Keshish v. Allstate Ins. Co.

959 F.Supp.2d 1226

Rozik KESHISH and Vartan Keshish, Plaintiffs,

v.ALLSTATE INSURANCE COMPANY, and Does 1–10, Defendants.

Case No. CV 12–03818 MMM (JCx).

United States District Court, C.D. California.

April 22, 2013.

Anahid Barsegian, Ana Barsegian Law Offices, Glendale, CA, Ari Emanuel Moss, Law Offices of Ari Moss, Sherman Oaks, CA, for Plaintiffs.

Peter H. Klee, McKenna Long and Aldridge LLP, San Diego, CA, Theona Zhordania, McKenna Long and Aldridge LLP, Los Angeles, CA, for Defendants.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

MARGARET M. MORROW, District Judge.

On April 2, 2012, Rozik and Vartan Keshish filed this action against Allstate Insurance Company, alleging claims for breach of contract, breach of the covenant of good faith and fair dealing, elder abuse, violation of the Unruh Civil Rights Act, and violation of California's Unfair Competition Law (“UCL”).¹ The parties thereafter stipulated to dismiss the UCL claim. ² On July 30, 2012, the court granted in part and denied in part Allstate's motion for judgment on the pleadings.³ Specifically, it granted judgment in Allstate's favor on plaintiffs' Unruh Act claim, but declined to enter judgment on the remaining claims.⁴ The court also determined that plaintiffs' breach of contract claim and breach of the covenant of good faith and fair dealing were entirely duplicative, such that they were not separate claims but rather one claim for breach of the implied covenant. ⁵ The parties later stipulated to dismiss plaintiffs' elder abuse claim.⁶ Thus, the claim for breach of the covenant of good faith and fair dealing is the sole remaining cause of action. On February 23, 2013, Allstate filed a motion for summary judgment on this claim.⁷ Plaintiffs oppose the motion.⁸

I. BACKGROUND

This case concerns a homeowners' insurance policy that Allstate issued to plaintiffs.⁹ In late August or early September 2009, a wildfire broke out in the Sunland–Tujunga area near plaintiffs' home.¹⁰ On October 2, 2009, plaintiffs' attorney submitted a claim for smoke damage to Allstate. ¹¹ She requested that a home inspection be expedited because Rozik Keshish was a kidney transplant recipient.¹² To accommodate this request, Allstate assigned plaintiffs' claim to an available claims adjuster. ¹³ The adjuster inspected plaintiffs' property on October 5, 2009 to determine the scope of the smoke damage; ¹⁴ he estimated repair costs of $8,582.09, and forwarded this estimate to plaintiffs' attorney.¹⁵ On October 9, 2009, plaintiffs' attorney called the adjuster to complain that the estimate was too low; ¹⁶ in response, Allstate retained ServiceMaster, an independent contractor, to reevaluate the damage.¹⁷ Allstate also paid plaintiffs $7,582.09, which represented the amount of the original estimate minus a $1,000 deductible.¹⁸

On November 10, 2009, after evaluating the property, ServiceMaster submitted an independent estimate to Allstate. It placed the damage at $5,322.97, more than $3,000 less than the adjuster's original estimate.¹⁹ ServiceMaster opined that this amount was sufficient to complete all necessary cleaning and repairs.²⁰ On November 20, 2009, plaintiffs' counsel sent Allstate a letter objecting to ServiceMaster's estimate; she included with the letter the estimates of two contractors plaintiffs had retained; they placed cleaning and repair costs at $81,326.45.²¹ Allstate determined that this estimate was too high, and advised plaintiffs that it would not pay any additional amounts on the claim.²² Allstate closed plaintiffs' file on December 28, 2009; it sent a letter instructing them to contact it immediately if they discovered additional damage not accounted for in Allstate's original estimate.²³

Two months later, plaintiffs retained an independent industrial hygienist to inspect their property and prepare a report regarding the level of smoke damage to the home.²⁴ Plaintiffs did not advise Allstate that they had hired a hygienist or that they had an additional evaluation of the property conducted.²⁵ From mid-February to May 2010, plaintiffs' attorney sent five letters to Allstate, demanding an appraisal of the loss under the policy's appraisal provision.²⁶ None of these letters enclosed a copy of the hygienist's report or mentioned its existence. ²⁷ The letters were not received by the proper Allstate representatives until June 3, 2010, because they referenced an incorrect claim number.²⁸ On June 4, 2010, Allstate responded that it would review any new information plaintiffs had obtained since it had closed its file. ²⁹ Allstate sent a follow-up letter on June 15, 2010, again requesting any new information plaintiffs had received.³⁰ Plaintiffs did not provide the hygienist's report.

Between July 2010 and January 2012, plaintiffs and Allstate exchanged several letters in an attempt to select appraisers and conduct the appraisal process. ³¹ The process was delayed several months because plaintiffs did not timely select an umpire.³² Once they did, plaintiffs did not immediately pay him, and the umpire refused to participate in the appraisal until he had been compensated.³³ Finally, on January 17, 2012, Allstate received notice that plaintiffs' umpire anticipated he would be paid and was prepared to engage in the appraisal process.³⁴ Allstate also learned for the first time that plaintiffs had retained a hygienist who had prepared a report.³⁵ Allstate spoke with its appraiser, who said that the hygienist's report had been prepared in February 2010; he advised Allstate to have a hygienist report prepared and submit it to the appraisers.³⁶

Allstate retained a hygienist in late January 2012. Plaintiffs, however, refused to allow Allstate's hygienist to inspect the property. As a consequence, plaintiffs' was the only hygienist report submitted to the appraisers.³⁷ In February, 2012, the appraisal panel determined that the value of plaintiffs' loss was $42,950.³⁸ This was $34,367.91 more than Allstate's estimate, but $38,826.45 less than plaintiffs' demand. On March 23, 2012, Allstate paid the full amount of the appraisal award.³⁹

II. DISCUSSION

A. Standard Governing Motions for Summary Judgment

A motion for summary judgment must be granted when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R.Civ.Proc. 56. A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the moving party will have the burden of proof on an issue at trial, the movant must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. On an issue as to which the nonmoving party will have the burden of proof, however, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case. See id. If the moving party meets its initial burden, the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, “specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Fed.R.Civ.Proc. 56(e)(2). Evidence presented by the parties at the summary judgment stage must be admissible. Fed. R.Civ.Proc. 56(e)(1). In reviewing the record, the court does not make credibility determinations or weigh conflicting evidence. Rather, it draws all inferences in the light most favorable to the nonmoving party. See T.W. Electrical Service, Inc. v. Pacific Electrical Contractors Ass'n, 809 F.2d 626, 630–31 (9th Cir.1987).

B. Whether Allstate is Entitled to Summary Judgment on Plaintiffs' Breach of the Covenant of Good Faith and Fair Dealing Claim

California law implies a covenant of good faith and fair dealing in every contract. Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., 2 Cal.4th 342, 371, 6 Cal.Rptr.2d 467, 826 P.2d 710 (1992); see also Chodos v. West Publishing Co., 292 F.3d 992, 996 (9th Cir.2002) (noting that “California law, like the law in most states, provides that a covenant of good faith and fair dealing is an implied term in every contract” (citations omitted)). The covenant is implied “to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenant) frustrates the other party's rights [to] the benefits of the contract.” Marsu B.V. v. Walt Disney Co., 185 F.3d 932, 938 (9th Cir.1999) (citing Los Angeles Equestrian Ctr., Inc. v. City of Los Angeles, 17 Cal.App.4th 432, 447, 21 Cal.Rptr.2d 313 (1993)). This principle applies to insurance policies just as it does to other types of contracts. Kransco v. Am. Empire Surplus Lines Ins. Co., 23 Cal.4th 390, 400, 97 Cal.Rptr.2d 151, 2 P.3d 1 (2000). “In order to establish a breach of the implied covenant of good faith and fair dealing under California law, a plaintiff must show: (1) [that] benefits due under the policy were withheld; and (2) [that] the reason for withholding benefits was unreasonable or without proper cause.” Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir.2001) (citing Love v. Fire Ins. Exch., 221 Cal.App.3d 1136, 1151, 271 Cal.Rptr. 246 (1990)).

“The implied covenant of good faith and fair dealing acts as a ‘supplement to express contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the other party's rights to the benefits of the agreement.’ ” Moncada v. Allstate Ins. Co., 471 F.Supp.2d 987, 996 (N.D.Cal.2006) (quoting Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1, 44, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995)). There can be a breach of the...