St. Cyr v. Cal. Fair Plan Ass'n

• Decision Date: 14 May 2014
• Docket Number: B243159
• Citation: 223 Cal.App.4th 786,167 Cal.Rptr.3d 507
• Court: California Court of Appeals Court of Appeals
• Parties: Gaeton ST. CYR et al., Plaintiffs and Appellants, v. CALIFORNIA FAIR PLAN ASSOCIATION, Defendant and Respondent.

223 Cal.App.4th 786

167 Cal.Rptr.3d 507

Gaeton ST. CYR et al., Plaintiffs and Appellants,

v.CALIFORNIA FAIR PLAN ASSOCIATION, Defendant and Respondent.

B243159

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

Filed January 31, 2014

Review Denied May 14, 2014

See 2 Witkin, Summary of Cal. Law (10th ed. 2005) Insurance, § 131.

APPEAL from a judgment of the Superior Court of Los Angeles County, William F. Highberger, Judge. Affirmed. (Los Angeles County Super. Ct. Nos. BC422741/BC425950)

Law Office of Denise Jarman, Denise Jarman; Kreindler & Kreindler, and Gretchen M. Nelson for Plaintiffs and Appellants Gaetan St. Cyr, Doug Pace, Julie Pace, Marc Musicant, Mark Kofler, and Chris Walden.

Ball & Roberts, Stephen C. Ball, and John A. Roberts for Plaintiffs and Appellants Gary Reisenweber and Ivana Noell.

Lewis Brisbois Bisgaard & Smith, Raul L. Martinez, and Elise D. Klein for Defendant and Respondent.

MANELLA, J.

In 1968, the Legislature enacted the California FAIR Plan to provide property insurance to the otherwise uninsurable. Appellants, who lived in high fire risk areas, were insured under the FAIR Plan. Following the loss of their homes and other tangible property following wildfires, appellants were paid the full amount of their policy limits. Appellants contend, however, that they were entitled to additional payments. The trial court disagreed, determining that respondent California FAIR Plan Association had met its contractual and statutory obligations to them. The court dismissed appellants' actions against respondent, after sustaining a demurrer to their first amended complaints. Appellants contend the trial court erred, as they were entitled to the protections provided in the standard form fire policy set forth in Insurance Code section 2071.¹ We conclude that respondent has satisfied both its contractual obligations under the policies issued and the requirements of section 2071. Accordingly, we affirm the trial court's determination that appellants failed to state a cause of action against respondent.

PROCEDURAL HISTORY

Beginning in September 2009, appellants filed several complaints against respondent.² In their first amended complaints, appellants admitted that respondent paid them the “actual cash value” (ACV) of their respective policies within weeks of their losses. However, they alleged that the amount was insufficient to cover their total losses, and that in issuing such policies, respondent had provided less protection than statutorily mandated by the “Basic Property Insurance Inspection and Placement Plan,” sections 10090 through 10100.2.³ Specifically, they contended that respondent was required to issue a policy in accordance with the standard form fire insurance policy set forth in section 2071 and the “ ‘Basic Property Insurance’ written in the normal market.” One appellant asserted that the “Basic Property Insurance written in the normal market is the standard form policy known as the ‘HO–3.’ ” According to appellants, respondent's policy did not comply with the statutory requirements of section 2071. Specifically, they asserted that “an insurer must minimally insure for the actual cash value (ACV) of [the] dwelling” and provide a “measure of indemnity for a total loss equal to the expense of the insured of replacing the thing lost or injured.” They further alleged that respondent's policy improperly excluded coverage available in the “insurance industry standard ‘Basic Property Insurance’ policy,” including coverage for “ ‘Other Structures,’ ” “ ‘Additional Living Expenses,’ ” “trees and shrubs,” “debris removal,” “ ‘fair rental value,’ ” and “building code upgrades.” These purportedly improper exclusions effectively reduced the promised coverage for total losses by 35 percent.

One complaint (the St. Cyr complaint) alleged class action claims pursuant to the unfair competition law (UCL), Business & Professions Code sections 17200 et seq., for the same underlying conduct. Another complaint (the Reisenweber complaint) alleged causes of action for negligence and fraud against the appellant's insurance broker. These fraud and negligence causes of action were subsequently dismissed with prejudice.

The trial court determined that the complaints were related, and ordered all counsel to engage in a common meet-and-confer. On May 21, 2010, respondent filed a motion seeking to dismiss all related actions, or in the alternative, for a stay pending action by the Insurance Commissioner (Commissioner) under the primary jurisdiction doctrine. Respondent also filed demurrers to the complaints.

On September 10, 2010, the trial court denied respondent's motion to dismiss, but granted its motion to stay the related actions. In its order, the court also referred four issues to the Commissioner to determine. On January 4, 2012, the Department of Insurance (Department) informed the court and the parties that: “The issues presented do not appear to involve issues of primary jurisdiction with the Commissioner. The Department did approve the FAIR Plan's rate filing based upon the forms submitted to the Department, and there is no information presented to show that any changes to the forms resulted in a change to their rate impact. If forms are changed and there is a rate impact, the FAIR Plan would need to submit those to the Department for review and approval.... It is not clear how the FAIR Plan could issue an HO–3 form since it was not submitted as part of its rate plan nor is the FAIR Plan authorized to issue some of the coverages offered under that form.” Subsequently, on January 30, 2012, the court ordered respondent to file new demurrers and/or other filings, and set a briefing schedule.

On March 5, 2012, respondent filed a demurrer to the complaints. The demurrer asserted that appellants had failed to state a cause of action for bad faith breach of contract, for breach of contract, or for unfair business practice, because (1) the Commissioner had approved all of the challenged features of the FAIR Plan, (2) the FAIR Plan satisfied the statutory requirements for “ ‘basic property insurance,’ ” and (3) under the statutory scheme, the Commissioner, not the court, must determine whether the FAIR Plan should have expanded coverage beyond that presently provided in the plan.

Appellants opposed the demurrer, arguing that respondent is statutorily mandated to write a policy no more restrictive than the “California Standard Form Fire Policy” set forth in section 2071, which, they contended, required at a minimum that all of the insured property be covered for its ACV. Appellants also contended that sections 10090 through 10100.2, establishing the FAIR Plan, did not implicitly or explicitly repeal the mandatory provisions set forth in section 2071. Appellants further contended that respondent failed to establish that the Department ever approved its policy forms.

In reply, respondent contended that appellants are bound by the terms and conditions of their policies, that its fire policy complied with the requirements of section 2071, and that the disputed portions of its fire policy were approved by the Commissioner.

On May 10, 2012, the court sustained respondent's demurrer without leave to amend. The court found that respondent “performed the contract as written and that the insurance contract form did in fact comply with the applicable requirements of the Insurance Code.” The court determined that section 2082 did not require respondent to use the standard form fire policy, that the FAIR Plan could deviate from the standard form fire policy, that applying all losses to a single stated policy limit is acceptable, that the Commissioner had acquiesced in the FAIR Plan's use of its policy form, and that any challenge to that form should be raised with the Commissioner.

On June 8, 2012, a judgment of dismissal against appellants and in favor of respondent was entered. Appellants filed notices of appeal from the judgment. The appeals were consolidated September 13, 2012. On October 31, 2013, appellants filed a request for judicial notice, asking this court to take judicial notice of respondent's July 31, 2009 rate filing. On January 8, 2014, this court granted the request for judicial notice.

DISCUSSION

A. Standard of Review

“In reviewing an order sustaining a demurrer, we assume well-pleaded factual allegations to be true and examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action on any legal theory. [Citation.]” (Kyablue v. Watkins (2012) 210 Cal.App.4th 1288, 1292, 149 Cal.Rptr.3d 156.) Because the demurrer was sustained based upon an interpretation of certain provisions of the Insurance Code, we must determine whether the trial court's interpretation was correct. “Statutory interpretation is a question of law subject to our independent review.” (Honig v. San Francisco Planning Dept. (2005) 127 Cal.App.4th 520, 524, 25 Cal.Rptr.3d 649.) “As in any case involving statutory interpretation, our fundamental task here is to determine the Legislature's intent so as to effectuate the law's purpose. [Citation.] We begin by examining the statute's words, giving them a plain and commonsense meaning. [Citation.] We do not, however, consider the statutory language ‘in isolation.’ [Citation.] Rather, we look to ‘the entire substance of the statute ... in order to determine the scope and purpose of the provision.... [Citation.]’ [Citation.]” (People v. Murphy (2001) 25 Cal.4th 136, 142, 105 Cal.Rptr.2d 387, 19 P.3d 1129.)

B. The California FAIR Plan

In response to insurers' reluctance to write “basic property insurance” for homeowners who live in high risk or otherwise uninsurable areas, in 1968, the Legislature enacted the “Basic Property Insurance Inspection and Placement Plan,” sections 10090 through 10100.2. The purposes of the statute are to: (1) assure stability in the property insurance market, (2) assure the availability of basic property...