Fadeeff v. State Farm General Insurance Co., 052220 CAAPP1, A155691
| Opinion Judge | MILLER, J. |
| Party Name | LEONARD FADEEFF, et al., Plaintiffs and Appellants, v. STATE FARM GENERAL INSURANCE CO., Defendant and Respondent. |
| Judge Panel | We concur: Kline, P.J., Richman, J. |
| Case Date | May 22, 2020 |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
Mendocino County Super. Ct. No. SCTMCVG1768908
MILLER, J.
Leonard and Patricia Fadeeff's home and personal property were damaged by the 2015 Valley Fire that swept across a wide swath of northern California. Their insurer, State Farm General Insurance Company (State Farm), paid for cleaning, repairs and some living expenses, but denied the Fadeeffs' supplemental demand for policy benefits for additional repairs and contents replacement. The Fadeeffs sued State Farm for breaching the implied covenant of good faith and fair dealing in their property policy, commonly known as insurance bad faith, and sought punitive damages. The trial court granted State Farm's motion for summary judgment. The Fadeeffs appeal, and we now reverse.
FACTUAL AND PROCEDURAL BACKGROUND
The Fadeeffs' home in Hidden Valley Lake, California was insured under a State Farm homeowners' policy that covered building loss and personal property. In September 2015, the Valley Fire in Lake County caused smoke damage to the Fadeeffs' property, which they timely reported. Shortly thereafter State Farm was aware that the linen wall covering inside the home had started to buckle and that one of the Fadeeffs had asthma and other health concerns. With State Farm's approval, the Fadeeffs retained ServPro to assist with smoke and soot mitigation and cleaning. State Farm “call[ed] the shots” with respect to what ServPro could do in connection with the Fadeeffs' claim. ServPro power washed the exterior siding of the home to clean smoke, soot and ash.
State Farm inspected the Fadeeffs' property on October 3, 2015. The file notes from its independent adjuster Greg Gannaway state that the home was “well maintained with no apparent deferred maintenance” and that “[a]ll damage is related to smoke and soot.” State Farm found smoke and soot on the interior walls, ceilings and carpeting, and on all exterior elevations including on the very large deck and handrail.
State Farm made a series of payments in October, November and December on the Fadeeffs' claim totaling about $50, 000.1
The Fadeeffs hired a public adjuster and submitted supplemental claims for further dwelling repairs and additional contents replacement in January 2016, totaling approximately $75, 000.
State Farm used a different independent adjuster (James Carpenter) to investigate the supplemental claims. Carpenter is not a licensed adjuster in California, nor is he licensed in any building trade. He inspected the Fadeeffs' property in March 2016 and stated he could not find smoke damage.
In connection with the supplemental claims, State Farm retained Forensic Analytical Consulting Services (FACS) to inspect the Fadeeffs' home and a company called HVACi to inspect the Fadeeffs' HVAC system.
State Farm has an internal “Operations Guide” for the use of third-party experts in handling first party claims. It requires that adjusters prepare a written referral letter to the third-party expert that “provide[s] clear and concise instructions, and list[s] the specific question(s) to be addressed by the independent expert.” The Operations Guide includes a template letter for this purpose.2 Carpenter was unaware of the Operations Guide regarding the use of third-party experts, and the retention letter issued by State Farm to FACS did not provide “[a list of] the specific questions to be addressed, ” as required by the Operations Guide. State Farm did not issue a referral letter at all when it retained HCAVi.
FACS took only surface samples from the Fadeeffs' home. David Brinkerhoff (the certified industrial hygienist for FACS), did not sample the backside of any materials, from wall cavities, behind outlets and light switch plates, or under floor coverings. According to Brinkerhoff, air samples were not within FACS's scope of work. FACS's report states that it “recommends cleaning and restoration” in cases of “distinct observable smoke odor” or “clearly visible debris, staining, or corrosion indicative of fire related smoke particle deposition.” Brinkerhoff determined that no additional cleaning was required to address smoke or fire damage.
The FACS report noted other “sources of combustion” at the Fadeeffs' property, including an outdoor propane barbeque, a wood fireplace in the bedroom, a wood stove, and candles that had been burned in the living room. Brinkerhoff testified that he never asked the Fadeeffs when they had last used any of these sources of combustion.
The FACS and HVACi reports supported Carpenter's conclusion to deny those portions of the supplemental claims they addressed. State Farm sent a letter dated April 25, 2016, to the Fadeeffs' public adjuster denying all of the supplemental claims and included copies of the two reports.
Two specifics of State Farm's April 25, 2016 denial letter (signed by Carpenter) are particularly relevant to the issues before us:
State Farm denied the Fadeeffs' supplemental claim for repairs to the exterior paint and for the interior “wallpaper and... carpet” based on Carpenter's conclusion that the damage was due to wear, tear, and deterioration.
State Farm denied coverage for the rear deck because it concluded that this portion of the exterior “did not sustain accidental direct physical loss and therefore, there is no apparent smoke or fire (ember) damage.” (This is apparently contrary to the initial inspection on October 3, stated above, describing smoke and soot on the very large deck.)
The Fadeeffs filed suit against State Farm for insurance bad faith and punitive damages. They also sued ServPro for negligence in its performance of emergency services, causing further damage to the Fadeeffs' property.
State Farm moved for summary judgment on the ground that the “genuine dispute” doctrine defeats the bad faith claim where an insurer reasonably relies upon an expert opinion in reaching a claim decision. State Farm's theory was that the retention of FACS and HVACi demonstrated its “good faith effort to investigate the claim, ” and without regard to whether the Fadeeffs contest those opinions, it is “undisputed that State Farm reasonably relied upon them in determining that no additional amounts were owed on the claim. At the very least, this is a classic ‘genuine dispute' upon which plaintiffs cannot, as a matter of law, base a bad faith cause of action.”
The Fadeeffs' written opposition to the motion included a request for a continuance to take discovery under Code of Civil Procedure section 437c, subdivision (h).[3] As to the merits, the Fadeeffs argued that there were multiple material disputes as to whether State Farm acted unreasonably in denying the Fadeeffs' supplemental claims. The Fadeeffs submitted the declaration of James Irmiter, a senior project manager for Forensic Building Science, Inc. (FBS) who they had retained to conduct a survey of fire debris damage to their home. FBS's preliminary report, included in the Fadeeffs' evidence, concluded that based on site inspection and soot sampling, the Fadeeffs' property was damaged by deposits of soot throughout the structure that had not yet been completely removed, and that removal of all wall and ceiling finishes, exposed wall and roof insulation, HVAC equipment, cavity insulation and conduit with any opening would be required for proper cleaning and remediation. The FBS preliminary report also contained a section entitled “[r]eview of FACS report, ” with comments on specific statements in the FAC report. The Fadeeffs also submitted a declaration of their independent public adjuster, David DeTinne, and a declaration of their trial counsel, Christopher Carling, addressing the continuance issue and authenticating certain documents.
At the hearing on the summary judgment motion, the trial court did not address the request for continuance. It sustained State Farm's objections to portions of the Irmiter declaration and to the entire attached FBS report on foundation and hearsay grounds, the effect of which was to gut the Fadeeffs' proffered evidence contradicting State Farm's expert FACS. The court then granted State Farm's motion for summary judgment, and later signed without modification the proposed order prepared by State Farm.
This appeal followed, raising two issues: whether the trial court erred in not granting appellants' request for continuance, and whether the trial court erred in granting the motion for summary judgment.
DISCUSSION
I.
For a defendant to prevail on a motion for summary judgment, it must show that at least one element of plaintiff's cause of action cannot be established, or the defendant has an affirmative defense. (§ 437c, subd. (o); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853.) We review de novo the trial court's grant of summary judgment. (Duarte v. Pacific Specialty Ins. Co. (2017) 13 Cal.App.5th 45, 52.) We view the evidence in the light most favorable to the nonmoving party. (Saelzer v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.)
In insurance policies, as in all contracts, the law implies a covenant of good faith and fair dealing, and an insurer's denial or delay in paying policy benefits can give rise to tort damages if the denial or delay was unreasonable. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720, 723 (Wilson).)4 “As a close corollary of that principle, it has been said that ‘an insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured's coverage claim...
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