Case Name:   Susie P. Smith v. State Farm General Insurance Company, et al.

 

Case No.:       1-14-CV-261409

 

Demurrer by Defendant State Farm General Insurance Company to Plaintiff Susie P. Smith’s Complaint

 

Plaintiff is the owner of 13346 Fontaine Drive in the city of Saratoga (“Property”).  (Complaint, ¶3.)  Prior to February 29, 2012, defendant State Farm General Insurance Company issued Plaintiff a homeowner’s insurance policy (“Policy”) insuring the Property.  (Complaint, ¶9.)  The Policy insured against the risk of direct physical loss and damage to the Property, personal property and contents therein, and the loss of use of such property. (Complaint, ¶10.) On February 29, 2012, while the Policy was in full force and effect, Plaintiff suffered damage to the Property, personal property, and contents therein, when a water heater drain valve failed and flooded the Property.  (Complaint, ¶13.)  The valve failure and flooding constituted a covered loss within the meaning of the Policy.  (Id.)  Plaintiff submitted a timely claim.  (Id.)

 

State Farm acknowledged coverage for the loss and instructed Plaintiff to call defendant VJB Ventures, Inc. dba ServiceMaster Allcare Restoration (“ServiceMaster”) to perform emergency cleaning and repair.  (Complaint, ¶14.)  State Farm represented to Plaintiff that ServiceMaster was a contractor and service provider participating in its “State Farm Premier Service Program.”  (Id.)  Thereafter, ServiceMaster and Plaintiff entered into a written contract. (Complaint, ¶16 and Exh. A.)  ServiceMaster agreed to restore the Property and its contents to pre-loss condition.  (Complaint, ¶17.)  ServiceMaster agreed to prepare an inventory of items removed from the Property and to give Plaintiff an opportunity to accept/verify the inventory, but failed to do so.  (Complaint, ¶18.)  For several weeks, Plaintiff was deprived of full use and access to the Property and her personal property while ServiceMaster performed cleaning and restoration.  (Complaint, ¶¶19 and 21.)  ServiceMaster removed gypsum wall boards at the Property without performing necessary testing for asbestos and taking necessary precautions. (Complaint, ¶20.)  As a result, ServiceMaster dispersed asbestos fibers and contaminated the Property.  (Id.)

 

Although State Farm had agreed in the Policy to pay for all damage to the Property, personal property, and contents, instead State Farm engaged in an intentional scheme designed to deprive Plaintiff of Policy benefits.  (Complaint, ¶22.)  For example, State Farm obtained unreasonably inadequate bids to perform repair work at the Property.  (Id.)  State Farm agreed to pay for limited abatement of asbestos, but refused to pay for the complete abatement of asbestos caused by its contractor, ServiceMaster.  (Complaint, ¶23.)  Due to delay by State Farm and ServiceMaster and due to State Farm’s termination and refusal to pay for temporary housing, Plaintiff and her family moved into rental property belonging to Plaintiff, depriving Plaintiff of rental income.  (Complaint, ¶24.)  Plaintiff subsequently hired a contractor to perform the necessary repairs at the Property, and said repairs were completed in or about September 2013. (Complaint, ¶25.)  Despite Plaintiff’s request, State Farm and ServiceMaster have not released her personal property which remains in storage.  (Complaint, ¶26.)

 

On February 27, 2014, Plaintiff filed this complaint against State Farm and ServiceMaster. The complaint asserts causes of action for:

 

(1)            Breach of Contract [versus State Farm]

(2)            Declaratory Relief [versus State Farm]

(3)            Breach of Implied Covenant of Good Faith and Fair Dealing [versus State Farm]

(4)            Breach of Contract [versus ServiceMaster]

(5)            Negligence [versus ServiceMaster]

(6)            Breach of Implied and Express Warranty [versus ServiceMaster]

(7)            Declaratory Relief [versus all defendants]

 

On June 9, 2014, State Farm filed this demurrer to the first, second, third, and seventh causes of action in Plaintiff’s complaint.

 

Request for Judicial Notice

 

State Farm’s request for judicial notice is GRANTED. (See Evid. Code, §452, subd. (d); People v. Woodell (1998) 17 Cal.4th 448, 455—court may “take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached–in the documents such as orders, statements of decision, and judgments–but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.”)

 

Demurrer

 

In demurring to the complaint, State Farm relies principally upon Rattan v. United Services Automobile Association (2000) 84 Cal.App.4th 715, 717 (“Rattan”), in which the appellate court began its opinion by explaining: “No doubt for their own convenience and as a means of limiting their claims costs, but also as a way of assisting their insureds, many homeowner insurers recommend and guarantee the work of particular general contractors or other professionals needed to perform repair work following covered losses. In such cases when a contractor or other professional fails to perform adequately, the contractor’s or professional’s conduct alone will not support a tort claim against the insurer.”

 

In Rattan, USAA insured the Rattans’ home against loss.  The Rattans’ home suffered damage in a fire.  USAA recommended one of its preferred contractors, Baker Pacific, to perform structural repairs.  USAA agreed to guarantee the work of its preferred contractor.  Baker Pacific’s performance was defective in a number of respects.  Thereafter, USAA retained another contractor to complete the repairs.  Upon returning home, the Rattans discovered a number of electrical problems, defects related to the work performed by Baker Pacific.  At USAA expense, those defects were remedied.  Apart from the structural damage to their home, the Rattans hired Servpro and Reiter Mosier (RM) to remove and store their personal belongings while their home was being repaired.  The Rattans later discovered that property not damaged in the fire had been damaged by improper cleaning, storing, and packing.

 

The Rattans filed a complaint against USAA for breach of contract and breach of the covenant of good faith and fair dealing.  At trial, the Rattans sought to hold USAA liable on the theory that Baker Pacific, Servpro, and RM were agents of USAA.  The trial court refused to issue a jury instruction on agency.  The appellate court affirmed this ruling.

 

In addition to the insurance policy and its special obligations, following the fire USAA entered into three other contracts with the Rattans.  In particular, the record reflects that USAA guaranteed the work of both Baker Pacific and Servpro.  USAA also warranted the restoration work of RM.  However, these guarantees were not themselves contracts of insurance or part of the insurance policy USAA had issued to the Rattans.  Rather, the fairly limited record of what USAA promised by way of its preferred contractor program [footnote] suggests at most that USAA undertook only to cure defects in the contractors’ workmanship, as opposed to provide compensation for all the potential consequential damage that might have been caused by faulty workmanship.  Protection for all consequential damage caused by the contractors would in effect have made USAA not the Rattans’ insurer, but the liability insurer for the contractors.  There is no evidence in the record which suggests that USAA undertook such a broad responsibility for its preferred contractors or that the Rattans understood that USAA would act as the contractors’ liability insurer.

 

(Rattan, supra, 84 Cal.App.4th at p. 722.)

 

Here, however, Rattan is not dispositive because Plaintiff’s allegations regarding breach of contract are not limited to the conduct of ServiceMaster.  For example, at paragraph 10 of the complaint, Plaintiff alleges the Policy insured the “loss of use” of property and “provided other insurance benefits.”  Plaintiff alleges at paragraph 24 of the complaint, State Farm “unreasonably terminated the payment of, and refused to pay for, temporary housing.”  The breach of contract cause of action incorporates these general allegations and also alleges, at paragraph 28, that State Farm “refuse[s] and continue[s] to refuse, to pay all available benefits [including] … additional living expenses.”  These allegations are sufficient to support a breach of contract against State Farm for its own actions, not those of ServiceMaster.  Since a defendant cannot demur to a portion of a cause of action, State Farm’s demurrer to the first cause of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for breach of contract is OVERRULED.  (See Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764, 778—“[A] defendant cannot demur generally to part of a cause of action;” see also PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682—“A demurrer does not lie to a portion of a cause of action.”)

 

State Farm demurs to the third cause of action for breach of implied covenant of good faith and fair dealing by arguing that such a claim cannot exist without an underlying breach of the insurance contract itself.  (See Love v. Fire Insurance Exchange (1990) 221 Cal.App.3d 1136.)  In light of the discussion and ruling above, State Farm’s demurrer to the third cause of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for breach of implied covenant of good faith and fair dealing is OVERRULED.

 

In demurring to the second and seventh causes of action for declaratory relief, State Farm essentially repeats its earlier arguments.  For the same reasons discussed above, State Farm’s demurrer to the second and seventh causes of action on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for declaratory relief is OVERRULED.