Fire Ins. Exchange v. Superior Court

Decision Date02 March 2004
Docket NumberNo. B169455.,B169455.
Citation116 Cal.App.4th 446,10 Cal.Rptr.3d 617
CourtCalifornia Court of Appeals Court of Appeals
PartiesFIRE INSURANCE EXCHANGE et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; Lydia Altman et al., Real Parties in Interest.



A group of homeowners (real parties) whose homes were damaged or destroyed in the 1994 Northridge earthquake brought an action against Fire Insurance Exchange and Farmers Insurance Exchange (petitioners) to recover under their policies and for damages, alleging breach of contract, insurance bad faith, fraud, and negligence.

Real parties' first amended complaint alleges that at the time of the earthquake, their homes were insured under the Fourth Edition "Protector Plus Homeowners Package Policy," with "Guaranteed Replacement Cost Coverage," issued by Fire Insurance Exchange.1 It is alleged that real parties repaired or rebuilt their homes, and in doing so, incurred costs for land stabilization and for construction upgrades made necessary by changes to the building code, and that petitioners denied their claims for such costs.

The matter was assigned to Los Angeles Superior Court Judge Carl West. For case management purposes, prior to setting the matter for trial, Judge West resolved disputed issues raised by the pleadings regarding the interpretation of the policy terms upon which coverage depended.2

The court found the policy to be ambiguous, and exclusions relating to damage to land and building code upgrades to be invalid and unenforceable. On August 22, 2003, petitioners filed a petition for writ of mandate or prohibition, and on November 20, 2003, we issued an order to show cause and ordered real parties to file a written return.


We have construed the trial court's case-management order as a denial of a motion for judgment on the pleadings with regard to the alleged causes of action insofar as they are based upon coverage for costs for land stabilization and for construction upgrades made necessary by changes to the building code.3 The denial of a motion for judgment on the pleadings may be reviewed by means of a petition for writ of mandate. (See American Internat. Group, Inc. v. Superior Court (1991) 234 Cal.App.3d 749, 755, 285 Cal.Rptr. 765.) And a case-management order is properly reviewed by petition for writ of mandate. (See e.g., Hernandez v. Superior Court (2003) 112 Cal.App.4th 285, 291-292, 4 Cal.Rptr.3d 883.)

A motion for judgment on the pleadings is the functional equivalent of a general demurrer. (American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1118, 51 Cal.Rptr.2d 251, 912 P.2d 1198.) Ordinarily, a general demurrer does not lie to a portion of a cause of action, and if any part of a cause of action is properly pleaded, the demurrer will be overruled. (Campbell v. Genshlea (1919) 180 Cal. 213, 217, 180 P. 336.) The trial court has broad discretion, however, to fashion suitable methods of practice in order to manage complex litigation. (Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 967, 67 Cal.Rptr.2d 16, 941 P.2d 1203.) Accordingly, "courts have the power to fashion a new procedure in a complex litigation case to manage and control the case before them." (Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1380, 5 Cal.Rptr.2d 882.)

The trial court deemed the resolution of the issues presented here to be critical to the management of this litigation and the 600 other earthquake cases pending before the court with similar issues. In its statement of decision, the court invoked Code of Civil Procedure section 166.1, which provides that "a judge may indicate in any interlocutory order a belief that there is a controlling question of law as to which there are substantial grounds for difference of opinion, appellate resolution of which may materially advance the conclusion of the litigation."

Since the unusual procedure undertaken by the trial court was within its power to manage complex litigation, and the parties agreed to it and no objection has been made in these proceedings, we shall not invoke the usual rule pertaining to general demurrers, but will determine whether real parties' causes of action may be based upon either or both of the two claimed coverages.

In deciding or reviewing a judgment on the pleadings, all properly pleaded material facts are deemed to be true, as well as all facts that may be implied or inferred from those expressly alleged. (Treweek v. City of Napa (2000) 85 Cal.App.4th 221, 233, 101 Cal.Rptr.2d 883.) A ruling on a motion for judgment on the pleadings "resolves a mixed question of law and fact that is predominantly one of law, viz., whether or not the factual allegations that the plaintiff makes are sufficient to constitute a cause of action. [Citation.] The resolution of a question of this sort calls for examination de novo. [Citation.]" (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515, 101 Cal.Rptr.2d 470, 12 P.3d 720.)

Further, where the facts are undisputed, the interpretation of an insurance policy is a question of law. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619.) We are not bound by the trial court's interpretation of an insurance policy, but must independently interpret its provisions. (Brodkin v. State Farm Fire & Casualty Co. (1989) 217 Cal.App.3d 210 216, 265 Cal.Rptr. 710.) Our goal is to determine the mutual intention of the parties at the time the policy was created, and such intent should be inferred, if possible, solely from the written terms of the policy. (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-822, 274 Cal.Rptr. 820, 799 P.2d 1253.) "The `clear and explicit' meaning of these provisions, interpreted in their `ordinary and popular sense,' unless `used by the parties in a technical sense or a special meaning is given to them by usage' [citation], controls judicial interpretation. [Citation.]" (Id. at p. 822, 274 Cal.Rptr. 820, 799 P.2d 1253.)

A. Cost of Repairing Land Beneath the Covered Dwelling

Petitioners' first contention is that the trial court erred in finding that the replacement cost coverage in the "Protector Plus" policy includes the cost of repairing the land under damaged or destroyed buildings, when such repair is necessary before the buildings can be repaired or replaced. We agree. The absence of insurance coverage for damage or injury to land is both "clear and explicit" in the Protector Plus policy. It is error to fail to apply the plain, unambiguous language of an insurance policy. (Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1073, 135 Cal.Rptr.2d 361, 70 P.3d 351; Civ.Code, § 1644.)

The policy insures loss to three types of property. "Coverage A" insures against loss to the insured's "dwelling, including attached structures, on the residence premises used principally as [the insured's] private residence"; "Coverage B" insures against loss to the insured's "separate structures," which are also referred to as "other structures on the residence premises"; and "Coverage C" insures against loss to "personal property." (Italics added.) The policy defines "residence premises" as "the one or two family dwelling and separate structures or that part of any other building where [the insured] reside[s], and which is shown in the Declarations."4

Real parties contend that controlling authority for the trial court's ruling is found in Strickland v. Federal Ins. Co. (1988) 200 Cal.App.3d 792, 246 Cal.Rptr. 345 (Strickland), and Snapp v. State Farm Fire & Cas. Co. (1962) 206 Cal.App.2d 827, 24 Cal.Rptr. 44 (Snapp), where the term, "dwelling," as used in the subject homeowner's policies, was interpreted as including the land underlying the covered building. (Snapp, supra, 206 Cal.App.2d at p. 833, 24 Cal.Rptr. 44; Strickland, supra, 200 Cal.App.3d at p. 799, 246 Cal.Rptr. 345.) There is no similarity in the circumstances of this case and Snapp or Strickland. In each of those cases, the policy before the court was interpreted as providing policy limits where the covered peril (earth movement) was a continuing one, so that the insurer's obligation with regard to resulting damage to the residence would continue so long as the underlying soil remained unstable, and the cost of stabilizing the land far exceeded policy limits. (Strickland, supra, 200 Cal.App.3d at pp. 797-798, 246 Cal.Rptr. 345; Snapp, supra, 206 Cal.App.2d at pp. 832-833, 24 Cal.Rptr. 44.)

We find nothing in either case that requires the definition of dwelling to include land in all insurance policies. Neither case recites policy language remotely similar to the Protector Plus policy, other than providing coverage for the insured's "dwelling." In construing the policy before us, it is not our function to select a particular definition of a single word and apply it without regard to other language in the policy. (See Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 808, 180 Cal.Rptr. 628, 640 P.2d 764.) "`Ambiguity is not necessarily to be found in the fact that a word or phrase isolated from its context is susceptible of more than one meaning.' [Citation.]" (Castro v. Fireman's Fund American Life Ins. Co. (1988) 206 Cal.App.3d 1114, 1120, 253 Cal.Rptr. 833.) An insurance policy must be interpreted as a whole and in context. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18, 44 Cal.Rptr.2d 370, 900 P.2d 619.)

Thus, moving beyond the single word, "dwelling," we find the following language under "SECTIONI — PROPERTY, Coverage A"...

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