Monterey Ins. Co.
v.
1725 Fulton St., LLC

This case is not covered by Casetext's citator
COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONEApr 18, 2018
A149722 (Cal. Ct. App. Apr. 18, 2018)

A149722

04-18-2018

MONTEREY INSURANCE COMPANY, Plaintiff and Appellant, v. 1725 FULTON STREET, LLC, et al., Defendants and Respondents.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 Francisco County Super. Ct. No. CGC 14-539780)

Defendant Stephen Arthur Brown failed to disclose, on an insurance application submitted to plaintiff Monterey Insurance Company, information about an apartment building's prior claims history. After defending several claims brought by some of the building's tenants, plaintiff filed a lawsuit against Brown and others for various causes of action, including fraud, based on Brown's misrepresentations. Plaintiff now appeals from the trial court's order granting summary judgment in favor of Brown. The trial court granted summary judgment after concluding plaintiff had waived its right to recover because it took no action when it received documentation of the property's loss history after the insurance application was submitted. We agree with plaintiff that there are disputed issues of material fact as to whether it waived its right to sue for the misrepresentations that Brown made in procuring the insurance policy. Accordingly, we reverse.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

From 1999 until June 2013, Brown was the property manager for the apartment building located at 1725 Fulton Street (the Property) in San Francisco.

On February 9, 2012, Nikko Bravo, a tenant at the Property, filed a request for a civil harassment restraining order against Norman Sabel, one of the building's owners.

On March 7, 2012, Nicole Wooldridge and Jeanne Besanceney filed separate actions against Brown, Norman Sabel, Sylvia Sabel (Norman's sister and co-owner of the Property), and Sabel Properties, LLC, for various claims relating to their tenancies, including habitability issues.

On June 29, 2012, Bravo filed a second request for a civil harassment restraining order against Norman Sabel.

On or about September 11, 2012, Brown contacted an insurance agent named James Mason and requested an insurance policy for the Property and 1725 Fulton Street, LLC. He told Mason the policy was needed right away.

Apparently, the Sabel siblings had a falling out and decided to divide their ownership. The 1725 Fulton Street property was placed into its own limited liability corporation, 1725 Fulton Street, LLC.

Mason had known Brown for 35 years and had placed over 100 policies with him. He had never known Brown to fail to disclose prior claims. In response to Mason's inquiry, Brown told him there were no prior claims pertaining to the Property or the insured. However, this was a misrepresentation, which Brown has conceded. In fact, Brown knew that several tenants had filed lawsuits regarding the Property.

Before it issues a policy, plaintiff will review an insurance application to determine loss history and building profile information. Mason submitted the insurance application to plaintiff stating there were no prior losses. Mason would not have bound the policy with plaintiff if Brown had told him about the existing lawsuits.

On September 13, 2012, plaintiff offered an insurance quote to 1725 Fulton Street, LLC. The quote states: "This is not a policy. . . . This quote is based upon information provided as of 9/13/2012 and is valid until 11/12/2012. Please contact your authorized company agent to accept this quotation and to bind coverage. . . . Subject to Favorable Inspection Report, [and] Loss History."

On September 13, 2012, at 11:10 a.m., plaintiff's underwriter contacted Mason's assistant by e-mail to state that a policy (Policy No. 3-SOP-3-1761550 (Policy)) was bound, effective September 12, 2012, as submitted and proposed. The correspondence also states that a "[p]rior Carrier Loss Runs report will be required, please forward within the next 14 days." The Policy was issued that same day, with an effective date of September 12, 2012.

On September 18, 2012, plaintiff mailed a letter to Mason, requesting him to submit within 30 days a hard copy of three years of loss runs for claims pertaining to the Property and 1725 Fulton Street, LLC.

On September 24, 2012, Greg Galinsky filed a complaint for claims relating to his tenancy at the Property. The complaint names Sabel Properties, LLC, as a defendant, not 1725 Fulton Street, LLC.

On October 2, 2012, Brown sent the loss runs to Mason. The document appears to have been generated by Travelers, the Property's previous carrier. It identifies three claims, one by Besanceney and two by Wooldridge. The document indicates that the claims had a zero-dollar amount. It also states that the information pertains to Sabel Properties, LLC. It does not reference 1725 Fulton Street, LLC, nor does it reference any of the defendants. For unknown reasons, the loss runs were not immediately sent to plaintiff.

On October 18, 2012, plaintiff's underwriter sent Mason a second request for the loss runs.

On October 24, 2012, Mason e-mailed the loss runs to plaintiff. Plaintiff's underwriter testified at her deposition that she did not receive this e-mail.

On November 19, 2012, Mason's office sent a second e-mail copy of the loss runs to plaintiff.

Plaintiff's Director of Commercial Lines testified at deposition that evidence of loss history is required as a part of plaintiff's internal review process for acceptability. The three claims listed on the loss runs in this case should have caused the underwriter to find that the application contained a material misrepresentation with regard to loss history. The underwriter should have recommended to her supervisor that coverage be rescinded. However, she under-reacted and did not analyze the loss runs upon receiving them. Nor did she compare them to the application information.

On January 31, 2013, Bravo and his wife, Marina Konakova, filed a complaint against defendants for claims relating to their tenancy. Like the other tenant complaints, this one also names Sable Properties, LLC, as a defendant, not 1725 Fulton Street, LLC.

On June 14, 2013, plaintiff sent 1725 Fulton Street, LLC, a letter notifying it that the Policy was being renewed, with a renewal period of September 12, 2013 to September 12, 2014.

On September 24, 2013, plaintiff sent 1725 Fulton Street, LLC, a letter stating that it was canceling the Policy effective October 12, 2013, because it had not received payment for the premium for the renewal.

On October 3, 2013, 1725 Fulton Street, LLC, submitted to plaintiff claims under the Policy based on the tenants' lawsuits. Subsequently, plaintiff attempted to rescind the Policy. Plaintiff did agree to defend the Besanceney and Bravo actions, subject to a full reservation of rights. Plaintiff incurred defense costs in these actions. It also paid out a settlement of $150,000 to settle the claims brought by Besanceney, Wooldridge, and Galinsky, and paid out a confidential settlement amount in the Bravo action.

On October 10, 2014, plaintiff filed its first amended complaint (FAC) against Brown and others for rescission, intentional misrepresentation, fraud by concealment, declaratory relief, and indemnity.

All the causes of action were asserted against Brown except for the actions for declaratory relief. On March 24, 2015, the trial court granted Brown's motion for judgment on the pleadings as to the cause of action for rescission.

On February 27, 2015, Brown filed his answer to the FAC.

On April 22, 2016, Brown filed a motion for summary judgment, or in the alternative, for summary adjudication. Brown asserted the FAC's causes of action against him fail as a matter of law, in part because plaintiff waived its right to rescind the Policy or assert fraud-based causes of action arising out of any misrepresentation or concealment in the application. Specifically, Brown asserted plaintiff had actual knowledge that the facts presented on the insurance application were untrue once it received the loss runs from Mason. Rather than investigating the discrepancy between the loss runs and the information on the application, plaintiff and its underwriter neglected to make any inquiry as to the allegedly material misrepresentations. Instead, plaintiff did not rescind the Policy until over a year later, after the insured submitted a claim.

Additionally, Brown asserted that he did not intend to defraud plaintiff, and that plaintiff did not justifiably rely on his conduct. He also raised the affirmative defenses of laches and unclean hands.

On July 21, 2016, the trial court granted Brown's motion for summary judgment. The court concluded, as a matter of law, that plaintiff "acted in a manner inconsistent with the intent to enforce its right to bring claims against Brown" based on his misstatements regarding the loss history. The court noted plaintiff had actual knowledge of the loss activity after it received the loss runs from Mason, but it made no inquiries and took no action, allowing the Policy to stay in place for a year and offering to renew the Policy the following year. The court recognized that insurers can waive the right to rescind a policy without waiving the right to pursue a claim against the party who made the misstatements. However, the court found that the "only reasonable inference on this record is that [plaintiff] had no intent to enforce its right to pursue Brown for his September 2012 misstatement."

On September 6, 2016, the trial court filed its judgment in favor of Brown. This appeal followed.

DISCUSSION

I. Standard of Review

Summary judgment is properly granted when there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A moving defendant can meet his or her burden by demonstrating that a cause of action has no merit, which it can do either by showing that one or more elements of the cause of action cannot be established, or by establishing an affirmative defense to the cause of action. (§ 437c, subds. (o), (p)(2).)

Subsequent statutory references are to the Code of Civil Procedure unless otherwise noted.

On appeal from a summary judgment, our task is to independently determine whether an issue of material fact exists and whether the moving party is entitled to summary judgment as a matter of law. (Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1601.) We review the trial court's decision de novo, considering all of the evidence set forth in the moving and opposing papers except that to which objections were made and sustained. (Hughes v. Pair (2009) 46 Cal.4th 1035, 1039.) We liberally construe the opposing party's evidence, strictly construe the moving party's evidence, and resolve all doubts in favor of the opposing party. (Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64; Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) II. Waiver

A. Legal Principles

"All case law on the subject of waiver is unequivocal: ' "Waiver always rests upon intent. Waiver is the intentional relinquishment of a known right after knowledge of the facts. [Citations.] The burden, moreover, is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and 'doubtful cases will be decided against a waiver.' " ' " (DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 60, italics added.) "The pivotal issue in a claim of waiver is the intention of the party who allegedly relinquished the known legal right." (Ibid.) "The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right." (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.)

"An insurer has the right to rescind a policy when the insured has misrepresented or concealed material information in seeking to obtain insurance. [Citations.] That right, like any other, can be waived. 'An insurance company will be deemed to waive any ground which would otherwise entitle it to rescind a policy or treat it as forfeited when, despite knowledge of the facts giving it the option, it impliedly recognizes the continuing effect of the policy.' [Citations.] This test for waiver in the context of insurance contracts comports with the general rule for finding a waiver: ' "In general, to constitute a waiver, there must be an existing right, a knowledge of its existence, an actual intention to relinquish it, or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished." ' " (DuBeck v. California Physicians' Service (2015) 234 Cal.App.4th 1254, 1264-1265 (DuBeck).)

An insurance company cannot stand idle when confronted with an insured's potentially fraudulent conduct. In DuBeck, the appellate court applied the principle that " '[a]ctual knowledge of a breach of a policy provision is not essential to establish a waiver of a policy provision. It is sufficient if the insurer has information which if pursued with reasonable diligence would lead to the discovery of the breach.' " (DuBeck, supra, 234 Cal.App.4th at p. 1267.) The DuBeck court noted this principle was recognized in Barrera v. State Farm Mut. Auto Ins. Co. (1969) 71 Cal.2d 659 (Barrera), where "the Supreme Court observed: " ' "The rule is well established that the means of knowledge is equivalent to knowledge, and that a party who has the opportunity of knowing the facts constituting the fraud of which he complains cannot be supine and inactive, and afterwards allege a want of knowledge that arose by reason of his own laches or negligence." ' " (DuBeck, at p. 1267.)

At the same time, an insurance company is entitled to rely on the insured's representations contained in an insurance application. The fact that an insurance company does not follow its own internal policy regarding verification of an insured's statements made on an application is not determinative. California statutes expressly permit an insurer to rely on an insured's representations. (See Ins. Code, § 331; see also Robinson v. Occidental Life Ins. Co. (1955) 131 Cal.App.2d 581, 585 [insured has duty to divulge fully; insurer is not required to assume falsity of statements made to insurer's examiner].) Thus, even assuming an insurance company fails to follow its internal verification procedures, this does not establish waiver as a matter of law: "An insured who withholds information and then blames the insurer for not discovering it is at best exhibiting gamesmanship." (Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 822, fn. 9.) Furthermore, the failure to follow an insurer's internal guidelines does not "rewrite the California statutes expressly permitting an insurer to rely on an insured's representations." (Colony Ins. Co. v. Crusader Ins. Co. (2010) 188 Cal.App.4th 743, 754, italics added; see Ins. Code, § 331.)

B. Application

Plaintiff persuasively argues that triable issues of fact exist as to whether it waived, intended to waive, or even knew of the falsity of Brown's representations such that it could waive the right to pursue a claim against him. First, it observes that the loss runs Brown submitted do not refer to 1725 Fulton Street, LLC, or to the Property. Instead, the loss runs reference Sabel Properties, LLC, and contain zero-dollar amounts for the three claims that were listed. Plaintiff also notes that the insureds did not tender any claims until after the Policy expired. It further asserts there is no dispute that it issued the Policy before it received the loss runs, in reliance on Brown's false representations that the Property had no prior claims. It contends that after it received the loss runs, it took no affirmative action that would suggest an intent to relinquish its rights against Brown. It further argues that "[w]hether such a failure to act . . . constitutes an intentional relinquishment is a triable issue of fact for the jury."

Plaintiff also asserts the trial court erred in concluding that the Policy was issued subject to the receipt of favorable loss runs. It notes the quote for insurance includes such language, but the actual Policy itself does not include such language. Instead, the record shows the Policy was made effective September 12, 2012, as Brown requested. Plaintiff further argues that its duty to defend and indemnify began once the Policy was issued, and was not dependent on receipt of the loss runs.

We agree that clear and convincing evidence does not establish plaintiff intentionally relinquished its right to pursue Brown for fraud once it acquired full knowledge of the facts. Brown relies on Barrera in arguing that waiver can be found here as a matter of law. Barrera acknowledges that, for the protection of third parties, an insurer may be barred from rescinding a policy after learning of an applicant's misrepresentation. (Barrera, supra, 71 Cal.2d at pp. 676-677.) However, that case also holds that an insurer still retains the right to pursue the insured. (Id. at p. 681.) Plaintiff argues that Barrera did not hold that an insurer is "entitled" to recover under these circumstances. Regardless, the issue here is not whether plaintiff is "entitled" to recover. The issue is whether Brown's waiver defense should be decided by a jury. In light of the standard of review that we must follow, we agree with plaintiff that the facts do not support a finding of waiver as a matter of law.

Brown also argues that by not taking steps to rescind the policy, plaintiff effectively conceded it did not suffer damages as a result of the misrepresentations. This argument is unsupported by any legal authority and contradicts Barrera, which indicates that an insurer retains its legal remedies for misrepresentation notwithstanding whether it rescinds a policy. (Barrera, supra, 71 Cal.2d at p. 681.)

Brown also observes actual knowledge is not a required element of waiver, asserting that the loss runs were sufficient to put plaintiff on notice even though the documents identified a different corporate entity. He relies on cases holding that insurers cannot rely on misrepresentations to avoid liability where the misrepresentations are contradicted by other information known to the insurer at the time it issued the policy. However, in Dalzell v. Northwestern Mutual Ins. Co. (1963) 218 Cal.App.2d 96, 102, the appellate court merely found there was substantial evidence to support a jury's finding that a requirement was waived. The case does not support Brown's position that waiver can be established as a matter of law just because an insurer has access to information that could expose a prior misrepresentation. Similarly, Barrera, supra, 71 Cal.2d 659, DiPasqua v. California Etc. Life. Ins. Co. (1951) 106 Cal.App.2d 281, and Rutherford v. Prudential Ins. Co. (1965) 234 Cal.App.2d 719 are inapposite in that they are not summary judgment cases.

Brown cites to Magnuson v. Video Yesteryear (9th Cir. 1996) 85 F.3d 1424, 1427 (Magnuson) for the proposition that "[a]n insurer waives its rights if it ignores information that it has that if reviewed would distinctly imply misrepresentation of other facts included in an application." We are puzzled by the citation as Magnuson is a copyright infringement case that does not address insurance or waiver.

While there is evidence here to support a finding of waiver, the evidence does not appear to satisfy the requisite clear and convincing standard. As Brown notes, the three claims listed on the loss runs submitted should have triggered some action by plaintiff's underwriter to make an assessment that the application contained a material misrepresentation and to take action to rescind the Policy. However, plaintiff's underwriter "did not analyze the loss runs upon receiving them." Viewing this evidence in a light favorable to plaintiff, we observe a jury could find that plaintiff, through its underwriter, negligently "dropped the ball," as opposed to having intentionally decided to waive the misrepresentations. Accordingly, there are triable issues of fact as to whether plaintiff "knowingly" waived its legal right to seek redress from Brown for his misrepresentations. Summary judgment on this issue should have been denied. III. Other Defenses

A. Causation

Brown contends he has no liability because "there is no causal connection between the misrepresentation allegedly made by Brown and any damages suffered." He makes the questionable assertion that a binder, not a policy, was issued on September 12, 2012. He also claims plaintiff could not have relied on his misrepresentations because it "took no action and acted inconsistently with the assertion of its rights." He concludes that "[h]aving waived the right to rescind, [plaintiff] is liable for damages in the underlying litigation as well as attorney's fees and there is no liability assigned to Brown."

Binders are different from subsequently issued policies of insurance. (Ahern v. Dillenback (1991) 1 Cal.App.4th 36, 48.) A binder is issued upon application for insurance and is merely a memorandum of the most important terms of a preliminary contract of insurance that gives temporary protection pending the insurer's investigation of the risk and issuance of a formal policy. (Ibid.; accord Chicago Title Ins. Co. v. AMZ Ins. Services, Inc. (2010) 188 Cal.App.4th 401, 419.) The binder ceases to be effective by its terms or upon issuance of the policy. (Ahern v. Dillenback, at pp. 48-49.) The binder "constitute[s] a statement of the terms and conditions upon which the issuer is willing to issue its title policy, if such offer is accepted." (Ins. Code, § 12340.11.) Stated differently, binders are offers to insure. (Ibid.) Brown appears to contend that the quote plaintiff issued on September 13, 2012, was a binder of insurance; however, the quote does not contain any language to that effect.

Brown disputes plaintiff's claim that the actual Policy was issued on September 12, 2012, in reliance on his representations, stating "this is not true and clearly the evidence establishes to the contrary." He reasons that "[t]he fact that [plaintiff] received the loss run and not only issued the policy, but sent out renewal notice for a second period establishes that Monterey made the decision that the condition [for issuance of the policy] had been met." His argument is that plaintiff cannot prove causation because it "waived the requirement of satisfactory loss runs when it issued the policy."

Plaintiff counters that Brown's argument is based on the "false premise" that the Policy was not issued or effective until after the loss runs were provided. Plaintiff contends it is undisputed that the policy was bound on September 13, 2012, and was made effective September 12, 2012, before plaintiff received the loss runs. The record on appeal contains the insurance policy, which does indicate that the policy period is from September 12, 2012, to September 12, 2013. This evidence support's plaintiff's position, and Brown did not dispute this point below. Additionally, as noted above, the Policy itself is not expressly conditioned on the receipt of loss runs.

In support of his argument as to lack of causation, Brown cites to cases that frown on the practice of "post-claims underwriting," relying largely on Barrera, supra, 71 Cal.2d 659. His authorities are not on point.

In Barrera, the plaintiff had previously obtained a judgment for damages caused by a negligent driver. When she sued the driver's automobile liability insurer to compel payment of that judgment, the insurer filed a cross-complaint seeking a declaration that the insurance policy it had issued was void ab initio. The trial court entered judgment for the insurer on both the complaint and the cross-complaint, finding rescission of the insurance policy justified because: (1) the insurer had issued the policy in reliance on a material misrepresentation made by the insured (that his license had not been suspended in the last five years); and (2) the insurer acted promptly to rescind upon discovery of the insured's misrepresentation. (Barrera, supra, 71 Cal.2d at pp. 662, 665.)

In reversing that judgment, the Barrera court declared: "We conclude that an automobile liability insurer must undertake a reasonable investigation of the insured's insurability within a reasonable period of time from the acceptance of the application and the issuance of a policy. This duty directly inures to the benefit of third persons injured by the insured. Such an injured party, who has obtained an unsatisfied judgment against the insured, may properly proceed against the insurer; the insurer cannot then successfully defend upon the ground of its own failure reasonably to investigate the application." (Barrera, supra, 71 Cal.2d at p. 663.)

An important aspect of Barrera involved the automobile insurance context. For example, the court in that case noted that unlike ordinary indemnity insurance, the law governing automobile liability insurance was enacted to protect the public, that is, such insurance represents protection "for those who suffer injury or death on the highway from financially irresponsible drivers." (Barrera, supra, 71 Cal.2d at p. 672.) In finding that public policy considerations support a duty to reasonably and timely investigate insurability, Barrera emphasized the duty inures directly to the class of potential victims of the insured. Thus, when an automobile liability insurer "breaches that duty, it may not defeat recovery by the injured person, who has recovered a judgment against the insured, by relying on an untimely attempt to rescind." (Barrera, at p. 675.)

As we have already discussed above, the Barrera opinion notes that an insurer, upon satisfying a judgment in favor of the injured person, retains a right to prosecute a cause of action against the insured for damages for the latter's misrepresentations. (Barrera, supra, 71 Cal.2d at p. 681; see United Services Automobile Assn. v. Pegos (2003) 107 Cal.App.4th 392, 395, fn. 1.) Thus, even under Barrera, lawsuits like the present one are viable, notwithstanding whether an insured's misrepresentations are uncovered by the insurance company only after a claim has been presented.

Brown also relies on Shain v. Sresovich (1894) 104 Cal. 402, 405, and Consolidated Reservoir & Power Co. v. Scarborough (1932) 216 Cal. 698, 701-702, cases that are inapposite in that they concern imputed knowledge with respect to running of the statute of limitations only. His argument that plaintiff "lost any right to rely on the misrepresentation or attribute any of its damages to [his acts]" (italics added) is overstated. --------

Also, unlike Barrera, this case does not involve an automobile liability insurer or the public policy of protecting injured third parties. (See Fireman's Fund Ins. Co. v. Superior Court (1977) 75 Cal.App.3d 627, 633 [Barrera has been "limited to automobile liability insurers who deny coverage for reasons arising out of their own negligence"]; Nieto v. Blue Shield of California Life & Health Ins. Co. (2010) 181 Cal.App.4th 60, 85, fn. 6 [distinguishing Barrera on ground Barrera was based on overriding public policy of protecting injured third parties].) Here, the relevant law requires an applicant for insurance to truthfully disclose material facts and permits rescission and other remedies absent such disclosure. (Ins. Code, §§ 331, 359; Resure, Inc. v. Superior Court (1996) 42 Cal.App.4th 156, 161.) Further, in the present case, plaintiff did not rescind the policy. It defended the claims under a reservation of rights before bringing this lawsuit afterwards to recover damages for defendant's misrepresentations. Thus, the public policy concerns advanced by Barrera are not implicated here. The tenants who filed claims against the Property have had their cases resolved and are not affected by this lawsuit.

Also important for our purposes, Barrera explained that ordinarily it is a question of fact whether or not an insurer has breached its duty to reasonably and timely investigate insurability. (Barrera, supra, 71 Cal.2d at p. 681.) The court noted that in the automobile insurance setting, for example, reasonableness of the defendant insurer's failure to investigate the insured's driving record would depend on various factors, including: (1) the cost of obtaining that information from the Department of Motor Vehicles (DMV); (2) the availability of that information from the DMV or elsewhere; (3) the general administrative burden of making such an investigation; and (4) whether the defendant insurer had a practice of delaying investigation until the presentation of a significant claim on the insurance policy. (Id. at p. 682 & fn. 17.) This suggests that causation is not an appropriate for summary judgment here.

B. Justifiable Reliance

Brown also asserts that plaintiff cannot establish the elements of fraud or concealment, focusing on the element of reliance. The necessary elements of a fraud or a concealment/suppression claim consist of " '(1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.' " (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.)

Brown first asserts plaintiff did not present any evidence that he was the agent of 1725 Fulton Street, LLC or that he was acting in any official capacity at the time the representations were made. Additionally, he argues that an insurer cannot rely on misrepresentations in an insurance application that are contradicted by other information known to the insurer. Based on the facts underlying his waiver argument, Brown also claims any purported reliance on his statements made on the application was unreasonable.

"Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff's reliance is reasonable is a question of fact." (Blankenheim v. E. F. Hutton & Co. (1990) 217 Cal.App.3d 1463, 1475.) "However, whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts." (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843.) We have already concluded that there are triable issues of material fact as to whether plaintiff could have apprehended Brown's misrepresentations at the time it issued the Policy. As such, summary judgment would not be appropriate on the issue of justifiable reliance.

C. Public Policy

Finally, Brown urges that allowing plaintiff to avoid liability by relying on a misrepresentation that it had an opportunity to discover based on information in its possession would go against public policy, relying on Barrera, supra, 71 Cal.2d 659. We do not necessarily disagree. However, the only issue we need to consider here is whether there are factual issues that should be addressed by a jury, rather than on summary judgment. We conclude the case should go to the jury to decide.

DISPOSITION

The judgment is reversed.

/s/_________


Dondero, J. We concur: /s/_________
Margulies, Acting P. J. /s/_________
Banke, J.