Defendant’s demurrer is overruled in its entirety.

First cause of action for declaratory relief

The court may refuse to exercise the power of declaratory judgment where its declaration or determination is not necessary or proper at the time under all the circumstances. (Code Civ. Proc., § 1061.)

Actions for declaratory relief fall within three possible categories: (1) those that must be dismissed by the trial court; (2) those in which dismissal would be an abuse of discretion; and (3) those in which the court has discretion to either provide relief or refuse to provide relief. (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 365 [“Osseous Technologies”].)

This case is not a “Type 1” case because Plaintiff seeks guidance with regard to his legal rights under the subject insurance policies and an actual controversy has arisen and is ripe, i.e. whether Defendant has a duty to defend. (See Osseous Technologies, supra, 191 Cal.App.4th at 365 [controversy ripe when “it has reached, but has not passed, the point that the facts have sufficiently congealed to permit an intelligent and useful decision to be made”].)

This case appears to be a “Type 2” case because Defendant is alleging a continuing contractual relationship with future consequences for the conduct of the relationship. (See Id. at 371.) In the insurance context, the duty to defend is a continuing duty that commences upon tender of the defense and continued until the underlying lawsuit is concluded. (Lambert v. Commonwealth Land Title Ins. Co. (1991) 53 Cal.3d 1072, 1079.) Here, the FAC alleges that the Monex action is ongoing. For this reason, the demurrer is overruled.

Even if this were a “Type 3” case, the court will exercise its discretion to consider the declaratory relief action. The Osseous Technologies court laid out three factors for determining whether to dismiss “Type 3” claim for declaratory relief: (1) whether an adequate remedy at law exists for the parties to resolve their dispute; (2) whether the parties’ ongoing relationship will be guided by declaratory relief; and (3) whether the timing of the declaratory relief action suggests litigation strategy motivated the filing rather than a concern that judicial guidance was needed and would not be that judicial guidance was needed and would not be (Osseous Technologies, 191 Cal.App.4th at 374-376.)

On balance the relevant factors weigh in favor of allowing the declaratory relief claim as alleged.

As to the first factor, Defendant correctly asserts that an adequate legal remedy forthcoming absent the filing of a declaratory relief action exists for Plaintiff to resolve this dispute. Where, as here, a declaratory relief claim is based exclusively on the past breach of a contract (denial of coverage), a cause of action for breach is an adequate legal remedy. (See Osseous Technologies, 191 Cal.App.4th at 375.)

As to the second factor, Plaintiff has the better argument. Because Defendant’s duty to defend is ongoing until the Monex action has been resolved, a judicial determination as to Defendant’s duty to defend will likely guide the parties’ future conduct. For example, if it is determined that there is a duty to defend, Plaintiff (and his counsel) would likely vigorously defend the Monex action knowing Defendant is responsible for the cost of defense, or Defendant may decide to defend the Monex action to control the costs of defense.

As to the third factor, there is no indication that the declaratory relief claim was filed for a reason of litigation strategy.

Third cause of action for breach of the implied covenant of good faith and fair dealing

For an insured to allege a breach of the implied covenant of good faith and fair dealing, the plaintiff insured “must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement. Just what conduct will meet these criteria must be determined on a case by case basis and will depend on the contractual purposes and reasonably justified expectations of the parties.” (Careau & Co. v. Sec. Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.)

Although barebones, the First Amended Complaint alleges that Defendant failed to conduct a reasonable and unbiased investigation into the claims made in the Monex action, and that Defendant failed to do so as part of its plan to withhold policy benefits. (See FAC, ¶ 29.) From this allegation, it can reasonably be inferred that Defendant deliberately and unreasonably failed to review relevant information to determine whether Plaintiff’s claims were covered under the subject policies. Whether this failure amounts to a mere breach of the insurance policies, negligence on Defendant’s part, or a deliberate refusal by Defendant to discharge its contractual responsibilities is a generally a question of fact. (See Chateau Chamberay Homeowners Ass’n v. Associated Int’l Ins. Co. (2001) 90 Cal.App.4th 335, 346 [“reasonableness of an insurer’s claims-handling conduct is ordinarily a question of fact”].)

The CMC will be continued for 90 days as it appears that the matter is not at issue.

Plaintiff is ordered to give notice.