Rosenberg-Wohl v. St. Farm Fire & Cas. Co.

551 P.3d 1097

323 Cal.Rptr.3d 95

Katherine ROSENBERG-WOHL, Plaintiff and Appellant,

v.STATE FARM FIRE AND CASUALTY COMPANY, Defendant and Respondent.

S281510

Supreme Court of California.

July 18, 2024

First Appellate District, Division Two, A163848, San Francisco City and County Superior Court, CGC-20-587264, Anne-Christine Massullo, Judge

Hershenson Rosenberg-Wohl and David M. Rosenberg-Wohl, Oakland, for Plaintiff and Appellant.

Rob Bonta, Attorney General, Michael J. Mongan, State Solicitor General, Nicklas A. Akers, Assistant Attorney General, Christopher D. Hu and Samuel T. Harbourt, Deputy State Solicitors General, Michele Van Gelderen and Adelina Acuna, Deputy Attorneys General, for the California Attorney General as Amicus Curiae on behalf of Plaintiff and Appellant.

Horvitz & Levy, Lisa Perrochet, Jason R. Litt, Burbank, Jasjaap S. Sidhu, Los Angeles; DTO Law, Lauren Hudecki, Megan O’Neill, Los Angeles, and Erik P. Mortensen for Defendant and Respondent.

Gutierrez, Preciado & House and Calvin House, Pasadena, for the Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Respondent.

Opinion of the Court by Guerrero, C. J.

Section 2071 of the Insurance Code prescribes a standard form fire insurance policy, the provisions of which provide a baseline for fire insurance coverage in this state.¹ Language within the standard policy provides, "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss." (§ 2071.) The issue before us is whether this one-year deadline for filing suit, as found within an insurance policy that is subject to section 2071, determines the timeliness of an insured’s cause of action under the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.) that challenges the insurer’s general practices in handling claims and through which the insured seeks only declaratory and injunctive relief on behalf of all policyholders, or whether the UCL’s four-year statute of limitations (Bus. & Prof. Code, § 17208) governs instead.

In this case, a divided Court of Appeal affirmed the superior court’s entry of judgment in favor of defendant State Farm Fire and Casualty Company (State Farm) upon agreeing with the lower court that plaintiff Katherine Rosenberg-Wohl’s failure to file her lawsuit within one year of her loss defeated her cause of action tinder the UCL. The dissenting justice would have allowed plaintiff’s suit to proceed, concluding that the UCL’s four-year limitations period controlled.

We conclude that the dissent was correct. Plaintiff’s lawsuit is not a "suit or action on [her] policy for the recovery of any claim." (§ 2071.) Plaintiff is not attempting to directly or indirectly recover damages associated with the denial of her insurance claim. Instead, plaintiff seeks only declaratory relief regarding State Farm’s claims-handling practices generally and a forward-looking injunction under the UCL. In pursuing such relief, plaintiff brings an essentially "preventive" (Nationwide Biweekly Administration, Inc. v Superior Court (2020) 9 Cal.5th 279, 326, 261 Cal.Rptr.3d 713, 462 P.3d 461 (Nationwide Biweekly)) action to which neither the standard policy’s language, nor the policy reasons underlying the Legislature’s authorization of a one-year limitations period for filing certain kinds of claims-related lawsuits, applies. We therefore reverse the judgment below and remand the matter for further proceedings consistent with our opinion.

I. Factual and Procedural Background

[1–3] Because this appeal is from a judgment entered after the sustaining of a demurrer, " ‘We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law.’ " (County of Santa Clara v. Superior Court (2023) 14 Cal.5th 1034, 1041, 310 Cal.Rptr.3d 130, 531 P.3d 951.) We also consider matters that are subject to judicial notice. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.)

Plaintiff procured a homeowners insurance policy from State Farm that provided coverage for all risks, including fire, except those specifically excluded under the policy. The policy excluded losses from, among other things, "wear, tear, marring, scratching, deterioration, inherent vice, latent defect or mechanical breakdown" and "settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundation, walls, floors, roofs or ceilings." One of the policy conditions provided as follows: "Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage" (boldface omitted).

On two occasions in late 2018 or early 2019, plaintiff’s neighbor stumbled and fell as she descended a staircase at plaintiff’s residence. After investigating, plaintiff discovered that the pitch of the stairs had changed, and that the stairs would have to be replaced to fix this issue. She authorized this work to be performed and contacted State Farm on or around April 23, 2019. On August 9, 2019, plaintiff submitted a claim to State Farm, seeking reimbursement for what she had paid to repair the staircase. On August 26, 2019, State Farm denied plaintiff’s claim, advising her by letter that there was "no evidence of a covered cause or loss nor any covered accidental direct physical loss to the front exterior stairway" and identifying several exclusions within her policy as potentially applicable.

Plaintiff subsequently made a follow-up inquiry, to which a State Farm claims representative responded in August 2020. After a conversation between plaintiff and the claims representative later that month, the representative advised plaintiff once again that her claim was denied.

Plaintiff then filed two lawsuits in state court against State Farm in October 2020. In one of these lawsuits, plaintiff alleged claims for breach of contract and the implied covenant of good faith and fair dealing and sought damages against State Farm. State Farm removed that case to federal court. Agreeing with State Farm that plaintiff’s lawsuit was barred under the limitations period found in her insurance policy because she did not file suit within one year of her loss, the federal district court granted the insurer’s motion to dismiss plaintiff’s second amended complaint (see Fed. Rules Civ. Proc., rule 12(b)(6), 28 U.S.C.). (Rosenberg-Wohl v. State Farm Fire and Casualty Co. (N.D.Cal. Mar. 28, 2022, No. 20-cv-09316-DMR) 2022 WL 901545, p. *8; see also Rosenberg-Wohl v. State Farm Fire and Casualty Co. (N.D.Cal. Sept. 17, 2021, No. 20-cv-09316-DMR) 2021 WL 4243389, p. *7 [granting State Farm’s motion to dismiss plaintiff’s first amended complaint, with leave to amend].) Plaintiff eventually abandoned her appeal in that matter.²

This lawsuit, meanwhile, remained in state court. As originally filed, plaintiff’s second amended complaint (complaint), which is the operative complaint, asserted causes of action under the False Advertising Law (Bus. & Prof. Code, § 17500 et seq.) as well as the UCL. The complaint alleges that "State Farm has a practice of summarily denying and regularly summarily denies property insurance claims unless State Farm believes the particular claim falls into a category of likely coverage." State Farm allegedly "followed that practice" with plaintiff’s claim. According to plaintiff, "[b]ecause State Farm did not investigate Plaintiff’s claim, State Farm had no reasonable basis for its determination that coverage should be denied." State Farm’s conduct allegedly "was and is designed to deny claimants coverage for all but the most obvious of covered claims, to the detriment of State Farm’s policyholders and to its own benefit."

The complaint further alleges that "State Farm has a practice of obfuscating and regularly fails to make clear precisely what the basis is for its denials," as assertedly shown by State Farm’s denial letter to plaintiff merely listing "a wide range of excluded risks that were possibly applicable" to plaintiff’s claim. "Because State Farm did not identify any particular reason for its denial," the complaint alleges, "State Farm deprived plaintiff of any reasonable opportunity to question or challenge the basis of the denial, much less seek out and provide additional information that might be relevant and possibly change State Farm’s mind." These practices are alleged to be contrary to State Farm’s advertising, which leads consumers "to believe that upon submitting a claim to State Farm, State Farm would investigate the claim made and .,if denying the claim, will provide the reason(s)." According to plaintiff, "The failure of State Farm to investigate all claims made in a good faith and reasonable manner constitutes … an unfair business practice" under the UCL, as does "[t]he failure of State Farm to identify the applicable reasons for its denial."

Plaintiff seeks declaratory relief, injunctive relief, attorney fees under Code of Civil Procedure section 1021.5, and costs of suit. The complaint specifically disavows any claim for damages. Regarding injunctive relief under the UCL, plaintiff requests an order that would require State Farm, "when adjudicating any property insurance claim presented to it, to give at least as much consideration to the interests of its insured as to its own interests " Although the complaint does not specify the precise declaratory relief plaintiff seeks, the pleading is fairly read as requesting a declaration concerning State Farm’s allegedly widespread practices of summarily denying claims without proper investigation and not providing...