Wilshire Manor Apartments, LLC v. State Farm General Insurance ( 2018 )

FILED
NOT FOR PUBLICATION
JUL 25 2018
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
WILSHIRE MANOR APARTMENTS, No. 17-55216
LLC, a California limited liability
company, D.C. No.
2:16-cv-04363-R-GJS
Plaintiff-Appellant,
v. MEMORANDUM*
STATE FARM GENERAL INSURANCE
COMPANY, an Illinois corporation,
Defendant-Appellee,
and
DOES, 1 through 50, Inclusive,
Defendant.
Appeal from the United States District Court
for the Central District of California
Manuel L. Real, District Judge, Presiding
Argued and Submitted July 9, 2018
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: BERZON and N.R. SMITH, Circuit Judges, and NYE,** District Judge.
Wilshire Manor Apartments LLC appeals the grant of summary judgment in
favor of State Farm General Insurance Company in this insurance coverage action.
Wilshire alleged State Farm breached the contract and breached its implied
covenant of good faith and fair dealing. We have jurisdiction under 28 U.S.C.
§ 1291, and we reverse and remand.
1. Issues of material fact exist as to whether State Farm paid for all repairs
required to put Wilshire Manor Apartments back to its pre-loss condition.
Specifically, there are issues of material fact with regard to (1) whether the repairs
paid for to date were for temporary repairs only; (2) whether State Farm paid for
all of the temporary repairs; and (3) whether additional repairs were required to put
both elevators to their pre-loss condition (as outlined in the Lerch Bates report).
The fact that this contract allowed for replacement of damaged property is
not relevant to the resolution of this appeal. State Farm elected to repair the
damage to the apartment building. It did not elect to pay actual cash value for the
loss. See Fire Ins. Exch. v. Superior Court, 10 Cal. Rptr. 3d 617, 635 (Cal. Ct.
App. 2004). Thus, the discussion surrounding whether the elevators need to be
**
The Honorable David C. Nye, United States District Judge for the
District of Idaho, sitting by designation.
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replaced is only relevant to the extent it raises issues of fact as to whether State
Farm repaired them to their pre-loss condition.1
The district court’s alternative ground for issuing summary judgment also
fails. Issues of material fact also exist with regard to whether Wilshire failed to
comply with the duties outlined in the Policy. State Farm received the Lerch Bates
report before it closed its claim file. To the extent that Wilshire provided evidence
of previously unreported damages after the lawsuit was initiated, there are issues of
material fact with regard to whether State Farm had notice of these damages from
its claim investigation. See White v. W. Title Ins. Co., 710 P.2d 309, 316-17 (Cal.
1985) (rejecting the argument that “all evidence relating to events after plaintiffs
filed suit should have been excluded”).
2. California law provides a cause of action for breach of an implied covenant
of good faith and fair dealing where benefits owed under an insurance policy were
unreasonably withheld. See Love v. Fire Ins. Exch., 271 Cal. Rptr. 246, 255 (Cal.
Ct. App. 1990) (“[T]here are at least two separate requirements to establish breach
1
State Farms asserts that Wilshire’s claims for repair or replacement are
excluded because they related to code upgrades required by the Los Angeles
Department of Building and Safety. A review of the record establishes that this
assertion is not accurate. The Lerch Bates report outlines damages and repairs
associated with the fire, which do not rely on any code upgrades. Thus, the issue
of whether the elevators and the hoistways must be brought up to code (which is
disputed) is not relevant to the summary judgment determination.
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of the implied covenant: (1) benefits due under the policy must have been
withheld; and (2) the reason for withholding benefits must have been unreasonable
or without proper cause.”). Because issues of material fact exist with regard to
whether State Farm breached the contract, it follows that issues of material fact
also exist with regard to whether State Farm breached its implied covenant of good
faith and fair dealing.
3. Because we remand for further proceedings, we need not determine whether
the district court abused its discretion in denying Wilshire’s Federal Rule of Civil
Procedure 56(d) motion or in denying Wilshire’s motions to supplement the
record.
REVERSED and REMANDED.
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