Case Number: BC520829 Hearing Date: May 08, 2014 Dept: 34

Moving Party: Defendant Geico Casualty Companty (“defendant”)

Resp. Party: Plaintiff Charles Hunter Coates III (“plaintiff”)

Defendant’s demurrer to the complaint is OVERRULED.

Defendant’s motion to strike plaintiff’s request for punitive damages is DENIED. Defendant’s motion to strike plaintiff’s request for restitution for the unfair business practices cause of action is GRANTED.

The Court takes judicial notice of the existence of the items requested by defendant. (See Evid. Code, § 452(d), (h).) However, the Court declines to take judicial notice of the truth of the statements made therein. (See Day v. Sharp (1975) 50 Cal.App.3d 904, 914; Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1565.)

BACKGROUND:

Plaintiff commenced this action on 9/9/13 against defendant for: (1) breach of insurance contract; (2) bad faith breach of implied covenant of good faith and fair dealing; and (3) unfair business practices. Plaintiff alleges he was insured under defendant’s automobile policies during the relevant time periods. (Compl., ¶ 6.) Plaintiff alleges that, between 7/23/11 and 8/1/11, a vehicle covered under the policy was taken without permission. (Id., ¶ 8.) The vehicle was reported stolen to the LAPD. (Ibid.) On 11/4/11, the vehicle was located by authorities and impounded. (Ibid.) On 11/17/11, the vehicle was again wrongfully taken from the police impound yard. (Ibid.) Plaintiff has been deprived of the vehicle since it was first taken. (Ibid.) Plaintiff alleges that on 9/25/12, defendants denied plaintiff’s claim for the loss of the vehicle. (Id., ¶ 10.)

ANALYSIS:
Demurrer

Defendant demurs to the entire complaint on the ground that it fails to state sufficient facts to constitute a cause of action. Though the demurrer states that defendant separately demurs to the third cause of action, the memorandum suggests that this demurrer is to the second cause of action. (See Memo., pp. 1, 6-7.)

Defendant first argues that the claims fail because the policy only covers theft or larceny, and there was no theft or larceny of the vehicle. The policy states that defendant will pay for losses caused by theft or larceny, but it does not define these terms. (See Compl., Exh. 1, p. 8.) The Penal Code provides a definition for larceny and theft:

Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, or who causes or procures others to report falsely of his or her wealth or mercantile character and by thus imposing upon any person, obtains credit and thereby fraudulently gets or obtains possession of money, or property or obtains the labor or service of another, is guilty of theft.

(Pen. Code, § 484(a).) “[A] claim of right to take disputed property negates the criminal intent necessary for theft. [Citation.] Section 511 of the Penal Code codifies this principle, providing that a claim of right vitiates criminal charges where ‘the property was appropriated openly and avowedly, and under a claim of title preferred in good faith, even though such claim is untenable.’ [Citation.]” (Barnett v. State Farm General Ins. Co. (2011) 200 Cal.App.4th 536, 544-545.)

Defendant argues that plaintiff’s claims do not fall within the policy or are excluded because they do not constitute a theft and/or that exclusions apply. Defendant expects that Chaka Grossman, the person who may currently possess the car, will testify that he had a lien interest in the car because of fees owed to him by plaintiff. This argument is not well; the Grossman so testifies, this argument will be better suited for a motion for summary judgment. A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. (Code Civ. Proc. § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) At no point does Plaintiff allege any facts establishing that Grossman had a lien or any other interest in the vehicle.

Defendant primarily relies on the content of the judicially noticed exhibits. As stated above, the Court declines to take judicial notice of the statements made in these exhibits. Even if the Court were to take judicial notice of the statements, they would not support defendant’s arguments. It does not appear that plaintiff, at any point in these documents, makes any assertion about a fee dispute with Grossman or otherwise indicates that Grossman may have an interest in the vehicle. (See Def. Exh. A.) Instead, plaintiff clearly asserted that Grossman wrongfully took the vehicle. (See, e.g., id., pp. 5, 7, 8, 9, 13, 14, 25 [the Court only refers to the last numbers in the bates stamped pages].) The fact that defendant “expects” Grossman to testify that he had an interest in the vehicle is not enough, at the demurrer stage, to show that plaintiff’s claims fail.

Defendant alternatively argues that plaintiff has not alleged sufficient facts to support a claim for breach of the covenant of good faith and fair dealing. “[W]hen an insurer ‘fails to deal fairly and in good faith with its insured by refusing, without proper cause, to compensate its insured for a loss covered by the policy, such conduct may give rise to a cause of action in tort for breach of an implied covenant of good faith and fair dealing.’ [Citation.]” (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 920.) “ ‘[T]he ultimate test of [bad faith] liability in the first party cases is whether the refusal to pay policy benefits was unreasonable.’ [Citation.] ‘[B]efore an [insurer] can be found to have acted tortiously, i.e., in bad faith, in refusing to bestow policy benefits, it must have done so “without proper cause.” ’ [Citation.]” (Morris v. Paul Revere Life Ins. Co. (2003) 109 Cal.App.4th 966, 973.) If an investigation would have disclosed information which would render the insurer’s doubts unreasonable, the insurer may be liable for breach of the covenant of good faith and fair dealing by failing to investigate, regardless of whether the insurer honestly harbored doubts. (See Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720-721.)

Plaintiff alleges that defendant “knew or in the exercise of good faith reasonably should have known” that plaintiff was entitled to recover the loss of the vehicle and loss of its use under the insurance policy. (Compl., ¶ 14.) Plaintiff alleges that defendant failed to conduct a reasonable investigation and failed to provide an understandable explanation for its actions. (Ibid.) This is sufficient to allege that defendant acted in bad faith. The Court rejects defendant’s arguments as to Grossman for the reasons stated above.

Because the first two causes of survive demurrer, so does the third cause of action for violation of the UCL.

Defendant’s demurrer to plaintiff’s complaint is OVERRULED.

Motion to Strike

Defendant seeks to strike plaintiff’s request for punitive damages and the request for restitution under the third cause of action.

Punitive damages

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

[¶] (1) ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. [¶] (2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. [¶] (3) ‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

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

Plaintiff alleges that defendant is liable for the tort of bad faith breach of the implied covenant of good faith and fair dealing. Plaintiff alleges that defendant knew or should have known that plaintiff was entitled to recover the vehicle, and that defendant failed to conduct a reasonable investigation into plaintiff’s claim. (Compl., ¶ 14.) Plaintiff alleges that defendant engaged in conduct for the sole purpose of denying plaintiff the benefits under the insurance contract. (Id., ¶ 15.) These allegations are sufficient to allege that defendant engaged in despicable conduct with willful and conscious disregard for plaintiff’s rights.

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

Restitution

Defendant is correct that section 17200 is equitable in nature and that damages may not be awarded. (See Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144.) “[U]nder the UCL, ‘[p]revailing plaintiffs are generally limited to injunctive relief and restitution.’ [Citation.]” (Ibid.) “[A]n order for restitution is one ‘compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person.’ [Citation.] The object of restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Id. at p. 1149.)

Plaintiff does not seriously contest this in his opposition. (See Opp., p. 3:10-16.) Plaintiff does not appear to be seeking restitution of money obtained by defendant through its alleged unfair business practices. Instead, plaintiff is seeking payment for his claim.

Accordingly, defendant’s motion to strike plaintiff’s request for restitution is GRANTED.

Defendant to answer within 10 days.