Stanley v. Fire Ins. Exchange

Citation274 Cal.Rptr. 157,224 Cal.App.3d 833
Decision Date17 October 1990
Docket NumberNo. A047028,A047028
PartiesPreviously published at 224 Cal.App.3d 833 224 Cal.App.3d 833 Roger O. STANLEY et al., Plaintiffs and Appellants, v. FIRE INSURANCE EXCHANGE, Defendant and Respondent.
CourtCalifornia Court of Appeals

Michael D. Nelson, Nelson & Leighton, Danville, Cal., for plaintiffs and appellants.

Stephen G. Schrey, Marilyn A. Moberg, Michelle R. Bernard, James C. Martin, Crosby, Heafey, Roach & May, Oakland, Cal., for defendant and respondent.

POCHE, Associate Justice.

Plaintiffs Roger O. Stanley and Linda Stanley filed this action to recover on two nonsequential homeowner's policies they had with defendant and respondent, Fire Insurance Exchange ("FIE"). The trial court found by way of summary judgment that the second policy excluded the loss, and that as to each policy plaintiffs' claims were barred by their failure to comply with the policy's requirement that suit be brought "within twelve months next after inception of the loss." From the ensuing judgment 1 in favor of FIE, plaintiffs appeal.

Two primary issues are presented on appeal. First, does a homeowner's insurance policy in effect at the time damage begins but whose policy period elapses before the damage becomes apparent to the homeowner provide coverage for the loss incurred during the policy period? Second, is the one-year period of limitations contained in a homeowner's policy tolled from the time in which an insured files a claim with the insurance company until the company formally denies it? We answer both questions in the affirmative and reverse.

Factual and Procedural History.

In April of 1977 plaintiff Linda Stanley (then Linda Horton) purchased a new home in Concord from the Hofmann Company. At that time she obtained a homeowner's insurance policy from FIE known as the Sixth Edition Dwelling Package ("Sixth Edition" policy) which did not exclude structural damage to the home caused by earth movement or a loss caused by third party negligence. The policy period of the Sixth Edition policy ran from April 1977 to April 1982.

Upon moving into the house, plaintiff and her then husband, Verne Horton, noticed some defects: squeaking floors, leaking in the family room, cracking of the exterior wall. The defects were reported to the builder who made repairs, but defects persisted and the builder made at least a second visit. None of the defects was reported to the insurer.

In March of 1982 plaintiff changed her homeowner's coverage to State Farm Fire & Casualty Company, a policy which she renewed until March of 1984.

In November of 1983 plaintiff, by then divorced from Verne Horton, married plaintiff Roger Stanley. According to Stanley, he began to notice damage to the house in 1982. Specifically, he saw doors that would not close, cracking on the garage floor, the driveway, the fireplace, and on the exterior stucco near the patio door. He tried to make repairs himself.

In March of 1984 the Stanleys returned to FIE and obtained a homeowner's policy called Third Edition Protector Plus Homeowner's Package Policy ("Protector Plus"). This policy expressly excluded losses arising from earth movement.

Sometime prior to November of 1985 plaintiffs went to a neighborhood meeting where numerous complaints were aired about structural and other defects in the construction of the houses.

Thereafter Mr. Stanley told his FIE agent about the problems with the house. On November 14, an FIE adjustor inspected the house.

FIE then hired a soils engineering firm, Seidelman Associates, to inspect the property. Their first report, completed February 6, 1986, tentatively concluded that the home's foundation was undergoing movement in response to soil movement, "likely the result of expansive soils undergoing seasonal moisture changes and/or the settlement of a poorly compacted fill." The report also cited a poorly designed and constructed foundation and poor drainage conditions. Before definite conclusions were reached, Seidelman needed further investigation. A comprehensive report, completed July 21, 1986, confirmed the earlier opinions.

Despite numerous telephone requests by plaintiffs for a decision on their claim, by January of 1987 FIE had not taken a position. By letters dated January 27, and February 18, 1987, plaintiffs formally requested FIE to make "a decision of settlement or a denial of the claim" in order for plaintiffs to preserve their rights to sue Hofmann company as they believed the statute of limitations for latent construction defects would run in March. Plaintiffs were first told orally that their claim would be denied. Subsequent letters from FIE dated March 27 and December 9, 1987, formally advised plaintiffs of the basis of the denial.

Some sixteen months after the first claim with FIE was made, the instant lawsuit was filed March 13, 1987. As against FIE plaintiffs alleged causes of action for breach of contract and breach of the covenant of good faith and fair dealing, and breach of fiduciary duties, and breach of statutory duties under Insurance Code section 790.03 in the denial of benefits under either the Sixth Edition policy or the Protector Plus policy. 2

FIE moved for summary judgment contending that as a matter of law it was not responsible for the damage to plaintiffs' home. With respect to the Protector Plus policy, FIE argued there was no coverage because it expressly excluded damage caused by earth movement. As to each policy, FIE argued that plaintiffs' action was barred because plaintiffs had failed to file suit within one year of inception of the loss as required by the policies.

In opposition to the motion, plaintiffs argued that their claim was timely because their property damage did not become apparent until November of 1985 the time of the homeowner's meeting. Plaintiffs then argued that the one-year provision was tolled during the time that FIE investigated the claim; alternatively, plaintiffs argued that because FIE took so long to deny their claim, FIE should be estopped to assert the one-year provision.

The trial court concluded that there was a triable issue of fact as to whether plaintiffs should have discovered their loss prior to the November 1985 meeting. That issue, however, was mooted in that the 1984 Protector Plus policy excluded coverage for the earth movement loss. To the extent plaintiffs sought coverage under the 1977 Sixth Edition policy, plaintiffs' action was barred by the one-year suit provision of the contract. On motion for reconsideration, the court made its ruling explicit: there was no basis to apply any theory of estoppel to the running of the one-year period.

I. Standard of Review.

Because this case comes to us on appeal from a summary judgment (Code Civ.Proc § 437c), we briefly reiterate the now familiar standard of review.

A motion for summary judgment must be granted where the papers demonstrate that there is no issue of material fact to be tried and that the moving party is entitled to judgment in his favor as a matter of law. (Code Civ.Proc., § 437c, subd. (c); AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064-1065, 225 Cal.Rptr. 203.) The affidavits of the moving party are to be strictly construed and those of the opposing party, liberally construed; doubts as to the propriety of the motion should be resolved in favor of a trial on the merits. (Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417, 42 Cal.Rptr. 449, 398 P.2d 785; Mann v. Cracchiolo (1985) 38 Cal.3d 18, 35-36, 210 Cal.Rptr. 762, 694 P.2d 1134.) Resolution of a statute of limitations issue is normally a question of fact; but where the uncontradicted evidence established through discovery is susceptible of only one reasonable inference, the matter may be resolved by way of summary judgment. (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112, 245 Cal.Rptr. 658, 751 P.2d 923.)

II. Coverage for the Loss.

The trial court found that a triable issue of fact existed as to whether plaintiffs should have discovered their loss prior to the November 1985 homeowner's meeting. For purposes of appeal, therefore, both sides take that date as the date of discovery of the loss. We do the same.

FIE argues that the only policy whose policy period had not expired by November 1985 was the Protector Plus, which expressly excluded coverage for losses occasioned by third party negligence and/or earth movement, and therefore as a matter of law there was no coverage for plaintiffs' loss. Plaintiffs counter 3 that the Sixth Edition policy, which does not exclude coverage for losses caused by either earth movement or the negligence of third parties, covers any loss which occurred during 1977 and 1982, even though the loss was not discovered until 1985. We agree.

The starting point is the contract. The Sixth Edition policy is divided into two Divisions. Division I provides coverage for real and personal property; Division II provides for comprehensive personal liability. In the section entitled "GENERAL CONDITIONS APPLICABLE TO THE ENTIRE POLICY", paragraph "75 3" defines the "Policy Term": "This policy applies only to loss under Division I or occurrences or accidents under Division II which happen during the policy term." Thus the very simple question before this court is whether the loss for which the Stanleys seek compensation "happen[ed] during the policy term" i.e., 1977-1982.

Under well-established principles, an insurance policy will be interpreted in a manner consistent with the reasonable expectations of the insured. (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807-808, 180 Cal.Rptr. 628, 640 P.2d 764; Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 267, 54 Cal.Rptr. 104, 419 P.2d 168.) Any ambiguous language will be construed in favor of the insured and against the insurer. (Continental Cas. Co. v. Phoenix...

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