Case Number: BC719476 Hearing Date: September 19, 2019 Dept: 26

Superior Court of California
County of Los Angeles
Department 26

OGANES SEPUHYAN,

Plaintiff,

vs.

CSE INSURANCE GROUP et al.,

Defendants.

Case No.: BC719476

Hearing Date: September 19, 2019

[TENTATIVE] order RE:

defendanT’S Demurrer to the complaint and MOTION TO STRIKE PORTIONS OF THE COMPLAINT

Background

Introduction

Oganes Sepuhyan (Plaintiff) sues CSE Safeguard Insurance Company[1] (Defendant) for damages arising from failure to pay Plaintiff’s claimed physical damage to his home under Defendant’s homeowner insurance policy (Policy) after the La Tuna brush fires damaged Plaintiff’s home and personal property in September 2017.

Factual Background

Plaintiff alleges that, after conducting a walkthrough at his house on October 13, 2017 with Defendant’s adjuster, Plaintiff received a letter from Defendant in December 2017 in which Defendant estimated Plaintiff’s damages but referenced a different insured, property, claim, and location. (Complaint ¶¶ 11, 13.) After receiving that letter, Plaintiff contacted Defendant to address the error, find out the results of the adjustor’s report for his property, and seek payment on his claim. (Id. ¶ 14.) Although Plaintiff continued to contact Defendant, Defendant never responded, never provided a corrected adjustor’s report, and never paid Plaintiff’s claim. (Id. at ¶ 15.)

Procedural History

On August 28, 2018, Plaintiff filed a complaint asserting causes of action against Defendant and Does 1 through 50 for (1) breach of insurance contract and (2) breach of the implied covenant of good faith and fair dealing.

On May 28, 2019, Defendant filed its demurrer to Plaintiff’s complaint for insufficient facts and uncertainty and motion to strike Plaintiff’s prayer for punitive damages and related allegations. On September 5, 2019, Plaintiff filed his oppositions. On September 12, 2019, Defendant filed its replies.

LEGAL STANDARD

Meet and Confer Requirement

Code of Civil Procedure section 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due. (Id. § 430.41, subd. (a)(2).) The demurring party must also file and serve a declaration detailing the meet and confer efforts. (Id., subd. (a)(3).) A similar meet and confer process and declaration is required for motions to strike. (Id., § 435.5.)

Automatic Extension of Time to File a Responsive Pleading

If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer. The 30-day extension shall commence from the date the responsive pleading was previously due, and the demurring party shall not be subject to default during the period of the extension. Any further extensions shall be obtained by court order upon a showing of good cause. (Id., § 430.41, subd. (a)(2).)

Demurrer Standard

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) No other extrinsic evidence can be considered.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water & Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at p. 747.)

A special demurrer for uncertainty under Code of Civil Procedure section 430.10, subdivision (f) is disfavored and will only be sustained where the pleading is so bad that defendant or plaintiff cannot reasonably respond because it cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616 (Khoury).) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

Motion to Strike Standard

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436, subd. (b).)

DISCUSSION

Meet and Confer Requirement

Defendant’s counsel asserts that he was unable to meet and confer with Plaintiff’s counsel prior to the deadline to file a responsive pleading and was forced to request a 30-day extension. (Mountain Decl., ¶ 4, Exh. A.) Defendant’s counsel further states that in April 2019, he attempted to reach Plaintiff’s counsel several times. Eventually, he left Plaintiff’s counsel a voicemail message and sent a follow-up email requesting to meet and confer on the issues he planned to raise in Defendant’s demurrer and motion to strike. (Id. at ¶ 6.) Although Defendant’s counsel was unable to meet and confer with Plaintiff’s counsel, he attempted to reach Plaintiff’s counsel telephonically. Thus, Defendant’s repeated attempts to meet and confer in compliance with Code of Civil Procedure sections 430.41 and 435.5 are sufficient. The Court considers the merits of Defendant’s demurrer and motion to strike as set forth below.

Demurrer Analysis

First Cause of Action – Breach of Insurance Contract

Defendant contends that the first cause of action fails to state facts sufficient to constitute a cause of action and is uncertain. Defendant further contends that it cannot be ascertained from the pleadings whether the contract is written, oral, or implied by conduct.

To allege a breach of contract, a plaintiff must plead the contract, plaintiff’s performance or excuse for non-performance, defendant’s breach, and damage to plaintiff therefrom. (Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913.) Further, the complaint must indicate on its face whether the contract is written, oral, or implied by conduct. (Otworth v. Southern Pacific Transportation Co. (1985) 166 Cal.App.3d 452, 458.) “If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference.” (Ibid.) Although a written contract is usually pled by alleging its making and attaching a copy which is incorporated by reference, a written contract can also be pled by alleging the making and the substance of the relevant terms. (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.) General allegations stating that a defendant violated a contract are insufficient, and instead, pleaders must state with certainty facts showing a breach. (Levy v. State Farm Mutual Automobile Ins. Co. (2007) 150 Cal.App.4th 1, 5-6.); Melican v. Regents of Univ. of Cal. (2007) 151 Cal.App.4th 168, 174.)

Here, Plaintiff alleges that Plaintiff procured a policy of homeowner’s insurance from Defendant bearing policy number CAH1083175 and that the Policy provided coverage for physical losses. (Complaint ¶ 6.) Plaintiff further alleges that the damage sustained to his home and personal property caused by the La Tuna brush fire were covered losses under the Policy. (Ibid.) Accordingly, Plaintiff presented claims for benefits to Defendant under the Policy, which Plaintiff alleges was in full force and effect at the time that the La Tuna brush fire damaged Plaintiff’s home and personal property in September 2017. (Id. at ¶¶ 6, 8.)

Plaintiff Alleges that the Contract Was Made in Writing

Plaintiff’s allegations that the Policy used standard forms which provided coverage for physical losses and that the Policy bore the number CAH1083175 demonstrate that the contract between Plaintiff and Defendant was written. (Complaint ¶ 6.) Further, the letter sent by Defendant in December 2017 is further evidence of a written contract between the parties. Thus, Plaintiff sufficiently alleges that the contract between the parties was written.

Plaintiff Sufficiently Alleges the Making of the Contract and the Substance of the Relevant Terms

Although Plaintiff does not attach the Policy or plead the terms of the Policy verbatim, he sufficiently alleges the making and the substance of the relevant terms of the Policy. Specifically, Plaintiff alleges that he entered into a contract with Defendant to provide coverage for prospective physical damage to his home located at 9739 Sombra Valley Drive, Shadow Hills, California, 91040. (Complaint ¶¶ 5-6.) Plaintiff further alleges that the Policy “used standard forms which provided coverage for physical losses,” was issued by Defendant “after conducting a detailed exterior and interior inspection of the property,” and was in effect at the time of the alleged loss in September 2017. (Id. at ¶¶ 6, 8.) Furthermore, Plaintiff alleges that Defendant’s agent advised Plaintiff “that any claim for damages sustained to his premises would be promptly and fairly inspected, adjusted and paid by Defendant.” (Id. at ¶ 7.) Thus, Plaintiff alleges the relevant terms of the contract.

Plaintiff Sufficiently Alleges Breach and Damages Under the Contract

Plaintiff alleges that following his submission of a claim for property damage to Defendant under the Policy, Defendant sent Plaintiff a letter in December 2017 with an estimate of damages that referenced the incorrect insured, property, claim, and location. (Complaint at ¶ 13.) From that point forward, Plaintiff alleges that Defendant did not respond to Plaintiff’s repeated requests for Defendant to address the error, obtain the results of the adjustor’s report on his property, and seek payment on his claim. (Id. at ¶ 14.) Plaintiff alleges that, although Plaintiff made a timely claim for benefits due under the Policy, Defendant has refused to pay Plaintiff his physical damage benefits. (Id. at ¶ 16.) Thus, Plaintiff alleges Defendant breached the Policy because it failed to pay Plaintiff under the Policy for the damage sustained to Plaintiff’s home and property caused by the La Tuna brush fire.

Thus, Defendant’s demurrer to Plaintiff’s first cause of action is overruled.

Second Cause of Action – Breach of the Implied Covenant of Good Faith and Fair Dealing

Defendant argues that Plaintiff does not plead sufficient facts because Plaintiff fails to specifically allege that (1) Defendant had a contractual obligation to pay Plaintiff under the Policy, (2) Defendant withheld benefits owed to Plaintiff under the Policy, or (3) Defendant’s reason for withholding benefits was unreasonable and without proper cause. Defendant contends that Plaintiff fails to state a viable cause of action for breach of contract, and Plaintiff’s factual allegations do not sufficiently plead that Defendant acted in bad faith.

The law implies a covenant of good faith and fair dealing in every contract, including insurance policies. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720.) The obligations imposed by the implied covenant are imposed by law to govern the manner in which the express contractual obligations must be discharged: fairly and in good faith. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573.)

“[T]he essence of the implied covenant of good faith and fair dealing is that ‘[t]he [insurer] must refrain from doing anything that will injure the right of the insured to receive the benefits of the [insurance] agreement, the terms and conditions of which define the duties and performance to which the insured is entitled.” (Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1514¿1515.) The two requirements for a breach of the implied covenant are that (1) benefits due under the policy must have been withheld, and (2) the reason for withholding benefits must have been unreasonable or without proper cause. (Id. at p. 1515.) Breach of a specific provision of the insurance contract is not a necessary prerequisite to bringing a bad faith claim. (Carson v. Mercury Ins. Co. (2012) 210 Cal.App.4th 409, 429.) Nor is it necessary that the breaching party’s conduct be dishonest so long as improper claims handling causes detriment to the insured. (Ibid.) In short, breach of the implied covenant of good faith and fair dealing is an implied-in-law term of any contract, and its breach will necessarily result in a breach of the contract. (Archdale v. American International Specialty Lines Ins. Co. (2007) 154 Cal.App.4th 449, 468.)

Here, as set forth above, Plaintiff alleges that (1) he made a claim to Defendant under the Policy for damages sustained to his home in the La Tuna brush fire in September 2017 (Complaint ¶¶ 8, 10, 16); (2) Defendant has not paid Plaintiff benefits due under the policy (id. at ¶¶ 15-16); (3) Defendant sent him a letter in December 2017 with an incorrect estimate of damages that referenced a different insured, property, claim, and location (id. at ¶ 13); and (4) Defendant failed to rectify its mistakes despite Plaintiff’s repeated attempts to contact Defendant to address the error, find out the results of the adjustor’s report for his property, and seek payment on his claim. (Id. at ¶ 14.) Plaintiff further alleges that Defendant’s refusal to pay Plaintiff’s claim was “improper, unreasonable, reckless and incompetent” and that Defendant engaged in deceptive practices. (Id. at ¶¶ 39, 43.) These allegations demonstrate bad faith because Defendant failed to justify its refusal to pay full benefits and failed to even properly identify Plaintiff and his property.

Thus, the Court overrules Defendant’s demurrer to Plaintiff’s second cause of action.

Motion to Strike

Defendant moves to strike Plaintiff’s prayer for punitive damages and related allegations on the ground that Plaintiff’s allegations are insufficient to support any award of punitive damages.

Punitive Damages Are Available Under Plaintiff’s Tort Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

To succeed on a motion to strike punitive damages allegations, it must be said as a matter of law that the alleged behavior was not so vile, base, or contemptible that it would not be looked down upon and despised by ordinary decent people. (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1228-1229.)

Civil Code section 3294 provides punitive damages are available in non-contract actions where the defendant is guilty of malice, oppression, or fraud, defined as follows:

(c) As used in this section, the following definitions shall apply:

(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.

A demand for punitive damages for the commission of any tort requires more than conclusory allegations, such as allegations that the defendant’s conduct is “intentional, willful and fraudulent.” (Brosseau v. Jarrett (1977) 73 Cal.App.3d 864.) The allegations of fact must, in their totality, describe a state of mind and a motive that would sustain an award of punitive damages. (Perkins v. Superior Court (1981) 117 Cal.App.3d 1, 6-7.) The mere allegation that an intentional tort is committed is insufficient to warrant an award of punitive damages. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166.) Not only must there be circumstances of oppression, fraud, or malice, but facts must be alleged in the pleading to support such a claim. (Ibid.)

The availability of tort damages is the primary reason for proceeding in tort against an insurer in a bad faith action. (Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 462.) Further, because punitive damages are not authorized in contract actions, where both contract and tort damages are sought in insurance claims for breach of the implied covenant of good faith and fair dealing, punitive damages are only available for the tort cause of action. (See Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1224.) “In particular, unlike other contractual relationships, an insurance contract permits an insured to recover tort damages when in bad faith the benefits of an insurance contract have been deprived.” (Rattan v. United Services Auto. Association (2000) 84 Cal.App.4th 715, 721.)

Here, Plaintiff alleges that Defendant knowingly avoided its obligations to pay him benefits pursuant to the Policy by relying on erroneous information about Plaintiff’s identity and Plaintiff’s property as set forth above. (Complaint ¶¶ 13-14.) Thus, Plaintiff alleges that Defendant acted in conscious disregard of Plaintiff’s rights under the Policy.

Accordingly, Defendant’s motion to strike Plaintiff’s prayer for punitive damages and related allegations is denied.

Conclusion and ORDER

Defendant’s demurrer to Plaintiff’s complaint is overruled in its entirety. Defendant’s motion to strike Plaintiff’s prayer for punitive damages and related allegations is denied in its entirety.

Defendant is to file an answer within 10 days.

Defendant is to give notice and file proof of service of such.

DATED: September 19, 2019 ___________________________

Elaine Lu

Judge of the Superior Court

[1] Erroneously sued as CSE Insurance Group