Preview
George J. Vasquez, SBN 291395 E-FILED
1 Clovis Law Group LLP 12/30/2020 2:18 PM
725 Pollasky Ave., Ste. 101 Superior Court of California
2 Clovis, CA 93612 County of Fresno
Telephone: (559) 900-2806
3 Facsimile: (559) 314-6214 By: C. York, Deputy
E-mail: george@clovislawgroup.com
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Attorney for Shaw Creek Homeowners Association
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SUPERIOR COURT OF CALIFORNIA
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COUNTY OF FRESNO – CIVIL UNLIMITED
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8 SHAW CREEK HOMEOWNERS
ASSOCIATION, a corporation; Case No.: 20CECG00772
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Plaintiff, MEMORANDUM OF POINTS AND
10 AUTHORITIES IN OPPOSITION TO
v. DEFENDANT NATIONAL UNION FIRE
11 INSURANCE COMPANY OF
ADMIRAL INSURANCE GROUP, LLC, a PITTSBURGH, PA’S DEMURRER TO
12 limited liability company; NATIONAL FIRST AMENDED COMPLAINT
UNION FIRE INSURANCE COMPANY
13 OF PITTSBURGH, PA., a corporation; TOP
CONTRACTORS INSURANCE
14 SERVICES, INC., a corporation; and DOES
1 through 50, inclusive;
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Defendants.
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 1
TABLE OF CONTENTS
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I. Introduction 3
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II. Legal Standard 4
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III. Legal Argument 5
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5 A. The Complaint alleges sufficient facts evidencing that Plaintiff became an additionally
6 named insured under the Umbrella Policy through two different ways. 5
7 1. Plaintiff became an additionally named insured under the commercial liability policy
8 through the written contract with the Roofing Company which required the Roofing
9 Company to provide insurance for the Roofing Project with Plaintiff as an additionally
10 named insured. 6
11 2. The Complaint alleges that Top Contractor Insurance Services, Inc. was approached
12 to cause the commercial liability policy and the Umbrella Policy to be endorsed to add
13 Plaintiff as an additionally named insured, but may have failed to cause the commercial
14 liability policy and the Umbrella Policy to be so endorsed. The answer of Top Contractor
15 Insurance Services, Inc. places this fact question at issue. 9
16 B. Coverage is required under the Umbrella Policy for damage to the properties separately
17 owned by Plaintiff’s members and not owned by Plaintiff. 10
18 C. The Complaint alleges sufficient facts to support a cause of action for Fraud – Failure to
19 Disclose. 11
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IV. Conclusion 14
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 2
1 I. INTRODUCTION
2 Shaw Creek Homeowners Association’s (“Plaintiff”) First Amended Complaint (the
3 “Complaint”) sufficiently alleges causes of action against its commercial liability insurer
4 Defendant Admiral Insurance Company (“Admiral”) and its umbrella insurer, Defendant Nationa
5 Union Fire insurance Company of Pittsburgh, Pa. (“National Union”) for breach of contract,
6 breach of the implied covenant of good faith and fair dealing, and fraud – failure to disclose.
7 Plaintiff’s claims against National Union relate to an umbrella insurance policy (the “Umbrella
8 Policy”) which provides coverage in addition to the coverage provided by Admiral’s commercial
9 liability policy.
10 National Union’s demurrer claims that the Complaint is not adequately pled, but fails to
11 address the relevant allegations relating to the contractual relationship between Plaintiff and
12 National Union, the allegations relating to the terms of the Umbrella Policy, and the nature of the
13 claims presented under the policy which are for damage to third parties’ properties, Plaintiff’s
14 members.
15 A closer reading of the Complaint and matters subject to judicial notice reveals that the
16 Complaint alleges sufficient facts showing that Plaintiff became an additional insured under the
17 Umbrella Policy. The Complaint alleges that Plaintiff entered a written contract with the
18 Roofing Company which required the Roofing Company to secure insurance with Plaintiff
19 named as an additionally named insured under both the Roofing Company’s commercial liability
20 and umbrella policies. The Complaint also alleges that based on information and belief, that
21 Plaintiff became an additionally named insured under both the commercial and umbrella
22 policies.
23 Under the endorsement entitled “Additional Insured –Owners, Lessees or Contractors –
24 Scheduled Person or Organization” of the Policy, the written agreement with the Roofing
25 Company automatically made Plaintiff an additionally named insured under the commercial
26 liability policy. The Complaint also alleges that Defendant Top Contractors Insurance Services,
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 3
1 Inc. was asked to cause the Policy to be endorsed with Plaintiff as an additionally named insured,
2 but may have failed to do so. Defendant Top Contractors Insurance Services, Inc. has filed an
3 answer denying these allegations thereby putting at issue whether the Policy was specifically
4 endorsed with Plaintiff as an additionally named insured.
5 The Complaint also alleges facts evidencing that as additionally named insured under the
6 Policy, Plaintiff submitted claims for property damage to the separate property of Plaintiff’s
7 members, not just Plaintiff’s property. The Complaint also alleges that Plaintiff, as a
8 homeowners association governed by the Davis-Sterling Act (Civ. Code, §§ 4000 et seq.), is
9 legally liable to its members to maintain their separate property roofs and is liable for damage to
10 their roofs.
11 National Union’s demurrer ignores these facts. A complete reading of the facts alleged in
12 the Complaint and the reasonable inferences that can be drawn from them require National
13 Union’s demurrer to be overruled.
14 II. LEGAL STANDARD
15 A defendant can object to a complaint by demurrer if “[t]he pleading does not state facts
16 sufficient to constitute a cause of action.” (Code Civ. Proc., §§ 430.30, 430.10(e).)
17 A demurrer tests the legal sufficiency of a complaint. (See Coastside Fishing Club v.
18 California Resources Agency (2008) 158 Cal.App.4th 1183, 1191-1192.) In considering a
19 demurrer, a court is to “…assume the truth of the complaint’s properly pleaded or implied factual
20 allegations.” (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) The court also
21 considers matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311,
22 318.)
23 A general demurrer tests whether the allegations of a complaint have provided sufficient
24 factual basis to state a cause of action. (See Colvig v. RKO General, Inc. (1965) 232 Cal.App.2d
25 56, 63.) A general demurrer should be overruled if a complaint includes sufficient factual
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 4
1 allegations to support a “…cause of action under any possible legal theory.” (Lee Newman,
2 M.D., Inc. v. Wells Fargo Bank (2001) 87 Cal.App.4th 73, 79.)
3 A special demurrer tests whether a complaint is uncertain, meaning ambiguous and
4 unintelligible. (Code Civ. Proc., § 430.10(f).) “A demurrer for uncertainty is strictly construed,
5 even where a complaint is in some respects uncertain, because ambiguities can be clarified under
6 modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th
7 612, 616.) A demurrer for uncertainty should be overruled when the allegations of the complaint
8 sufficiently apprise the defendant of the claims being made. (See Id.)
9 III. LEGAL ARGUMENT
10 The demurrer challenges the sufficiency of the facts alleged in the Complaint as they
11 relate to the first two causes of action for breach of contract and breach of the implied covenant
12 of good faith and fair dealing first based on a purported lack of contractual relationship between
13 Plaintiff and National Union and second based on a purported lack of coverage under the
14 Umbrella Policy even if Plaintiff. As shown below, the Complaint alleges sufficient facts
15 supporting the existence of a contractual relationship between Plaintiff and National Union as
16 well as a basis for coverage.
17 The demurrer challenges the sufficiency of the facts alleged in the Complaint as they
18 relate to the third cause of action for Fraud – Failure to Disclose based on an alleged lack of
19 particularity. As shown below, the Complaint alleges sufficient facts for this cause of action as
20 well.
21 A. The Complaint alleges sufficient facts evidencing that Plaintiff became an
22 additionally named insured under the Umbrella Policy through two different ways.
23 National Union’s demurrer primarily challenges the sufficiency of the Complaint based
24 on its contention that the Complaint cannot allege facts showing that is an additionally named
25 insured under the Umbrella Policy, but does not provide any analysis of the facts alleged in the
26 Complaint.
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 5
1 The Complaint, however, alleges several facts that evidence that Plaintiff became and
2 additionally named insured under the commercial liability policy and in turn the Umbrella Policy
3 with National Union through different mechanisms.
4 As an umbrella liability insurance policy, the Umbrella Policy provides excess coverage
5 to the commercial liability policy issued by Admiral. (See Padilla Construction Co., Inc. v.
6 Transportation Ins. Co. (2007) 150 Cal.App.4th 984, 987.) Under the commercial liability
7 policy’s “Additional Insured –Owners, Lesees or Contractors –Scheduled Person or
8 Organization” and second through Top Contractors Insurance Services, Inc. causing the
9 Umbrella Policy to be specifically endorsed with Plaintiff as an additionally named insured. The
10 Complaint also alleges that it is informed and believes that the Roofing Company approached
11 Top Contractor’s Insurance Company to have the commercial liability policy as well as the
12 Umbrella Policy’s endorsed with Plaintiff as an additionally named insured. The Complaint
13 alleges that Top Contractor’s may have failed to cause this endorsement, but that allegation has
14 been denied by Top Contractor’s and is now a factual issue of the case.
15 If there is any deficiency in the sufficiency of the specificity of the terms of the Umbrella
16 Policy, such deficiency can be cured by giving Plaintiff leave to amend.
17 1. Plaintiff became an additionally named insured under the commercial liability policy
through the written contract with the Roofing Company which required the Roofing
18 Company to provide insurance for the Roofing Project with Plaintiff as an additionally
named insured.
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The endorsement to the commercial liability policy entitled “Additional Insured –
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Owners, Lesees or Contractors –Scheduled Person or Organization” included an addition to the
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schedule of named insured which added:
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“Any person or organization that is an owner of real property or
23 personal property on which you are performing ongoing operations,
or a contractor on whose behalf you are performing ongoing
24 operations, but only if coverage as an additional insured is required
by a written contract or written agreement that is an ‘insured
25 contract’, and provided the ‘bodily injury’ or ‘property damage’ first
occurs, or the ‘personal and advertising injury’ offense is first
26 committed, subsequent to the execution of the contract or
agreement.”
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 6
1 The Complaint’s allegations evidence that Plaintiff became an additionally named
2 insured under this endorsement under the rules governing interpretation of an insurance policy:
3 “While insurance contracts have special features, they are still
contracts to which the ordinary rules of contractual interpretation.
4 [Citation.] The fundamental goal of contractual interpretations is to
give effect to the mutual intention of the parties. [Citation.] If
5 contractual language is clear and explicit, it governs. [Citation.] On
the other hand, ‘[i]f the terms of a promise are in any respect
6 ambiguous or uncertain, it must be interpreted in the sense in which
the promisor believed, at the time of making it, that the promise
7 understood it.’[Citations.] this rule, as applied to a promise of
coverage in an insurance policy, protects not the subjective beliefs
8 of the insurer but, rather, ‘the objectively reasonable expectations of
the insured.’ [Citation.] Only if this rule does not resolve the
9 ambiguity do we then resolve it against the insurer. [Citation.]”
(Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-
10 1265.)
11 “In interpreting an insurance policy we apply the general principle that doubts as to
12 meaning must be resolved against the insurer and that any exception for the performance of the
13 basic underlying obligation must be so stated as clearly to apprise the insured of its effect.”
14 (Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 269.)
15 The endorsement here is an additional insured endorsement which depends on the
16 existence of a written contract between the named insured, the Roofing Company, and the
17 additional insured, Plaintiff. “When additional insured endorsements, by their own terms,
18 depend on the existence of a written contract between the named insured and the additional
19 insured, the contract is a significant circumstance in determining the objectively reasonable
20 expectations of the additional insured. This is true whether or not the insurer ever actually read
21 the contract. [Citation.]” (St. Paul Mercury Ins. Co. v. Frontier Pacific Ins. Co. (2003) 111
22 Cal.App.4th 1234, 1245.) “…[T]here is no demonstrable public policy favoring a narrow
23 interpretation of additional insured clauses. [Citation.] (Fireman’s Fund Ins. Companies v.
24 Atlantic Richfield Co. (2001) 94 Cal.App.4th 842, 853.) Accordingly, the written contract
25 between Plaintiff and the Roofing Company determines whether Plaintiff qualifies as an
26 additionally named insured under this endorsement.
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 7
1 Paragraphs 13-17 of the Complaint allege that Plaintiff and the Roofing Company
2 negotiated a contract for the Roofing Company to complete the Roofing Project and that through
3 these negotiations, Plaintiff and the Roofing Company specifically agreed that the Roofing
4 Company would secure insurance for the Roofing Project with Plaintiff as an additionally named
5 insured. Plaintiff and the Roofing Company entered into a written contract reflecting these
6 negotiations which specified that the Roofing Company was “…to provide all Labor, Materials,
7 Insurance, Warranty and Equipment.”
8 Under the well-established rules of contract interpretation, the written agreement between
9 Plaintiff and the Roofing Company required the Roofing Company to obtain insurance for the
10 Roofing Project with Plaintiff as an additionally named insured:
“The rules governing the role of the court in interpreting a written
11 instrument are well established. The interpretation of a contract is a
judicial function. [Citations.] In engaging in this function, the trial
12 court ‘give[s] effect to the mutual intention of the parties as it
existed’ at the time the contract was executed. [Citation.]
13 Ordinarily, the objective intent of the contracting parties a legal
question determined solely by reference to the contract’s terms.
14 [Citations.]
15 The court generally may not consider extrinsic evidence of any prior
agreement or contemporaneous oral agreement to vary or contradict
16 the clear and unambiguous terms of a written, integrated contract.
[Citations.] Extrinsic evidence is admissible, however, to interpret
17 an agreement when a material term is ambiguous. [Citation.].”
(Wolfe v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th
18 1107, 1125-1126.)
19 The finalized written contract between Plaintiff and the Roofing Company does not
20 expressly identify what kind of insurance the Roofing Company was to obtain for the Roofing
21 Project, or what limits of liability were to be, or who was to be named as an insured on the
22 policies, but those requirements .
23 The meaning of the written contract’s requirement for the Roofing Company to obtain
24 insurance is therefore ambiguous and is susceptible to more than one reasonable interpretation
25 which requires extrinsic evidence “…to determine the contracting parties’ objective intent.” (See
26 Wolfe v. Walt Disney Pictures & Television, supra, 162 Cal.App.4th at p. 1126.) The allegations
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 8
1 related to the negotiations of the written contract between Plaintiff and the Roofing Company
2 allege the extrinsic evidence that will prove that the written contract between Plaintiff and
3 Roofing Company required the Roofing Company to obtain insurance for the Roofing Project
4 with Plaintiff as an additionally named insured.
5 The commercial liability policy does not specify what form the written contract must take
6 to qualify under this endorsement. The objectively reasonable expectations of both the Roofing
7 Company and Plaintiff were that the written agreement requiring the Roofing Company to
8 provide insurance for the Roofing Project included the requirement for the Roofing Company to
9 name Plaintiff as an additionally named insured on its policies as they had negotiated and agreed
10 before signing the contract. Accordingly, the written contract between Plaintiff and the Roofing
11 Company caused Plaintiff to become an additionally named insured under the Policy.
12 2. The Complaint alleges that Top Contractor Insurance Services, Inc. was approached to
cause the commercial liability policy and the Umbrella Policy to be endorsed to add
13 Plaintiff as an additionally named insured, but may have failed to cause the
commercial liability policy and the Umbrella Policy to be so endorsed. The answer of
14 Top Contractor Insurance Services, Inc. places this fact question at issue.
15 The Complaint alleges that Defendant Top Contractors Insurance Services, Inc. issued
16 certificates of insurance identifying Plaintiff as an additional named insured on the commercial
17 liablilty policy and the Umbrella Policy’s term in effect at the time Plaintiff contract with the
18 Roofing Company and for the renewed term. (Complaint, ¶¶ 15, 16 & 20.) The Complaint also
19 alleges Defendant Top Contractors Insurance Services, Inc. may have failed to cause Plaintiff to
20 be specifically endorsed as an additionally named insured under the commercial liability policy
21 and the Umbrella Policy. (Complaint, ¶¶ 15, 37-39.)
22 Top Contractors Insurance Services, Inc. has filed an answer to the Complaint with a
23 general denial, in effect denying the allegation that it failed to cause Plaintiff to be specifically
24 endorsed as an additionally named insured under the Policy. (RJN, Exhibit 2.) “The effect of a
25 general denial is to ‘put in issue the material allegations of the complaint.’” (Advantec Group,
26 Inc. v. Edwin’s Plumbing Co., Inc. (2007) 153 Cal.App.4th 621, 627.) By denying paragraphs
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 9
1 15, 38, and 39 of the Complaint, Defendant Top Contractors Insurance Services, Inc. is denying
2 that it failed to cause Plaintiff to be specifically endorsed as an additionally named insured under
3 the Admiral Policy, putting the fact question at issue for trial.
4 B. Coverage is required under the Umbrella Policy for damage to the properties
5 separately owned by Plaintiff’s members and not owned by Plaintiff.
6 As alleged in paragraphs 9-10 of the Complaint, Plaintiff is a homeowners association
7 organized under the Davis-Sterling Common Interest Development Act (“Davis-Sterling”) (Civ.
8 Code, §§ 4000 et seq.) Plaintiff is an “association” under Davis-Sterling, as it is a nonprofit
9 corporation created for the purpose of managing a common interest development. (See Civ.
10 Code, § 4080.) A common interest development under Davis-Sterling is created “…whenever a
11 separate interest coupled with an interest in the common area or membership in the association
12 is, or has been, conveyed….” (Civ. Code, § 4200.) As noted in the Complaint, Plaintiff owns
13 certain property within the Development, but Plaintiff’s members also own separate properties
14 within the Development. (See Complaint, ¶¶ 9-10.)
15 Plaintiff’s Declaration of Covenants, Conditions and Restrictions further specifies which
16 parts of the Development are owned by Plaintiff and which are owned separately by its members.
17 (See RJN, Exhibit 1, Article I, Sections 2 and 4.) The
18 Under Davis-Sterling, the area within the Development owned by Plaintiff is known as
19 the “common area” whereas the properties owned by the Plaintiff’s members are known as their
20 “separate interests.” The complaint alleges that Plaintiff is responsible for the maintenance and
21 repair of the entire roof system of the Development. (See Complaint, ¶ 10.) This is further
22 evidenced by Article IV-A of Plaintiff’s Declaration of the Covenants Conditions, and
23 Restrictions which states, in pertinent part:
24 “EXTERIOR MAINTENANCE
In addition to maintenance upon the Common Area, the
25 Association shall provide exterior maintenance upon each lot which
is subject to assessment hereunder as follows: paint, repair, replace
26 and care for roofs, gutters, downspouts, exterior building surfaces,
trees, shrubs, grass, walks, and other exterior improvements. Such
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 10
exterior maintenance shall not include glass surfaces.” (See RJN,
1 Exhibit 1.)
2 It is well established that a homeowners association can be liable to its members for
3 property damage when the homeowners association fails to maintain property. (See Ritter &
4 Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th
5 103, 124.) As alleged in the Complaint, the claims submitted to Admiral and National Union
6 were for damage to the Development’s roof system which included property owned by Plaintiff
7 and the property separately owned by Plaintiff’s members which Plaintiff is obligated to
8 maintain. (See Complaint, ¶¶ 9, 10, 28, 29, 30, 47, 48, 49, 62, & 63.)
9 Because Plaintiff’s claim relates to claims made by Plaintiff’s members, who are third
10 parties, relating to damage to their separate property interests within the development, coverage
11 under the Umbrella Policy would not be excluded under the Policy as National Union contends.
12 Plaintiff is in fact seeking coverage for its legal liabilities to third parties, its members.
13 National Union’s demurrer to the first and second causes of action fails to recognize these
14 facts evidencing that Plaintiff is an additionally named insured under the Umbrella Policy and
15 has tendered claims for damage to third party property. The demurrer to the first and second
16 causes of action should be overruled. Any deficiencies related to the adequacy of the Complaint
17 in pleading the terms of the Umbrella Policy can be cured by amendment and Plaintiff is entitled
18 to an opportunity to amend if the deficiency only relates to the adequacy of the pleading of the
19 terms of the Umbrella Policy. (See Association of Community Organizations for Reform Now v.
20 Department of Industrial Relations (1995) 41 Cal.App.4th 298, 302.)
21 C. The Complaint alleges sufficient facts to support a cause of action for Fraud –
22 Failure to Disclose.
23 National Union’s demurrer contends the Complaint fails to plead the cause of action for
24 Fraud – Failure to Disclose with particularity. It is true that such a cause of action must be
25 pleaded with “specificity”, (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472) but
26 the Complaint has done so and the demurrer to this cause of action should be overruled.
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 11
1 A cause of action for Fraud – Failure to Disclose requires a plaintiff to plead that (1) a
2 defendant has suppressed a fact which the defendant was bound to disclose, (2) the defendant
3 had a duty to disclose the fact to the plaintiff, (3) the defendant intentionally concealed or
4 suppressed the fact with the intend to defraud the plaintiff, (4) the plaintiff was unaware of the
5 fact and would not have acted as it did if it had known of the fact, and (5) that the plaintiff
6 sustained resulting damage. (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223
7 Cal.App.4th 1105, 1129.)
8 The Complaint alleges that Plaintiff submitted a claim with National Union on October
9 19, 2017 identifying itself as a named insured and that National Union opened a claim for
10 Plaintiff. (Complaint, ¶¶ 24, 73, & 74.) The Complaint further alleges that Plaintiff
11 communicated with National Union by telephone on May 21, 2028 and spoke to an adjuster for
12 National Union who informed Plaintiff that it would be allowing Admiral to handle the claim.
13 The Complaint also alleges that an adjuster for Admiral informed Plaintiff that it would not be
14 taking any action on the claim until the litigation with the Roofing Company was completed.
15 (Complaint, ¶¶ 26, 76.) The Complaint alleges that on August 28, 2018, Plaintiff followed up
16 with Admiral and National Union’s adjuster by e-mail reminding Admiral and National Union
17 that Plaintiff was a named insured on the commercial liability policy and the Umbrella Policy,
18 but did not receive a response. (Complaint, ¶ 77.) The Complaint alleges that prior to the filing
19 of this lawsuit, that National Union did not inform Plaintiff that it did not consider Plaintiff a
20 named insured under the Policy. (Complaint, ¶¶ 79-83.) The Complaint alleges that on
21 November 29, 2018 that Plaintiff contacted National Union to notify National Union of potential
22 damage to the roof system and that Admiral did not respond. (Complaint, ¶ 30.) Finally, the
23 Complaint alleges that Plaintiff settled with the roofing company in reliance on its belief that it
24 was a named insured under the Policy and would not have settled with the roofing company if it
25 had known that it was not conserved an insured under the Policy. (Complaint, ¶¶ 84-85.)
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 12
1 These facts are specific enough to support each element of the cause of action. First,
2 these facts clearly and specifically state that National Union failed to disclose that it did not
3 consider Plaintiff to be an insured under the Umbrella Policy until after Plaintiff filed the lawsuit.
4 Second, these facts also clearly and specifically state that National Union had a duty to
5 disclose that it did not consider Plaintiff an insured under the Policy by nature of the fact that
6 Plaintiff had filed a claim identifying itself as a named insured and National Union opened a
7 claim knowing that Plaintiff considered itself to be a named insured. By opening the claim,
8 National Union had a duty to disclose to Plaintiff that it did not consider Plaintiff to be its
9 insured. This duty is recognized by statute through Insurance Code section 790.03 subdivision
10 (h) subparagraph (1), which states that an insurance company has a duty to not misrepresent
11 “…to claimants pertinent facts or insurance policy provisions relating to any coverages at
12 issue.”1 Whether Plaintiff qualified as an insured under the Umbrella Policy was certainly a
13 pertinent fact relating to the coverage of the claim filed by Plaintiff and National Union had a
14 duty to disclose to Plaintiff that it did not consider Plaintiff to be a named insured under the
15 Umbrella Policy.
16 Third, the Complaint alleges that Plaintiff made multiple attempts to communicate with
17 National Ujnion regarding its claim and asserting its standing as a named insured. The
18 Complaint alleges that National Union, through Admiral, told Plaintiff that it would not take any
19 action on the claim pending the resolution of the litigation but did not notify Plaintiff that it did
20 not consider Plaintiff an insured until after Plaintiff filed the lawsuit, which evidences National
21 Union’s intent to defraud Plaintiff. “…[T]he only intent by a defendant necessary to prove a
22 case of fraud is the intent to induce reliance. Moreover, liability is affixed not only where the
23 Plaintiff’s reliance is intended by the defendant but also where it is reasonably expected to
24 occur.” (Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 85, 93 [emphasis in original].) “Few
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1
While there is no direct private right of action for a violation of Insurance Code section 790.03 subdivision (h) (See
26 Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, 313), acts which violate Insurance Code
section 790.03 subdivision (h) can also constitute common law fraud. (See Diaz v. Allstate Ins. Group (C.D. Cal.
27 1998) 185 F.R.D. 581, 594-595.)
MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 13
1 defrauding defendants give any serious thought to the nature or quality of the harm which could
2 befall the victims who rely on their deceptive acts.” (Id.) Plaintiff’s reliance on coverage as a
3 named insured in seeking to resolve the litigation with the Roofing Company in order to pursue
4 the insurance coverage was reliance that reasonably expected to occur by concealing the fact that
5 National Union did not consider Plaintiff an insured.
6 Finally, the Complaint alleges that Plaintiff was not aware that National Union did not
7 consider Plaintiff to be an insured and that Plaintiff would not have settled the litigation with the
8 Roofing Company had it know that National Union did not consider Plaintiff to be a named
9 insured. By settling with the Roofing Company, Plaintiff was damaged by foregoing the right to
10 proceed to trial on its claims against the Roofing Company.
11 The Complaint sufficiently alleges a cause of action for fraud – failure to disclose against
12 National Union for failing to disclose that it did not consider Plaintiff to be a named insured
13 under the Policy and National Union’s demurrer should be overruled.
14 IV. CONCLUSION
15 For the foregoing reasons, Plaintiff respectfully requests the Court to overrule National
16 Union’s demurrer or, alternatively, provide Plaintiff to amend the First Amended Complaint to
17 correct any deficiencies determined by the Court.
18 Dated: December 30, 2020 CLOVIS LAW GROUP LLP
19
George J. Vasquez,
20 Attorney for Plaintiff, Shaw Creek Homeowners
Association
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MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER
TO FIRST AMENDED COMPLAINT - 14
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George J. Vasquez, SBN 291395 E-FILED 1 Clovis Law Group LLP 12/30/2020 2:18 PM 725 Pollasky Ave., Ste. 101 Superior Court of California 2 Clovis, CA 93612 County of Fresno Telephone: (559) 900-2806 3 Facsimile: (559) 314-6214 By: C. York, Deputy E-mail: george@clovislawgroup.com 4 Attorney for Shaw Creek Homeowners Association 5 SUPERIOR COURT OF CALIFORNIA 6 COUNTY OF FRESNO – CIVIL UNLIMITED 7 8 SHAW CREEK HOMEOWNERS ASSOCIATION, a corporation; Case No.: 20CECG00772 9 Plaintiff, MEMORANDUM OF POINTS AND 10 AUTHORITIES IN OPPOSITION TO v. DEFENDANT NATIONAL UNION FIRE 11 INSURANCE COMPANY OF ADMIRAL INSURANCE GROUP, LLC, a PITTSBURGH, PA’S DEMURRER TO 12 limited liability company; NATIONAL FIRST AMENDED COMPLAINT UNION FIRE INSURANCE COMPANY 13 OF PITTSBURGH, PA., a corporation; TOP CONTRACTORS INSURANCE 14 SERVICES, INC., a corporation; and DOES 1 through 50, inclusive; 15 Defendants. 16 17 18 19 20 21 22 23 24 25 26 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 1 TABLE OF CONTENTS 1 I. Introduction 3 2 II. Legal Standard 4 3 III. Legal Argument 5 4 5 A. The Complaint alleges sufficient facts evidencing that Plaintiff became an additionally 6 named insured under the Umbrella Policy through two different ways. 5 7 1. Plaintiff became an additionally named insured under the commercial liability policy 8 through the written contract with the Roofing Company which required the Roofing 9 Company to provide insurance for the Roofing Project with Plaintiff as an additionally 10 named insured. 6 11 2. The Complaint alleges that Top Contractor Insurance Services, Inc. was approached 12 to cause the commercial liability policy and the Umbrella Policy to be endorsed to add 13 Plaintiff as an additionally named insured, but may have failed to cause the commercial 14 liability policy and the Umbrella Policy to be so endorsed. The answer of Top Contractor 15 Insurance Services, Inc. places this fact question at issue. 9 16 B. Coverage is required under the Umbrella Policy for damage to the properties separately 17 owned by Plaintiff’s members and not owned by Plaintiff. 10 18 C. The Complaint alleges sufficient facts to support a cause of action for Fraud – Failure to 19 Disclose. 11 20 IV. Conclusion 14 21 22 23 24 25 26 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 2 1 I. INTRODUCTION 2 Shaw Creek Homeowners Association’s (“Plaintiff”) First Amended Complaint (the 3 “Complaint”) sufficiently alleges causes of action against its commercial liability insurer 4 Defendant Admiral Insurance Company (“Admiral”) and its umbrella insurer, Defendant Nationa 5 Union Fire insurance Company of Pittsburgh, Pa. (“National Union”) for breach of contract, 6 breach of the implied covenant of good faith and fair dealing, and fraud – failure to disclose. 7 Plaintiff’s claims against National Union relate to an umbrella insurance policy (the “Umbrella 8 Policy”) which provides coverage in addition to the coverage provided by Admiral’s commercial 9 liability policy. 10 National Union’s demurrer claims that the Complaint is not adequately pled, but fails to 11 address the relevant allegations relating to the contractual relationship between Plaintiff and 12 National Union, the allegations relating to the terms of the Umbrella Policy, and the nature of the 13 claims presented under the policy which are for damage to third parties’ properties, Plaintiff’s 14 members. 15 A closer reading of the Complaint and matters subject to judicial notice reveals that the 16 Complaint alleges sufficient facts showing that Plaintiff became an additional insured under the 17 Umbrella Policy. The Complaint alleges that Plaintiff entered a written contract with the 18 Roofing Company which required the Roofing Company to secure insurance with Plaintiff 19 named as an additionally named insured under both the Roofing Company’s commercial liability 20 and umbrella policies. The Complaint also alleges that based on information and belief, that 21 Plaintiff became an additionally named insured under both the commercial and umbrella 22 policies. 23 Under the endorsement entitled “Additional Insured –Owners, Lessees or Contractors – 24 Scheduled Person or Organization” of the Policy, the written agreement with the Roofing 25 Company automatically made Plaintiff an additionally named insured under the commercial 26 liability policy. The Complaint also alleges that Defendant Top Contractors Insurance Services, 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 3 1 Inc. was asked to cause the Policy to be endorsed with Plaintiff as an additionally named insured, 2 but may have failed to do so. Defendant Top Contractors Insurance Services, Inc. has filed an 3 answer denying these allegations thereby putting at issue whether the Policy was specifically 4 endorsed with Plaintiff as an additionally named insured. 5 The Complaint also alleges facts evidencing that as additionally named insured under the 6 Policy, Plaintiff submitted claims for property damage to the separate property of Plaintiff’s 7 members, not just Plaintiff’s property. The Complaint also alleges that Plaintiff, as a 8 homeowners association governed by the Davis-Sterling Act (Civ. Code, §§ 4000 et seq.), is 9 legally liable to its members to maintain their separate property roofs and is liable for damage to 10 their roofs. 11 National Union’s demurrer ignores these facts. A complete reading of the facts alleged in 12 the Complaint and the reasonable inferences that can be drawn from them require National 13 Union’s demurrer to be overruled. 14 II. LEGAL STANDARD 15 A defendant can object to a complaint by demurrer if “[t]he pleading does not state facts 16 sufficient to constitute a cause of action.” (Code Civ. Proc., §§ 430.30, 430.10(e).) 17 A demurrer tests the legal sufficiency of a complaint. (See Coastside Fishing Club v. 18 California Resources Agency (2008) 158 Cal.App.4th 1183, 1191-1192.) In considering a 19 demurrer, a court is to “…assume the truth of the complaint’s properly pleaded or implied factual 20 allegations.” (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) The court also 21 considers matters which may be judicially noticed. (Blank v. Kirwan (1985) 39 Cal.3d 311, 22 318.) 23 A general demurrer tests whether the allegations of a complaint have provided sufficient 24 factual basis to state a cause of action. (See Colvig v. RKO General, Inc. (1965) 232 Cal.App.2d 25 56, 63.) A general demurrer should be overruled if a complaint includes sufficient factual 26 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 4 1 allegations to support a “…cause of action under any possible legal theory.” (Lee Newman, 2 M.D., Inc. v. Wells Fargo Bank (2001) 87 Cal.App.4th 73, 79.) 3 A special demurrer tests whether a complaint is uncertain, meaning ambiguous and 4 unintelligible. (Code Civ. Proc., § 430.10(f).) “A demurrer for uncertainty is strictly construed, 5 even where a complaint is in some respects uncertain, because ambiguities can be clarified under 6 modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 7 612, 616.) A demurrer for uncertainty should be overruled when the allegations of the complaint 8 sufficiently apprise the defendant of the claims being made. (See Id.) 9 III. LEGAL ARGUMENT 10 The demurrer challenges the sufficiency of the facts alleged in the Complaint as they 11 relate to the first two causes of action for breach of contract and breach of the implied covenant 12 of good faith and fair dealing first based on a purported lack of contractual relationship between 13 Plaintiff and National Union and second based on a purported lack of coverage under the 14 Umbrella Policy even if Plaintiff. As shown below, the Complaint alleges sufficient facts 15 supporting the existence of a contractual relationship between Plaintiff and National Union as 16 well as a basis for coverage. 17 The demurrer challenges the sufficiency of the facts alleged in the Complaint as they 18 relate to the third cause of action for Fraud – Failure to Disclose based on an alleged lack of 19 particularity. As shown below, the Complaint alleges sufficient facts for this cause of action as 20 well. 21 A. The Complaint alleges sufficient facts evidencing that Plaintiff became an 22 additionally named insured under the Umbrella Policy through two different ways. 23 National Union’s demurrer primarily challenges the sufficiency of the Complaint based 24 on its contention that the Complaint cannot allege facts showing that is an additionally named 25 insured under the Umbrella Policy, but does not provide any analysis of the facts alleged in the 26 Complaint. 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 5 1 The Complaint, however, alleges several facts that evidence that Plaintiff became and 2 additionally named insured under the commercial liability policy and in turn the Umbrella Policy 3 with National Union through different mechanisms. 4 As an umbrella liability insurance policy, the Umbrella Policy provides excess coverage 5 to the commercial liability policy issued by Admiral. (See Padilla Construction Co., Inc. v. 6 Transportation Ins. Co. (2007) 150 Cal.App.4th 984, 987.) Under the commercial liability 7 policy’s “Additional Insured –Owners, Lesees or Contractors –Scheduled Person or 8 Organization” and second through Top Contractors Insurance Services, Inc. causing the 9 Umbrella Policy to be specifically endorsed with Plaintiff as an additionally named insured. The 10 Complaint also alleges that it is informed and believes that the Roofing Company approached 11 Top Contractor’s Insurance Company to have the commercial liability policy as well as the 12 Umbrella Policy’s endorsed with Plaintiff as an additionally named insured. The Complaint 13 alleges that Top Contractor’s may have failed to cause this endorsement, but that allegation has 14 been denied by Top Contractor’s and is now a factual issue of the case. 15 If there is any deficiency in the sufficiency of the specificity of the terms of the Umbrella 16 Policy, such deficiency can be cured by giving Plaintiff leave to amend. 17 1. Plaintiff became an additionally named insured under the commercial liability policy through the written contract with the Roofing Company which required the Roofing 18 Company to provide insurance for the Roofing Project with Plaintiff as an additionally named insured. 19 The endorsement to the commercial liability policy entitled “Additional Insured – 20 Owners, Lesees or Contractors –Scheduled Person or Organization” included an addition to the 21 schedule of named insured which added: 22 “Any person or organization that is an owner of real property or 23 personal property on which you are performing ongoing operations, or a contractor on whose behalf you are performing ongoing 24 operations, but only if coverage as an additional insured is required by a written contract or written agreement that is an ‘insured 25 contract’, and provided the ‘bodily injury’ or ‘property damage’ first occurs, or the ‘personal and advertising injury’ offense is first 26 committed, subsequent to the execution of the contract or agreement.” 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 6 1 The Complaint’s allegations evidence that Plaintiff became an additionally named 2 insured under this endorsement under the rules governing interpretation of an insurance policy: 3 “While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation. 4 [Citation.] The fundamental goal of contractual interpretations is to give effect to the mutual intention of the parties. [Citation.] If 5 contractual language is clear and explicit, it governs. [Citation.] On the other hand, ‘[i]f the terms of a promise are in any respect 6 ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promise 7 understood it.’[Citations.] this rule, as applied to a promise of coverage in an insurance policy, protects not the subjective beliefs 8 of the insurer but, rather, ‘the objectively reasonable expectations of the insured.’ [Citation.] Only if this rule does not resolve the 9 ambiguity do we then resolve it against the insurer. [Citation.]” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264- 10 1265.) 11 “In interpreting an insurance policy we apply the general principle that doubts as to 12 meaning must be resolved against the insurer and that any exception for the performance of the 13 basic underlying obligation must be so stated as clearly to apprise the insured of its effect.” 14 (Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 269.) 15 The endorsement here is an additional insured endorsement which depends on the 16 existence of a written contract between the named insured, the Roofing Company, and the 17 additional insured, Plaintiff. “When additional insured endorsements, by their own terms, 18 depend on the existence of a written contract between the named insured and the additional 19 insured, the contract is a significant circumstance in determining the objectively reasonable 20 expectations of the additional insured. This is true whether or not the insurer ever actually read 21 the contract. [Citation.]” (St. Paul Mercury Ins. Co. v. Frontier Pacific Ins. Co. (2003) 111 22 Cal.App.4th 1234, 1245.) “…[T]here is no demonstrable public policy favoring a narrow 23 interpretation of additional insured clauses. [Citation.] (Fireman’s Fund Ins. Companies v. 24 Atlantic Richfield Co. (2001) 94 Cal.App.4th 842, 853.) Accordingly, the written contract 25 between Plaintiff and the Roofing Company determines whether Plaintiff qualifies as an 26 additionally named insured under this endorsement. 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 7 1 Paragraphs 13-17 of the Complaint allege that Plaintiff and the Roofing Company 2 negotiated a contract for the Roofing Company to complete the Roofing Project and that through 3 these negotiations, Plaintiff and the Roofing Company specifically agreed that the Roofing 4 Company would secure insurance for the Roofing Project with Plaintiff as an additionally named 5 insured. Plaintiff and the Roofing Company entered into a written contract reflecting these 6 negotiations which specified that the Roofing Company was “…to provide all Labor, Materials, 7 Insurance, Warranty and Equipment.” 8 Under the well-established rules of contract interpretation, the written agreement between 9 Plaintiff and the Roofing Company required the Roofing Company to obtain insurance for the 10 Roofing Project with Plaintiff as an additionally named insured: “The rules governing the role of the court in interpreting a written 11 instrument are well established. The interpretation of a contract is a judicial function. [Citations.] In engaging in this function, the trial 12 court ‘give[s] effect to the mutual intention of the parties as it existed’ at the time the contract was executed. [Citation.] 13 Ordinarily, the objective intent of the contracting parties a legal question determined solely by reference to the contract’s terms. 14 [Citations.] 15 The court generally may not consider extrinsic evidence of any prior agreement or contemporaneous oral agreement to vary or contradict 16 the clear and unambiguous terms of a written, integrated contract. [Citations.] Extrinsic evidence is admissible, however, to interpret 17 an agreement when a material term is ambiguous. [Citation.].” (Wolfe v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 18 1107, 1125-1126.) 19 The finalized written contract between Plaintiff and the Roofing Company does not 20 expressly identify what kind of insurance the Roofing Company was to obtain for the Roofing 21 Project, or what limits of liability were to be, or who was to be named as an insured on the 22 policies, but those requirements . 23 The meaning of the written contract’s requirement for the Roofing Company to obtain 24 insurance is therefore ambiguous and is susceptible to more than one reasonable interpretation 25 which requires extrinsic evidence “…to determine the contracting parties’ objective intent.” (See 26 Wolfe v. Walt Disney Pictures & Television, supra, 162 Cal.App.4th at p. 1126.) The allegations 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 8 1 related to the negotiations of the written contract between Plaintiff and the Roofing Company 2 allege the extrinsic evidence that will prove that the written contract between Plaintiff and 3 Roofing Company required the Roofing Company to obtain insurance for the Roofing Project 4 with Plaintiff as an additionally named insured. 5 The commercial liability policy does not specify what form the written contract must take 6 to qualify under this endorsement. The objectively reasonable expectations of both the Roofing 7 Company and Plaintiff were that the written agreement requiring the Roofing Company to 8 provide insurance for the Roofing Project included the requirement for the Roofing Company to 9 name Plaintiff as an additionally named insured on its policies as they had negotiated and agreed 10 before signing the contract. Accordingly, the written contract between Plaintiff and the Roofing 11 Company caused Plaintiff to become an additionally named insured under the Policy. 12 2. The Complaint alleges that Top Contractor Insurance Services, Inc. was approached to cause the commercial liability policy and the Umbrella Policy to be endorsed to add 13 Plaintiff as an additionally named insured, but may have failed to cause the commercial liability policy and the Umbrella Policy to be so endorsed. The answer of 14 Top Contractor Insurance Services, Inc. places this fact question at issue. 15 The Complaint alleges that Defendant Top Contractors Insurance Services, Inc. issued 16 certificates of insurance identifying Plaintiff as an additional named insured on the commercial 17 liablilty policy and the Umbrella Policy’s term in effect at the time Plaintiff contract with the 18 Roofing Company and for the renewed term. (Complaint, ¶¶ 15, 16 & 20.) The Complaint also 19 alleges Defendant Top Contractors Insurance Services, Inc. may have failed to cause Plaintiff to 20 be specifically endorsed as an additionally named insured under the commercial liability policy 21 and the Umbrella Policy. (Complaint, ¶¶ 15, 37-39.) 22 Top Contractors Insurance Services, Inc. has filed an answer to the Complaint with a 23 general denial, in effect denying the allegation that it failed to cause Plaintiff to be specifically 24 endorsed as an additionally named insured under the Policy. (RJN, Exhibit 2.) “The effect of a 25 general denial is to ‘put in issue the material allegations of the complaint.’” (Advantec Group, 26 Inc. v. Edwin’s Plumbing Co., Inc. (2007) 153 Cal.App.4th 621, 627.) By denying paragraphs 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 9 1 15, 38, and 39 of the Complaint, Defendant Top Contractors Insurance Services, Inc. is denying 2 that it failed to cause Plaintiff to be specifically endorsed as an additionally named insured under 3 the Admiral Policy, putting the fact question at issue for trial. 4 B. Coverage is required under the Umbrella Policy for damage to the properties 5 separately owned by Plaintiff’s members and not owned by Plaintiff. 6 As alleged in paragraphs 9-10 of the Complaint, Plaintiff is a homeowners association 7 organized under the Davis-Sterling Common Interest Development Act (“Davis-Sterling”) (Civ. 8 Code, §§ 4000 et seq.) Plaintiff is an “association” under Davis-Sterling, as it is a nonprofit 9 corporation created for the purpose of managing a common interest development. (See Civ. 10 Code, § 4080.) A common interest development under Davis-Sterling is created “…whenever a 11 separate interest coupled with an interest in the common area or membership in the association 12 is, or has been, conveyed….” (Civ. Code, § 4200.) As noted in the Complaint, Plaintiff owns 13 certain property within the Development, but Plaintiff’s members also own separate properties 14 within the Development. (See Complaint, ¶¶ 9-10.) 15 Plaintiff’s Declaration of Covenants, Conditions and Restrictions further specifies which 16 parts of the Development are owned by Plaintiff and which are owned separately by its members. 17 (See RJN, Exhibit 1, Article I, Sections 2 and 4.) The 18 Under Davis-Sterling, the area within the Development owned by Plaintiff is known as 19 the “common area” whereas the properties owned by the Plaintiff’s members are known as their 20 “separate interests.” The complaint alleges that Plaintiff is responsible for the maintenance and 21 repair of the entire roof system of the Development. (See Complaint, ¶ 10.) This is further 22 evidenced by Article IV-A of Plaintiff’s Declaration of the Covenants Conditions, and 23 Restrictions which states, in pertinent part: 24 “EXTERIOR MAINTENANCE In addition to maintenance upon the Common Area, the 25 Association shall provide exterior maintenance upon each lot which is subject to assessment hereunder as follows: paint, repair, replace 26 and care for roofs, gutters, downspouts, exterior building surfaces, trees, shrubs, grass, walks, and other exterior improvements. Such 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 10 exterior maintenance shall not include glass surfaces.” (See RJN, 1 Exhibit 1.) 2 It is well established that a homeowners association can be liable to its members for 3 property damage when the homeowners association fails to maintain property. (See Ritter & 4 Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 5 103, 124.) As alleged in the Complaint, the claims submitted to Admiral and National Union 6 were for damage to the Development’s roof system which included property owned by Plaintiff 7 and the property separately owned by Plaintiff’s members which Plaintiff is obligated to 8 maintain. (See Complaint, ¶¶ 9, 10, 28, 29, 30, 47, 48, 49, 62, & 63.) 9 Because Plaintiff’s claim relates to claims made by Plaintiff’s members, who are third 10 parties, relating to damage to their separate property interests within the development, coverage 11 under the Umbrella Policy would not be excluded under the Policy as National Union contends. 12 Plaintiff is in fact seeking coverage for its legal liabilities to third parties, its members. 13 National Union’s demurrer to the first and second causes of action fails to recognize these 14 facts evidencing that Plaintiff is an additionally named insured under the Umbrella Policy and 15 has tendered claims for damage to third party property. The demurrer to the first and second 16 causes of action should be overruled. Any deficiencies related to the adequacy of the Complaint 17 in pleading the terms of the Umbrella Policy can be cured by amendment and Plaintiff is entitled 18 to an opportunity to amend if the deficiency only relates to the adequacy of the pleading of the 19 terms of the Umbrella Policy. (See Association of Community Organizations for Reform Now v. 20 Department of Industrial Relations (1995) 41 Cal.App.4th 298, 302.) 21 C. The Complaint alleges sufficient facts to support a cause of action for Fraud – 22 Failure to Disclose. 23 National Union’s demurrer contends the Complaint fails to plead the cause of action for 24 Fraud – Failure to Disclose with particularity. It is true that such a cause of action must be 25 pleaded with “specificity”, (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472) but 26 the Complaint has done so and the demurrer to this cause of action should be overruled. 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 11 1 A cause of action for Fraud – Failure to Disclose requires a plaintiff to plead that (1) a 2 defendant has suppressed a fact which the defendant was bound to disclose, (2) the defendant 3 had a duty to disclose the fact to the plaintiff, (3) the defendant intentionally concealed or 4 suppressed the fact with the intend to defraud the plaintiff, (4) the plaintiff was unaware of the 5 fact and would not have acted as it did if it had known of the fact, and (5) that the plaintiff 6 sustained resulting damage. (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 7 Cal.App.4th 1105, 1129.) 8 The Complaint alleges that Plaintiff submitted a claim with National Union on October 9 19, 2017 identifying itself as a named insured and that National Union opened a claim for 10 Plaintiff. (Complaint, ¶¶ 24, 73, & 74.) The Complaint further alleges that Plaintiff 11 communicated with National Union by telephone on May 21, 2028 and spoke to an adjuster for 12 National Union who informed Plaintiff that it would be allowing Admiral to handle the claim. 13 The Complaint also alleges that an adjuster for Admiral informed Plaintiff that it would not be 14 taking any action on the claim until the litigation with the Roofing Company was completed. 15 (Complaint, ¶¶ 26, 76.) The Complaint alleges that on August 28, 2018, Plaintiff followed up 16 with Admiral and National Union’s adjuster by e-mail reminding Admiral and National Union 17 that Plaintiff was a named insured on the commercial liability policy and the Umbrella Policy, 18 but did not receive a response. (Complaint, ¶ 77.) The Complaint alleges that prior to the filing 19 of this lawsuit, that National Union did not inform Plaintiff that it did not consider Plaintiff a 20 named insured under the Policy. (Complaint, ¶¶ 79-83.) The Complaint alleges that on 21 November 29, 2018 that Plaintiff contacted National Union to notify National Union of potential 22 damage to the roof system and that Admiral did not respond. (Complaint, ¶ 30.) Finally, the 23 Complaint alleges that Plaintiff settled with the roofing company in reliance on its belief that it 24 was a named insured under the Policy and would not have settled with the roofing company if it 25 had known that it was not conserved an insured under the Policy. (Complaint, ¶¶ 84-85.) 26 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 12 1 These facts are specific enough to support each element of the cause of action. First, 2 these facts clearly and specifically state that National Union failed to disclose that it did not 3 consider Plaintiff to be an insured under the Umbrella Policy until after Plaintiff filed the lawsuit. 4 Second, these facts also clearly and specifically state that National Union had a duty to 5 disclose that it did not consider Plaintiff an insured under the Policy by nature of the fact that 6 Plaintiff had filed a claim identifying itself as a named insured and National Union opened a 7 claim knowing that Plaintiff considered itself to be a named insured. By opening the claim, 8 National Union had a duty to disclose to Plaintiff that it did not consider Plaintiff to be its 9 insured. This duty is recognized by statute through Insurance Code section 790.03 subdivision 10 (h) subparagraph (1), which states that an insurance company has a duty to not misrepresent 11 “…to claimants pertinent facts or insurance policy provisions relating to any coverages at 12 issue.”1 Whether Plaintiff qualified as an insured under the Umbrella Policy was certainly a 13 pertinent fact relating to the coverage of the claim filed by Plaintiff and National Union had a 14 duty to disclose to Plaintiff that it did not consider Plaintiff to be a named insured under the 15 Umbrella Policy. 16 Third, the Complaint alleges that Plaintiff made multiple attempts to communicate with 17 National Ujnion regarding its claim and asserting its standing as a named insured. The 18 Complaint alleges that National Union, through Admiral, told Plaintiff that it would not take any 19 action on the claim pending the resolution of the litigation but did not notify Plaintiff that it did 20 not consider Plaintiff an insured until after Plaintiff filed the lawsuit, which evidences National 21 Union’s intent to defraud Plaintiff. “…[T]he only intent by a defendant necessary to prove a 22 case of fraud is the intent to induce reliance. Moreover, liability is affixed not only where the 23 Plaintiff’s reliance is intended by the defendant but also where it is reasonably expected to 24 occur.” (Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 85, 93 [emphasis in original].) “Few 25 1 While there is no direct private right of action for a violation of Insurance Code section 790.03 subdivision (h) (See 26 Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, 313), acts which violate Insurance Code section 790.03 subdivision (h) can also constitute common law fraud. (See Diaz v. Allstate Ins. Group (C.D. Cal. 27 1998) 185 F.R.D. 581, 594-595.) MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 13 1 defrauding defendants give any serious thought to the nature or quality of the harm which could 2 befall the victims who rely on their deceptive acts.” (Id.) Plaintiff’s reliance on coverage as a 3 named insured in seeking to resolve the litigation with the Roofing Company in order to pursue 4 the insurance coverage was reliance that reasonably expected to occur by concealing the fact that 5 National Union did not consider Plaintiff an insured. 6 Finally, the Complaint alleges that Plaintiff was not aware that National Union did not 7 consider Plaintiff to be an insured and that Plaintiff would not have settled the litigation with the 8 Roofing Company had it know that National Union did not consider Plaintiff to be a named 9 insured. By settling with the Roofing Company, Plaintiff was damaged by foregoing the right to 10 proceed to trial on its claims against the Roofing Company. 11 The Complaint sufficiently alleges a cause of action for fraud – failure to disclose against 12 National Union for failing to disclose that it did not consider Plaintiff to be a named insured 13 under the Policy and National Union’s demurrer should be overruled. 14 IV. CONCLUSION 15 For the foregoing reasons, Plaintiff respectfully requests the Court to overrule National 16 Union’s demurrer or, alternatively, provide Plaintiff to amend the First Amended Complaint to 17 correct any deficiencies determined by the Court. 18 Dated: December 30, 2020 CLOVIS LAW GROUP LLP 19 George J. Vasquez, 20 Attorney for Plaintiff, Shaw Creek Homeowners Association 21 22 23 24 25 26 27 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S DEMURRER TO FIRST AMENDED COMPLAINT - 14