Janney v. Csaa Ins. Exch.

• Decision Date: 15 October 2021
• Docket Number: C089534
• Citation: 285 Cal.Rptr.3d 397,70 Cal.App.5th 374
• Parties: Marissa JANNEY, as Successor in Interest, etc., Plaintiff and Appellant, v. CSAA INSURANCE EXCHANGE, Defendant and Respondent.
• Court: California Court of Appeals

70 Cal.App.5th 374

285 Cal.Rptr.3d 397

Marissa JANNEY, as Successor in Interest, etc., Plaintiff and Appellant,

v.CSAA INSURANCE EXCHANGE, Defendant and Respondent.

C089534

Court of Appeal, Third District, California.

Filed October 15, 2021

The O'Connor Law Firm and Timothy J. O'Connor, Irvine, CA, for Plaintiff and Appellant.

Coddington, Hicks & Danforth, Santa Monica, CA, R. Wardell Loveland, Redwood City, CA, and Min K. Kang, for Defendant and Respondent.

HOCH, J.

Peggy Baltar's home in Siskiyou County was destroyed by a wildfire in September 2014. She ultimately had a new house built on the same property. Her insurer, CSAA Insurance Exchange (CSAA), paid the full amount charged by her contractor for construction of the new house. Baltar sued for breach of contract and breach of the implied covenant of good faith and fair dealing. According to Baltar, CSAA breached the insurance policy by, among other things, failing to provide her with a complete and accurate estimate for replacing the original house, which would have provided her with a budget for the construction of the new house; without such a budget, she claims, she was forced to build a cheaper house than the one destroyed by the fire. She claims this, and other asserted breaches of the policy, amounted to bad faith and entitled her to punitive damages. The trial court granted CSAA's motion for summary judgment and entered judgment in favor of the company. Baltar appeals.¹ We affirm.

BACKGROUND

In September 2014, Baltar's house in Weed was destroyed by the Boles Fire. The homeowners policy she purchased from CSAA insured her against such an occurrence.

Relevant Policy Provisions

The policy's declarations page set out the following coverages in section I: $219,800 for the dwelling (Coverage A), $22,600 for other structures (Coverage B), $164,900 for personal property (Coverage C), and $87,920 for loss of use (Coverage D). The policy also included an endorsement providing limited home replacement cost coverage. This endorsement increased the coverage limits for the dwelling and other structures to "150% of the respective amounts" noted above if certain conditions were met.² The endorsement further provides: "Coverage is limited to the amount reasonably necessary to repair or replace the dwelling and other ‘building structures,’ but does not include any costs required to replace, rebuild, stabilize or otherwise restore or protect the land." Thus, the policy limits for repair or replacement of the dwelling and other structures was increased to $329,700 and $33,900, respectively, limited by the "reasonably necessary" qualification noted above.

The policy's loss settlement provisions relating to repair or replacement of the dwelling and other structures provide:

"Covered property losses are settled as follows: [¶] ... [¶] "b. ‘Building structures’ under Coverage A or B at ‘replacement cost’ without deduction for depreciation, subject to the following:

"(1) ... we will pay the cost of repair or replacement, without deduction for depreciation, but not exceeding the smallest of the following amounts:

"(a) The limit of liability under this policy applying to the ‘building structure’;

"(b) The ‘replacement cost’ of that part of the ‘building structure’ damaged for equivalent construction and use on the same premises; or

"(c) The amount actually and necessarily spent to repair or replace the damaged ‘building structure.’ "

Paragraph 4 of this subdivision further provides that CSAA would "pay no more than the ‘actual cash value’ of the damage until actual repair or replacement is completed and costs incurred."

Additional relevant policy provisions will be set forth in the discussion portion of this opinion. For now, we simply note the policy also covered loss of "trees, shrubs, plants or lawns" up to "5% of the limit of liability that applies to the dwelling," as well as "the reasonable expense incurred" by the policyholder for debris removal.

CSAA's Initial Handling of Baltar's Claim

On September 16, 2014, the day after Baltar's house was destroyed, she submitted a claim to CSAA. The company immediately acknowledged the claim and assigned a large loss claim adjuster to handle the matter. Three days later, after certain payments were made to Baltar for loss of personal property, CSAA's large loss specialist, Rick McMullen, met with Baltar and inspected the property.

On September 22, Baltar notified CSAA that she had moved into a rental home, requiring payment of a security deposit in addition to monthly rent beginning October 1. The following day, CSAA paid Baltar additional sums for loss of personal property and also advanced her the security deposit for the rental home.

On September 24, McMullen completed a valuation report, estimating the actual cash value of the destroyed house to be $108,355.44. This valuation was based on square footage and other basic details of the structure. Three days later, CSAA paid Baltar and her lienholder $107,355.44 (estimated actual cash value, minus Baltar's $1,000 deductible).

About a week later, CSAA paid Baltar the balance of the policy limit for loss of personal property. Additional loss of use payments (totaling six months of rent, minus the amount advanced for the security deposit) were made in October.

Thus, about a month after the loss of her home, Baltar was paid the policy limit of $164,900 for loss of personal property, as well as the estimated actual cash value of the dwelling, plus loss of use payments allowing her to move into and pay rent at the rental home for six months.

Competing Reconstruction Estimates

CSAA also consulted with Cronic Disaster Services (Cronic), a licensed general contractor located in Redding, to prepare a reconstruction estimate for Baltar's destroyed house. Cronic submitted the requested estimate in November 2014. On a page titled "Summary for dwelling," the estimate listed $180,984.39 as the replacement cost value. This valuation was based on a "Line item total" of $145,095.55, plus materials sales tax of $5,724.78, plus $30,164.06 in overhead and profit. However, various line items did not list the estimated cost for that item, but were instead simply designated "OPEN ITEM" or "AS OCCURRED." Thus, as Matthew Williams, the large loss specialist who took over Baltar's claim in May 2016, admitted during his deposition, Cronic would "[m]ore than likely" have charged more than $180,984.39 to rebuild Baltar's house. Nevertheless, Williams understood that Cronic had agreed to rebuild the house for that price, "subject to [the] open items that would be paid as incurred."

On November 21, 2014, CSAA sent Baltar a letter following up on a previous phone conversation and informing her that the policy entitled her to "the actual cash value of [the] damaged building," which had already been paid, "along with the opportunity to make further claim for replacement cost." The letter attached the Cronic estimate described above and stated: "As discussed, our payment has been based upon an agreed price [of] $180,984.39 with Cronic who is a member [of] our Direct Repair Network. They have indicated their willingness to assist you in the reconstruction of the home if you so desire." The letter advised Baltar that she had the right to choose another contractor, but also noted that "reconstruction costs will vary by contractor and increased costs for equivalent construction are not in themselves grounds for adjustment in the amount necessary to repair the home." The letter continued: "Please review the estimate to assure its accuracy. If you believe something has been over looked please contact us immediately so that we may address your concerns. Additionally it is possible that the contractor may identify supplemental issues during the actual repair that will require additional work and payment."

About a week later, CSAA paid Baltar an additional $53,061.30 for replacement of the dwelling, $21,322.81 for replacement of other structures, and $13,037.58 for debris removal. Thus, by the end of the year, CSAA had paid Baltar a total of $160,416.74 for the dwelling ($180,984.39 total replacement cost value estimated by Cronic, minus depreciation of $19,567.65, minus the $1,000 deductible). The payments for replacement of other structures and debris removal were also based on Cronic's estimate.

In May 2015, Baltar entered into a contract with a different contractor, J. Carleton Company, to build her a new house on the same property for $260,000. Rather than confer with CSAA regarding whether the company considered this amount reasonably necessary to replace the original dwelling, Baltar retained the services of Robert Ellenberg, a licensed public adjuster with Unity Adjustments, to have her own replacement cost estimate prepared. As Ellenberg explained in his declaration: "I retained an estimator, Victor Romero of Construction First, to work with Ms. Baltar's contractor John Carleton to calculate a more complete replacement cost estimate for Ms. Baltar's home. Ms. Baltar's contractor checked and corrected the estimate, and authorized me to submit the estimate to CSAA under his company name." This estimate listed $346,998.57 as the replacement cost value of the dwelling, more than $17,000 above the policy limit for the dwelling coverage.

Ellenberg submitted the estimate to CSAA in August 2015. He wrote in the cover letter: "The first measure of what is to be established in determining what an insured may be due under the terms of their policy is almost never properly calculated–THE REPLACEMENT COST for what they actually had." After noting that Baltar's policy entitled her to "the smallest " of various amounts, one being the cost of replacing the structure using equivalent construction, Ellenberg continued: "Determining the Replacement Cost as defined in the policy can only be done by an accurate and in depth determination of the specifications to which the building was built. This must include all aspects of a project that would be...