Case Number: BC531703    Hearing Date: November 07, 2014    Dept: 32

CASE NAME: Jack Farahi v Travelers Commercial Insurance Co, et al.
CASE NO.: BC531703
HEARING DATE: 11/07/14
DEPARTMENT: 32
SUBJECT: (1) Demurrer to Complaint
(2) Motion to Strike
MOVING PARTY: (1), (2) Defendant Eric Kongsli
RESP. PARTY: (1), (2) Plaintiff Jack Farahi

TENTATIVE RULING

Demurrer to Complaint

Fourth Cause of Action (Violation of B & P Code Sec 17200) SUSTAINED WITH 20 DAYS LEAVE TO AMEND.

Motion to Strike MOOT.

ANALYSIS

Demurrer

Defendant demurs to the fourth cause of action for unfair business practices for failure to state a claim.

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action stated therein. (CCP § 430.50(a).) A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff’s ability to prove those allegations. (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal.App.4th 726, 732.) The court must treat as true all of the complaint’s material factual allegations, but not contentions, deductions or conclusions of fact or law. (Id. at 732-33.) The complaint is to be construed liberally to determine whether a cause of action has been stated. (Id. at 733.)

Violations of Insurance Code § 790.03

Defendant contends that the UCL claim is improperly based on violations of California Insurance Code §790.03 and its attendant regulations. Defendant contends, citing Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, that it is well established that California law does not permit a private cause of action against an insurer for alleged claim handling violations pursuant to § 790.03.

Moradi–Shalal held the Unfair Insurance Practices Act (Ins.Code, § 790 et seq.; UIPA) does not create a private cause of action against insurers who violate its provisions. Therefore, the California Supreme Court has indicated that a party cannot plead around this limitation by relying on conduct that violates only the UIPA to state a UCL claim. (See Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 283.)

In Yanting Zhang v. Superior Court (2013) 57 Cal.4th 364, the California Supreme Court held that “when the Legislature enacted the UIPA, it contemplated only administrative enforcement by the Insurance Commissioner. Private UIPA actions are absolutely barred; a litigant may not rely on the proscriptions of section 790.03 as the basis for a UCL claim. However, when insurers engage in conduct that violates both the UIPA and obligations imposed by other statutes or the common law, a UCL action may lie. The Legislature did not intend the UIPA to operate as a shield against any civil liability.” (Zhang at 384 [citations omitted].) Zhang also noted that “common law bad faith claims provide a viable basis for a UCL action.” (Id. at 381.)

In the Court’s ruling on Traveler’s demurrer on July 18, 2014, the Court noted that Defendant Traveler’s reliance on Moradi–Shalal was unpersuasive in light of Zhang. The fourth cause of action incorporates all prior allegations, including those that support the bad faith claim, and therefore is not based solely on a violation of the UIPA. (Compl. ¶ 31.) The UCL claim is derivative of the third cause of action for insurance bad faith, which is properly pleaded against Travelers.

However, although Kongsli is included in the general allegations in the complaint, the breach of contract and bad faith claims are not brought against Kongsli. From the face of the fourth cause of action, it appears that the UCL claim against Kongsli is based solely on violations of Insurance Code § 790.30 and its regulations. (Compl. ¶ 35.) Therefore, as presently pleaded, the fourth cause of action against Kongsli is barred by Moradi–Shalal.

Agent for Disclosed Principal

Defendant contends that, as an agent for Travelers, he cannot be liable for claims arising from breach of the insurance contract or bad faith.

“An adjuster is an agent hired by a principal, the insurer, to investigate a claim. Agents are not liable to third parties for economic loss.” (Sanchez v. Lindsey Morden Claims Services, Inc. (1999) 72 Cal.App.4th 249, 255.)

However, “an agent or employee is always liable for his or her own torts, whether the principal is liable or not, and in spite of the fact that the agent acts in accordance with the principal’s directions. [Citations.] [¶] Similarly, an agent who commits an independent tort, such as fraud, remains liable despite the fact that the principal, by ratification, also becomes liable.” (Bock v. Hansen (2014)
225 Cal.App.4th 215, 231 [holding that “a cause of action for negligent misrepresentation can lie against an insurance adjuster”].)

In his opposition, Plaintiff argues that “plaintiff alleges that Defendant Kongsli intentionally misrepresented and hid the facts from the Plaintiff to significantly underpay and undervalue the damage in his home. Furthermore, Kongsli negligently misrepresented to the Plaintiff the terms of the insurance contract and value of Plaintiffs loss.” (Oppo. 7.) However, Plaintiff does not cite any portions of the complaint alleging fraud or negligent misrepresentation, and the Court has found none.

Plaintiff argues that “Plaintiff has alleged sufficient facts to prove Kongsli failed to properly and fully investigate plaintiffs claim, failed to evaluated [sic] plaintiffs claim objectively, failed to advise plaintiff of all benefits, coverages, time limits and other provisions that might apply to plaintiffs claim under the policy, deliberately denied benefits, and failed to respond in writing.” (Oppo. 9.) Plaintiff has alleged some facts in the complaint along these lines. (Compl. ¶¶ 11-12.) However, these allegations all appear to relate to Kongsli’s adjustment of the claim as an agent for Travelers, and none can be categorized as an independent tort.

The demurrer to the fourth cause of action is SUSTAINED WITH LEAVE TO AMEND.

Based on the sustaining of the demurrer, the motion to strike is MOOT. However, for guidance of the Plaintiff should he amend the complaint, the court notes that paragraph 38 suggesting that Plaintiff seeks restitution on behalf of similarly situated persons would properly be stricken. Paragraph 38 alleges the following: “Plaintiff also seeks an Order restoring to all persons in interest any money or property which may have been acquired or withheld by Travelers by means of such unfair competition. This allegation is improper because Plaintiff does not seek to certify a class. (Yanting Zhang v. Superior Court (2013) 57 Cal.4th 364, 372.)