HERRERA v. AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA

CASE NO.: VC067026

HEARING: 08/08/19

JUDGE: KRISTIN S. ESCALANTE

#11

TENTATIVE ORDER

Defendants INTERINSURANCE EXCHANGE OF THE AUTOMOBILE CLUB and AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA’s demurrer to Plaintiff’s First Amended Complaint is SUSTAINED with leave amend in part, and OFF-CALENDAR as MOOT in part. CCP §430.10(e). To the extent the demurrers are sustained with leave to amend, Plaintiffs have 20 days to amend.

Defendants INTERINSURANCE EXCHANGE OF THE AUTOMOBILE CLUB and AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA’s motion to strike portions of Plaintiff’s First Amended Complaint is MOOT in part, GRANTED without leave to amend in part, and OFF-CALENDAR as MOOT in part.

Moving Party to give Notice.

No Opposition(s) filed as of August 6, 2019.

The demurrer and motion to strike as to Defendant AUTOMOBILE CLUB OF SOUTHERN CALIFORNIA are OFF-CALENDAR as MOOT. A Request for Dismissal without Prejudice as to Automobile Club of Southern California was entered on 05/22/19.

This action involving insurance coverage was filed by Plaintiffs SUMIKO HERRERA and ANTHONY HERRERA on March 26, 2018. The relevant facts, as alleged, are as follows: “On or about February 8, 2016, Plaintiffs…entered into a contract for insurance coverage with Defendant[] . . . INTERINSURANCE EXCHANGE. Under that contract of insurance, . . . INTERINSURANCE EXCHANGE would provide insurance coverage for the vehicle owned by Plaintiffs…. Such coverage includes, but is not limited to, Personal Liability, Property Damage, Comprehensive (Loss and/or Damage) and Collision (Loss and/or Damage).” (FAC ¶12.) “Sometime in the middle of the night, on or about April 7, 2016 to April 8, 2016, the Vehicle was removed from Plaintiffs’ residence….” (FAC ¶14.) On or about April 8, 2016, 3 uniformed sheriff’s deputies informed Plaintiff SUMIKO HERRERA that “Plaintiff Anthony Herrera had hit another vehicle and left the scene of the accident.” (FAC ¶15.) Plaintiff Sumiko Herrera informed the deputies that she believed the vehicle was actually stolen, and asked the deputies to take a police report for the alleged theft (FAC 17-18). The deputies refused to take the report. (FAC 19-21). Plaintiffs subsequently retrieved the vehicle and noticed that it had suffered damage. Plaintiffs submitted claims pursuant to the policy, but the claims were denied on the grounds that Interinsurance Exhange had concluded that a theft had not occurred and that Plaintiffs had failed to provide requested information. (FAC 25 & Ex. B). Plaintiffs allege that Defendants failed to provide insurance coverage to Plaintiffs pursuant to the parties’ insurance agreement.

Plaintiffs’ FAC asserts the following causes of action: (1) Breach of Contract; (2) Contractual Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing; (4) Bad Faith; and (5) Unfair Trade Practices.

Defendants INTERINSURANCE EXCHANGE OF THE AUTOMOBILE CLUB (“Exchange”) demurs to Plaintiffs’ second, third, fourth, and fifth causes of action pursuant to CCP §430.10(e).

Second and Third Causes of Action – Contractual Breach of the Implied Covenant of Good Faith and Fair Dealing and Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing

“Every contract imposes on each party an implied duty of good faith and fair dealing.” Progressive W. Ins. Co. v. Superior Court (2005) 135 Cal. App. 4th 263, 276–78. “Simply stated, the burden imposed is that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” Id. (internal quotation marks deleted). “[I]n the context of the insurance contract, it has been held that the insurer's responsibility to act fairly and in good faith with respect to the handling of the insured's claim is not the requirement mandated by the terms of the policy itself—to defend, settle, or pay. It is the obligation ... under which the insurer must act fairly and in good faith in discharging its contractual responsibilities.” Id. (internal quotation marks and citations deleted).

“Because peace of mind and security are the principal benefits for the insured, the courts have imposed special obligations, consonant with these special purposes, seeking to encourage insurers promptly to process and pay claims. Thus, an insurer must investigate claims thoroughly; it may not deny coverage based on either unduly restrictive policy interpretations or standards known to be improper; it may not unreasonably delay in processing or paying claims.” Id. (internal quotation marks and citations deleted).

A plaintiff seeking to state a claim for breach of the implied covenant of good faith and fair dealing in an insurance contract must plead two elements (among others): “(1) benefits due under the policy must have been withheld; and (2) the reason for withholding benefits must have been unreasonable or without proper cause.” Id. (internal quotation marks deleted). It is the allegation that the insurance company acted unreasonably or without proper cause that distinguishes the claim for contractual or tortious breach of the implied warranty of good faith and fair dealing from a simple breach of contract claim.

Here, the First Amended Complaint alleges simply that the insurer breached its duty of good faith and fair dealing by refusing to properly compensate Plaintiffs for a loss that should have been covered under the policy. Plaintiffs do not allege that the reasons for withholding benefits were unreasonable or without proper cause, and the Court cannot infer such bad faith from the facts that have been alleged. The demurrer to the third cause of action is SUSTAINED with leave to amend. Plaintiffs have 20 days to amend.

Fourth Cause of Action – Bad Faith

In the Fourth Cause of Action, Plaintiffs purport to allege a claim for “bad faith.” Plaintiffs’ claims for breach of the covenant of good faith and fair dealing and insurance bad faith are duplicative. (See e.g., Archdale v. American Int’l Specialty Lines Ins. Co. (2007) 154 Cal.App.4th 449, 467.) This claim fails for the same reason that the tortious breach of covenant of good faith and fair dealing fails; Plaintiffs have not alleged that the insurer acted unreasonably or without proper cause in denying benefits. The demurrer to the fourth cause of action is SUSTAINED with leave to amend. Plaintiffs have 20 days to amend.

Fifth Cause of Action – Unfair Trade Practices

To state a claim under §17200, Plaintiffs must allege whether the conduct complained of is a fraudulent, unlawful or an unfair business practice. To bring a claim under the fraud prong, Plaintiffs must allege an affirmative misrepresentation, conduct or business practice on the part of a defendant; or an omission in violation of defendant’s duty to disclose; and that is likely to deceive members of the public. (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) To state a claim under the unfairness prong, Plaintiffs must allege that one or more of Defendants’ business practices are unfair, unlawful or fraudulent; and the remedy sought is authorized by law. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676; see also Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 337.) To state a claim under the unlawful prong, Plaintiffs must allege a violation of law and cite that law. (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 610 [demurrer to SAC which failed to allege violation of a law was properly sustained without leave to amend].)

Here, Plaintiffs have not alleged any statutory violations. Further, Plaintiffs have not alleged any fraudulent conduct or unfair business practice by Defendant. The demurrer is SUSTAINED with leave to amend as to the fifth cause of action. Plaintiffs have 20 days to amend.

Motion to Strike

The Motion to Strike punitive damages, compensatory damages, and attorney’s fees with respect to the second, third, fourth and fifth causes of action is rendered MOOT by the Court’s ruling on the demurrer above.

The only claim remaining in the First Amended Complaint as currently pleaded is a breach of contract claim. The Court considers the motion to strike attorney’s fees in connection with that claim. A motion to strike lies either when (1) there is “irrelevant, false or improper matter inserted in any pleading”; or (2) to strike any pleading or part thereof “not drawn or filed in conformity with the laws of this state, a court rule or order of court.” (CCP §436.) Attorney’s fees are allowable in a breach of contract claim only if the contract allows for recovery or if there is otherwise a statutory basis for the recovery. (CCP §1021; 1033.5(a)(1); City of Industry v. Gordon (1972) 29 Cal.App.3d 90, 93.) Here, Plaintiffs have attached the Insurance Agreement as Exhibit A to the FAC. The insurance policy does not contain an attorney fee provision and Plaintiffs have identified no statute under which attorneys fees could be awarded for the breach of contract claim. Punitive damages are also not recoverable on a breach of contract claim. Thus, the motion to strike the following portions of the Complaint is granted: Page 7, lines 13-15 (reference to attorneys’ fees); Page 10, line 19 (prayer for exemplary or punitive damages); Page 10, line 20 (prayer for attorneys’ fees). The Court does not reach the question of whether an amended complaint could properly seek punitive damages or attorneys fees on claims other than breach of contract.