Case Number: 17K03018 Hearing Date: January 17, 2018 Dept: 77

Plaintiff David Sayegh’s motion for reconsideration is GRANTED. Defendant’s Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED as to First, Second and Third Causes of Action with leave to amend. The Demurrer is SUSTAINED as to Fourth Cause of Action without leave to amend. The Motion to Strike is moot and not decided. Plaintiff is ordered to file a second amended complaint within fifteen (15) days.

Background

Plaintiff David Sayegh (“Plaintiff”) filed the instant action against Defendant State Farm Mutual Automobile Insurance Company (“Defendant”), alleging that it breached its obligation to indemnify him for losses he incurred with respect to his insured motor vehicle. The Complaint alleges claims for (1) bad faith breach of contract; (2) bad faith breach of contract (indemnity); (3) breach of the implied covenant of good faith and fair dealing; and (4) declaratory relief.

On August 31, 2017, the Court sustained Defendant’s demurrer on the ground that (1) an exhibit attached to the Complaint appeared to demonstrate that Plaintiff’s insurance had expired at the time of the accident, and (2) failed to allege that the accident in question involved either a covered individual (i.e., himself), or a covered vehicle. The Court provided Plaintiff an opportunity to explain at the hearing whether he could remedy these problems, but ultimately concluded he could not, and sustained the demurrer without leave to amend.

On September 15, 2017, Plaintiff filed the instant motion for reconsideration, requesting that the Court reconsider its prior ruling and provide Plaintiff leave to file an amended complaint. (The Court sustained the demurrer as to the fourth cause of action without leave to amend as well, and there is no dispute between the parties that such a holding was proper. The request solely seeks leave to amend the first three causes of action.)

Legal Standard

Pursuant to CCP § 1008(a):

When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order. The party making the application shall state by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.

As stated by the court in Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1499, a court acts in excess of jurisdiction when it grants a motion to reconsider that is not based upon “new or different facts, circumstances or law.” There is a strict requirement of diligence, meaning the moving party must present a satisfactory explanation for failing to provide the evidence or different facts earlier. (Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 690.)

Discussion

Diligence

First, Defendant argues Plaintiff was not diligent in presenting the various different facts upon which Plaintiff now relies.

Both parties agree that, at the hearing in question, Plaintiff’s counsel argued that the complaint could be properly amended to prove that Plaintiff had valid insurance at the time of the accident, and that Plaintiff was driving the vehicle in question at the time of the accident. Plaintiff was therefore diligent in bringing these issues to the Court’s attention.

Defendant instead focuses on Plaintiff’s argument that he first filed a claim under his own policy, before that claim was allegedly turned into a claim under the other driver’s policy by Defendant. Plaintiff’s counsel declares that he first learned of the claim made under Plaintiff’s policy when he called Defendant on August 31, 2017, after the hearing occurred. (Culpepper Decl. ¶ 3.) In opposition, Defendant’s claim representative declares that his claim notes indicate that he had a call with a representative from Plaintiff’s counsel’s firm on August 24, 2017, but had no conversation with either Plaintiff’s counsel or anyone from his office on or about August 31, 2017. (Burrow Decl. ¶¶ 3-5.) Accordingly, Defendant argues that Plaintiff already had the necessary information one week before the hearing, and failed to present it to the Court.

Frankly, Plaintiff provides no clear response to this, other than vaguely arguing that reconsideration is appropriate where there are new or different facts, and that even if these are not new facts, they are different facts. This argument largely ignores that a showing of diligence in learning the requisite facts is required regardless of whether the facts are considered ‘new’ or ‘different.’ (Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 690.)

That said, the Court notes that its tentative ruling never explicitly addressed the issue of first-party claims versus third-party claims, which is now the focus of these different facts. Instead, the tentative clearly stated that the demurrer was being sustained because Exhibit A, attached to the FAC, appeared to indicate that Plaintiff’s insurance had lapsed at the time of the accident, and because, although Plaintiff alleged he was insured under the policy, he failed to allege either that he was driving at the time of the accident, or that the vehicle itself (if driven by another) was insured under the policy. There is no dispute that, at the hearing, the contract attorney that appeared for Plaintiff provided proof that Plaintiff was insured, and informed the Court that Plaintiff was the driver at the time of the hearing. (Adamsky Decl., ¶¶ 3-4; Daly Decl. ¶ 1.) Despite addressing the only two issues actually raised in the tentative ruling provided to the parties in advance of the hearing, the hearing subsequently turned on the issue of third-party claims, and Plaintiff’s counsel failed to address that particular issue. In light of the fact that, even accepting Defendant’s evidence, Plaintiff’s counsel learned of the additional claim information only one week in advance of the hearing, and in light of the fact that the Court’s tentative may have reasonably misled Plaintiff’s primary counsel into not preparing the contract counsel with information regarding that issue, the Court concludes that Plaintiff was diligent in both obtaining the information and to bringing it to the Court’s attention in the instant motion for reconsideration.

Proposed Second Amended Complaint

Plaintiff’s motion for reconsideration relies, in no small part, on Careau & Co. v. Security Pacific Business Credit Inc. (1990) 222 Cal.App.3d 1371, which specifically held that a motion to reconsideration was proper where leave to amend had been denied, but a subsequent showing was made as to the likelihood of being able to successfully amend the complaint. The Court of Appeal held that it had been an abuse of discretion for the trial court to not grant the motion for reconsideration and permit the amendment. (Id. at 1386-87.)

However, Defendant points out that in Careau, the party moving for reconsideration had attached a proposed amended complaint, and the Careau court at least appeared to suggest attaching such a proposal was a necessary prerequisite to success on the merits. Here, Plaintiff has failed to attach such a proposal, and Defendant argues the motion should therefore be denied.

The Court disagrees. While the Careau court evaluated the proposed amendment, and clearly held that reconsideration should be granted because of the content of the amendment, it is an overreading to hold that Careau required that such an amendment be attached. Careau states that plaintiffs “were entitled to submit proposed second amended complaints by way of a motion for reconsideration,” and that, having done so, the trial court “was obligated” to review the proposal. (Id. at 1386.) That is not the same has holding that a motion for reconsideration without a proposed amended complaint must be denied as a matter of course. To obtain leave to amend, “the plaintiff must show how the complaint can be amended to state a cause of action.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) As far as this Court is aware, no authority holds that a plaintiff can only meet that burden by submitting a proposed amendment. While such a proposal would undoubtedly be useful in evaluating whether to provide leave to amend, it does not appear to be mandatory.

Merits of Proposed Amended

Finally, Defendant argues that, because there is no amended complaint, it cannot satisfactorily argue against Plaintiff’s proposed amendments. It nevertheless attempts to do so, arguing that no matter how Plaintiff seeks to spin the situation, Plaintiff’s allegations still at heart consist of a third-party claim against Defendant, which are not permitted under Moradi-Shalal v. Fireman’s Fund Ins. Co. (1988) 46 Cal.3d 287. Specifically, Defendant argues that the claim in question was not made pursuant to Plaintiff’s insurance agreement with Defendant, but pursuant to the other driver’s insurance agreement with Defendant. Plaintiff has no standing to enforce that agreement.

In Moradi-Shalal, the Supreme Court clarified that, in a situation such as this, Plaintiff’s proper recourse would have been to sue the other driver directly, for the property damage or any injury arising from the accident. The other driver would then be entitled to sue Defendant, his insurance carrier, if, for example, Defendant did not defend him or did not properly handle a settlement. Plaintiff would have no contractual action against Defendant (although Moradi-Shalal emphasizes that common law torts, such as fraud, might still be available).

Defendant argues that, because Plaintiff’s claim was made under the other driver’s insurance, rather than his own, the foregoing applies, and his claim is barred.

This argument fundamentally ignores the additional evidence Plaintiff has submitted in support of his motion. Per Plaintiff’s counsel:

I contacted Defendant State Farm at 855-231-1590, extension 704 to inquire about retrieving information, specifically proof of insurance for the time period at the time of the accident of December 2016, which the Court requested in its tentative ruling. It was during these phone calls that State Farm representative, Mr. Devin Burron [sic] provided information as to a second claim #75-0537-3W2, which was made on Plaintiffs policy on December 29, 2016.

When I inquired as to why the claim was transferred from the first claim #75-0537-3W2 to claim #75-0512-7S8, representative Mr. Burron [sic] from Defendant State Farm responded that upon their determination that Plaintiff was not at fault of the accident, State Farm opened a claim on the policy of the driver who hit Plaintiff. This claim was given the number of 75-0512-7S8. They could not explain what day the transfer to the second claim took place. They explained that this way, Plaintiff would not have to pay the comprehensive and collision deductible for repairing the vehicle. This representative further explained that at some point, there was an attempt to transfer the claim back to Plaintiff’s policy, but that this did not occur and he could not explain why. The further [sic] finally stated that no payments have been made for the property damage claim and that he agreed that no rental payment was made even though there has been 250 days since the accident.

(Culpepper Decl. ¶¶ 3-4.)

This is clearly sufficient, at the pleading stage, to demonstrate that there is at least a reasonable possibility of Plaintiff stating his causes of action—for breach of contract, breach of contract (indemnity), and breach of covenant of good faith and fair dealing—against Defendant. Without deciding any of the issues at this stage, it appears Plaintiff has alleged the existence of a contract, his performance of the contract (by making a claim under the agreement), Defendant’s breach (by failing to honor that claim), and damages (no property damage or rental vehicle payments). The Court’s view of the foregoing is without prejudice to any right Defendant may have to subsequently demur, once again, to any amended complaint. But simply as an initial matter, it appears Plaintiff may be able to assert valid causes of action, and providing Plaintiff with leave to amend the complaint is therefore appropriate.

Accordingly, Plaintiff’s motion for reconsideration is GRANTED. Defendant’s Demurrer to Plaintiff’s First Amended Complaint is SUSTAINED as to First, Second and Third Causes of Action with leave to amend within fifteen (15) days. The Demurrer is SUSTAINED as to the Fourth Cause of Action without leave to amend. The Motion to Strike is moot and not decided. Plaintiff is ordered to file a second amended complaint within fifteen (15) days.

Plaintiff to give notice.