State Farm Fire & Cas. Co.

This case is not covered by Casetext's citator
A136569 (Cal. Ct. App. Feb. 10, 2017)



GREG KAWAI, Plaintiff and Appellant, v. STATE FARM FIRE AND CASUALTY COMPANY et al., Defendants and Respondents.


California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Mateo County Super. Ct. No. CIV 483007)

This action arises out of an insurance claim for water damage. Appellant Greg Kawai (Kawai) filed a claim with respondent State Farm Fire and Casualty Company (State Farm) after a broken pipe in the home of his upstairs neighbor caused damage to Kawai's bathroom. State Farm ultimately determined that the damage to Kawai's home stemmed both from the covered pipe-break leak as well as from certain pre-existing seepage leaks that were not covered under Kawai's condominium insurance policy (Policy). As a result, State Farm paid only a portion of the costs actually incurred by Kawai in the repair of his residence. After Kawai filed this action—claiming breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and negligent misrepresentation—a jury returned a verdict in favor of State Farm, concluding that Kawai had suffered no unpaid losses under the Policy. On appeal, Kawai now argues that the evidence presented to the jury supported the conclusion that he was entitled to additional benefits from State Farm, both for emergency water mitigation costs and for living expenses he incurred while he was displaced from his home during the repair process. Kawai also challenges the trial court's refusal to instruct the jury with respect to certain additional mold damages, disputing the court's conclusion that the evidence presented did not support the existence of such damages. Having determined that the challenged determinations in this case were all amply supported by the evidence, we affirm.


In November 2007, Kawai noticed water dripping into his bathroom from the upstairs unit, reportedly caused by a broken pipe. Specifically, water was leaking from a light fixture located above his vanity. Although he contacted the maintenance coordinator for his condominium association, it took several days for the upstairs water to be turned off and the leak fixed. Shortly thereafter—after asking his local State Farm office for suggestions—Kawai contacted a contractor, Britannia Construction, Inc. (Britannia), to prepare an estimate for repairs. After an inspection of the unit in mid-December, Britannia submitted a repair estimate in the amount of $3,149.25. In addition, Steve Kelley (Kelley) of Cal Pacific Restoration, Britannia's sister corporation (Cal Pacific), estimated that water damage remediation would cost $2,067.04, assuming no "microbial growth is found in the wall and ceiling cavities."

According to Kawai, he did not immediately report the loss to State Farm because he was hoping that his upstairs neighbor would take financial responsibility for the repairs. After receiving a nominal $500 from the neighbor, however, it became apparent that this would not be the case. Thus, Kawai filed a claim with State Farm on January 7, 2008. The State Farm claims representative Cynthia Atilano (Atilano) advised Kawai that rot or deterioration was not covered under the Policy, but that a sudden discharge of water would be covered. After receiving Britannia's estimate, Atilano authorized payment for the repairs.

In early February 2008, however, when a Cal Pacific technician was sent to the residence to perform emergency water mitigation services, significant mold was discovered behind the sheetrock and in the ceiling cavity of Kawai's bathroom. This discovery led to a decision to test for asbestos, the finding that the sheetrock tape contained asbestos, and related asbestos abatement. The necessary abatement took place in April 2008, and, during this process, the walls and ceiling were removed. Kawai moved out of his residence at this time because he no longer had access to a toilet or tub/shower.

It was when the walls and ceiling were opened up so that the abatement could be completed that Mike Stringer of Britannia (Stringer) reported "major pipe issues in [the] wall [that were] still actively leaking." Specifically, Stringer identified what he opined were two long-term seepage leaks—one from the upstairs waste line and another from the upstairs tub/shower drain. These newly discovered leaks had caused damage to the ceiling and the tiled walls surrounding the tub/shower, including visible mold. Atilano spoke with Kawai about these long-term leaks on April 3, 2008. She informed him that he would need to file a separate claim if he wanted to seek coverage for the newly discovered leaks, but that his Policy only covered accidental discharges and not repeated or continuous seepage. In this same conversation, Atilano informed Kawai that the Policy included coverage for additional living expenses (ALE), costs he incurred while his unit was uninhabitable due to a covered loss.

Atilano also arranged for a field adjuster to view the property. As a result, on April 8, 2008, Tasha Lane, a State Farms claim representative (Lane), met Stringer and Kelley at Kawai's residence. Lane took photographs of the damage and discussed it with Stringer and Kelley. According to Lane, Stringer believed that the mold damage was a result of the long-term leaks, and, although he could not distinguish damage caused by the waste line leak from damage caused by the tub/shower drain leak, he was certain all of the newly discovered damage was a "seepage and leakage issue." Lane reported her findings to Atilano and, in later testimony, confirmed she was told at this meeting that the damage to the sheetrock behind the tub appeared to be a long-term and ongoing problem.

On April 10, 2008, Atilano spoke with Kawai by telephone. She told him that State Farm would cover all damage resulting from the sudden pipe break, but not the newly discovered damages caused by active leaking in the building plumbing. Although "it [was] hard to delineate where to begin and stop" because some of the new damages overlapped with the covered damages from the original claim, Atilano agreed to cover all repair and remediation work up to the framing line for the shower/tub. She also indicated that State Farm could pay Kawai's ALE for the time it took for repairs related to the original water leak. In a subsequent telephone call on April 17, 2008, Kawai reported to Atilano that he had spent 15 days in a hotel at a rate of $77 per day for which he was seeking ALE coverage. He further told Atilano that he had recently moved into a cheaper hotel and would try to obtain future compensation for his hotel expenses from his homeowner's association.

Since Britannia was an approved State Farm provider, Kawai elected to have the company complete all of the required repairs. Thereafter, Britannia generated an updated estimate for State Farm which included the asbestos abatement and related costs. Britannia also prepared a separate estimate for Kawai which covered repairs "outside the already approved insurance repairs," in the amount of $7,248.34. Britannia completed its repair of Kawai's residence in June 2008. Ultimately, State Farm paid $8,805.36 on the claim, including covered repairs of $7,649.36 and $1,155 in ALE. It closed its file in June 2008.

Approximately six months later, State Farm began receiving inquiries from Kawai and his newly-retained counsel, Coddington, Hicks & Danforth, seeking information regarding how the claim for Kawai's residence had been adjusted. Since Atilano had transferred to a different office, Kristina Downey (Downey) responded on behalf of State Farm. In December 2008, Downey wrote a letter to Kawai attempting to explain his coverage under the Policy. Thereafter, in February 2009, Downey wrote a letter to Kawai's counsel enclosing a complete copy of the claim file and clarifying the basis for State Farm's distinction between covered and uncovered damage in Kawai's bathroom. The letter expressly referenced the Policy exclusion for long-term seepage or leakage.

On April 10, 2009, Kawai filed the present action in San Mateo County Superior Court, alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and negligent misrepresentation against State Farm based on the insurance company's handling of Kawai's water damage claim. Kawai also alleged causes of action for breach of contract and negligence against Britannia and Cal Pacific based on the same facts. As relief, Kawai sought reimbursement for the work performed on his home that State Farm had determined was not covered by the Policy; additional ALE reimbursement over and above the $1,155 already paid to Kawai by State Farm; and $5000 in coverage for mold damage under the Policy. Kawai also sought emotional distress damages, punitive damages, and attorney fees. On April 2, 2009, at Kawai's request, defendants Britannia and Cal Pacific were dismissed from the action without prejudice.

Thereafter, in March 2011, Kawai filed a motion for summary adjudication, seeking a determination by the trial court that State Farm had improperly denied coverage for $5000 in mold damage under the Policy. After opposition, the trial court denied Kawai's motion, concluding that it was procedurally improper as it sought to dispose of only a portion of Kawai's breach of contract cause of action, rather than a whole cause of action as required by statute. (See Code Civ. Proc., § 437c, subd. (f)(1).) In addition, the court noted that Kawai had not, at that point, provided any specific evidence with respect to causation or damages.

Ultimately, the matter was tried to a jury over the course of seven days in February and March 2012. Once the matter was submitted, the jurors were supplied with a verdict form detailing seven specific questions. The first three addressed Kawai's breach of contract cause of action. Specifically, question one stated: "Did plaintiff Greg Kawai suffer unpaid loss to his bathroom covered under his State Farm Insurance Policy?" Question two asked whether State Farm had been notified of the unpaid loss, and question three asked for the amount of the unpaid loss, distinguishing between costs of repair and ALE. The remaining questions dealt with issues of bad faith and related damages. Most of the questions, including question one, further provided that if the jury answered "no" it was to "stop here, answer no further questions, and have the presiding juror sign and date th[e] form." After 33 minutes of deliberation, the jury in this case returned a verdict, answering "no" to the first question. Thus, no further questions were answered.

In light of the jury's verdict, the trial court entered judgment in favor of State Farm on April 27, 2012, with notice of entry on July 19, 2012. Kawai's timely notice of appeal now brings the matter before this court.


A. Standard of Review

As Kawai concedes, the deferential, substantial evidence standard of review applies to our appellate consideration of the findings in the trial court that he was not entitled to any additional insurance benefits. (See McRae v. Department of Corrections & Rehabilitation (2006) 142 Cal.App.4th 377, 389 (McRae).) In challenging the jury verdict, however, Kawai fundamentally misapprehends what substantial evidence review entails. Specifically, he argues that—despite the jury's findings—substantial evidence supports the conclusion that he is owed additional benefits under the Policy. Even if this is true, however, the existence of substantial evidence in Kawai's favor is not dispositive. Rather, "[t]he appellant has the burden to demonstrate there is no substantial evidence to support the findings under attack." (Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 749, italics added; see Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 (Foreman).)

Moreover, " '[i]n determining whether a judgment is supported by substantial evidence, we may not confine our consideration to isolated bits of evidence, but must view the whole record in a light most favorable to the judgment, resolving all evidentiary conflicts and drawing all reasonable inferences in favor of the decision of the trial court. [Citation.] We may not substitute our view of the correct findings for those of the trial court [or jury]; rather, we must accept any reasonable interpretation of the evidence which supports the [factfinder's] decision.' " (McRae, supra, 142 Cal.App.4th at p. 389.) In sum, " '[w]hen a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.' " (Foreman, supra, 3 Cal.3d at p. 881, italics added.) It is under this well-established analytical framework that we will review each of Kawai's claims. Of course, to the extent our analysis involves interpretation of the Policy, this is a question of law subject to our de novo review. (Liberty National Enterprises, L.P. v. Chicago Title Ins. Co. (2013) 217 Cal.App.4th 62, 77.) B. Additional Living Expenses (ALE)

Pursuant to the Policy, State Farm offered coverage for additional living expenses (ALE) as follows: "When a Loss Insured causes the residence premises to become uninhabitable, we will cover the necessary increase in cost you incur to maintain your standard of living for up to 24 months. Our payment is limited to incurred costs for the shortest of: (a) the time required to repair or replace the premises; (b) the time required for your household to settle elsewhere; or (c) 24 months." However, the Policy further provided for certain "Losses Not Insured," stating in relevant part: "We do not insure under any coverage for any loss which is caused by one or more of the items below . . . [including] continuous or repeated seepage or leakage of water or steam from a: [¶] . . . [¶] . . . plumbing system, including from, within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceilings or floors (italics added)." In the present case, Kawai was displaced from his home from the beginning of April 2008 until sometime in June 2008, while both covered and uncovered damages were repaired. He received ALE of $1,155, payment for 15 nights in a hotel at the rate of $77 per night.

Kawai later testified that he had actually paid only $59 per night, as he obtained his reservation through a discount website.

At trial, Kawai argued that, based on the terms of the Policy, he was entitled to ALE coverage for expenses he incurred during the period required to complete all of the repairs to his residence, whether covered or uncovered. The jury was instructed that to prevail on his argument, Kawai had to prove that he "suffered a loss, all of which was covered under an insurance policy with State Farm, [and] that State Farm was notified of the loss as required by the policy." Alternatively, the jury was instructed that, for State Farm to prevail on its argument that a policy exclusion applied, it bore the burden of demonstrating that "Mr. Kawai's unpaid loss occurred because of a continuous or repeated seepage or leakage from a plumbing system including from within, or around any shower stall, shower bath, tub installation or other plumbing fixture including walls, ceilings or floors and that Mr. Kawai's unpaid loss did not occur because of a sudden and accidental discharge or overflow of water from within a plumbing system." Since the jury concluded that Kawai did not "suffer unpaid loss to his bathroom covered under his State Farm insurance policy," it implicitly rejected Kawai's position in favor of State Farm's, a determination we believe is amply supported by the record.

First, as detailed above, substantial evidence exists that the damage to Kawai's tub and surrounding tile was caused by long-term seepage, specifically two separate continuing leaks—one from the upstairs waste line and another from the upstairs tub/shower drain. Thus, the jury's implicit conclusion that any loss related to those leaks was excluded under the express terms of the Policy is defensible. Moreover, despite Kawai's argument to the contrary, when the relevant provisions of the Policy are read as a whole, their plain meaning supports the conclusion that ALE coverage is only available in connection with a covered loss. (See Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-1265 [if the language of an insurance policy is "clear and explicit" it governs; terms must be interpreted "in context"].) Specifically, the Policy exclusion stating, "[w]e do not insure under any coverage for any loss which is caused by" a long-term seepage leak, would seem necessarily to exclude coverage for ALE generated in connection with such a leak, even if the ALE provision, itself, could be interpreted more broadly when read in isolation. In sum, we see no error in the jury's implied conclusion that the only ALE reimbursable under the terms of the Policy involve expenses incurred in connection with covered losses.

Kawai also claims, however, that, even if ALE payments are restricted to the timeframe necessary to complete the covered repairs, there is insufficient evidence in the record with respect to the actual time it took to complete those repairs. To the contrary, Atilano testified that she relied on Britannia's estimate of the time that would be required to complete the portion of the repairs falling within the terms of the Policy. Specifically, Stringer opined that the covered repairs would "take approx. 2 wks at least." As stated above, Atilano authorized payment of ALE to Kawai for 15 days. Moreover, the notes in the claim file indicate that, when Kawai spoke to Atilano on April 17, 2008, he was not seeking further reimbursement from State Farm beyond the 15 days he received, but instead stated that he was going to try and get his homeowner's association to pay for the rest. Under such circumstances, the jury could have reasonably concluded that the repairs were completed during the estimated time and that Kawai was not entitled to any further payments for ALE. C. Emergency Water Mitigation Costs

There is a file note from April 2, 2008, indicating that another State Farm employee spoke with Kawai, who wanted authorization for more ALE because he "didn't want to spend out of pocket." At this point, the possible long-term leaks had just been discovered, and Kawai was advised that the employee would not authorize further ALE at that time because it would not be available for an uncovered loss. Kawai was instructed that he would "need to discuss further w/ assigned CR Atilano when she returns tomorrow."

Kawai also contends that he incurred $2067.04 in emergency water mitigation costs which were never reimbursed by State Farm as required under the Policy. In support of this claim, Kawai presented at trial an invoice from Britannia dated October 30, 2008, which lists $2067.04 as an amount due for Emergency Water Damage Remediation. The invoice also details costs for Structure Repairs ($5449.36), Private Billing ($7248.34), and Asbestos Abatement ($2700). As stated above, however, the jury in this case found that Kawai did not "suffer unpaid loss to his bathroom covered under his State Farm insurance policy." Thus, the jury implicitly rejected Kawai's claim for reimbursement of emergency water mitigation costs. And, despite Kawai's assertion to the contrary, substantial evidence in the record supports the jury's implied finding.

First, Kawai points to no evidence establishing that he actually paid for the emergency water damage costs, such as a paid credit card invoice or cancelled check. To the contrary, he testified that he was only paying the private billing portion of the invoice and that State Farm would be responsible for the rest. Stringer also testified that Kawai was only responsible for the approximately $7000 covering the private portion of the bill. Finally, State Farm's claim file notes indicate that Atilano advised Britannia by telephone that Kawai might need emergency water service (EWS) "to check for residual moisture in the areas of concern." Atilano further reported that Kawai wanted Britannia to do this work as well and that the company should bill State Farm for it directly. Thus, the evidence on payment was, at best, ambiguous, and the jury could reasonably have inferred from the information presented that Kawai never actually paid for any emergency water mitigation services.

Such an inference is further supported by the evidence tending to suggest that, in fact, no emergency water mitigation was ever done at Kawai's residence. In support of his argument that EWS occurred, Kawai cites testimony from Steve Kelley, Britannia's water remediation provider, that he had "started" water mitigation. Kawai also highlights Stringer's statement that humidifiers were used at the residence. What Stringer actually said, however—when asked if drying was ever done at Kawai's unit—was: "I would think there was some dehumidifiers set [] in place." But when pressed as to whether he knew if this was done, Stringer responded: "I can't recall." Thus, Stringer's testimony is of little use in establishing that EWS was provided to Kawai.

Further, when viewed as a whole, Kelley's testimony is similarly unhelpful to Kawai's position. Kelley initially provided a private water mitigation estimate in the amount of $2067.04 to Kawai in December 2007, prior to State Farm's involvement and before any wall or ceiling cavities were opened. In fact, Kelley's estimate expressly stated that "[i]f microbial growth is found in the wall and ceiling cavities and [sic] new estimate will be written." According to Kelley, Kawai opted not to go forward with the EWS at that time because "he wasn't quite sure who was going to pay for it." It appears from State Farm's claim file notes that, as of January 23, 2008, water mitigation still had not been performed. Kelley then sent a technician to perform the EWS on February 6, 2008, but "that's when he found all the mold, the technician." This discovery led to a decision to test for asbestos, the finding that the sheetrock tape contained asbestos, and related asbestos abatement. After the abatement was completed, Kelley returned to the residence in April 2008 at Stringer's request because Stringer "wanted me to look at a shower surround, and the wall cavity was open at the time, and they left the shower there, and he wanted my opinion on what to do with it if it should be—if it can be dried out or if it should be removed." Kelley opined that it should be removed. Thereafter, a revised estimate for repairs was sent to Kawai on April 17, 2008. The estimate did not include a line item for water mitigation and, in fact, stated that "water mitigation techniques" were "not yet performed."

A reasonable inference from all of this evidence, perhaps the most reasonable inference, is that EWS were never provided at Kawai's residence because the decision was made to remove all of the damaged buildings materials rather than attempting to dry them out. As the project evolved, mitigation was simply no longer an appropriate option, and thus the invoice detailing that charge was in error. In short, on these facts, we see ample support for the jury's conclusion that State Farm did not owe Kawai anything further for emergency water mitigation. D. Mold Damages

As a final matter, Kawai complains that the trial court refused to include damages attributable to the need for additional future mold remediation as an express option in the verdict form given to the jury. Kawai did not object to any of the actual jury instructions given to the jury in this case. Rather, when the trial judge asked if there were any further discussions regarding the verdict form, Kawai's trial counsel stated: "Your Honor, if I may record the objection with respect to one [] element regarding the repair to the unit that the Court has indicated it does not believe is appropriate to include in the verdict form, the subsequent repair to the unit that we discussed." The court confirmed that Kawai's attorney was talking about the cost of additional mold remediation still required to be done at the property. Although the trial court agreed that additional costs of repair may be an appropriate element of damages, he declined to include it as a separate option on the verdict form under the current facts, stating: "I do not feel the testimony of the various witnesses or any of them support the cost of mold remediation . . . . [¶] There's been no expert that has really given us a definitive statement of what the cost of this remediation work would be for purposes of mold clean up and whether or not there is a mold problem at this time. There's no evidence that mold is still an issue in this apartment" (italics added).

On appeal, Kawai contends that the trial court erred in concluding that there was no evidence presented of a continuing mold problem or the cost of any necessary additional remediation. Specifically, he argues that, because certain photographs taken by Lane on April 8, 2008— after the asbestos abatement process—show mold still present in the bathroom, it must be true that "mold was left in Mr. Kawai's bathroom and remains to this day." Kawai also asserts that his expert, Pat Kelley, testified that "a good starting point" for the costs of future remediation would be the costs previously paid by State Farm and Kawai combined, because the work would be "similar if not identical."

State Farm does not dispute the fact that photographs taken on April 8, 2008, after asbestos abatement was completed, show the presence of some mold. However, under the evidence presented at trial, this fact is not dispositive regarding the continued presence of abatable mold at the site. To the contrary, Stringer, a Britannia employee, testified that any mold on the sheetrock and insulation was abated or discarded along with the sheetrock as part of the repair. This would leave only the possibility of mold on the wooden framing. However, as Stringer explained, wooden framing purchased from the lumberyard is stacked out in the open; is considered "wet or green" at the time of purchase; and has mold on it to some degree. This so-called "lumberyard mold," is found in many wooden structures. Britannia, however, completed its restoration work after the April 8 pictures were taken. And, when expressly asked: "To your understanding, was all mold or any mold in Mr. Kawai's bathroom that required remediation was that taken care of as a part of or in the course of the abatement and the repairs by Britannia," Stringer responded "[y]es." Finally, Neil Bordenave, State Farm's insurance expert, opined as follows regarding the restoration process in this case: "[Britannia] brought in hazardous people because the tape tested positive for asbestos, so you go in and you have to bag up all that stuff. On the wallboard, they would have bagged it and taken it away. What is left is the studs, and, you know, a firm like Britannia would have cleaned them off. I can't imagine they would have left mold on the studs." Rather, the removal of mold under such circumstances would be "normal and customary of what a contractor does."

Kawai does not cite to anything contradicting this strong evidence that all necessary mold abatement was completed by Britannia. Indeed, Kawai's own expert, Patrick Kelley, indicated that he had no opinion as to whether Britannia removed all mold and did not know "the condition of the internal wall conditions as they exist today." Rather, his testimony regarding "a good starting point" for the costs of future remediation was based solely on the assumption that mold remained "throughout the bathroom." It is well established, as pointed out by State Farm, that " '[d]amages which are remote, contingent, or merely possible cannot serve as a legal basis for recovery.' " (Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507, 531; see also Civ. Code, § 3301 ["[n]o damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin"]; Munoz v. MacMillan (2011) 195 Cal.App.4th 648, 662 [noting that a "breach of contract plaintiff has burden to prove with reasonable certainty she suffered nonspeculative damages" (fn. omitted)]; Fisher v. Hampton (1975) 44 Cal.App.3d 741, 748 ["[u]ncertainty as to the fact of whether any damages were sustained at all is fatal to recovery"].) We agree with the trial court that the record in this case simply does not support the continuing presence of mold at the repair site. Thus, the trial court properly declined to include future mold remediation as an element of possible damages on the verdict form submitted to the jury.

Since we have concluded that substantial evidence supports the determination in the trial court that Kawai was owed no further benefits under the Policy, we need not consider his contention that the issue of bad faith should be remanded for further consideration. As Kawai, himself, concedes, in order to establish a claim for breach of the implied covenant of good faith and fair dealing, benefits due under the Policy must have been withheld. (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.) --------


The judgment is affirmed. Each party to bear their own costs.


REARDON, J. We concur: /s/_________
RUVOLO, P. J. /s/_________