Case Name: The Restoration Cleanup Company, Inc. v. Rantz, et al.
Case No.: 1-11-CV-212971

Currently before the Court are the following motions: (1) the demurrer to the second amended cross-complaint (“SACC”) of cross-complainants Michael and Paula Rantz (the “Rantzes”) by cross-defendant Northwall Builders, Inc. (“NWB”) and NWB’s motion to strike portions of the same; (2) cross-defendant Adanac Fire Protection, Inc.’s (“Adanac”) demurrer to the SACC and motion to strike the SACC and portions of the same; (3) cross-defendant United Specialty Insurance Company’s (“USIC”) demurrer to the SACC and motion to strike the SACC and portions of the same; (4) cross-defendant North American Capacity Insurance Company’s (“NAC”) demurrer to the SACC and motion to strike portions of the same; (5) cross-defendant Koning & Associates, Inc.’s (“Koning”) demurrer to the SACC and motion to strike the SACC and portions of the same; (6) cross-defendant Croft Claimswork, LLC’s (“Croft”) demurrer to the SACC and motion to strike the SACC and portions of the same; and (7) NWB and Adanac’s motions to sever certain claims from this action. USIC requests to join in both motions to sever and each of the motions to strike other than NWB’s. NAC requests to join in NWB’s motion to sever.

As an initial matter, the Rantzes submit a single request for judicial notice in support of their oppositions to the cross-defendants’ demurrers and motions to strike. The Rantzes’ request is GRANTED as to the existence of Exhibits 1-4 (request nos. 1-3) given that they are court records (see Evid. Code, § 452, subd. (d)), but the Court takes judicial notice only of the existence of these documents and the fact that they contain certain allegations or statements, and not of the truth of statements contained therein or of the Rantzes’ interpretation of the effect of such statements. (See Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-1568 [a court may take judicial notice of the existence of each document in a court file and the fact that certain findings were made, but may not take judicial notice of the truth of factual findings].)

The Rantzes’ request is DENIED as to Exhibits 5-9 and 11 (request nos. 5-9 and 11). (See Ross v. Creel Printing & Publishing Co., Inc. (2002) 100 Cal.App.4th 736, 744 [appellate court did not take judicial notice of District Attorney’s letter that did not fall into any of the categories for either mandatory or permissive judicial notice under section 451 or 452]; California School Boards Ass’n v. State Bd. of Educ. (2010) 186 Cal.App.4th 1298, 1327, fn.20 [content of correspondence not a proper subject of judicial notice]; Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1145 [“the existence of a contract between private parties cannot be established by judicial notice under Evidence Code section 452, subdivision (h)”].) The request is GRANTED as to Exhibit 10 (request no. 10). (See Ascherman v. General Reinsurance Corp. (1986) 183 Cal.App.3d 307, 310-311 [appellate court took judicial notice of terms of reinsurance contract referenced in complaint, where the parties did not dispute the existence of the contract].)

NWB’s Demurrer and Motion to Strike

NWB demurs to the first, second, fifth, sixth, and ninth through seventeenth causes of action on the grounds that they do not state facts sufficient to constitute causes of action, and to the third and sixth causes of action on the basis of uncertainty. NWB also moves to strike portions of the SACC.

NWB’s requests for judicial notice are GRANTED as to Exhibits A through D to the request filed in support of its demurrer, Exhibits A and C to the request filed in support of its motion to strike, and Exhibits A and B to the request filed in support of its reply brief. (See Evid. Code, §§ 451, subd. (a) and 452, subd. (d).) NWB’s request filed in support of its demurrer is DENIED as to Exhibit E given that these discovery responses clarify rather than contradict the allegations of the SACC. (See Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604-605 [“The court will take judicial notice of records such as admissions, answers to interrogatories, affidavits, and the like, when considering a demurrer, only where they contain statements of the plaintiff or his agent which are inconsistent with the allegations of the pleading before the court.”].) NWB’s request filed in support of its motion to strike is DENIED as to Exhibit B because a jury instruction is not an appropriate subject for judicial notice.

NWB’s demurrer to the first, second, and seventeenth causes of action is OVERRULED. The Rantzes’ claims for indemnity are not moot simply because the underlying action by The Restoration Cleanup Company, Inc. (“RCC”) was settled. (See Bank One Trust Co. NA v. Alma Products I, Inc. (9th Cir. 2005) 137 Fed. App’x. 68, 69-70 [claim for indemnity remains live so long as indemnitee has not been fully compensated for covered damages].) Further, while it may be true that indemnification agreements “ordinarily” relate to third party claims (Queen Villas Homeowners Ass’n v. TCB Property Management (2007) 149 Cal.App.4th 1, 5), here, the Rantzes allege that the specific contracts at issue provide that NWB will indemnify them from all losses, including claims, causes of action, and attorneys’ fees, arising out of the performance of the work on their home, in addition to reimbursing them for costs payable to another contractor due to defective construction (SACC, ¶¶ 61, 62), and that this language covers their damages connected to this action.

NWB’s demurrer to the third cause of action is OVERRULED as to both uncertainty and failure to state a cause of action. The Rantzes allege that NWB and Adanac violated specific provisions of the California Fire Code and Palo Alto Municipal Code (SACC, ¶ 71).

NWB’s demurrer to the fifth cause of action is OVERRULED. Essentially, NWB complains that the Rantzes have mischaracterized their claim as one for “permanent,” rather than “continuing” nuisance. While this distinction would be relevant to a determination of available remedies or the applicable statute of limitations, these issues are not relevant to the question of whether the fifth cause of action states a claim as an initial matter. (See Baker v. Burbank-Glendale-Pasadena Airport Authority (1985) 39 Cal.3d 862, 868 [distinction between permanent and continuing nuisance “determine[s] the remedies available to injured parties and the applicable statute of limitations”].) Here, the SACC clearly alleges the presence of mold and water damage on the property at one time, which impacted the Rantzes’ use and enjoyment of the Property (SACC, ¶ 95), and it further alleges that the Rantzes have been forced to live with uncompleted repairs, which have also obstructed their use and enjoyment of the Property (SACC, ¶ 96). Consequently, the fifth cause of action states a claim for nuisance, whether abated, continuing, or permanent. (Civ. Code, §§ 3479 [“Anything which is … indecent or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property, … is a nuisance.”]); 3484 [“The abatement of a nuisance does not prejudice the right of any person to recover damages for its past existence.”].)

NWB’s demurrer to the sixth cause of action is OVERRULED as to both uncertainty and failure to state a cause of action. The sixth cause of action is based upon a number of specific contractual provisions, some of which are characterized as warranties and others of which are not. Regardless of how these provisions are appropriately characterized, however, it is clear which provisions are at issue and how NWB allegedly breached a number of these provisions, given the general allegations concerning water damage to the Property and NWB’s failure to reimburse the Rantzes for resulting damages.

NWB’s demurrer to the ninth, tenth, and twelfth through sixteenth causes of action is SUSTAINED with 10 days’ leave to amend. In support of these claims for fraud, the Rantzes allege that NWB misrepresented their additional insured status (SACC, ¶¶ 120, 125, 190, and 191) and told the Rantzes that they would be reimbursed by the contractors’ insurers for losses and expenses arising from the damage to the Property if they initially submitted their claim to their own “all risk” insurer, Assurance Company of America (“ACA,” also known as “Zurich”) (SACC, ¶¶ 133, 134, 141, and 196). The Rantzes state that they believe they were named as additional insureds as required, but plead in the alternative that they were not additional insureds given that coverage was ultimately denied. (SACC, ¶ 122.) As argued by NWB, the Rantzes fail to adequately plead that NWB knew or should have known the representations at issue were false, given that NWB conveyed them on behalf of others (SACC, ¶¶ 119, 120, 133, and 134) and the SACC provides no facts indicating that NWB knew or should have known the representations were incorrect. (See Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158 -159 [“[p]redictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud,” but broken promises as to one’s own future conduct may be actionable], internal citations omitted; Wilson v. Rigali & Veselich (1934) 138 Cal.App. 760, 764-765 [predictions as to future acts to be performed by others may be conceded to be mere expressions of opinion that do not support a claim for fraud]; see also Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331 [“Here, the complaint fails to plead with specificity a factual basis for how [an attorney] ‘knew’ the representations she communicated to Goodman on behalf of [a client] were false.”].)

NWB’s demurrer to the eleventh cause of action is SUSTAINED with 10 days’ leave to amend. The Rantzes’ claim for promissory estoppel is based on NWB’s “contractual” obligation to bind subcontractors to the contracts between NWB and the Rantzes (SACC, ¶¶ 149, 150), its representations of coverage and the proof of insurance it provided (SACC, ¶ 151), and its promises that the Rantzes would be reimbursed for all damages if they elected to report their claim to their “all risk” insurer (SACC, ¶¶ 153 and 154). As to the first theory, the Rantzes do not allege that NWB breached this admittedly “contractual” obligation. (See SACC, ¶ 149 [“Discovery, which is just beginning, will determine if these obligations were satisfied.”].) Further, given that the second and third theories pertain to representations concerning actions by the insurers, and not promises by NWB itself to provide insurance coverage or reimburse the Rantzes, they do not state a claim for promissory estoppel against NWB. (See US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 904 [“[P]romissory estoppel claims are aimed solely at allowing recovery in equity where a contractual claim fails for a lack of consideration, and in all other respects the claim is akin to one for breach of contract.”]; see also Aceves v. U.S. Bank, N.A. (2011) 192 Cal.App.4th 218, 226 [promise supporting a claim for promissory estoppel must be definite enough that a court can determine the scope of the promisor’s duty].)

NWB’s motion to strike is DENIED as to the portions of the SACC pertaining to the Rantzes’ requests for consequential damages. The Court finds that the parties’ contract is ambiguous as to whether consequential damages are waived in light of the arguments raised by the Rantzes.

NWB’s motion to strike is GRANTED without leave to amend as to the portions of the SACC pertaining to the Rantzes’ requests for stigma damages. Stigma damages for residual diminution of a property’s market value after repairs have been completed may be available under California law in certain contexts (see Santa Fe Partnership v. ARCO Products Co. (1996) 46 Cal.App.4th 967, 983-984 (hereinafter, “Santa Fe”) [chemical contamination case noting that “claims for stigma damages are beginning to arise in cases throughout the nation in toxic contamination cases … presenting substantial evidence the property suffers permanent physical injury despite remediation efforts”]; see also Bartleson v. U.S. (1996) 96 F.3d 1270, 1275 [citing Santa Fe for the broader proposition that “[d]amages for diminution in property value due to stigma have been recognized by the California courts in cases of permanent nuisance” and holding that adjacent artillery range could be held to create a permanent nuisance]), but the Rantzes cite no authority for the proposition that such damages are available due to water damage as opposed to more serious types of contamination, such as toxic contamination. Given that there is no indication that California would recognize such a claim, the Court finds that stigma damages are not recoverable in this context. (See Aas v. Super. Ct. (William Lyon Company) (2000) 24 Cal.4th 627, 652, fn.15 [construction defect case noting that “no reported decision in this state appears to authorize such recovery”], superceded by statute on other grounds as stated in Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1079-1080.)

NWB’s motion to strike is DENIED as to the Rantzes’ prayer for prejudgment interest given that the language of the Rantzes’ prayer self-evidently allows for the imposition of a different rate of interest where specified by contract.

NWB’s motion to strike references to damages already compensated by Zurich is GRANTED with 10 days’ leave to amend as to payments to NWB but DENIED as to payments to RCC. As noted by the Court (Hon. Kleinberg) in its prior order, the collateral source rule applies to the Rantzes’ claims against NWB. (See Shaffer v. Debbas (1993) 17 Cal.App.4th 33, 40 [applying collateral source rule in homeowner suit against builders, subcontractors, and architects for negligence and breach of warranty]; see also Patent Scaffolding Co. v. William Simpson Const. Co., supra, 256 Cal.App.2d at 511 [“The rule has been oft repeated to provide that where a person suffers property damage, the amount of damages shall not be reduced by the receipt by him of payment for his loss from a source wholly independent of the person who caused the injury.”].) Zurich is wholly independent from NWB given that the Zurich policy was maintained by the Rantzes, not NWB. (See Barnes v. Western Heritage Insurance Company (2013) 217 Cal.App.4th 249, 261 [the “wholly independent” distinction is “between insurance coverage maintained by a plaintiff as coverage for the plaintiff’s loss (a source collateral to the alleged wrongdoer) and insurance coverage maintained by the alleged wrongdoer as coverage for the alleged wrongdoer’s liability (a source not collateral to the wrongdoer)”.) NWB’s argument that Section 11.4.7 of the parties’ contract waives damages covered by the Zurich “all-risk” policy is well-taken. However, Section 14.6.4 does create an ambiguity respecting the Rantzes’ current entitlement to damages with respect to payments to third party RCC only, given that the provision pertains to third-party claims and not payments to NWB.

Accordingly, the following language is stricken from the SACC as to NWB:

-“stigma damages” (SACC, ¶ 65 at p.23, l. 26)

-“As the environmental report and prior mold growth at the RANTZ home evidence a material disclosure which will impact the property value of the RANTZ home, and the existence of a permanent stigma to the estimated value of the property, the RANTZ home has suffered a permanent harm.” (SACC, ¶ 98 at p. 34, ll. 20-23.)

-“stigma” (SACC, ¶ 98 at p. 34, l. 24.)

-“and stigma damages” (SACC, ¶ 117 at p. 49, l. 20.)

-“stigma damages” (SACC, ¶ 143 at p. 59, l. 7.)

– “NWB and” (SACC, ¶ 65 at p. 23, l. 24.)

Adanac’s Demurrer and Motion to Strike

Adanac demurs to the second, third, fifth, seventh through sixteenth, and nineteenth causes of action on the grounds that they fail to state facts sufficient to constitute a cause of action and are uncertain. Adanac also moves to strike the SACC and portions thereof.

Adanac’s request for judicial notice is GRANTED in its entirety. (See Evid. Code, § 452, subd. (d).)

Adanac’s demurrer on the basis of uncertainty is OVERRULED. While the SACC is not a model of clarity, it is not so unintelligible that Adanac cannot respond to it. (See Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal App 4th 612, 616 [“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”]; Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 266 [“in ruling on a demurrer, the trial court … [must ignore] [e]rroneous or confusing labels attached by the inept pleader … if the complaint pleads facts which would entitle the plaintiff to relief”], citation omitted; see also Fenton v. Groveland Cmty. Services Dist. (1982) 135 Cal.App.3d 797, 809 [an uncertainty demurrer also must distinctly specify exactly how or why the pleading is uncertain and where such uncertainty appears].)

Adanac’s demurrer to the second cause of action for implied indemnity is OVERRULED. While “[i]t is well-settled in California that equitable indemnity is only available among tortfeasors who are jointly and severally liable for the plaintiff’s injury” (Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4th 1036, 1040, italics original), the Rantzes’ claim for implied indemnity is not based upon the theory that they and Adanac are joint tortfeasors. “[I]mplied contractual indemnity between the indemnitor and the indemnitee can [also] provide a basis for equitable indemnity” (id. at p. 1041), and this is the theory alleged by the Rantzes here. (See SACC, ¶ 68 [NWB and Adanac “agreed to pay for all property damage arising from their negligence and the clean-up costs associated with the water damage,” which “were the result of NWB and ADANAC’s acts and omissions”].)

Adanac’s demurrer to the third cause of action for breach of statutory obligation and the fifth cause of action for permanent private nuisance is OVERRULED for the same reasons discussed with respect to NWB’s demurrer.

Adanac’s demurrer to the seventh cause of action for breach of contract, the eighth cause of action for breach of implied warranties, and the nineteenth cause of action for breach of the implied covenant of good faith and fair dealing is OVERRULED. As urged by the Rantzes, the SACC alleges that Adanac agreed to be bound by the provisions of the Rantzes’ contract with NWB related to the Project. (See SACC, ¶¶ 5 [“NWB was required to ‘bind in writing all subcontractors … to the terms of the entire agreement between Owner and Contractor”], 104 [the Rantzes are informed and believe that Adanac “agreed to be bound to the provisions of the contracts relating to the project …”.) Such allegations are sufficient to state that the Rantzes are third-party beneficiaries of NWB’s contract with Adanac (see Civ. Code, § 1559 [“A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.”]), an issue which Adanac does not squarely address in its moving or reply papers. Consequently, the Rantzes have alleged a claim for breach of contract against Adanac, and they have also alleged a claim for breach of implied warranty and breach of the implied covenant of good faith and fair dealing. (See Burch v. Super. Ct. (Premier Homes, LLC) (2014) 223 Cal.App.4th 1411, 1423 [an exception to the general rule that an implied warranty can arise only in favor of a party to the contract arises where homeowner is intended beneficiary of contract between general contractor and subcontractor, citing Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65]; Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1034 [third party beneficiary can assert claim for breach of the implied covenant of good faith and fair dealing].)

Adanac’s demurrer to the ninth and tenth causes of action for intentional and negligent misrepresentation and the sixteenth cause of action for fraud and deceit is SUSTAINED with 10 days’ leave to amend. As with NWB, the ninth, tenth, and sixteenth causes of action as alleged against Adanac are based on Adanac’s alleged misrepresentation of the Rantzes’ additional insured status (see SACC, ¶¶ 120, 126, 193, 194) and promise that the Rantzes would be reimbursed by the contractors’ insurers if they submitted their claim to Zurich (see SACC, ¶¶ 133, 134, 200). As discussed above, the Rantzes include no allegations that would support the conclusion that Adanac knew or should have known that its insurer’s coverage representations were false, and Adanac’s statements as to its insurer’s future actions are not actionable. (See Tarmann v. State Farm Mut. Auto. Ins. Co., supra, 2 Cal.App.4th at p. 158 -159; Wilson v. Rigali & Veselich, supra, 138 Cal.App. at pp. 764-765; see also Wilhelm v. Pray, Price, Williams & Russell, supra, 186 Cal.App.3d at p. 1331.)

Adanac’s demurrer to the twelfth through fifteenth causes of action for intentional and negligent suppression and concealment of fact is OVERRULED. In their twelfth through fifteenth causes of action, the Rantzes allege that in a May 25, 2011 email to RCC, an agent of Koning (Adanac’s insurer’s claims adjuster) declined to pay an RCC invoice and stated that Adanac had not accepted liability for the loss at issue. (SACC, ¶¶ 165-166, 184, 186.) Eddy Reyes of Adanac was copied on this email, and it was later received by Adanac’s founder, principal, and officer Don Wardstrom, who had initially represented to NWB that the Rantzes and Zurich would be reimbursed by Adanac’s and/or NWB’s insurers; however, Adanac did not inform the Rantzes that Adanac and its insurers now would not accept liability. (See SACC, ¶¶ 21, 32, 42, 165, 166.) The Rantzes learned of Adanac’s change of position months later, on September 14, 2011. (See SACC, ¶ 52.) These allegations state a claim for fraudulent nondisclosure. (See OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859 [nondisclosure or concealment may constitute actionable fraud outside of a fiduciary relationship where the defendant “had exclusive knowledge of material facts not known to the plaintiff; … actively conceals a material fact from the plaintiff; [or] … makes partial representations but also suppresses some material facts”].)

Adanac’s demurrer to the eleventh cause of action for promissory estoppel is SUSTAINED without leave to amend for the same reasons discussed with respect to NWB’s demurrer.

Adanac’s motion to strike the entire SACC is DENIED. Adanac moves to strike the entire SACC on the grounds that it is improperly pled on information and belief and the Rantzes added new claims and allegations to the SACC that were not authorized by Judge Kleinberg’s prior order resolving the cross-defendants’ initial round of demurrers. However, allegations, even those pertaining to fraud, may be pleaded upon information and belief so long as the facts upon which the belief is founded are provided (see Woodring v. Basso (1961) 195 Cal.App.2d 459, 465), and the lengthy SACC includes numerous specific factual allegations supporting its claims. In addition, Adanac cites no authority for the proposition that the Court should strike the Rantzes’ entire SACC because they added certain causes of action, and it is noted that Adanac is not even named in these new causes of action.

Adanac’s motion to strike is GRANTED as to references to attorney fees incurred in prosecuting this cross-complaint, but DENIED as to references to attorney fees incurred in defending third party claims. Adanac notes correctly that Judge Kleinberg’s prior order on Croft’s motion to strike held that the “tort of another doctrine,” which “allows a plaintiff attorney fees if he is required to employ counsel to prosecute or defend an action against a third party because of the tort of the defendant” (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 505), does not enable the Rantzes to recover fees incurred in prosecuting the instant cross-action. (December 6th, 2013 Order at p. 12.) However, as urged by the Rantzes in opposition and as also noted by Judge Kleinberg’s order, the Rantzes allege that they incurred attorney fees in defending the original action by RCC, and continue to incur attorney fees in defending NWB’s cross-complaint, because Adanac failed to inform them of its and its insurer’s change in position as to liability (see SACC, ¶¶ 177, 186). Adanac does not address why the tort of another doctrine would not apply to these claims, and the Court finds that the Rantzes have pleaded allegations adequate to support their requests for attorneys’ fees on this theory. However, as in the FACC, the Rantzes also include attorney fee allegations that appear to pertain to fees incurred in prosecuting their own cross-complaint.

Adanac’s motion to strike is DENIED as to the Rantzes’ requests for punitive damages and related allegations. As discussed above, the Rantzes have adequately pleaded intentional suppression and concealment of fact against Adanac on the basis of Adanac’s failure to disclose its and its insurer’s change in position regarding their liability for the loss at issue. Further, the Rantzes specifically allege that Don Wardstrom, Adanac’s officer, knew of the change in position and did not disclose it. (See Civ. Code, § 3294, subd. (b); Cruz v. HomeBase (2000) 83 Cal.App.4th 160, 167 [“the punitive damage statute requires proof of malice[, fraud, or oppression] among corporate leaders: the ‘officer[s], director[s], or managing agent[s]’”], quoting Civ. Code, § 3294, subd. (b).)

Adanac’s motion to strike is GRANTED as to the SACC’s references to stigma damages for the same reasons discussed with respect to NWB’s motion to strike.

Finally, Adanac moves to strike additional language not addressed by its memorandum of points and authorities. Its motion is DENIED as to such language.

Accordingly, the following language is stricken from the SACC as to Adanac:

-“stigma damages” (SACC, ¶ 65 at p. 23, l. 26.)

-“attorneys fees in connection with the present cross-complaint” (SACC, ¶ 108, p. 45, l. 16.)

-“stigma damages” (SACC, ¶ 117 at p. 49, l. 20.)

-“stigma damages” (SACC, ¶ 143 at p. 59, l. 7.)

-“incurs attorney’s fees and costs pursuing the contractual and tort remedies to which RANTZ is legally entitled” (SACC, ¶ 146 at p. 60, ll. 20-21.)

-“stigma damages” (SACC, prayer for relief at p. 102, l. 13.)

-“For reasonable attorneys’ fees” (SACC, prayer for relief at p. 102, l. 16.)

USIC’s Demurrer and Motion to Strike

USIC demurs to the entire cross-complaint on the grounds that Adanac is an implied in law co-insured under the Zurich policy and the Rantzes waived their right to damages covered by the Zurich policy, and to the ninth through nineteenth causes of action on the ground that they do not state facts sufficient to constitute causes of action. It also moves to strike the entire SACC and portions thereof.

USIC’s request for judicial notice submitted in connection with its reply brief filed in support of its demurrer is DENIED as to request nos. 1 and 2, given that a treatise and a transcript of a hearing with Judge Manoukian are not appropriate subjects of judicial notice, and GRANTED as to request nos. 3-6 (see Evid. Code, §§ 451, subd. (a) and 452, subd. (d); Ascherman v. General Reinsurance Corp. (1986) 183 Cal.App.3d 307, 310-311 [appellate court took judicial notice of terms of reinsurance contract referenced in complaint, where the parties did not dispute the existence of the contract]). USIC’s request for judicial notice submitted in support of its amended motion to strike is DENIED in its entirety. The treatise is not an appropriate subject of judicial notice, nor, generally, is a contract between private parties, and USIC does not contend that the agreement at issue was somehow incorporated into the SACC. (See Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1145 [“the existence of a contract between private parties cannot be established by judicial notice under Evidence Code section 452, subdivision (h)”]; cf. Ascherman v. General Reinsurance Corp., supra, 183 Cal.App.3d at pp. 310-311.)

USIC’s demurrer to the entire SACC is OVERRULED. USIC points to no allegation in the SACC or judicially noticeable document establishing the asserted fact that the “all risk” policy named Adanac as an additional insured, and cites no authority for the proposition that Zurich’s asserted lack of subrogation rights against Adanac would bar the Rantzes’ entire lawsuit against USIC. Further, even if USIC is correct that the subrogation waiver applies to it, the Rantzes allege damages other than those compensated by Zurich. Consequently, USIC’s argument that this provision bars the Rantzes’ entire action against it lacks merit.

USIC’s demurrer to the ninth, tenth, and twelfth through sixteenth causes of action for misrepresentation, suppression and concealment of fact, and fraud and deceit; the eleventh cause of action for promissory estoppel; and the “unnumbered cause of action” for promissory fraud are OVERRULED.

In support of its argument that statements concerning insurance coverage cannot create coverage on a promissory fraud theory, USIC cites to Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583, 587, fn.1 (hereinafter, “Quan”), which addressed claims for declaratory relief, breach of insurance contract, and breach of the implied covenant of good faith and fair dealing, and did not address claims for fraud or negligent misrepresentation. While Quan supports the proposition that coverage under an insurance policy cannot be established by estoppel or waiver (see Quan, supra, 67 Cal.App.4th at p. 602, fn.18), the court in Broberg v. Guardian Life Ins. Co. of America (2009) 171 Cal.App.4th 912, 921 held that the trial court erred in sustaining a demurrer to fraud and negligent misrepresentation claims in light of policy disclaimers contradicting the alleged misrepresentation. It is thus clear that an insurer may be held independently liable for fraudulent representations or omissions as to coverage. Further, whether the Rantzes’ reliance was reasonable in light of the policy endorsement cited by USIC is not appropriately resolved on demurrer. (See Broberg v. Guardian Life Ins. Co. of America, supra, 171 Cal.App.4th at p. 921 [reasonableness of reliance may be decided as a matter of law “only if the facts permit reasonable minds to come to just one conclusion”; disagreeing with the trial court that “the disclaimers in the policy illustration are so clear and so obvious that, as a matter of law,” a claim of reasonable reliance must be rejected].)

As the Court (Hon. Kleinberg) noted in its December 6th, 2013 order, the SACC alleges that David Clement, an adjuster with Croft and an agent of USIC, represented on or about March 31, 2011 that Croft and/or USIC would reimburse the Rantzes and Zurich for the property damage at issue as well as all damages not covered under the “all risk” policy. (See SACC, ¶ 45, 135-137, 155, 225; see also December 6th Order at p. 9.) These facts are alleged with adequate specificity to state claims for fraud and promissory estoppel, which USIC does not appear to dispute. Further, in light of the allegation that USIC knew it would not reimburse the Rantzes by May 2011 at the latest (see SACC, ¶¶ 160, 184), and as previously held by the Court, the Rantzes also state claims for intentional and negligent suppression and concealment of fact against USIC. (See December 6th Order at p. 9.) As the Court has already held, the Rantzes allege detrimental reliance in that they did not submit their claims to the contractors’ liability carriers at once and were forced to defend this action by RCC. (See id.)

USIC’s demurrer to the seventeenth cause of action for declaratory relief, the eighteenth cause of action for breach of insurance contract, the nineteenth cause of action for breach of the implied covenant of good faith and fair dealing; and the “unnumbered cause of action” for tortuous breach of implied covenant/fraudulent claims handling is OVERULED. USIC argues that the demurrer to these claims, which was previously overruled by the Court (see December 6th Order at pp. 8-9), should be sustained because there is no contract between USIC and the Rantzes to support them. First, USIC points to provisions in the contract between NWB and the Rantzes indicating that the contract does not bind non-parties, contending that these provisions contradict the Rantzes’ allegations that Adanac and USIC were obligated to add the Rantzes as additional insureds and did so in fact. However, the Rantzes allege that USIC’s insurance policy issued to Adanac, not the contract between NWB and the Rantzes, confers benefits to the Rantzes as “Owners.” (See SACC, ¶¶ 9-11.) In addition, USIC contends that the policy documents state that only a person for whom Adanac is performing operations “when you and such person … have agreed in writing in a contract or agreement that such person … [will] be added as an additional insured on your policy,” language which is also specifically alleged by the Rantzes in the SACC. (See SACC, ¶¶ 31-32.) While the Rantzes do not clearly allege that Adanac agreed with them directly or in writing to add them as additional insureds, they do allege that NWB represented in writing that Adanac had so named them and that Adanac’s officer Don Wardstrom agreed to identify the Rantzes as an additional insured and believed that he had done so. (See SACC, ¶ 32.) Thus, contrary to USIC’s contention, it is not clear from the SACC that Adanac and the Rantzes did not agree in writing that the Rantzes would be additional insureds, nor is it clear that the Rantzes’ and Adanac’s mutual contractual agreements with NWB would not suffice to make the Rantzes additional insureds under the USIC policy.

USIC’s requests to join in the motions to strike of Adanac, Koning, and Croft are GRANTED.

For reasons discussed elsewhere and because the release cited by USIC is not a proper subject of judicial notice, USIC’s motion to strike the entire SACC is DENIED.

USIC’s motion to strike is GRANTED without leave to amend as to the third, twentieth, and twenty-first causes of action and the portion of the sixteenth cause of action labeled “tortious breach of implied covenant/fraudulent claims handling.” While the Court’s prior order gave the Rantzes leave to amend their fraud claims, the causes of action at issue do not address the duty owed by the insurance adjusters to the Rantzes in the context of their fraud claims or the fraud claims more generally. Further, the Court’s previous order addressing USIC’s and the other cross-defendants’ motion to strike the Rantzes’ prayer for punitive damages granted the motion on the ground that the Rantzes had not alleged that an officer, director, or managing agent authorized the allegedly fraudulent conduct at issue. (See Dec. 6th Order at p. 9.)

Nothing in the Court’s previous order authorized the Rantzes to add claims alleging entirely new statutory violations against the cross-defendants. Consequently, these allegations are stricken. (See Harris v. Wachovia Mortg., FSB (2010) 185 Cal.App.4th 1018, 1023 [trial court properly sustained demurrer where new cause of action was not within the scope of the order granting leave to amend]; cf. Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015 [where court found plaintiff failed to allege she had standing to bring shareholder derivative claims, new declaratory relief cause of action supported her standing claim by seeking a declaration that she had a community property interest in the defendant corporation—i.e., that she was a shareholder].) The “tortious breach of implied covenant/fraudulent claims handling” portion of the Rantzes’ sixteenth cause of action for fraud and deceit (SACC, ¶¶ 201-221) does not allege any misrepresentation or concealment of fact by USIC and appears to comprise an entirely new cause of action. These paragraphs are stricken on the same basis as the allegations discussed above.

USIC’s motion to strike references in the SACC to punitive damages is GRANTED without leave to amend. The Court sustained USIC’s previous motion to strike the Rantzes’ request for punitive damages on the ground that the Rantzes failed to allege that an officer, director, or managing agent of USIC authorized, directed, or ratified fraudulent conduct as required to state a claim for punitive damages against a corporation. (See Dec. 6th Order at p. 9.) While the Rantzes now allege that Mr. Clement, who made the coverage representation supporting their fraud claims, is an “officer, director and/or managing agent” of Croft (SACC, ¶¶ 135, 182), this is not sufficient to state a claim against USIC for punitive damages. (See Code Civ. Proc., § 3294, subd. (b); Nolin v. National Convenience Stores, Inc. (1979) 95 Cal.App.3d 279, 289 [“punitive damages can properly be awarded against a principal because of an act by an agent if, but only if ‘(a) the principal authorized the doing and the manner of the act, or (b) the agent was unfit and the principal was reckless in employing him, or (c) the agent was employed in a managerial capacity and was acting in the scope of employment, or (d) the employer or a manager of the employer ratified or approved the act”].)

For the reasons discussed above with respect to Adanac’s motion, which USIC joined, USIC’s motion to strike is GRANTED with 10 days’ leave to amend as to references to fees incurred in prosecuting this cross-complaint and without leave to amend as to stigma damages, but DENIED as to references to attorney fees incurred in defending third party claims.

Finally, USIC moves to strike additional language not addressed by its memorandum of points and authorities or those in which it joins. Its motion is DENIED as to such language.

Accordingly, the following portions of the SACC are stricken as to USIC:

-the third, twentieth, and twenty-first causes of action in their entirety

-paragraph 34 in its entirety

-“stigma damages” (SACC, ¶ 65 at p. 23, l. 26.)

-“attorneys fees in connection with the present cross-complaint” (SACC, ¶ 108, p. 45, l. 16.)

-“stigma damages” (SACC, ¶ 117 at p. 49, l. 20.)

-“stigma damages” (SACC, ¶ 143 at p. 59, l. 7.)

-“incurs attorney’s fees and costs pursuing the contractual and tort remedies to which RANTZ is legally entitled” (SACC, ¶ 146 at p. 60, ll. 20-21.)

-paragraphs 180 and 187 in their entirety

-paragraphs 201 to 221 in their entirety

-“punitive damages” (SACC, ¶ 225, p. 88, l. 6.)

-paragraphs 227, 228, and 253 in their entirety

-“exemplary damages” (SACC, ¶ 254, p. 95, l. 19.)

-paragraph 2-4 and 15 of the prayer for relief in their entirety

-“stigma damages” (SACC, prayer for relief at p. 102, l. 13.)

-paragraph 18 of the prayer for relief in its entirety

NAC’s Demurrer and Motion to Strike

NAC demurs to the entire SACC on the grounds that there is a misjoinder of parties and its allegations are contradicted by its exhibits and other judicially noticeable facts. NAC furthermore demurs to the third, ninth through sixteenth, twentieth, and twenty-first causes of action on the grounds that they do not state facts sufficient to constitute causes of action, and moves to strike portions of the SACC.

NAC’s request for judicial notice is GRANTED as to Exhibits A and C (see Evid. Code, § 452, subd. (d)) and DENIED as to Exhibit B as that document is irrelevant to NAC’s demurrer.

NAC’s demurrer to the entire SACC is OVERRULED. While acknowledging that the Court already rejected this argument in its prior order (see Dec. 6th Order, p. 6), NAC again raises the argument that it may not be jointly sued along with its named insured. As discussed below with respect to NWB’s motion to sever, in which NAC joins, this argument lacks merit. NAC further argues that the entire SACC fails because the insurance policy it issued to NWB covers only damages resulting from a judgment against an insured, since it is limited to “those sums that the insured becomes legally obligated to pay as damages” (see SACC, Ex. 2, “Commercial General Liability Coverage Form,” ¶ 1(a)), and there is no such judgment here.

However, as urged by the Rantzes, the policy also provides that NAC has a duty to defend its insured in a suit seeking damages (see id.), and RCC brought such a suit against the Rantzes. NAC next argues that it had no duty to defend the Rantzes in the underlying lawsuit because that suit was for breach of contract rather than for “property damages” directly. However, as urged by the Rantzes, the NAC policy language provides for a duty to defend against suits seeking damages that the insured may be obligated to pay “because of” property damage to which the policy applies (see SACC, Ex. 2, “Commercial General Liability Coverage Form,” ¶ 1(a)), and it is not clear that this language would not encompass the suit by RCC to recover payment for services to repair property damage, particularly given that the policy’s definition of “property damage” is not before the Court. On demurrer, the Court must defer to the Rantzes’ interpretation of this ambiguous language (SACC, ¶¶ 35 and 36; see Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239 [“[s]o long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff’s allegations as to the meaning of the agreement”]), particularly given that “language in a contract must be interpreted as a whole” (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18) and the Court has only part of the contract at issue before it. NAC also urges that its policy is not a first party policy. However, this argument does not foreclose the Rantzes’ theory that the policy covers expenses related to RCC’s lawsuit seeking damages due to property damage, rather than the property damage directly.

NAC’s demurrer to the third cause of action for breach of statutory obligation, the twentieth cause of action for unfair competition, and the twenty-first cause of action for violation of the Cartwright Act is deemed MOOT in light of the ruling on NAC’s motion to strike below.

NAC’s demurrer to the ninth and tenth causes of action for intentional and negligent misrepresentation, the eleventh cause of action for promissory estoppel, and the sixteenth cause of action for fraud and deceit is SUSTAINED without leave to amend. Unlike its claims against NWB, Adanac, and USIC, the Rantzes’ claims against NAC rest entirely upon their theories that (1) if they are not additional insureds under the NAC policy or the policy does not cover the damages at issue, NAC misrepresented these facts via the policy documents that it issued to NWB, which the Rantzes received from NWB (see SACC, ¶¶ 120, 125, 127, 128, 152, 223) and (2) if they are additional insureds and the policy does cover the damages at issue, NAC falsely represented the opposite in denying their claim or falsely represented an intent to perform the obligations of the policy in issuing it (see SACC, ¶¶ 131, 224).

As an initial matter, neither of these theories alleges a specific representation by a specific individual at NAC or a promise by NAC to the Rantzes as required to support claims for fraud or promissory estoppel. Even if NAC’s issuance of policy documents to NWB could be deemed a representation to the Rantzes, the first theory does not state a claim given that the SACC alleges only that the policy documents themselves were conveyed to the Rantzes, not that NAC made any representation or promise as to what the policy did and did not cover beyond their literal terms. The second theory does not state a claim given that the Rantzes do not allege they relied on NAC’s denial of their claim, and do not allege any facts in support of the conclusion that NAC did not intend to honor its policy at the time it was issued. Given that the Court sustained NAC’s previous demurrer to these claims on the ground that they did not allege any positive assertions by NAC (see Dec. 6th Order at p. 7), NAC’s demurrer to these claims is now sustained without leave to amend.

NAC’s demurrer to the twelfth and thirteenth causes of action for negligent and intentional suppression of fact and the fourteenth and fifteenth causes of action for negligent and intentional concealment of fact is SUSTAINED without leave to amend. In support of their twelfth and thirteenth causes of action, the Rantzes allege that NAC knew that they had agreed to submit their claim to Zurich subject to reimbursement by NAC or USIC but intentionally suppressed or failed to provide its coverage determination, required under the Code of Regulations, until after the Rantzes paid the majority of the payments relating to the rebuild to NWB. (See SACC, ¶¶ 83, 161-163, 173-176.) The Rantzes allege that they were advised of NAC’s position that “there may be no coverage” under its policy on September 14, 2011 (SACC, ¶ 176), do not allege any facts in support of the conclusion that NAC arrived at its coverage position at an earlier date, and do not allege that NAC ever represented that it would cover the claims (see SAC, ¶ 83 [NAC never advised the Rantzes of their rights under its policy until September 2011]). Consequently, the Rantzes fail to allege any omission by NAC that it had a duty to disclose for purposes of their fraud claims. (See OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859 [there are four circumstances in which nondisclosure or concealment may constitute actionable fraud: “(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts”].) As urged by NAC, the fourteenth and fifteenth causes of action contain no allegations concerning NAC, and they are not supported by the allegations included in support of the twelfth and thirteenth causes of action for the reasons discussed above. Given that the Court sustained NAC’s previous demurrer to these claims on the ground that they did not allege any omission by NAC that it had a duty to disclose (see Dec. 6th Order at p. 7), NAC’s demurrer to these claims is sustained without leave to amend.

NAC’s motion to strike the third, twentieth, and twenty-first causes of action is GRANTED without leave to amend for the same reasons discussed in connection with USIC’s motion to strike.

NAC’s motion to strike is GRANTED without leave to amend as to the allegations regarding punitive damages. Its prior motion to strike these allegations was granted on the ground that the FACC did not allege sufficient facts to support NAC’s involvement in any oppressive, fraudulent, or malicious actions (see Dec. 6th Order at pp. 7-8), and the SACC is also deficient in this respect.

Finally, NAC moves to strike additional language not addressed by its memorandum of points and authorities. Its motion is DENIED as to such language.

Accordingly, the following portions of the SACC are stricken as to NAC:

-the third, twentieth, and twenty-first causes of action in their entirety

-paragraph 34 in its entirety

-paragraph 253 in its entirety

-“exemplary damages” (SACC, ¶ 254, p. 95, l. 19.)

-paragraphs 2-4 and 15 of the prayer for relief in its entirety

NAC’s motion is deemed MOOT as to the allegations supporting the ninth through sixteenth causes of action.

Koning’s Demurrer and Motion to Strike

Koning demurs to the third, twelfth through fifteenth, and twentieth causes of action on the grounds that they fail to state facts sufficient to constitute a cause of action, and also moves to strike the SACC and portions of the same.

Koning’s requests for judicial notice are GRANTED in their entirety. (See Evid. Code, § 452, subd. (d).)

Koning’s demurrer to the third cause of action for breach of statutory obligation, the twentieth cause of action for unfair competition, and the twenty-first cause of action for violation of the Cartwright Act is deemed MOOT in light of the ruling on its motion to strike below.

Koning’s demurrer is SUSTAINED without leave to amend as to the twelfth through fifteenth causes of action for negligent and intentional suppression and concealment of fact. The Rantzes allege that Koning knew of their claim around the time the water damage occurred, learned in May 2011 that USIC would not pay the claim, but failed to advise the Rantzes that USIC was closing its claim file and Adanac had withdrawn its admission of liability. (See SACC, ¶¶ 47, 160, 165, 167-172, 184.) Without alleging any facts in support of this conclusion, the Rantzes also allege that Koning knew that they had agreed to submit the claim to Zurich subject to the agreement that the liability insurers would reimburse them later. (See SACC, ¶ 161.)

Koning contends that the claims for suppression and concealment of fact must fail because as an independent claims adjustor, it owed no duty of care to the Rantzes. Koning cites Sanchez v. Lindsey Morden Claims Services, Inc. (1999) 72 Cal.App.4th 249 (hereinafter, “Sanchez”), which the Court relied on in sustaining Koning’s previous demurrer to the claims for negligent misrepresentation and suppression and concealment of fact (see Dec. 6th Order at pp.4-5), and which held that an adjuster is not liable to the insured for negligent claim handling because it owes the insured no duty of care in that context. In their supplemental brief, the Rantzes cite the recent decision in Bock v. Hansen (2014) 170 Cal.Rptr.3d 293 (hereinafter, “Bock”), which distinguished Sanchez and held that a cause of action for negligent misrepresentation can lie against an insurance adjuster. As urged by Koning in its reply to the Rantzes’ supplemental brief, Bock is distinguishable because the Rantzes no longer assert a claim for negligent misrepresentation against Koning, but only claims for suppression and concealment of fact. These claims are more akin to the negligent claims handling alleged in Sanchez and the Court consequently finds that Koning did not owe the Rantzes a duty in this context. The Court previously held that the FACC contained no allegations supporting a claim for suppression or concealment against Koning because the Rantzes did not allege a contractual or fiduciary relationship with Koning (see Dec. 6th Order at p. 5), and given that the SACC includes no new allegations on this point, Koning’s demurrer to these claims is sustained without leave to amend. (See OCM Principal Opportunities Fund v. CIBC World Markets Corp. supra, 157 Cal.App.4th at p. 859; Bock v. Hansen, supra, 170 Cal.Rptr.3d at p. 295 [relationship between the insurer and its agents and insured is not a true fiduciary one, although it and general principles of negligent misrepresentation support a claim for negligent misrepresentation].)

Koning’s motion to strike is GRANTED without leave to amend as to the third and twentieth causes of action for the reasons discussed with respect to USIC’s motion to strike, and is otherwise deemed MOOT.

Croft’s Demurrer and Motion to Strike

Croft demurs to the third, ninth, tenth, twelfth through sixteenth, and twentieth causes of action on the grounds that they fail to state facts sufficient to constitute a cause of action. Croft also moves to strike portions of the SACC.

Croft’s request for judicial notice is GRANTED. (See Evid. Code, § 452, subd. (d).)

Croft’s demurrer is deemed MOOT as to the third cause of action for breach of statutory obligation and the twentieth cause of action for unfair competition in light of the ruling on its motion to strike below.

Croft’s demurrer to the ninth, tenth, and twelfth through sixteenth causes of action for intentional and negligent misrepresentation, suppression of fact, and concealment of fact and fraud and deceit are OVERRULED. Croft contends that these claims fail because as a claims administrator, it owed no duty of care to the Rantzes, citing Sanchez and the Court’s prior order (see Dec. 6th Order at p. 11). As discussed above, the decision cited by the Rantzes in their supplemental brief, Bock, distinguished Sanchez and held that a cause of action for negligent misrepresentation can lie against an insurance adjuster. Croft did not file any response to the Rantzes’ supplemental brief or otherwise address Bock. As discussed with respect to USIC’s demurrer, the Rantzes state a claim for negligent misrepresentation based upon David Clement’s representation on or about March 31, 2011 that Croft and/or USIC would reimburse the Rantzes and Zurich for the property damage at issue as well as all damages not covered under the “all risk” policy. (See SACC, ¶ 45, 135-137, 155, 225; see also December 6th Order at p. 9.) This statement also supports the Rantzes’ other fraud claims.

The Court previously overruled Croft’s demurrer to the claims for intentional suppression and concealment of fact on the ground that Mr. Clement’s representation created an obligation to communicate USIC’s change in coverage position to the Rantzes. (See Dec. 6th Order at p. 11; Civ. Code, § 1710(3) [deceit includes “[t]he suppression of a fact, by one who … gives information of other facts which are likely to mislead for want of communication of that fact”]; OCM Principal Opportunities Fund v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 859 [liability for concealment arises when the defendant makes partial representations but also suppresses some material facts].) Croft argues that the Rantzes could not have reasonably relied on Croft’s statements concerning coverage by USIC given that the Rantzes were not insured under the USIC policy. As discussed above, however, the Rantzes state a claim based upon Mr. Clement’s representation that is independent of their rights under the USIC policy itself and it may be reasonable for insureds to rely on their insurer’s or its adjuster’s representation about coverage although coverage may not exist in fact. (See Bock v. Hansen, supra, 170 Cal.Rptr.3d at pp. 304-305 [rejecting argument that insured cannot justifiably rely on an adjuster’s representations about coverage when they contradict the express terms of the policy].)

Croft’s demurrer to the eleventh cause of action for promissory estoppel is SUSTAINED with 10 days’ leave to amend. While the Rantzes have adequately alleged their reliance on Croft’s representation as to their insurance coverage, as urged by Croft, it is clear that any promised coverage would ultimately come from USIC as the insurer, not Croft. (See US Ecology, Inc. v. State of California, supra, 129 Cal.App.4th at p. 904; see also Aceves v. U.S. Bank, N.A., supra, 192 Cal.App.4th at p. 226.)

Croft’s motion to strike the entire SACC is DENIED for the reasons discussed with respect to Adanac’s motion to strike.

Croft’s motion to strike the third and twentieth causes of action and the portion of the sixteenth cause of action labeled “tortious breach of implied covenant/fraudulent claims handling” is GRANTED without leave to amend for the reasons discussed with respect to USIC’s motion to strike.

Croft’s motion to strike the Rantzes’ ninth through sixteenth causes of action on the basis that they are not separately pleaded and numbered is DENIED. (See Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn.2 [“Although inconvenient, annoying and inconsiderate, the lack of labels for plaintiff’s causes of action does not substantially impair Beechnut’s ability to understand the complaint, and a demurrer sustained on the ground of uncertainty without leave to amend should have been overruled.”].)

Croft’s motion to strike references to attorney fees is GRANTED without leave to amend as to references to fees incurred in prosecuting this cross-complaint but DENIED as to references to attorney fees incurred in defending third party claims, for the reasons discussed above with respect to Adanac’s motion to strike.

Croft’s motion to strike the SACC’s request for punitive damages and related allegations is GRANTED without leave to amend. The Court previously sustained Croft’s motion to strike the Rantzes’ request for punitive damages on the ground that the FACC did not allege that an officer, director, or managing agent of Croft authorized, directed, or ratified the alleged wrongful conduct. The Rantzes now allege that Mr. Clement, who made the coverage representation supporting their fraud claims, is an “officer, director and/or managing agent” of Croft. (SACC, ¶¶ 135, 182.) However, this conclusory allegation is unsupported by any specific facts, including which of the three categories the Rantzes allege Mr. Clement falls into, and is inconsistent with the Rantzes’ more specific allegations that Mr. Clement is an “adjuster” with Croft. (See SACC, ¶ 45.)

Accordingly, the following portions of the SACC are stricken as to NAC:

-the third and twentieth causes of action in their entirety

-“CROFT’s officer, director and/or managing agent” (SACC, ¶ 135, p. 56, l. 8.)

-“officer, director and/or managing agent of CROFT” (SACC, ¶ 182, p. 72, l. 22.)

-paragraphs 180 and 187 in their entirety

-paragraphs 201 to 221 in their entirety

-“punitive damages” (SACC, ¶ 225, p. 88, l. 6.)

-paragraphs 227, 228, and 253 in their entirety

-paragraph 15 of the prayer for relief in its entirety

-paragraph 18 of the prayer for relief in its entirety

The Motions to Sever

NAC’s and USIC’s requests for joinder are GRANTED.

NWB’s and Adanac’s requests for judicial notice are GRANTED in their entirety. (See Evid. Code, § 452, subd. (d).)

NWB and Adanac’s motions to sever are DENIED without prejudice to the cross-defendants’ right to seek separate trial of issues pertaining to fault for the sprinkler malfunction and issues pertaining to insurance coverage.

NWB and Adanac correctly contend that the trial of the Rantzes’ claims concerning their liability for the sprinkler malfunction along with their claims concerning insurance coverage could unfairly prejudice them in violation of Evidence Code section 1155. However, the contractors do not merely seek separate trials of these issues, but the severance of all of the claims asserted against the Insurance Defendants from all of the claims asserted against the contractors, many of which pertain to actual and promised insurance coverage rather than fault respecting the sprinkler malfunction.

Given that the coverage-related claims asserted against all of the cross-defendants are closely intertwined, severing the claims asserted against the Insurance Defendants would hinder the economic management of this action and prejudice the Rantzes. (See Royal Surplus Lines Ins. Co., Inc. v. Ranger Ins. Co. (2002) 100 Cal.App.4th 193, 203 [reversing trial court’s finding that subcontractor and its insurer were misjoined in action by landowner that alleged it was an additional insured; “[m]ost of the issues alleged against [the subcontractor and its insurer] concern coverage issues, and the answers to those issues lie in interpretation of the [insurance] policy and [agreement between the landowner and subcontractor] and are inextricably intertwined”]; see also Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. (1987) 189 Cal.App.3d 1072, 1086 [“In denying the motion for severance, the trial court noted that the evidence on the issue of [the insurer’s] bad faith was interrelated with the issue of coverage under the bond …. We find nothing in this case that compels a conclusion of an abuse of discretion by the trial court in denying the motion for severance.”].)

NWB and Adanac contend that they will be prejudiced in defending claims related to their fault for the sprinkler malfunction if the Rantzes procure discovery of their insurer’s claim files, including reports by counsel, for purposes of the coverage-related claims. However, the contractors offer no explanation as to how severing the claims against the Insurance Defendants would alter the timing or scope of discovery concerning those claims. Instead, the contractors cite Royal Globe Ins. Co. v. Super. Ct. (Keoppel) (1979) 23 Cal.3d 880 (hereinafter “Royal Globe”). As noted by the Court in its December 6th, 2013 order, Royal Globe’s holding has not been applied to first party actions such as those brought by alleged additional insureds like the Rantzes. (See December 6th Order at p. 6; Royal Surplus Lines Ins. Co., Inc. v. Ranger Ins. Co. (2002) 100 Cal.App.4th at p. 200.)

The contractors contend that Omaha Indemnity Co. v. Super. Ct. (Greinke) (1989) 209 Cal.App.3d 1266 (hereinafter, “Omaha”), which issued a writ of mandate ordering a trial court to grant an insurer’s motion to sever a claim by alleged intended beneficiaries against the insurer from their claim against its insured, is such a first-party case. However, Omaha cites to Code of Civil Procedure section 1048, pertaining to severance of a trial, and does not address discovery issues. (Id. at p. 1275.) Further, the two claims at issue in that case—one for negligence against the insured and one for declaratory relief against the insurer—were easily severed, and doing so would have promoted judicial economy. (See id. at p. 1270.) The Omaha court noted that the relief it ordered would not have been proper had the trial court denied the insurer’s motion without prejudice, because “Omaha may have succeeded in obtaining, upon proper application at a later time, an order for severance.” (Id. at p. 1274.) Consequently, it appears that the Omaha court was focused on the prejudice that would result from a joint trial rather than discovery issues, which would arise throughout the case. The Court thus follows Royal Surplus Lines Ins. Co., Inc. v. Ranger Ins. Co., supra, 100 Cal.App.4th 193, which held on very similar facts to those at issue here that there was no misjoinder of an insurer and its insured by an alleged additional insured.

The Motion to Appoint a Referee in Aid of Discovery

Parties to appear to discuss this motion.

The Court will prepare the order.

The parties are reminded of the case management conference scheduled for July 22, 2014 at 11:30 A.M.