Case Number: BC484621 Hearing Date: April 15, 2014 Dept: 34

DEMURRER TO SECOND AMENDED COMPLAINT AND MOTION TO STRIKE

Moving Party: Defendant State Farm General Insurance Company (“defendant”)

Resp. Party: None

Defendant’s demurrer to the second amended complaint is OVERRULED.

Defendant’s requests to strike the fourth cause of action and the claim for consequential and general damages from the first cause of action are GRANTED. Defendant’s motion to strike is otherwise DENIED.

BACKGROUND:

Plaintiff commenced this action on May 18, 2012. On August 21, 2012, plaintiff filed a first amended complaint (“FAC”) against defendants for: (1) breach of contract; (2) insurance bad faith; and (3) intentional interference with contract.

On 2/19/13, the Court sustained defendant’s demurrer to the first and second causes of action, with leave to amend.

On March 15, 2013, plaintiff filed a second amended complaint against defendants for: (1) breach of contract; (2) insurance bad faith; (3) intentional interference with contract; and (4) breach of warranty. The first, second, and fourth causes of action are alleged against the moving defendant. Plaintiff’s home was insured by defendant State Farm. (SAC ¶ 1.) On June 25, 2009, plaintiff suffered damage to her home which was allegedly covered by her insurance policy. (Id., ¶ 6.) Plaintiff notified State Farm of the damage, and alleges she has done everything required under the insurance contract. (Id., ¶¶ 8-9.) Plaintiff alleges defendant breached the contract by failing to make a timely investigation of the damages and other alleged breaches. (Id., ¶¶ 11-16.)

On 3/22/13, plaintiff filed a notice of stay of the action due to her bankruptcy petition.

Defendant previously demurred and moved to strike as to the second amended complaint, which was set for hearing on 7/30/13. The Court took the hearings off calendar pursuant to the bankruptcy stay.

On 9/23/13, the Court held a conference re plaintiff’s bankruptcy. Counsel represented that plaintiff had been discharged from bankruptcy. The Court ordered defense counsel to re-notice the demurrer and motion to strike after a hearing on plaintiff’s counsel’s asserted motion to withdraw. The Court set the motion to withdraw for 11/25/13.

The Court notes that plaintiff’s counsel at no point submitted a motion to withdraw, and no hearing was held on such a motion. Defendant submitted an amended notice of demurrer and motion to strike on 10/21/13.

PRELIMINARY COMMENTS:

This demurrer is unopposed, yet plaintiff has not indicated that she is planning on filing an amended complaint. The Court finds such silence to be troubling. If plaintiff believed that the demurrer should be overruled, the court would expect that she would have filed an opposition. If plaintiff agreed that the complaint needed to be amended, the court would expect that she would have filed a request to file a third amended complaint.

Instead, we simply have silence from the plaintiff.

ANALYSIS:

Demurrer

1. First cause of action for breach of contract

“The essential elements of a breach of contract claim are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.’” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614 [quoting Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830].) “To state a cause of action for breach of contract, it is absolutely essential to plead the terms of the contract either in haec verba or according to legal effect.” (Twaite v. Allstate Ins. Co. (1989) 216 Cal.App.3d 239, 252.)

Plaintiff’s complaint now includes a copy of the insurance policy. (SAC, Exh. A.) The policy covered plaintiff’s residence and personal property. (See id., Exh. A, pp. 2-3.) Plaintiff alleges that the damage to her residence was covered by the policy. (Id., ¶ 6.) Plaintiff alleges that defendant breached its obligations under the policy by failing to make a timely investigation of the nature and extent of the damage to her residence, failing to recognized substantial areas of the damage, failing to properly compensate for “line of sight” issues, failing to make adequate payments for damage, and refusing to address the water damage caused to plaintiff’s personal property. (See id., ¶¶ 11-16.) These allegations are sufficient to allege a breach of the policy. To the extent that specific facts are not alleged, they may be obtained during the discovery process.

Defendant also asserts that plaintiff’s claims may be untimely. A provision in the policy provides: “No action shall be brought unless there has been compliance with the policy provisions and the action is started within one year after the date of loss or damage.” (See SAC, Exh. A, p. 10, ¶ 8.) Defendant points to plaintiff’s complaint in another action where plaintiff raised claims based on water damage that occurred on June 24, 2009. Even assuming that the other action pertained to the same damage, it does not show that plaintiff was aware of the damage more than a year before plaintiff filed the instant action. (See RJN, Exh. 1.) Plaintiff filed the other action on 6/21/11 – less than one year before filing the instant action. Therefore, it cannot be determined from the face of the pleading or judicially noticed items that plaintiff’s claim is untimely.

Accordingly, defendant’s demurrer to the first cause of action is OVERRULED.

2. Second cause of action for bad faith breach of good faith and fair dealing

“In every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing.” (Universal Sales Corp. v. California Press Mfg. Co. (1942) 20 Cal.2d 751, 771.) Tort recovery for the breach of the covenant of good faith and fair dealing has previously been sanctioned in the insurance and employment contexts. (See Copesky v. Superior Court (1991) 229 Cal.App.3d 678, 685-686.)

“While an insurance company has no obligation under the implied covenant of good faith and fair dealing to pay every claim its insured makes, the insurer cannot deny the claim ‘without fully investigating the grounds for its denial.’” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720 [quoting Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 215].) “By the same token, denial of a claim on a basis unfounded in the facts known to the insurer, or contradicted by those facts, may be deemed unreasonable.” (Wilson, 42 Cal.4th at p. 721.)

Plaintiff alleges that defendant breached the covenant by failing and refusing to provide the benefits due to plaintiff under the policy, failing to investigate the claim and unreasonably withholding the benefits due to plaintiff under the policy, failing to adjust the claim, bringing in “coverage counsel” and other attorneys to block the progress of the claim and create excuses for the non-payment, failing to objectively evaluate the claim, ignoring evidence supporting the claim, failing to rely on the entire factual record when making its decisions, failing to accept or deny each element of the claim within 40 days after receipt of notice of the claim, making an unreasonably low settlement offer, and bringing in consultants to prepare intentionally deceptive reports to support the non-payment of the claim. (SAC ¶¶ 22.1-22.9.) These ultimate facts are sufficient to support plaintiff’s claim that defendant engaged in bad faith and failed to make a reasonable investigation of the claim. The allegations against defendant Mitchell do not clearly defeat the second cause of action against State Farm. (See id., ¶¶ 34-37.)

Accordingly, defendant’s demurrer to the second cause of action is OVERRULED.

3. Fourth cause of action for breach of warranty

The Court addresses defendant’s challenge to this cause of action in the analysis for the motion to strike.

Motion to Strike

1. Fourth cause of action for breach of warranty

This cause of action is improper because plaintiff was not given leave to add it. In a situation where a court grants leave to amend following the sustaining of a demurrer, “granting of leave to amend is not a sanctioning of a particular amendment which the pleader has submitted to the trial court. Rather . . . such granting of leave to amend must be construed as permission to the pleader to amend the cause of action which he pleaded in the pleading to which the demurrer has been sustained.” (People ex rel. Dept. Pub. Works v. Clausen (1967) 248 Cal.App.2d 770, 785.) This rule is not applicable where the new cause of action directly responds to the court’s reasons for sustaining the demurrer. (See Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.) Therefore, a plaintiff may not amend the complaint to add a new cause of action without having obtained permission to do so, unless the new cause of action is within the scope of the order granting leave to amend. (Ibid.)

The breach of warranty claim does not appear to be within the scope of the Court’s order which granted plaintiff leave to amend following the sustaining of demurrer to the FAC. To the extent that plaintiff seeks to assert this claim against defendant, plaintiff must obtain leave to do so. Accordingly, defendant’s request to strike the fourth cause of action is GRANTED.

2. Punitive damages

The standard of proof for recovery of punitive damages is “clear and convincing” evidence of malice, fraud, or oppression. (Civil Code § 3294(a).) Under Civil Code 3294(c),

[¶] (1) ‘Malice’ means 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. [¶] (2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. [¶] (3) ‘Fraud’ means 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.

“In determining whether a complaint states facts sufficient to sustain punitive damages, the challenged allegations must be read in context with the other facts alleged in the complaint. Further, even though certain language pleads ultimate facts or conclusions of law, such language when read in context with the facts alleged as to defendants’ conduct may adequately plead the evil motive requisite to recovery of punitive damages.” (Monge v. Superior Court (1986) 176 Cal. App. 3d 503, 510.) The inquiry is generally fact specific to the nature of the claim raised and the context in which the damages are sought, but “the critical element is an ‘evil motive’ of the defendant.” (Ibid.) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.'” (American Airlines v. Sheppard (2002) 96 Cal. App. 4th 1017, 1051.)

The allegations in paragraphs 22.1 through 22.9 are sufficient to support plaintiff’s claim for punitive damages. Plaintiff alleges that defendant, among other things, engaged in intentional acts designed to hinder the progress of the investigation and create excuses for non-payment, ignored evidence in support of the claim, and was involved in the preparation of intentionally deceptive reports. (See SAC ¶¶ 22.1-22.9.) This is sufficient to allege that defendant engaged in despicable conduct with willful and conscious disregard for plaintiff’s rights.

Accordingly, defendant’s request to strike plaintiff’s claim for punitive damages is DENIED.

3. Attorney’s fees

“[A]s a general rule, attorney fees are not recoverable as costs unless they are authorized by statute or agreement.” (People ex rel. Dept. of Corporations v. Speedee Oil Change Systems, Inc. (2007) 147 Cal.App.4th 424, 429.) Courts may strike prayers for attorney fees where a party demonstrated no potential basis for their recovery. (Agricultural Ins. Co. v. Sup. Ct. (1999) 70 Cal.App.4th 385, 404.) However, unsupported attorneys fees allegations need not be stricken pursuant to a motion to strike, since later discovery may reveal a basis for their recovery. (Camenisch v. Sup. Ct. (1996) 44 Cal.App.4th 1689, 1699.)

Plaintiff seeks attorney’s fees in the first and second causes of action. Plaintiff does not clearly allege a basis for the fees request in the first cause of action. Attorney’s fees may be recovered as damages for the second cause of action. (See Brandt v. Superior Court (1985) 37 Cal.App.3d 813, 817.)

The Court declines to strike plaintiff’s request for attorney’s fees at this time. The basis for the recovery of the fees may be explored during the discovery process. Accordingly, defendant’s request to strike plaintiff’s request for attorney’s fees is DENIED.

4. Consequential and general damages in the first cause of action

In the breach of contract action, plaintiff seeks general and consequential damages. (See SAC ¶ 17.) “The basic measure of recovery in a first party case is the benefits due under the insurance policy, plus interest from the date the benefits were due.” (Croskey, et al., Cal. Prac. Guide: Ins. Lit. (The Rutter Group 2013) ¶ 13:9.) “The detriment caused by the breach of an obligation to pay money only, is deemed to be the amount due by the terms of the obligation, with interest thereon.” (Civ. Code, § 3302.)

Accordingly, defendant’s request to strike the claim for consequential and general damages from the first cause of action is GRANTED.

5. Prejudgment interests

An insurer may be liable for prejudgment interests where there is a legal dispute, but may not be liable for prejudgment interest where there is a factual dispute. (See Oil Base Inc. v. Transport Indemnity Co. (1957) 148 Cal.App.2d 490, 492; Highlands Ins. Co. v. Continental Casualty Co. (9th Cir. 1995) 64 F.3d 514, 521.) Nothing in the complaint establishes that the latter situation is present here. Like a demurrer, the grounds for a motion to strike must appear on the face of the pleading. (See Code Civ. Proc., § 437(a).)

Accordingly, defendant’s request to strike plaintiff’s claim for prejudgment interest is DENIED.

MOTIONS TO COMPEL

(1) Motion to Compel Responses to Special and Form Interrogatories (set one);
(2) Motion to Compel Responses to Requests for Production (set one);
(3) Motion for an Order Establishing Requests for Admissions as Admitted

Moving Party: Defendant State Farm General Insurance Co. (“Defendant”)

Responding Party: None

Plaintiff must provide verified responses to defendant’s form interrogatories, special interrogatories, and demand for production, without objection.

Defendant’s requests for admissions are deemed admitted.

The Court declines to impose sanctions against plaintiff.

PRELIMINARY COMMENTS:

As an initial matter, the Court notes that defendant has provided an incorrect caption for its motion to compel responses to the requests for production.

Background:

Plaintiff commenced this action on May 18, 2012. On August 21, 2012, plaintiff filed a first amended complaint (“FAC”) against defendants for: (1) breach of contract; (2) insurance bad faith; and (3) intentional interference with contract.

Plaintiff’s home was insured by defendant State Farm. (FAC ¶ 1.) On June 25, 2009, plaintiff suffered damage to her home which was allegedly covered by her insurance policy. (Id., ¶ 6.) Plaintiff notified State Farm of the damage, and alleges she has done everything required under the insurance contract. (Id., ¶¶ 8-9.) Plaintiff alleges defendant breached the contract by failing to make a timely investigation of the damages and other alleged breaches. (Id., ¶¶ 11-16.)

Defendant filed the instant motions on February 15, 2013. The motions are unopposed.

Analysis

California Code of Civil Procedure requires a response from the party to whom interrogatories are propounded within 30 days after service of the interrogatories. (Code Civ. Proc., § 2030.260(a).) If a party fails to serve timely responses, “the party propounding the interrogatories may move for an order compelling response to the interrogatories.” (Code Civ. Proc. § 2030.290(b).) By failing to respond, the offending party waives any objection to the requests. (Code Civ. Proc. § 2030.290(a).)

California Code of Civil Procedure requires a response from the party to whom a request for production of documents is directed within 30 days after service of a demand for inspection, etc. (Code Civ. Proc., § 2031.260(a).) If the party fails to serve a timely response, “the party to whom the demand for inspection . . . is directed waives any objection to the demand.” (Code Civ. Proc., § 2031.300(a).) The requesting party may then “move for an order compelling response to the inspection demand.” (Code Civ. Proc., § 2031.300(b).)

California Code of Civil Procedure requires a response from the party to whom the request for admissions is directed within 30 days after service of the request for admissions. (Code Civ. Proc., § 2033.250(a).) If the party fails to serve a timely response, “the party to whom the requests for admission are directed waives any objection to the requests.” (Code Civ. Proc., § 2033.280(a).) The requesting party may then “move for an order that the genuineness of any documents and the truth of any matters specified in the requests be deemed admitted, as well as for monetary sanction under Chapter 7.” (Code Civ. Proc., § 2033.280(b).)

For a motion to compel, all a propounding party must show is that it properly served its discovery requests, that the time to respond has expired, and that the party to whom the requests were directed failed to provide a timely response. (See Leach v. Superior Court (1980) 111 Cal.App.3d 902, 905 906.) Indeed, “[o]nce [a party] ‘fail[ed] to serve a timely response,’ the trial court had authority to grant [opposing party’s] motion to compel responses.” (Sinaiko Healthcare Counseling, Inc. v. Pacific Healthcare Consultants (2007) 148 Cal.App.4th 390, 405.)

Defendant propounded the subject discovery requests upon plaintiff on October 22, 2012. (Batezel Decl., ¶ 2.) On January 23, 2013, defense counsel wrote to plaintiff’s counsel advising that no responses had been received and requesting responses by January 30, 2013. (Id., ¶ 4.) Plaintiff’s counsel left a telephone message with defense counsel on January 31, 2013, advising that he would provide responses to the discovery no later than February 8, 2013. (Id., ¶ 5.) Plaintiff has not served responses as of February 15, 2013. (Id., ¶ 6.)

Accordingly, the Court grants defendant’s motions. Plaintiff must provide verified responses, without objections, to defendant’s special interrogatories (set one), form interrogatories (set one), and requests for production of documents (set one). Defendant’s requests for admissions are deemed admitted. Verified responses to be provided by the date of the CMC, as indicated below.

Sanctions

Pursuant to California Code of Civil Procedure sections 2030.290(c) and 2031.300(c), a court “shall” impose a monetary sanction under Chapter 7 (commencing with Section 2023.010) on any party “who unsuccessfully makes or opposes a motion to compel a response , unless [the Court] finds that one subject to the sanction acted with substantial justification or that other circumstances make the imposition of sanctions unjust.” (Code Civ. Proc., §§ 2030.290(c), 2031.300(c).) Pursuant to Code of Civil Procedure section 2033.280(c), “[i]t is mandatory that the court impose a monetary sanction under Chapter 7 (commencing with Section 2023.010) on the party or attorney, or both, whose failure to serve a timely response to requests for admission necessitated this motion.”

Defendant seeks $1,133.34 in sanctions against plaintiff and her attorneys of record for each of the motions. Defendant requests sanctions for 1.5 hours of work preparing each motion and an anticipated one hour reviewing an opposition and preparing a reply, all at an hourly rate of $280.00. (Batezel Decl., ¶ 7.) Defendant anticipates spending three hours traveling to and from the hearing and one hour attending the hearing. (Id., ¶ 9.) Defendants incurred $60.00 in filing fees for each motion.

The amounts requested are excessive and unreasonable. Because the motions consist of brief memoranda and nearly identical declarations, the Court fails to see why 1.5 hours were needed to prepare each motion. Further, the motions are set for the same time as defendant’s demurrer and motion to strike, and hence counsel will spend no additional time attending the hearing on these motions. (If indeed counsel even plans to attend in person, as opposed to appearing via CourtCall.)

“‘If . . . the Court were required to award a reasonable fee when an outrageously unreasonable one has been asked for, claimants would be encouraged to make unreasonable demands, knowing that the only unfavorable consequence of such misconduct would be reduction of their fee to what they should have asked in the first place. To discourage such greed, a severer reaction is needful . . . .’ (Serrano v. Unruh (1982) 32 Cal.3d 621, 635, quoting Brown v. Stackler (7th Cir. 1980) 612 F.2d 1057, 1059.) “A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether.” (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 990; Ketchum v. Moses (2001) 24 Cal.4th 1122, 1137; Serrano v. Unruh (1982) 32 Cal.3d 621, 635.)

Defendant’s request for sanctions is DENIED.

CONCLUDING COMMENTS

This case is almost two years old. Given that there has been no opposition to any of these motions, and given that plaintiff’s counsel had indicated he was going to file a motion to withdraw (although he never did), the Court is concerned that plaintiff may have abandoned her case and/or that plaintiff’s counsel may have abandoned his client.