Opinion
Case No. 05CV2215 — IEG (CAB).
March 28, 2006
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT [Doc. No. 6]
Presently before the Court is a motion by Allstate Insurance Company ("defendant") for partial summary judgment on the complaint filed by Sandra Gallardo and Jeanette Ampudia ("plaintiffs.) For the following reasons, the Court grants in part and denies in part defendant's motion.
BACKGROUND
A. Factual Background
In or around 1999, Gallardo went to an Allstate agency where she was attended by an agent named Garcia. Gallardo informed Garcia that she needed an automobile policy that provided coverage in Mexico because she frequently traveled there to visit family and friends. (TAC. ¶ 8.) Garcia sold Gallardo a policy that, he purported, provided coverage in Mexico. (Id.)
Plaintiffs refer to the original Allstate agent as "Salazar." Apparently, the agent's full name is Pete Salazar Garcia, which would account for the discrepancy. (Memo. ISO Motion at 3.) The Court will hereinafter refer to Peter Salazar Garcia as "Garcia."
Following her purchase of an insurance policy from Allstate, Gallardo received a policy book indicating limited coverage in Mexico:
"For your protection you should purchase insurance from a company licensed in Mexico. However, the coverage of this policy for an insured private passenger or utility auto is extended to cover that auto within the Republic of Mexico. This coverage applies only while the insured auto is within 75 miles of the United States border and only for a period not to exceed ten days after each separate entry into the Republic of Mexico." (Allstate Ex. 2 at P4.)
On or about October 6, 1999, Allstate mailed Gallardo policy declarations. The policy declarations indicated that plaintiffs' policy form was an APC113, a form that does not provide for coverage in Mexico. (Allstate Ex. 3 at MRN 79.) Although the policy declarations referred to policy form APC113, they did not specifically state that plaintiffs' policy did not provide coverage in Mexico. (Allstate Ex. 3.) Gallardo read these declarations. (Allstate Ex. 1 at 106.) Allstate sent identical policy declarations to Gallardo more than twenty times. (Allstate Ex. 3.)
An insurance policy's declarations are part of the insurance policy itself and can list a policy's limits on liability. See Eliopulos v. North River Ins. Co., 219 Cal.App.2d 845, 852 (Cal.Ct.App. 1963); (Opp. at 6) (stating that "Gallardo agrees that the declarations pages list the limits of liability for Allstate.")
In January 2003, plaintiffs' BMW 330 automobile was stolen in Tijuana, Mexico (the "first loss"). (TAC ¶ 18.) Plaintiffs made a claim to Allstate. (Id. ¶ 20.)
On January 17, 2003, Allstate sent plaintiffs a letter denying the claim and explaining: "We must deny the following claim for the reason noted: Your Allstate APC policy only applies to losses within the United States, its territories or possessions or Canada." (Allstate Ex. 1 at 261-3.) Plaintiffs admit to having read the first letter. (Id. at 263.) Three days later, Allstate sent a second letter confirming the denial on the ground that the policy did not provide coverage in Mexico. (Id. at 267-9.) Plaintiffs admit to receiving and reading the second letter. (Id.)
In April 2003, Allstate sent plaintiffs an offer of renewal that plaintiffs accepted. (Ex. 1 at 295.)
On July 11, 2003, plaintiffs' BMW M5 was in a collision in Tijuana (the "second loss.") (TAC ¶ 23.) Plaintiffs made another claim, which Allstate denied on the ground that plaintiffs' policy did not have coverage in Mexico. (Allstate Ex. 6.)
B. Procedural Background
On January 14, 2005, plaintiffs filed their complaint against Allstate in San Diego Superior Court. [Doc. No. 1.] On June 13, 2005, plaintiffs filed a third amended complaint. [Id.] The complaint has five causes of action: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing (a "bad faith" claim), (3) intentional misrepresentation, (4) negligent misrepresentation and (5) negligence. [Id.]
On December 2, 2005, Allstate removed the case to this Court claiming diversity jurisdiction. [Doc. No. 1]
On January 26, 2006, Allstate filed the present motion for partial summary judgment. In regards to the first loss, Allstate seeks summary judgment on plaintiffs' breach of contract claim on the ground that the written contract never provided for coverage in Mexico. (Memo. ISO Motion at 5.) Allstate seeks summary judgment on plaintiffs' bad faith claim on the ground that Allstate was not contractually obligated to pay benefits and, in the alternative, on the ground that there was a genuine dispute as to whether plaintiffs had coverage in Mexico. (Id. at 9.) In regards to the second loss, Allstate seeks summary judgment as to all claims on the grounds that Allstate provided plaintiffs with notice that their policy did not provide coverage in Mexico on January 17, 2003 and on January 20, 2003 and that plaintiffs subsequently renewed their policy. (Id. at 11.)
On February 13, 2006, plaintiffs filed their opposition. [Doc. No. 12.] On February 17, Allstate replied. [Doc. No. 16.]
DISCUSSION
A. Summary Judgment Standard
Summary judgment is appropriate when there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c);Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Klamath Water Users Protective Ass'n v. Patterson, 204 F.3d 1206, 1210 (9th Cir. 2000) (recognizing that where material facts are undisputed, the court only decides the application of relevant law). A dispute is "genuine" when "the evidence presented is such that a jury applying [the appropriate] evidentiary standard could reasonably find for either the plaintiff or the defendant." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the non-moving party's case, or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. See id. at 322-23.
Once the moving party meets the requirement of Rule 56, the burden shifts to the party resisting the motion, who "must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256. It is not enough for the party opposing a properly supported motion for summary judgment to "rest on mere allegations or denials of his pleadings." Id. Genuine factual issues must exist that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. at 250. To make such a showing, the nonmoving party must go beyond the pleadings to designate specific facts showing that there is a genuine issue for trial.Celotex, 477 U.S. at 325. The requirement that a nonmoving party go beyond the pleadings is meant to further one of Rule 56's principal purposes, namely "to isolate and dispose of factually unsupported claims or defenses." Id. at 323-24.
Importantly, when determining whether or not there is, in fact, a genuine issue for trial, all inferences drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, [when] he [or she] is ruling on a motion for summary judgment." Anderson, 477 U.S. at 255.
B. The First Loss
I. Breach of Contract Claim
The Court denies summary judgment on plaintiffs' breach of contract claim.
The elements of a breach of contract claim are: [1] the existence of a contract, [2] substantial performance by plaintiff, [3] fulfillment of conditions for defendant's performance, [4] failure by defendant to perform and [5] damages. (CACI, California Jury Instructions § 303, Oct. 2005)
Allstate attempts to negate the first element by arguing that the policy declarations consistently stated that plaintiffs' policy was an APC 113, a type of policy that does not provide coverage in Mexico. (Memo. ISO Motion at 5.) In Allstate's view, these policy declarations control interpretation of the insurance policy and thereby bar plaintiffs' breach of contract claim. (Id.) Plaintiffs respond that they can proceed on their breach of contract claim based on their allegation that Allstate's agent, Garcia, represented to plaintiff-Gallardo at the time of purchase that the insurance policy in question provided coverage in Mexico. (Opp. at 4.) Plaintiffs also point to documentary evidence, such as the policy book Gallardo received in 1999, indicating that the insurance policy did provide coverage in Mexico. (Opp. at 4-5.)
Plaintiffs' allegations and factual showing regarding the representations of Garcia to Gallardo at the time of purchase are sufficient to raise a material question of fact as to whether the contested insurance policy provided for coverage in Mexico. Where an insurance applicant "requests a specific type of coverage, and the insurer through its authorized agent promises to give it, the insured is entitled to rely on that promise, and can hold the company to the terms requested although the policy as written and delivered differs from them." Witkin, Vol. 2, § 29 (2005) (citing to Golden Gate Motor Transport v. Great Amer. Indem. Co., 6 Cal.2d 439, 448 (Cal. 1936) and Ames v. Employers Cas. Co., 16 Cal.App.2d 255, 266 (Cal.Ct.App. 1936)). For example, inGolden Gate, the California Supreme Court found that an insurance company was bound to an insurance contract based on the terms requested orally by the insured and promised by the insurer's agent despite the fact that the terms promised orally differed from those in the written contract. 6 Cal.2d at 447-448 ("Under these circumstances the company must be held bound to give the protection thus contracted for.")
Allstate points out that most of the case law supporting this proposition is fairly old. However, Allstate has not pointed to any authority indicating that Golden Gate and similar cases are not good law.
Here, Gallardo has stated in deposition testimony that Allstate's agent, Garcia, told her during his sales presentation that the policy he sought to sell her provided "coverage for property damage and medical, rental reimbursement, towing uninsured motorist and limited coverage in Mexico." (Plaintiffs' Ex. 2 at 90.) Gallardo goes on to say that Garcia assured her that she would receive coverage within 75 miles of the United States Border, ending somewhere near Ensenada. (Id. at 97.) If these facts were true, then Allstate could be held to an insurance contract that provided for coverage in Mexico.
Moreover, Allstate has not furnished any authority stating that an insurance policy's declarations are necessarily controlling when other documentation, including the initial policy book furnished to Gallardo, contained contrary statements of policy. Thus, plaintiffs could also show the existence of a valid contract providing insurance coverage by pointing to other Allstate documents received by Gallardo suggesting that her policy did, in fact, provide coverage in Mexico.
II. Bad Faith Claim
The Court denies summary judgment on this point.
The elements of a claim for breach of the implied covenant of good faith and fair dealing are: [1] that a benefit be due under the terms of the policy and [2] that the insurer withheld that benefit unreasonably or without probable cause. Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 571-5 (Cal. 1973).
Allstate argues for summary judgment on the grounds that it does not owe plaintiffs a benefit under the policy. (Reply at 6.) Since the Court has found that plaintiffs may have a breach of contract claim, this argument is not meritorious. Alternatively, Allstate argues for summary judgment on the grounds that it has not acted unreasonably because there was a genuine legal dispute as to whether the insurance policy provided coverage in Mexico. (Memo. ISO Motion at 9-11.) Allstate contends that its position that the policy declarations controlled its contractual obligations was objectively reasonable in light of the law that existed at the time and it therefore had a right to deny coverage without further investigation. (Reply at 7.) Plaintiffs respond that Allstate's denial of their claim without properly investigating the basis for that denial constitutes bad faith. (Opp. at 7-10.)
The mere fact that an insurer withholds coverage does not mean that the insurer breached the implied covenant of good faith and fair dealing. Chateau Chamberary Homeowners Ass'n v. Assoc. Int'l Ins. Co., 90 Cal.App. 4th 335, 347 (Cal.Ct.App. 2001.) "As long as the insurer's coverage decision was reasonable, it will have no liability for breach of the covenant of good faith and fair dealing." Morris v. Paul Revere Life Ins. Co., 109 Cal.App. 4th 966, 977 (Cal.Ct.App. 2003.) "It is well established that `bad faith liability cannot be imposed where there exist[s] a genuine issue as to [the insurer's] liability under California law.'" Fraley v. Allstate Ins. Co., 81 Cal.App. 4th 1282, 1292 (Cal.Ct.App. 2000). On the other hand, "an insurer cannot reasonably and in good faith deny payments to its insured without thoroughly investigating the foundation for its denial." Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 819 (Cal. 1979).
Based on the evidence submitted in the record, a jury could find that Allstate's denial of plaintiffs' claims without investigating the existence of any alleged oral representations was unreasonable. Allstate cannot reasonably say that it denied benefits based on the position that the policy declarations govern its contractual obligations because that contention does not have legal support. The law is clear that under certain circumstances, the oral representations of an insurance agent to an insured around the time of purchase will trump the text of an insurance policy. See e.g. Golden Gate, 6 Cal.2d at 448. Therefore, the operative issue regarding the validity of plaintiffs' claim was factual rather than legal, specifically, what the agent Garcia told plaintiffs would be determinative.
As noted above, the denial of claims without thorough investigation of the foundation for denial is unreasonable.Egan 24 Cal.3d at 816, 819-20. (Insurer's denial of benefits where claims adjusters failed to contact physicians who could have provided information supportive of finding a valid claim was unreasonable.) Taken in the light most favorable to plaintiffs, the facts in the record could show that Allstate's actions were unreasonable because Allstate was aware that its agent might have orally entered into an insurance contract providing for coverage in Mexico but Allstate completely failed to investigate this possibility.
Plaintiffs have submitted evidence indicating that Allstate was aware of Gallardo's contention that she had entered into an oral contract with the Garcia. On December 2, 2004, Gallardo sent one of the Allstate agents handling her claim, Gregory Carpenter, a letter stating that she had been told that she had "coverage in Mexico within 75 miles of the border" and that no one had told her of any change in coverage. (Plaintiffs' Ex. 17.) Gallardo attached a copy of the policy book indicating coverage in Mexico to the letter she sent Allstate. (Plaintiffs' Ex. 18.) Furthermore, Allstate computer records state that Gallardo believed that her insurance policy provided coverage within 75 miles of the Mexican border. (Plaintiffs' Ex. 14.)
Apparently, neither of the two Allstate employees who handled Gallardo's January, 2003 claim, Lois Huerth and Greg Carpenter, investigated Gallardo's claim that she was told that she had coverage in Mexico at the time of purchase. Lois Huerth stated in her deposition that she believed Gallardo did not have coverage in Mexico based on information contained in Allstate's computers and that she did not investigate further. (Plaintiffs' Ex. 13 at 59-60.) Likewise, Gregory Carpenter stated in deposition that he did not investigate the representations of the Allstate agent who sold Gallardo the policy. (Plaintiffs' Ex. 16 at 30) ("I didn't know there was an issue with the policy. I know what we see when we handle a claim as to which policy the insured or customer has. As far as investigating if somebody handed her a policy, no.")
Moreover, plaintiffs' evidence indicates that an investigation into plaintiffs' claims would not have been difficult. For example, Carpenter stated that he was "sure" he could have found the name of the person who was the agent at the time the insurance policy was issued to Gallardo. (Plaintiffs' Ex. 16 at 42.)
C. The Second Loss
I. Breach of Contract Claim
The Court grants Allstate summary judgment on this point. It is undisputed that plaintiffs renewed their Allstate policy in April 2003, after receiving two letters from Allstate indicating that the policy in question did not, in Allstate's view, provide for coverage in Mexico. (Allstate Ex. 1 at 295; Allstate Ex. 5; Allstate Ex. 6.) Additionally, the offer of renewal indicated that plaintiffs had an APC 113 policy, a type of policy that does not provide coverage in Mexico. (Allstate Ex. 3 at MRN 148.) It is clear from these undisputed facts that Allstate's offer of renewal did not give plaintiffs the option of purchasing an insurance contract providing coverage in Mexico. By accepting Allstate's offer, plaintiffs could only bind Allstate to a contract pursuant to the terms of the offer.See e.g. Love v. Gulyas, 87 Cal.App.2d 608 (Cal.Ct.App. 1948). Therefore, Allstate and plaintiffs did not have a contract providing for insurance coverage in Mexico after the April 2003 renewal. Since there was no contract, plaintiffs cannot bring an action for breach of contract.
II. Bad Faith Claim
The Court grants summary judgment to Allstate on this point. "Where no benefits are withheld or delayed, there is no cause of action for the breach of the covenant of good faith and fair dealing." Progressive Wes Ins. Co. v. Yolo County Superior Court, 37 Cal.Rptr.3d 434, 447 (Cal.Ct.App. 2005.); Accord Gunderson v. Fire Ins. Exch., 37 Cal. App. 4th 1106, 1119 (Cal.Ct.App. 2005) (stating that when "there was no breach of the insurance contract, appellants' bad faith claim also fails").
Here, the Court has found that there was no contract providing for insurance coverage in Mexico after April 2003. Accordingly, the Court has found that plaintiffs cannot state a claim for breach of contract. In view of clear California case law, the Court must also bar plaintiffs' bad faith claim regarding the second loss.
III. Intentional and Negligent Misrepresentation
The Court grants Allstate summary judgment on these two causes of action.
The elements of intentional misrepresentation are: [1] a representation, [2] falsity of the representation, [3] defendant's knowledge of the falsity, [4] defendant's intent that plaintiff should rely, [5] reasonable reliance, [6] harm and [7] causation. (CACI, California Jury Instructions § 1900, Oct. 2005)
The elements of negligent misrepresentation are: [1] a representation, [2] falsity of the representation, [3] defendant had no reasonable grounds to believe that the representation was true, [4] defendant's intent that the plaintiff should rely, [6] harm and [7] causation. (CACI, California Jury Instructions § 1903, Oct. 2005.)
Allstate contends plaintiffs cannot show reasonable reliance because Allstate cured whatever misunderstanding plaintiffs might have had regarding their insurance coverage with two letters in January, 2003 stating that Allstate's insurance policy did not provide coverage in Mexico. (Memo. ISO Motion at 12.) Plaintiffs do not address the issue of whether Allstate's two January 2003 letters to plaintiffs negate the element of justifiable reliance in regards to plaintiffs' second loss.
The Court agrees with Allstate that Allstate's two January letters negate the element of justifiable reliance. An indispensable element of fraud is a right to rely on the misrepresentation alleged. Wilhelm v. Pray, Price, Williams Russell, 186 Cal.App.3d 1324, 1332 (Cal.Ct.App. 1986) If a party knows the true facts, he cannot justifiably rely on the alleged misrepresentations. Chavez v. Citizens for a Fair Farm Labor Law, 84 Cal.App.3d 77, 80 (Cal.Ct.App. 1978). Here, there can be no question that Allstate's two January letters disabused plaintiffs of whatever notions they may have had regarding coverage. The letter dated January 17, 2003 states in pertinent part:
"We must deny the following claim for the reason noted: Your Allstate APC policy only applies to losses within the United States, its territories or possessions of Canada." (Allstate Ex. 4)
As indicated by the above text, the January 17, 2003 letter set out the truth of the matter. Plaintiffs admit to having read this letter. (Allstate Ex. 1 at 263.) After becoming aware of the truth of the matter, plaintiffs were no longer entitled to rely on any, then contradicted, statements made by the Allstate agent who initially sold plaintiffs their policy.
IV. Negligence
The Court grants Allstate summary judgment on plaintiffs negligence claim.
The elements of negligence are duty, breach, causation and damages. Wiener v. Southcoast Childcare Centers, Inc., 32 Cal.4th 1138, 1142 (Cal. 2004)
Plaintiffs based their negligence claim on the allegations that [1] Allstate failed to sell a policy with terms specifically requested or that [2] Allstate failed to notify plaintiffs of any modifications made to the original policy. (TAC ¶ 61.) Plaintiffs' first allegation is not relevant to the second loss because of the existence of an intervening contract, the renewed insurance agreement. As for plaintiffs' second allegation Allstate did notify plaintiffs in plain terms on January 17, 2003 that their policy did not provide coverage in Mexico. (Allstate Ex. 4.) Thus, Allstate has negated the element of breach.
Moreover, as a matter of law, no duty could attach to Allstate's conduct after it notified plaintiffs that their policy did not provide coverage in Mexico. "A court's task-in determining `duty'" is "to evaluate more generally whether the category of negligent conduct at issue is sufficiently likely to result in the kind of harm experienced that liability may appropriately be imposed on the negligent party." Friedman v. Merck Co., 107 Cal.App.4th 454, 465 (Cal.Ct.App. 2003).
CONCLUSION
For the foregoing reasons, the Court DENIES Allstate summary judgment on plaintiffs' breach of contract and bad faith claims relating to their first loss. The Court GRANTS Allstate summary judgment on all of plaintiffs' claims relating to the second loss.
IT IS SO ORDERED.