Melissa v. State Farm Mut. Auto. Ins. Co., B281732

• Decision Date: 21 November 2018
• Docket Number: B281732
• Court: California Court of Appeals Court of Appeals
• Parties: Melissa CASE, Plaintiff and Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., INC., Defendant and Respondent.

30 Cal.App.5th 397

241 Cal.Rptr.3d 458

Melissa CASE, Plaintiff and Appellant,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., INC., Defendant and Respondent.

B281732

Court of Appeal, Second District, Division 4, California.

Filed November 21, 2018

Phillips & Associates, John W. Phillips, Solana Beach, and Patrick Phillips, San Diego, for Plaintiff and Appellant.

Shaver, Korff & Castronovo and Michael J. O’Neill, Los Angeles, for Defendant and Respondent.

MANELLA, P. J.

In the underlying action, appellant Melissa Case asserted claims for breach of insurance contract and bad faith against respondent State Farm Mutual Insurance Company, Inc. (State Farm), and requested an award of punitive damages. The trial court granted summary adjudication in State Farm’s favor on each claim and on the request for punitive damages. We affirm.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

The following facts are not in dispute: In March 2013, Case was employed by Lawry’s Restaurant, and insured under a personal automobile policy issued by State Farm. The policy’s uninsured-underinsured motorist (UM) coverage for bodily injury was $100,000 per person and $300,000 per accident. On March 29, 2013, while returning to Lawry’s Restaurant from an off-site catering location, Case was injured in a car accident involving an uninsured driver. The next day, she sought workers’ compensation benefits through her employer’s policy and submitted a claim to State Farm under her personal automobile policy. In 2014, after Case submitted a demand for UM policy benefits, State Farm sought verification of a "final lien" relating to medical expenses incurred as workers’ compensation benefits. When State Farm failed to pay UM benefits, Case requested arbitration.

On May 28, 2015, Case initiated the underlying action against State Farm for breach of an insurance contract and bad faith. The complaint asserted that State Farm acted improperly in delaying arbitration and settlement of Case’s claim for UM benefits, alleging that although she verified a final workers’ compensation lien relating to medical expenses no later than November 2014, State Farm neither paid her claim for UM benefits nor undertook arbitration. The complaint requested compensatory and punitive damages.

In September 2015, Case submitted information to State Farm showing that she had exhausted the possibility of receiving additional payments through the workers’ compensation system. In November 2015, State Farm and Case settled her claim for UM benefits for $35,000.

In December 2016, State Farm sought summary judgment or adjudication on Case’s claims. State Farm requested summary adjudication on the claim for breach of the insurance contract, contending it had provided all policy benefits due Case. Furthermore, relying on Rangel v. Interinsurance Exchange (1992) 4 Cal.4th 1, 14 Cal.Rptr.2d 783, 842 P.2d 82 ( Rangel ), State Farm contended the bad faith claim failed, arguing that it breached neither the policy nor the implied covenant of good faith by declining to pay or arbitrate Case’s UM claim before her claim for workers’ compensation benefits had been resolved. In view of the purported defects in the claims for breach of an insurance contract and bad faith, State Farm maintained that summary adjudication was proper with respect to Case’s request for punitive damages.

The trial court granted summary judgment, concluding that summary adjudication was proper with respect to Case’s claims and her request for punitive damages. On March 6, 2017, the court entered a judgment in favor of State Farm and against Case. This appeal followed.

DISCUSSION

Case contends the trial court erred in granting summary judgment. For the reasons explained below, we disagree.

A. Standard of Review

"A summary adjudication motion is subject to the same rules and procedures as a summary judgment motion. Both are reviewed de novo. [Citations.]" ( Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819, 44 Cal.Rptr.2d 56.) "A defendant is entitled to summary judgment if the record establishes as a matter of law that none of the plaintiff’s asserted causes of action can prevail. [Citation.]" ( Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107, 252 Cal.Rptr. 122, 762 P.2d 46.) Generally, "the party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact." ( Aguilar v. Atlantic Richfield Co . (2001) 25 Cal.4th 826, 850, 107 Cal.Rptr.2d 841, 24 P.3d 493.) In moving for summary judgment, "all that the defendant need do is to show that the plaintiff cannot establish at least one element of the cause of action -- for example, that the plaintiff cannot prove element X ." ( Id . at p. 853, 107 Cal.Rptr.2d 841, 24 P.3d 493, fn. omitted.)

Although we independently assess the grant of summary judgment, our review is governed by a fundamental principle of appellate procedure, namely, that " ‘[a] judgment or order of the lower court is presumed correct,’ " and thus, " ‘error must be affirmatively shown.’ " ( Denham v. Superior Court (1970) 2 Cal.3d 557, 564, 86 Cal.Rptr. 65, 468 P.2d 193, quoting 3 Witkin, Cal. Procedure (1954) Appeal, § 79, pp. 2238-2239, italics omitted.) Under this principle, Case bears the burden of establishing error on appeal, even though State Farm had the burden of proving its right to summary judgment before the trial court. ( Frank and Freedus v. Allstate Ins. Co . (1996) 45 Cal.App.4th 461, 474, 52 Cal.Rptr.2d 678.) For this reason, our review is limited to contentions adequately raised in Case’s briefs. ( Christoff v. Union Pacific Railroad Co. (2005) 134 Cal.App.4th 118, 125-126, 36 Cal.Rptr.3d 6.)

B. Governing Principles

Generally, "[a]n insured can pursue a breach of contract theory against its insurer by alleging the insurance contract, the insured’s performance or excuse for nonperformance, the insurer’s breach, and resulting damages." ( San Diego Housing Com. v. Industrial Indemnity Co . (1998) 68 Cal.App.4th 526, 536, 80 Cal.Rptr.2d 393.) In view of the requirement for contract-related damages, an insurer may secure summary adjudication on the claim when there are no unpaid policy benefits. ( Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1468, 127 Cal.Rptr.3d 372.)

To establish bad faith, a policy holder must demonstrate misconduct by the insurer more egregious than an incorrect denial of policy benefits. "The law implies in every contract, including insurance policies, a covenant of good faith and fair dealing." ( Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720, 68 Cal.Rptr.3d 746, 171 P.3d 1082 ( Wilson ).) The obligation imposed on the insurer under the covenant " ‘is not the requirement mandated by the terms of the policy itself .... It is the obligation ... under which the insurer must act fairly and in good faith in discharging its contractual responsibilities.’ " ( California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 54, 221 Cal.Rptr. 171, quoting Gruenberg v. Aetna Ins. Co . (1973) 9 Cal.3d 566, 573-574, 108 Cal.Rptr. 480, 510 P.2d 1032, italics omitted.) In the context of a bad faith claim, "an insurer’s denial of or delay in paying benefits gives rise to tort damages only if the insured shows the denial or delay was unreasonable." ( Wilson , supra , 42 Cal.4th at p. 723, 68 Cal.Rptr.3d 746, 171 P.3d 1082.)

Under this standard, "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 is not liable in bad faith[,] even though it might be liable for breach of contract." ( Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001) 90 Cal.App.4th 335, 347, 108 Cal.Rptr.2d 776.) That is because "whe[n] there is a genuine issue as to the insurer’s liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute." ( Ibid ., italics deleted.)

Here, the key issues concern State Farm’s conduct regarding Case’s claim for UM benefits, which she pursued while seeking workers’ compensation benefits. Under Insurance Code section 11580.2 ( section 11580.2 ), automobile insurance policies must offer UM coverage and provide for binding arbitration of certain disputes relating to UM benefits. ( Ins. Code, § 11580.2, subds. (a), (f), (p) ; Rangel , supra , 4 Cal.4th at pp. 7-8, 14 Cal.Rptr.2d 783, 842 P.2d 82.) The scope of the mandated arbitration is limited: absent an agreement between the insured and the insurer, only the uninsured driver’s liability and the amount of damages caused by the uninsured driver are subject to arbitration; other issues -- including coverage issues relating to the claim for UM benefits -- are not arbitrable. ( Bouton v. USAA Casualty Ins. Co. (2008) 43 Cal.4th 1190, 1200, 78 Cal.Rptr.3d 519, 186 P.3d 1.)

As discussed further below, section 11580.2 contains provisions intended to prevent a "double recovery" of UM benefits and workers’ compensation benefits for the same injury. ( Rangel , supra , 4 Cal.4th at p. 9, 14 Cal.Rptr.2d 783, 842 P.2d 82.) Among the principal benefits available through the workers’ compensation system are temporary disability indemnity and permanent disability indemnity. ( Department of Rehabilitation v. Workers’ Comp. Appeals Bd. (2003) 30 Cal.4th 1281, 1291, 135 Cal.Rptr.2d 665, 70 P.3d 1076.) The former replaces a fixed percentage of the wages lost by the worker during the healing period ( County of Alameda v. Workers’ Comp. Appeals Bd. (2013) 213 Cal.App.4th 278, 282-283, 151 Cal.Rptr.3d 920 ; see Lab. Code, §...