James Copelan v. Infinity Ins. Co. ( 2018 )

FILED
NOT FOR PUBLICATION
JUN 06 2018
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JAMES B. COPELAN, on behalf of No. 16-55980
himself and all others similarly situated;
BRIAN M. LOWENTHAL, on behalf of D.C. No. 2:16-cv-01355-R-JPR
himself and all others similarly situated,
Plaintiffs-Appellants, MEMORANDUM*
v.
INFINITY INSURANCE COMPANY;
LIBERTY MUTUAL FIRE INSURANCE
COMPANY,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Manuel L. Real, District Judge, Presiding
Argued and Submitted February 5, 2018
Pasadena, California
Before: W. FLETCHER, BERZON, and OWENS, Circuit Judges.
Plaintiffs-Appellants James B. Copelan and Brian M. Lowenthal
(“Plaintiffs”) appeal the district court’s dismissal of their six causes of action. We
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
have jurisdiction under 28 U.S.C. § 1291. We reverse in part, affirm in part, and
remand for further proceedings.
Much of this case turns on whether Lowenthal’s policy with Infinity
Insurance Company (“Infinity”) covered damages for the diminution in value of
Copelan’s car. We hold that the policy does provide such coverage. Lowenthal’s
policy covers “damages . . . for . . . property damage for which an insured person is
legally liable because of an accident.” “Property damage” is defined as “physical
damage to tangible property, including destruction or loss of its use.” Although
diminution in value is not itself a form of physical damage, it is an accepted way of
measuring damage. See Pruyn v. Agric. Ins. Co., 42 Cal. Rptr. 2d 295, 300 n.6 (Ct.
App. 1995); State Farm Fire & Cas. Co. v. Superior Court, 264 Cal. Rptr. 269,
274–75 (Ct. App. 1989). The damage measured in terms of diminution in value
could be physical damage, which Lowenthal’s policy covers; it could be so-called
stigma damage, which Lowenthal’s policy does not cover, see Carson v. Mercury
Ins. Co., 148 Cal. Rptr. 3d 518, 528 (Ct. App. 2012); or it could be both. Here, on
the facts Plaintiffs alleged, it is the first; the diminution in value was caused by
“physical damage to tangible property.” We therefore reverse the dismissal of the
first cause of action as to Infinity.
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However, we affirm the dismissal of the first cause of action as to Liberty
Mutual Fire Insurance Company (“Liberty”). Plaintiffs have failed to allege that
Liberty’s pursuit of its subrogation claims prevented Copelan and other putative
class members from recovering from their tortfeasors. See Chandler v. State Farm
Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010) (“Plaintiff must show that
he was foreclosed from recovering from the tortfeasor because of Defendant’s act
of seeking and obtaining reimbursement.”). Plaintiffs may amend their complaint
on remand to specify that Lowenthal’s policy with Infinity, properly interpreted to
cover diminution in value measuring physical damage, and Lowenthal’s personal
assets are insufficient to satisfy Copelan’s judgment, and to make similar
allegations for the other putative class members.
We affirm the dismissal of the second cause of action as to Liberty and
Infinity. Plaintiffs stated in their complaint that this cause of action was “brought
pursuant to” California Insurance Code § 790.03. That provision does not
authorize a private cause of action. See Zhang v. Superior Court, 304 P.3d 163,
177 (Cal. 2013).
We affirm the dismissal of the third cause of action. Under its policy with
Copelan, Liberty had discretion to repair the Mercedes. Plaintiffs have not alleged
that Liberty’s repairs left the car “unsafe,” Baldwin v. AAA N. Cal., Nev. & Utah
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Ins. Exh., 204 Cal. Rptr. 3d 433, 442 (Ct. App. 2016), or otherwise failed to return
it to its “normal running condition,” Ray v. Farmers Ins. Exh., 246 Cal. Rptr. 593,
595 (Ct. App. 1988). As a result, Liberty’s “election to repair is conclusive,”
regardless of any diminution in value. Ray, 246 Cal. Rptr. at 595. The third cause
of action also sought relief based on Liberty’s pursuit of its subrogation claims.
For the reasons discussed above, we affirm the dismissal of this part of the third
cause of action, as well, subject to any amendments Plaintiffs may make to their
complaint.
We affirm the dismissal of the fourth cause of action, given that the object of
the alleged conspiracy entailed the same conduct we rejected as a basis for liability
under the third cause of action. See Applied Equip. Corp. v. Litton Saudi Arabia
Ltd., 869 P.2d 454, 457 (Cal. 1994) (“Standing alone, a conspiracy does no harm
and engenders no tort liability. It must be activated by the commission of an actual
tort.”).
We reverse the dismissal of the fifth cause of action. California law
authorizes Copelan to enforce the judgment he obtained directly against Infinity.
See Cal. Ins. Code § 11580(b); Clark v. Cal. Ins. Guarantee Ass’n, 133 Cal. Rptr.
3d 1, 4 (Cal. App. 2011). We reject Infinity’s argument that Copelan cannot
pursue a diminished-value claim as a lessee, as Copelan is not pursuing a
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diminished-value claim before us. He seeks only to enforce his state small-claims
judgment against Infinity’s insured Lowenthal, which was upheld after a trial de
novo in state superior court.
Finally, we reverse the dismissal of the sixth cause of action. As discussed
above, Lowenthal’s policy covers diminution-in-value damages. Plaintiffs did not
waive this argument below. They have adequately alleged a breach of contract and
the duty of good faith.
On remand, leave to amend the dismissed causes of action should be granted
“unless [the district court] determines that the pleading could not possibly be cured
by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.
2000) (en banc) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)).
We grant Liberty’s motion to take judicial notice (Dkt. 23). Such notice is
limited to the fact of the pleadings; it does not extend to the truth of what is
pleaded.
Each party shall bear its own costs on appeal.
REVERSED in part, AFFIRMED in part, and REMANDED.
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