Apex Sol., Inc. v. Falls Lake Ins. Mgmt Co., Inc.

• Court: California Court of Appeals
• Writing for the Court: STREETER, J.
• Citation: Apex Sol., Inc. v. Falls Lake Ins. Mgmt Co., Inc., 319 Cal.Rptr.3d 833 (Cal. App. 2024)
• Docket Number: A167491
• Decision Date: 16 April 2024
• Parties: APEX SOLUTIONS, INC., Plaintiff and Appellant, v. FALLS LAKE INSURANCE MANAGEMENT COMPANY, INC., Defendant and Respondent.

319 Cal.Rptr.3d 833

APEX SOLUTIONS, INC., Plaintiff and Appellant,

v.FALLS LAKE INSURANCE MANAGEMENT COMPANY, INC., Defendant and Respondent.

A167491

Court of Appeal, First District, Division 4.

Filed March 28, 2024

As Modified on Denial of Rehearing April 16, 2024

Trial Court: Superior Court of California, County of Alameda, Trial Judge: Hon. Tara Desautels (Alameda County Super. Ct. No. RG21099709)

Williams & Gum biner, Joel P. Gumbiner, San Rafael, and Bartlett H. Williams for Plaintiff and Appellant.

Hinshaw & Culbertson, Maria S. Quintero, San Francisco, for Defendant and Respondent.

STREETER, J.

In this insurance coverage case, we are called upon to review a judgment entered for the insurer, Falls Lake National Insurance Company (Falls Lake), following a ruling on cross-motions under Code of Civil Procedure section 437c.¹

The appellant, Apex Solutions, Inc. (Apex), runs a cannabis business in Oakland. Apex sustained property and business income losses when unknown burglars broke into its facility in June 2020 and emptied the contents of two vaults containing cannabis inventory. It presented claims for loss of over $2.5 million to Falls Lake, and this litigation ensued when the parties could not agree on the amount of loss owing under Falls Lake’s policy.

The principal issue for decision is whether Apex’s property insurance claim for stolen inventory is subject to a single per occurrence limit of $600,000, as Falls Lake contends, or two per occurrence limits totaling $1.2 million, as Apex contends. We must also address whether Falls Lake owes some $154,000 in additional payments and reimbursements on Apex’s business interruption claim.

On the first issue, we conclude the trial court correctly ruled that a single per occurrence limit applies. On the second, we conclude that, in granting summary judgment for Falls Lake, the court overlooked a disputed issue of material fact concerning proper calculation of Apex’s claim of lost business income.

We will reverse the judgment in part, remand on one narrow aspect of the claim for lost business income, and otherwise affirm.

I. BACKGROUND

In the early summer of 2020, the mayor of Oakland declared a municipal state of emergency, citing conditions of extreme peril to the safety of persons and property within the city. The declaration came in the wake of "unrest and violence … in Oakland and other cities in the Bay Area and around the country" following the murder of George Floyd. Among these emergency conditions was the looting of businesses.

Apex, which describes itself as the owner of a business that "manufactures, stores and distributes cannabis and cannabis related products and merchandise," operates out of a facility at 8435 Baldwin Street in Oakland. In the early morning hours of June 1, 2020, a group of unidentified burglars broke into Apex’s facility and stole a large portion of its cannabis inventory. The thieves raided two separate inventory vaults on Apex’s premises, one called the Distro Vault, and one called Kate’s Vault.

The following day, Apex submitted a police report. In its report, Apex described a break-in at its facility and theft of inventory in the middle of the night. Apex stated the incident started on "06/01/2020 01:30 AM" and ended on "06/01/2020 5:00 AM". On Apex’s security surveillance video recording, the perpetrators’ activities can be clearly seen, but they wore masks and could not be identified. No one was ever apprehended or charged in connection with the burglary.

The narrative in Apex’s police report reads as follows: "On 6/1/20 at around 1:30am, our business at 8435 Baldwin St in Oakland was broken into and burglarized. There was a large group that congregated in front of our building, and through the audio of the surveillance footage, you can hear one male directing the rest of the group to grab crowbars to pry open the front door as well as giving them direction on how to. The group then proceeded to storm the building and dispersed into separate rooms to each steal from one part of the building. This seemed like a coordinated attack from a gang, as everyone was on the same page and cooperating with each other."

Several months later, on October 27, 2020, Apex submitted a supplemental police report updating its original narrative of the June 1 break-in and theft of its inventory. In the October 27 supplemental police report, Apex claimed the time-stamps showed two different groups of burglars entering and leaving independently of one another, and two separate and sequential breaches, first of the Distro Vault, and then, after a break in time of nearly an hour, of Kate’s Vault. According to Apex, these two groups of burglars entered its premises, respectively, at 1:45 a.m. and 2:57 a.m.

Apex was insured against this kind of loss. Falls Lake issued a commercial pack- age policy to Apex, effective from March 26, 2020 to March 26, 2021 (the Policy). Apex is the named insured and the insured premises is Apex’s Baldwin Street location. The Policy includes a series of Special Forms providing various types of coverage, including Commercial General Liability Coverage (CGL Coverage); Commercial Property Coverage (Property Coverage); and Business Income (and Extra Expense) Coverage (Lost Business Income Coverage).² The Property Coverage affords coverage for any loss of "Cannabis Inventory" up to a $600,000 per occurrence" limit, and the Lost Business Income Coverage affords coverage for lost income due to business interruption up to a $2 million limit.³

On June 2, 2020, the same day Apex initially reported the night raid and theft of its inventory to the police, Apex submitted a claim to Falls Lake reporting a covered loss under the Property Coverage and the Lost Business Income Coverage. The preliminary proof of loss, submitted by Apex’s adjuster a few weeks later, stated, "we have prepared a preliminary loss measure which reflects the cumulative total of each of the burglary occurrences. Given a cannabis inventory value in the amount of $2,535,278 against an occurrence policy limit of $600,000, [we] see no reason why the total occurrence limit cannot be paid."

Falls Lake reserved its rights on the per occurrence limit issue, while taking the position that only a single limit applied. On August 4, 2020, it paid $600,000 for the claimed cannabis inventory loss. Its adjuster explained, "we have conducted a preliminary evaluation and reviewed the police report and records you have provided us…. Based on our preliminary evaluation, it appears only one occurrence applies to this loss." Eventually, Falls Lake paid another $673,477 of Apex’s claimed loss under the Lost Business Income Coverage. Apex took the position it was owed an additional $64,138 under the Lost Business Income Coverage based on projected future customer sales, as well as reimbursement for an additional $89,700 in extra expenses incurred to avoid future losses.

When the parties were unable to resolve their differences in the adjustment process, Apex filed a complaint in Alameda County Superior Court against Falls Lake (erroneously sued as Falls Lake Insurance Management Company Inc.); CannGen Insurance Services, LLC; and Fidens International LLC dba Fidens Insurance Brokerage, LLC.⁴ Against Falls Lake, the complaint alleged causes of action for breach of contract and for breach of the implied covenant.

The parties brought cross-motions under section 437c directed to both causes of action, with Falls Lake seeking summary judgment or in the alternative summary adjudication, and Apex seeking only summary adjudication. On December 2, 2022, the court issued an order granting Falls Lake’s motion and denying Apex’s motion. The court later entered judgment for Falls Lake pursuant to the order disposing of these motions. This timely appeal from the judgment followed.

II. DISCUSSION

[1, 2] We address two issues in this appeal, both of them claims of error in the trial court’s section 437c ruling for Falls Lake on the first cause of action for breach of contract.⁵ Specifically, those issues are: (1) Does Apex’s claim of loss for the theft of its cannabis inventory involve one occurrence, or two occurrences, for purposes of the per occurrence limit in the Property Coverage? And (2) is Apex entitled to additional payment for lost business income or for extra expense reimbursement on its claim of loss under the Lost Business Income Coverage?

On the first issue, the parties agree the facts are undisputed, but draw different legal conclusions from those facts, with Apex taking the position we should not only reverse but instruct that summary adjudication be rendered in its favor. On the second issue, Apex claims there is a material dispute of fact that must be tried.

[3] Our analysis is governed by familiar principles. If, on a motion for summary judgment or summary adjudication, "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law," then a grant of the motion is warranted. (§ 437c, subd. (c); see Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 107 Cal.Rptr.2d 841, 24 P.3d 493 (Aguilar).) "We independently review the parties’ papers supporting and opposing the motion, using the same method of analysis as the trial court. Essentially, we assume the role of the trial court and apply the same rules and standards." (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1373, 105 Cal.Rptr.2d 699.)

[4, 5] Under Aguilar, the movant initially cames the burden of making a prima facie showing in its favor. (§ 437c, subd. (p)(1); see Aguilar, supra, 25 Cal.4th at p. 849, 107 Cal.Rptr.2d 841, 24 P.3d 493.) "The prima facie showing by the moving party must be such that it would, if uncontradicted, entitle the moving party to judgment as a matter of law. [Citation.] That is, ‘a moving defendant must present evidence which, if uncontradicted, would constitute a preponderance of evidence [i.e., show it is...