SAMUEL CONTI, District Judge.
Before the Court are four related actions in which Plaintiff James Jardine ("Jardine") brings claims against insurance companies Maryland Casualty Company ("Maryland") and OneBeacon Insurance Company ("OneBeacon"). Case Number 10-3318 ("10-3318") involves Maryland's refusal to pay the policy amount after a wall in Plaintiff's property was allegedly damaged. Case Number 10-3319 ("10-3319") involves Maryland's refusal to pay after a fire damaged the same property.
Unless otherwise noted, the following facts are not in dispute between Jardine and Maryland.
To improve the Property's appearance, Chavez and Serna applied a plaster treatment to its walls, which were composed of painted cinder blocks. Id. The parties agree that the plaster treatment interacted negatively with the cinder, causing damage to the wall. 10-3318 Mot. at 10; 10-3318 Opp'n at 5-6.
On October 28, 2006, Chavez and Serna sold their business and assigned their lease to Raquel Pardo ("Pardo"). Ten. Decision at 3. Around this time, Jardine and Pardo became aware of the wall damage. Id. Jardine testified that he never removed the plaster or repaired the wall. 10-3318 Gross Decl. Ex A at 218-219. In spite of the wall damage, Pardo entered into a new lease with Jardine on April 25, 2007. Id. Ex. B.
Jardine has testified that Pardo stopped paying rent in September or October of 2007 and moved out around that time. 10-3119 Gross Decl. Ex. A at 116. It is unclear whether the fire or plaster damage was a factor in Pardo's decision. Id. at 116-117.
On April 2, 2008, Jardine entered into a Policyholders Settlement and Release Agreement with OneBeacon, Pardo's insurer, concerning the fire damage. 10-3335 ECF No. 30, Cook Decl. Ex. F ("Settlement Agreement"). Under the Settlement Agreement, Jardine was "paid for fire damage repairs that may exceed the reasonable and necessary cost of repair." Id. at 1.
Two weeks later, Jardine notified Maryland of his claims for the plaster and fire damage. 10-3318 Gross Decl. Ex. D; 10-3319 Gross Decl. Ex. E ("Jardine RFA Response") at 2.
With respect to the fire damage, on August 28, 2008, an independent adjustor prepared a repair estimate at Maryland's request. 10-3319 Gross Decl. Ex. H. The estimate concluded that fire damage repairs on the Property would cost $10,727.97. Id. On November 8, 2008, Maryland paid Jardine $10,227.97 (the amount of the repair estimate less Jardine's $500 deductible). Id. Ex. I. Maryland and Jardine also agreed to hire VP Construction to prepare another repair estimate. 10-3319 Opp'n at 5. In a letter dated December 3, 2008, VP Construction estimated that the repairs for the fire damage would cost $34,423.20 and would take 60 days to complete, as long as building code upgrades were not required. 10-3319 Gross Decl. Ex. F. Jardine declares that code upgrades would have cost an additional
On September 10, 2009, the City of Hayward purchased the Property from Jardine for approximately $1.3 million. 10-3318 Gross Decl. Ex. S. The Property is to be used for the construction of the Route 238 Corridor Improvement Project. Id.
On February 10, 2010, Jardine filed his 10-3318 action against Maryland for payments allegedly due for the plaster damage in the Superior Court of California for Alameda County ("Superior Court"). ECF No. 1-1. On March 9, 2010 he filed an amended complaint in the 10-3318 action as well as a complaint in his 10-3319 action for payments allegedly due for the fire damage, both in Superior Court. ECF No. 1-2 ("10-3318 Compl."); 10-3319 ECF No. 1 Ex. A ("10-3319 Compl."). Maryland removed both actions to federal court on July 29, 2010 on diversity grounds. ECF No. 1; 10-3319 ECF No. 1.
Both complaints allege three causes of action: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; and (3) violations of the Fair Claims Settlement Act as set forth in California Insurance Code § 790.03 et seq. and California Code of Regulations § 2695.1 et seq. 10-3318 Complaint; 10-3319 Complaint.
In its 10-3318 Motion, Maryland argues that summary judgment is appropriate because (1) no private right of action exists for the statutory violation alleged in Jardine's third cause of action (2) Jardine's plaster claim is barred under the Policy's exclusions, (3) Jardine is not entitled to any further payments under the Policy, and (4) Jardine is not entitled to any additional coverages under the policy. 10-3318 Motion at 8-9. With respect to its 10-3319 Motion, Maryland argues that summary judgment is appropriate because (1) no private right of action exists for the alleged statutory violations, (2) Jardine has been fully compensated for his fire loss, (3) Jardine is not entitled to coverage for code upgrades, and (4) Jardine is not entitled to Business Income coverage. 10-3319 Motion at 5-6.
Entry of summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Summary judgment should be granted if the evidence would require a directed verdict for the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, "Rule 56[] mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson, 477 U.S. at 255, 106 S.Ct. 2505. However, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Id. at 252, 106 S.Ct. 2505. "When opposing parties tell two
Maryland moves for summary judgment on the third cause of action in 10-3318 on the grounds that no private right of action exists under California Insurance Code Section 790.03 et seq. and California Code of Regulations Section 2695.1 et seq. 10-3318 Mot. at 25. Jardine does not object to the dismissal of his third cause of action. 10-3319 Opp'n at 22-23. Accordingly, the Court GRANTS Maryland's 10-3318 Motion as to Jardine's third cause of action for violation of the Fair Claims Settlement Practices Act.
Maryland argues that Jardine's remaining claims for plaster damage are barred by two policy exclusions: (1) the exclusion for faulty, inadequate, or defective renovation or remodeling under section II.A.3 of the Policy ("renovation/ remodeling exclusion"); and (2) the exclusion for loss or damage resulting from rust, corrosion, or deterioration under section II.A.2 ("deterioration exclusion"). 10-3318 Mot. at 15-17. Specifically, the Policy provides:
Policy at 7-8, 10 (emphasis added).
Maryland argues that the renovation/remodeling exclusion applies here because Chavez and Serna applied plaster to the walls to renovate and remodel the Property. 10-3318 Mot. at 16. Maryland contends the plaster application amounted to faulty, inadequate, or defective renovation
Jardine responds that neither exclusion applies. Jardine points out that, while the Policy does exclude loss or damage resulting from defective renovation or remodeling, it also states: "if an excluded Cause of Loss . . . results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss." 10-3318 Opp'n at 11. Jardine argues that because the plaster application resulted in a covered cause of loss, he is entitled to compensation. 10-3318 Opp'n at 11. Jardine also argues that the deterioration exclusion does not apply because the damage to his wall was the result of a "specific event" that caused the wall to degrade within a short period of time, not the result of a "gradual decline." Id. at 12. Finally, Jardine contends that the earlier determination by Maryland's claims adjustors that this was a covered claim should be binding on Maryland. Id.
Jardine is correct that the remodeling/renovation exclusion bars only the replacement of the plaster, not the loss resulting from its application.
The Court finds that the deterioration exclusion bars Jardine's claim. Jardine concedes that the damage to his wall "occurred over an approximate year and a half time," 10-3318 Opp'n at 12, just short of the two-year timeframe at issue in Berry. Such "slow-moving disintegration or corrosion" constitutes deterioration. The Court rejects Jardine's contention that the deterioration exclusion does not apply because the plaster damage was caused by the specific act of his tenants. Jardine cites no authority supporting his position, and the Ninth Circuit reached a contrary conclusion in Berry. In that case, a specific act—the use of liquid fungicide—caused the deterioration.
The Court finds that Jardine's 10-3318 claim is barred by the Policy's deterioration exclusion. Accordingly, the Court GRANTS Maryland's Motion as to Jardine's claims for breach of contract and breach of the implied covenant of good faith and fair dealing.
As in 10-3318, Jardine does not object to the dismissal of his third cause of action in 10-3319 for violations of the Unfair Insurance Practices Act. Accordingly, the Court GRANTS Maryland's 10-3319 Motion as to Jardine's third cause of action.
Maryland contends that Jardine has been fully compensated for the property damage resulting from the fire. 10-3319 Mot. at 10-12. Specifically, Maryland argues that Jardine has already received $41,099.22 in insurance proceeds— $30,781.25 from OneBeacon
Jardine concedes that the estimated cost to repair the fire damage was $34,423.20, plus the cost of code upgrades.
Jardine's threadbare and self-serving declaration is blatantly contradicted by the record. The OneBeacon Settlement Agreement, which Jardine signed, states that Jardine was "being paid for damage repairs that may exceed the reasonable and necessary cost of repair of the fire and damage and also constitutes a replacement cost payment before said fire damage repair work is completed." Settlement Agreement ¶ 2. Further, correspondence between Jardine and one of OneBeacon's adjustors concerning the settlement, which included an itemized list of the components of the Settlement Agreement, shows that Jardine could have no reason to believe that the $30,781.25 was for anything but fire damage repairs. See 10-3319 Gross Decl. Ex F. Accordingly, no reasonable juror could find that the purpose of the OneBeacon payment was for anything other than compensation for the fire damage.
Nor is there a genuine dispute of material fact as to the purpose of Maryland's $10,227.97 payment. Jardine's declaration that the payment was an advance towards his plaster claim and lost rent is directly contradicted by the record. Maryland's August 28, 2008 repair estimate found fire damage of $10,727.97 on the Property. 10-3319 Gross Decl. Ex. H. The estimate called for "replacing the suspended ceiling tile in the main area, cleaning the grid, painting the wall, replacing the carpet and a few fluorescent light fixtures." Id. Other documentation provided by Maryland shows that the company later paid Jardine $10,227.97, the cost of repairs less Jardine's $500 deductible, for his June 13, 2007 fire loss.
Accordingly, the Court finds that Jardine was more than fully compensated for
In addition to repair costs, Jardine claims that he is entitled to at least $59,446 for code upgrades under the Building Ordinance or Law provisions of the Policy. 10-3319 Opp'n at 7. The Building Ordinance or Law coverage pays for increased costs to repair, reconstruct, and/or remodel damaged and undamaged portions of a property "when the increased cost is the consequence of enforcement of building, zoning or land use ordinance law." Policy at 15. Jardine's policy states: "If you do not repair or replace the damaged building, we will pay only to demolish and clear the site of the undamaged portions of the building." Id.
Maryland argues that Jardine is not entitled to Building Ordinance or Law coverage for two independent reasons. 10-3319 Mot. at 12-13. First, Jardine never repaired the fire damage and the express terms of the policy bar windfall payments in such situations. Id. Second, Maryland contends that there never was an enforcement of an ordinance or law affecting Jardine's repairs. Maryland points to Jardine's interrogatory response that he "was required to do some of the repairs without formal determination by the building department what the legally required upgrades might be." Mot. at 13.
In his Opposition, Jardine responds to both points. First, he argues that he intended to repair the fire damage but failed to do so because he lacked the funds and Maryland refused to advance the cost of repairs. 10-3319 Opp'n at 10; 10-3319 Jardine Decl. ¶ 13. Jardine declares that his contractor could not know what code upgrades were required until it applied for a building permit, but it was later determined that the upgrades would cost approximately $59,446. 10-3319 Jardine Decl. ¶¶ 6-7. Jardine argues that he should not be punished for Maryland's refusal to pay for repairs. 10-3319 Opp'n at 10. Second, Jardine argues that the City of Hayward never enforced the building codes and required code upgrades because Maryland refused to pay Jardine's contractor and, consequently, the contractor did not apply for the building permit to do the work. Id. Again, Jardine maintains that Maryland should not be permitted to take advantage of its refusal to pay for repairs. Id.
The Court agrees with Maryland. Jardine's policy states that Maryland will pay "only to demolish and clear the site of the undamaged portions of the building" where repairs are not performed. Policy at 15. Jardine does not dispute that he never performed any code upgrades after the fire. Jardine Decl. at 12-13. Further, as the property has been sold to the City of Hayward, Jardine never will perform any code upgrades on the Property. Jardine's argument that he would have performed the repairs had Maryland advanced him the money is unpersuasive. His policy does not require Maryland to advance money for speculative upgrades, and Jardine points to no authority which would require Maryland to provide such an advance. Awarding Jardine funds for repairs that will never be performed would amount to the kind of windfall payment that is expressly foreclosed by his policy.
Moreover, it is unclear whether code upgrades were even necessary. Jardine declares that "code up-grades would cost approximately $59,446," but fails to provide any evidence to support that figure. See Jardine Decl. ¶ 7. Jardine also submits deposition testimony of his contractor, Gary Fair ("Fair"), purportedly showing that code upgrades were required due to the fire damage. 10-3319 Peck Decl. Ex. B. However, Fair's testimony is so vague that
For these reasons, the Court finds that Jardine is not entitled to Building Ordinance or Law coverage.
Jardine also claims that he is entitled to Business Income coverage because his tenant moved out as a result of the fire. 10-3319 Opp'n at 11-12. Jardine's policy provides: "We will pay for the actual loss of `business income' you sustain due to the necessary suspension of `operations' during the `period of restoration,' but not to exceed 12 consecutive months." Policy at 13. The policy defines operations as "your business activities occurring at the described premises." Id. The "period of restoration" commences on "the date of direct physical loss or damage caused by or resulting from any Covered Cause of Loss." Id. The period ends on the earlier of "the date when the property at the `described premises' should be repaired, rebuilt or replaced with reasonable speed or similar quality" or "[t]he date when business is resumed at the new location." Id.
Maryland argues that Jardine is not entitled to Business Income coverage because he did not cease his operations as landlord during the period of restoration. 10-3319 Mot. at 14. Maryland contends that the period of restoration commenced on June 13, 2007, when the fire occurred, and ended sixty days later since the VP Construction estimate stated that repairs could be completed in sixty days. 10-3319 Mot. at 14. Maryland argues that Jardine did not suspend business operations during this time because Jardine continued to rent the premises to Pardo for four months after the fire. 10-3319 Mot. at 14-15; 10-3319 Reply at 10.
Jardine responds that the estimate provided by VP Construction indicated that fire repair work would take sixty days only if no building code upgrades were required. 10-3319 Opp'n at 11. Jardine contends that because code upgrades were required, the period of restoration should be longer than sixty days, though he does not specify how much longer. Id. Jardine also argues that he is entitled to recover lost income because Pardo moved out as a result of the fire damage, which would have been repaired earlier if Maryland had not refused to pay the repair costs. Id. at 11-12.
The Court finds that Jardine has failed to make a showing sufficient to establish that he is entitled to Business Income coverage under the Policy. Jardine has testified that Pardo stopped paying rent in September or October 2007, three to four months after the fire. See 10-3119 Gross Decl. Ex. A at 116. Thus, at trial, Jardine would bear the burden of proving that the period of recovery, i.e., the time it would have taken to repair the Property with reasonable speed or similar quality, exceeded three to four months. The VP Construction estimate—the only evidence before the Court bearing on the period of recovery—indicates that Jardine's repairs would have taken approximately sixty days. 10-3319 Gross Decl. Ex. F.
The evidence does not support Jardine's contention that code upgrades would have extended the period of recovery past the date when Pardo ceased paying rent. First, as discussed above, it is unclear whether code upgrades were necessary. Second, even if code upgrades were necessary,
The Court also rejects Jardine's contention that he is entitled to Business Income coverage because repairs were delayed due to Maryland's refusal to pay and, as a result, Pardo moved out before repairs could be started. The Policy expressly provides that the period of recovery starts to run on the date of the loss, not on the date when repairs could have or should have commenced. Policy at 13. Moreover, Jardine did not tender his claim for repairs to Maryland until April 16, 2008, approximately six to seven months after Pardo stopped paying rent and ten months after the fire. Jardine RFA Response at 2.
The Court finds that Jardine has failed to raise a genuine dispute of material fact concerning whether he is entitled to any further compensation under the Policy. Accordingly, the Court GRANTS Maryland's 10-3319 Motion.
For the forgoing reasons, the Court GRANTS Defendant Maryland Casualty Company's Motions for Summary Judgment against Plaintiff James Jardine in Case Numbers 10-3318 and 10-3319.
IT IS SO ORDERED.
