Spray, Gould & Bowers v. Associated Internat. Ins. Co.

• Decision Date: 04 May 1999
• Docket Number: No. B116450,B116450
• Citation: 84 Cal.Rptr.2d 552,71 Cal.App.4th 1260
• Court: California Court of Appeals Court of Appeals
• Parties: , 99 Cal. Daily Op. Serv. 3241, 1999 Daily Journal D.A.R. 4205 SPRAY, GOULD & BOWERS, Plaintiff and Appellant, v. ASSOCIATED INTERNATIONAL INSURANCE COMPANY, Defendant and Respondent.

Page 552

84 Cal.Rptr.2d 552

71 Cal.App.4th 1260, 99 Cal. Daily Op. Serv. 3241,

1999 Daily Journal D.A.R. 4205

SPRAY, GOULD & BOWERS, Plaintiff and Appellant, v. ASSOCIATED INTERNATIONAL INSURANCE COMPANY, Defendant and Respondent.

No. B116450.

Court of Appeal, Second District, Division 3, California.

May 4, 1999.

Review Denied Aug. 11, 1999.

Watkins & Stevens, Steven B. Stevens, Los Angeles; Mazursky, Schwartz & Angelo and Christopher E. Angelo, Los Angeles, for Plaintiff and Appellant.

Bryan Cave LLP, William I. Chertok and Richard C. Ochoa, Santa Monica, for Defendant and Respondent.

PETERSEN, J. ^*

Plaintiff Spray, Gould & Bowers is a law firm ("SG&B") which appeals the trial court's summary judgment in favor of the defendant Associated International Insurance Company ("AIIC"), based on the contract limitations period stated in the subject insurance policy. We hold that an insurer's direct violation of duly promulgated administrative regulations issued by the California Insurance Commissioner, requiring the insurer to notify a claimant insured of time limits pertaining to the claim, may provide the basis of an estoppel against the insurer's assertion of a contract limitations defense. The trial court's summary judgment is reversed and the matter is remanded for further proceedings.

STATEMENT OF THE CASE

1. The Complaint.

On September 16, 1996, SG&B filed its complaint, alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. The complaint alleged that SG&B had suffered loss as a result of the Northridge Earthquake on January 17, 1994, that claim on SG&B's contract of insurance with AIIC had been timely made, and that AIIC had wrongly refused to pay, together with subsidiary supporting allegations. On January 6, 1997, AIIC filed its answer, raising inter alia a contract limitations affirmative defense.

2. The Summary Judgment Motion Proceedings.

a. The Motion.

On May 19, 1997, AIIC filed its motion for summary judgment, or in the alternative, for summary adjudication. The facts adduced in support of the summary judgment motion were the following. AIIC had sold to SG&B a Combined Business Interruption and Extra Expense Insurance Policy (the " Policy") On July 2, 1997, SG&B filed its opposition to the motion. SG & B submitted declarations and discovery responses which stated that the SG&B employees charged with the responsibility for the claim (executive director and business managers) were unaware of the 12-month policy limitations period, and that AIIC did not advise SG&B of the 12-month limit in the exchange of correspondence relating to the claim. SG&B submitted in evidence California Code of Regulations, title 10, sections 2695.1 and 2695.4. ¹ These sections comprise a portion of the Fair Claims Settlement Practices Regulations (§§ 2695.1-2695.17) issued by the California Insurance Commissioner, (operative January 14, 1993, Register 92, No. 52). ²

                with an effective period of September 2, 1993 to September 2, 1994.  The Policy contained a contractual limitations clause.  That clause (entitled "Suit.") provided that "no suit, action or proceeding for the recovery of any claim under this policy shall be sustainable in any court of law or equity unless the same shall be commenced within twelve (12) months next after discovery by the insured of the occurrence which gives rise to the claim, provided however, that if by the laws of the State within which this policy is issued such limitation is invalid, then any such claims shall be void unless such action, suit or proceeding be commenced within the shortest period of time permitted by the laws of such State."   The loss occurred on January 17, 1994.  The loss was discovered by the insured on January 17-18, 1994.  The insured made claim under the policy on November 21, 1994.  On April 18, 1995, AIIC denied the claim.  The action below was filed on September 16, 1996.  AIIC contended that under the computation standards set forth in Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674, 274 Cal.Rptr. 387, 798 P.2d 1230, approximately 10 months of the 12-month limitation period elapsed between January 18, 1994 (the discovery of the loss) and November 21, 1994 (the date of the claim), the period was then tolled until April 18, 1995 (the date of denial of the claim), and thus the filing of the action an additional 17 months later on September 16, 1996, was untimely because of a net elapsed period of approximately 27 months, past the contract limitations limit of 12 months.
                

Section 2695.4(a) (as in effect at the time of the issuance of the policy, the loss, and the submission and denial of the claim here), required insurers to disclose to insureds time limits which apply to submitted claims. ³

In its opposition argument, SG&B principally contended that AIIC had failed to notify SG&B of the time limit for filing an action on the policy (other than of course the admitted existence of the policy provision), and that in light of SG&B's lack of actual knowledge of the time limit, AIIC should be estopped from relying on the policy limitations provision.

On July 11, 1997, AIIC filed a reply and evidentiary objections, in essence denying the applicability of section 2695.4(a), under traditional contract and estoppel principles, to the limitations dispute. AIIC did not dispute its alleged violation of the regulation.

b. The Trial Court's Order And Judgment.

The trial court agreed with AIIC, essentially on the grounds that the stated (and presumably intended) consequence of a regulatory violation was solely administrative action by the Insurance Commissioner. The trial court granted the summary judgment motion, and on September 22, 1997, entered

judgment for AIIC. SG&B filed this timely appeal.

CONTENTIONS

SG&B contends that the trial courts granting of summary judgment is erroneous in that: (1) AIIC did not prove its initial entitlement to summary judgment, (2) a triable issue of fact was raised as to whether AIIC was estopped to assert the statute of limitations defense, and (3) the trial court applied the wrong statutory period to the implied covenant and the declaratory relief causes of action.

We agree that a triable issue of fact was raised as to whether AIIC should be estopped from raising the limitations defense, and on that basis reverse the summary judgment. In light of our holding that AIIC's violation section 2695.4(a) of the Fair Claims Settlement Practices Regulations (requiring the insurer to "disclose to" a claimant insured all policy "time limits ... that may apply to the claim") may provide the basis of an estoppel against the insurer's assertion of a contract limitations defense, SG&B established a triable issue of fact as to whether it had actual knowledge of the policy time limits applicable to the claim.

DISCUSSION

1. Introduction.

a. Standard Of Review.

A summary judgment is properly granted if there is no question of fact and the issues raised by the pleadings may be decided as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) In determining the propriety of a summary judgment, we are limited to those facts shown by the evidentiary materials submitted, as well as those admitted and uncontested in the pleadings. (Sacks v. FSR Brokerage, Inc. (1992) 7 Cal.App.4th 950, 962, 9 Cal.Rptr.2d 306.) On a motion for summary judgment, the moving party bears the burden of showing there are no triable issues of material fact. "A defendant ... has met his or her burden of showing that a cause of action has no merit if that party has shown ... that there is a complete defense to that cause of action." (Code Civ. Proc., § 437c, subd. (o)(2).) The burden then shifts to the plaintiff to show the existence of a triable issue of fact. ⁴ (Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 629, 41 Cal.Rptr.2d 329.) In our review we exercise independent judgment in determining whether there are no triable issues of material fact and the moving party is thus entitled to judgment as a matter of law. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 579, 37 Cal.Rptr.2d 653; Torres v. Cool Carriers A.B. (1994) 26 Cal.App.4th 900, 904, 31 Cal.Rptr.2d 790.)

b. AIIC Proved Its Initial Entitlement To Summary Judgment.

AIIC showed that SG&B discovered the loss on January 17-18, 1994, made its claim on November 21, 1994, and that on April 18, 1995, AIIC denied the claim.

In the absence of statutory provisions to the contrary, 12-month contractual limitation provisions in insurance policies are generally valid, provided they are plain, clear and conspicuous, and further provided they are not unreasonable. (C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, Under Prudential-LMI Com. Insurance v. Superior Court, the one-year period is equitably tolled between the time that the insured notifies the carrier of the loss, and the written denial of the claim. Therefore, the period was indisputably tolled for the 10-month period between November 21, 1994 (the date of the claim), and April 18, 1995 (the date of denial). But the filing of the action came an additional 17 months later on September 16, 1996. This was a net-elapsed period of approximately 27 months, well beyond the contract limitations limit of 12 months.

1064, 211 Cal.Rptr. 765; cf. Prudential-LMI Com. Insurance v. Superior Court, supra, 51 Cal.3d 674, 274 Cal.Rptr. 387, 798 P.2d 1230 [statutorily required 12-month limitation provision in homeowner's policy valid, but held subject to further equitable tolling].)

AIIC carried its initial burden to show the claim time-barred by the contract limitations provision according to computation formula set forth in Prudential-LMI Com. Insurance v. Superior Court. ⁵

2. SG&B Raised A Triable Issue Of Fact As To Whether AIIC Was Estopped To Assert The Statute Of Limitations Defense.

SG&B's major contention is that...