State Farm Fire and Cas. Co. v. Martin, CV 86-6672 (CBM).

• Decision Date: 20 October 1987
• Docket Number: No. CV 86-6672 (CBM).,CV 86-6672 (CBM).
• Citation: 668 F. Supp. 1379
• Parties: STATE FARM FIRE AND CASUALTY COMPANY, a corporation, Plaintiff, v. Steven M. MARTIN and Peggy D. Martin, individuals, Defendants. Steven M. MARTIN and Peggy D. Martin, individuals, Counter-claimants, v. STATE FARM FIRE AND CASUALTY COMPANY, a corporation, Counter-defendants.
• Court: U.S. District Court — Central District of California

668 F. Supp. 1379

STATE FARM FIRE AND CASUALTY COMPANY, a corporation, Plaintiff, v. Steven M. MARTIN and Peggy D. Martin, individuals, Defendants.

Steven M. MARTIN and Peggy D. Martin, individuals, Counter-claimants, v. STATE FARM FIRE AND CASUALTY COMPANY, a corporation, Counter-defendants.

No. CV 86-6672 (CBM).

United States District Court, C.D. California.

July 9, 1987.

Memorandum Order Granting Summary Judgment October 20, 1987.

Jeffrey H. Leo, Daniel L. Gardner, Douglas R. Irvine, Parkinson, Wolf, Lazar & Leo, Los Angeles, Cal., for plaintiff.

Paul B. Witmer, Jr., P.C., Santa Ana, Cal., for defendants.

MEMORANDUM ORDER GRANTING SUMMARY JUDGMENT IN FAVOR OF PLAINTIFF

CONSUELO BLAND MARSHALL, District Judge.

This matter is before the Court on plaintiff State Farm Fire and Casualty Company's motion for summary judgment. A hearing was held on June 1, 1987 before Honorable Consuelo B. Marshall, United States District Judge, presiding. The Court having reviewed the pleadings, moving papers, oppositions, replies, all exhibits presented by the parties, all pertinent authority and having heard the arguments of counsel, hereby issues the following memorandum order.

I. FACTS

This action is based on denial by plaintiff State Farm of a claim by defendants under their homeowners insurance policy.

Defendants Steven and Peggy Martin purchased the residential property that is the subject of the insurance claim in early January, 1984. On January 4, 1984, defendants purchased a homeowners insurance policy from State Farm insurance. The policy issued was contained in Form Policy 7175.

Sometime between May 5, 1984 and August 6, 1985, defendants noticed cracking and other related problems on their property, including bulging, corrosion and tilting.

On January 4, 1985, the policy was renewed as contained in Form Policy 7185.

On August 6, 1985, defendants submitted a claim to State Farm for cracking and related problems on their property, and on September 4, 1985 they met with Chiquita Ector, State Farm claims representative, in their home, and Ector inspected the premises.

On October 16, 1985, Jim Damm, State Farm claims superintendent sent defendants a "reservation of rights" letter setting forth possible exclusions under the policy.

Sometime in October of 1985, Tim Welch, a senior engineering geologist at the time employed by American Earth Technologies, investigated the cause of damage to defendants' property at the request of State Farm.

In his report to State Farm, dated October 21, 1985, Welch stated the potential causes of distress to be one or more of the following:

1. Settlement of subgrade soil;

2. Expansion of subgrade soil;

3. Sulfate crystalization within the subgrade soil;

4. Sulfate attack to the cement foundations;

5. Poor foundation construction.

State Farm sent a copy of this report to the defendants' attorney on September 15, 1986.

Subsequently, Welch states in his declaration, further tests were conducted and further investigative work done, which led him to conclude that sulfate crystalization was not, in fact, a potential cause of the damage to the Martin's property.

State Farm filed the complaint in this action on October 15, 1986, seeking declaratory relief, including a ruling that the insurance contract does not provide coverage for the losses contained in defendants claim against the insurance policy.

Defendants filed an answer and counterclaim on November 4, 1986. The counterclaims included the following:

1. Refusal to pay under terms of the policy;

2. Breach of implied covenant of good faith and fair dealing;

3. Violation of California Insurance Code Section 530;

4. Bad faith conduct in violation of California Insurance Code Section 790.03(h).

II. PARTIES' CONTENTIONS

Plaintiff contends that all potential causes of the trauma to the defendants' property were expressly excluded under their insurance policy. Plaintiff specifically cites in its moving papers to Form Policy 7175, section I, at 1(f), 2(b), (c)(3), and 3; and Form Policy 7185 Section I, at 1(f), (h), (i), 2(b), (c)(3), 3(a)(b), and 4(a), (b). These restrictions are essentially the same in both years.

Plaintiff argues that the language contained in these sections of the policy is explicit and lists earth movement, underground water, contamination and deterioration as causative events which are expressly excluded. Plaintiff further argues that the contract is unambiguous in its explanation that resulting damage which would not have occurred in the absence of one of these excluded events is also excluded from coverage, no matter whether or not other concurrent causes exist. Plaintiff contends that under California caselaw it has an absolute right to limit coverage under an insurance policy and that because defendants had a copy of the policy at all times herein, they are charged with knowledge of the terms of that policy. Moreover, plaintiff explains that defendants did not pay for an "all-risk" policy; to require plaintiff State Farm to pay for excluded perils would, in turn, require the company to raise the premimums on all such restrictive policies in order to stay financially sound; this would harm the group of all insureds.

Plaintiff contends that because it did not unreasonably delay in investigating defendants' insurance claim, and because there was a reasonable basis for denial of plaintiff's claim, it is not in violation of California Insurance Code § 790.03.

Plaintiff asserts that in drafting the insurance policy in question, the company did not disregard or violate California Insurance Code § 530. Finally, plaintiff contends that all counterclaims are time barred by the one-year limitations period imposed by the policy.

Defendants, in opposition, contend that based on California law, the policy must be construed narrowly against the insurer and so as, if semantically possible, to provide indemnity to the insured.

Moreover, defendants contend that this is a situation where coverage should exist pursuant to California Insurance Code § 530 because the earth movement and other excluded causes were concurrent with a non-excluded cause of damage—sulfate crystalization.

Defendants claim that summary judgment against their counter-claims based on the one-year contractual limitations period is improper because theere is a triable issue of fact as to what losses are affected by the limitation, when the limitations period commenced, and whether State Farm is estopped to assert or has waived the limitations defense.

III. DISCUSSION

A. Ambiguity

Defendants cite Safeco Insurance Co. v. Guyton, 471 F.Supp. 1126 (C.D.Cal. 1979) for the rule of strict construction against insurers, i.e., the proposition that "if any ambiguity or uncertainty exists an insurance policy is construed strictly against the insurer and most liberally in favor of the insured." Safeco, 471 F.Supp. at 1129. However, what plaintiff fails to note is that the case goes on to explain that the rule

... is subject to an important limitation, ... it is applicable only when the policy actually presents such uncertainty, ambiguity, inconsistence or doubt. In the absence thereof, the courts have no alternative but to give effect to the contract of insurance as executed by the parties. Accordingly, when the terms of the policy are plain and explicit the courts will not indulge in a forced construction so as to fasten a liability on the insurance company which it has not assumed. Safeco, 1471 F.Supp. at 1130.

In Safeco, the Court, in fact, found that there was no coverage. Moreover, the policy involved in Safeco was what is termed an "all-risk" policy; its coverage was more broad, in general, than that under the policy currently at issue.

The language of the policy herein is explicit as to exclusions. The Court must give full effect to the policy as written.

Defendants have presented no evidence to dispute plaintiff's allegations and supporting declarations that defendants had timely received copies of the reservation of rights letter, detailing exclusions, following submission of their claim. Nor have defendants made allegations or provided any evidence that representations were ever made by plaintiff that the policy purchased would be an all-risk policy.

B. Coverage

The language of this policy form is unambiguous as to the sections limiting coverage. In Form 7175, effective from January 1984 to January 1985, the policy specifically states in "Section I," "Loss not insured" at 1(f) that there is no coverage for loss "consisting of, or directly and immediately caused by, one or more of the following:

f. wear and tear; marring; ... deterioration; ... contamination; ... settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roof, or ceiling; ..." (Ector Decl., Exh. 12 at 0023).

Moreover, the policy specifically states that it does not insure for any loss that would not have occurred in the absence of certain events, including earth movement and water damage (Section I, 2(b)f, (c), "regardless of ... any other causes, or whether other causes acted concurrently or in any sequence with the excluded event to produce the loss." (Id.)

Defendants, in opposition, cite Sabella v. Wisler, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889 (1963), for the proposition that this language is violative of California Insurance Code § 530. However, in Sabella the insurer attempted to rely on California Insurance Code § 532, alone, to argue that because one cause or "peril" was excluded, the loss would not have occurred in the absence of that peril, the loss is automatically exempted, even if another covered cause directly led to the loss. The Court in Sabella was focusing on interpretation of Cal.Ins.Code § 530, and held that the insurer could not rely on section 532 alone, but must read that section in conjunction with section 530, which provides:

An insurer is liable for a loss of which a peril insured against

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