Hellinger v. Farmers Group, Inc.

• Decision Date: 24 August 2001
• Docket Number: No. B138734.,B138734.
• Court: California Court of Appeals Court of Appeals
• Parties: Jay HELLINGER et al., Plaintiffs and Appellants, v. FARMERS GROUP, INC. et al., Defendants and Respondents.

111 Cal.Rptr.2d 268

91 Cal.App.4th 1049

Jay HELLINGER et al., Plaintiffs and Appellants, v. FARMERS GROUP, INC. et al., Defendants and Respondents.

No. B138734.

Court of Appeal, Second District, Division 4.

August 24, 2001.

As Modified on Denial of Rehearing September 24, 2001.

Review Denied January 29, 2002.

Law Offices of James Osborne & Associates and W. James Osborne, Sherman Oaks, for Plaintiffs and Appellants.

Peterson, Picker, Chow & Freisleben, Alan J. Freisleben, Todd A. Picker and Robert T. Johnson, Newport Beach, for Defendant and Respondent Farmers Group, Inc.

Chapin Shea McNitt & Carter, David A. Myers, Irvine; Horvitz & Levy, Lisa Perrochet and Stephanie Rae Williams, Encino, for Defendant and Respondent Mid-Century Insurance Company.

EPSTEIN, J.

We are asked to decide whether a claim for damages from the Northridge earthquake is time-barred by the one-year limitations provision in an insurance contract. We conclude that Code of Civil Procedure section 340.9 applies and extends the deadline for presenting the claim.¹

FACTUAL AND PROCEDURAL SUMMARY

Jay Hellinger owned a home in Los Angeles County which was damaged by the Northridge earthquake of January 17, 1994. He and his brother, Lee Hellinger, lived in the residence. The Hellingers purchased a single homeowners insurance policy from Farmers Insurance Exchange (Farmers), Fire Insurance Exchange, and Mid-Century Insurance Company (Mid-Century). In 1992, the Hellinger brothers purchased a separate earthquake insurance policy for the home from Mid-Century Insurance Company. The earthquake policy provided: "We may not be sued unless there has been full compliance with all the terms of this policy. Suit on or arising out of this policy must be brought within one year after the loss occurs." Before the Northridge earthquake, Lee Hellinger transferred his interest in the residence to his brother, Jay.

Within days of the earthquake, the Hellingers noticed cracks in interior and exterior walls, the driveway, patio, gazebo, and a block wall; a leak near the chimney; and electrical problems with various appliances. Farmers agent Howard Hammer called the Hellingers within a week of the earthquake to ask about the status of their home. Lee Hellinger told Hammer about the damage to the home. After some discussion, Mr. Hammer told Lee Hellinger that he thought the losses would not exceed the deductible and that damages to the gazebo, retaining wall, sidewalk, Jacuzzi, and landscaping were not covered by the policy. Agent Hammer did not report the loss to Farmers nor did he ask an adjuster to inspect the Hellinger home.

In April 1994, the Hellingers hired a contractor to repair the visible damage caused by the earthquake, at a cost of $4,350. In July 1995, while gardening, Lee Hellinger noticed a large crack in the concrete foundation under the soil line. He reported this damage to Mr. Hammer and asked for an inspection.

Farmers sent a claims adjuster to inspect the damage in mid-September 1995. The Hellingers' claim was denied in writing on November 27, 1995, citing the policy clause which requires that suit be brought within one year of the loss.

The Hellingers sued Farmers, Fire Insurance Exchange, and Mid-Century on August 26, 1996. In their original complaint, they alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud. The second amended complaint alleged causes of action for breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and breach of contract. The trial court sustained a demurrer without leave to amend to the second amended complaint on the ground that Farmers and Fire Insurance Exchange were not proper parties since the earthquake policy was separate from the homeowners policy they had issued. The Hellingers were then granted leave to amend to add Farmers as a defendant on an alter ego theory. (The theory was that Mid-Century had no employees and had relied upon Farmers and Fire Insurance Exchange to investigate all Northridge earthquake claims and to develop the practices and procedures for handling those claims.) The third amended complaint, naming Mid-Century and Farmers, is the charging pleading. It alleges causes of action for breach of the covenant of good faith and fair dealing, breach of contract, alter ego liability, and joint venture liability.

Mid-Century and Farmers filed a joint motion for summary judgment, or in the alternative, for summary adjudication. They based their motion on the Hellingers' failure to file their lawsuit within one year of the date of the earthquake, and on the ground that Lee Hellinger no longer had an insurable interest when the earthquake occurred. The Hellingers opposed the motion on the sole ground that they needed a continuance pursuant to section 437c, subdivision (h) to allow completion of outstanding discovery. They pointed out that five discovery motions were then pending before the court.

The trial court granted summary adjudication on the cause of action for breach of the covenant of good faith and fair dealing and on the claim for punitive damages, and continued the hearing on the cause of action for breach of contract. The court also granted summary adjudication against Lee Hellinger, because he had no insurable interest in the residence.

The Hellingers sought reconsideration, based on a newly obtained sworn statement of a former claims supervisor for Farmers and the recently completed deposition of Lee Hellinger. The trial court denied the motion. The Hellingers then sought a writ of mandate to compel the trial court to grant their request for a continuance of the motion for summary judgment. That petition was denied.

On November 18, 1999, the trial court granted summary adjudication to defendants on the cause of action for breach of contract as to Jay Hellinger. It found the action was untimely under Insurance Code section 2071 and the one-year limitations period contained in the policy. The court entered judgment in favor of Mid-Century and Farmers. The Hellingers' motion for new trial was denied. They filed a timely appeal from the judgment, including the underlying summary adjudication and summary judgment and a costs order against Lee Hellinger. The briefing on appeal is on behalf of Jay Hellinger only with respect to the merits of the summary judgment and summary adjudication; no issue is raised challenging the finding that Lee Hellinger had no insurable interest in the property. Lee Hellinger appeals from the judgment of costs assessed against him, but cites neither authority nor the record in support of his appeal from the award of costs. We regard his appeal as abandoned. (See Leader v. Health Industries of America, Inc. (2001) 89 Cal. App.4th 603, 611, 107 Cal.Rptr.2d 489.) Our references to "plaintiff in the Discussion portion of this opinion refer to Jay Hellinger.

After the normal briefing on appeal, we asked counsel to address the applicability of section 340.9, which became effective January 1, 2001. That statute revives certain claims arising out of the Northridge earthquake that otherwise are time-barred. Jay Hellinger and Mid-Century filed letter briefs in response to our request.²

DISCUSSION

I

Section 340.9 was enacted in 2000. It became effective on January 1, 2001, the usual date for nonurgency legislation enacted in 2000. It provides "(a) Notwithstanding any other provision of law or contract, any insurance claim for damages arising out of the Northridge earthquake of 1994 which is barred as of the effective date of this section solely because the applicable statute of limitations has or had expired is hereby revived and a cause of action thereon may be commenced provided that the action is commenced within one year of the effective date of this section. This subdivision shall only apply to cases in which an insured contacted an insurer or an insurer's representative prior to January 1, 2000, regarding potential Northridge earthquake damage. [¶] (b) Any action pursuant to this section commenced prior to, or within one year from, the effective date of this section shall not be barred based upon this limitations period. [¶] (c) Nothing in this section shall be construed to alter the applicable limitations period of an action that is not time barred as of the effective date of this section. [¶] (d) This section shall not apply to either of the following: [¶] (1) Any claim that has been litigated to finality in any court of competent jurisdiction prior to the effective date of this section. [¶] (2) Any written compromised settlement agreement which has been made between an insurer and its insured where the insured was represented by counsel admitted to the practice of law in California at the time of the settlement, and who signed the agreement." We begin our discussion with the construction of this statute.³

A. Insurance Code section 2071

The applicable limitations period in this case is contractual, rather than statutory under Insurance Code section 2071. That statute specifies mandatory provisions for fire insurance policies, including a limitations period of one year from the date of loss, to commence an action on the policy. Plaintiff argues that since the Legislature has the power to revive a claim that is time-barred under a statutory limitations period, "there is no persuasive reason why it would lack the power to alter a limitation period [Ins.Code, § 2071] it has legislatively permitted the insurer to insert in fire insurance policies abrogating the general statute of limitations." That may be true, but it does not resolve the issue in this case.

Insurance Code section 2071 does not apply because the insurance at issue is a stand-alone policy covering earthquake damage only. It is not a fire insurance policy. (See Unetco Industries Exchange v. Homestead Ins. Co. (1997) 57 Cal. App.4th 1459, 1466-1467, 67 Cal.Rptr.2d 784 [earthquake policy is not...