Case Number: EC062047    Hearing Date: August 01, 2014    Dept: NCB

Demurrer

The Complaint alleges that the Plaintiffs obtained an automobile liability policy with the Defendant, State Farm, on June 29, 2012. The policy had a one year term. The Defendant sent a letter on May 21, 2013 to advise the Plaintiff, Peter Marsh, that the policy would not be renewed on June 29, 2013 and advised him to obtain other insurance.
The Plaintiffs then contacted Defendant, Lynn Wen, to obtain replacement automobile coverage for Peter Marsh and to continue coverage with State Farm for Donna Marsh. Lynn Wen failed to send any applications.
Peter Marsh was in an automobile accident on July 20, 2013. State Farm denied coverage.
The Plaintiffs relied to their detriment on the promise of Lynn Wen to help them obtain automobile insurance. This caused them damages because they did not have insurance when Peter Marsh was in the accident.
Plaintiffs plead causes of action for:
1) Promissory Estoppel
2) Reformation of Insurance Contract
3) Breach of Insurance Contract
4) Breach of the Implied Covenant of Good Faith and Fair Dealing
5) Professional Negligence

This hearing concerns the Defendants’ demurrer and motion to strike directed at the Complaint.

1. Demurrer
a. Third Cause of Action for Breach of Written Contract
This cause of action is directed at the Defendant, State Farm. The Defendant argues that the cause of action does not identify whether the contract was oral, written, or implied by conduct. Under CCP section 430.10(g), in an action founded upon a contract, there are grounds for a demurrer when it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.
The Plaintiffs allege in paragraph 18 that the “Policy, as reformed” covers them for liabilities, property damage, and other losses resulting from Peter Marsh’s accident. The term “Policy” is defined in paragraph 7 to refer to the automobile liability insurance policy 310 9260-F29-75A. There are no allegations identifying the form of this contract. Further, the contract was not attached as an exhibit.
This review of the Complaint reveals that the Plaintiffs do not expressly allege that this policy is written. In their opposition, the Plaintiffs cite to paragraph 18 and 7 to support their argument that they “clearly” alleged that the contract is written. However, there is no allegation that the contract is written. It is not possible to ascertain from the pleadings that the contract is oral, written, or implied by conduct because the Plaintiffs did not allege any facts regarding the form of the contract.
Accordingly, there are grounds for a demurrer under CCP section 430.10(g).

The Defendants then argue that the Plaintiffs do not allege the terms of the contract. In an action based on the breach of contract, a plaintiff may plead the legal effect of the contract rather than its precise language. Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal. 4th 189, 198-199. In order to plead a contract by its legal effect, plaintiff must allege the substance of its relevant terms. McKell v. Washington Mutual, Inc. (2006) 142 Cal. App. 4th 1457, 1489.
The Plaintiffs allege in paragraph 18 that the Policy “as reformed” covers the Plaintiffs for liabilities, property damage, and other losses suffered as a result of the accident. The term “Policy” is a reference to the insurance policy issued by State Farm.
The Plaintiffs do not explain the phrase “as reformed”. It appears that the Plaintiffs are claiming that the one year contract that expired on June 29, 2013 before the July 20, 2013 accident should be “reformed” so that it would be in effect at the time of the accident. There are no allegations that identify a legal or equitable theory under which an automobile insurance contract can be “reformed” so that it covers a driver after the term of the contract has expired and after the insurance company has sent a letter stating that the contract will not be renewed.
Further, the Plaintiffs do not allege the legal effect of this “reformed” contract because they do not identify the relevant terms, e.g., what motor vehicles it covered, what person it covered, or the payments due from the Plaintiffs. It is unclear what the terms of the automobile insurance policy would be after it is “reformed”. Since the Plaintiffs did not plead the legal effect of their “reformed” contract, there are grounds for a demurrer to the third cause of action under CCP section 430.10(e) for the failure to state sufficient facts.

Therefore, the Court sustains the demurrer to the third cause of action for breach of contract with ten days leave to amend.

b. Fourth Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing
The Defendants argue that there are grounds for a demurrer to this cause of action because it is based on the same contract that was not pleaded properly in the third cause of action. The covenant of good faith and fair dealing is implied in every contract and it imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own and also the duty to do everything that the contract presupposes that he will do to accomplish its purpose. Pasadena Live v. City of Pasadena (2004) 114 Cal. App. 4th 1089, 1093. The implied covenant is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract. Id.

The Plaintiffs allege in paragraph 21 that the “Policy, as reformed” contained an implied covenant of good faith and fair dealing. This indicates that the fourth cause of action is based on the same contract identified in the third cause of action, i.e., the Policy, as reformed.
As noted above, the Plaintiffs did not plead facts from which it can be ascertained whether the “Policy, as reformed” is oral, written, or implied by conduct. This is grounds for a demurrer under CCP section 430.10(g).
In addition, as noted above, the Plaintiffs did not plead sufficient facts to identify the legal effect of the “Policy, as reformed”. This is grounds for a demurrer under CCP section 430.10(e) for the failure to state sufficient facts.

Therefore, the Court sustains the demurrer to the third cause of action for breach of contract with 10 days leave to amend.

3. Motion to Strike
The Defendants request that the Court strike the pleadings in paragraph 24 that include a claim for punitive damages. This paragraph is contained within the fourth cause of action for breach of the implied covenant of good faith and fair dealing. Since this cause of action is removed by the demurrer, the Defendants’ motion to strike is moot because it is directed at a portion of the pleadings that will be removed.