Baldwin v. AAA N. Cal., Nev. & Utah Ins. Exch.

• Decision Date: 13 June 2016
• Docket Number: A142217
• Citation: 204 Cal.Rptr.3d 433,1 Cal.App.5th 545
• Court: California Court of Appeals Court of Appeals
• Parties: William BALDWIN, Plaintiff and Appellant, v. AAA NORTHERN CALIFORNIA, NEVADA & UTAH INSURANCE EXCHANGE et al., Defendant and Respondent.

1 Cal.App.5th 545

204 Cal.Rptr.3d 433

William BALDWIN, Plaintiff and Appellant

v.AAA NORTHERN CALIFORNIA, NEVADA & UTAH INSURANCE EXCHANGE et al., Defendant and Respondent.

A142217

Court of Appeal, First District, Division 3, California.

Filed June 13, 2016

As Modified July 13, 2016

Day Law Offices, Montie S. Day, for Plaintiff and Appellant.

Coddington, Hicks & Danforth, R. Wardell Loveland, Redwood City, Jay C. Patterson, Redwood City, Richard G. Grotch, Redwood City, Min K. Kang, Los Angeles, for Defendant and Respondent.

McGuiness

, P.J.

Plaintiff William Baldwin (Appellant) appeals from the judgment dismissing with prejudice his complaint against defendant AAA Northern California, Nevada & Utah Insurance Exchange (AAA), after AAA's demurrer was sustained without leave to amend. Appellant contends he stated valid causes of action against AAA for breach of contract and bad faith because AAA refused to fully compensate him for collision-related damages to his vehicle as required under his insurance policy and under the insurance policy of a driver involved in the collision. For the reasons set forth below, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

As this is an appeal from an order sustaining AAA's demurrer, in the factual summary that follows we accept as true the facts alleged in the complaint and the attached exhibit. (Westamerica Bank v. City of Berkeley (2011) 201 Cal.App.4th 598, 607, 133 Cal.Rptr.3d 883

.)

Appellant's almost new Toyota Tundra Pickup (pickup) sustained structural damage, while parked, as a result of a collision between the vehicles of defendants Mark Rivera Hollandsworth and Peter Bona Sebastian. Appellant had an insurance policy through AAA covering collision-related damages. Defendant Hollandsworth also had an insurance policy with AAA covering property damage that he caused through negligence.

Once advised of the accident, AAA refused to consider the pickup a “total loss.” Instead, it had the vehicle repaired at a reported cost of $8,196.06, and provided a rental car for Appellant during the interim. As a result of the collision and following the repairs, the pickup's future resale value was decreased by more than $17,100.

Appellant filed suit, alleging a first cause of action against defendants Hollandsworth and Sebastian for negligence, and second and third causes of action against AAA for breach of contract and bad faith. Appellant contended that AAA was obligated, under his insurance policy and that of defendant Hollandsworth, either to pay him the entire pre-accident value of the pickup or to repair the pickup to its original pre-accident condition, and that AAA did neither. After repair work was completed, Appellant contends, the pickup did not match its pre-accident condition “with respect to safety, reliability, mechanics, cosmetics and performance” and its future resale value had decreased by $17,000. The rental vehicle provided him also did not match the pre-accident value of the pickup, and Appellant seeks the difference in value for the period that the pickup was under repair.

AAA demurred to the complaint, contending that Appellant essentially was seeking reimbursement for the lost market value of his pickup, a loss that specifically was excluded under his insurance policy. The trial court agreed and sustained the demurrer to the second and third causes of action against AAA. Appellant did not seek leave to amend the complaint or identify further facts that might be added to an amended complaint. The trial court consequently sustained the demurrer without leave to amend, and ordered a final judgment of dismissal with prejudice for AAA. This appeal followed.

DISCUSSION

A decision to sustain a demurrer is a legal ruling, which we review de novo. (See, e.g., San Mateo Union High School Dist. v. County of San Mateo (2013) 213 Cal.App.4th 418, 426, 152 Cal.Rptr.3d 530

.) In doing so, we “must assume the truth of the complaint's properly pleaded or implied factual allegations.” (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081, 6 Cal.Rptr.3d 457, 79 P.3d 569.) We “give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 432, 194 Cal.Rptr.3d 19.) “We also consider the complaint's exhibits.” (San Mateo Union High School Dist. v. County of San Mateo, supra, 213 Cal.App.4th at p. 425, 152 Cal.Rptr.3d 530.) Appellant bears the burden of demonstrating that the trial court erred in sustaining the demurrer. (Brown v. Crandall (2011) 198 Cal.App.4th 1, 8, 132 Cal.Rptr.3d 388.)

1. Breach of contract

“ ‘ “[I]nterpretation of an insurance policy is a question of law.” [Citation.] “While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply.” [Citation.] Thus, “the mutual intention of the parties at the time the contract is formed governs interpretation.” [Citation.] If possible, we infer this intent solely from the written provisions of the insurance policy. [Citation.] If the policy language “is clear and explicit, it governs.” ’ ” (Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1074–1075, 135 Cal.Rptr.2d 361, 70 P.3d 351

.)

In this case, the policy language was clear and explicit. Regarding coverage for car damage, it provided that AAA “may pay the loss in money or repair ... damaged ... property.” (Italics added.) The policy's use of the term “may” suggests AAA had the discretion to choose between the two options. (See, e.g., Woodbury v. Brown–Dempsey (2003) 108 Cal.App.4th 421, 433, 134 Cal.Rptr.2d 124

[“ ‘May’ ” ordinarily “connotes a discretionary or permissive act”].) This suggestion is supported by the statement in the same section of the policy, under “LIMITS OF LIABILITY ,” that AAA's coverage responsibility for car damage would “not exceed” “the lesser of” those two options, namely, paying “the actual cash value of the ... damaged property” or “the amount necessary to repair ... the property with similar kind and quality.”

Appellant alleges generally that it was not possible to repair his almost new pickup to its original pre-accident condition and that AAA's attempted repairs did not restore the car to that standard. Other than the decline in future resale value, however, Appellant offers no specific factual allegations identifying any unrepaired damage or continuing performance issue with the insured vehicle. He does not allege that the pickup had specific mechanical problems when returned to him, was unsafe in any specific way, or had any specific cosmetic flaws. Indeed, in his opening brief, Appellant indirectly suggests the pickup may have been returned to him in a state arguably qualifying as a “normal running condition,” although he vaguely cautions that repaired vehicles generally “may still be dangerous,” and describes anecdotal reports of others (non-parties) who experienced grave post-repair accidents.¹

“Facts alleging a breach,” however, “must be pleaded with specificity.” (Levy v. State Farm Mutual Automobile Ins. Co. (2007) 150 Cal.App.4th 1, 6–7, 58 Cal.Rptr.3d 54

.) In reviewing an order sustaining a demurrer, the court does not assume the truth of “contentions, deductions, or conclusions of fact or law.” (Green Valley Landowners Assn. v. City of Vallejo, supra, 241 Cal.App.4th at p. 432, 194 Cal.Rptr.3d 19 ; see, e.g., Melican v. Regents of University of California (2007) 151 Cal.App.4th 168, 174, 59 Cal.Rptr.3d 672 [“[A]n allegation that a defendant might have breached a contract does not state a valid cause of action”].) Appellant's general allegation that his repaired pickup was not restored to its pre-accident condition “with respect to safety, reliability, mechanics, cosmetics and performance” is a mere conclusion unsupported by any specific factual allegations. We thus reject it. (See, e.g., Ramirez v. Wong (2010) 188 Cal.App.4th 1480, 1488, 116 Cal.Rptr.3d 412

[affirming order sustaining demurrer because plaintiffs alleged no facts supporting their “conclusory allegation”].)

Appellant relies on case law indicating that an insurer has an obligation to repair a damaged vehicle to its “pre-accident safe, mechanical, and cosmetic condition.” He overlooks significant language from those cases, however, and ineffectively attempts to distinguish the facts in some instances. The cases do not stand for the principle that a plaintiff may rely on general allegations to meet his burden in pleading a claim for breach of contract. To the contrary, one of the decisions he cites affirmed an order sustaining a demurrer, in part because the complaint contained conclusory allegations, failing to specify the manner in which the repaired vehicle differed from its pre-accident condition. (Levy v. State Farm Mut. Auto. Ins. Co., supra, 150 Cal.App.4th at pp. 8–9, 58 Cal.Rptr.3d 54

.)

Another of the cases that plaintiff cites, Ray v. Farmers Ins. Exchange (1988) 200 Cal.App.3d 1411, 246 Cal.Rptr. 593

(Ray ), more significantly undercuts his position. In that seminal case, as here, the insured alleged breach of contract and bad faith claims based on the insurer's refusal to compensate him for diminution in market value after repair of his wrecked car. (Id. at pp. 1413–1414, 246 Cal.Rptr. 593.) As in this case, the insurance policy “unambiguously gave [the insurer] the right to elect to repair [the insured's] vehicle” to a similar condition if repair costs would be less than the actual cash value of the vehicle at the time of the loss.² (Id. at p. 1416, 246 Cal.Rptr. 593.) The court cited case law concluding that the insurer's election to make repairs in such context was conclusive if the repairs placed the vehicle “substantially in its pre-accident condition.” (Id. at pp. 1416–1417, 246 Cal.Rptr. 593, citing Owens v. Pyeatt (1967) 248 Cal.App.2d 840, 849, 57 Cal.Rptr. 100.) It specifically rejected the notion that this meant repairing the vehicle “to...