Judge Upinder S. Kalra, Case Number: 23STCV10653, Date: 2023-10-25 Tentative Ruling

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CASE NAME: Arcelia H. Villalobos, et al. v. Blue Cross of California dba Anthem Blue

RESPONDING PARTY(S): Plaintiff Arcelia H. Villabos, individually and as executory of the Estate of Salvador A. Villalobos

1. First Cause of Action for failure to state facts sufficient under CCP § 430.10(e).

2. Second Cause of Action for failure to state facts sufficient under CCP § 430.10(e) and uncertainty under CCP § 430.10(f).

3. Third Cause of Action for failure to state facts sufficient under CCP § 430.10(e).

1. FAC, Paragraph 29, line 6-7: “As a result, AHV is also entitled to punitive damages.”

2. FAC, Prayer for Relief, Page 8, Section 3, line 16: “For punitive damages on the third claim for relief;”

3. FAC, Prayer for Relief, Page 8, Section 5, line 19: “For attorneys fees and costs of suit.”

1. The court SUSTAINS the demurrer as to the first cause of action without leave to amend;

2. The court OVERRULES the demurrer as to the second and third causes of action;

a. The court STRIKES: FAC, Paragraph 29, line 6-7: “As a result, AHV is also entitled to punitive damages.” And FAC, Prayer for Relief, Page 8, Section 3, line 16: “For punitive damages on the third claim for relief;”

On May 8, 2023, Plaintiffs Arcelia H. Villalobos, individually and as Executor of the Estate of Salvador A. Villalobos, (Plaintiff) filed a Complaint against Defendant Blue Cross of California dba Anthem Blue Cross (Defendant). The Complaint has three causes of action for: (1) Declaratory Judgment; (2) Breach of Contract; and (3) Breach of the Covenant of Good Faith and Fair Dealing.

According to the Complaint, Plaintiff and her husband, decedent, were insured through Medicare and through a Medicare supplemental plan provided by Defendant via decedent’s employer. Plaintiff alleges that Defendant refused to reimburse approximately $50,000 in medical bills that Plaintiff paid for out of pocket. These services occurred at a Mexican hospital to decedent due to a brain bleed while on vacation in Mexico. Plaintiff alleges she also paid $36,000 to the Mexican treating physician and Defendant did not reimburse those costs either. Plaintiff alleges decedent’s son-in-law submitted claims for reimbursement to Defendant, of which Defendant only reimbursed ambulance fees, and a medical billing company located in Florida apparently submitted bills to Defendant for the same services Plaintiff paid for to the Mexican providers. Plaintiff alleges Defendant did not pay Plaintiff but paid this medical billing company. The medical billing company in turn sent a new bill to Plaintiff at four times the amounts set forth in the Mexican hospital’s original billing statement, noted an insurance payment of $47,762.24, and demanded an additional $100,626.95.[1] Plaintiff contends she paid the hospital bill in full and owes nothing further.

On August 7, 2023, Defendant filed a demurrer with motion to strike portions of the Complaint, which the court SUSTAINED with leave to amend on October 25, 2023.

On November 22, 2023, Plaintiff filed a First Amended Complaint (FAC) with the same three causes of action.

On December 28, 2023, the parties stipulated to extend time for Defendant to respond to the FAC.

On January 24, 2024, Defendant filed the instant demurrer with motion to strike portions of the FAC. On February 5, 2024, Plaintiff timely filed oppositions. On February 9, 2024, Defendant timely filed replies.

A demurrer for sufficiency tests whether the complaint states a cause of action.¿(Hahn v. Mirda¿(2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context.¿In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. …. The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”¿(Hahn¿147 Cal.App.4th at 747.)

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., (CCP) § 436(a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436(b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id.¿§¿437.)¿“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.” (Vaccaro v. Kaiman¿(1998) 63 Cal.App.4th 761, 768.)¿

Irrelevant matter includes: allegations not essential to the claim or defense, allegations “neither pertinent to nor supported by an otherwise sufficient claim or defense,” or a demand for judgment “requesting relief not supported by the allegations of the complaint or cross-complaint.” (CCP § 431.10(b).)

Prior to filing a demurrer, the demurring party is required to satisfy their meet and confer obligations pursuant to Code of Civ. Proc. §430.41, and demonstrate that they so satisfied their meet and confer obligation by submitting a declaration pursuant to Code of Civ. Proc. §430.41(a)(2) & (3). The meet and confer requirement also applies to motions to strike. (CCP § 435.5.) Here, the parties met and conferred on January 18, 2024 but were unable to resolve the issues. (Vedro Decl. ¶ 3.)

Defendant contends that Plaintiff lacks standing because she failed to comply with CCP § 377.32.[2] Plaintiff argues that she not only complied with CCP § 377.32 but is the default successor-in-interest for her deceased husband as his surviving spouse pursuant to Probate Code § 6400, et seq.[3] Plaintiff additionally argues that she has standing as a third-party beneficiary.

(a) The person who seeks to commence an action or proceeding or to continue a pending action or proceeding as the decedent’s successor in interest under this article, shall execute and file an affidavit or declaration under penalty of perjury under the laws of this state stating all of the following:

3. “No proceeding is now pending in California for administration of the decedent’s estate.”

4. If the decedent’s estate was administered, a copy of the final order showing the distribution of the decedent’s cause of action to the successor in interest.

a. “The affiant or declarant is the decedent’s successor in interest (as defined in Section 377.11 of the California Code of Civil Procedure) and succeeds to the decedent’s interest in the action or proceeding.”

b. “The affiant or declarant is authorized to act on behalf of the decedent’s successor in interest (as defined in Section 377.11 of the California Code of Civil Procedure) with respect to the decedent’s interest in the action or proceeding.”

6. “No other person has a superior right to commence the action or proceeding or to be substituted for the decedent in the pending action or proceeding.”

7. “The affiant or declarant affirms or declares under penalty of perjury under the laws of the State of California that the foregoing is true and correct.”

This section also requires a certified copy of the decedent’s death certificate. (Id. at subd. (c).)

CCP § 377.11 defines “decedent’s successor in interest” as “the beneficiary of the decedent’s estate or other successor in interest who succeeds to a cause of action or to a particular item of the property that is the subject of a cause of action.”

Here, Plaintiff has standing as SAV’s successor-in-interest. First, Plaintiff satisfied the requirements of CCP § 377.32 by stating: (1) decedent’s name; (2) the date and place of his death; (3) “No proceeding is now pending in California for administration of the decedent’s estate.”; (4) states she is the successor in interest in this action; (6) “No other person has a superior right to commence the action or proceeding or to be substituted for Salvador [the decedent] in this pending action.”; and (7) declares under penalty of perjury. (Villalobos Decl. in its entirety.) Item No. 4 articulated in the statute applies if the estate was administered. (CCP § 377.32(a)(4).) The court interprets its absence from Plaintiff’s declaration as indicating that the estate was not administered. The court is unaware of any authority, and Defendant has provided none, indicating that Plaintiff need do more as SAV’s widow to articulate standing as his successor-in-interest.

Defendant contends that Plaintiff failed to allege specific obligations arising from the Policy or obligations that Defendant allegedly breached and that Plaintiff’s attaching a screenshot indicating a policy existed is insufficient. Plaintiff argues that she attached the pertinent clause, namely, for Foreign Travel Emergency and that she alleged that under the Policy, if SAV required medical care that Anthem would pay for such care.

“To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff. [Citation.]” (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.) “A written contract may be pleaded either by its terms – set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference – or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms.’” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.)

After reviewing the FAC, Plaintiff sufficiently alleges breach of contract. First, unlike in the Complaint, here, Plaintiff plead the existence of the contract because she identified the specific provision at issue: the Foreign Travel Emergency provision. (FAC ¶ 7, Exhibit A.) That clause states: “You pay: First $250 each calendar year and 20% of remaining charges. You pay all costs over lifetime benefit of $50,000.00.”[4] (Ibid.) Second, Plaintiff alleges that she, via her husband, fully performed by paying all premiums due while SAV lived. (FAC ¶ 20.) Third, Plaintiff alleges that Defendant breached the Policy when they failed to pay Plaintiff for medical costs she incurred in Mexico for SAV’s medical treatment. (FAC ¶ 21.) Fourth, Plaintiff alleges damages as a result of the breach. (FAC ¶ 22.)

Accordingly, the court OVERRULES Defendant’s demurrer to the second cause of action with leave to amend.

Third Cause of Action - Breach of the Implied Covenant of Good Faith and Fair Dealing

Defendant contends that this claim fails because Plaintiff’s breach of contract claim fails. Defendant also contends that Plaintiff’s third cause of action is duplicative of the second cause of action because she did not allege intentional refusal to discharge contractual responsibilities beyond the alleged failure to comply with contractual obligations.[5] Plaintiff argues that in the insurance contract, the unreasonable denial of policy benefits constitutes a breach of the covenant of good faith and fair dealing.

Every contract contains an implied covenant of good faith and fair dealing that neither party will do anything to interfere with the other party’s right to receive the benefits of the agreement. (Howard v. American Nat’l Fire Ins. Co. (2010) 187 Cal.App.4th 498, 528.)

The elements of a claim for breach of implied covenant of good faith and fair dealing are: (1) a contractual relationship; (2) plaintiff fulfilled their contractual obligations; (3) any conditions precedent to defendant’s performance occurred; (4) defendant unfairly interfered with plaintiff’s right to receive the benefits of the contract; and (5) plaintiff was harmed by defendant’s conduct. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36.)

The elements of a claim for breach of implied covenant of good faith and fair dealing in the insurance context are: (1) insurer obligated under policy to first or third party; (2) implied duty; (3) unreasonable breach of that duty; and (4) causation of at least economic damages. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723; Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1209-1210 [first party claims]; Waller, supra, at p. 36-37.)

Tort damages are available for breach of the implied covenant of good faith in insurance contracts. (Wexler v. California Fair Plan Ass’n (2021) 63 Cal.App.5th 55, 62-63.) Privity of contract is typically required to bring this claim. (Ibid.)

Upon reviewing the FAC, Plaintiff has sufficiently plead a cause of action for breach of the implied covenant of good faith and fair dealing. First, she plead the existence of a contract. (FAC ¶ 1, 7.) Second, Plaintiff, via her husband, paid the premiums during SAV’s lifetime. (FAC ¶ 20.) Third, Plaintiff alleges that all conditions required for Defendant’s performance have occurred.[6] (FAC ¶ 25.) Fourth, Defendant unfairly interfered with Plaintiff’s right to receive benefits because it paid PHI for the medical services instead of reimbursing Plaintiff. (FAC ¶¶ 10, 13.) Fifth, Plaintiff claims damages as a result. (FAC ¶ 29.)

Plaintiff also sufficiently pleaded breach of the implied covenant of good faith and fair dealing in the insurance context. As above, she plead the existence of the Policy. (FAC ¶¶ 1, 7.) Second, she plead an implied duty, namely, that Defendant would pay for SAV’s medical care while he was living. (FAC ¶¶ 19, 24.) Third, Plaintiff plead unreasonable breach of that duty because Defendant paid PHI instead of reimbursing Plaintiff for the medical care. (FAC ¶¶ 10, 13, 25, 26.) Fourth, Plaintiff plead causation of at least economic damages because she incurred $86,413.47 in medical bills that Defendant has not reimbursed. (FAC ¶¶ 25, 26, 29.) Plaintiff also plead standing because she is pursuing claims as the successor-in-interest to her deceased husband who was the insured. (FAC p. 1:21-22; Villalobos Decl. ¶ 4.)

Accordingly, the court OVERRULES Defendant’s demurrer to the third cause of action.

Defendant contends that this claim fails because it is dependent on the second and third causes of action which also fail. Plaintiff argues that this claim is valid because her breach of contract claim is valid.

“Any person interested . . . under a contract . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action . . . for a declaration of [their] rights and duties . . . including a determination of any question of construction or validity arising under the instrument or contract.” (CCP § 1060.) A plaintiff’s declaratory relief complaint must specifically allege that an actual, present controversy exists, and must state the facts of the respective claims concerning the disputed subject matter. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79; Connerly v. Schwarzenegger (2007) 146 Cal.App.4th 739, 746 (Connerly).) A sufficient complaint: (1) sets forth facts showing the existence of an actual controversy relating to the parties’ legal rights and duties, and (2) requests the court to adjudge these rights and duties. (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606; Qualified Patients Ass’n v. City of Anaheim (2010) 187 Cal.App.4th 734, 751; see also Travers v. Louden (1967) 254.Cal.App.2d 926, 931-32 (Travers) [commenting that declaratory relief may be appropriate for parties with a continuing relationship].) A declaratory relief claim should not be used to determine issues that are already engaged by other causes of action. (Hood v. Superior Court (1995) 33 Cal.App.4th 319, 324.) Declaratory relief is not appropriate to address past wrongs. (SJJC Aviation Services, LLC v. City of San Jose (2017) 12 Cal.App.5th 1043, 1062.)

Upon reviewing the FAC, Plaintiff has not sufficiently plead a cause of action for declaratory relief. Notably, Plaintiff does not allege a present controversy, but actions occurring in the past, because Defendant already allegedly breached the Policy. (FAC ¶¶ 10, 13, 21, 22, 25, 26.) Plaintiff did not allege a continuing relationship because her husband died, is no longer incurring medical expenses, and the controversy wholly concerns those medical expenses incurred in Mexico. (FAC ¶¶ 1, 5, 6, 8, 10, 13.) The court does not see how Plaintiff can reasonably amend the FAC to rectify this problem because the relief requested hinges on a specific contractual clause in a specific moment of time that has already passed and is covered by Plaintiff’s second and third claims stemming from breach of contract.[7] Plaintiff did not articular how she could so amend in her opposition.

Accordingly, the court SUSTAINS Defendant’s demurrer to the first cause of action without leave to amend.

Defendant seeks to strike portions of the Prayer for Relief in the FAC that pertain to punitive damages and attorneys fees because there are insufficient facts supporting punitive damages and no contractual or statutory basis for the attorneys fees. Plaintiff argues that she sufficiently plead oppression, fraud, or malice and that attorneys’ fees are recoverable in insurance bad faith claims. Defendant replies that failure to pay a party does not warrant punitive damages, that the FAC alleges PHI engaged in such malicious and fraudulent conduct (not Defendant), and the FAC failed to allege entitlement to attorneys’ fees outside of the Prayer.

To obtain punitive damages, a plaintiff must plead sufficient facts in support of punitive damages.¿ (See¿Hilliard v. A.H. Robins Co.¿(1983) 148 Cal.App.3d 374, 391-92.)¿ In addition,¿punitive damages are allowed only where “it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.”¿ (Civ. Code, § 3294(a).)¿ Courts have viewed despicable conduct as conduct “so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. (Scott v. Phoenix Schools, Inc., (2009) 175 Cal.App.4th 702, 715.) Further, Civil Code § 3294(c) provides the definition of malice, oppression, and fraud. Malice is “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Ibid.) Oppression is “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” (Ibid.) Fraud is “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.”¿(Ibid.)

After reviewing the FAC, Plaintiff has not sufficiently alleged oppression, fraud, or malice to warrant punitive damages against Defendant. First, Plaintiff alleges that Defendant “unfortunately” paid PHI instead of reimbursing Plaintiff and Defendant has not responded to two requests for reimbursement. (FAC ¶¶ 10, 13.) Indeed, Plaintiff alleges that Defendant acted in bad faith by failing to reimburse Plaintiff. (FAC ¶ 25.) Second, Plaintiff alleges that Defendant “knew its position in denying and refusing to pay AHV’s claim was unreasonable” but did not actually allege a definitive refusal by Anthem – only a failure to respond to demands for reimbursement. (Compare FAC ¶ 27 with FAC ¶¶ 10, 13, and 25.) As such, the court does not see how this rises to “willful and conscious disregard of the rights or safety of others,” “cruel and unjust hardship in conscious disregard of that person’s rights” or fraud.[8]

Accordingly, the court GRANTS Defendant’s motion to strike the portions of the FAC pertaining to punitive damages.

“A party may not recover attorney fees unless expressly authorized by statute or contract. [Citations.] In the absence of a statute authorizing the recovery of attorney fees, the parties may agree on whether and how to allocate attorney fees.” (Hom v. Petrou (2021) 67 Cal.App.5th 459, 464, review denied (Oct. 20, 2021); see also, Civ. Code § 1717.)¿ A plaintiff may recover reasonable attorney fees incurred to recover benefits due under the policy, but this does not include fees in proving the bad faith claim itself. (Brandt v. Sup. Ct. (Standard Ins. Co.) (1985) 37 Cal.3d 813, 817.)

Here, Plaintiff has not alleged a contractual basis to recover attorney fees. Plaintiff may, however, seek attorneys’ fees as damages against an insurer in a bad faith claim. (CCP § 1021; Brandt, supra, at p. 818.) Defendant is correct that Plaintiff has no factual allegations supporting her claim for attorneys’ fees, but Plaintiff has asserted a claim for attorneys’ fees and costs in her Prayer.[9] (FAC Prayer ¶ 5.) Indeed, Defendant seeks to strike the entire sentence grouping attorneys’ fees with the request for costs. Under Brandt, the amount of Plaintiff’s attorneys’ fees as damages to recoup the alleged unpaid benefit is a question of fact which, as the parties are well aware, is not appropriate for decision at the demurrer stage. (Brandt, supra, at p. 819.)

Accordingly, the court DENIES Defendant’s motion to strike the Prayer requesting attorneys’ fees.

1.The court SUSTAINS the demurrer as to the first cause of action without leave to amend;

b. The court STRIKES: FAC, Paragraph 29, line 6-7: “As a result, AHV is also entitled to punitive damages.” And FAC, Prayer for Relief, Page 8, Section 3, line 16: “For punitive damages on the third claim for relief;”

[1] The medical billing provider is not a defendant in the instant action.

[2] Defendant solely relies on CCP § 377.32 to support this proposition. The other cited authority so not discuss this statute.

[3] The court does not see how these sections of the probate code bolster Plaintiff’s claim to be her husband’s successor in interest because they discuss division of community property in intestacy.

[4] The courts notes that, as plead, Plaintiff seeks reimbursement of $86,413.47 but the quoted Policy language states “You pay all costs over lifetime benefit of $50,000.” (FAC ¶ 7, Prayer for Relief ¶ 2.) Plaintiff has not plead other portions of the Policy indicating she can recover more than the lifetime benefit.

[5] Defendant relies on Bionghi v. Metropolitan Water Dist. of So. California (1999) 70 Cal.App.4th 1358, which was not at the demurrer stage but at summary judgment. Additionally, reliance on that case is misplaced because the Court there carved out insurance contracts as an exception due to a special relationship. (Id.at p. 1370.) The Bionghi Court cited Careau & Co. v. Security Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371 as expressing the carve out for special relationships, including those stemming from insurance contracts. (Ibid.) Defendant’s reliance on Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306 also fails because the Court there found, at summary judgment, no breach of contract cause of action. That case did not involve and insurance contract.

[6] Read in context of the entire FAC, this is not a conclusory statement.

[7] Indeed, it appears to the court that Plaintiff knows what the “plain language” of the Policy is and that Defendant is in breach. (FAC ¶ 26(a).)

[8] There are allegations of such conduct by non-party PHI. (FAC ¶¶ 10, 11.)

[9] Defendant relies on Wiley v. Rhodes, (1990) 223 Cal.App.3d 1470, 1474 to support their proposition. However, Wiley awarded attorneys’ fees as costs on default judgment and did not concern breach of the implied covenant of good faith and fair dealing in the insurance context. Plaintiff’s opposition fails to address this point.