Case Number: EC060363 Hearing Date: June 13, 2014 Dept: B

Motion for Summary Judgment

The Plaintiffs allege that Karmen Ovasapyan purchased motor vehicle insurance from the Defendant to cover her 2010 Honda Civic and that the Plaintiff, Hamlet Hovasapyan, was a covered user under the policy.

On September 5, 2011, the Plaintiff, Hamlet Hovasapyan, was involved in a motor vehicle accident in the 2010 Honda Civic. The Plaintiffs submitted a claim to the Defendant. The Defendant breached the insurance agreement by denying the claim.

The causes of action in the Complaint are:
1) Breach of Contract
2) Breach of Implied Covenant of Good Faith and Fair Dealing

This hearing concerns the Defendant’s motion for summary judgment to the complaint. Under CCP section 437c, the Defendant has the burden of showing that the complaint has no merit. To accomplish this, CCP section 437c requires the Defendant to provide evidence showing that the Plaintiffs cannot establish an essential element of their two causes of action or that an affirmative defense bars each cause of action.

1. First Cause of Action for Breach of Contract

The essential elements of a cause of action for breach of contract are the following:

1) the contract,
2) plaintiff’s performance or excuse for nonperformance,
3) defendant’s breach, and
4) the resulting damages to plaintiff.
Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 830.

The Defendant argues that the Plaintiffs cannot establish that it breached the contract because the physical evidence demonstrates that the accident did not occur. The Defendant’s argument is that it did not breach the contract because it had no duty to indemnify the Plaintiffs’ claim under a provision that authorized the Defendant to decline coverage when the insured intentionally falsifies facts related to the accident.

Insurance policies are written in two parts:

1) an insuring agreement, which defines the type of risks being covered, and
2) exclusions, which remove coverage for certain risks which are initially within the insuring clause.

Before considering whether any exclusions apply, a Court must examine the coverage provisions to determine whether coverage exists at all. Collin v. American Empire Ins. Co. (1994) 21 Cal. App. 4th 787, 802-803. When an occurrence is clearly not within the coverage clause, it does not have to be specifically excluded. This analysis is important because it defines the burdens at trial:

1) the insured must prove that the claim is within the scope of coverage under the insurance policy; and
2) the insurer must prove that the claim is excluded by an express exclusions clause, clauses which are narrowly construed.
Id.

Accordingly, to prevail, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential.

The Defendant provides facts in its separate statement of facts (“SSF”) to demonstrate the following:

1) the Plaintiffs were insured under an automobile insurance policy with the Defendant (SSF 3);
2) the insurance policy includes a provision that the Defendant may decline coverage when the insured intentionally falsifies facts related to the loss (SSF 4);
3) the Plaintiffs claimed that they were in a motor vehicle accident caused when Hamlet Hovasapyan’s motor vehicle struck the rear of a motor vehicle operated by Andre Polus because Andre Polus had braked suddenly to avoid hitting a pedestrian (SSF 2); and
4) the Defendant investigated the claim and determined that the Plaintiffs had intentionally misrepresented the facts of the accident because the physical damage to the motor vehicle did not support their account of the accident (SSF 5 to 29).

The Defendant’s facts indicate that it had no duty to indemnify because its investigation of the accident determined that the Plaintiffs had falsified facts related to the claim. Under CCP section 437c, this shifts the burden of proof to the Plaintiffs.
.
The Plaintiffs meet this burden with the facts in the declaration of Hamlet Hovasapian and their expert, Jesse Wobrock. Mr. Hovasapyan states facts indicating that the motor vehicle accident occurred when he saw a man run across Glenoaks Blvd. and he struck the rear of a motor vehicle trying to avoid hitting the man. Dr. Wobrock provides an opinion that the accident occurred in the manner described by the Plaintiffs. These facts indicate that the Plaintiffs have evidence that they are not falsifying their account of the accident. Since the Plaintiffs’ facts indicate that there is a dispute of fact, the Defendant cannot establish that it did not breach the contract.

Therefore, the Court denies the Defendant’s motion for summary judgment because there is a dispute of fact whether the Defendant breached the contract on the ground that the Plaintiffs falsified their account of the accident.

2. Request for Summary Adjudication

In the alternative, the Defendant requests that the Court grant summary adjudication on the second cause of action and the claim for punitive damages. Under CCP section 437c(f), the Court may grant summary adjudication only if it completely resolves a cause of action, an affirmative defense, a claim for damages, or an issue of duty. Dunn v. County of Santa Barbara (2006) 135 Cal. App. 4th 1281, 1290. The phrase “a claim for damages” in CCP section 437c(f) is limited to a claim for punitive damages. Decastro W. Chodorow & Burns v. Superior Court (1996) 47 Cal. App. 4th 410, 421. The Legislative Intent of CCP section 437c(f) was to stop the practice of adjudication of facts or adjudication of issues that do not completely dispose of a cause of action or a defense. Lilienthal & Fowler v. Superior Court (1993) 12 Cal. App. 4th 1848, 1854.

Accordingly, a motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for punitive damages, or an issue of duty.

a. Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

The Defendant argues that the Plaintiffs cannot
establish that it acted with bad faith when it denied coverage. The implied covenant of good faith and fair dealing involves something more than a breach of the contract or mistaken judgment. Century Surety Co. v. Polisso (2006) 139 Cal. App. 4th 922, 948. There must also be proof that the insurer failed or refused to discharge its contractual duties not because of an honest mistake, bad judgment, or negligence, “but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement.” Id. Accordingly, to establish a bad faith claim, the insured must show the following:

1) benefits due under the policy were withheld; and
2) the reason for withholding the benefits was unreasonable or without proper cause.
Id.

The Defendant argues that the genuine dispute doctrine applies because it relied upon the opinion of experts to determine the cause of loss. The genuine dispute doctrine holds that an insurer does not act in bad faith when it mistakenly withholds policy benefits, if the mistake is reasonable or is based on a legitimate dispute as to the insurer’s liability. Id. This doctrine may be applied when the insurer denies a claim based on the opinions of experts. McCoy v. Progressive West Ins. Co. (2009) 171 Cal. App. 4th 785, 793. However, reliance on an expert does not bar a bad faith claim when, for example, there is evidence that the insurer dishonestly selected its experts, the insurer’s experts were unreasonable, or the insurer failed to conduct a thorough investigation. Id.

The Defendant provides facts to demonstrate the following:

1) the Defendant retained expert accident reconstructionist, Kenneth Zion, to determine if the body damage to the vehicles was consistent with an impact between the front section of the Plaintiffs’ Honda Civil and the rear section of the Toyota Camry driven by Andre Polus (SSF 17);
2) Dr. Zion reviewed photographs, property damages estimates, the sworn statement of Hamlet Hovasapyan, AutoStats Vehicle Dimensional Specifications, and related NHTSA information (SSF 18);
3) Dr. Zion prepared a report in which he concluded that the damage to the motor vehicles did not match because there was a lack of paint transfer, mismatched ride heights, and incorrect damage profiles (SSF 19); and
4) the Defendant denied coverage in a letter to the Plaintiffs and cited to Dr. Zion’s findings (SSF 26).

This evidence demonstrates that the Defendant denied coverage based upon the opinion of its expert, Kenneth Zion. Accordingly, this evidence establishes that the genuine dispute doctrine applies to the Plaintiffs’ cause of action because the Defendant relied upon the opinion of its expert when it denied the Plaintiffs’ claim.

Under CCP section 437c, the Defendant’s evidence shifts the burden of showing a dispute of fact to the Plaintiffs. The Plaintiffs offer no facts to demonstrate that the Defendant did not rely upon the opinion of Kenneth Zion, that the Defendant dishonestly selected Kenneth Zion, that Kenneth Zion’s acted unreasonably, or that the Defendant failed to conduct a thorough investigation.

The Plaintiffs argue that the Defendant waited seven months after the accident. The Plaintiffs offer no explanation to demonstrate that this indicates that the Defendant acted in bad faith or that there was no genuine dispute about the Plaintiffs’ claim.

Further, the Plaintiffs argue that the Defendant’s expert never performed a physical inspection of the two vehicles and that he relied solely on photographs. The Plaintiffs offer no facts to demonstrate that a physical inspection is required or that it is unreasonable to rely on photographs when making a determination as to the cause of a motor vehicle accident.

The Plaintiffs also argue that the expert is biased and based his opinion on incomplete and insufficient evidence. The Plaintiffs direct the Court to no evidence that Kenneth Zion had bias towards them or that his investigation was incomplete or insufficient.

Instead, the Plaintiffs offer facts in the declaration of their own expert, Jesse Wobrock, to demonstrate that the accident occurred in the manner they described. This is irrelevant because it does not demonstrate that the Defendant acted in bad faith by relying upon the opinion of its expert or that there was no genuine dispute.

The Plaintiffs do not meet their burden because they offer no facts that demonstrate that the Defendant did not rely upon the opinion of Kenneth Zion, that the Defendant dishonestly selected Kenneth Zion, that Kenneth Zion’s acted unreasonably, or that the Defendant failed to conduct a thorough investigation. Accordingly, the undisputed facts demonstrate that the Defendant did not act in bad faith when it denied coverage based on its expert’s opinion.

In their opposition, the Plaintiffs also raise a claim that the Defendant engaged in fraud by directing them to an attorney, Stephen Kalpakian, and then coercing statements from the plaintiffs under the false guise of providing a defense. The Plaintiffs claim that the Defendant used these fraudulent tactics to obtain confidential information.

However, a review of the Plaintiffs’ Complaint reveals no allegations that the Defendant engaged in bad faith breach of the insurance contract by directing the Plaintiffs to an attorney in order to obtain confidential information. Instead, the sole claim in their second cause of action is that the Defendant breached its duty to investigate the Plaintiffs’ claim and to provide a defense.

The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings. FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382. Since the pleadings delimit the issues, summary judgment cannot be granted or denied on grounds not raised by the pleadings. Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663.

Here, the Plaintiffs pleaded a claim for bad faith breach on the theory that the Defendant did not properly investigate their claim and provide a defense. Accordingly, the Court cannot deny the Defendant’s motion on a theory not raised by the Plaintiffs in their pleadings.

Finally, the Plaintiffs also request a continuance because they have not completed discovery. Under CCP section 437c(h), the Court may continue a hearing on a motion for summary judgment when there is a showing with facts in a declaration that essential evidence may exist but cannot then be presented. A summary judgment is a drastic measure which deprives the losing party of trial on the merits. Bahl v. Bank of America (2001) 89 Cal.App.4th 389, 395. To mitigate this harshness, the drafters of CCP section 437c included a provision making continuances virtually mandated. Id. Where the opposing party submits an adequate affidavit showing that essential facts may exist but cannot be presented timely, the Court must either deny summary judgment or grant a continuance. Dee v. Vintage Petroleum, Inc. (2003) 106 Cal. App. 4th 30, 34-35.

However, section 437c(h) cannot be employed as a device to get an automatic continuance by every unprepared party who simply files a declaration stating that unspecified essential facts may exist. Lerma v. County of Orange (2004) 120 Cal. App. 4th 709, 715-716. The party seeking the continuance must justify the need, by detailing both the particular essential facts that may exist and the specific reasons why they cannot then be presented. Id.

The Plaintiffs’ attorney, Richard Foster, provides facts in his declaration to demonstrate that his former associate, Angela Berberyan, was unable to set depositions for the Defendant’s employees in September and October of 2013. This was seven months ago. Mr. Foster offers no facts to explain the failure to take these depositions in the intervening seven months. This is insufficient to identify the specific reasons for the failure to obtain these facts through diligent discovery.

Further, Mr. Foster offers no facts that detail the particular essential facts that may exist. This is insufficient to demonstrate that the discovery will obtain any facts essential to the Plaintiffs’ opposition. As noted above, a request for a continuance cannot be based on the claim that unspecified essential facts may exist.

Therefore, the Court denies the Plaintiffs’ request for a continuance because the Plaintiffs did not meet their burden under CCP section 437c(h) to submit an adequate declaration showing that essential facts may exist but cannot be presented.

Accordingly, the Court grants Defendant’s motion for summary adjudication of the second cause of action because the undisputed facts demonstrate that the Plaintiffs cannot establish that the Defendant acted in bad faith. As discussed above, the Defendant has established that the genuine dispute doctrine applies with the evidence that it relied upon its expert when it denied coverage.

b. Claim for Punitive Damages

The Plaintiffs’ claim for punitive damages is based on their second cause of action for breach of the implied covenant of good faith and fair dealing. Since the Court grants the Defendant motion for summary adjudication of the second cause of action, it also demonstrates that the Defendant is entitled to summary adjudication of the claim for punitive damages because the claim is not supported by any theory in the Complaint.

Therefore, the Defendant is entitled to summary adjudication of the claim for punitive damages because it is based on the second cause of action and the undisputed facts demonstrate that the Plaintiffs cannot establish their second cause of action.