Case Name: Kei Jung Ning, et al. v. Fire Insurance Exchange, et al.
Case No.: 2015-1-CV-277603

Motion to Strike Portions of the Second Amended Complaint by Defendant Fire Insurance Exchange

Factual and Procedural Background

This is an insurance case. Plaintiffs Kei Jung Ning and Li Juan Liu (collectively, “Plaintiffs”) own a home located at 20409 Via Palamos in Cupertino, California. (Second Amended Complaint [“SAC”] at ¶ 1.) Plaintiffs were insured under a written policy of insurance (“Policy”) issued by, through and/or on behalf of defendant Fire Insurance Exchange (“FIE”) for the real and personal property owned by Plaintiffs. (Ibid.) The Policy was in full force and effect when Plaintiffs’ residence and personal property were damaged or destroyed by two separate water losses. (Id. at ¶ 2.) The first loss occurred on September 11, 2010 and the other loss occurred on September 18, 2011. (Ibid.) The damage caused by the two water losses giving rise to Plaintiffs’ claims is covered under the Policy. (Id. at ¶ 13.)

On September 20, 2010, defendants FIE, Fire Underwriter’s Association, and Farmer’s Group, Inc. (collectively, “Insurance Defendants”) communicated to Plaintiffs that the water damage to their home had been remediated and Plaintiffs should begin the process of repair. (SAC at ¶ 19.) Plaintiffs had no knowledge that the remediation was poorly done. (Ibid.) Unknown to Plaintiffs, Insurance Defendants had low-balled the claim such that numerous portions of the home remained contaminated. (Ibid.) In fact, the Insurance Defendants provided lowball estimates or inadequate funds for almost all aspects of construction. (Id. at ¶ 21.) In addition, Insurance Defendants failed to obtain any clearance testing to determine whether the home constituted a habitable living environment. (Id. at ¶ 19.) Insurance Defendants knew or should have known that due to the contamination in the home it was not safe for Plaintiffs to be in the home to interview contractors or begin the repair process. (Ibid.) Nonetheless, the Insurance Defendants falsely advised Plaintiffs, after September 20, 2010, that they may safely return to their home. (Ibid.)

Accordingly, after September 20, 2010, Plaintiffs came home every day to interview contractors and generally start the repair process. (SAC at ¶ 20.) Plaintiffs however became highly ill, with symptoms that included skin rashes all over the bodies, open sores, giant blistering, joint pain, and swelling. (Ibid.) They also suffered respiratory illness and severe abdominal pain. (Ibid.) All of these medical issues were caused in whole or in part by the fact that Plaintiffs’ home had not been properly cleaned. (Ibid.) These medical conditions continued over a period of years due to conditions in the home. (Ibid.)

In September 2011, Plaintiffs’ home suffered from another catastrophic water leak related to a Jacuzzi. (SAC at ¶ 23.) Similar to the first claim, the Insurance Defendants failed to adequately cover this loss. (Ibid.) Also, even as to those funds that the Insurance Defendants were willing to advance, they unreasonably took many months before approving funds and actually making payment. (Ibid.) During this time, as Insurance Defendants knew, both Plaintiffs were severely ill. (Ibid.) Nonetheless, the Insurance Defendants continued to treat its insureds callously and unfairly. (Ibid.)

On December 18, 2017, Plaintiffs filed the operative SAC asserting causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.

Motion to Strike Portions of the SAC

Currently before the Court is defendant FIE’s motion to strike the following portions of the SAC alleging punitive damages: (1) page 12, paragraph 38, lines 4-14; (2) page 12, line 22 to page 13, line 2; and (3) page 13, line 8, prayer item no. 2. (See Code Civ. Proc., §§ 435, 436.) Plaintiffs filed written opposition. FIE filed reply papers.

Meet and Confer Requirement

As a preliminary matter, the Court notes that FIE did not meet and confer before filing the motion to strike.

Before filing a motion to strike, the moving party shall “meet and confer in person or by telephone” with the opposing party to determine “whether an agreement can be reached that resolves the objections to be raised in the motion to strike.” (Code Civ. Proc., § 435.5, subd. (a).) This conference should occur at least five days before the deadline to file the motion to strike. (Code Civ. Proc., § 435.5, subd. (a)(2).)

When filing the motion to strike, the moving party must include a declaration stating either “the means by which the moving party met and conferred with [the other party] and that the parties did not reach an agreement resolving the objections raised by the motion to strike” or [the other party] “failed to respond to the meet and confer request of the moving party or otherwise failed to meet and confer in good faith.” (Code Civ. Proc., § 435.5, subd. (a)(3).) “A determination by the court that the meet and confer process was insufficient is not grounds to grant or deny the motion to strike. (Code Civ. Proc., § 435.5, subd. (a)(4).)

Defendant FIE failed to file a meet and confer declaration as required by Code of Civil Procedure section 435.5. Nor is there any indication in the moving papers that FIE engaged in any meet and confer efforts before filing the motion to strike. In furtherance of judicial economy, the Court will overlook defendant FIE’s failure to comply with Code of Civil Procedure section 435.5 in this instance. The Court hereby admonishes defendant FIE and its counsel to comply with the Code of Civil Procedure with respect to future filings.
Legal Standard

A court may strike out any irrelevant, false, or improper matter asserted in a pleading. (Code Civ. Proc., § 436, subd. (a).) A court may also strike out all or any part of a pleading not filed in conformity with the laws of the State of California. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

Punitive Damages Allegations

“In order to state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code section 3294. These statutory elements include allegations that the defendant has been guilty of oppression, fraud, or malice. ‘Malice’ is defined in the statute as conduct ‘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.’ ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. ‘Fraud’ is ‘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.’” (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63 [internal citations omitted].)

Furthermore, “a breach of fiduciary duty alone without malice, fraud or oppression does not permit an award of punitive damages. The wrongdoer must act with the intent to vex, injure, or annoy, or with a conscious disregard of the plaintiff’s rights. Punitive damages are appropriate if the defendant’s acts are reprehensible, fraudulent or in blatant violation of law or policy. The mere carelessness or ignorance of the defendant does not justify the imposition of punitive damages…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.” (Flyer’s Body Shop Profit Sharing Plan v. Ticor Title Ins. Co. (1986) 185 Cal.App.3d 1149, 1154 [internal citations and quotation marks omitted]; Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.)

“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.” (See Monge v. Superior Court (1986) 176 Cal.App.3d 503, 510 (Monge).)

Here, Plaintiffs seek an award of punitive damages in connection with their claim for breach of the implied covenant of good faith and fair dealing. (See Fleming v. Safeco Ins. Co. (1984) 160 Cal.App.3d 31, 44 [an insurer’s bad faith may not only breach the implied covenant of good faith and fair dealing but can also be treated for tort purposes as a basis for exemplary damages where it occurs in a context of malice, fraud, or oppression].) The crux of this claim is summarized in paragraph 34 of the SAC which provides:

“Defendants breached their duty of good faith and fair dealing owed to plaintiffs by failing to investigate and adjust the claims fairly. Defendants failed to consider plaintiffs interests as much as their own interests and were only looking to underpay the claims. The wrongful conduct was intended to compel plaintiffs to institute litigation to recover the benefits due under the Policy.”

(SAC at ¶ 34.)

Defendant FIE argues the second cause of action alleges only boilerplate conclusions of malice, oppression, and fraud thus failing to provide a basis for punitive damages. (See SAC at ¶¶ 38-39; see also Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042 [punitive damages claim is inadequate where it is devoid of any factual assertions supporting a conclusion that party acted with oppression, fraud or malice].) For example, paragraph 39 alleges that “Defendants participated in the above conduct intentionally, maliciously, oppressively, fraudulently, and subject Plaintiffs to cruel and unjust hardships in conscious disregard of their rights, safety, financial and emotional circumstances.” (Id. at ¶ 39.) By itself, such an allegation would be insufficient to support punitive damages. The Court however must consider this allegation in the context of other facts in deciding whether there is adequate support for punitive damages. (See Monge, supra, 176 Cal.App.3d at p. 510.)

According to the SAC, Plaintiffs allege FIE and other defendants intentionally delayed payment of benefits in order to frustrate Plaintiffs and get them to drop the claims. (Id. at ¶ 38.) Plaintiffs also allege FIE stonewalled and/or misrepresented the claim with the expectation that Plaintiffs would be unwilling to file suit. (Ibid.) Finally, there are allegations that FIE attempted to mislead Plaintiffs in order to prevent them from recovering benefits due under the insurance contracts. (Id. at ¶ 35, subd. (L).) Such allegations involve something beyond mere carelessness or ignorance. Indeed, these allegations in part support a finding of malice as FIE’s actions may be construed as intending to vex or annoy Plaintiffs. (See Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 462 [to be liable for exemplary damages, a defendant must act with the intent to vex, injure or annoy, or with a conscious disregard of the plaintiff’s rights].) In addition, such allegations may support fraud as FIE, by misrepresenting the claim, intended to deprive Plaintiffs of benefits under the insurance contracts. It remains to be seen if Plaintiffs will ultimately prevail on their case and recover an award for punitive damages. However, at least for pleading purposes, the Court is satisfied that sufficient underlying facts have been pled to support a basis for punitive damages.

Consequently, the motion to strike portions of the SAC is DENIED.

The Court will prepare the order.