Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
San Francisco County Super. Ct. No. 427527
Haerle, Acting P.J.
I. INTRODUCTION
This is an appeal following a defense verdict for respondent Prudential Property and Casualty Insurance Company against appellants Alice Wong and Robert Lehman. The sole issue on appeal is whether the trial court erred in granting a motion in limine excluding any argument that Prudential’s request for an appraisal of the value of the fire loss to their house constituted bad faith. We conclude that no error occurred and affirm the judgment.
II. FACTUAL AND PROCEDURAL BACKGROUND
Appellants own a house in San Francisco that was, in 2001, insured by Prudential under a homeowner’s policy. On May 7, 2001, there was a fire at appellants’ house.
Krueger Brothers was the contractor chosen by appellants to prepare an estimate of the scope of repair. On May 18, 2001, Mike O’Brien, an estimator for Krueger Brothers, submitted to Jim Parvis, the Prudential agent handling appellants’ claim, a “fire damage repair estimate” for the damage to appellants’ house. This estimate, based on an on site inspection of the property, totaled $92,709.31. With add-ons for overhead and profit, the estimate came to $111,251.17.
Around this same time, Parvis prepared an “estimated scope” of repairs to the house. He described the physical process of preparing this document as a “[s]tick by stick, where you go basically top to bottom, front to back, room to room and measure everything that is damaged so you can determine what you are dealing with as far as square footages or yardages or whatever the case may be on the particular item that’s damaged or that needs to be repaired.” The total amount of this estimate was $52,453.08.
Parvis believed there were some “deficiencies” in the Krueger brothers estimate. He explained that these could have been due to “scope issues, input issues, pricing issues. The scope should have been very, very close because we agreed on the scope while we were at the premises.”
Parvis requested and received on June 16, 2001, another estimate for repair of the house from Dave Sutton at Olympic Restoration. The amount of this bid was $79,827.14.
On June 21, 2001, Parvis received a revised estimate from Krueger Brothers. This estimate was for a total of $83,480.13. With add-ons for overhead and profit, this estimate came to $100,176.15.
Parvis asked Sutton to revise his estimate. On June 27, 2001, Sutton faxed Parvis a revised estimate in the amount of $77,613.56. On June 29, 2001, Sutton contacted appellants, enclosed a copy of his revised estimate, and told appellants that “this amount has been agreed upon with Jim Parvis at Prudential Insurance.”
On July 3, 2001, Parvis sent Mike O’Brien at Krueger Brothers a copy of his scope of repair and estimate in the amount of $59,431.08. He informed O’Brien that Olympic “has bid for same scope at $77,613.56.”
On July 31, 2001, Kevin Dawson, an independent adjuster, notified Parvis that he had been retained by appellants. Dawson informed Parvis that his firm was “reviewing the previously developed scopes and estimates” and that they would “tender our claims in due course.”
After Dawson was retained, and sometime in August 2001, Krueger prepared another estimate for repairing appellants’ house. This estimate totaled $145,775.21. With add-ons for overhead and profit, the total of this new estimate was $174,930.25. This estimate was based on a “certain set of assumptions” regarding the appropriate repair scope provided to Krueger by Dawson. This scope was different from that previously used by Krueger, Parvis or Sutton.
On August 8, 2001, Dawson wrote Parvis and told him that “there is no agreement with your insured . . . on the scope of loss or the value of the claim.”
On August 14, 2001, Parvis wrote Dawson, acknowledging that appellants “disagree with our scope and estimate of repairs” and asking for a “timely counter to our proposal . . . .” On the same day, Parvis also wrote Dawson and told him that, although there “may be asbestos in the accoustic [sic] ceiling materials, the original scope walk through with Krueger Brothers indicated there was less than 100 square feet of accoustic [sic] ceiling repairs” and, therefore Prudential had not tested for asbestos. Parvis asked Dawson to forward any evidence to the contrary to him immediately. Parvis also referred to an “alleged fungus discovery” and informed Dawson that he would be contacted by a company called “Impact General” to “arrange for inspection of the mold condition.”
On August 21, 2001, Dawson wrote Parvis, noted that he had taken a sample of drywall and the sample indicated “10% asbestos presence.” Dawson requested that Prudential “undertake and finance testing of the drywall throughout the residence to determine the definitive answer” to the question of whether asbestos was present.
On September 5, 2001, Dawson wrote Parvis and informed him that Prudential had failed to pay Additional Living Expense benefits. Dawson also informed Parvis that “environmental testing” was “scheduled for September 11, 2001. Only subsequent to testing can the repair scope be properly ascertained.” He also stated that “[t]he estimated indemnity period will be forthcoming and future Additional Living Expense claims determined.”
On September 29, 2001, Dawson wrote Parvis and told him that the insured has received Additional Living Expense benefits. He also noted that environmental samples had been taken on September 19 and he would like to receive a copy of this report in order to “plan, cooperatively, the insured’s recovery.”
On October 8, 2001, Parvis wrote Dawson. He enclosed monies for advanced living expenses, and asked for documentation of rental costs. He also agreed to share the report of the environmental inspection.
On October 11, 2001, Dawson asked to immediately receive copies of the lab results from the environmental samples in order to “independently interpret the results and seek consultation from our experts . . . .” He also requested an additional $5,540 in additional living expense monies.
Parvis replied to Dawson on October 25, 2001. He stated that there was no justification for the request for additional living expense monies. He also told Dawson that he had not yet received a “full report and remediation plan from Impact General” (the company that performed the environmental inspection). He informed Dawson that he would be seeking bids from local remediation companies once he received the report, and told Dawson he was welcome to let Parvis know if there was any such company he might want to “enlist in this process.”
On November 6, 2001, Loren Rodrick at Prudential e-mailed Parvis and told him that “[i]t appears you don’t have any agreements with [Dawson] at this point and time is passing. Delays are driving our ALE (additional living expense) costs and could well be responsible for the mold issue. Please nail down an A/P for dwelling, contents and ALE and let me know what the agreements are.”
On November 7, 2001, in an e-mail to Parvis, Dawson acknowledged that he had received the environmental report and that, once reviewed, “we can arrange the abatement bids.”
On November 9, 2001, Parvis wrote Dawson and told him that he had contacted Linda Shane (apparently one of Dawson’s recommended bidders on the environmental work) at AC&S. He also acknowledged receipt of Dawson’s e-mails and stated: “You express looking forward to our ‘renewed’ spirit of cooperation. To this end, please supply me with any and all documentation relating to damages being claimed on the behalf of our insureds. To date, you have refuted all prior agreements and scope, but have not provided information or specifications for what you feel is an adequate supplemental amount for this loss.” Parvis also noted that he had not received “any documentation from Allied Restoration Services on the cost of personal property cleaning, storage or packout.”
On November 13, 2001, Dawson wrote David Krueger and Allied Restoration. In this letter he sated that “[w]e have not tendered our bids due to the uncertainty of the environmental testing. We want our bid accurate, yet scope has not been completely defined because of abatement issues.” He noted there was no inventory from Allied of personal property nor any “billing for the pack out, storage or bids for restoration/cleaning . . . .”
On November 18, 2001, Krueger Brothers sent Dawson a “processing estimate” for the personal property loss sustained by appellants.
On December 3, 2001, Parvis sent Dawson a bid for “asbestos and mold treatments.” He also stated that Linda Shane of AC&S had not yet inspected the premises. He noted that “I really did expect to have these abatement issues inspected by the time I had returned from my November vacation . . . .”
On December 17, 2001, Parvis sent Dawson a letter stating that Prudential “is very interested in concluding any unresolved issues our insured may have on this claim.” Parvis asked Dawson to “tender your claim documentation as requested in my letters of October 8, 2001, October 25, 2001, and November 9, 2001.” He also told Dawson that “Prudential may be forced to take these matters to Appraisal if a continued lack of response persists.”
On the same day, Parvis e-mailed John Schuler at Prudential and told him that “[w]ith the PA (Dawson) largely unresponsive, having never produced any documentation for any portion of this claim, we only have his refutation that any part of the claim is agreed to.” Later in the e-mail, Parvis noted that, among possible action that might be taken “calling for appraisal to settle any issues” should be discussed.
In hand written notations dated December 17, 2001, memorializing a telephone conversation with Parvis, Dawson wrote “Disagreement over scope, but ‘no major issues.’” He also noted that he had agreed to meet to “provide docs.”
Two days later, on December 19, 2001, Parvis wrote Dawson, thanking him for meeting with him the day before. He stated “I await your revised package as promised. I will give it prompt review and consideration when received.” He also stated that “though Appraisal is still a possible avenue for settlement of this claim, Prudential remains open to any reasonable compromise to resolve these matters.” Dawson’s handwritten notes regarding this meeting, state that “agreed withdrawal of several scope issues” and “will send revisions . . . for pricing.”
Dawson testified at the hearing on the motion in limine that, on December 19, 2001, his understanding was that they had reached agreement on most of the issues concerning scope of repairs.
On January 4, 2002, Dawson wrote Parvis and told him that, in addition to removing the insured’s personal property from one restoration company to another, and being prepared to conduct an inventory of the property, “[w]e are completing the revisions to the KBBI bid consistent with our recent meeting on the scope. I hope to have this available for you on the 11th.”
On January 24, 2002, Parvis wrote Dawson as follows: “I still have not received documentation as promised by you for this claim. Specifically, you advised that you would be submitting a revised scope of dwelling repairs during our meeting December 18, 2001. It was to be delivered to me during our contents inspection in Oakland on January 11, 2002. Personal Property loss inventory was to be separated and I was to be called for additional inspection to verify damage. You have not supplied evidences of Additional Living Expense loss to date. These delays cannot continue without adversely affecting the insured’s Additional Living benefits under the policy. [¶] It appears Prudential may still be forced to take these matters to Appraisal if a continued lack of response persists.”
The next day, on January 25, 2001, Parvis and Dawson spoke by telephone. Dawson documented this conversation as follows: “Telecon with Parvis: Review by [¶] Prudential Home Office will demand appraisal unless we resolve on February 5, 2002; he will carry a demand letter to deliver in person. [¶] States revised loss plus $11k; will allow $20-30k to account for appraisal, about $100k. [¶] Advised we adjusted loss to $145k plus or minus, too large a difference to compromise. [¶] Told him to send his demand letter. We will accept appraisal.” Dawson understood at the time of this discussion that they were going to try to resolve their differences, and that Parvis was able to offer $100,000.
Parvis understood at this time that Dawson believed the $175,000 Krueger Brothers estimate was high and Dawson was “looking to lower it.” Dawson said he would give Parvis a revised bid but, as of January 30, 2002, he had received no other bid from Dawson than the $175,000 bid from the previous June. At this time, the difference between appellants and Prudential on the house repairs was $55,000.
On the same day, January 25, 2002, Parvis wrote Dawson. He stated that they had agreed to meet on February 5, 2002, “to inspect the progress and results of the mold remediation repairs. At that time, we will do an additional walk-through to try to resolve any scope differences we may have. You will also supply to me at that time, all documents previously promised that have been delayed in getting to me for whatever reasons. This includes evidences of repairs, estimates & scope of dwelling damages, additional living expenses and inventories of damaged personal property.” He also stated “[s]hould there be any major differences that cannot be negotiated, or if it appears the claim faces further unnecessary delay, I will be compelled to recommend these matters be taken to Appraisal.”
The same day, Parvis also e-mailed his supervisor at Prudential after this conversation. He reported that “I just spoke with [Dawson]. His contractor’s revised bid reduce $30,000 to around $145,000. I advised I could find another $11,000 in concessions on accoustic [sic] and cabinets. He told me they had decided to go to appraisal back in early December, but waited to see what Pru would do. He said send the appraisal letter. What is the procedure for this?”
A note written on this e-mail and dated February 1, 2002, states that “per conversation . . . with Loren -- he will transfer to Moutray for handling.”
In a letter dated January 30, 2002, Parvis informed Dawson that “[b]ecause we are unable to agree on a settlement for” appellants’ claim, “we will use the appraisal process . . . .” On February 12, 2002, Moutray, a Prudential adjuster, informed Dawson that he would be handling the claim and the appraisal.
On August 15, 2002, the appraisal panel gave appellants an award of $100,770.13 for the cost of repairing plaintiffs’ house. On October 2, 2003, the panel gave appellants an award of $79,588.63 in replacement cost for their personal property and $75,670.22 in actual cash value.
On November 24, 2004, appellants filed a second amended complaint against Prudential, alleging breach of insurance contract, breach of the covenant of good faith and fair dealing, intentional infliction of emotional distress and fraud. Before trial, Prudential filed a motion in limine to exclude argument that Prudential’s election of the appraisal procedure constituted bad faith. In its motion, Prudential argued that, as a matter of law, a “genuine dispute” existed between itself and appellants and, therefore, it “could not be liable for bad faith either for demanding the appraisal or for failing to attempt to settle the claim during the appraisal process; rather, Prudential was permitted to defer to the appraisal panel to determine the amount of the loss.”
On July 12, 2007, at the hearing on this motion in limine, the trial court heard extensive testimony on the question of whether a “genuine dispute” existed between Prudential and appellants. The trial court heard the testimony of both Kevin Dawson, appellants’ “public adjuster,” and James Parvis, Prudential’s claims adjuster. The court also examined (and “relied primarily on”) exhibits produced by counsel concerning the claim and the handling of the claim by Prudential.
The trial court, in an order dated July 16, 2007, granted the motion in limine. The court precluded appellants from “arguing in any way whatsoever that the defendant acted in bad faith by electing the appraisal procedure, or that the defendant’s request for the appraisal procedure, or its actions during the appraisal procedure, were corrupt, invalid, unsupported, or otherwise improper.”
In so doing, the court expressly held that “evidence concerning events that occurred prior to the building loss award by the appraisers on August 15, 2002 and personal property loss award on October 3, 2003 is admissible as to whether the defendant acted in bad faith in handling the plaintiffs’’ claim, but any argument, reference, or implication of bad faith relative to the appraisal procedure is excluded.”
The case came on for trial on July 9, 2007. The jury was sworn in on July 16, 2007. Opening statements were heard the next day, on July 17, 2007. During trial, appellants’ expert, Clinton Miller, testified to numerous examples of what he considered Prudential’s bad faith. Among other things, Miller testified that Prudential failed to meet industry standards by not investigating appellants’ claim thoroughly and failed to meet industry standards by not paying undisputed amounts.
The case was submitted to the jury on July 27, 2007. Among other things, the jury was asked to decide if Prudential had breached the implied covenant of good faith and fair dealing when it (a) informed appellants of their rights and obligations under the policy; (b) investigated appellants’ losses; (c) paid insurance benefits covered under the policy. On August 1, 2007, the jury returned a verdict in favor of the defense.
This timely appeal followed.
III. DISCUSSION
A. Standard of Review
Appellants argue that the trial court erred in granting Prudential’s motion in limine to exclude argument in support of their claim that Prudential acted in bad faith when it asked for an appraisal of their claim. Before we address this issue, we must first determine the appropriate standard of review.
Generally, we review a court’s decision to grant or deny a motion in limine under the abuse of discretion standard of review. However, as appellants point out, when the motion in limine seeks to exclude a claim, that motion is the functional equivalent of a motion for a nonsuit. Therefore, we review the granting of this type of motion in limine under the standard of review applicable to a nonsuit. (Mechanical Contractors Assn. v. Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 676-677.) “‘The scope of a trial court’s inquiry on a motion for nonsuit is . . . limited. A motion for nonsuit or demurrer to the evidence concedes the truth of the facts proved, but denies as a matter of law that they sustain the plaintiff’s case. A trial court may grant a nonsuit only when, disregarding conflicting evidence, viewing the record in the light most favorable to the plaintiff and indulging in every legitimate inference which may be drawn from the evidence, it determines there is no substantial evidence to support a judgment in the plaintiff’s favor. [Citations.]’” (Id. at p. 677.)
Here, however, Prudential’s motion in limine sought to exclude all argument relating to one of appellants’ claims. Appellants were not precluded from making out a bad faith claim altogether. Accordingly, the standard of review in this case would be the abuse of discretion standard of review. Nevertheless, even were we to apply the heightened scrutiny applicable to motions for nonsuit, we would still affirm, as we discuss below.
Under that standard of review, we, like the trial court, view the evidence most favorably to appellants, resolving all presumptions, inferences and doubts in their favor, and uphold the ruling only if it was required as a matter of law. (Mechanical Contractors Assn. v. Greater Bay Area Assn., supra, 66 Cal.App.4th at p. 677.)
Further, we reject defendant’s argument that appellants have waived any contention that the trial court erred in permitting defendant to employ the motion in limine procedure in this matter. Appellants have not raised this issue and, therefore, defendant’s waiver argument is irrelevant.
B. Motion in Limine
In ruling on Prudential’s motion in limine to exclude argument that its election of the appraisal procedure constituted bad faith, the trial court found there was a genuine dispute as to the amount of appellants’ loss and, therefore, as a matter of law there could be no bad faith claim based on defendant’s decision to request an appraisal pursuant to Insurance Code section 2071. We agree: the trial court did not err in granting the motion in limine.
Under the genuine dispute doctrine, an insurer breaches the implied covenant of good faith and fair dealing when its refusal or delay in paying out policy benefits is unreasonable or not in good faith. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723-724; Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573.) An insurer’s withholding of benefits is not in bad faith when the decision to do so is reasonable or based on a legitimate dispute as to liability. (Opsal v. United Services Auto. Assn. (1991) 2 Cal.App.4th 1197, 1205-1206 (Opsal); Fraley v. Allstate Ins. Co. (2000) 81 Cal.App.4th 1282.) Thus, in Opsal, the court held that when there is a genuine issue as to the insurer’s liability, bad faith liability cannot be imposed. (Opsal, supra, 2 Cal.App.4th at pp. 1205-1206.) On the other hand, an insurer who maintains a position in bad faith and on unreasonable grounds cannot invoke the genuine dispute rule. (Brehm v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1255.)
The issue, then, is whether the trial court erred in granting the motion in limine on the ground that there was a genuine dispute as to the amount of money owed under the policy. We conclude that, even were we to view the evidence most favorably to appellants, a genuine dispute existed as a matter of law. Accordingly, the trial court did not err in granting the motion in limine.
We have reviewed the evidence before the trial court when it granted the motion in limine and conclude that there was a genuine dispute between appellants and Prudential about the amount of their loss due to the fire. Immediately before the appraisal was requested, Prudential’s highest estimate for the property damage loss was around $100,000. Appellants’ lowest estimate was $145,000. In the words of appellants’ own representative, this was “too large a difference to compromise.”
Appellants, however, argue that the trial court improperly weighed conflicting evidence in reaching its conclusion and that, in fact, Dawson’s testimony at the July 12, 2007, hearing on the motion in limine conclusively established a genuine dispute. We note, first, that we review the trial court’s ruling, not its reasoning. (Lindelli v. Town of San Anselmo (2003) 111 Cal.App.4th 1099, 1104.) We have reviewed Dawson’s testimony and do not agree that it establishes there was no genuine dispute between Prudential and appellants. Even if we accept Dawson’s conclusory statements regarding having reached an agreement on the scope of repairs on December 19, 2001, by January 25, 2002, there was a genuine dispute as to the cost of those repairs. Dawson himself wrote that he advised Parvis on January 25, 2002, that, at that point, there was “too large a difference to compromise. [¶] Told him to send his demand letter, we will accept appraisal.”
Appellants also argue that the trial court erred in relying on Rappaport-Scott v. Interinsurance Exchange of the Automobile Club (2007) 146 Cal.App.4th 831 (Rappaport-Scott) in reaching its conclusion. We disagree.
In Rappaport-Scott, the insured claimed $346,732.34 in losses. The insurer offered to pay only $7,000 on the claim. An arbitrator awarded Rappaport-Scott $33,000.
In concluding that the trial court did not err in finding that the insured had failed to allege facts that demonstrated the existence of a genuine dispute, the court first articulated the well-established rule that “the withholding of benefits due under the policy is not unreasonable if there was a genuine dispute between the insurer and the insured as to coverage or the amount of payment due.” (Rappaport-Scott, supra, 146 Cal.App.4th at pp. 837, 839.) Applying this rule to Rappaport-Scott’s complaint, the court held that the insureds had failed to allege facts sufficient to constitute a breach of the implied covenant of good faith and fair dealing. The court based its conclusion on the fact that, “[d]espite the difference between the $7,000 offered by [the insurer] and the $33,000 later determined to be payable on the policy, the vast difference between the $346,732.34 in losses claimed by Rappaport-Scott and the $63,000 in actual losses as determined by the arbitrator demonstrates, as a matter of law, that a genuine dispute existed as to the amount payable on the claim.” (Id. at p. 839.)
Appellants argue that Rappaport-Scott conflicts with In re Bongfeldt (1971) 22 Cal.App.3d 465, 468 and, therefore, the court erred in relying on it. Again, we disagree. Rappaport-Scott does not conflict with In re Bongfeldt on the genuine dispute doctrine. Rather, the Rappaport-Scott court pointed out that it did not agree with that court’s conclusion that “an insurer’s tort liability for failure to accept a reasonable settlement . . . can arise with respect” to the payment of first party benefits. (Rappaport-Scott, supra, 146 Cal.App.4th at p. 838.) The court pointed out that the issue in In re Bonfeldt was “not whether the insurer had refused a reasonable settlement offer, but whether the insurer had acted reasonably regarding the payment of first party benefits due under the policy.” (Rappaport-Scott, supra, at p. 838.) The cases in no way conflict with each other on the question of the genuine dispute doctrine, and the trial court did not err in relying on Rappaport-Scott.
In any event, even if the court did err in relying on Rappaport-Scott, we review the trial court’s ruling rather than its reasoning. Under the strict standard of review applicable to a motion for nonsuit, we conclude that a genuine dispute existed as a matter of law.
Finally, appellants argue that the trial court’s order on the motion in limine, that “[p]laintiffs are precluded from arguing in any way whatsoever that the defendant acted in bad faith by electing the appraisal procedure, or that the defendant’s request for the appraisal procedure, or its actions during the appraisal procedure, were corrupt, invalid, unsupported or otherwise improper” was “overbroad.” In making this argument, appellants rely on Corral v. State Farm Mutual Auto. Ins. Co. (1979) 92 Cal.App.3d 1004, a case that holds that an insured can assert a bad faith claim as to an insurer’s actions during an arbitration. We reject this argument.
The motion in limine on which the court ruled sought to preclude argument on the issue of whether Prudential’s election of the appraisal procedure constituted bad faith. Appellants were quite clear at the hearing that they were not attempting to “challeng[e] the results of the appraisal. We’re not . . . making any sort of collateral attack on the appraisal award. We’re not alleging the appraisal was fraudulent.” The court’s order properly reflects the issues before it and is not erroneous.
IV. DISPOSITION
The judgment is affirmed.
We concur: Lambden, J., Richman, J.