Malkin v. Fed. Ins. Co.

562 F.Supp.3d 854

Katherine L. MALKIN

v.FEDERAL INSURANCE COMPANY

Case No. 2:21-cv-00172-CAS-PDx

United States District Court, C.D. California.

Filed March 7, 2022

Douglas Rawles, David Halbreich, Christopher Kuleba, for Plaintiffs.

Matthew Ponzi, for Defendant.

Proceedings: PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS (Dkt. 35, filed on February 4, 2022)

DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS (Dkt. 33, filed on February 4, 2022)

CHRISTINA A. SNYDER

I. INTRODUCTION

On December 14, 2020, plaintiff Katherine L. Malkin filed this action in Santa Barbara County Superior Court against defendant Federal Insurance Company, alleging (1) breach of contract; and (2) breach of the implied covenant of good faith and fair dealing. See Dkt. 1-1 ("Compl."). Defendant issued an "all risk" insurance policy (the "Policy") to plaintiff with respect to her home located at 2910 Sycamore Canyon Road, Montecito, CA 93108 ("Home"). Id. ¶ 7. Plaintiff asserts that the Home and its contents suffered damage due to fire, ash, and rain during the January 27, 2017 to January 27, 2018 coverage period. Id. ¶¶ 25-27, 30-33, 35. Defendant rejected plaintiff's claims, and denied coverage for certain damage to the Home. Id. ¶¶ 75-76.

On January 6, 2021, defendant answered plaintiff's complaint. Dkt. 1-3. On January 8, 2021, defendant removed this action to this Court on the basis of diversity of citizenship. See Dkt. 1 ("Removal") ¶ 1.

On December 15, 2021, the parties filed a motion for leave to file cross-motions for judgment on the pleadings. Dkt. 28. Therein, the parties stated that "[s]olely for purposes of the parties’ cross-motions for Judgment on the Pleadings ... Malkin and Federal would stipulate to a set of undisputed facts and allegedly applicable policy exclusions [ ] in support of their respective cross-motions. Based on these Stipulated Facts, the Court [is requested to rule] as a matter of law whether, under the facts and defenses alleged, the policy affords coverage for Mrs. Malkin's claim or whether certain policy language and exclusions contained in the policy would preclude coverage.... Thus, the parties’ briefing would focus on policy interpretation, which is a question of law for the Court." Id. at 3. The Court granted leave to file the cross-motions on December 28, 2021. Dkt. 29.

On February 4, 2022, plaintiff filed a motion for judgment on the pleadings. Dkt. 35 ("Plf's MJOP"). On February 4, 2022, defendant filed a motion for judgment on the pleadings. Dkt. 33 ("Def's MJOP"). The parties also filed a joint stipulation of facts in support of the cross-motions. Dkt. 32 ("SOF"). Therein, they stated that they "do not seek a ruling from the Court as to what the Court believes to be the efficient proximate cause of Ms. Malkin's loss." Id. at 2. Instead, they "request that the Court issue a ruling deciding whether, assuming Plaintiff's theory of causation is correct and proven at trial, the Policy exclusions would preclude coverage." Id.

On February 25, 2022, plaintiff filed her opposition to defendant's motion for judgment on the pleadings. Dkt. 38 ("Plf's Opp."). On February 25, 2022, defendant filed its opposition to plaintiff's motion for judgment on the pleadings. Dkt. 37 ("Def's Opp.")

The Court held a hearing on March 7, 2022. Having carefully considered the parties’ arguments and submissions, the Court finds and concludes as follows.

II. BACKGROUND

The following facts are taken from the parties’ pleadings and their joint stipulation of facts, and the documents subject to judicial notice.

A. The Property Damage

In December 2017, the Thomas Fire burned to within 3 miles of the Home, inundating the exterior of the Home, the gutters, and other drainage systems with ash. SOF Nos. 3-4. The smoke and ash also infiltrated the interior of the Home, damaging artwork, furniture, carpets, countertops, ductwork, and the attic. Id. No. 5. The fire was fully contained by January 12, 2018. Id. No. 3.

On January 9, 2018, heavy rain fell in Santa Barbara and Montecito. Id. Nos. 6-7. Because the Home drainage system was clogged with ash from the Thomas Fire, the rain overwhelmed the drainage systems, resulting in water overflow into and beneath the Home. Id. Nos. 8-9. This included water overflows onto the balconies and into the basement, foundation, and soil beneath the Home. Id. No. 12. In the areas of water intrusion into and under the Home, the soil supporting the eastern side of the Home compressed, the southeast portion of the Home settled approximately two inches, and the structure was damaged. Id. Additionally, after the rains, plaintiff noticed changes to the Home, including doors sticking, crown molding peeling, cracks in the walls, and black water pouring onto the foundation and into the basement. Id. No. 11.

Plaintiff initially made a claim for the costs of the fire, smoke, ash, and water damage to the Home and its interior. Compl. ¶ 42. By the end of August 2018, defendant had paid $1,073,296.95 in fire-related (ash and water) damage to the Home, including to plaintiff's balconies, rugs, furniture, fine art, and other of the Home's contents. SOF No. 10; see Compl. ¶ 48. On or about February 22, 2019, plaintiff notified defendant of the additional damage to the Home related to the soil compression, differential settlement, and cracks on the walls. Compl. ¶ 50. On February 22, 2020, defendant denied coverage for this loss. Compl. ¶¶ 76-78. Plaintiff rebuilt the Home due to concerns about its structural integrity due to the soil compression and settlement. Compl. ¶¶ 68, 83.

B. The Policy

The policy at issue provides "all risk" coverage, under which coverage exists for all losses not expressly excluded by the policy:

Deluxe House Coverage

In Deluxe House Coverage, a "covered loss" includes all risk of physical loss to your house or other property covered under this part of your Masterpiece Policy, unless stated otherwise or an exclusion applies. Exclusions to this coverage are described in Exclusions.

SOF No. 13 (emphasis in original). The Exclusions section of the Policy states that "[t]he words ‘caused by’ mean any loss that is contributed to, made worse by, or in any way results from that peril." Id. No. 15. Defendant contends that the following policy exclusions apply to preclude coverage for the additional damage to the Home:

• Structural movement. We do not cover any loss caused by the settling, cracking, shrinking, bulging, or expansion of bulkheads, pavements, patios, landings, steps, footings, foundations, walls, floors, roofs, or ceilings except loss to glass that is part of a building, storm door, or storm window. But we do insure ensuing covered loss due to fire, explosion, or theft unless another exclusion applies.

• Surface water. We do not cover any loss caused by:

• Flood, accumulation of rainwater on the ground, surface water, wave action, including tidal wave and tsunami, tides, tidal water, seiche, overflow of water from a body of water, spray or surge from any of these, even if driven by wind;

• Water borne material from any of the above, including when any such waters or water borne material enters and backs up or discharges from or overflows from any sewer or drain, located outside of or on the exterior of a fully enclosed structure, including gutters, rainwater pipes, downspouts, or underground drainage systems;

• Run off of water or water borne material from a paved surface, driveway, walkway, patio, or other similar surface; or

• Escape, overflow, discharge or release, for any reason, of water or water borne material from a canal, dam, reservoir, levee, dike, seawall, or any other boundary or containment.

• However, we do insure ensuing covered loss due to fire, explosion, or theft unless another exclusion applies.

• Ground water. We do not cover any loss caused by:

• Water or water borne material in the ground or lack of water in the ground;

• Water pressure or lack of water pressure;

• Leakage, overflow or seepage from natural or man-made sources; or

• Backup or overflow of drainage channels or drainage fields.

• But we do insure ensuing covered loss due to fire, explosion, or theft unless another exclusion applies.

• Earth movement. We do not cover any loss caused by earth movement. "Earth movement" includes volcanic eruptions, landslides, mud flows, and any expansion, contracting, erosion, sinking, shrinking, rising, settling, or shifting of the earth, soil, or land. This exclusion applies whether or not the earth, soil, or land is combined or mixed with water or any other liquid or natural or man-made material.

• We also do not cover any loss caused by: rain, lack of rain, snow, sleet, or hail; wind or fire; or dead or dying trees, bushes or groundcover, to the extent that these conditions cause or contribute in any way to, or result in, any form of earth movement.

• However, we do cover losses caused by: a volcanic blast or airborne shock waves; ash, dust, or particulate matter; or lava flow, which are the direct result of a volcanic eruption.

• We also insure ensuing covered loss due to fire, explosion, or theft unless another exclusion applies.

• Collapse from earth movement. We do not cover any loss caused by collapse or the imminent danger of collapse from earth movement, as previously defined. But we do insure ensuing covered loss due to fire, explosion, or theft unless another exclusion applies.

SOF No. 14.

III. LEGAL STANDARD

A motion for judgment on the pleadings may be brought "[a]fter the pleadings are closed—but early enough not to delay trial[.]" Fed. R. Civ. P. 12(c). "Analysis under Rule 12(c) is substantially identical to analysis under Rule 12(b)(6) because, under both rules, a court must determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy." Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012). " ‘A judgment on the pleadings is properly granted when, taking all allegations in the pleading as true, the moving party is entitled to judgment...