NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       DEC 19 2019
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

LINDA TAYLOR; RAYMOND MAGEE,                    No.    18-55687

                Plaintiffs-Appellants,          D.C. No.
                                                2:17-cv-07550-RGK-GJS
 v.

GARRISON PROPERTY AND                           MEMORANDUM*
CASUALTY INSURANCE COMPANY;
DOES, 1 through 50, inclusive,

                Defendants-Appellees.

                   Appeal from the United States District Court
                      for the Central District of California
                   R. Gary Klausner, District Judge, Presiding

                    Argued and Submitted November 14, 2019
                              Pasadena, California

Before: FERNANDEZ, M. SMITH, and MILLER, Circuit Judges.

      Linda Taylor and her husband, Raymond Magee, appeal from the district

court’s grant of summary judgment in favor of their insurer, Garrison Property and

Casualty Insurance Company. Taylor and Magee sued Garrison for breach of

contract and breach of the duty of good faith and fair dealing after Garrison denied



      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
coverage for fire-related damage to a detached structure behind their home. We

have jurisdiction under 28 U.S.C. § 1291. We affirm in part, reverse in part, and

remand for further proceedings.

       1.     Taylor and Magee created genuine issues of fact material to whether

Garrison breached any express or implied contractual duties with respect to their

claims for lost rental income and personal property. Magee testified that on the

night of the fire, he called Garrison’s claims representative and reported that the

studio apartment they rented out for $900 per month had been destroyed along with

Taylor’s art collection and other personal property. According to Magee, the

claims representative explained that because Taylor had been operating her

business out of the detached structure, their coverage was limited to lost rental

income and $10,000 in personal property. A transcript of this call and a claims

report support Magee’s testimony that he notified Garrison of those losses.

       Garrison counters that Magee’s call was insufficient to make a claim

because Taylor and Magee did not submit an inventory list detailing each loss. But

under the terms of the policy, it was Garrison’s duty to investigate the claims and

to request an inventory list if it believed one was needed. See Waller v. Truck Ins.

Exch., Inc., 

, 639 (Cal. 1995) (“‘[D]elayed payment based on

inadequate or tardy investigations . . . may breach the implied covenant because’

[it] frustrate[s] the insured’s right to receive the benefits of the contract . . . .”


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(quoting Love v. Fire Ins. Exch., 

, 1153 (Cal. Ct. App.

1990))); see also Cal. Ins. Code § 790.03(h)(2) (prohibiting an insurer’s “[f]ail[ure]

to acknowledge and act reasonably promptly upon communications with respect to

claims arising under insurance policies”). Garrison made no such request.

      The district court noted that Garrison’s claims denial letter “did not deny a

claim for lost rent or personal property.” That is true, but the fact remains that

Garrison has not paid any such claims. We reverse the district court’s order in part

and remand for further proceedings to determine whether Garrison breached a

contractual duty or an implied duty of good faith and fair dealing by failing to

investigate, delaying payment for, or effectively denying Taylor and Magee’s

claims for lost rental income and personal property.

      2.     We reject Taylor and Magee’s challenge to the policy’s business-use

exclusion under the California Insurance Code. Taylor and Magee’s policy is a

mixed-peril policy, so it “need not comply with the provisions of the standard form

of fire insurance policy . . . ; provided, that coverage with respect to the peril of

fire, when viewed in its entirety, is substantially equivalent to or more favorable to

the insured than that contained in [the] standard form.” Cal. Ins. Code § 2070.

Taylor and Magee’s policy meets this standard. The standard form does not contain

use exclusions, but at least one California court has upheld them. See Rizzuto v.

Nat’l Reserve Ins. Co., 

, 431–33 (Cal. Ct. App. 1949) (upholding a


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fire insurance policy provision covering the insured’s building “while occupied

only for barber shop purposes”). California courts have also emphasized that an

insurance company “has the unquestioned right to select those whom it will insure

and to rely upon [the insured] for such information as it desires as a basis for . . .

selecting its risks.” Mitchell v. United Nat’l Ins. Co., 

, 633–34

(Cal. Ct. App. 2005) (quoting Robinson v. Occidental Life Ins. Co., 

,

42 (Cal. Ct. App. 1955)). The policy’s business-use exclusion merely reflects the

character of risk that Garrison agreed to assume: to cover fire-related damage to

Taylor and Magee’s home, not their business. It does not impermissibly reduce

statutorily mandated coverage.

      3.     Nor should Garrison be estopped from enforcing the policy’s

business-use exclusion. Even assuming that Garrison understood at the time of

issuance that Taylor was operating a business out of the detached structure, there is

no evidence that Taylor and Magee justifiably relied on Garrison’s alleged

omissions. They had a duty to read the policy and discover the business-use

exclusion, yet they apparently failed to do so. See Granco Steel, Inc. v. Workmen’s

Comp. App. Bd., 

, 295 (Cal. 1968) (concluding that to apply the

estoppel doctrine, the insured must be “ignorant of the true state of facts” and must

detrimentally rely on the insurer’s conduct); see also Hadland v. NN Inv’rs Life

Ins. Co., 

, 94–95 & 94 n.9 (Cal. Ct. App. 1994) (holding that an


                                           4
insurer was not liable for misrepresenting its policy because the insureds never

read it and thus failed to discover that the insurer’s representations were at odds

with the policy’s terms). In the absence of any showing of justifiable reliance by

Taylor and Magee, we cannot rewrite the policy to include a risk that the parties

agreed to exclude.

      4.     The district court held that Taylor and Magee were not entitled to

punitive damages because they failed to raise genuine issues of fact material to

their claim for breach of the duty of good faith and fair dealing. Because we

reverse and remand that claim with respect to lost rental income and personal

property, we also vacate the district court’s punitive-damages determination. We

express no opinion on whether Taylor and Magee are entitled to such damages.

      AFFIRMED in part, REVERSED in part, and REMANDED.

      The parties shall bear their own costs.




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