequately alleged breach of contract.

Defendant reasserts the same arguments as above. (Demurrer p. 7 [“There cannot be breach of the implied covenant of good faith and fair dealing where there is not contract breach and no additional policy benefits are due.”].)

For reasons explained above, the court OVERRULES the demurrer as to the second cause of action.[2]

Civ. Code, section 3294, subsection (a), provides: "In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the Plaintiffs, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant." (Ibid., emphasis added.)

Defendant moves to strike references to punitive damages because Plaintiffs have not alleged any facts that, if proved, would establish that Tokio Marine acted with an intent to injure them. (Motion to Strike p. 5.)

In opposition, Plaintiffs aver that “Defendant[] forced Plaintiffs into paying such expenses out of pocket, when Defendant knew and had reason to know that placing the onus of such costs on Plaintiffs would be financially onerous and unmanageable by Plaintiffs. This in a nutshell is the definition of ‘despicable’ conduct.’” (Opp. p. 5.)

Indeed, oppression means “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code § 3294(c)(2).) And here, the court finds that Plaintiffs have made sufficient allegations.

Plaintiffs allege that “the appraisal panel determined that the cost of repair was $114,018.54, an increase of approximately 50% from what TOKIO originally paid.” (FAC ¶14.) Moreover, Plaintiffs allege that “Plaintiffs advised TOKIO that the repairs could not be started until adequate funds were provided. Plaintiffs specifically asked TOKIO how the repairs could get started sixteen (16) months prior to being in receipt of an agreed scope of repairs and proper indemnity, of which TOKIO refused to address that inquiry. Plaintiffs advised TOKIO that it was impossible for a contractor to agree to perform unknown work as the scope of repairs had not been agreed upon until August of 2020 and that it was additionally impossible for Plaintiffs to pay a contractor for the repairs until proper funds for the repairs were received. TOKIO continued to ignore this plea.” (FAC ¶21.)

Effectively, the combination of these allegations that Defendant provided (i) significantly insufficient funds and (ii) knowing Plaintiffs could not pay for repairs until sufficient funds were received, reasonably indicate that Defendant had reason to know Plaintiffs would be unhoused for over two years. As such, the court finds despicable conduct as being unhoused is an unjust hardship.

Based on the foregoing, the Demurrer is OVERRULED in its entirety and the Motion to Strike is DENIED.

[1] See footnote 2, infra, regarding necessity of a contractual right. The court referenced this deficiency in the last demurrer, but Plaintiffs’ FAC fails to reference any specific provision that requires timely payment of claims.

[2] “ 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 [firmly] rooted . . . the covenant is implied as a supplement to the express contractual covenants . . . [W]hen 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’ they frustrate the insured's right to receive the benefits of the contract in ‘prompt compensation for losses.’ Absent that contractual right, however, the implied covenant has nothing upon which to act as a supplement, and should not be endowed with an existence independent of its contractual underpinnings.’” (Waller, supra, 11 Cal.4th at p. 36, quoting Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151-1153.)