Parkview Villas Ass'n v. State Farm Fire

35 Cal.Rptr.3d 411

133 Cal.App.4th 1197

PARKVIEW VILLAS ASSOCIATION, INC., Plaintiff and Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant and Respondent.

No. B174017.

Court of Appeal, Second District, Division 7.

November 2, 2005.

Kabateck · Brown · Kellner · LLP, Brian S. Kabateck, Richard L. Kellner, for Defendant and Appellant.

Robie & Matthai, APC, James R. Robie, Kyle Kveton and Craig W. Brunet; Crandall, Wade & Lowe, APC, and James Crandall; LHB Pacific Law Partners, LLP, and Clarke B. Holland, for Plaintiff and Respondent.

Horvitz & Levy LLP, Lisa R. Jaskol and Wendy S. Albers for 21st Century Insurance Company and American International Group, Inc., as Amici Curiae on behalf of Defendant and Respondent.

Stephan, Oringher, Richman & Theodora, P.C., Harry W.R. Chamberlain II, Robert M. Dato and Brian P. Barrow for Association of Southern California Defense Counsel as Amicus Curiae on behalf of Defendant and Respondent.

PERLUSS, P.J.

Parkview Villas Association, Inc. appeals from the judgment entered after the trial court granted summary judgment in favor of State Farm Fire and Casualty Company (State Farm) in Parkview Villas's action concerning the adjustment of its property damage losses from the 1994 Northridge earthquake. In granting the motion the trial court found State Farm had met its initial burden of showing that one or more elements of Parkview Villas's claims for breach of contract and tortious breach of the implied covenant of good faith and fair dealing (insurance bad faith) could not be established and Parkview Villas had "offered no rebuttal, in that it failed to present any admissible evidence of the elements necessary for a prima facie showing" of breach of contract or breach of the implied covenant of good faith. The trial court subsequently explained, "[T]he lack of admissible evidence in opposition to the motion stems from [Parkview Villas's] inadequate statement of undisputed material facts."

We reverse. Although Parkview Villas's failure to file an adequate separate statement is certainly unacceptable, that procedural error did not deprive either State Farm or the trial court of notice of the factual disputes and supporting evidence upon which Parkview Villas's opposition was based; indeed, State Farm responded to that evidence at length in both its reply memorandum in support of the motion and at oral argument before the trial court. In light of the strong policy favoring disposition of cases on their merits, the trial court's refusal to consider Parkview Villas's evidence was an abuse of discretion.

FACTUAL AND PROCEDURAL BACKGROUND

1. Parkview Villas's Earthquake Coverage and Northridge-earthquake Damage Claim

Prior to the January 17, 1994 Northridge earthquake, State Farm issued a condominium association policy to Parkview Villas, a homeowners association for a 26-unit condominium complex in Panorama City, which included an earthquake/volcanic eruption endorsement. The earthquake coverage was subject to a policy limit and a per building deductible equal to 10 percent of the coverage for each building; the endorsement did not extend coverage to the contents of individual condominium units.

The condominium complex was damaged by the Northridge earthquake. By January 21, 1994 Parkview Villas had submitted a claim to State Farm for damage to the buildings and common areas of the complex. After inspecting the property and evaluating preliminary engineering reports obtained by Parkview Villas regarding the structural safety of the condominium complex, State Farm estimated the total actual cost of repairs for all the buildings and common areas at $214,289.90. In accordance with the terms of the policy, only the estimated repairs for the line item denominated "walls, walks and fences" exceeded the applicable line-item deductible amount. On May 25, 1994 State Farm sent Parkview Villas a check for $16,798.11 for repairs to the walls, walks and driveways at the complex with a copy of State Farm's repair estimate, as well as a letter explaining that damage to the buildings and the individual units did not exceed the applicable deductibles. State Farm's letter also stated, "In the event that any repair costs do exceed our estimates or any of your applicable deductibles, please give me a call and send me a copy of your estimate before starting repairs, so I can review your estimate and determine whether payment can be made." State Farm's adjustment of the property damage losses suffered by Parkview Villas was premised on the absence of any significant structural damage to the condominium complex.

2. Parkview Villas's Complaint for Breach of Contract and Insurance Bad Faith

Parkview Villas filed a complaint against State Farm on December 27, 2001 for breach of contract, breach of the implied covenant of good faith and fair dealing and violation of Business and Professions Code section 17200 et seq.¹ The complaint, which sought compensatory and punitive damages, alleged the total damage to the condominium complex from the Northridge earthquake was not yet fully ascertainable but exceeded the applicable deductible amounts. Parkview Villas alleged State Farm had failed to thoroughly and objectively investigate and evaluate its claim, failed to properly adjust its claim and failed to pay the full policy benefits to which Parkview Villas was entitled. Parkview Villas further alleged State Farm's conduct with respect to its claim was part of a corporate scheme of improper, unfair and unreasonable claims practices directed to its insureds who had suffered losses in the Northridge earthquake.

3. State Farm's Motion for Summary Judgment

On August 22, 2003 State Farm moved for summary judgment or in the alternative summary adjudication, scheduling the hearing on its motion for November 12, 2003 (four weeks prior to the December 10, 2003 trial date). Addressing Parkview Villas's claims for breach of contract and breach of the implied covenant of good faith, State Farm's separate statement of undisputed material facts identified 29 undisputed facts and presented supporting evidence to demonstrate it had settled Parkview Villas's claim pursuant to the terms of its policy, promptly paying Parkview Villas all sums owed; at no time prior to the filing of the current litigation had Parkview Villas provided State Farm with any estimate that exceeded State Farm's original estimate of damage or reported additional earthquake damages or higher repair costs. In support of its undisputed fact No. 10 ("Engineering evaluations confirm that the Association's buildings did not sustain structural damage from the Northridge earthquake of January 17, 1994"), State Farm submitted evidence that during the pendency of the lawsuit it had retained engineers who inspected the property and confirmed that Parkview Villas's buildings had sustained no structural damage in the Northridge earthquake.

4. Parkview Villas's Opposition to the Summary Judgment Motion

On October 30, 2003 Parkview Villas filed a 25-page memorandum of points and authorities in opposition to State Farm's motion. The opposition attached the seven-page declaration of Greg Watson, a licensed public insurance adjustor and general contractor; a four-page declaration of William L. McCarthy, a registered professional engineer specializing in civil and structural engineering; and a seven-page declaration from Richard Masters, an individual with extensive experience in the insurance industry as an expert who has previously testified regarding the standard of care for insurance companies, including with respect to claims practices; as well as declarations from the property manager at Parkview Villas at the time of the Northridge earthquake (Richard Monson, Jr.), two Parkview Villas condominium owners and Parkview Villas's trial counsel. Parkview Villas's opposition memorandum began with a short paragraph highlighting its basic theme: "State Farm grossly under evaluated and outrageously low balled the subject loss in 1994, paying Plaintiff slightly in excess of $16,000. General contractor/public adjuster Greg Watson has opined that the physical damages approximate 1.5 million dollars."

Parkview Villas separately filed a document entitled "Response to Separate Statement of Allegedly Undisputed Materials," which admitted five of the 29 undisputed facts presented by State Farm and disputed another 17 only on the ground State Farm had failed to present any admissible evidence to support its proposed undisputed fact (and asserting objections to the evidence submitted). Parkview Villas disputed the remaining seven proposed undisputed facts by restating its objections to the evidence submitted by State Farm in support of the facts and by citation to the declarations it had attached to its opposition memorandum, both in their entirety and by reference to specific paragraphs.

With respect to State Farm's undisputed fact No. 10 (no structural damage to the condominium complex), Parkview Villas referred generally to six of the seven declarations it had submitted (excepting only the declaration from its insurance industry expert) but also cited specifically to paragraphs in the declarations from its general contractor/public adjustor (Watson) and its structural engineer (McCarthy) in which these witnesses opined the project had suffered structural damage as a result of the earthquake and in which Watson stated his opinion that Parkview Villas's loss for the Northridge earthquake "approximates 1.5 million dollars." With respect to State Farm's undisputed fact No. 7 (the Parkview Villas complex was inspected and the cost of repairs estimated by an experienced adjuster trained in the adjustment of earthquake losses), Parkview Villas cited to specific paragraphs in the Watson and McCarthy declarations including Watson's explanations of what he believed were serious deficiencies in the adjuster's estimates (for example, the estimates do not include...