C & H. Foods Co. v. Hartford Ins. Co.

• Decision Date: 17 October 1984
• Docket Number: KWIK-SERV
• Citation: 163 Cal.App.3d 1055,211 Cal.Rptr. 765
• Court: California Court of Appeals Court of Appeals
• Parties: C & H FOODS, CO., A DIVISION OFFOODS, INC., et al., Plaintiffs and Appellants, v. The HARTFORD INSURANCE COMPANY, Defendant and Respondent. B004275.

Page 765

211 Cal.Rptr. 765

163 Cal.App.3d 1055

C & H FOODS, CO., A DIVISION OF KWIK-SERV FOODS, INC., et al., Plaintiffs and Appellants, v. The HARTFORD INSURANCE COMPANY, Defendant and Respondent.

B004275.

Court of Appeal, Second District, Division 4, California.

Oct. 17, 1984.

Hearing Denied Jan. 17, 1985.

[163 Cal.App.3d 1059] David S. Sperber, Encino, for plaintiffs and appellants.

Overton, Lyman & Prince and Jon P. Kardassakis, Los Angeles, for defendant and respondent.

McCLOSKY, Associate Justice.

Plaintiffs C & H Foods Co. (C & H), a division of Kwik-Serv Foods, Inc. (Kwik-Serv), Frank Cottle (Cottle) and Fred W. Harris (Harris) purport to "appeal from the January 5, 1983 Superior Court's Order to the effect that a portion of the First Amended Complaint be sustained without leave to amend, and from the March 24, 1983 Superior Court's Order to the effect that the First and Second Causes of Action of the Second Amended Complaint be dismissed without leave to amend." An order sustaining a demurrer is a nonappealable order. We treat the notice of appeal as taken from the order (judgment) of dismissal entered in favor of respondent The Hartford Fire Insurance Company (Hartford) on March 24, 1983. In connection therewith, we review the propriety of both orders of the trial court sustaining the demurrers to the portions of the First and Second Amended Complaints.

All plaintiffs also sued defendants Hayward Mason and Rolapp Insurance Associates and certain Does for "insurance malpractice" but none of those defendants are properly parties to this appeal as the judgment was solely against Hartford.

Plaintiffs contend: (1) A private statute of limitations in an insurance policy does not bar an insured when the insured is unaware of the private statute of limitations; (2) even if the private statute of limitations was not a bar, it was waived by defendant Hartford; (3) the individual

plaintiffs state a cause of action for bad faith refusal to pay an insurance benefit since there was a close nexus between the individuals and the corporate insured, and the corporate plaintiff states a cause of action for bad faith refusal to pay benefits; (4) the complaint affords a basis to award punitive damages.

FACTS

In their First and Second Amended Complaints plaintiffs alleged that C & H bought eight marine insurance policies covering the shipment of 6,437 pails of cured beef. Of these, 4,154 pails of beef were delivered to Pago Pago, American Samoa between September 1980 and February 1, 1981, in a spoiled and unusable condition. The plaintiffs attached to the respective complaints a copy of a two page marine insurance policy insuring the pails of beef "against all risks of physical loss or damage from any external cause ... but ... warranted free from any claims arising out of the inherent vice of goods insured ...." In the two complaints, all of the plaintiffs sued for declaratory relief, bad faith and refusal to pay benefits. The individual plaintiffs additionally sued for emotional distress. In the complaints it was further alleged that "[b]uried within the reverse side of each of the aforesaid policies, in unreasonably small type, was the following provision: '12. No suit or action on this policy shall be sustainable in any court of law or Equity unless the insured shall have complied in full with all the terms and conditions of this insurance, nor unless same shall be commenced within twelve (12) months next after the happening of the loss, ...' "

Nevertheless, in the complaints it was alleged that defendants did not advise plaintiffs either orally or in writing of "the shortened statute of limitations," of which plaintiffs were unaware, but instead represented to plaintiffs "that defendants were not of the practice of relying upon technicalities of any kind in connection with the handling of claims by insureds, and in connection with the handling of a claim, defendants would look to the merits of the claim." They alleged further that "defendants owed to plaintiff a fiduciary responsibility, and pursuant to that fiduciary relationship, defendants are precluded from relying upon a shortened statute of limitations absent a complete and full disclosure of it to plaintiff."

On or about February 16, 1982, some 12 months after the last loss, plaintiffs first notified Hartford of the aforesaid loss and made demand upon it for $169,489.88, the amount of the loss. Defendants thereafter denied the claim saying among other things: "As I have told you, in most instances in my experience, technical provisions of a policy are not enforced by an insurance company if their basic position has not been jeopardized. In the case of the last claim [the claim on the eighth policy] where there was a potential of recovery from the steamship line, because of the passage of time, The Hartford is blocked out and therefore their position was seriously prejudiced. In the case of the other claims [policies one through seven] where there was an inadequate pail used, even though you have all-risk insurance, this type of situation does not fall under that area of coverage. It is presumed in any type of a cargo policy the container used for the shipment must be adequate to the job and when it isn't, this is not subject to insurance."

On or about March 23, 1982, defendants wrote C & H as follows:

"Our problems with the claims at this late date are:

"1. Late notice--no opportunity to survey or inspect damages, or develop the facts as to cause.

"2. In the event of transit damages--any claim against the responsible carrier is time barred--T/B [time barred] date is one year from date delivered.

"3. As the major cause of damages appears to be the packing--pails--the shipments were apparently not sufficiently packaged to withstand the anticipated conditions of the voyage to Pago Pago.

"The insurance policy also contains a one year time for suit clause which had expired before receipt of notice. "In view of the foregoing, we have no alternative but to decline liability for these claims under [the policies in question]."

Plaintiffs alleged on information and belief that their late notice caused no prejudice to defendants as "even timely notice would not have given [Hartford] an opportunity to survey or inspect damages, since the goods were ordered immediately destroyed by the Health Department of American Samoa. The goods were destoryed [sic ], and the pails within which the goods were shipped were buried. A representative sample of the aforesaid pails has been recovered."

They also alleged on information and belief "that the damage was not the result of transit damages and defendants have not been prejudiced by any claim not being made to the shipper, since there is no claim as against the shipper." "That the cause of damages was the result of a manufacturer's defect in the pails, and that defendants have not been prejudiced in any way as to their rights as against the manufacturer of the pails."

Plaintiffs Cottle and Harris alleged that they were each 50 percent owners of C & H and that it was at their behest that the insurance policies were brought to guarantee the continued operation of C & H. They further alleged that the unconditional denial of liability by Hartford to C & H was intentional, wrongful, reckless, malicious, oppressive, fraudulent in nature, and done in bad faith with conscious disregard of plaintiffs' rights and caused Cottle and Harris emotional distress for which they sought compensatory and punitive damages.

All plaintiffs also alleged that Hartford, acting in bad faith, pursuant to a plan and scheme to act in bad faith refused to pay the benefits to them where there was no prejudice to Hartford. They alleged that it was Hartford's normal practice not to invoke the statute of limitations when there had been no prejudice to it by an insured's failure to file an "early" claim. They also alleged that Hartford failed to adopt and implement reasonable standards for the prompt investigation and processing and settlements of claims under plaintiffs' policies of insurance.

DISCUSSION

I

A general demurrer admits all material facts that are properly pleaded. Generally, material facts alleged in the complaint are treated as true for the purpose of ruling on the demurrer. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 572, 108 Cal.Rptr. 480, 510 P.2d 1032.) Also taken as true are facts that may be implied or inferred from those expressly alleged. (Harvey v. City of Holtville (1969) 271 Cal.App.2d 816, 76 Cal.Rptr. 795; Miranda v. Great Southwest Fire Ins. Co. (1975) 50 Cal.App.3d 492, 123 Cal.Rptr. 357, disapproved in part on other grounds in Wood v. Elling Corp. (1977) 20 Cal.3d 353, 362, fn. 7, 142 Cal.Rptr. 696, 572 P.2d 755.) However, contentions, deductions or conclusions of fact or law alleged in the complaint are not considered in judging its sufficiency. (Gruenberg v. Aetna Ins. Co., supra, 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032.) In short, the ruling on a demurrer determines a legal issue on the basis of assumed facts, i.e., those properly alleged in the complaint, regardless of whether they ultimately prove to be true. (See 3 Witkin, Cal.Procedure (2d ed. 1971) Pleading, § 800, p. 2413-2414.)

In ruling on a demurrer, the trial court is required to construe the complaint liberally with a view to substantial justice between the parties. (Code Civ.Proc., § 452; Cameron v. Wernick (1967) 251 Cal.App.2d 890, 60 Cal.Rptr. 102.) A general demurrer will not be sustained unless the complaint liberally construed fails to state a cause of action on any theory. (See Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 141 Cal.Rptr. 200.) Doubt in the complaint may be resolved against plaintiff and facts not alleged are presumed not to exist. (Melikian v. Truck Ins. Exchange (1955) 133 Cal.App.2d 113, 283 P.2d 269.) Sustaining a general demurrer without leave to amend is not an abuse of discretion if it appears from...