Jones v. Aetna Casualty & Surety Co., No. A060386

• Court: California Court of Appeals
• Writing for the Court: MERRILL; WHITE, P.J., and CHIN
• Citation: 33 Cal.Rptr.2d 291,26 Cal.App.4th 1717
• Parties: Frank N. JONES et al., Plaintiffs and Appellants, v. AETNA CASUALTY AND SURETY COMPANY, Defendant and Respondent.
• Docket Number: No. A060386
• Decision Date: 26 July 1994

Page 291

33 Cal.Rptr.2d 291 26 Cal.App.4th 1717 Frank N. JONES et al., Plaintiffs and Appellants,
v.
AETNA CASUALTY AND SURETY COMPANY, Defendant and Respondent. No. A060386. Court of Appeal, First District, Division 3, California. July 26, 1994.
Review Denied Nov. 17, 1994.

Page 293

[26 Cal.App.4th 1720] Mukesh Advani, San Francisco, for appellants.

John M. Ingle, Popelka, Allard, McCowan & Bondonno, San Jose, for respondent.

MERRILL, Associate Justice.

Frank N. Jones, Donna M. Jones and Snowcreek, Inc. (Jones), appeal from the judgment entered in favor of respondent Aetna Casualty and Surety Company (Aetna), following the order sustaining the [26 Cal.App.4th 1721] demurrer without leave to amend to Jones's first amended complaint for tortious breach of insurance contract.

FACTUAL AND PROCEDURAL BACKGROUND

Our review of the sufficiency of a complaint against a general demurrer admits all material facts properly pleaded, but not contentions, deductions, or conclusions of fact or law. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) Accordingly, the following factual statement, gleaned from Jones's first amended complaint, is accepted as true for purposes of this appeal.

Jones had leased commercial property in Danville from Danville L & M Limited (lessor) for the operation of their restaurant. Pursuant to the lease agreement, lessor was obligated to maintain rental income insurance providing coverage for damage or destruction from fire or other perils. The lease stated this coverage would be at Jones's expense and the policy would provide that the loss would be payable to lessor. The lease also stated that during any repairs to the premises after damage or destruction from a peril, Jones's rent would be equitably reduced to the extent lessor received proceeds from the rental income insurance. The insurance policy lessor obtained, through Aetna, included a "rental value endorsement" which stated Aetna would be liable for the "ACTUAL LOSS SUSTAINED by the insured resulting directly from necessary untenantability, caused by damage to or destruction of the building(s) or structure(s) as furnished and equipped by the insured, by a peril not excluded in this policy...."

In 1989 and 1990, the restaurant premises suffered damage from the intrusion of water from a variety of sources. Patronage was reduced to the extent that Jones was unable to meet its rent obligations. On August 10, 1990, Jones vacated the premises.

Aetna was notified of the loss by Jones in 1989. It failed to provide coverage benefits on the claim for loss of rental income or damage to the structure. Jones alleged that Aetna's actions constituted a breach of the covenant of good faith and fair dealing and that such breach caused lessor to sue Jones for nonpayment of rent and for structural damage to the premises. In the first cause of action, Jones claimed Aetna breached its "obligations to the plaintiffs as implied-in-law co-insureds under the policy of insurance." In the second cause of action, Jones charged Aetna breached its obligations to Jones as third-party beneficiaries under the insurance policy. A third cause of action stated that Aetna's actions were intentional and entitled Jones to punitive damages.

[26 Cal.App.4th 1722] Aetna's general demurrer to the original complaint was sustained with leave to amend. Its general demurrer to the amended complaint was sustained without leave to

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amend. Aetna maintained Jones had no standing to sue as an implied-in-law coinsured under the contract of insurance or as a third party beneficiary. DISCUSSION

On appeal from the judgment following the sustaining of a general demurrer without leave to amend, a reviewing court must determine whether the facts as pleaded state a cause of action on any legal theory. When the demurrer has been sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment. If there is no such possibility, an abuse of discretion is not shown and we affirm the trial court. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318, 216 Cal.Rptr. 718, 703 P.2d 58.) We find no error in the trial court's ruling as Jones has no standing to sue Aetna, either as an implied-in-law coinsured or as a third party beneficiary of the policy.

While an action for breach of the covenant of good faith and fair dealing sounds in tort, the duty of good faith and fair dealing arises from and exists solely because of the contractual relationship between the parties. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 577-578, 108 Cal.Rptr. 480, 510 P.2d 1032.) Thus, someone who is not a party to the contract has no standing to enforce it or to recover extra-contractual damages for the wrongful withholding of benefits to the contracting party. (Hatchwell v. Blue Shield of California (1988) 198 Cal.App.3d 1027, 1034, 244 Cal.Rptr. 249.) However, in the context of insurance policies, "[a] non-party who is nevertheless entitled to policy benefits, such as an 'insured' person under the terms of the policy or an express beneficiary, has standing only if [he or] she is the claimant whose benefits are wrongfully...