Preview
co em YN DH BF WN
NN NY NN NY NN KN Bee Be ee ee eH
oN WNW AW RF YW YN F&F SGC we ND HW BF WN SF SO
MICHAEL B. MURPHY (State Bar No. 123849)
mbm@severson.com
DAVID C HUNGERFORD (State Bar No. 209609)
dch@severson.com
SEVERSON & WERSON
A Professional Corporation
One Embarcadero Center, Suite 2600
San Francisco, California 94111
Telephone: (415) 398-3344
Facsimile: (415) 956-0439
Attorneys for Defendant
PREMIER CLAIMS MANAGEMENT, LLC
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA
PAUL ELIAS, individually and dba APEC
CONSTRUCTION,
Plaintiff,
vs.
INTERNATIONAL INSURANCE
COMPANY OF HANNOVER SE; COLONY
SPECIALTY INSURANCE COMPANY;
PREMIER CLAIMS MANAGEMENT, LLC;
and DOES 1-25, INCLUSIVE,
Defendants.
12681,0002/12957336.1
Case No. 18CV335946
MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
DEFENDANT PREMIER CLAIMS
MANAGEMENT, LLC’S DEMURRER TO
PLAINTIFF PAUL ELIAS DBA APEC
CONSTRUCTION’S COMPLAINT
Date: April 30, 2019
Time: 9:00 a.m.
Dept.: 2
Judge: Hon. Mark H. Pierce
Filed concurrently with Notice of Demurrer
and Demurrer; Declaration of David C.
Hungerford; [Proposed] Order
Action Filed: October 4, 2018
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT PREMIER CLAIMS, LLC’S
DEMURRER TO PLAINTIFF PAUL ELIAS DBA APEC CONSTRUCTION’S COMPLAINT1. INTRODUCTION
Plaintiff Paul Elias named three defendants in this action. As to each defendant, Plaintiff
asserted four causes of action, all of which sound in contract. Two of the defendants are insurance
companies that plaintiff alleges issued him liability insurance policies. The alleged insurance
policies clearly constitute purported contracts with plaintiff. But the remaining defendant —
Premier Claims Management, LLC (“Premier Claims”) — is not alleged to have any contractual
relationship with plaintiff. Instead, Premier Claims’ liability allegedly stems from acting as a
third-party administrator that performed work on behalf of one of the insurance company
defendants.
Plaintiffs claims against Premier Claims all fail for the most fundamental reason: plaintiff
does not (and cannot) allege that he entered into any contract with Premier Claims, yet the causes
of action he asserts are founded entirely in contract. The complaint alleges a typical coverage
dispute — that defendants were obligated, but failed, to defend or indemnify plaintiff in an
underlying lawsuit. Plaintiff asserts the expected causes of action in such a case, for declaratory
relief (twice, once as to defense and once as to indemnity), breach of contract, and bad faith.
Regardless of the merits, or lack thereof, of plaintiff's claims as to the other two defendants,
Premier Claims is clearly not a proper defendant.
California law is clear that a contract with the defendant is an essential element of each of
the claims plaintiff asserts. By failing to allege such a contract (presumably because none exists),
plaintiff's complaint demonstrates that no relief can be granted as to Premier Claims. Simply put,
because Premier Claims is not party to the insurance policies, it should not be a party to this
action. Therefore, Premier Claims’ demurrer should be sustained.
Il. LEGAL STANDARD
The purpose of a demurrer is to test “the legal sufficiency of the pleading.” To test the
sufficiency of the pleading, a demurrer admits only the truth of material facts properly pleaded. A
demurrer does not admit the truth of “contentions, deductions or conclusions.” Aubry v. Tri-City
Hosp. Dist. (1992) 2 Cal. 4th 962, 966-967, citing Moore v. Regents of University of California
12681,0002/12957336.1 2
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT PREMIER CLAIMS, LLC’S
DEMURRER TO PLAINTIFF PAUL ELIAS DBA APEC CONSTRUCTION’S COMPLAINTBW NY
aA vA RF BW N
(1990) 51 Cal. 3d 120, 125. Stated differently, a demurrer cuts through the plaintiffs’ rhetoric and
asks the simple question: if we were to assume the facts pled to be true, does plaintiff have a
legally recognized claim?
Any doubt that the complaint states a valid claim must be resolved against plaintiff.
Kramer v. Intuit Inc. (2004) 121 Cal.App.4th 574, 578, quoting C. & H. Foods Co. v. Hartford
Ins, Co. (1984) 163 Cal.App.3d 1055, 1062 (“Doubt in the complaint may be resolved against
plaintiff and facts not alleged are presumed not to exist.”) (internal quotations omitted). If the
facts pleaded are not sufficient to constitute a legally recognized claim, then the complaint shall be
dismissed. Cal. Code Civ. Proc., §§ 430.10(e), 430.50.
Il. FACTUAL ALLEGATIONS
Elias! alleges that defendants International Insurance Company of Hannover SE
(“Hannover”) and Colony Specialty Insurance Company (“Colony”) insured Elias under
commercial general liability policies with effectives dates from 2014 to 2017. (Complaint, § 6,
7.) Elias alleges that those policies required defendants Hannover and Colony to indemnify Elias
for sums that Elias was obligated to pay as damages because of property damage. (Complaint, §
8.) Elias alleges that those policies also required defendants Hannover and Colony to defend Elias
against any suit seeking such damages. (Complaint, { 8.)
Elias alleges that he was sued in an underlying action for damages arising out of
construction work at property in Los Gatos, California. (Complaint, § 9.) Elias alleges that he
tendered defense and indemnity of the underlying lawsuit to Hannover. (Complaint, 410.) Elias
alleges that Hannover, through its third-party administrator Premier Claims, denied coverage for
the underlying action. (Complaint, J 11.) Elias alleges that he twice sought reconsideration of
Hannover’s denial. (Complaint, {§ 12, 14, 15.) Elias alleges that Hannover, through Premier
Claims, denied coverage in response to Elias’s first request for reconsideration and that Premier
' Elias sues individually and “dba APEC CONSTRUCTION.” He will be referred to herein as
“Elias.”
1268 1.0002/12957336.1 3
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT PREMIER CLAIMS, LLC’S
DEMURRER TO PLAINTIFF PAUL ELIAS DBA APEC CONSTRUCTION’S COMPLAINTCoO wm ND HW RB WN
Claims, which allegedly stated that it would respond within 15 days to the second request, failed
to respond to the second request on behalf of Hannover. (Complaint, {J 13, 16.)
Elias alleges that he tendered the action to Colony twice and that Colony denied coverage
three times, twice directly and once through its counsel. (Complaint, J§ 17, 18, 19, 20, 21.) Elias
does not allege that Premier Claims performed any function for Colony in connection with its
denials. (Complaint, {§ 17, 18, 19, 20, 21.)
Elias alleges that Hannover and Colony continue to decline Elias’s tender of defense and
indemnity in the underlying action. (Complaint, 4 22.) Elias alleges that “[t]he Defendants,
through their claims handling representatives and attorneys, have refused to deal in good faith with
[Elias],” causing Elias to incur attorneys’ fees and costs in an effort to obtain such a defense.
(Complaint, § 23.) Elias alleges that he “seeks judicial construction and enforcement of the
commercial general liability policies sold by defendants HANNOVER and COLONY” to Elias,
and “a declaration that the terms of these policies obligate defendant insurers to defend and
indemnify the insured arising out of the alleged construction defects [in the underlying action.]”
(Complaint, § 24.)
The complaint includes four causes of action: declaratory relief as to the defendants’
respective duties to defend Apec in the underlying action; declaratory relief as to the defendants’
respective duties to indemnify Apec in the underlying action; breach of contract based on the
defendants’ purported failure to fulfill their respective duties to defend and indemnify Apec; and
breach of the implied covenant of good faith and fair dealing arising out of the alleged contractual
breaches. (Complaint, {§ 29 through 50.) The complaint does not specify which defendant each
cause of action is asserted against.
IV. PREMIER CLAIMS’ DEMURRER SHOULD BE SUSTAINED
Each cause of action in Elias’s complaint is based on contractual obligations that Elias
alleges are owed by defendants. The first and second causes of action seek judicial declarations
that “defendants owe contractual duties to defend and indemnify Elias against the underlying
action. (Complaint, §{ 31,39.) The third cause of action is for breach of contract. The fourth
1268 1.0002/12957336.1 4
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT PREMIER CLAIMS, LLC’S
DEMURRER TO PLAINTIFF PAUL ELIAS DBA APEC CONSTRUCTION’S COMPLAINTCo De ND
cause of action is for breach of the duty of good faith and fair dealing.
The only contracts alleged in the complaint, and therefore the contracts at issue in this
demurrer, are commercial general liability insurance policies which Elias alleges that Hannover
and Colony issued to him. Elias includes no allegations that he (or Apec) is a party to any contract
with Premier Claims. Instead, the complaint alleges that Premier Claims serves as a third party
administrator in connection with the policies issued by Hannover.
Elias alleges that Premier Claims conveyed Hannover’s coverage positions to Elias. Elias
also alleges that he directed his requests for reconsideration as to coverage under the Hannover
policies to Premier Claims. Nothing in these allegations suggests that Premier Claims owed any
duty to Elias. Instead, any such duty would run from Premier Claims to Hannover.
Elias’s inability to allege a contractual relationship with Premier Claims necessarily means
that Elias cannot state any of its contractually-based claims against Premier Claims. Because
those are the only claims alleged by Elias, this demurrer should be sustained. Elias also fails to
allege any basis on which Premier Claims could owe Elias a non-contractual duty. Accordingly,
amending his complaint will not salvage plaintiffs claims.
Elias’s first two causes of action seek declaratory relief as to the parties’ respective rights
and duties under the insurance. The first cause of action requests a judicial declaration that
defendants have a duty to defend Elias in the underlying action. The second cause of action
requests a judicial declaration that defendants have a duty to indemnify Elias in the underlying
action.
California’s Code of Civil Procedure permits a party to a written instrument to seek a
declaration “relating to the legal rights and duties of the respective parties.” Cal. Code Civ. Pro. §
1060. Elias seeks a declaration that “defendants” have the duty to defend and indemnify him
under the insurance policies. But Premier Claims is not alleged to be, and is not, a party to any
contract alleged in the complaint. It follows that Premier Claims is not one of the “respective
parties” under the insurance policies, as contemplated under section 1060, and Elias is not entitled
to declaratory relief as to Premier Claims in connection with those policies. See Oppenheimer v.
12681 0002/12957336,1 5
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT PREMIER CLAIMS, LLC’S
DEMURRER TO PLAINTIFF PAUL ELIAS DBA APEC CONSTRUCTION’S COMPLAINTGeneral Cable Corp. (1956) 143 Cal.App.2d 293, 297 (holding that section 1060 “provides for
declaratory relief ‘in cases of actual controversy relating to the legal rights and duties of the
respective parties’. It does not provide for the settlement of disputes between plaintiff and persons
having no interest under the contract[.]”
A similar analysis demonstrates the futility of asserting a breach of contract claim against
Premier Claims. The first element of a breach of contract claim is, unsurprisingly, a contract. See,
e.g., McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489, citing Elements of
Cause of Action, 4 Witkin, Cal. Proc. Sth Plead § 515 (2008). Traditionally, California law
required that an alleged contract be pleaded verbatim or attached to the complaint. McKell, supra,
at 1489. Modern pleading also permits a party to “plead a contract by its legal effect,” which
requires the pleading party to “allege the substance of its relevant terms.” Jd. (quoting Witkin,
supra.)
Regardless of which method plaintiff chooses, however, plaintiff must plead a contract.
Elias fails to meet this fundamental requirement as to Premier Claims. No contract is alleged to
exist between Elias and Premier Claims anywhere in the complaint. Therefore, the breach of
contract claim must fail as to Premier Claims.
Elias’ fourth cause of action asserts a breach of the implied covenant of good faith and fair
dealing. “The implied covenant of good faith and fair dealing rests upon the existence of some
specific contractual obligation.” Racine & Laramie, Ltd. v. Department of Parks & Recreation
(1992) 11 Cal.App.4th 1026, 1031. In other words, the implied covenant “is “a supplement to the
express contractual covenants, to prevent a contracting party from engaging in conduct which ...
frustrates the other party’s rights to the benefits of the contract.” Love v. Fire Ins. Exchange
(1990) 221 Cal.App.3d 1136, 1153 (emphasis original). The implied covenant does not create
rights or remedies beyond the four corners of an actual written contract. “[I]t is universally
recognized [that] the scope of conduct prohibited by the covenant of good faith is circumscribed
by the purposes and express terms of the contract.” Carma Developers (Cal.), Inc. v. Marathon
Development California, Inc. (1992) 2 Cal.4th 342, 373.
12681.0002/12957336.1 6
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT PREMIER CLAIMS, LLC’S
DEMURRER TO PLAINTIFF PAUL ELIAS DBA APEC CONSTRUCTION’S COMPLAINTAlthough sometimes styled as a tort, or a hybrid of tort and contract, every claim of a
breach of the implied covenant of good faith and fair dealing requires an underlying contract
between the parties, which serves as the basis for the implied covenant. Therefore, as with the
first three causes of action, the fourth cause of action must be dismissed as to Premier Claims
because it never contracted with Elias.
V. CONCLUSION
Premier Claims’ demurrer is based on the basic legal principle that plaintiff's contract-
based causes of action must be dismissed where plaintiff cannot allege a contract with the
defendant. Elias does not (and cannot) allege a contract with Premier Claims. Because each of
Elias’ causes of action requires a contract with defendant, each cause of action should be
dismissed as to Premier Claims.
Therefore, Premier Claims respectfully requests that its demurrer be sustained.
DATED: December \ 9, 2018 SEVERSON & WERSON
A Professional Corporation
By:
David C. Hungerford
Attorneys for Defendant PREMIER CLAIMS
MANAGEMENT, LLC
1268 1.0002/12957336.1 7
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT PREMIER CLAIMS, LLC’S
DEMURRER TO PLAINTIFF PAUL ELIAS DBA APEC CONSTRUCTION’S COMPLAINT