Vulk v. State Farm Gen. Ins. Co.

• Decision Date: 31 August 2021
• Docket Number: C090073, C090074, C090278
• Citation: 69 Cal.App.5th 243,284 Cal.Rptr.3d 360
• Parties: Matthew VULK, Plaintiff and Appellant, v. STATE FARM GENERAL INSURANCE COMPANY, Defendant and Respondent. Gary Andrighetto, Plaintiff and Appellant, v. State Farm General Insurance Company, Defendant and Respondent. James Dalin, Plaintiff and Appellant, v. State Farm General Insurance Company, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

69 Cal.App.5th 243

284 Cal.Rptr.3d 360

Matthew VULK, Plaintiff and Appellant,

v.STATE FARM GENERAL INSURANCE COMPANY, Defendant and Respondent.

Gary Andrighetto, Plaintiff and Appellant,

v.State Farm General Insurance Company, Defendant and Respondent.

James Dalin, Plaintiff and Appellant,

v.State Farm General Insurance Company, Defendant and Respondent.

C090073, C090074, C090278

Court of Appeal, Third District, California.

Filed August 31, 2021

Certified for Partial Publication.^*

The O'Connor Law Firm and Timothy J. O'Connor, Elk Grove, for Plaintiffs and Appellants.

LHB Pacific Law Partners, Sandra Elizabeth Stone, and Jenny Jen-Yi Chu, Emeryville; Defendant and Respondent.

Duarte, J.

These consolidated appeals arise from an insurance coverage dispute following a wildfire that burned in Siskiyou County. In September 2014, the Boles Fire damaged and destroyed numerous homes in the town of Weed, including the homes owned by plaintiffs Gary Andrighetto, James Dalin, and Matthew Vulk. Plaintiffs and others filed suit against their insurance company, defendant State Farm General Insurance Company (State Farm), alleging various claims, including breach of contract and negligence. At the center of the parties’ dispute is whether State Farm intentionally or negligently underinsured plaintiffs’ homes. Plaintiffs argued their homes were insufficiently insured due to State Farm's alleged failure to calculate reasonable or adequate policy limits on their behalf for the full replacement cost of their homes.

After the trial court granted State Farm's motion for summary judgment against Andrighetto, Dalin and Vulk stipulated to entry of judgment in favor of State Farm. Each plaintiff timely appealed, and we consolidated the appeals for argument and disposition. Thereafter, we requested that the parties discuss in their briefing whether the judgments in the Dalin and Vulk matters need to be reversed pursuant to Magaña Cathcart McCarthy v. CB Richard Ellis, Inc . (2009) 174 Cal.App.4th 106, 94 Cal.Rptr.3d 109 ( McCarthy ).¹

As we shall explain, we will affirm the judgment in the Andrighetto matter and reverse the stipulated judgments in the Dalin and Vulk matters; we remand the Dalin and Vulk matters for further proceedings.

BACKGROUND

In view of the procedural posture of these consolidated appeals, we need only summarize the pertinent facts and procedural history related to the Andrighetto matter. In the Discussion section of our opinion, we provide additional background information relevant to the stipulated judgments entered in the Dalin and Vulk matters.

The Property and Insurance Policy

Andrighetto is the owner of the real property located at 444 Shasta Avenue, Weed, California (the property). State Farm began insuring the property in the early 1960's when it was owned by Andrighetto's parents. In 1970, Andrighetto insured the property after his father died. The property included a three bedroom, two bathroom house with a two-car attached garage, together approximately 1,500 square feet, and two storage structures.

In November 1993, Andrighetto submitted an application for homeowners insurance to State Farm. Thereafter, State Farm issued homeowners policy No. 55-VA-2434-8, effective November 30, 1993. The policy insured Andrighetto's dwelling, dwelling extensions, and personal property against various risks (including fire) up to stated policy limits. The coverage limit on his dwelling was initially set at $94,400.

Once a year from 1993 to 2013, State Farm sent Andrighetto an insurance renewal certificate setting forth his policy limits for the next policy term, which automatically increased each year to account for inflation. The renewal certificate sent to Andrighetto in 2013, which covered the period from November 30, 2013, to November 30, 2014, advised him that the policy limit for his home was "based on an estimate of the cost to rebuild [his] home, including an approximate cost for labor and materials in [his] area, and specific information that [he had] provided about [his] home." The renewal certificate informed Andrighetto that higher policy limits were available at higher premiums, that it was Andrighetto's responsibility to "choose the coverages and limits that [met his] needs," and that State Farm recommended that he purchase a coverage limit "at least equal to the estimated replacement cost of [his] home." The renewal certificate further advised Andrighetto that home replacement cost estimates could be obtained from various sources, including a building contractor or his insurance agent via a third-party vendor, and that State Farm "does not guarantee that any estimate will be the actual future cost to rebuild [his] home." The renewal certificate encouraged Andrighetto to "periodically review [his] coverages and limits with [his] agent and to notify [State Farm] of any changes or additions to [his] home."

When Andrighetto renewed his policy in 2013, the coverage limit on his dwelling was $184,900 (Coverage A), plus $18,490 for dwelling extension coverage (Coverage A).² The dwelling-related coverage limits also included the following optional coverages: (1) Option ID, which provided an additional sum, equal to 20 percent of the policy maximum, for increased dwelling and dwelling extension costs; (2) Option OL, which provided an additional sum, equal to 10 percent of the policy maximum, for statutory or building code-compliance costs; and (3) an additional sum, equal to 5 percent of the policy maximum, for dwelling debris removal costs.

In addition to the annual renewal certificate, every two years, including in October 2012, State Farm sent Andrighetto the California Residential Property Insurance disclosure form mandated by Insurance Code section 10102. This form listed and defined various types of insurance coverage, including: (1) "replacement cost coverage," which "only pays for replacement costs up to the limits specified in [the] policy"; (2) "extended replacement cost coverage," which "provides additional coverage above the dwelling limits up to a stated percentage or specific dollar amount"; and (3) "guaranteed replacement cost coverage," which "covers the full cost to repair or replace the damaged or destroyed dwelling ... regardless of the dwelling limits shown on the policy declarations page." (See Ins. Code, § 10102, subd. (a).)

The disclosure form sent to Andrighetto in October 2012 advised him that he had purchased extended replacement cost coverage for his dwelling and building code upgrade coverage, and that guaranteed replacement cost coverage, which he did not purchase, was the broadest level of coverage.³ The form additionally advised Andrighetto that his policy's declarations page identified the specific coverage limits he purchased, and explained that it was important for him to consider whether the limits were sufficient to meet his needs and that he should contact his insurance agent or insurance company if he had any questions about the coverage he purchased or if he wanted to discuss his coverage options. The form specifically warned Andrighetto about being "underinsured" (i.e., insuring his home for less than its replacement cost), which "may result in [his] having to pay thousands of dollars out of [his] own pocket to rebuild [his] home if it is completely destroyed." The form advised Andrighetto that the coverage limit on his dwelling should be high enough to allow him to rebuild his home in the event it is completely destroyed, and encouraged him to obtain a current estimate of the cost to rebuild his home from his insurance agent or insurance company, or to obtain an independent appraisal from a local contractor, architect, or real estate appraiser, and to contact his agent or insurance company immediately if he believed his coverage limits might be inadequate. The form explained that a current estimate of the cost to replace his home could "help protect [him] against being underinsured," and that if he obtained such an estimate and wanted to change his coverage limits, he should contact his insurance company. Thus, State Farm notified Andrighetto that he did not have guaranteed replacement cost coverage for his home; rather, he was insured for replacement only to the extent of the coverage limits set forth on his policy's declarations page.

Every five years, including in August 2009 and August 2014, State Farm sent Andrighetto a letter providing him "information about an important aspect of ... homeowners coverage – estimating the cost to replace [his] home at today's reconstruction prices." The letter identified several ways to obtain such an estimate, including using a recent replacement cost appraisal, a recent building contractor's estimate, or working with his insurance agent using Xactware software. State Farm specifically advised Andrighetto that it does not guarantee that any replacement cost estimate will be the actual future cost to rebuild his home and recommended that Andrighetto purchase insurance coverage in an amount at least equal to the estimated cost to replace his home. In doing so, State Farm informed Andrighetto that while he estimated the cost to replace his home when he originally purchased his homeowners policy (i.e., in 1993), it recommended that he review his policy each year to ensure he had sufficient insurance coverage. State Farm emphasized that such a review was particularly important if Andrighetto felt that home improvements, rising construction costs, or other economic factors made his original estimate outdated.

Andrighetto's Deposition

Andrighetto was deposed in June 2017. During his deposition, Andrighetto stated that he could not recall receiving any document from State Farm summarizing the coverage limits of his homeowners policy, but acknowledged that even if he had received any such documents, he "probably wouldn't have looked at [them] anyhow," as he usually threw away anything that was not a billing invoice. Andrighetto explained that he never...