Cherewick v. State Farm Fire & Cas.

• Decision Date: 14 July 2020
• Docket Number: Case No.: 3:20-cv-00693-BEN-MSB
• Parties: RANDOLF CHEREWICK, Plaintiff, v. STATE FARM FIRE AND CASUALTY, an Illinois Corporation; and, DOES 1-50, Defendants.
• Court: U.S. District Court — Southern District of California

RANDOLF CHEREWICK, Plaintiff, v. STATE FARM FIRE AND CASUALTY,an Illinois Corporation; and, DOES 1-50, Defendants.

Case No.: 3:20-cv-00693-BEN-MSB

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

July 14, 2020

ORDER DENYING MOTION TO DISMISS

Before the Court is the motion to dismiss Plaintiff's Complaint filed by Defendant State Farm Fire and Casualty Company ("State Farm"). (Doc. No. 2-1.) For the reasons that follow, the motion is DENIED.

I. BACKGROUND¹

Plaintiff Randolph Cherewick is a resident of San Diego, California, and owner of a 2008, 27' Boston Whaler boat ("vessel"). In July 2015, Plaintiff delivered the vessel to Oceanside Marine Center ("OMC") for the inspection and repair of three Honda outboard engines. Other than the engines, the vessel was in good condition. Plaintiff selectedOMC to repair the vessel because OMC was well known in the City of Oceanside and was recommended to the Plaintiff by a reputable yacht broker. Plaintiff prepaid OMC over $17,000.00 for any parts or materials prior to work commencing.

On November 18, 2015, OMC's employee and General Manager, Butch Hainsworth represented to the Plaintiff that while conducting a sea trial of the vessel, OMC had "bumped" into a dock, causing minor damage to the vessel, which OMC would repair at its own cost. At the time of the collision, Plaintiff had no basis upon which to doubt the veracity of OMC's representations.

In February 2016, while in the care of OMC and while under the command and operation of Hainsworth, the vessel suffered significant damages.

In March 2016, Hainsworth contacted Plaintiff's representative to set up a meeting at OMC to demonstrate that the Kolher generator, which OMC claimed to have rebuilt, was operating properly. At the meeting, OMC's mechanic was unable to get the generator to start. Plaintiff's assistant who appeared at the meeting believed the generator was either installed backwards or improperly. In June 2016, at the direction of OMC, Plaintiff had the vessel removed from OMC and placed in dry storage.

Due to Plaintiff's other pursuits (traveling overseas, traveling regularly to a second home in Seattle, and overseeing new home construction in San Diego) the vessel remained in dry storage and was not inspected by the Plaintiff until September of 2018.

In September 2018, while having the vessel cleaned and washed, the Plaintiff discovered - for the first time - a swath of mismatched color paint on the upper part of the forward bow of the vessel's hull and poorly fitted fiberglass stamping deck repairs just above the forward bow of the vessels hull. OMC had used paint and fiberglass to cover damage caused to the vessel by OMC. Plaintiff further discovered - for the first time - substantial spider-cracking of the vessel's hull and damage to the heavy-duty rubber side board strakes. The vessel, at the time it was delivered to OMC, had not been in an accident or suffered similar damage since its initial purchase as new.

On October 6, 2018, the Plaintiff tendered a claim to State Farm for the damage to the vessel. On October 7, 2018, the Plaintiff provided State Farm with a summary of the known history leading up to the claim which stated that the vessel had "suffered significant and possibly irreparable damage while being operated by the Oceanside Marine Center."

On October 9, 2018, Plaintiff spoke with State Farm's Claim Specialist, Andrea Wills regarding the discovery of the loss. Later that day, Wills, on behalf of State Farm, denied Plaintiff's claim pursuant to the policy's exclusions.

On November 28, 2018, Plaintiff requested State Farm reconsider his claim. State Farm did so and conducted an inspection of the vessel through Todd & Associates Inc.

On February 20, 2019, State Farm again denied coverage claiming in part that "there has not been a cost incurred by Mr. Cherewick for the initial impact damages caused by Oceanside Marine Center, the repairs were completed . . . there is no structural damage to the hull that weakened it or made it structurally unsafe. The issues found are cosmetic from the gelcoat repair and colors not matching well."

On November 25, 2019, Plaintiff filed a complaint in the San Diego Superior Court alleging breach of contract and breach of the implied covenant of good faith and fair dealing and seeking punitive damages. (Doc. No. 1-2.) On April 10, 2020, Plaintiff's action was removed to this Court. (Doc. No. 1.) On April 15, 2020, Defendant filed a Motion to Dismiss Plaintiff's Complaint in its entirety and without leave to amend pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 2.) On May 22, 2020, Plaintiff filed an Opposition to Defendant's 12(b)(6) motion. (Doc. No. 3.) On May 29, 2020, the Defendant filed a Reply to Plaintiff's Opposition and now seeks dismissal of the claims asserted against it in the Complaint. (Doc. No. 4.)

Attached to Plaintiff's Complaint are multiple exhibits. Exhibit 13 a. includes an email, dated February 23, 2016, from Sean Keating to Plaintiff and Hainsworth regarding a status report of the vessel. The email states in part:"Damage: my understanding is that the boat hit the cement piling in front of your pier and caused fairly significant damage. The colors don't quite match, but close enough. For safety's sake, we need a report on what happened and what work was performed by Jorge (how many hours)."

Under exhibit 13 a. there is another email, dated March 16, 2016, addressed to Hainsworth from the Plaintiff, regarding his visit to the vessel on March 16, 2016. The email states in part: "Daniel showed me the repair work and the damage at the bow of my boat (12" wide by 3" deep approximately, located in the deck of the light colored fiberglass), with a slightly raised repair surface. No other damage area was shown to me."

The events related in the emails are not specifically mentioned in the allegations of the Complaint. For purposes of a 12(b)(6) motion, looking at the facts in the light most favorable to the nonmoving party, the Court considers but does not rely on these exhibits.

II. THE INSURANCE POLICY

On December 31, 2015, State Farm issued a Boatowners Policy (policy no. 47-BJ-R419-1) to Plaintiff insuring the vessel. State Farm insured the vessel during all relevant times in 2015 and 2016.²

III. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint if, taking all factual allegations as true, the complaint fails to state a plausible claim for relief on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556-57 (2007). Dismissal is appropriate if the complaint fails to state enough facts to raise a reasonable expectation that discovery will reveal evidence of the matter complained of, or if the complaint lacks a cognizable legal theory under which relief may be granted. Twombly, 550 U.S. at 556.

In reviewing the plausibility of a complaint, courts "accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, courts do not "accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). Furthermore, courts may consider material properly submitted as part of the complaint. Hal Roach Studios, Inc. v. Richard Feiner and Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1989).

IV. DISCUSSION

Plaintiff's Complaint asserts two state law claims against Defendant for breach of contract and breach of good faith and fair dealing. Plaintiff also seeks punitive damages. Defendant's motion argues that Plaintiff has failed to state a claim on two primary grounds:³ (1) Plaintiff's Complaint is time-barred by the one-year suit limitation provision in the insurance policy; and (2) all potential for coverage for Plaintiff's claim is precluded by the policy's exclusions. Furthermore, Defendant argues that since it owed no benefits to the Plaintiff under the policy, Defendant did not act unreasonably by withholding such benefits. As will be explained in further detail below, the Court finds the allegations in Plaintiff's complaint sufficient to withstand a motion to dismiss.

A. BREACH OF CONTRACT (CLAIM ONE)

To state a claim for breach of contract under California law, the plaintiff must allege the following elements: "(1) existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff as a result of the breach." CDF Firefighters v. Maldonado, 70 Cal. Rptr. 3d 667, 679 (Cal. Ct. App. 2008), as modified on denial of reh'g (Feb. 5, 2008.); Keen v. Am. Home Mortgage Servicing, Inc., 664 F.Supp.2d 1086, 1099 (E.D. Cal. 2009). Defendant does not contest element: (1) the existence of a contract; (2) Plaintiff's performance or excuse for nonperformance; or (4) that Plaintiff suffered damages. Defendant argues that Plaintiff's claim for breach of contract fails because the Complaint is time-barred by the policy's one-year suit limitation or alternatively, the alleged loss is entirely precluded by the policy's exclusions.

1. Delayed Discovery and Inception of the Loss

"Under California law, [pursuant to Insurance Code Section 2070,] all fire insurance policies must be on a standard form and, except for specified exceptions, may not contain additions thereto." Prudential-LMI Com. Ins. v. Superior Court, 798 P.2d 1230, 1235 (Cal. 1990), as modified (Dec. 13, 1990). "This standard form provides that no suit or action for recovery of any claim shall be sustainable unless commenced within 12 months after the 'inception of the loss.'" Id. (Citations omitted.) "Inception of the loss" has been defined as "that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable...