Case Name:   Jonathan Cobb and Lois Cobb v. Rachel Bushner, et al.       

 

Case No.:       1-14-CV-265974

 

The Demurrer to the First Amended Complaint by defendant Safeco Insurance Company of America     

 

Factual and Procedural Background

 

This is a motor vehicle accident case.  On June 4, 2012, at approximately 11:00 a.m., Plaintiffs were driving southbound on Alma Street in Palo Alto, California.   Plaintiffs were in the third vehicle in a line of cars that had come to a complete stop at a red traffic light near the intersection of Alma and Meadow.  Shortly thereafter, defendant Rachel Bushner carelessly and negligently struck the rear of Plaintiffs’ vehicle causing them to suffer injuries.

 

On June 2, 2014, Plaintiffs (self-represented) filed a judicial council form complaint against Bushner and defendant Safeco Insurance Company of America alleging the following causes of action: (1) motor vehicle negligence; (2) negligence; and (3) fraud.

 

On July 25, 2014, Safeco filed a demurrer to the complaint for failure to state a cause of action.  (Code Civ. Proc. § 430.10, subd. (e).)  The motion was set for hearing on August 28, 2014.  On that day, the court adopted its tentative ruling and sustained the demurrer with 10 days’ leave to amend.

 

On September 8, 2014, Plaintiffs filed a judicial council form first amended complaint (“FAC”) alleging causes of action for: (1) motor vehicle negligence [against Bushner and Safeco]; (2) negligence [against Bushner]; (3) breach of the covenant of good faith and fair dealing [against Safeco]; and (4) fraud [against Safeco].

 

Demurrer to the FAC

 

On demurrer, Safeco argues that the third and fourth causes of action fail to state a claim for relief.

 

1. Legal Standard

 

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules.  ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.  We also consider matters which may be judicially noticed.’”  (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)  “A demurrer tests only the legal sufficiency of the pleading.  It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.”  (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

 

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded.  The court does not, however, assume the truth of contentions, deductions or conclusions of law.  …  [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory.  And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.”  (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4^th 845, 850.)

 

2. Third Cause of Action: Breach of the Covenant of Good Faith and Fair Dealing

 

“Breach of the covenant of good faith and fair dealing exposes an insurer to breach of contract and tort damages.  But a breach of an insurance contract does not automatically subject an insurer to tort damages for bad faith.  An insurer’s tortious breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself.  In simple terms, an insurer’s tortious bad faith conduct is conduct that is unreasonable.”  (Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4^th 498, 528-529 [internal citations and quotation marks omitted].)

 

“Generally, an insurer may not be joined as a party-defendant in the underlying action against the insured by the injured third party.  The fact that an insurer has agreed to indemnify the insured for any judgment rendered in the action does not make the insurer a proper party.  Liability insurance is not a contract for the benefit of the injured party so as to allow it to sue the insurer directly.”  (Royal Surplus Lines Ins. Co. v. Ranger Ins. Co. (2002) 100 Cal.App.4^th 193, 200.)

 

Here, Plaintiffs are attempting to directly sue Safeco, the insurer, for compensation of their injuries along with Bushner, the insured.  However, Plaintiffs are not in contractual privity with Safeco and thus cannot sue defendant for breach of the covenant of good faith and fair dealing.  (See Royal Indem. Co. v. United Enterprises, Inc. (2008) 162 Cal.App.4^th 194, 211 [third party claimant lacked standing to intervene in coverage litigation between insurer and insured].)  There are exceptions to the general rule, such as where the insured assigns to a third party claimant its contract and tort claims against the insurer for failure to defend or indemnify the insured against the third party’s claims.  (Id. at p. 205.)  “Another recognized exception to the limitations on standing of a third party claimant against insurer is found: Where ‘the liability insurance also provides medical payments coverage for anyone injured by the insured, the injured party may have a direct claim against the insurer for his or her medical expenses.  I.e., the injured party is treated as an additional insured as to the medical payments coverage.”  (Id. at p. 206.)  None of these exceptions are apparent on the face of this pleading.

 

Therefore, Safeco’s demurrer to the third cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state a claim.

 

3. Fourth Cause of Action: Fraud

 

“The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.”  (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4^th 780, 792 [citation omitted].)

 

Here, Plaintiffs’ fraud claim is identical to their third cause of action for breach of the covenant of good faith and fair dealing.  Thus, for the reasons stated above, Plaintiffs fail to state a valid fraud claim.  Furthermore, to the extent that any misrepresentations were made, Plaintiffs fail to allege any detrimental reliance on such statements.  (See Mirkin v. Wasserman (1993) 5 Cal.4^th 1082, 1088 [it is settled that a plaintiff, to state a cause of action for deceit based on a misrepresentation, must plead that he or she actually relied on the misrepresentation]; Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4^th 951, 976 [actual reliance occurs when a misrepresentation is an immediate cause of a plaintiff’s conduct which alters his legal relations].)

 

Therefore, Safeco’s demurrer to the fourth cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state a claim.