2013-00153992-CU-BC

Tamara Watson vs. The Progressive Corporation

Nature of Proceeding: Hearing on Demurrer

Filed By: Brenneman, Eric R.

The demurrer of Defendant Progressive Choice Insurance Company (“Progressive
Choice”) is OVERRULED.

Overview

This is a coverage dispute that follows an October 2009 car accident involving a third-
party uninsured motorist. Plaintiff Tamara Watson (“Watson”) alleges that Progressive
Choice and other insurers wrongfully denied coverage and issued settlement offers
that were unreasonably low given the physical injuries. Progressive Choice extended
settlement offers that Watson rejected. In March 2011, Watson issued a demand for
$90,000, followed by a CCP § 998 offer for the amount of $37,500. Progressive
Choice rejected the demand and § 998 offer. In November 2012, the parties
conducted a binding arbitration pursuant to the Progressive Choice policy, and Watson
received an award of $72,579.14, $63,320.00 of which were damages associated with
the accident and $9,259.14 of which were costs awarded in light of the fact that the
award exceeded Watson’s § 998 offer. The arbitration award was within policy limits.

Watson’s current complaint contains two causes of action for tortious breach of
contract and breach of the implied covenant of good faith and fair dealing. Watson
alleges that Progressive Choice and other insurers unlawfully delayed and denied
insurance benefits, and that the delays and denials caused her damages, including
emotional distress damages. Progressive Choice demurs to both of Watson’s causes
of action on grounds that the allegations do not state a valid cause of action.

Discussion

Preliminarily, the court disregards Progressive Choice’s demurrers purportedly brought
on behalf of its co-defendants. Progressive Choice has no evident standing to bring
such demurrers, and the court will only address demurrers involving causes of action
against Progressive Choice. For this reason, and because the court may not consider
evidence on demurrer, the court disregards the Declaration of Kristin Charles
submitted with the moving papers.

The following paragraph from Progressive Choice’s Moving Memorandum of Points
and Authorities contains Progressive Choice’s essential arguments in support of its
demurrer:

An insurer’s delay in paying benefits owed under the policy is not
unreasonable where there is a genuine dispute as to the amount owed
under the policy. Wilson v. 2Is t Century Ins. Co. (2007) 42 Cal.4th 713,
723; Chateau Chamberay Homeowners Ass’n v. Associated Int’I Ins. Co.
(2001) 90 Cal.App.4th 335, 346-47. The existence of a genuine dispute
also excuses an insurer’s failure to accept its insured’s settlement offer
even if it turns out in retrospect that the insured’s offer was reasonable.
Rappaport-Scott, supra, 146 Cal.App.4th at pp. 837-38. See also
Croskey, Heeseman & Imre, CAL. PRAC. GUIDE: INSURANCE
LITIGATION (The Rutter Group 2013) at § 12:842.10. In an uninsured
motorist case, a genuine dispute is shown as a matter of law where the
amount awarded is less than that demanded by the claimant and inside
the policy limits. Rappaport-Scott, supra, at p. 839; Maynard v. State
Farm Mut. Auto Ins. Co. (C.D.Cal. 2007) 449 F.Supp.2d 1154, 1160.

(Moving Memo. at 5:12-22 [bold added].) In advancing its arguments, Progressive
Choice relies primarily on Rappaport-Scott. The Court of Appeal in that case held that,
given the “vast difference” between the insured’s claimed losses of $346,732.34 and
the arbitrator’s determination that actual losses were $63,000, a genuine dispute
th
existed as a matter of law as to the amount payable on the claim. (146 Cal.App.4 at
839.) Thus, the Court of Appeal affirmed the trial court’s order dismissing the action
following an order sustaining the insurer’s demurrer without leave to amend.

With respect to the instant case, the court is not persuaded that the critical “vast
difference” in damages assessments noted in Rappaport-Scott is present here. On the
contrary, although Watson demanded $90,000 at one point, she also extended a § 998
offer in the amount of $37,500–well below the $63,320.00 in damages assessed by
the arbitrator. Given these figures, this court cannot conclude, as the Rappaport-Scott
court did, that the parties’ dispute over the amount payable on Watson’s claim was
“genuine.” Rather, the genuineness of the dispute appears to present a factual
st
question that this court may not currently resolve. (See Brehm v. 21 Century Ins. Co.
th
(2008) 166 Cal.App.4 1225, 1238 [“in the insurance bad faith context, a dispute is not
‘legitimate’ unless it is founded on a basis that is reasonable under all the
circumstances”] [brackets and citation omitted].)

Progressive Choice’s request for judicial notice of the complaint herein and the
arbitrator’s award dated November 13, 2012 is GRANTED. In taking judicial notice of
these documents, the court accepts the facts of their existence and contents, not the
truth of their contents. (See Professional Engineers v. Dep’t of Transp. (1997) 15
th
Cal.4 543, 590 [judicial notice of findings of fact does not mean that those findings of
fact are true]; Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112,
120-121.)

Conclusion The demurrer is OVERRULED.

Progressive Choice is directed to file and serve its answer no later than June 13, 2014.

The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or
further notice is required.

Counsel are advise to review CCP §§ 1005(b) and (c), which govern the service
deadlines and methods of service applicable to oppositions and replies to most
motions, including demurrers and motions to strike portions of a pleading.

Item 12 2013-00153992-CU-BC

Tamara Watson vs. The Progressive Corporation

Nature of Proceeding: Motion to Strike Punitive Damages in Complaint

Filed By: Brenneman, Eric R.

Defendant Progressive Choice Insurance Company’s (“Progressive Choice”) motion to
strike the punitive damages allegations and corresponding prayer from Plaintiff
Tamara Watson’s (“Watson”) complaint is DENIED.

This is a coverage dispute that follows an October 2009 car accident involving a third-
party uninsured motorist. Plaintiff Tamara Watson (“Watson”) alleges that Progressive
Choice and other insurers wrongfully denied coverage and issued settlement offers
that were unreasonably low given the physical injuries. Progressive Choice extended
settlement offers that Watson rejected. In March 2011, Watson issued a demand for
$90,000, followed by a CCP § 998 offer for the amount of $37,500. Progressive
Choice rejected the demand and § 998 offer. In November 2012, the parties
conducted a binding arbitration pursuant to the Progressive Choice policy, and Watson
received an award of $72,579.14, $63,320.00 of which were damages associated with
the accident and $9,259.14 of which were costs awarded in light of the fact that the
award exceeded Watson’s § 998 offer.

Watson’s current complaint contains two causes of action for tortious breach of
contract and breach of the implied covenant of good faith and fair dealing. In support
of the second cause of action, Watson alleges that Progressive Choice’s conduct, as
well as that of the other defendants, was performed with

a conscious disregard for WATSON’s rights and constitutes despicable
conduct, and was done with the intent to vex, injure or annoy WATSON
such as to constitute oppression, fraud, and/or malice pursuant to
California Civil Code Sec. 3294, entitling WATSON to punitive damages
in an amount appropriate to punish or set an example of the defendants
in an amount according to proof at the time of trial.

(Compl., ¶ 50.) Progressive Choice now moves to strike these allegations and the
corresponding prayer for punitive damages.
Progressive Choice argues that all the conduct alleged in the complaint is within the
litigation privilege at CC § 47(b) and, therefore, cannot support a punitive damages
claim. The court rejects this argument at the outset because the litigation privilege
only protects communications, not non-communicative conduct. (See Rusheen v.
Cohen (2006) 37 Cal.4th 1048, 1058.) Watson alleges conduct on Progressive
Choice’s part that can be construed as non-communicative. (See, e.g., Compl., ¶ 45
(a) [Progressive Choice failed promptly and fairly to investigate the claim].) As a
result, the litigation privilege does not foreclose the possibility of punitive damages.

Next, Progressive Choice argues that Watson has not alleged her punitive damages
claim with heightened particularity. The court disagrees and concludes that the
allegations in paragraphs 45(a)-(s) suffice for pleading purposes. In reaching this
conclusion, the court has determined that the allegations can be construed to establish
the requisite oppression, malice and despicable conduct referenced at CC ¶ 3294.

Progressive Choice’s request for judicial notice of the complaint herein and the
arbitrator’s award dated November 13, 2012 is GRANTED. In taking judicial notice of
these documents, the court accepts the facts of their existence and contents, not the
truth of their contents. (See Professional Engineers v. Dep’t of Transp. (1997) 15
th
Cal.4 543, 590 [judicial notice of findings of fact does not mean that those findings of
fact are true]; Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112,
120-121.)

Conclusion

The motion is DENIED.

Progressive Choice is directed to file and serve its answer no later than June 13, 2014.

The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or
further notice is required.

Counsel are advise to review CCP §§ 1005(b) and (c), which govern the service
deadlines and methods of service applicable to oppositions and replies to most
motions, including demurrers and motions to strike portions of a pleading.