This case was last updated from Los Angeles County Superior Courts on 07/15/2020 at 07:35:48 (UTC).

LIBERTY SURPLUS INSURANCE CORPORATION VS LTD CONSTRUCTION

Case Summary

On 02/16/2016 LIBERTY SURPLUS INSURANCE CORPORATION filed a Contract - Insurance lawsuit against LTD CONSTRUCTION. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are ELIZABETH ALLEN WHITE and LAURA A. SEIGLE. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****9793

  • Filing Date:

    02/16/2016

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Insurance

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

ELIZABETH ALLEN WHITE

LAURA A. SEIGLE

 

Party Details

Plaintiff, Petitioner, Respondent and Cross Defendant

LIBERTY SURPLUS INSURANCE CORPORATION

Defendants, Respondents, Cross Plaintiffs, Cross Defendants and Appellants

BERENDOS L.P.

A COMMUNITY OF FRIENDS

235 BERENDO L.P.

LTD CONSTRUCTION SERVICES GP

WALTON CONSTRUCTION SERVICES

ROCKHILL INSURANCE COMPANY

AXIS SURPLUS INSURANCE COMPANY

DOES 1 TO 200

PHILADELPHIA INDEMNITY INSURANCE CO.(DOE1

235 BERENDO LP

PHILADELPHIA INDEMNITY INSURANCE CO.

LTD CONSTRUCTION SERVICES GP DBA WALTON CONSTRUCTION SERVICES A GENERAL PARTNERSHIP

TOKIO MARINE SPECIALTY INSURANCE CO.

LIBERTY SURPLUS INSURANCE CORPORATION

INTERSTATE RESTORATION CALIFORNIA LP

SURPLUS INSURANCE COMPANY

TOKIO MARINE SPECIALITY INSURANCE COMPANY

17 More Parties Available

Attorney/Law Firm Details

Cross Defendant and Plaintiff Attorneys

PALUMBO DIANE O.

PALUMBO BERSTROM LLP

PALUMBO BERGSTROM LLP

HOVE DAWN

Plaintiff and Petitioner Attorneys

PALUMBO BERSTROM LLP

PALUMBO BERGSTROM LLP

Defendant, Respondent and Cross Plaintiff Attorneys

MASTERS JEFFREY D.

WOLKIN BRANDT L. ESQ.

DENNISON ROBERT D.

HARRIS & GREEN PC

LOUREIRO KARL R.

GRANT MERYN C.N.

WOLKIN BRANDT L.

PALLARES WILLIAM EDWARD

ARNOLD LARRY M. P.C.

YEGAZARIAN NONA

BROWN ETHAN J.

Defendant and Cross Defendant Attorneys

WOLKIN BRANDT L.

PALLARES WILLIAM EDWARD

BROWN ETHAN J.

MIGLIETTA MARGARET R.

PALUMBO DIANE O.

LAES SCOTT

 

Court Documents

Motion to Quash - MOTION TO QUASH SERVICE OF SUBPOENA AND/OR FOR A PROTECTIVE ORDER

8/29/2019: Motion to Quash - MOTION TO QUASH SERVICE OF SUBPOENA AND/OR FOR A PROTECTIVE ORDER

Declaration - DECLARATION DECLARATION RE: GOOD FAITH SETTLEMENT

10/15/2019: Declaration - DECLARATION DECLARATION RE: GOOD FAITH SETTLEMENT

Opposition - OPPOSITION BERENDO, L.P. , 235 BERENDO, L.P., AND A COMMUNITY OF FRIENDS OPPOSITION TO TOKIO MARINE SPECIALTY INSURANCE COMPANYS DEMURRER TO THE SECOND AMENDED COMPLAINT

11/4/2019: Opposition - OPPOSITION BERENDO, L.P. , 235 BERENDO, L.P., AND A COMMUNITY OF FRIENDS OPPOSITION TO TOKIO MARINE SPECIALTY INSURANCE COMPANYS DEMURRER TO THE SECOND AMENDED COMPLAINT

Reply - REPLY TO LIBERTY OPPOSITION TO MOTION FOR LEAVE TO FILE CROSS-COMPLAINT

12/13/2019: Reply - REPLY TO LIBERTY OPPOSITION TO MOTION FOR LEAVE TO FILE CROSS-COMPLAINT

NOTICE OF DISASSOCIATION OF COUNSEL

4/4/2018: NOTICE OF DISASSOCIATION OF COUNSEL

NOTICE PR EX PARTE

8/8/2018: NOTICE PR EX PARTE

PHILADELPHIA INDEMNITY INSURANCE COMPANY AND TOKIO MARINE SPECIALTY INSURANCE COMPANY'S UNDISPUTED MATERIAL FACTS IN SUPPORT OF REPLY TO LSIC'S RESPONSE ETC

8/10/2018: PHILADELPHIA INDEMNITY INSURANCE COMPANY AND TOKIO MARINE SPECIALTY INSURANCE COMPANY'S UNDISPUTED MATERIAL FACTS IN SUPPORT OF REPLY TO LSIC'S RESPONSE ETC

Proof of Service -

8/10/2018: Proof of Service -

DECLARATION OF DIANE 0. PALUMBO IN SUPPORT OF LIBERTY SURPLUS INSURANCE CORPORATION'S REPLY TO PHILADELPHIA INDEMNITY INSURANCE COMPANY AND; ETC.

8/10/2018: DECLARATION OF DIANE 0. PALUMBO IN SUPPORT OF LIBERTY SURPLUS INSURANCE CORPORATION'S REPLY TO PHILADELPHIA INDEMNITY INSURANCE COMPANY AND; ETC.

LIBERTY SURPLUS INSURANCE CORPORATION'S OBJECTION TO AND MOTION TO STRIKE JOHN NIEMEYER'S DECLARATION FILED IN SUPPORT OF BERENDOS ENTITIES OPPOSITION TO LIBERTY'S MOTION FOR SUMMARY ADJUDICATION

8/10/2018: LIBERTY SURPLUS INSURANCE CORPORATION'S OBJECTION TO AND MOTION TO STRIKE JOHN NIEMEYER'S DECLARATION FILED IN SUPPORT OF BERENDOS ENTITIES OPPOSITION TO LIBERTY'S MOTION FOR SUMMARY ADJUDICATION

Declaration - Declaration Of David Corona In support of ACOF's Motion In Limine No. 4

10/31/2018: Declaration - Declaration Of David Corona In support of ACOF's Motion In Limine No. 4

Witness List - (Proposed) Joint Witness List

11/13/2018: Witness List - (Proposed) Joint Witness List

Declaration - Declaration of Diane Palumbo

12/13/2018: Declaration - Declaration of Diane Palumbo

Brief - BRIEF A COMMUNITY OF FRIEND'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO SET ASIDE THE JURY'S ADVISORY VERDICT DENYING THE AFFIRMATIVE DEFENSE OF UNCLEAN HANDS

3/8/2019: Brief - BRIEF A COMMUNITY OF FRIEND'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO SET ASIDE THE JURY'S ADVISORY VERDICT DENYING THE AFFIRMATIVE DEFENSE OF UNCLEAN HANDS

Opposition - OPPOSITION INTERSTATE RESTORATION CALIFORNIA, LPS OPPOSITION TO DEFENDANT BERENDOS, LP AND A COMMUNITY OF FRIENDS MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT

4/8/2019: Opposition - OPPOSITION INTERSTATE RESTORATION CALIFORNIA, LPS OPPOSITION TO DEFENDANT BERENDOS, LP AND A COMMUNITY OF FRIENDS MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT

Motion for Order - MOTION FOR ORDER REGARDING SPECIAL INTERROGATORIES

5/17/2019: Motion for Order - MOTION FOR ORDER REGARDING SPECIAL INTERROGATORIES

SUMMONS -

2/16/2016: SUMMONS -

DEFENDANT PHILADELPHIA INDEMNITY INSURANCE COMPANY'S ANSWER TO COMPLAINT

6/6/2016: DEFENDANT PHILADELPHIA INDEMNITY INSURANCE COMPANY'S ANSWER TO COMPLAINT

989 More Documents Available

 

Docket Entries

  • 07/31/2020
  • Hearing07/31/2020 at 08:30 AM in Department 48 at 111 North Hill Street, Los Angeles, CA 90012; Trial Setting Conference

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  • 07/31/2020
  • Hearing07/31/2020 at 08:30 AM in Department 48 at 111 North Hill Street, Los Angeles, CA 90012; Status Conference

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  • 07/31/2020
  • Hearing07/31/2020 at 08:30 AM in Department 48 at 111 North Hill Street, Los Angeles, CA 90012; Conference Re: MSC Setting

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  • 07/31/2020
  • Hearing07/31/2020 at 08:30 AM in Department 48 at 111 North Hill Street, Los Angeles, CA 90012; Conference (Re: MSJ/MSA Setting)

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  • 06/29/2020
  • DocketAppeal - Ntc Designating Record of Appeal APP-003/010/103; Filed by Berendos, L.P. (Appellant); 235 Berendo, L.P. (Appellant); A Community of Friends (Appellant)

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  • 06/18/2020
  • DocketNotice of Filing of Notice of Appeal (Unlimited Civil) (NOA:6/17/20); Filed by Clerk

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  • 06/17/2020
  • DocketAppeal - Notice of Appeal/Cross Appeal Filed; Filed by Berendos, L.P. (Appellant); 235 Berendo, L.P. (Appellant); A Community of Friends (Appellant)

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  • 06/10/2020
  • DocketNotice (of Reassignment and Order); Filed by Liberty Surplus Insurance Corporation (Plaintiff)

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  • 06/02/2020
  • Docketat 08:30 AM in Department 48, Laura A. Seigle, Presiding; Hearing on Motion to Compel Further Discovery Responses - Not Held - Rescheduled by Party

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  • 06/02/2020
  • Docketat 08:30 AM in Department 48, Laura A. Seigle, Presiding; Conference ((ReMSJ/MSA Setting)) - Not Held - Rescheduled by Court

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1,621 More Docket Entries
  • 03/25/2016
  • DocketProof-Service/Summons; Filed by Liberty Surplus Insurance Corporation (Plaintiff)

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  • 03/04/2016
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

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  • 03/04/2016
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 03/01/2016
  • DocketSUMMONS

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  • 03/01/2016
  • DocketSummons; Filed by Liberty Surplus Insurance Corporation (Plaintiff)

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  • 02/26/2016
  • DocketNotice; Filed by Liberty Surplus Insurance Corporation (Plaintiff)

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  • 02/26/2016
  • DocketNOTICE OF ERRATA REGARDING SUMMONS AND COMPLAINT

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  • 02/16/2016
  • DocketSUMMONS

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  • 02/16/2016
  • DocketCOMPLAINT FOR: (1) DECLARATORY JUDGMENT DUTY TO INDEMNIFY; ETC

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  • 02/16/2016
  • DocketComplaint; Filed by Liberty Surplus Insurance Corporation (Plaintiff)

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Tentative Rulings

Case Number: BC609793    Hearing Date: May 11, 2021    Dept: 48

[TENTATIVE] ORDER RE: MOTION TO BIFURCATE TRIAL

This action arises out of renovation work that Berendos L.P. hired LTD Construction Services, GP d/b/a Walton Construction Services (“Walton”) to complete at two apartment buildings. After a rainstorm resulted in water damage, Berendos L.P. hired Interstate Restoration California LP (“Interstate”) to remediate the damage to the buildings. In the phase one trial, the jury found that Berendos breached its contract with Interstate and awarded the entire amount of Interstate’s invoices.

On April 19, 2021, Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”) filed a motion to bifurcate the causes of action between Berendos and Walton from the remaining causes of action. Philadelphia filed a notice of joinder to the motion. Liberty agrees to bifurcation if the parties agree to extend the five-year deadline and if the parties are not permitted to refer to Liberty’s excess commercial liability issued to Walton in the trial of the Berendos/Walton causes of action. Walton agrees to bifurcation if it can refer to its belief that insurance coverage existed in the trial of the Berendos/Walton causes of action.

A. Remaining Causes of Action

1. Berendos’ Third Amended Cross-Complaint

Berendos’ first cause of action alleges that under their contract, Walton agreed to bear full responsibility for “any damages, losses, costs, expenses, including, but not limited to, reasonable attorneys’ fees resulting from” the acts and omissions of its employees, subcontractors, agents, and other people or entities working on behalf of Walton or its subcontractors. The second cause of action alleges that Walton expressly agreed to defend and indemnify Berendos from any damage caused by its work. The third cause of action seeks declaratory relief regarding Walton’s responsibility for paying the judgment against Berendos from Phase One. The fourth cause of action alleges that Walton was negligent in fastening Visqueen plastic sheets and negligently left the apartment buildings uncovered during a rainstorm.

Walton’s Third Amended Cross-Complaint

The third cause of action seeks declaratory relief regarding Liberty’s failure to acknowledge that it is liable to Walton for any of the claims or losses. The fourth cause of action alleges that Liberty breached their contract by failing to provide insurance coverage benefits due under the policy. The fifth cause of action seeks declaratory relief regarding Philadelphia’s denial of Walton’s claim for coverage. The sixth cause of action alleges that Philadelphia breached the Builder’s Risk Policy contract by denying coverage and failing to provide insurance coverage benefits. The eleventh cause of action alleges that Liberty tortiously breached the implied covenant of good faith and fair dealing.

Walton’s fourteenth cause of action alleges that Berendos breached their contract by failing to supervise third-party Interstate, resulting in additional unnecessary work for which Berendos now seeks payment from Walton. This cause of action is the subject of Berendos’ pending motion for summary adjudication, to be heard on June 1, 2021.

The tenth cause of action seeks declaratory relief regarding Walton’s obligations to Interstate for the cost of the remediation work, but this cause of action is moot in light of the phase one jury verdict in favor of Interstate and against Berendos for the full cost of the work.

Liberty’s First Amended Complaint

Liberty’s first cause of action seeks declaratory relief regarding its lack of or limited duty to indemnify Berendos and Philadelphia under the Excess Policy. The second cause of action alleges subrogation and indemnification, and the third cause of action alleges equitable indemnification. The fifth cause of action seeks reimbursement from Walton of the expenses and losses that are not covered under the Excess Policy.

Philadelphia’s Cross-Complaint

Philadelphia’s first cause of action seeks declaratory relief regarding indemnification of Liberty and Walton.

B. Discussion

The Court may order a separate trial of any cause of action or any separate issue in furtherance of convenience or when separate trials will be conducive to expedition and economy. (Code Civ. Proc., § 1048, subd. (b).) The Court may also order the trial of an issue to precede the trial on another issue “when the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby.” (Code Civ. Proc., § 598.)

Berendos moves to try the following causes of action first: Berendos’ first cause of action for breach of contract against Walton; Berendos’ second cause of action for express indemnity against Walton; Berendos’ third cause of action for declaratory relief against Walton; Berendos’ fourth cause of action for negligence against Walton, and Walton’s fourteenth cause of action for breach of contract against Berendos. (The motion erroneously refers to the twelfth cause of action for breach of contract. The Court granted Berendos’ motion for summary adjudication of this cause of action on September 11, 2020.) The remaining causes of action would then be tried to the same jury immediately thereafter, or tried in a bench trial if the parties agree.

As stated above, the parties generally agree on this proposal, with some conditions. Determination of the issues between Berendos and Walton will determine which of the two is responsible for paying for the Interstate bill and is a prerequisite to determining which insurers, if any, may be responsible for paying for the damages, as well as the scope of Philadelphia’s and Liberty’s claims against each other. And if Walton is found to be not liable at all, then this further limits the issues to be determined in the second part of trial regarding the insurers. The Court therefore finds that bifurcation, with the same jury trying all causes of action in both phases, would be expeditious and serve judicial economy. (Code Civ. Proc., §§ 598, 1048, subd. (b).)

However, the bifurcation is subject to the parties all agreeing to extend the five-year rule. “An action shall be brought to trial within five years after the action is commenced against the defendant.” (Code Civ. Proc., § 583.310.) For actions that were filed on or before April 6, 2020, the time to bring the action to trial has been extended by six months. (California Rules of Court, emer. rule 10(a), appen. I.) If an action is not brought to trial within the required time period, it is subject to mandatory dismissal. (Code Civ. Proc., § 583.360.) The parties may extend the time by written stipulation or by oral agreement made in open court, if entered in the minutes or a transcript is made. (Code Civ. Proc., § 583.330.)

Liberty filed this action on February 16, 2016. Therefore, it must bring to trial its causes of action against Berendos, Philadelphia, and Walton by August 16, 2021. Jury trial is currently set for July 12, 2021, with a 15-day estimate. Liberty agrees to bifurcation only if the five-year deadline is extended. Philadelphia agrees to extend the five-year rule to October 12, 2021. Berendos also agree to a five-year rule deadline in October 2021. (Berendos Reply at p. 1.) Walton did not state whether it agrees. If all parties agree to extend the five-year deadline to October 12, 2021, the Court will grant the motion.

Walton argues that it must be allowed to refer to its belief that insurance policies would ultimately cover Interstate’s bills. (Walton Response at pp. 4-5.) Liberty and Philadelphia argue that they will be prejudiced if Walton introduced evidence of liability insurance, and evidence of insurance policies is inadmissible to prove negligence or wrongdoing. (Liberty Opposition at pp. 6-7; Philadelphia Amended Reply at pp. 6-7.) Berendos does no oppose the introduction of such evidence, but says this issue should be decided as a motion in limine. (Berendos Reply at p. 1.)

It would seem that stating Walton’s belief that insurance coverage existed to explain its actions at the time of the rainstorm is different from introducing evidence that in fact insurance existed. The parties can meet and confer on how this issue should be handled in the trial on the Berendos/Walton causes of action, including evidence and argument that should be allowed in that part of the trial and any limiting instructions. But this dispute is not a reason not to bifurcate.

C. Conclusion

The motion to bifurcate is GRANTED, with both the first part and the second part to be tried to the same jury, subject to all parties stipulating to extending the five-year rule to October 2021.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: May 7, 2021    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR LEAVE TO FILE FOURTH AMENDED CROSS-COMPLAINT

On February 16, 2016, Liberty Surplus Insurance Corporation (“Liberty”) filed this action against LTD Construction Services, GP dba Walton Construction Services (“Walton”).

On August 17, 2016, Berendos L.P. filed a cross-complaint. On September 20, 2016, Walton filed a cross-complaint against Rockhill Insurance Company, Liberty, Philadelphia Indemnity Insurance Company (“Philadelphia”), Axis Surplus Insurance Company, Berendos L.P., and Interstate Restoration – California LP. On February 8, 2017, Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”) filed a first amended cross-complaint (“FACC”). On January 23, 2019, Walton filed its FACC. On April 2, 2019, Walton filed its second amended cross-complaint (“SACC”).

On November 9, 2020, the Court denied Philadelphia’s and Tokio’s motion for determination of good faith settlement with Berendos. The Court also denied Philadelphia’s motion for summary adjudication of Walton’s claims.

On January 5, 2021, the Court granted Walton’s motion for leave to file a third amended cross-complaint (“TACC”) to replace its negligence cause of action against Berendos with one for breach of contract. Walton filed its TACC on January 15, 2021. On January 27, 2021, Berendos filed their TACC. On March 22, 2021, Berendos dismissed with prejudice its TACC as to Philadelphia and Tokio.

On April 7, 2021, Walton filed this motion for leave to file a fourth amended cross-complaint (“4ACC”).

The Court may, in its discretion and after notice to the adverse party, allow an amendment to any pleading. (Code Civ. Proc., § 473, subd. (a)(1).) A motion to amend a pleading must include a copy of the proposed amendment or amended pleading which must be serially numbered to differentiate it from previous pleadings or amendments and must state what allegations in the previous pleading are proposed to be deleted or added, if any, and where, by page, paragraph, and line number, the allegations are located. (California Rules of Court, rule 3.1324(a).) The motion shall also be accompanied by a declaration attesting to the effect of the amendment, why the amendment is necessary and proper, when the facts giving rise to the amended allegations were discovered, and why the request for amendment was not made earlier. (California Rules of Court, rule 3.1324(b).) “ ‘[E]ven if a good amendment is proposed in proper form, unwarranted delay in presenting it may—of itself—be a valid reason for denial.’ ” (Record v. Reason (1999) 73 Cal.App.4th 472, 486, quoting Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 939-940.)

Walton seeks to add a cause of action against Philadelphia for breach of the implied covenant of good faith and fair dealing. The proposed cause of action alleges that on or about August 6, 2020, Philadelphia and Berendos entered into a contingent settlement agreement, which “would have given Berendos a $1,400,000 war chest to proceed against LTD/Walton for the balance of the Philadelphia policy limit ($2,700,000), and more besides.” (McGovern Decl., Ex. A ¶ 120.) Philadelphia and Berendos also “specifically covenant and agree to cooperate in all reasonable ways in [Berendos’] pursuit of recovery against Walton . . .” (Ibid.) In October 2020, Walton warned Philadelphia that the actions it had already taken and was intending to take pursuant to the contingent settlement agreement constituted breaches of the implied covenant of good faith and fair dealing. (Id. at ¶ 121.) On or about March 21, 2021, Philadelphia and Berendos entered into an unconditional settlement agreement under which Philadelphia agreed to pay Berendos $800,000 under the Builder’s Risk Policy and Berendos dismissed Philadelphia with prejudice from their TACC. (Id. at ¶ 122.) The unconditional settlement agreement also contained an agreement to cooperate for the remaining issues in this case. (Id. at ¶ 125.) Walton alleges that through the terms of this settlement, Philadelphia breached the duty of good faith and fair dealing that it owes to Walton. (Id. at ¶ 127.)

Walton includes a red-lined version of the proposed 4ACC showing the proposed changes. Walton’s counsel explains that the facts giving rise to the proposed amendment were discovered on March 25, 2021, when Philadelphia served its ex parte application seeking leave to file summary judgment motions and paid Berendos on or about the same day. (McGovern Decl. ¶¶ 11, 13.)

The new allegations are based on the March 21, 2021 settlement between Philadelphia and Berendos, a distinct event that long post-dates the main issues in this case. Walton has not shown why it cannot bring this claim in a separate action. The Court has decided more than a dozen motions for summary judgment or summary adjudication regarding liability and insurance coverage in this phase of the case alone. To add the proposed cause of action now would introduce a new issue in this case on the eve of the July 12, 2021 trial in a case that is more than five years old. The trial date would need to be continued to allow an answer to the amended pleading, discovery and motion practice. It is time to bring this case to an end before the time limits of Code of Civil Procedure section 583.310 run.

Accordingly, the motion for leave to file a fourth amended cross-complaint is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: February 09, 2021    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR LEAVE TO FILE MOTIONS FOR SUMMARY JUDGMENT OR ADJUDICATION

On February 16, 2016, Liberty Surplus Insurance Corporation (“Liberty”) filed this action against LTD Construction Services, GP dba Walton Construction Services (“Walton”).

On September 20, 2016, Walton filed a cross-complaint against Rockhill Insurance Company (“Rockhill”), Liberty, Philadelphia Indemnity Insurance Company (“Philadelphia”), Axis Surplus Insurance Company (“Axis”), Berendos L.P., and Interstate Restoration – California LP (“Interstate”). In the cross-complaint, Walton sought a judicial determination of the rights and obligations regarding Walton’s indemnity obligations and whether Berendos breached its contract obligations, including its obligation to supervise subcontractor Interstate.

On February 16, 2017, Liberty filed a first amended complaint (“FAC”) against Berendos L.P., 235 Berendo, L.P., A Community of Friends (collectively, “Berendos”), Rockhill, Axis, Philadelphia, and Tokio Marine Specialty Insurance Company. The FAC added causes of action for declaratory judgment, subrogation – duty to indemnify, equitable indemnification, equitable contribution, and reimbursement.

On January 23, 2019, Walton filed its first amended cross-complaint (“FACC”), which added, among other things, causes of action for breach of contract (arising from Berendos L.P.’s failure to timely furnish information) and negligence (arising from Berendos L.P.’s application for insurance and failure to supervise subcontractor Interstate). On April 2, 2019, Walton filed its second amended cross-complaint (“SACC”), alleging the same causes of action against Berendos L.P. as in the FACC. On January 6, 2020, Berendos L.P. filed a motion for summary adjudication of Walton’s breach of contract, negligence, and declaratory relief causes of action (among many motions for summary judgment or adjudication filed by the parties).

On March 2, 2020, the Court granted Berendos’ ex parte application to vacate the trial date. Also, on that day, the Court ordered, “Pursuant to an oral stipulation of the parties, the discovery cutoff date shall follow the new trial date (with the exception of MSJ’s and MSA’s). Discovery cut-off date shall be governed by the new trial date. An Extension as to the cut-off date for Motions for Summary Judgment and Motions for Summary Adjudication requires leave of Court.” On July 31, 2020, the Court set a July 12, 2021 trial date.

On September 11, 2020, the Court granted Berendos L.P.’s motion for summary adjudication of Walton’s SACC, including the thirteenth cause of action for negligence. On January 5, 2021, the Court granted Walton’s motion for leave to file a third amended cross-complaint (“TACC”) to replace the negligence cause of action with one for breach of contract. The Court directed Berendos L.P., if it intended to move for summary adjudication of the new cause of action, to expeditiously reserve a hearing date and make a motion to reopen the time for making a summary adjudication motion.

On January 6, 2021, the Court denied in part Berendos’ motion for judgment on the pleadings as to Liberty’s FAC. The Court noted that, due to Walton being granted leave to file a TACC with a breach of contract cause of action, there remains a potential basis for Berendos’ liability to Walton, and in turn, a basis for subrogation and indemnification. The Court granted the motion only as to the fourth and fifth causes of action for contribution and reimbursement.

On January 15, 2021, Berendos filed this motion. Berendos seeks leave to file motions for summary judgment or adjudication of Walton’s TACC and Liberty’s FAC, based on Walton’s new claim for breach of contract. Berendos has already reserved June 1, 2021 and June 10, 2021 hearing dates for the motions. No parties filed any oppositions.

Accordingly, the motion for leave to file motions for summary judgment or adjudication is GRANTED. Leave is limited to arguments concerning the new breach of contract cause of action in the TACC. Both motions will be heard on June 1, 2021 at 8:30 a.m.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: January 15, 2021    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR LEAVE TO FILE THIRD AMENDED CROSS-COMPLAINT

On February 16, 2016, Liberty Surplus Insurance Corporation (“Liberty”) filed this action against LTD Construction Services, GP dba Walton Construction Services (“Walton”).

On August 17, 2016, Berendos L.P. filed a cross-complaint against Liberty, Walton, Rockhill Insurance Company, Interstate Restoration – California LP, Philadelphia Indemnity Insurance Company, and Axis Surplus Insurance Company. In the cross-complaint, Berendos L.P. sought a declaration that Walton had a duty to indemnify Berendos L.P. for expenses it incurred in remediation, and a declaration that the damage to each apartment building constitutes a separate occurrence. On February 8, 2017, Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”) filed a first amended cross-complaint (“FACC”) seeking the same declaratory relief against Walton.

Walton filed a cross-complaint on September 20, 2016, a FACC on January 23, 2019, and a second amended cross-complaint (“SACC”) on January 23, 2019.

On August 22, 2019, Berendos filed a SACC. The SACC added a cause of action for breach of contract, alleging Walton “contractually obligated itself to pay for the remediation necessary to cure the damage done by its negligently leaving the Apartments unprotected from the September 15, 2015, rain storm,” and Walton “provided defective services, which caused damage to be done to the Apartments. In addition, Walton has failed to pay for the remediation efforts undertaken as a result of Walton’s negligence.” The SACC also added causes of action for express indemnity and negligence, and it amended the cause of action for declaratory relief.

On December 6, 2019, the Court sustained Walton’s demurrer to the SACC’s breach of contract cause of action without leave to amend. The Court found that a reasonable interpretation of the contract is that Walton’s indemnity obligations under section 3.18 et seq. arise only upon either an admission or court finding of negligence.

On March 2, 2020, the Court granted Berendos’ ex parte application to vacate the trial date. Also, on that day, the Court ordered, “Pursuant to an oral stipulation of the parties, the discovery cutoff date shall follow the new trial date (with the exception of MSJ’s and MSA’s). Discovery cut-off date shall be governed by the new trial date. An Extension as to the cut-off date for Motions for Summary Judgment and Motions for Summary Adjudication requires leave of Court.” On July 31, 2020, the Court set a July 12, 2021 trial date.

On December 10, 2020, Walton filed a motion for leave to amend its SACC to add a cause of action for breach of contract based on Berendos’ failure to supervise and control Interstate and breach of Berendos’ express indemnity obligations. On December 17, 2020, Berendos filed this motion for leave to amend its SACC. On January 5, 2021, the Court granted Walton’s motion.

Walton’s request for judicial notice is granted.

The Court may, in its discretion and after notice to the adverse party, allow an amendment to any pleading. (Code Civ. Proc., § 473, subd. (a)(1).) A motion to amend a pleading must include a copy of the proposed amendment or amended pleading which must be serially numbered to differentiate it from previous pleadings or amendments and must state what allegations in the previous pleading are proposed to be deleted or added, if any, and where, by page, paragraph, and line number, the allegations are located. (California Rules of Court, rule 3.1324(a).) The motion shall also be accompanied by a declaration attesting to the effect of the amendment, why the amendment is necessary and proper, when the facts giving rise to the amended allegations were discovered, and why the request for amendment was not made earlier. (California Rules of Court, rule 3.1324(b).) “ ‘[E]ven if a good amendment is proposed in proper form, unwarranted delay in presenting it may—of itself—be a valid reason for denial.’ ” (Record v. Reason (1999) 73 Cal.App.4th 472, 486, quoting Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 939-940.)

Berendos seeks to add causes of action for breach of contract and promissory estoppel.

The proposed breach of contract cause of action adds the allegation that Walton agreed in section 3.3.2 of the contract to bear full responsibility for “any damages, losses, costs, expenses, including, but not limited to, reasonable attorneys’ fees resulting from” the acts and omissions of its “employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for, or on behalf of, [Walton] or any of its Subcontractors.” The cause of action also adds the allegation that Walton promised in September 2015 correspondence to pay for the remediation costs.

The proposed promissory estoppel cause of action alleges that in September 2015 correspondence, Walton promised to pay the entire cost of the remediation.

Berendos includes a red-lined version of the proposed cross-complaint showing the proposed changes. Berendos’ counsel explains that the proposed amendment does not introduce new issues, does not impose additional defensive or discovery burdens, removes claims and references that have already been settled or adjudicated, and clarifies headings. (Brown Decl. ¶ 6.) Counsel explains that the amendment is necessary now for Berendos to adequately defend themselves after Walton’s amendment by alleging that Walton breached the contract first. (Id. at ¶¶ 8-9.) The proposed amendment adds causes of action that “are effectively cross-claims to Walton’s new proposed claim.” (Id. at ¶ 11.)

Walton argues that it will be prejudiced by the amendment because the Court previously sustained a demurrer to Berendos’ breach of contract cause of action without leave to amend, and the proposed amendment is retaliation for Walton’s amended pleadings. (Opposition at pp. 3, 4.)

Regarding the proposed allegations of a breach of section 3.3.2, that section of the contract contains language different than section 3.18. It is not obvious that reasoning in the ruling sustaining the demurrer to a cause of action alleging a breach of section 3.18 would also bar a cause of action alleging a breach of section 3.3.2. Therefore, the prior ruling is not a reason to deny the motion for leave to amend. And, Walton has not shown prejudice from adding the claims about section 3.18. The issues about the leaky roof, responsibility for the leak, remediation efforts, and resulting damages have been disputed from the beginning of this case. The parties have had many months to take discovery on those issues. And Berendos explains the breach of contact cause of action is an element of its argument in response to Walton’s breach of contract cause of action in the TACC that Walton breached first.

Regarding the proposed allegations of a breach of a promise in the September 2015 correspondence, the parties do not explain the effect of the prior ruling sustaining the demurrer to the breach of contract cause of action in the SACC. If the prior ruling sustained a demurrer to the entire cause of action without leave to amend, Berendos has not shown why it should be allowed to add back the allegations about the September 2015 correspondence. If the prior demurrer ruling did not affect the allegations in the SACC about the September 2015 correspondence, Berendos has not shown why those allegations need to be amended.

Regarding the proposed promissory estoppel cause of action, Berendos does not explain why it could not have brought that cause of action long ago. Also, as just mentioned, if the prior ruling sustained the demurrer to the breach of contract cause of action based on the September 2015 correspondence without leave to amend, the proposed promissory estoppel cause of action is improper as it restates that cause of action, framed as promissory estoppel. If the prior ruling did not affect the breach of contract cause of action based on the September 2015 correspondence, then Berendos has not shown why the proposed promissory estoppel cause of action is not duplicative and unnecessary.

The motion for leave to file a third amended cross-complaint is GRANTED in part. Leave is granted to file the proposed allegations about a breach of section 3.3.2 and any non-substantive changes, but not the proposed allegations about the September 2015 correspondence and the promissory estoppel cause of action. Berendos are to file and serve the TACC within five days of the date of this order. If Walton intends to file a motion for summary adjudication on the breach of contract cause of action, it has time before the trial date. But it must act immediately and expeditiously to reserve a hearing date and make a motion to reopen the time for making a summary adjudication motion (if the parties fail to stipulate to allow the motion).

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: January 06, 2021    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR JUDGMENT ON THE PLEADINGS

On December 21, 2016, Liberty Surplus Insurance Corporation (“Liberty”) filed its first amended complaint (“FAC”) against Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”), Rockhill Insurance Company, Axis Surplus Insurance Company, Philadelphia Indemnity Insurance Company (“Philadelphia”), and Tokio Marine Specialty Insurance Company (“Tokio”).

On April 2, 2019, LTD Construction Services, GP d/b/a Walton Construction Services (“Walton”) filed its second amended cross-complaint (“SACC”) against Berendos L.P. On September 11, 2020, the Court granted Berendos’ motion for summary adjudication of Walton’s causes of action for breach of contract, negligence, and declaratory relief.

On December 9, 2020, Berendos filed this motion for judgment on the pleadings with respect to Liberty’s FAC on the grounds that Berendos cannot be liable to Liberty (Walton’s insurer) when Berendos is not liable to Walton.

A motion for judgment on the pleadings is the functional equivalent to a general demurrer. (Lance Camper Mfg. Corp. v. Republic Indemnity Co. of Am. (1996) 44 Cal.App.4th 194, 198.) Like demurrers, motions for judgment on the pleadings challenge the legal sufficiency of the allegations, not their veracity. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) The Court “must accept as true all material facts properly pleaded, but does not consider conclusions of law or fact, opinions, speculation, or allegations contrary to law or facts that are judicially noticed.” (Stevenson Real Estate Services, Inc. v. CB Richard Ellis Real Estate Services, Inc. (2006) 138 Cal.App.4th 1215, 1219-1220.)

First, Second, and Third Causes of Action – Declaratory Judgment, Subrogation, and Equitable Indemnity

Liberty’s FAC seeks subrogation and indemnification of “Walton and/or any other insured to the Excess Policy against the Claim that [Liberty] has incurred, or will incur.” (Liberty FACC ¶¶ 65-66.) Berendos contends that Liberty’s first and second causes of action fail as a matter of law because the Court dismissed Walton’s claims against Berendos, which arose out of the same set of facts. (Motion at pp. 7-8.) Berendos also contends that because Liberty’s claims are derivative of Walton’s adjudicated claims, Liberty’s third cause of action lacks merit. (Id. at p. 8.)

On January 5, 2021, the Court granted Walton leave to file a TACC to add a breach of contract claim against Berendos. Accordingly, there remains a potential basis for Berendos’ liability to Walton, and in turn, a basis for subrogation and indemnification.

Berendos also argues for the first time in its reply that Liberty’s FAC fails to satisfy all of the elements of equitable subrogation. (Reply at p. 6.) This argument was not raised in the original motion, and the Court should not consider arguments raised for the first time in a reply. (See, e.g., Techno Lite, Inc. v. Emcod, LLC (2020) 44 Cal.App.5th 462, 474 fn. 5.)

Accordingly, judgment on the pleadings as to the first through third causes of action is denied.

Fourth and Fifth Causes of Action – Equitable Contribution and Reimbursement

Liberty agrees to dismiss the fourth and fifth causes of action for contribution and reimbursement as to Berendos. (Opposition at pp. 11-12.)

Conclusion

The motion for judgment on the pleadings is GRANTED as to the fourth and fifth causes of action and is otherwise DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: January 05, 2021    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR LEAVE TO FILE THIRD AMENDED CROSS-COMPLAINT

On February 16, 2016, Liberty Surplus Insurance Corporation (“Liberty”) filed this action against LTD Construction Services, GP dba Walton Construction Services (“Walton”). On September 20, 2016, Walton filed a cross-complaint against Rockhill Insurance Company, Liberty, Philadelphia Indemnity Insurance Company (“Philadelphia”), Axis Surplus Insurance Company, Berendos L.P. (“Berendos”), and Interstate Restoration – California LP (“Interstate”). In the cross-complaint, Walton sought a judicial determination of the rights and obligations regarding Walton’s indemnity obligations and whether Berendos breached its contract obligations, including its obligation to supervise subcontractor Interstate.

On January 23, 2019, Walton filed its first amended cross-complaint (“FACC”), which added, among other things, causes of action for breach of contract (arising from Berendos’ failure to timely furnish information) and negligence (arising from Berendos’ application for insurance and failure to supervise subcontractor Interstate). On April 2, 2019, Walton filed its second amended cross-complaint (“SACC”), alleging the same causes of action against Berendos as in the FACC.

On January 6, 2020, Berendos filed a motion for summary adjudication of Walton’s breach of contract, negligence, and declaratory relief causes of action (among many motions for summary judgment or adjudication filed by the parties). Berendos argued, in part, that the SACC improperly transformed a breach of contract claim into a negligence claim.

On March 2, 2020, the Court granted Berendos’ ex parte application to vacate the trial date. Also, on that day, the Court ordered, “Pursuant to an oral stipulation of the parties, the discovery cutoff date shall follow the new trial date (with the exception of MSJ’s and MSA’s). Discovery cut-off date shall be governed by the new trial date. An Extension as to the cut-off date for Motions for Summary Judgment and Motions for Summary Adjudication requires leave of Court.” On July 31, 2020, the Court set a July 12, 2021 trial date.

On September 11, 2020, the Court granted Berendos’ motion for summary adjudication, noting “[t]ort damages are not available for negligent breach of a construction contract, which is what the negligence claim amounts to here” and observing “Walton cites no legal authority allowing a negligence cause of action for failure to supervise subcontractors as required by a construction contract.”

On November 9, 2020, the Court denied Philadelphia’s motion for summary adjudication of Walton’s SACC, as it was based on Philadelphia’s conditional settlement with Berendos, and the conditions for effectuating the settlement did not occur.

On December 10, 2020, sixteen court days before the hearing on this motion for leave to file a third amended cross-complaint (“TACC”), Walton filed this motion. However, Walton served it on Berendos via electronic service, making service untimely by two days. (Code Civ. Proc., §§ 1005, subd. (b) [motion shall be filed and served at least 16 court days before the hearing], 1010.6, subd. (a)(4)(B) [notice period is extended by two court days when service is made by electronic means].) The Court nevertheless considers the motion, as no prejudice is shown and Berendos opposed the motion on the merits. If Berendos would like two additional days, the Court will continue this hearing for two days.

Walton’s requests for judicial notice are granted.

The Court may, in its discretion and after notice to the adverse party, allow an amendment to any pleading. (Code Civ. Proc., § 473, subd. (a)(1).) A motion to amend a pleading must include a copy of the proposed amendment or amended pleading which must be serially numbered to differentiate it from previous pleadings or amendments and must state what allegations in the previous pleading are proposed to be deleted or added, if any, and where, by page, paragraph, and line number, the allegations are located. (California Rules of Court, rule 3.1324(a).) The motion shall also be accompanied by a declaration attesting to the effect of the amendment, why the amendment is necessary and proper, when the facts giving rise to the amended allegations were discovered, and why the request for amendment was not made earlier. (California Rules of Court, rule 3.1324(b).) “ ‘[E]ven if a good amendment is proposed in proper form, unwarranted delay in presenting it may—of itself—be a valid reason for denial.’ ” (Record v. Reason (1999) 73 Cal.App.4th 472, 486, quoting Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 939-940.)

Walton seeks to add a cause of action for breach of contract based on Berendos’ failure to supervise and control Interstate and breach of Berendos’ express indemnity obligations. Walton includes a copy of the proposed cross-complaint, including a red-lined version showing the proposed changes. Walton’s counsel’s declaration does not comply with Rule 3.1324(b); however, the motion provides the required information. Walton explains that the proposed breach of contract cause of action is based on long-existing allegations in this action, and it would be prejudiced if it could not assert breach of contract. (Motion at pp. 4, 8.) Walton contends that before the Court’s summary adjudication ruling, “it was not clear whether Walton needed to assert these allegations as a breach of contract cause of action instead of negligence, nor was it clear precisely what allegations should be asserted in this cause of action.” (Id. at p. 4.) Walton also contends that it had to wait to file this motion until after the Court ruled on Philadelphia’s motion for summary adjudication, as Philadelphia’s conditional settlement with Berendos “if effectuated, would have resulted in an additional basis for breach of contract by Walton against Berendos.” (Id. at p. 5.)

Berendos argues that it will be prejudiced by the amendment because Walton delayed in seeking leave to amend. (Opposition at pp. 4-5.) Walton knew of the facts underlying its proposed breach of contract claim at the time it filed its original cross-complaint, as it alleged that “Berendos is in breach of its obligation [under Article 6.1 of the contract] to supervise its remediation contractor, Interstate.” (Cross-Complaint ¶ 89(d).) These allegations remained in the amended cross-complaints’ causes of action for declaratory relief. (FACC ¶ 97(d); SACC ¶ 97(d).) Walton also knew that Berendos challenged its negligence claim as an improperly pleaded breach of contract claim when Berendos filed its motion for summary adjudication on January 6, 2020. Instead, Walton waited until after the Court granted summary adjudication of its negligence cause of action to attempt to resurrect the allegations, restyled as a breach of contract.

Walton could have asserted the breach of contract cause of action earlier, as an alternate legal theory to its negligence cause of action. However, Berendos is not unduly prejudiced by the addition of the cause of action now. The proposed breach of contract cause of action is a new legal theory based on previously-alleged facts. Whether Berendos properly supervised Interstate has been at issue for some time, and the parties have had time to take discovery on that issue. If the re-framing of the issue as a breach of contract, rather than as negligence, truly requires additional discovery, the parties have time for that discovery before trial.

Berendos argues that it will be prejudiced by the addition of a breach of contract cause of action because it will need to raise the defense that Walton materially breached the contract first. (Opposition at p. 5.) Berendos may raise affirmative defenses in its answer to the TACC. Additionally, in response to this motion, Berendos filed its own motion to amend its cross-complaint to add defensive breach of contract claims. (Id. at pp. 5-6.)

Berendos argues that amendment should be denied because it would be futile due to res judicata. Res judicata applies when (1) a claim or issue in the current action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom res judicata is asserted was a party to the prior proceeding. (Zevnik v. Superior Court (2008) 159 Cal.App.4th 76, 82-83.)

According to Berendos, Walton was a party to the Phase I trial and verdict but chose not to participate. Walton argues it was not allowed “to make oral argument, present witnesses, present evidence, [or] make closing arguments.” (Reply at p. 5.) In bifurcating the trial, the Court ruled, “The order allowing bifurcation is without prejudice to the parties ability to participate” (Sept. 11, 2018 Notice of Ruling, Ex. A at p. 2.), and “all parties are allowed to participate in the first phase of trial.” (Sept. 6, 2018 Minute Order at p. 2.) Therefore, it is not certain that Walton has not allowed to participate in the Phase I trial.

Berendos also argues the Phase I trial resulted in a final judgment on the merits of whether Interstate performed unnecessary work because the jury considered evidence about the reasonableness of Interstate’s work under the agreement between ACOF and Interstate. That contract required Interstate’s fees to be reasonable for the work involved according to certain criteria. (Opposition at pp. 2, 6.) Pointing to the verdict form, Walton argues the jury did not determine whether Berendos properly supervised Interstate and did not consider Berendos’ contractual obligations with Walton.

The issue of the reasonableness of Interstate’s fees for its work under its contract with ACOF is not identical to the issue of whether Berendos properly supervised Interstate. For example, there could be a scenario under which Berendos directed Interstate to do certain work, which Interstate did, but Berendos’ directions were faulty or otherwise resulted in Interstate performing extra work that would not have been necessary if Berendos had given different directions or provided better supervision. In that scenario, a jury could conclude Interstate’s fees were reasonable under the ACOF/Interstate contract given Berendos’ directions. But a jury could also conclude that Berendos’ actions, directions, or supervision increased the cost of Interstate’s work. Therefore, the Court cannot conclude res judicata renders Walton’s proposed amendment futile as a matter of law.

The motion for leave to file a third amended cross-complaint is GRANTED. Walton is to file and serve the TACC within five days of the date of this order. If Berendos intends to file a motion for summary adjudication on the breach of contract cause of action, it has time before the trial date. But it must act immediately and expeditiously to reserve a hearing date and make a motion to reopen the time for making a summary adjudication motion (if the parties fail to stipulate to allow the motion).

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: December 11, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR JUDGMENT ON THE PLEADINGS

On April 2, 2019, LTD Construction Services, GP d/b/a Walton Construction Services (“Walton”) filed its second amended cross-complaint (“SACC”) against Berendos L.P. On August 22, 2019, Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”) filed a second amended cross-complaint against Walton, Liberty Surplus Insurance Corporation; Interstate Restoration – California LP (“Interstate”); Philadelphia Indemnity Insurance Company; and Tokio Marine Specialty Insurance Company.

On September 11, 2020, the Court granted Berendos’ motion for summary adjudication of Walton’s causes of action for breach of contract, negligence, and declaratory relief. On November 13, 2020, Walton filed this motion for judgment on the pleadings with respect to Berendos’ fourth cause of action for negligence. Walton’s request for judicial notice is granted.

A motion for judgment on the pleadings is the functional equivalent to a general demurrer. (Lance Camper Mfg. Corp. v. Republic Indemnity Co. of Am. (1996) 44 Cal.App.4th 194, 198.) Like demurrers, motions for judgment on the pleadings challenge the legal sufficiency of the allegations, not their veracity. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) The Court “must accept as true all material facts properly pleaded, but does not consider conclusions of law or fact, opinions, speculation, or allegations contrary to law or facts that are judicially noticed.” (Stevenson Real Estate Services, Inc. v. CB Richard Ellis Real Estate Services, Inc. (2006) 138 Cal.App.4th 1215, 1219-1220.)

Walton contends Berendos’ negligence cause of action is barred by the doctrine of judicial estoppel based on Berendos’ prior arguments in connection with its motion for summary adjudication of Walton’s negligence cause of action and this Court’s prior ruling. (Motion at p. 7.) Judicial estoppel applies when “(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183.) Judicial estoppel can be applied only against a party that has taken positions so inconsistent that one necessarily excludes the other. (Bell v. Wells Fargo Bank, N.A. (1998) 62 Cal.App.4th 1382, 1387.) “The inconsistent position generally must be factual in nature.” (ABF Capital Corp. v. Berglass (2005) 130 Cal.App.4th 825, 832.)

Walton’s fourth cause of action alleged that Berendos negligently failed to obtain an appropriate builder’s risk policy, as required by their contract. (Walton SACC ¶¶ 118-123.) Walton also alleged that Berendos was negligent in retaining and supervising Interstate, causing Interstate’s invoices to be too high. (Id. at ¶¶ 124-128.) In its motion for summary adjudication, Berendos argued these allegations were nothing more than a claim for breach of contract. (Walton RJN, Ex. 1 at p. 10.) Berendos asserted, “It is axiomatic that a party may not convert a claim sounding in contract into one of tort.” (Ibid.) Quoting Erlich v. Menezes (1999) 21 Cal.4th 543, 551, Berendos argued breach of contract is tortious “only when it also violates a duty independent of the contract arising from principles of tort law.” The Court ruled this cause of action restated Berendos’ contractual obligation to purchase and maintain a builder’s risk insurance policy, and acting negligently in trying to comply with that contract provision did not give rise to a completely independent tort. The Court also ruled that the parties’ contract required Berendos to supervise the work of Interstate using Berendos’ best skill and attention, and the allegation that Berendos was negligent in supervising Interstate amounted to a breach of contract.

Berendos’ SACC alleges that Walton negligently performed general contracting services by leaving the property uncovered in a rainstorm, resulting in remediation charges and other costs. (Berendos SACC ¶¶ 92-95.) In its breach of contract claim, Berendos alleges Walton provided defective services that caused damage to the property, and despite being contractually obligated to pay for remediation, it failed to pay for the remediation required as a result of it negligently leaving the property unprotected during the rainstorm. (Id. at ¶¶ 79, 81.)

Walton argues Berendos’ positions are inconsistent because Berendos argued in its motion for summary adjudication that the Walton’s negligence cause of action was nothing but a breach of contract claim, but now Berendos is arguing that its own negligence cause of action is not merely a breach of contract claim. (Motion at p. 8.) Berendos argues that its positions are not inconsistent because Walton’s negligence claim arose out of a duty to supervise required by the parties’ contract, and Berendos’ negligence claim arises from the damage to the properties caused by Walton’s inadequate covering of the buildings ahead of the rainstorm, which was not governed by any provision in the parties’ contract. (Opposition at pp. 3-4.)

As an initial matter Walton asserts several times that this Court made “law of the case” in granting summary adjudication on Walton’s fourth cause of action. That is not so. A trial court does not make law of the case. (Morohoshi v. Pacific Home (2004) 34 Cal.4th 482, 491 [“the doctrine of ‘law of the case’ deals with the effect of the first appellate decision on the subsequent retrial or appeal . . . .”].) In granting the motion for summary adjudication, the Court applied California law to the facts of this case.

Next, the disputed Berendos positions are legal positions, not factual positions. Regarding Walton’s negligence cause of action, Berendos took the legal position that the cause of action improperly attempted to convert a breach of contract into a tort. Regarding its own negligence cause of action, Berendos takes the legal position that it is not converting a breach of contract into a tort. Walton does not cite legal authority that conflicting legal positions can be subject to judicial estoppel.

Also, Walton has not shown that Berendos has taken totally inconsistent positions. Berendos’ position with respect to Walton’s negligence cause of action was that specific contract provisions addressed obtaining builder’s risk insurance and supervision of Interstate, and therefore the cause of action was a breach of contract claim. Berendos’ position with respect to its own negligence cause of action is that there is no specific contract provision addressing Walton’s alleged failure to protect the building from the rainstorm and therefore the negligence cause of action stands. There are not totally inconsistent positions. In fact, they have little to do with each other, and they could all be true.

In its reply, Walton steps back from its judicial estoppel argument and asserts that judgment should be granted on Berendos’ negligence cause of action because “a negligence claim cannot be brought, as a matter of law, based on allegations of breach of the construction contract.” (Reply at p. 6.) In its reply, Walton cites many contract provisions, which it argues require Walton to protect the building, and argues that Berendos’ negligence claim alleges nothing more than the breach of these contract provisions. (Reply at pp.2-3.)

Walton should have made this argument in its moving papers. In any event, when it comes to holding builders liable for construction defects causing property damage, the answer is not so simple (which may be why Walton did not demurrer or move for summary judgment much earlier on this ground). In Aas v. Superior Court (2000) 24 Cal.4th 627 the California Supreme Court discussed at length when a property owner may recover damages in negligence from a contractor for construction defects. “Speaking very generally, tort law provides a remedy for construction defects that cause property damage or personal injury. Focusing on the conduct of person involved in the construction process, courts in this state have found such a remedy in the law of negligence. . . . For defective products and negligent services that have caused neither property damage nor personal injury, however, tort remedies have been uncertain.” (Id. at pp. 635-636.) Berendos’ negligence cause of action alleges that Walton’s negligence caused property damage – because Walton failed to secure the roof, water entered and damaged the buildings. (SACC, ¶ 19.) (This is another reason Berendos’ two positions are not totally inconsistent. Walton’s negligent cause of action did not allege that the failure to obtain an adequate builder’s risk policy or the failure to properly supervise Interstate caused property damage or personal injury.) Therefore, the Court cannot conclude as a matter of law based on the pleadings that Berendos has no remedy in tort.

The motion for judgment on the pleadings is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: November 09, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR SUMMARY ADJUDICATION

On April 2, 2019, Cross-Complainant LTD Construction Services, GP d/b/a Walton Construction Services (“Walton”) filed its second amended cross-complaint (“SACC”) against Cross-Defendants Rockhill Insurance Company, Liberty Surplus Insurance Corporation, Philadelphia Indemnity Insurance Company (“Philadelphia”), Axis Surplus Insurance Company, Berendos L.P. (“Berendos”), and Interstate Restoration - California LP (“Interstate”).

On August 17, 2020, Philadelphia filed this motion for summary adjudication. On September 8, 2020, Philadelphia filed an ex parte application to allow this motion, despite having filed it without leave of court as required by the Court’s March 2, 2020 minute order. The Court granted the application in part, stating that it “will consider the arguments about why the additional motion for summary for summary adjudication scheduled for hearing on Nov. 9, 2020 should be permitted, despite the prior court order requiring leave to file another motion for summary adjudication, when the Court hears the motion on Nov. 9, 2020.”

REQUEST FOR JUDICIAL NOTICE

Philadelphia’s and Walton’s requests for judicial notice are granted.

FACTUAL BACKGROUND

On July 23, 2014, Berendos contracted with Walton for renovation work at two apartment buildings at 226 and 235 South Berendo Street, Los Angeles, California. (Undisputed Material Fact “UMF” 1.) Philadelphia issued a builder’s risk policy for October 15, 2014 to October 15, 2015, under which Walton was an additional insured. (UMF 4-5.) The builder’s risk policy contains an Elite Property Enhancement, which provides: “We shall have the right, but not the obligation to adjust any loss solely with the named insured regardless of the claimant which such adjustment shall be binding upon the named insured and any additional insured.” (UMF 7.)

The roofs on Berendos’ buildings were removed as of September 1, 2015, and a rainstorm on September 15, 2015 resulted in water entering the buildings. (UMF 8-10.) Berendos hired Interstate to remediate the damage to the buildings, and Interstate billed Berendos for the work. (UMF 13-14.) In Phase One of this case, the jury found that Berendos breached its contract with Interstate. (Additional Material Fact “AMF” 3.)

On August 5, 2020, Berendos, Philadelphia, and Tokio entered into a settlement agreement, in which Philadelphia agreed to pay Berendos $1.4 million under the builder’s risk policy in exchange for a full and final release of claims against it and Tokio. (UMF 15-16.) The settlement is contingent upon the Court finding that the settlement is made in good faith and upon Philadelphia prevailing on this motion. (UMF 17.)

DISCUSSION

Philadelphia moves for summary adjudication of Walton’s fifth cause of action for declaratory relief and sixth cause of action for breach of contract on the ground that it has no contractual obligation to Walton. Philadelphia bases this argument on the “Additional Named Insured” provision stating that it has the right “to adjust any loss solely with the named insured regardless of the claimant which such adjustment shall be binding upon the named insured an any additional insured.” (Motion at p. 11.) Philadelphia also refers to the construction contract between Walton and Berendos specifying that any payments under property policies be made to Berendos. (Motion at p. 13.) According to Philadelphia, because it has the right to adjust the loss and because payments go to Berendos, Walton has no contractual rights. (Motion at pp. 13-14.)

This is at least the second motion for summary adjudication brought by Philadelphia against Walton on Walton’s fifth and sixth causes of action. On January 27, 2020, Philadelphia filed its previous motion on those causes of action, which the court denied. Philadelphia did not comply with Code of Civil Procedure section 437c, subdivision (f)(2) before bringing this motion. That section prohibits a second motion for summary adjudication unless the party establishes newly discovered facts or circumstances or a change of law. Philadelphia’s arguments in this second motion rely on the policy and contract language. Philadelphia could have made these arguments in its early motion.

The Court made the March 2, 2020 order for a reason. The parties have turned a blind eye to section 437c, subdivision (f)(2) and the rules about page limits by filing piecemeal motions for summary adjudication, greatly increasing the number of motions, pages filed, and amount of court resources devoted to this case.

Because Philadelphia failed to comply with section 437c, subdivision (f)(2), the motion for summary adjudication is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

[TENTATIVE] ORDER RE: MOTION FOR CONFIRMATION OF GOOD FAITH SETTLEMENT

On August 22, 2019, Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”) filed a second amended cross-complaint (“SACC”) against Cross-Defendants Liberty Surplus Insurance Corporation (“Liberty”); LTD Construction Services, GP dba Walton Construction Services (“Walton”); Interstate Restoration - California LP (“Interstate”); Philadelphia Indemnity Insurance Company (“Philadelphia”); and Tokio Marine Specialty Insurance Company (“Tokio”).

Philadelphia and Tokio have now settled with Berendos and filed this application for determination of good faith settlement pursuant to Code of Civil Procedure section 877.6. Under the settlement, Philadelphia will pay $1.4 million to Berendos under Philadelphia’s builder’s risk policy, contingent upon (1) the Court finding that the settlement was made in good faith and that such a finding extinguishes all claims against Philadelphia and Tokio, including all claims by Liberty; and (2) granting Philadelphia’s motion for summary adjudication, filed on August 17, 2020. Walton and Liberty oppose the motion.

Philadelphia’s and Walton’s requests for judicial notice are granted.

DISCUSSION

The Court must approve any settlement entered into by less than all joint tortfeasors or co-obligors on a contract debt. (Code Civ. Proc., § 877.6.) Philadelphia stretches the meaning of “co-obligors on a contract debt” beyond recognition and ignores the applicable law.

Philadelphia argues that section 877.6 applies because Liberty and Philadelphia are each obligated to Walton and Berendos. The reasoning goes that because Berendos’ builder’s risk policy with Philadelphia names Walton as an additional insured and because Liberty’s CGL policy issued to Walton names Berendos as an additional named insured, Liberty and Philadelphia share the same obligations to Walton and Berendos. (Motion at p. 19.) Philadelphia does not cite any law holding that when two separate insurers issue different policies to the same insureds, those two insurers become “co-obligors on a contract debt.”

Philadelphia also argues that because Walton and Philadelphia/Tokio each have contractual obligations to indemnify Berendos, they are also co-obligors. (Motion at p. 19.) While they each may have contractual obligations to Berendos, those obligations exist under separate and distinct contracts (a construction contract and an insurance policy). In its reply, Philadelphia backs off this argument, stating its motion “was not intended to be directed to Walton.” (Reply at p.2.) That contradicts its own motion, which requested an “order barring any claims by any other party, including Walton and Liberty.” (Motion at pp. 19-20.) There is no law that simply because two persons each have contracts with a third person, the two person are co-obligors of the separate contracts.

Philadelphia ignores the many cases cited in Liberty’s opposition holding that section 877.6 does not apply here. Here are a few. “[I]nsurers are not ‘co-obligors on a contract debt.’” (Rohr Industries, Inc. v. First State Ins. Co. (1997) 59 Cal.App.4th 1480, 1489.) “Section 877.6, subdivision (c) is limited to ‘claims . . . for equitable comparative contribution . . . based on comparative negligence or comparative fault.’ Because an action by one insurer seeking contribution from a nonparticipating insurer does not depend on ‘fault’ concepts but is based on an equitable apportionment of the contractual undertakings [citation], the bar of section 877.6, subdivision (c) is inapplicable.” (Hartford Accident & Indemnity Co. v. Superior Court (1994) 29 Cal.App.4th 435, 441.) With respect to the phrase “co-obligors on a contract debt,” “the plain language of the statute dictates the interpretation of this phrase refers to parties to a contract dispute which itself is the subject of the underlying litigation.” (Pacific Estates, Inc. v. Superior Court (1993) 13 Cal.App.4th 1561, 1571.) “[A]n indemnity claim against a codefendant based on express contract survives a good faith section 877.6 settlement. The Legislature, by specifying equitable comparative indemnity, evidenced its intention to exclude contractual indemnity. The language of section 877.6 is clear . . . .” (C. L. Peck Contractors v. Superior Court (1984) 159 Cal.App.3d 828, 834.) Philadelphia’s silence in response to Liberty’s litany of cases leaves only one conclusion – Liberty is right.

Because Philadelphia has not shown any legal authority for interpreting section 877.6 to apply to bar claims by Liberty and Walton, the motion for confirmation of good faith settlement is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: November 04, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION (No. 4)

On August 22, 2019, Cross-Complainants Berendos L.P., 235 Berendo L.P., and A Community of Friends (“ACOF”) (collectively, “Berendos”) filed a second amended cross-complaint (“SACC”) against Cross-Defendants Liberty Surplus Insurance Corporation; LTD Construction Services, GP dba Walton Construction Services (“Walton”); Interstate Restoration - California LP (“Interstate”); Philadelphia Indemnity Insurance Company (“Philadelphia”); and Tokio Marine Specialty Insurance Company (“Tokio”). Berendos alleged causes of action for declaratory relief (fifth cause of action), unfair business practices (eighth cause of action), and breach of contract (ninth cause of action) against Tokio.

On December 20, 2019, Tokio moved for summary judgment, or in the alternative, summary adjudication as to the fifth and ninth causes of action and its second through fourth, sixth, and tenth affirmative defenses.

REQUEST FOR JUDICIAL NOTICE

Tokio’s and Berendos’ requests for judicial notice are granted.

FACTUAL BACKGROUND

Berendos owns, manages, and renovated two apartment buildings at 226 and 235 South Berendo Street, Los Angeles, California. (Undisputed Material Fact “UMF” 3, 32, 61, 90, 113, 136, 158, 183; Additional Material Fact “AMF” 203.) Berendos purchased insurance for the buildings from Philadelphia and Tokio. (AMF 214.) The insurance policy provides: “We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply. We may, at our discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result. . . .” (UMF 21, 50, 79, 108, 131, 154, 176, 201.)

“Property damage” is “[p]hysical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it, “or “[l]oss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.” (UMF 23, 52, 81, 110, 178.) A “suit” is “a civil proceeding in which damages because of ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which this insurance applies are alleged.” (AMF 215.) An “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (UMF 22, 51, 80, 109, 177.)

The policy contains a Contractual Liability Exclusion, under which the policy does not apply to “‘[b]odily injury’ or ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages: (1) That the insured would have in the absence of the contract or agreement; or (2) Assumed in a contract or agreement that is an ‘insured contract’, provided the ‘bodily injury’ or ‘property damage’ occurs subsequent to the execution of the contract or agreement.” (UMF 24, 53, 82, 132.) An “insured contract” is a contract for a lease of premises, a sidetrack agreement, any easement or license agreement, an obligation to indemnify a municipality, an elevator maintenance agreement, or a part of any other contract or agreement pertaining to the business under which it assumes the tort liability of another party to pay for “bodily injury” or “property damage” to a third party. (UMF 25, 54, 83, 133.)

The policy excludes “property damage” to property “you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another’s property.” (UMF 26, 55, 84, 155.) The policy also excludes “property damage” to “[t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations” or “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” (UMF 27, 56, 85, 179.) “Your work” is “[w]ork or operations performed by you or on your behalf” and “[m]aterials, parts or equipment furnished in connection with such work or operations.” (UMF 28, 57, 86, 180.)

The policy excludes “property damage” “arising out of the rendering of or failure to render any professional services by you or on your behalf, but only with respect to . . . [p]roviding engineering, architectural or surveying services to others in your capacity as an engineer, architect or surveyor . . . [or] [p]roviding, or hiring independent professionals to provide, engineering, architectural or surveying services in connection with construction work you perform.” (UMF 29, 58, 87.) Professional services include “[p]reparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders, or drawings and specifications,” and do not include “services within construction means, methods, techniques, sequences and procedures employed by you in connection with your operations in your capacity as a construction contractor.” (UMF 29, 58, 87, 202.)

On July 23, 2014, Berendos, L.P. contracted with Walton for renovation work of the buildings, which included the removal of the roofs. (UMF 5-6, 34-35, 63-64, 92-93, 115-116, 138-139, 160-161, 185-186; AMF 204-205.) Both buildings were without roof membranes as of September 1, 2015. (UMF 7, 36, 65, 94, 117, 140, 162, 187.) On September 14, 2015, Walton became aware of a forecast of rain, and its employees attempted to cover both roofs with Visqueen. (UMF 8, 37, 66, 95, 118, 141, 163, 188; AMF 206.) In the early morning hours of September 15, 2015, winds dislodged some of the Visqueen and rain entered the buildings. (UMF 9, 38, 67, 96, 119, 142, 164, 189; AMF 207.) Tenants then had to be relocated, and their personal property was removed and stored offsite. (UMF 10, 39, 68, 97, 120, 143, 165, 190.) Berendos hired Interstate to perform repairs. (AMF 207.)

Interstate brought a first amended cross-complaint against Berendos for breach of contract and goods and services rendered. (UMF 11, 40, 69, 98, 121, 144, 166, 191.) In phase one, Interstate sought and recovered economic damages from ACOF. (UMF 12, 41, 70, 99, 122, 145, 167, 192.) Liberty’s first amended cross-complaint against Berendos sought declaratory judgment, subrogation, equitable indemnification, equitable contribution, and reimbursement. (UMF 13, 42, 71, 100, 123, 146, 168, 193; AMF 213.) Walton’s second amended cross-complaint against Berendos, L.P. asserted causes of action for declaratory relief, breach of contract, and negligence. (UMF 15, 44, 73, 102, 125, 148, 170, 195; AMF 210-212.)

DISCUSSION

Tokio moves for summary adjudication of Berendos’ fifth cause of action for declaratory relief and ninth cause of action for breach of contract on the ground that those causes of action have no merit. (Code Civ. Proc., § 437c, subd. (f)(1).) The fifth cause of action seeks a declaration that Todio has a duty to indemnify Berendos for the expenses incurred in remediating the damages to the buildings. (SACC ¶ 98.) The ninth cause of action alleges Tokio failed to honor fully its obligation to pay Berendos’ claims, including for “all amounts they paid their tenants to satisfy the tenants’ claims for damage to their personal property” and “for any other expenses [Berendos] incurred to remediate damages caused by the storm. (SACC ¶¶ 51, 118.) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

Tokio’s notice of motion also states Tokio moves for summary adjudication of its own affirmative defenses, but it does not cite authority for such a motion. Under section 437c, subdivision (f)(1), “A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.” Tokio is not asking the Court to determine that “there is no affirmative defense to the cause of action” or “that there is no merit to an affirmative defense.” Rather, Tokio argues that the fifth and ninth causes of action have no merit because they are barred by the following affirmative defenses.

Second Affirmative Defense – Property Damages

The second affirmative defense alleges the policy covers damages because of property damage to which the insurance applies. Tokio argues Interstate’s action against ACOF sought only economic damages, not property damage. (Motion at p. 15.) The policy provides that Tokio will pay for “those sums that the insured becomes legally obligated to pay as damages” because of property damage, which is defined as physical injury to tangible property, including loss of use. (UMF 21, 23.) Tokio will also defend the insured against any suit seeking those damages. (UMF 21.)

Tokio argues that Interstate’s first amended cross-complaint against Berendos, L.P. and ACOF alleged that they retained Interstate to perform water and mold remediation work. (Tokio’s RJN, Ex. F at ¶¶ 10-11; UMF 11.) The jury found that Interstate and ACOF entered into a contract under which Interstate performed, and ACOF failed to pay. (Tokio’s RJN, Ex. F; UMF 12.) Tokio argue the damages ACOF owes to Interstate are not damages to tangible property, including loss of use. (Motion at p. 15.) Likewise, Tokio asserts amounts Walton claims for tenant relocation, per diem, and storing tenants’ property are not property damages. (Ibid.)

Berendos argues the costs associated with tenant relocation, per diem, and storing tenants’ property are damages including the loss of use of property, such as the tenants’ inability to use their apartments. (Opposition at p. 8.) Tokio replies that those claims are barred by the fourth affirmative defense and that in any event, the claims other those associated with tenant damages are barred by the second affirmative defense. (Reply at p. 9.) Therefore, Tokio concludes, the Court “should find in Tokio Marine’s favor that its second affirmative defense: no coverage is owed for the purely economic damages and therefore, Tokio Marine owes no obligation to indemnify the Berendos Entities for judgment obtained by Interstate against them.” (Reply at p. 9.) In effect, Tokio all but concedes the tenant claims are for damages for loss of use of property.

In other words, Tokio requests summary adjudication on a portion of the breach of contract and declaratory relief causes of action – that the second affirmative defense bars part of Berendos’ claims. That is not permitted by section 437c, subdivision (f)(1), which allows summary adjudication that “completely disposes of a cause of action.” Ruling as Tokio request would not completely dispose of a cause of action. Accordingly, summary adjudication on this ground is denied.

Third Affirmative Defense – Contractual Liability Exclusion

The third affirmative defense alleges the policy does not apply to property damage for which the insured is obligated to pay damages by reason of the assumption of liability in a contract. Tokio argues Interstate only alleged breach of contract against ACOF, and Walton’s claims arise from various failures to perform under contracts. (Motion at p. 17.) Berendos argues it has an obligation to the tenants independent of those contracts. (Opposition at p. 9.)

Regarding a contractual liability exclusion, “ ‘the issue is not whether a claim is framed in tort or in contract. The key question is whether the duty that gives rise to liability is independent of the contract or rests upon it. If liability stems from the contract, the policy will not cover any award even if some of the damages are based on tort claims arising from the contractual relationship.’ [Citation.] (Stein-Brief Group, Inc. v. Home Indemnity Co. (1998) 65 Cal.App.4th 364, 370.) Tokio has not shown that the duty to pay the tenant costs stems from the contract between Berendos and Walton. Rather, as Berendos argues, it has independent duties to the tenants, including the duties under the covenant of quiet enjoyment.

Accordingly, summary adjudication is denied on this ground.

Fourth Affirmative Defense – Property Owned Exclusion

The fourth affirmative defense alleges the insurance does not apply to property damage Berendos owns, rents or occupies. Tokio argues this exclusion precludes coverage for the cost of remediation and repairs to the buildings. In opposition, Berendos argues the exclusion does not apply to damages relating to tenants’ property not owned by Berendos. In reply, Tokio does not contest that this exclusion does not apply to tenant-owned property and the damages from the relocation of tenants and their property. Berendos alleges, in part, that Tokio had an obligation to indemnify Berendos for amounts paid to satisfy claims for damages to third-party property. (SACC ¶ 51.)

Because this affirmative defense does not completely dispose of a cause of action, summary adjudication is denied on this ground.

Sixth Affirmative Defense – Incorrectly Performed Work

The sixth affirmative defense alleges the policy excludes property damage to the insured’s work or work done on the insured’s behalf. Tokio argues the policy excludes coverage because Walton inadequately secured the Visqueen to the roofs, causing water damages. (Motion at p. 20.) Tokio contends the resulting damages claims by Liberty and Walton are due to Walton’s inadequate work product. (Ibid.)

“The exclusion precludes coverage for liability for damages to and deficiencies of the insured’s contractor’s work product.” (Diamond Heights Homeowners Assn. v. National American Ins. Co. (1991) 227 Cal.App.3d 563, 571.) The exclusion states the insurance does not apply to property damage to the work performed by Berendos or its contractor. But damage to the work being performed does not include damage to the tenants, such as their relocation. Work was not being done on the tenants’ property. Also, it has not yet been established that Walton’s work was inadequate, faulty or defective.

Therefore, summary adjudication is denied on this ground.

Tenth Affirmative Defense – Professional Services Exclusion

The tenth affirmative defense alleges property damages arising from rending or failing to render professional services are excluded. Tokio argues this provision excludes coverage for liability arising from Berendos’ project engineer’s delay in responding to Walton’s requests for information. (Motion at p. 21.) If Tokio is basing its argument on Walton’s allegations that Berendos breached its construction contract by failing to timely respond to requests for information (UMF 17), the allegations in Walton’s second amended complaint are not evidence and do not conclusively establish any cause of the damage. It has not yet been determined that the engineer actually delayed or if a delay in response caused the damages.

Accordingly, summary adjudication is denied on this ground.

CONCLUSION

The motion for summary adjudication is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: October 30, 2020    Dept: 48

[TENTATIVE] ORDER RE: DEFENDANTS’ SPECIAL MOTION TO STRIKE COMPLAINT

On June 16, 2020, Plaintiff Andrew Manning (“Plaintiff”) filed this action against Defendants City of Alhambra (“City”), Scott Burnside (“Burnside”), Michael Brown (“Brown”), and JCC Venture. On August 28, 2020, Defendants City, Burnside, and Brown (collectively, “Defendants”) timely filed a special motion to strike under Code of Civil Procedure section 425.16 (“anti-SLAPP motion”) as to the first, second, fourth through tenth, and twelfth causes of action. On September 24, 2020, Plaintiff filed a first amended complaint, asserting the same causes of action against Defendants.

REQUEST FOR JUDICIAL NOTICE

Plaintiff’s request for judicial notice is granted.

EVIDENTIARY OBJECTIONS

The Court does not rule on the objections as the evidence was not material to the Court’s decision.

FACTUAL BACKGROUND

Plaintiff alleges that on November 22, 2018 around 1:30 p.m., a fire occurred at a property owned and controlled by JCC Venture. (Complaint ¶¶ 18-19.) City, Burnside, and Brown investigated the fire and allegedly fabricated evidence, causing another person to be maliciously prosecuted for arson. (Id. at ¶ 19.) Around 11:20 p.m., a second fire occurred, and City and Brown again responded. (Id. at ¶ 20.) After investigating, Brown found no ignitable fluids that would have caused the fire, and he formed the opinion that the second fire’s cause was “undetermined.” (Ibid.) Burnside later took over the investigation of both fires. (Ibid.)

Plaintiff alleges that City and Brown failed to adequately put out the first fire and failed to turn off the main gas line, causing the second fire. (Id. at ¶ 21.) Plaintiff also alleges that City, Burnside, and Brown conspired to cover up their illegal behavior by fabricating facts and details. (Ibid.) According to Plaintiff, Burnside falsely reported that the second fire’s first visible flames occurred at 23:23:12 hours after Plaintiff was seen in that location. (Id. at ¶ 22.) However, Plaintiff alleges, the surveillance video shows that the first flames were visible at 23:20:45 hours, while Plaintiff was visible at the other side of the building. (Ibid.)

On December 10, 2018, Burnside submitted an allegedly false affidavit for a search warrant to obtain samples of debris. (Id. at ¶ 23.) In doing so, Burnside indicated that Brown stated that the surveillance video showed a male pouring liquid in the area, which was not depicted in the video. (Ibid.) On December 12, 2018, Burnside interviewed Plaintiff about the second fire, and Plaintiff’s account was corroborated by the surveillance video. (Id. at ¶ 24.) Plaintiff alleges that Burnside lied and told Plaintiff that the video contradicted his timeline, in an effort to obtain a confession. (Ibid.) On December 21, 2018, Burnside submitted another allegedly false affidavit for a search warrant to obtain Plaintiff’s leather boots. (Id. at ¶ 25.) Burnside indicated that he reviewed the video himself and stated that Plaintiff was seen close to the fire, which spread through an ignitable or combustible liquid. (Ibid.)

Plaintiff alleges that on January 11, 2019, City, Burnside, and Brown were aware of and possessed two laboratory reports that contained negative results from a test for ignitable liquids on six samples of debris and Plaintiff’s boots. (Id. at ¶ 26.) Plaintiff alleges that City, Burnside, and Brown suppressed evidence and willfully falsified investigation reports, which led to a felony complaint against Plaintiff and his July 3, 2019 arrest. (Id. at ¶¶ 27-28.) Plaintiff was in custody until September 27, 2019, when all charges were dismissed. (Id. at ¶ 28.)

ANTI-SLAPP MOTION

“A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or California Constitution in connection with a public issue shall be subject to a special motion to strike unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (Code Civ. Proc., § 425.16, subd. (b)(1).)

“At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached. There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 396.)

Protected Activity

Defendants argue Plaintiff alleges fabrication or suppression of evidence, falsification of investigative reports, inaccurate reporting of surveillance video, and submission of false search warrant applications. (Motion at p. 9.) According to Defendants, these alleged acts were in furtherance of protected rights of petition, i.e., making written or oral statements in judicial proceedings, in connection with an issue of public interest. (Ibid.) Law enforcement’s statements and reports about an official investigation and communications among law enforcement are protected activities under the anti-SLAPP statute. (Bradbury v. Superior Court (1996) 49 Cal.App.4th 1108, 1116, 1117.)

Plaintiff does not dispute that these types of acts typically fall within the protected activity category. Rather, Plaintiff contends that Defendants’ alleged acts are not protected because they were illegal as a matter of law. (Opposition at p. 10.) Generally, conduct protected by the anti-SLAPP statute does not lose its coverage simply because a plaintiff alleges that it was unlawful or unethical. (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 910-911.) An exception applies in “a narrow circumstance, where either the defendant concedes the illegality of its conduct or the illegality is conclusively shown by the evidence, the motion must be denied. The rationale is that the defendant cannot make a threshold showing that the illegal conduct falls within the purview of the statute . . . .” (Flatley v. Mauro (2006) 39 Cal.4th 299, 316.) If, however, a factual dispute exists about the legitimacy of the defendant’s conduct, it cannot be resolved within the first step but must be raised by the plaintiff in connection with the plaintiff’s burden to show a probability of prevailing on the merits.” (Ibid.) The showing on this first prong analysis must be “either through defendant’s concession or by uncontroverted and conclusive evidence.” (Id. at p. 320.)

The complaint alleges Defendants falsely reported the contents of surveillance video, submitted false search warrant applications, and falsified investigative reports. (Opposition at p. 11.) Plaintiff contends Defendants conceded these illegal acts. (Opposition at p. 11.) Plaintiff bases this assertion on:

(1) Burnside’s testimony at the preliminary hearing that he had concluded Plaintiff was the only person in the building, but that after reviewing the video during a break in the hearing, he saw that Plaintiff did not enter the building until later. (Opposition at p. 11; Plaintiff’s Ex. 3 at pp.163-165.) Upon viewing the video at the hearing and seeing Plaintiff had entered the building later, Burnside stated, “I missed that when I saw – I didn’t honestly do it on purpose.” (Plaintiff’s Ex. 3 at p. 165.)

(2) The fact that the “exculpatory evidence” contained in the video “is not noted in Defendant Burnside’s reports submitted in support of Plaintiff’s arrest, and Burnside’s admission that he “didn’t note everything [he] saw on the video.” (Opposition at p. 11; Plaintiff’s Ex. 3 at p. 166.)

(3) Burnside’s testimony at the preliminary hearing that his statement in a search warrant about a video depicting a male pouring liquid in the area was false. (Opposition at p. 11.) In that portion of his testimony, Burnside stated that when he determined that statement was wrong he “documented it in my report.” (Plaintiff’s Ex. 3 at p. 169.)

(4) Burnside’s statement in his affidavit that Brown said he reviewed video depicting a male pouring liquid in the area, and Brown’s testimony that he did not tell Brown that. (Opposition at pp. 11-12. ) At the preliminary hearing, Burnside testified that his statement in his affidavit was “how I initially understood it when I talked to him.” (Plaintiff’s Ex. 3 at p. 168.) Brown testified at the preliminary hearing that he did not tell Burnside that he saw a male pour a liquid. (Plaintiff’s Ex. 3 at p. 101.)

None of these statements is a concession of illegality. They may be concessions of mistakes or sloppiness or inaccuracies. The testimony of Burnside and Brown may conflict. But that does not mean that either one of them conceded to an illegality or that one of them is lying.

Nor does the evidence show conclusively show an illegality. Burnside’s and Brown’s declarations set forth the basis for their actions, showing “a factual dispute exists about the legitimacy of the defendant’s conduct.” (Flatley, supra, 39 Cal.4th at p. 316.)

In sum, Defendants have met their burden of showing that their conduct arose from protected activity.

Probability of Success

“If the defendant makes the required showing [on the first prong], the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success.” (Sweetwater Union High School Dist. v. Gilbane Building Co.( 2019) 6 Cal.5th 931, 940.) In the second step, “[t]he court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff’s evidence as true, and evaluates the defendant’s showing only to determine if it defeats the plaintiff’s claim as a matter of law.” (Ibid.) “An anti-SLAPP motion is an evidentiary motion. Once the court reaches the second prong of the analysis, it must rely on admissible evidence, not merely allegations in the complaint or conclusory statements by counsel.” (Finton Construction, Inc. v. Bidna & Keys, APLC (2015) 238 Cal.App.4th 200, 213.)

Defendants contend that Plaintiff cannot prevail because Defendants are immune under Government Code section 821.6. “A public employee is not liable for injury caused by his instituting or prosecuting any judicial or administrative proceeding within the scope of his employment, even if he acts maliciously and without probable cause.” (Gov. Code, § 821.6.) This immunity is broadly construed and extends to actions taken in preparation for formal proceedings, including an investigation. (Gillan v. City of San Marino (2007) 147 Cal.App.4th 1033, 1048 (Gillan).) A public entity such as City cannot be liable for an employee’s act or omission if the employee would be immune. (Govt. Code, § 815.2, subd. (b).)

However, governmental immunity does not extend to false arrest or claims under Civil Code section 52.1 based on an arrest without probable cause. (Govt. Code, § 820.4; Gillan, supra, 147 Cal.App.4th at pp. 1048-1050.) False arrest is one form of false imprisonment. (Asgari v. City of Los Angeles (1997) 15 Cal.4th 744, 752 fn. 3.) False imprisonment is the unlawful violation of the personal liberty of another. (Id. at p. 757.)

Plaintiff argues 42 U.S.C. section 1983 preempts any state law immunities. (Opposition at p. 14.) That is not entirely correct. “ ‘The doctrine of qualified governmental immunity is a federal doctrine that does not extend to state tort claims against government employees.’ ” (Venegas v. County of Los Angeles (2007) 153 Cal.App.4th 1230, 1243.) As to federal law claims, “[i]mmunites based upon state law may not be applied in an action under section 1983, even if the action is brought in state court.” (Asgari, supra, 15 Cal.4th at p. 758 n.11.)

The first cause of action is for violation of Civil Code section 52.1 based on the alleged unlawful arrest and malicious prosecution.

The second cause of action is for negligence based on Defendants’ failing to prevent a dangerous condition at the building where the fire occurred, and based on Defendant City’s failure to adequately hire, train and supervise its employees resulting in the unlawful arrest.

The fourth cause of action is for false arrest.

The fifth cause of action is for malicious prosecution.

The sixth cause of action is for fraud based on making false statements in filing charges against and arresting Plaintiff.

The seventh cause of action is for judicial deception under 42 U.S.C. section 1983 based on submitting false reports, which resulted in a judge issuing a warrant and Plaintiff’s arrest.

The eighth cause of action is malicious prosecution under 42 U.S.C. section 1983.

The ninth cause of action is for fabricating evidence under 42 U.S.C. section 1983.

The tenth cause of action is for suppression of evidence under 42 U.S.C. section 1983.

The twelfth cause of action is for Defendants maintaining policies violating Plaintiff’s rights under 42 U.S.C. section 1983.

For the portions of the state law claims based on malicious prosecution, Defendants are immune under Government Code section 821.6. That includes portions of the first, portions of the second, the fifth, and portions of the sixth causes of action. But that still leaves, the portions of the first, portions of the second, the fourth, and portions of the sixth causes of action pertaining to false arrest, for which Defendants have no immunity under state law.

As for the section 1983 causes of action, no party argued whether federal immunity would apply here.

That leaves the question regarding the portions of the first, portions of the second, the fourth, and portions of the sixth causes of action pertaining to false arrest, and the eighth, ninth, tenth, and twelfth section 1983 causes of action pertaining to false arrest and malicious prosecution: has Plaintiff shown a probability of success?

“The tort of false imprisonment is defined as ‘the “unlawful violation of the personal liberty of another.” ’ [Citation.] . . . By contrast, ‘[m]alicious prosecution “consists of initiating or procuring the arrest and prosecution of another under lawful process, but from malicious motives and without probable cause. . . .” ’ [Citation.]” (Asgari, supra, 15 Cal.4th at p. 757.) Plaintiff provides evidence that the criminal court granted Plaintiff’s Penal Code section 995 motion to dismiss the charges against him. (Opposition at p. 12; id., Ex. 11 at p. 2.) An indictment will be set aside “only when there is a total absence of evidence to support a necessary element of the offense charged.” (People v. Superior Court (Jurado) (1992) 4 Cal.App.4th 1217, 1226.) A “total absence of evidence” indicates no probable cause. In addition, while Burnside’s and Brown’s testimony discussed above are not concessions, the testimony does show that evidence used to obtain the warrant was not accurate and that the inaccuracies implicated Plaintiff.

Accordingly, Plaintiff has shown at least minimal merit for the remaining causes of action, and portions of causes of action, sufficient to defeat an anti-SLAPP motion.

CONCLUSION

The anti-SLAPP motion is GRANTED as to the portions of the first, portions of the second, the fifth, and portions of the sixth causes of action for malicious prosecution.

The anti-SLAPP motion is otherwise DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: October 29, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR SUMMARY ADJUDICATION (No. 3)

On August 22, 2019, Cross-Complainants Berendos L.P., 235 Berendo L.P., and A Community of Friends (“ACOF”) (collectively, “Berendos”) filed a second amended cross-complaint (“SACC”) against Cross-Defendants Liberty Surplus Insurance Corporation; LTD Construction Services, GP dba Walton Construction Services (“Walton”); Interstate Restoration - California LP (“Interstate”); Philadelphia Indemnity Insurance Company (“Philadelphia”); and Tokio Marine Specialty Insurance Company (“Tokio”). On December 11, 2019, Philadelphia moved for summary adjudication as to its third, twelfth, thirteenth, and fifteen affirmative defenses.

REQUEST FOR JUDICIAL NOTICE

Philadelphia’s and Berendos’ requests for judicial notice are granted.

FACTUAL BACKGROUND

In July 2014, Berendos began renovating two apartment buildings at 226 and 236 South Berendo Street (“Properties”) and hired Walton to perform the work. (Additional Material Facts “AMF” 28, 29.) The project required seismic retrofitting and complete gutting of apartment units, including installation of new flooring, cabinets, countertops, plumbing and plumbing fixtures, new finishes to apartment units’ interiors, new drywall, new air conditioning, new electrical wiring, renovation of common areas in the buildings, improvements to the buildings’ exterior, ADA accessibility, and landscape. (AMF 63-64.) As part of the renovations, Walton removed the roofs. (AMF 66.)

In August 2014, ACOF applied, through its broker Epic Insurance Brokers (“Epic”), for insurance coverage for renovations at the Properties. (Undisputed Material Facts “UMF” 1.) Raegan Loston (“Loston”), a commercial lines account executive with Epic, manages the day-to day servicing of ACOF’s accounts. (UMF.) Loston asked Philadelphia for quotes on additional insurance coverage, explaining ACOF needed coverage of the existing structures during major renovations. (AMF 25.) Loston submitted information regarding the renovations to Philadelphia, including a Builder’s Risk supplemental application filled out by ACOF. (UMF 8-9.) Philadelphia issued the Builder’s Risk Policy, covering October 15, 2014 to October 15, 2015. (UMF 11; AMF 46.) The Builder’s Risk Policy limit was based on the value of the renovation and remodeling contract. (UMF 17.) Tokio issued course of construction coverage. (UMF 11.)

Berendos already had coverage for the Properties under a Philadelphia commercial package policy providing property and liability coverage. (UMF 12; AMF 32.) Loston did not intend to obtain double insurance for the existing buildings, and she understood that ACOF’s commercial package policy covered the existing buildings. (UMF 14, 21.)

The Builder’s Risk Policy provides that Philadelphia “will pay for direct physical ‘loss’ to Covered Property caused by or resulting from any of the Covered Causes of Loss.” (UMF 22.) The Builder’s Risk Policy initially defines “Covered Property” as “your property or the property of others for which you are liable, consisting of: a. Materials, supplies, machinery, equipment, or fixtures which will become a permanent part of the building, structure, or project at the project site shown in this Coverage Form Declarations; and b. Temporary buildings or structures at the project site shown in this Coverage Form Declarations.” (UMF 22.) The policy also states that Covered Property does not include “[e]xisting buildings or structures to which improvements, alterations, repairs, or additions are being made.” (UMF 22.) The Builder’s Risk Policy contains an Existing Building and Structure Coverage Endorsement that modifies the insurance provided (“Existing Building Endorsement”). (UMF 23.) Under the Existing Building Endorsement’s Coverage Form Declarations, the description of the project is “Renovation of 2 existing buildings consisting of 72 multifamily rental units,” at a project site of “226 & 235 S Berendo St, Los Angeles, CA 90004.” (UMF 23.) The Existing Building Endorsement replaces the definition of Covered Property with “your property or the property of others for which you are liable, consisting of: a. Materials, supplies, machinery, equipment, or fixtures which will become a permanent part of the building, structure, or project at the project site shown in this Coverage Form Declarations; b. Temporary buildings or structures at the project site shown in this Coverage Form Declarations; and c. An existing building or structure at the project site shown in this Coverage Form Declarations to which improvements, alterations, repairs, or additions are being made.” (UMF 24; AMF 49.) The Existing Building Endorsement replaced Section 3.A.2.a. in the Property Not Covered with “Existing buildings or structures to which improvements, alterations, repairs, or additions are being made, unless scheduled in this Coverage Form Declarations,” and added Section A.2.f., “Property to be removed from existing buildings or structures and not intended to become a permanent part of completed buildings or structures.” (UMF 24; AMF 50.)

The Philadelphia package policy’s Commercial General Liability (“CGL”) coverage does not apply to property damage to “[p]roperty you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another’s property” (“Property Owned Exclusion”) (UMF 25.) The CGL policy contains an endorsement that adds an exclusion for property damage to “[p]roperty you operate or manage or as to which you act as agent for the collection of rents or in any other supervisory capacity” (“Property Managed Exclusion”). (UMF 26.)

The CGL policy also contains an endorsement providing, “This insurance does not apply to ‘bodily injury’ or ‘property damage’ arising out of the ongoing operations described in the Schedule of this endorsement, regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others. Unless a ‘location’ is specified in the Schedule, this exclusion applies regardless of where such operations are conducted by you or on your behalf” (“Ongoing Operations Exclusion”). (UMF 27.)

On September 14, 2015, when rain was forecast for the night, Walton covered the roofs and existing plywood with Visqueen. (AMF 67.) Rainwater from the storm entered the Properties, causing extensive damage and requiring repairs. (AMF 68.)

DISCUSSION

When moving for summary adjudication of an affirmative defense, a plaintiff has the initial burden to make a prima facie showing that that the affirmative defense is without merit. (Continental Ins. Co. v. Columbus Line, Inc. (2003) 107 Cal. App. 4th 1190, 1199-1200 (Continental).) Then the burden shifts to the defendant or cross-defendant to show that a triable issue of material fact exists as to the defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

Third Affirmative Defense – Existing Buildings Endorsement

In its third affirmative defense, Philadelphia alleges the “Builder’s Risk Policy Existing Building Coverage Form precludes coverage for those portions of the Apartment Buildings that were not subject to renovation as no coverage amount is designed for such portions of the Apartment Building.” (Answer 7.) Philadelphia contends that “its Builder’s Risk Policy does not cover the existing apartment buildings (Motion at p.7), and “precludes coverage for those portions of the Apartment Buildings that were not subject to renovation.” (Motion at p. 11.) “An insurer may rely on an exclusion to deny coverage only if it provides conclusive evidence demonstrating that the exclusion applies. [Citations.] Thus, an insurer that wishes to rely on an exclusion has the burden of proving, through conclusive evidence, that the exclusion applies in all possible worlds.” (Atlantic Mutual Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017, 1038-1039 (Atlantic Mutual).

Philadelphia relies on the language of the policy and the Existing Buildings Endorsement. Under the Existing Buildings Endorsement, which modifies the policy, Covered Property includes “[a]n existing building or structure at the project site shown in this Coverage Form Declarations to which improvements, alterations, repairs, or additions are being made.” (UMF 24.) It excludes “[e]xisting buildings or structures to which improvements, alterations, repairs, or additions are being made, unless scheduled in this Coverage Form Declarations.” (UMF 24.) In the Existing Building Exclusion’s Coverage Form Declarations, the project is described as, “Renovation of 2 existing buildings consisting of 72 multifamily rental units,” and the project site is listed as “226 & 235 S Berendo St, Los Angeles, CA 90004.” (UMF 23.)

Because the two buildings at 226 and 235 South Berendo Street are listed in the Coverage Form Declarations, the Court cannot conclude that the Builder’s Risk Policy does not cover them. Philadelphia does not cite evidence that Berendos seeks coverage for existing buildings other than those undergoing renovations at the project site of 226 and 235 South Berendo Street. Nor does it provide evidence that Berendos seeks coverage only for those parts of the buildings not undergoing renovation. If at least some of Berendos’ claims are for portions undergoing renovation, the Court cannot conclude as a matter of law that the Builder’s Risk Policy and the Existing Buildings Endorsement do not cover Berendos’ claims.

Accordingly, summary adjudication of the third affirmative defense is denied.

Twelfth and Thirteenth Affirmative Defense – Property Owned/Managed Exclusions

The twelfth affirmative defense alleges property owned by Berendos is excluded. (Answer 16.) The thirteenth affirmative defense alleges the CGL policy excludes property Berendos operates or manages. (Answer 17.) Philadelphia argues these exclusions preclude coverage for property owned, managed, or operated by Berendos, as well as contribution and subrogation claims against Berendos. (Motion at pp. 12-13.)

Berendos agrees that the CGL policy does not provide first party property coverage here. (Opposition at p. 15.) But, Berendos argues it seeks coverage for claims by Liberty and Walton against Berendos relating to tenants’ personal property storage and relocation expenses. (Ibid.; see SACC ¶ 31.) In Titan Corp. v. Aetna Casualty & Surety Co. (1994) 22 Cal.App.4th 457, the only case cited by Philadelphia in support of its arguments, the court found that an owned-property exclusion barred coverage for solid waste removal because the solid waste caused no actual injury to third party property. (Id. at pp. 471-473.) But here, Berendos alleges damage to third-party tenants’ personal property and seeks coverage for the tenants’ expenses. (SACC ¶ 31.)

In its reply, Philadelphia accepts that these exclusions do not preclude claims relating to tenants’ personal property storage and relocation expenses. Instead, Philadelphia asks the Court to “make finding [sic] that to the extent claims are made against the Berendos Entities by either Walton or Liberty for indemnity for damage to the buildings, including the renovations, such claims are barred” by these two exclusions.” (Reply at pp. 7-8.)

This is not the Court’s role in deciding a motion for summary adjudication. The Court does not make advisory opinions. The Court does not decide issues. The Court can only dispose of an entire affirmative defense. Because these two exclusions do not preclude claims for store and relocation expenses, they do not preclude all of Berendos’ claims or the third-party claims. The Court cannot grant summary adjudication in this manner, as such a finding does not provide a complete defense. (See Code Civ. Proc., § 437c, subd. (p)(2).)

Accordingly, summary adjudication of the twelfth and thirteenth affirmative defenses is denied.

Fifteenth Affirmative Defense – Ongoing Operations Exclusion

The fifteenth affirmative defense alleges the policy precludes coverage for liability arising from ongoing construction operations. (Answer 18.) The Ongoing Operations Exclusion states that the insurance “does not apply to ‘bodily injury’ or ‘property damage’ arising out of the ongoing operations described in the Schedule of this endorsement.” (UMF 27.) The ongoing operations are described as “Real Estate Development/Construction Operations.” (Philadelphia RJN No. 1; SACC, Ex. 5 at PDF p. 401.) Philadelphia argues the CGL policy’s Ongoing Operations Exclusion precludes coverage here because the rain damage arose out of Walton’s renovations of the Properties, which constituted construction operations. (Motion at p. 15.) Berendos contends the ongoing operations were the renovations, and the rainstorm was an independent event that caused the damage. (Opposition at p. 16.) According to Berendos, because the damage arose from the rainstorm, not the renovations, “what constitutes damage ‘arising out of’ the renovations in this case is ambiguous.” (Ibid.)

“ ‘Words in an insurance policy are to be interpreted as a layperson would interpret them, in their “ ‘ordinary and popular sense.’ ” [Citations.] . . . If particular language is ambiguous, it is to be resolved by interpreting the ambiguous provisions in accordance with the insured’s objectively reasonable expectations.’ [Citation.]” (Energy Ins. Mutual Limited v Ace American Ins. Co. (2017) 14 Cal.App.5th 281, 290-291 (Energy Ins.).) Generally, “[a]n insurance policy’s coverage provision must be interpreted broadly to afford the insured the greatest possible protection, while a policy’s exclusions must be interpreted narrowly against the insurer.’ ” (Id. at p. 291.) “When it comes to exclusions, the insurer bears the burden of proving the exclusion applies. Exclusionary language must be plain, clear, and conspicuous. Policy terms are ambiguous when more than one reasonable construction of the language is possible. So long as coverage is available under any reasonable construction, the insurer will be held liable.” (ML Direct, Inc. v. TIG Specialty Insurance Co. (2000) 79 Cal.App.4th 137, 141-142.)

However, “California courts interpret the term ‘arising out of’ broadly.” (Energy Ins., supra, 14 Cal.App.5th at p. 298 [quotations and citation omitted].) “ ‘California courts have consistently given a broad interpretation to the terms “arising out of” or “arising from” in various kinds of insurance provisions. It is settled that this language does not import any particular standard of causation or theory of liability into an insurance policy. Rather, it broadly links a factual situation with the event creating liability, and connotes only a minimal causal connection or incidental relationship.’ [Citation.]” (Medill v. Westport Ins. Corp. (2006) 143 Cal.App.4th 819, 830 (Medill).) For example, where the loss “would not exist without” the excluded event, the claims are “not within the scope of coverage.” (Ibid.) “The term is generally understood to mean ‘ “ ‘originating from[,]’ ‘having its origin in,’ ‘growing out of’ or ‘flowing from’ or in short, ‘incident to, or having connection with’ . . . . [Citation.]” ’ [Citations.” (Energy Ins., supra, 14 Cal.App.5th at p. 298.)

It is undisputed that on the night of the rainstorm, the roofs had been removed as part of the renovation. (UMF 66, 67.) The rainwater entered the buildings, causing damage. (UMF68.) Thus, the rainwater that caused damages is linked to the renovation; if the roofs had not been removed, the rainwater would not have leaked and caused the damage.

Philadelphia’s argument that the damage was caused by the rain, not by the renovations, imports a causation requirement into the term “arising out of,” which the case law rejects. (See, e.g., Medill, supra, 143 Cal.App.4th at p. 830.) Similarly, Philadelphia’s distinction that this is not a situation where a crane fell and injured a person during construction (Opposition at p. 16) interprets the term “arising out of” too narrowly. In the example where a construction crane injures a person, the construction activity more directly causes the injury. But the caselaw interprets “arising out of” more broadly and without such a direct causal connection. The connection can be merely incidental. (Energy Ins., supra, 14 Cal.App.5th at p. 298.) If the parties had intended to exclude only loss caused by the renovations, they could have easily drafted the Ongoing Operations Exclusion to state that the policy “does not apply to ‘bodily injury’ or ‘property damage’ caused by the ongoing operations.”

Accordingly, summary adjudication of the fifteenth affirmative defense is granted.

CONCLUSION

The motion for summary adjudication is GRANTED as to the fifteenth affirmative defense and is otherwise DENIED.

Moving party to give notice.

[TENTATIVE] ORDER RE: MOTIONS FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION (Nos. 6, 10)

On February 8, 2017, Cross-Complainants Berendos L.P., 235 Berendo L.P., and A Community of Friends (“ACOF”) (collectively, “Berendos”) filed a first amended cross-complaint (“FACC”) against Cross-Defendants Liberty Surplus Insurance Corporation; LTD Construction Services, GP dba Walton Construction Services (“Walton”); Interstate Restoration - California LP; Philadelphia Indemnity Insurance Company (“Philadelphia”); and Tokio Marine Specialty Insurance Company. On September 13, 2018, the Court issued its ruling granting in part and denying in part Philadelphia’s motion for summary adjudication as to Berendos’ FACC.

On August 22, 2019, Berendos filed a second amended cross-complaint (“SACC”). On January 3, 2020, Philadelphia moved for summary judgment, or in the alternative, summary adjudication as to Berendos’ sixth, fifth, and tenth causes of action; Berendos’ claim for punitive damages; and Philadelphia’s fourth, fifth, and seventh affirmative defenses.

On September 20, 2016, Cross-Complainant Walton filed a cross-complaint against Cross-Defendants Rockhill Insurance Company, Liberty Surplus Insurance Corporation, Philadelphia, Axis Surplus Insurance Company, Berendos, L.P., and Interstate Restoration – California LP. On September 13, 2018, the Court issued its ruling granting in part and denying in part Philadelphia’s motion for summary adjudication as to Walton’s cross-complaint.

On January 23, 2019, Walton filed a first amended cross-complaint, and on April 2, 2019, Walton filed a second amended cross-complaint. On January 27, 2020, Philadelphia moved for summary judgment, or in the alternative, summary adjudication as to Walton’s fifth and sixth causes of action for declaratory relief and breach of contract and its third through seventh affirmative defenses.

Because Philadelphia’s motions against Berendos and against Walton are nearly identical, the Court addresses both motions here. The citations are primarily to the evidence and briefs filed in support of and in opposition to the motion against Berendos.

REQUEST FOR JUDICIAL NOTICE

Philadelphia’s, Berendos’ and Walton’s requests for judicial notice motion are granted.

EVIDENTIARY OBJECTIONS

Berendos’ objections to the Declaration of Miglietta/testimony of Raymond Rike are overruled.

FACTUAL BACKGROUND

In July 2014, Berendos contracted with Walton to perform renovation work at two apartment buildings at 226 and 235 South Berendo Street, Los Angeles, California. (Undisputed Material Facts from Motion No. 6 (“UMF”) 1, 20, 36, 52, 70, 88, 100, 114.) ACOF contacted a commercial lines account executive with Edgewood Partners Insurance Center to procure a builder’s risk policy for the project. (Additional Material Facts from Motion No. 6 (“AMF”) 126.) ACOF already had a commercial general liability policy that covered existing buildings. (AMF 127.)

Berendos purchased a Builder’s Risk Policy from Philadelphia, covering October 15, 2014 through October 15, 2015. (UMF 2, 21, 37, 53, 71, 89, 101, 115.) Walton was an Additional Named Insured. The policy states that Philadelphia “will pay for direct physical ‘loss’ to Covered Property caused by or resulting from any of the Covered Causes of Loss.” (UMF 3, 22, 38, 54, 72, 90, 102, 116.) Covered Causes of Loss are “Risks of Direct Physical ‘Loss’ to Covered Property unless the ‘loss’ is excluded in Section B., Exclusions.” (UMF 3, 22, 28, 54, 72, 90, 102, 116.) Covered Property includes “[t]emporary buildings or structures at the project site shown in this Coverage Form Declarations.” (UMF 3, 22, 28, 54, 72, 90, 102, 116.) One exclusion states, “We will not pay for a ‘loss’ caused by or resulting from . . . Rain, snow, sleet, or ice, whether driven by wind or not. But we will pay for ‘loss’ . . . To the Covered property within the building or structure caused by or resulting from rain . . . when: (a) The building or structure first sustains damage from any of the Covered Causes of Loss to its roof or walls through which the rain . . . enters” (“Rain Exclusion”). (UMF 4, 23, 39, 55, 73, 91.) Another exclusion states, “We will not pay for ‘loss’ caused by or resulting from any of the following. But if ‘loss’ by any of the Covered Causes of Loss results, we will pay for that resulting ‘loss.’ . . . Wear and tear, gradual deterioration, any quality in the property that causes it to damage or destroy itself, hidden or latent defect, rust, wet or dry rot, mold, dampness of atmosphere, freezing or extremes of temperature, insects, vermin, moths, rodents, or worms” (“Mold Exclusion”). (UMF 25, 41, 57, 75, 117.) The policy also contains a Faulty Workmanship Exclusion: “We will not pay for ‘loss’ caused by or resulting from any of the following. But if ‘loss’ by any of the Covered Causes of Loss results, we will pay for that resulting ‘loss.’ a. Faulty, inadequate, or defective materials, or workmanship.” (UMF 5, 24, 40, 56, 74, 103.)

As part of the renovations, Walton removed the roof and plywood deck from 235 South Berendo, and the plywood deck was replaced on August 27, 2015. (UMF 7, 26, 42, 58, 76, 92, 104, 118.) Walton also removed the roof from 226 South Berendo. (UMF 8, 27, 43, 59, 77, 93, 105, 119.) As of September 15, 2015, the tops of the buildings had roof joists and either plywood sheeting or 1” x 6” planking. (UMF 9, 28, 44, 60, 78, 94, 106, 120.) Based on a forecast of rain for September 15, 2015, Walton employees covered the unfinished roofs with Visqueen plastic. (AMF 138-141.) There was a rainstorm in the early morning, and the wind caused the Visqueen to move, allowing water to enter and damage the Properties. (UMF 14, 33, 83, 99, 111, 125; AMF 145, 147.)

On September 22, 2015, Berendos reported a notice of loss to Philadelphia. (AMF 149.) Philadelphia opened a claim in February 2016. (AMF 154.) Philadelphia’s claim handling guidelines provide that a claim investigation should occur promptly, comprise a thorough investigation of all possible bases of coverage, and analyze information in a fair and evenhanded way with a view towards coverage. (AMF 150.) An insurance adjuster visited the Properties on February 29, 2016 and interviewed representatives from Walton, Matthew Wickersham, and Ryan Lehman at ACOF’s offices. (AMF 156-157; see AMF 168.) They provided documents, including photographs, weather data, and other communications. (AMF 158.) The investigation report was based on the transcript of his interview with ACOF representatives, the adjuster’s summary of his conversations with Walton representatives, and certain photographs documenting the roofs of the Properties after the storm. (AMF 159.)

DISCUSSION

For each claim in the complaint, the defendant moving for adjudication must satisfy the initial burden of proof by showing that one or more elements of a cause of action cannot be established or that there is a complete defense to a cause of action. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.) Then the burden shifts to the plaintiff to show that a triable issue of material fact exists as to that cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf, supra, 128 Cal.App.4th at p. 1520.)

Subsequent Motions on Builder’s Risk Policy Exclusions

Berendos’ FACC alleged causes of action against Philadelphia for declaratory relief, breach of contract, and unfair business practices. Walton’s cross-complaint alleged causes of action against Philadelphia for declaratory relief and breach of contract.

The Court denied Philadelphia’s first motions for summary adjudication against Berendos and Walton, finding that Philadelphia did not provide sufficient evidence to show that Walton’s placement of the Visqueen barrier constituted “faulty materials or workmanship” as a matter of law. As to the Rain Exclusion, the Court concluded “a triable issue of fact exists as to whether a plastic sheet intended to serve as a temporary covering of a removed roof would constitute a temporary ‘roof’ for purposes of a policy intended to insure against on-going construction.” The Court also concluded Philadelphia failed to demonstrate that mold was the only cause of the loss, so the Mold Exclusion would apply to only part of the breach of contract cause of action.

Philadelphia now moves for summary adjudication of the same issues against Berendos and Walton– whether Philadelphia is entitled to summary adjudication based on the Rain Exclusion, Faulty Workmanship Exclusion, and Mold Exclusion. A party who files a second or subsequent motion for summary judgment based on issues asserted in a prior motion must establish newly discovered facts or circumstances or a change of law supporting the issues reasserted in the summary judgment motion.¿¿(Code Civ. Proc., § 437c, subd. (f)(2).) Philadelphia contends that it has new facts and evidence from depositions taken after it filed its first motions. Philadelphia does not cite new law that did not exist at the time of its first motions.

Fourth Affirmative Defense (Berendos) – Rain Exclusion

Fifth Affirmative Defense (Walton) – Rain Exclusion

The Rain Exclusion provides coverage for loss resulting from rain when the building first sustains damage to its roof or walls through which the rain enters. (UMF 4.) Philadelphia contends that new facts establish that the 235 Berendo building had plywood sheathing or 1” x 6” planking covering much of the roof area, and the 226 Berendo building had plywood over a raised platform in the center of the building and surrounding sections of the perimeter roof. (Motion at p. 20; UMF 7-9.) Therefore, Philadelphia argues, “[t]he plastic sheeting was not intended to become a permanent part of the roofs.” (Motion at p. 21.) These additional facts and Philadelphia’s argument do not address the Court’s holding on the first summary adjudication motions about whether a temporary roof constitutes a “roof” under the Builder’s Risk policy. Philadelphia has not shown how the additional facts about plywood sheathing and planking impact the Court’s prior holding and require a different conclusion.

Accordingly, summary adjudication is denied as to the fourth affirmative defense (Berendos) and fifth affirmative defense (Walton).

Fifth Affirmative Defense (Berendos) – Faulty Workmanship Exclusion

Sixth Affirmative Defense (Walton) – Faulty Workmanship Exclusion

The Builder’s Risk Policy does not cover loss caused by “[f]aulty, inadequate, or defective materials, or workmanship.” (UMF 5.) Philadelphia contends that “workmanship” includes Walton’s process for applying the Visqueen sheets, and this application was inadequate. (Motion at pp. 21-22.) Berendos contend that the exclusion applies only to finished work product. (Opposition at p. 21.)

None of Philadelphia’s legal arguments is based on new law. In the first summary adjudication motions, Philadelphia made a very brief argument about the Faulty Workmanship Exclusion and cited no law. In its second motions, Philadelphia expanded this issue into a densely-argued position with many legal citations. But it could have made all of these the legal points in its first motions. This Court will not (and in fact, cannot) reconsider a different judge’s earlier decision simply because Philadelphia bolstered its position with more precise arguments and legal authority.

As for new facts, Philadelphia presents evidence from new testimony about the defects in the precautions taken to protect the building from rain. The testimony of the expert Raymond Rike does not offer new facts unavailable to Philadelphia before its prior motion. Philadelphia could have hired him earlier, before its first motions, to opine on Walton’s efforts in protecting the roof.

In any event, the testimony does not present undisputed facts. For example, Philadelphia provides evidence that the sheets did not cover the entire roof and “[l]ots of sheets” did not overlap. (UMF 107; Arnold Decl., Ex. G at pp. 32, 114-115.) On the other hand, there is evidence that the roofs were fully protected with no gaps. (AMF 142; Brown Decl., Ex. 15 at p. 93; id., Ex. 17 at p. 62.) Philadelphia provides testimony that Walton should have taken additional precautions such as putting down felt or heavier material (UMF 18-20), and that the Visqueen was held in place by tape, heavy objects, and limited staples, but without nails. (UMF 107, 109; Arnold Decl., Ex. G at pp. 111-114; Miglietta Decl., Ex. E at pp. 59-60, 69, 237.) On the other hand, Berendos provide evidence that the use of Visqueen to cover unfinished roofs during rains was industry custom, it was secured with several methods including nails, heavy items were placed where there was brick and nails could not be used, the sheeting was placed so that water flowed into the drains, and there were no gaps between the sheets. (AMF 139, 141, 142; Brown Decl., Ex. 15 at pp. 78, 91, 93; id., Ex. 17 at pp. 55-56, 59-62, 64, 69-73, 235-237.) The dispute concerning whether the workmanship was faulty prevents a finding as a matter of law that the Faulty Workmanship Exclusion applies to exclude any claim.

Accordingly, summary adjudication is denied as to the fifth affirmative defense (Berendos) and sixth affirmative defense (Walton).

Seventh Affirmative Defense (Berendos and Walton) – Mold Exclusion

The Mold Exclusion states that Philadelphia will not pay for a loss caused by mold or dampness of atmosphere unless that loss results from a Covered Cause of Loss. (UMF 117.) Philadelphia contends that even if mold was caused by an ensuing loss from the water intrusion, the Mold Exclusion precludes coverage. (Motion at p. 25.) Philadelphia does not explain what new facts or law it relies upon in its second motion for summary adjudication against Berendos or why the decision should be any different as to Walton. Therefore, the summary adjudication is denied as to the seventh affirmative defense (Berendos and Walton).

Fifth and Sixth Causes of Action (Berendos) – Declaratory Relief and Breach of Contract

Fifth and Sixth Causes of Action (Walton) – Declaratory Relief and Breach of Contract

Philadelphia moves for summary adjudication of Berendos’s and Walton’s fifth and sixth causes of action on the grounds that the Builder’s Risk Policy does not provide coverage for Berendos’ claim. (Motion at p. 15.) Philadelphia does not present new law. In light of the discussion above about the new facts, summary adjudication is denied on these causes of action.

Tenth Cause of Action (Berendos) – Tortious Breach of Implied Covenant

“[B]efore an insurer can be found to have acted tortiously (i.e., in bad faith), for its delay or denial in the payment of policy benefits, it must be shown that the insurer acted unreasonably or without proper cause. [Citations.] However, where there is a genuine issue as to the insurer’s liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute. [Citation.]” (Chateau Chamberay Homeowners Ass'n v. Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 347.) “The genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured’s claim.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723.) “[A]n insurer is entitled to summary judgment based on a genuine dispute over coverage or the value of the insured’s claim only where the summary judgment record demonstrates the absence of triable issues (Code Civ. Proc., § 437c, subd. (c)) as to whether the disputed position upon which the insurer denied the claim was reached reasonably and in good faith.” (Id. at pp. 724.) “A genuine dispute exists only where the insurer’s position is maintained in good faith and on reasonable grounds.” (Id. at p. 723.) “Ordinarily, reasonableness is a factual issue to be decided by a jury.” (Fadeeff v Sate Farm General Ins. Co. (2020) 50 Cal.App.5th 94, 102.)

Philadelphia contends that “the general facts of the water intrusion now known are the same facts as those known to Philadelphia when the Berendos Entities initially presented their claim. The bases of Philadelphia's declination of coverage are the subject of this motion.” (Motion at p. 26.) As discussed above, there are genuine disputes of fact regarding Philadelphia’s liability under the policy. However, that is not sufficient because Philadelphia is entitled to summary judgment only where the record demonstrates the absence of triable issues as to whether Philadelphia’s position was reached reasonably and in good faith. Philadelphia did not submit evidence in its moving papers about how it reached its position.

Berendos contends that Philadelphia’s failure to investigate for five months after the rainstorm demonstrates bad faith. (Opposition at p. 22.) By then the remediation work had been completed, making a full investigation into the factual support of the exclusions impossible. (Id. at p. 23.) Philadelphia’s single day of interviews was not a full investigation, according to Berendos. (Ibid.)

In its reply, Philadelphia argues that when Berendos reported a loss, it was a notice of loss and not a notice of claim, and there are no facts Philadelphia would have discovered if it had done a fuller investigation. (Reply at pp. 9-10.) Philadelphia does not argue that it conducted a full investigation or say much of anything about how it reached its position. Instead it asserts that Berendos must show that Philadelphia would have discovered new facts if it had done a fuller investigation. Philadelphia cites no law for that assertion.

“ ‘A trier of fact may find that an insurer acted unreasonably if the insurer ignores evidence available to it which supports the claim.’” (Wilson, supra, 42 Cal.4th at p. 721.) The evidence suggests that could have occurred here. Philadelphia’s claim handling guidelines provide that a claim investigation should occur promptly, comprise a thorough investigation of all possible bases of coverage, and analyze information in a fair and evenhanded way with a view towards coverage. (AMF 150.) Berendos reported a notice of loss on September 22, 2015. (AMF 149; Brown Decl., Ex. 12 at pp. 93-95 & Ex. 403.) The record in the Claims Summary/Notes Report states that “this was intended to be a notice only, they are not filing a claim – the contractor carrier is taking care of damages – ok to close file down.” (Brown Decl., Ex. 12 at Ex. 403, Bates p. PIIC03527 [claim note dated 9/24/2015 at 4:35:36 PM].) Philadelphia closed the claim file on September 24 2015. (Brown Decl., Ex. 12 at p. 112.) On October 1, 2015, ACOF’s broker asked Philadelphia to convert the claim to an actual loss claim. (Brown Decl., Ex. 12 at p. 112.) Philadelphia responded on October 12, 2015, telling the broker and leaving a message for an ACOF’s representative that because of coverage issues the claim would not be reopened for investigation until she affirmatively heard back from them. (Brown Decl., Ex. 12 at pp. 112, 227, Ex. 403, Bates p. PIIC03526 [claim notes dated 10/12/2015].) On February 22, 2016, Philadelphia opened a claim. (AMF 154; Brown Decl., Ex. 12 at pp. 116-117 & Ex. 154.) When the insurance adjuster prepared his investigation report, it was based on the transcript of his interview with ACOF representatives, his summary of his conversations with Walton representatives, and certain photographs documenting the roofs of the Properties after the storm, but not other material provided by the parties. (AMF 159, 160; Brown Decl., Ex. 16 at pp. 127-128 & Ex. 170.)

A jury could conclude that Philadelphia did not act reasonably by not conducting an investigation when the broker asked to convert the claim to an actual loss claim on October 1, 2015, and instead closing the claim. A jury could also conclude Philadelphia did not act reasonably in not considering or addressing all materials provided when it eventually did an investigation. Berendos have therefore raised genuine disputes as to whether Philadelphia followed its own claims policies and thoroughly and fairly investigated the claim, and whether it ignored evidence presented by the parties supporting the claim.

Accordingly, summary adjudication is denied as to the tenth cause of action.

Punitive Damages (Berendos)

Berendos seek punitive damages in connection with their cause of action for tortious breach of implied covenant of good faith and fair dealing. (SACC ¶¶ 127, 129.) Punitive damages are available when there is “clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” (Code Civ. Proc., § 3294, subd. (a).) The initial burden is on the insurer to show that the insured cannot prove the insurer acted with an absence of malice, oppression or fraud. (Fadeeff, supra, 50 Cal.App.5th at p. 109.) Then, the burden shifts to the insured to establish evidence supporting punitive damages with the clear and convincing standard of proof. (Ibid.)

Philadelphia contends that there is no evidence of acts of malice, fraud, or oppression because Berendos did not want to present a claim to Philadelphia, believing that Walton was responsible. (Motion at p. 28.) Philadelphia cites to UMF 16, which states Berendos “did not submit a claim to Philadelphia under the Builder’s Risk policy until this Action was filed by Walton’s excess carrier and demanded that they do so.” (UMF 16.) Berendos disputes this fact, as detailed above. The disputed fact about when Berendos made a claim is not enough to shift the burden to Berendos. (Fadeeff, supra, 50 Cal.App.5th at p. 109.)

Because Philadelphia has not met its initial burden, summary judgment is denied as to punitive damages.

Third and Fourth Affirmative Defenses (Walton) – Existing Building Endorsement

The Existing Building Endorsement states that “Covered Property” includes “[a]n existing building or structure at the project site shown in this Coverage Form Declarations to which improvement, alterations, repairs, or additions are being made.” (UMF 24.) Philadelphia does not make any argument about this endorsement, except to point out its existence. Therefore summary adjudication is denied.

CONCLUSION

The motions for summary judgment, or in the alternative, summary adjudication are DENIED.

Moving party to give notice.

[TENTATIVE] ORDER RE: MOTIONS FOR SUMMARY ADJUDICATION (Nos. 1, 2.)

On April 2, 2019, Cross-Complainant LTD Construction Services, GP dba Walton Construction Services (“Walton”) filed a second amended cross-complaint against Rockhill Insurance Company, Liberty Surplus Insurance Corporation, Philadelphia Indemnity Insurance Company (“Philadelphia”), Axis Surplus Insurance Company, Berendos, L.P., and Interstate Restoration – California LP. On August 22, 2019, Cross-Complainants Berendos, L.P., 235 Berendo, L.P. and A Community of Friends (collectively “Berendos”) filed a second amended cross-complaint against Philadelphia among others.

Philadelphia asserted a faulty workmanship exemption as its fifth affirmative defense against Berendos and sixth affirmative defense against Walton. On November 13, 2019, Walton moved for summary adjudication as to Philadelphia’s sixth affirmative defense. On November 26, 2019, Berendos moved for summary adjudication as to the fifth affirmative defense.

REQUEST FOR JUDICIAL NOTICE

Walton’s, Berendos’, and Philadelphia’s requests for judicial notice are granted.

EVIDENTIARY OBJECTIONS

The Court does not rule on the objections because the evidence objected to is not material to the Court’s decision.¿¿(See Code Civ. Proc., § 437c, subd. (q).)

FACTUAL BACKGROUND

In July 2014, Berendos contracted with Walton to perform renovations at the two apartment buildings at 226 and 235 South Berendo Street, Los Angeles, California (“Properties”).

Philadelphia issued a Builder’s Risk policy to Berendos, covering October 15, 2014 to October 15, 2015. (Walton Undisputed Material Facts “UMF” 1.) Walton is an additional named insured under this policy. (UMF 3.) The policy states that Philadelphia “will pay for direct physical ‘loss’ to Covered Property caused by or resulting from any of the Covered Causes of Loss.” (UMF 4.) Covered Causes of Loss are “Risks of Direct Physical ‘Loss’ to Covered Property unless the ‘loss’ is excluded in Section B., Exclusions.” (UMF 4.) Covered Property includes “[t]emporary buildings or structures at the project site shown in this Coverage Form Declarations.” (UMF 5.) The policy also contains a Faulty Workmanship Exclusion: “We will not pay for ‘loss’ caused by or resulting from any of the following. But if ‘loss’ by any of the Covered Causes of Loss results, we will pay for that resulting ‘loss.’ a. Faulty, inadequate, or defective materials, or workmanship.” (UMF 6.)

During renovations, Walton removed the existing roofs at the Properties. (UMF 7, 8.) On September 14, 2015, Walton learned that a light rain or sprinkle was expected the next day. (UMF 9.) Walton’s job supervisor therefore directed his crews to take steps to protect the buildings. (UMF 10.) Walton employees and subcontractors covered the plywood roof decks with Visqueen, a polyethylene plastic protective material. (UMF 11.) The rainstorm caused water to enter the Properties, rendering them uninhabitable.

Walton submitted a claim to Philadelphia under the Builder’s Risk Policy, but Philadelphia denied the claim. (UMF 13, 14.) In doing so, Philadelphia relied on the Faulty Workmanship Exclusion, stating that there was no coverage for the “temporary cover” where Walton did not seal the lightweight Visqueen sheets together and only marginally secured the Visqueen at the parapet walls. (UMF 15.) Philadelphia also asserted that the exclusion applied to Walton’s inadequate and negligent actions and failure to protect the roof from rain. (UMF 16.)

DISCUSSION

When moving for summary adjudication of an affirmative defense, a plaintiff has the initial burden to make a prima facie showing that that the affirmative defense is without merit. (Continental Ins. Co. v. Columbus Line, Inc. (2003) 107 Cal. App. 4th 1190, 1199-1200 (Continental).) Then the burden shifts to the defendant or cross-defendant to show that a triable issue of material fact exists as to the defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

“The fundamental rules governing the interpretation of contracts apply equally to the construing of insurance contracts.” (Pardee Const. Co. v. Insurance Co. of the West (2000) 77 Cal.App.4th 1340, 1352.) “In the construction of insurance policies, it is the settled rule that the whole of the contract is to be taken together, each clause helping to interpret the other.” (Jurd v. Pacific Indem. Co. (1962) 57 Cal.2d 699, 704.) “The rules governing policy interpretation require us to ‘look first to the language of the [policy] in order to ascertain its plain meaning.’ [Citation.] The plain meaning of policy language is ‘the meaning a layperson would ordinarily attach to it.’ [Citation.]” (Garamendi v. Mission Ins. Co. (2005) 131 Cal.App.4th 30, 41-42 (Garamendi).)

Walton and Berendos argue that the Builder’s Risk Policy is an all-risk policy that covers all losses, including those resulting from negligence, unless specifically excluded. (Walton Motion at pp. 8-10; Berendos Motion at p. 10.) However, even if the policy covers losses arising from negligence generally, that does not preclude an exclusion for faulty, inadequate, or defective materials or workmanship. Further, section 3 states, “We will not pay for ‘loss’ caused by or resulting from any of the following.” Therefore, even if the policy otherwise covers all losses (whether caused by negligence or not), the policy does not cover the losses excluded in section 3.

Walton and Berendos next argue that the Faulty Workmanship Exclusion, like all of the exclusions in section 3 of the policy, apply only to “building materials and components that can and will fail for reasons unrelated to the construction process” and do not apply to the process of construction. (Walton Motion at p. 9; see also Berendos Motion at p. 10.) Walton relies on a canon of interpretation through which “the meaning of a word may be enlarged or restrained by reference to the object of the whole clause in which it is used.” (Ibid., quoting Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1391 fn. 14.) Therefore, argues Walton, the Faulty Workmanship Exclusion must be limited to building components and not to the installation of a temporary roof. (Walton Motion at p. 10.) That conclusion is not obvious from the language of section 3. For example, section 3.c. list, “Settling, cracking, shrinkage, bulging, or expansion of pavements, foundations, walls, floors, roofs, or ceilings.” It is possible that a loss could occur caused by walls, floors, etc. that settle, crack, shrink etc. due to the construction process.

Third, Walton argues the exclusion must be construed narrowly and the coverage broadly. Berendos also argues that these rules require a finding that the exclusion does not apply here. The general rule does not necessarily and ineluctably lead to the conclusion that the exclusion does not apply here. If that general rule were sufficient to require coverage “where a grant of coverage and an exclusion appear to be in competition” (Walton Motion at p. 10), then all exclusions would be rendered meaningless.

Alternatively, Walton argues that the Faulty Workmanship Exclusion is improperly ambiguous, and the ambiguity should be construed in its favor as the insured. (Walton Motion at pp. 10-13.) Both parties primarily rely on two cases for their respective interpretations. In Tzung v. State Farm Fire and Cas. Co. (9th Cir. 1989) 873 F.2d 1338, the Ninth Circuit acknowledged that in the context builders’ risk policies, “[t]he rule seems well settled in California that in that context losses caused to a product because of negligent workmanship are not covered, but damages caused by the negligently created product are covered.” (Id. at p. 1341.) But the court stated that “rule does not necessarily have any meaning in the context of this all risk policy, mainly because the exclusion here clearly states that damages caused by faulty workmanship are not covered . . . .” (Ibid.) The court concluded that “faulty workmanship” includes the “defective execution of making or doing something.” (Ibid.) Here, too the policy states that loss “caused by” faulty workmanship is excluded. So the “well-settled” rule noted in Tzung “does not necessarily have any meaning.” (Ibid.)

In the other case, Allstate Ins. Co. v. Smith (9th Cir. 1991) 929 F.2d 447, the Ninth Circuit interpreted the clause “faulty workmanship” in the context of the policy as a whole, which included a section providing for losses involving “defective materials or methods of construction.” (Id. at pp. 449-450.) The court determined that the insurer’s failure to borrow that language in the faulty workmanship clause led to an inference that the insurer did not intend for “faulty workmanship” to also apply to methods of construction. (Id. at p. 450.) In finding the term “faulty workmanship” ambiguous, the court also considered the multiple dictionary definitions of “workmanship” and other cases that supported one reasonable interpretation of “faulty workmanship” as a flawed product. (Ibid.)

Here, although Walton’s and Berendos’ reading of Section 3 as a whole does not require the Faulty Workmanship Exclusion to be limited to building components, its reading of the policy does support a finding of ambiguity. Additionally, the plain meaning of “workmanship” can apply to both the product, as “something effected, made or produced” (Workmanship, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/workmanship) and the process, as “the quality or mode of execution” (Workmanship, Dicitionary.com, https://www.dictionary.com/browse/workmanship) or “the skill with which something was made or done” (Workmanship, Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/workmanship). Thus, workmanship can be a quality of a product or it can be the process of making the product. Accordingly, the Court finds that the Faulty Workmanship Exclusion is ambiguous.

When a policy provision is ambiguous, a court must “attempt to determine whether coverage is consistent with the insured’s objectively reasonable expectations. In so doing, the court must interpret the language in context, with regard to its intended function in the policy.” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1265; see Garamendi, supra, 131 Cal.App.4th at p. 42; Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912.) Walton relies only on the fact that the policy was an all-risk policy and that it also provided coverage for temporary structures. (Walton Motion at p. 11; see UMF 5.) But the policy also contains exclusions. Although temporary buildings or structures fall under Covered Property, and it was reasonable for Walton to expect coverage for temporary structures, that does not exempt the temporary structures from the exclusions. Losses to Covered Property (including temporary structures) are not covered if listed in section 3’s exclusions. (See UMF 4.)

“The next rule, which is applied only if neither of the above rules resolves the problem, is to interpret the ambiguous provision against the insurer.” (Garamendi, supra, 131 Cal.App.4th at p. 42.) Accordingly, “workmanship” must be construed as meaning a quality of the product, not the process of making the product.

That raises the question: what is the product at issue? Walton argues the Faulty Workmanship Exclusion applies only to “losses caused by a defective, finished product – not losses that resulted from a temporary roof.” (Walton Motion at p. 1.) Likewise, Berendos argues the Faulty Workmanship Exclusion only applies “to actual finished work that is defective.” (Berendos at p. 1.)

But the exclusions in section 3 do not state they apply only to finished products. The policy covers “[t]emporary buildings or structures at the project site.” The exclusions in section 3 refer to structures that can be temporary or permanent, such as walls, floors, roofs, etc. Indeed, in the definition of Covered Property, the policy expressly refers to items that “will become a permanent part of the building, structure, or project,” indicating that when the drafters intended to refer to a permanent thing, they expressly stated so. Also, a temporary item can be “finished” when there is no more work to be done on it, it will exist for some period of time, and them it will be removed. “Temporary” and “finished” are not mutually exclusive. In addition, the Court previously concluded in the September 13, 2018 order that “a triable issue of fact exists as to whether a plastic sheet intended to serve as a temporary covering of a removed roof would constitute a temporary ‘roof’ for purposes of a policy intended to insure against on-going construction.”

Further, Walton argues that it was “objectively reasonable for Walton to expect coverage [for] its construction of the temporary roof.” (Walton Motion at p. 11.) Walton does not explain why it should obtain the benefit of coverage for the temporary roof but not the detriment of possible exclusion under section 3.a. If a temporary roof is covered under the policy, then defective workmanship in that temporary roof would reasonably be encompassed by the Faulty Workmanship Exclusion. In other words, if the temporary roof has the quality of faulty workmanship, it could be subject to the exclusion. As detailed in the concurrent rulings on Philadelphia’s motions for summary adjudication, disputed facts exist about whether the temporary covering was defective, for example, whether it covered all the required surface area.

For these reasons, the Court cannot conclude as a matter of law that the Faulty Workmanship Exclusion does not apply.

CONCLUSION

The motions for summary adjudication are DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: October 22, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR SUMMARY ADJUDICATION (No. 7)

On August 22, 2019, Cross-Complainants Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”) filed a second amended cross-complaint (“SACC”) against Cross-Defendants Liberty Surplus Insurance Corporation; LTD Construction Services, GP dba Walton Construction Services (“Walton”); Interstate Restoration - California LP (“Interstate”); Philadelphia Indemnity Insurance Company (“Philadelphia”); and Tokio Marine Specialty Insurance Company. On January 6, 2020, Berendos moved for summary adjudication as to Philadelphia’s seventh affirmative defense on the ground that the Mold Exclusion is completely irrelevant.

REQUEST FOR JUDICIAL NOTICE

Philadelphia’s request for judicial notice is denied, as the documents are not relevant to the Court’s decision.

EVIDENTIARY OBJECTIONS

Berendos’ Objection Nos. 1-4 are overruled.

FACTUAL BACKGROUND

In 2014, Berendos began renovating two apartment buildings at 226 and 235 South Berendo Street (“Properties”). (Undisputed Material Facts “UMF” 1.) Berendos purchased a builder’s risk policy from Philadelphia that covered October 15, 2014 to October 15, 2015, with a policy limit of $4,098,125. (UMF 3, 5.) Under the policy, Philadelphia “will pay for direct physical ‘loss’ to Covered Property caused by or resulting from any of the Covered Causes of Loss.” (UMF 6.) “Covered Causes of Loss” are “Risks of Direct Physical ‘Loss’ to Covered Property unless ‘Loss’ is excluded in Section B., Exclusions.” (UMF 6, 10.) One exclusion states, “We will not pay for ‘loss’ caused by or resulting from any of the following. But if ‘loss’ by any of the Covered Causes of Loss results, we will pay for that resulting ‘loss.’ . . . Wear and tear, gradual deterioration, any quality in the property that causes it to damage or destroy itself, hidden or latent defect, rust, wet or dry rot, mold, dampness of atmosphere, freezing or extremes of temperature, insects, vermin, moths, rodents, or worms” (“Mold Exclusion”). (UMF 8.) Another exclusion states, “We will not pay for a ‘loss’ caused by or resulting from . . . Rain, . . . whether driven by wind or not. But we will pay for ‘loss’ . . . To the Covered property within the building or structure caused by or resulting from rain . . . when: (a) The building or structure first sustains damage from any of the Covered Causes of Loss to its roof or walls through which the rain . . . enters.” (UMF 9.)

In July 2014, Berendos hired Walton to perform work on the Properties. (UMF 2.) As part of the renovation, Walton removed the roofs from both buildings. (UMF 11.) While the roofs were still removed, rain was forecast, so Walton covered the roofs and existing plywood with Visqueen to try to protect the Properties. (UMF 12.) Rainwater from the storm entered the Properties, and Berendos hired Interstate to perform remediation. (UMF 13.)

DISCUSSION

When moving for summary adjudication of an affirmative defense, a plaintiff has the initial burden to make a prima facie showing that that the affirmative defense is without merit. (Continental Ins. Co. v. Columbus Line, Inc. (2003) 107 Cal. App. 4th 1190, 1199-1200 (Continental).) Then the burden shifts to the defendant or cross-defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

Philadelphia asserted as its seventh affirmative defense the policy’s Mold Exclusion, which states that it will not pay for any loss caused by or resulting from mold or dampness of atmosphere, unless it resulted from a Covered Cause of Loss. (UMF 8, 14.) Berendos contends that the Mold Exclusion is “completely irrelevant.” (Motion at p. 1.) The argument goes: If the structures are not covered, then the Mold Exclusion is irrelevant. If the structures are covered and the rainwater exclusion applies, the issue of mold is not reached. And if the structures are covered and the rainwater exclusion does not apply, then there is coverage regardless of mold. (Motion at pp. 1-2.) Berendos argues that in that last scenario, under the efficient proximate cause doctrine, the Mold Exclusion cannot apply because the predominant cause of the mold was the rainwater. (Id. at pp. 10-11.) Berendos cites Vardanyan v. Amco Insurance Company (2015) 243 Cal.App.4th 779 (Vardanyan), in which an insurance policy provided that a building collapse was covered if caused by specific listed perils. (Id. at p. 793.) The court concluded that “[a] policy cannot extend coverage for a specified peril, then exclude coverage for a loss caused by a combination of the covered peril and an excluded peril, without regard to whether the covered peril was the predominant or efficient proximate cause of the loss.” (Id. at p. 796.)

Here, in addition to the Mold Exclusion, the policy states that Philadelphia will not pay for a loss caused by or resulting from rain, unless the building first sustained damage from a Covered Cause of Loss through which the rain enters. (UMF 9.) It has not been determined that the Properties first suffered damage from a Covered Cause of Loss that allowed rain to enter. Rather, there is evidence that Walton removed the roofs during renovation, and they were still removed on the night of the rainstorm. (UMF 11-12.) Thus, there exists a scenario in which Philadelphia shows that the lack of roofs caused rain to leak into the structure, which then caused mold. In this scenario, unlike in Vardanyan, it could be shown that there was not a covered cause combined with an excluded cause.

But that does not mean the Court can conclude as a matter of law that the Mold Exclusion is irrelevant. The parties spend most of their briefing arguing about causation of mold occurring after the storm. That only addresses part of the affirmative defense; those arguments do not address preexisting mold. The parties agree that preexisting mold is subject to the Mold Exclusion. (Reply at p. 11.) Regardless of what caused the mold damage after the rainstorm, there is evidence of preexisting mold. The amount of preexisting mold is disputed, as Philadelphia submitted evidence of preexisting mold in the kitchens and bathrooms. (Miglietta Decl. ¶ 2, Ex. A at pp. 31-32, 35-40; Responses to UMF 16, 17.)

Berendos argues that even if there was preexisting mold, there is no evidence the remediation of any preexisting mold exceeded the $1.5 million Berendos already received from other sources specifically for mold remediation. (Motion at pp. 11-12.) According to Berendos, Philadelphia’s coverage obligations do not begin until the $1.5 million is exhausted on mold remediation. (Reply at p. 11.)

Berendos does not cite evidence that the Mold Exclusion does not apply unless the mold damage exceeds $1.5 million. Also, the only evidence Berendos cites to show that the remediation of preexisting mold cost less than $1.5 million is the declaration of Matthew Hamilton. His declaration contains two sentences – that after the rainstorm he walked around the job site, gained an understanding of what was affected, obtained authorizations, and oversaw the project, and that “[a]t least 95 percent of the remediation work that took place at the Berendos Properties by Interstate was on areas damaged by the rainstorm.” That conclusory sentence does not adequately support a finding that preexisting mold remediation cost less than $1.5 million. The declaration does not mention mold or Hamilton’s knowledge of the existence of mold. The sentence refers to “areas damaged by rainstorm,” which does not preclude the possibility that those areas had preexisting mold. And the declaration does not address the amounts that Walton paid to repair damage after the storm. (Response to UMF 13.)

In sum, Berendos did not meet is burden of showing that that the seventh affirmative defense is without merit.

A last point: If it is the case as Berendos contends that the $1.5 million has already paid for all mold remediation costs, then Berendos has no need to recover from Philadephia for mold remediation costs. Philadelphia seems to be taking the position that the Mold Exclusion does not completely bar all claims presented by Berendos, only those claims for mold remediation. (Response to UMF 14.) If Berendos is only seeking to recover from Philadephia for non-mold losses, and if Philadelphia’s position is that the Mold Exclusion does not apply to non-mold losses, this motion would appear to be moot.

CONCLUSION

The motion for summary adjudication is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: October 09, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR SUMMARY ADJUDICATION (NO. 5)

On April 2, 2019, Cross-Complainant LTD Construction Services, GP dba Walton Construction Services (“Walton”) filed a second amended cross-complaint (“SACC”) against Cross-Defendants Rockhill Insurance Company (“Rockhill”), Liberty Surplus Insurance Corporation (“Liberty”), Philadelphia Indemnity Insurance Company, Axis Surplus Insurance Company, Berendos, L.P. (“Berendos”) and Interstate Restoration – California LP. On December 27, 2019, Walton moved for summary adjudication against Liberty.

REQUEST FOR JUDICIAL NOTICE

Walton’s request for judicial notice in support of the motion is granted. Liberty’s request for judicial notice is granted. Walton’s request for judicial notice in support of the reply is denied, as Liberty’s demurrer is not relevant.

EVIDENTIARY OBJECTIONS

The Court cannot rule on Liberty’s objections to pages 25-28 and 31 of Exhibit 10 and to page 82 of Exhibit 13 to the Declaration of Patrick McGovern because the exhibits do not contain those pages. Liberty’s remaining objections to the Declaration of Patrick McGovern are overruled.

Walton’s objections to the deposition testimony of Cameron Hawkins are overruled. Walton’s objections to the deposition testimony of Stephen Hein are overruled. Walton’s objections to the deposition testimony of Mark Stealey are overruled. Walton’s objection to the deposition testimony of Joshua White is overruled.

FACTUAL BACKGROUND

Liberty issued an excess commercial general liability policy (“CGL Policy”) to Walton. (Undisputed Material Facts “UMF” 1-2, 31-32.) The CGL Policy states that Liberty “will pay on behalf of the Insured ‘loss’ that results from an occurrence during the ‘policy period,’” and that Liberty “will pay for ‘loss’ in excess of the Underlying Insurance shown in Item 5 of the Declarations, but only up to an amount not exceeding our Limits of Liability as shown in Item 4 of the Declarations.” (UMF 3-4, 33-34.) The CGL policy also states that “[e]xcept for any definitions, terms, conditions and exclusions of this policy, the coverage provided by this policy is subject to the terms and conditions of the First Underlying Insurance Policy, as shown in Item 5 of the Declarations.” (UMF 5, 35.)

The CGL Policy defines “loss” as “those sums which [Walton is] legally obligated to pay as damages, after making proper deductions for all recoveries and salvage, which damages are covered by the First Underlying Insurance Policy [from Rockhill].” (UMF 6-7, 36-37.) Endorsement No. 4 (“CCC Exclusion”) states that the CGL Policy does not apply to “[a]ny ‘loss’ for property damage to real or personal property in the care, custody or control of any Insured, or loaned to any Insured, or used, rented or occupied by any Insured, or as to which any Insured is for any purpose exercising physical control.” (UMF 8.) Endorsement No. 8 (“Mold Exclusion”) states that the CGL Policy does not apply to any loss “arising out of or related in any way, either directly or indirectly, to any actual, alleged or threatened inhalation, discharge, dispersal, seepage, migration, absorption, release, exposure, or escape of any mold, mildew or fungus in any form from any source, at any time,” or any loss “resulting from or in any way related, directly or indirectly, to any claim, suit, investigation, or administrative proceeding brought by or on behalf of any person, entity, or government authority for damages or any other relief or remedy because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, or in any way responding to or assessing the effects of mold, mildew or fungus in any form from any source, at any time.” (UMF 9, 28.)

Walton contracted to perform renovation work at Berendos’ two apartment buildings located at 226 South Berendo Street and 235 South Berendo Street. (UMF 10, 39.) Walton’s contract with Berendos states in Section 3.16, “The Contractor shall provide the Owner and Architect access to the Work in preparation and progress wherever located.” (UMF 14.) Section 6.1.1 states that Berendos reserves the right to perform construction or operations related to the project and to award separate contracts. (UMF 15.) Under Section 9.9.1, “The Owner may occupy or use any completed or partially completed portion of the Work at any stage when such portion is designated by separate agreement with the Contractor,” as long as the occupancy or use was consented to by the insurer. (UMF 16.) “Such partial occupancy or use may commence whether or not the portion is substantially complete, provided the Owner and Contractor have accepted in writing the responsibilities assigned to each of them for . . . damage to the Work and insurance, and have agreed in writing concerning the period for correction of the Work and commencement of warranties required by the Contract Documents.” (UMF 16.)

Berendos dictated the time and place of Walton’s work. (UMF 21.) Tenants occupied some units of the buildings during the work, and the building managers had keys to the building. (UMF 18, 20, 22.) On September 15, 2015, there was a rainstorm. (UMF 13.) At the time, Walton’s subcontractor, ACE Repointing Service, Inc., was performing work on the roof, which was not complete. (UMF 17.) Mold was later discovered during remediation for the water damage. (UMF 13, 42.)

Walton tendered a claim to Liberty under the CGL Policy on November 23, 2015. (UMF 23, 43.) Liberty issued reservation of rights letters in which it reserved the right to disclaim coverage under the CCC Exclusion and Mold Exclusion. (UMF 25-27, 44-46.) Liberty’s December 14, 2015 letter stated that “[b]ased upon the above mold exclusion, if there’s any damage to the claimant’s property due to mold, mildew, etc. it may not be covered and we reserve our rights to disclaim coverage.” (UMF 28, 47.) Liberty’s January 28, 2016 letter stated that “[t]o the extent that the claims involve a ‘loss’ relating to mold, mildew or fungus, such claims may be precluded from coverage by Endorsement No. 8.” (UMF 29, 48.)

DISCUSSION

A plaintiff or cross-complainant moving for summary adjudication must satisfy the initial burden of proof by proving each element of a cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) When moving for summary adjudication of an affirmative defense, a plaintiff has the initial burden to make a prima facie showing that that the affirmative defense is without merit. (Continental Ins. Co. v. Columbus Line, Inc. (2003) 107 Cal. App. 4th 1190, 1199-1200 (Continental).) Then the burden shifts to the defendant or cross-defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.) A motion for summary adjudication may be made only as to a cause of action, affirmative defense, claim for damages or issue of duty. (Code Civ. Proc., § 437c, subd. (f)(1).)

According to the notice of motion, Walton seeks to determine “the issue of duty owed by Liberty to Walton, specifically whether Endorsement No. 4 applies to bar the subject loss,” and Liberty’s affirmative defense as to “the issue of duty, specifically whether the exclusion for mold in Liberty’s insurance policy applies to the water damage loss (and resulting mold) caused by the September 15, 2015 storm.” Walton argues that Liberty is required to pay its claim under the CGL Policy because the CCC Exclusion and Mold Exclusion do not apply.

CCC Exclusion

Walton contends the CCC Exclusion requires that the property be under its exclusive or complete control, but here, Walton’s subcontractor and Berendos’ representative, property managers, and tenants maintained some control. (Motion pp. 11-13.) Walton cites Home Indemnity Co. v. Leo L. Davis, Inc. (1978) 79 Cal.App.3d 863 as interpreting this type of exclusion to require exclusive or complete control. (Motion at p. 11.) In Home Indemnity, the policy exclusion stated the policy did not apply to damage to “property in the care, custody or control of the insured as to which the insured is for any purpose exercising physical control.” (Home Indem., supra, 79 Cal.App.3d at p. 867.) The court stated, “Almost invariably where coverage is denied, physical control by the insured has been exclusive, even if such exclusivity was only momentary, so long as the damage occurred in that moment.” (Id. at p. 871.) “[C]ourts are not averse to holding it inapplicable where the control exercised by the insured possessory or physical is not exclusive and complete at the critical moment in question.” (Id. at p. 872.)

Walton also cites McMillin Homes Construction, Inc. v. National Fire & Marine Ins. Co. (2019) 35 Cal.App.5th 1042. In that case, the court recognized “a general rule: the CCC exclusion is inapplicable where the facts at best suggest shared control.” (Id. at p. 1055.) The court also highlighted “‘the need for painstaking evaluation of the specific facts of each case, especially those that bear on the nature and extent of the insured’s control.’ [Citation.]” (Id. at p. 1057.)

The CCC Exclusion states that the CGL Policy does not apply to “[a]ny ‘loss’ for property damage to real or personal property in the care, custody or control of any Insured, or loaned to any Insured, or used, rented or occupied by any Insured, or as to which any Insured is for any purpose exercising physical control.” (UMF 8.) Walton is the Named Insured under the policy. (UMF 2.) Walton argues it did not have exclusive or complete control over the buildings because tenants, Berendos, building managers, ACOF, and a subcontractor also had control. (Motion at pp. 12-13.) Therefore, Walton concludes, the CCC Exclusion does not apply. (Motion at p. 10.)

The evidence does not satisfy Walton’s initial burden. First, the CCC Exclusion excludes losses for damage to property “as to which any Insured” had control. Walton did not submit evidence that it is the only “Insured” under the CGL Policy. There is evidence suggesting that Berendos, L.P may qualify as an additional insured. (See, e.g., Walton’s Evidentiary Appendix at PDF p. 162 [February 3, 2016 reservation of rights letter from Liberty to Berendos, L.P. stating “Berendos, L.P. may qualify as an additional insured to the Excess Policy”]; SACC, ¶¶ 36(3), 103(v) [referring to Berendos as an additional insured]). If both Walton and Berendos are Insureds under the CGL Policy, then the fact that they both may have had control means their shared control could still be exclusive for the purpose of the CCC Exclusion.

Similarly, Walton argues in its reply that ACOF is not an Insured, but Walton submits no evidence of that fact, and the evidence suggestions otherwise. For example, Walton’s UMF 19 states, “Dora Gallo, president and CEO of ACOF and the designated representative of Berendos, similarly stated that Walton and Berendos shared control over the Project on ‘issues related to tenants.’” (UMF 19.) That fact suggests that ACOF were closely related so that the president of ACOF could speak for Berendos.

Second, the CCC Exclusion excludes “[a]ny ‘loss’ for property damage to real or personal property in the care, custody or control of any Insured.” Walton argues that tenants, building managers, and a subcontractor also had control of the apartment buildings. (Motion at pp. 12-13.) But Walton has not shown that the loss at issue here is for damage to property over which the tenants, building managers, or subcontractor had control. For example, Walton did not show that the portion of the building affected by water damage was controlled by tenants, the building managers, or subcontractor. Nor has Walton shown that the contract should be interpreted to mean that if the building is damaged in one area, a person having control of a different part of the building is deemed to have control over the damaged area. Indeed, the motion is vague as to the loss it addresses – the notice of motion refers to “the subject loss.” Because Walton did not specify the loss at issue and exactly who had control over the property where that loss occurred, the “painstaking evaluation of the specific facts of each case, especially those that bear on the nature and extent of the insured’s control” cannot be done here. (McMillin, supra, 35 Cal.App.5th at p. 1057.)

Third, the timing of the control is important. For the exclusion to apply, the damage must occur when the control over the property is exclusive. (Home Indem., supra, 79 Cal.App.3d at p. 871 [“Almost invariably where coverage is denied, physical control by the insured has been exclusive, even if such exclusivity was only momentary, so long as the damage occurred in that moment”].) Walton has not submitted evidence that the damage occurred when the control was shared. Much of Walton’s evidence is vague about when the other persons had shared control. (See, e.g., UMF 18, 19.)

Due to the vague and incomplete evidence submitted by Walton, the Court cannot conclude as a matter of law that the CCC Exclusion does not apply and therefore Liberty had a duty to pay for Walton’s undefined subject loss.

Mold Exclusion

Liberty asserted as its thirty-ninth affirmative defense that the claimed damages are precluded under the policy exclusions, “including but not limited to mold.” Walton contends there was no evidence of mold before the September 15, 2015 storm. (Motion at p. 15.) However, the pages of deposition testimony that Walton relies on in support are not included in its compendium of evidence. (See UMF 11-12.) In opposition, Liberty provides some evidence that mold existed before the storm. (Opposition at pp. 16-18; Hawkins Depo. at pp. 31-32, 35-40; Hein Depo. at pp. 72-74.)

Walton contends that even if there was pre-existing mold, the vast majority of mold was caused by the rainstorm’s water damage, which is covered under the policy. (See Motion at pp. 13-14.) Walton also contends that it is Liberty’s burden to prove how much of the mold was pre-existing and how much was caused by the storm. (Motion at p. 16.) When there is a single injury or an indivisible amount of property damage, an insurer “may counter the insured’s evidence of indivisibility with its own evidence that the damages are divisible and that only a limited portion of them resulted from covered events.” (State of California v. Allstate Ins. Co. (2009) 45 Cal.4th 1008, 1036-1037.)

However, in that case, the Supreme Court reversed a decision granting an insurer’s motion summary adjudication as to a policy exclusion, finding triable issues of fact as to, among other things, whether the damages were incapable of division. (Id. at p. 1037-1038.) Similarly, here there remain disputes of fact as to the mold caused by the storm, the amount of pre-existing mold, how much of the loss is exclude by the mold exclusion, and how much Liberty is responsible for covering under the policy. For example, Liberty presented evidence of preexisting mold in bathrooms, kitchens, and on the first floor. (Opposition at pp. 16-19.) At least as to those areas, Liberty has submitted sufficient evidence to create a disputed fact as to whether some of the mold was preexisting and not caused by the water damage from the storm. Therefore, the extent of the claimed losses, if any, that are precluded by the mold exclusion cannot be decided on summary judgment. (Id. at p. 1037.)

CONCLUSION

The motion for summary adjudication is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: September 24, 2020    Dept: 48

[TENTATIVE] ORDER RE: MOTION FOR SUMMARY ADJUDICATION

On August 22, 2019, Cross-Complainants Berendos L.P., 235 Berendo L.P., and A Community of Friends (collectively, “Berendos”) filed a second amended cross-complaint (“SACC”) against Cross-Defendants Liberty Surplus Insurance Corporation; LTD Construction Services, GP dba Walton Construction Services (“Walton”); Interstate Restoration - California LP (“Interstate”); Philadelphia Indemnity Insurance Company; and Tokio Marine Specialty Insurance Company. On January 8, 2020, Berendos moved for summary adjudication against Walton.

EVIDENTIARY OBJECTIONS

The Court did not rely on the portions of the Declaration of Dora Leong Gallo to which Walton objected.

FACTUAL BACKGROUND

In 2014, Berendos began renovating two apartment buildings located at 226 and 235 South Berendo Street, and in July 2014, Berendos hired Walton. (Undisputed Material Facts “UMF” 1-2.) The parties entered into an agreement based on AIA forms that the parties modified, and Walton initialed every page. (UMF 3-4, 23.)

The agreement states in Section 3.3.2 that Walton “shall be responsible to [Berendos] for acts and omissions of [Walton’s] employees, Subcontractors and their agents or employees, and other persons or entities performing portions of work for, or on behalf of, [Walton] or any of its Subcontractors, and for any damages, losses, costs, expenses, including, but not limited to, reasonable attorneys’ fees resulting from such acts or omissions.” (UMF 6.) Section 3.18.1 states, “To the fullest extent permitted by law [Walton] shall indemnify and hold harmless [Berendos] (and its officers, directors, employees, agents, affiliates, and partners or members) . . . from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of the or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property, but only to the extent caused by the negligent acts or omissions of the Contractor . . . .” (UMF 8.)

Under the agreement, “[i]n no event shall the owner have control over, charge of, or any responsibility for construction means, methods, techniques, sequences, or procedures for safety precautions and programs in connection with the work.” (UMF 14.) Walton “shall be solely responsible for, and have control over, construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work under the Contract, unless the Contract Documents give other specific instructions concerning these matters.” (UMF 15.)

Section 10.2.1(2) states that Walton had a duty to “take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to the Work and materials and equipment to be incorporated therein, whether in storage on or off the site, under care, custody or control of the Contractor or the Contractor’s Subcontractors or Sub-subcontractors.” (UMF 16.) Section 10.2.7 states that Walton “shall not permit any part of the construction or site to be loaded so as to cause damage or create an unsafe condition. When all or a portion of the Work is suspended for any reason, the Contractor shall securely fasten down all coverings and protect the Work, as necessary, from injury by any cause.” (UMF 10.) Berendos “shall have no liability or responsibility for the safety of the site or any improvements located on the site until acceptance of the Work by the Owner.” (UMF 17.)

During the renovation, Walton removed the roofs from both buildings. (UMF 24.) On September 14, 2015, Walton became aware of forecasts of rain, and it covered the buildings with Visqueen plastic sheets. (UMF 26, 31.) These efforts did not prevent all rainwater from entering the buildings. (UMF 32.)

On September 21, 2015, Berendos’ Managing General Partner emailed Walton’s President stating that the flooding “resulted from Walton Construction’s failure to adequately cover and protect the roof of each building.” (UMF 34-35.) She stated that Berendos expected that Walton would “return the buildings to their former state prior to this flooding event wholly at [Walton’s] expense. Furthermore, all other costs associated beyond normal daily building operations will be borne by Walton . . . .” (UMF 36.) Four days later, Walton’s President replied confirming that those “expectations are correct, and be assured that [Walton] has been and will continue to be diligent in restoring the Berendos to their former state.” (UMF 38.)

Berendos hired American Technologies, Inc. (“ATI”) and Interstate to perform remediation after the storm, and it hired Anderson Environmental to direct the remediation. (UMF 43, 49.) Walton paid for the work that ATI and Anderson Environmental performed, as well as Berendos’ associated labor and personnel costs beyond normal daily operations during remediation. (UMF 48, 50, 57.) Walston and its primary insurer also paid some of the costs towards relocating tenants, storing their property, per diems, and damages to personal property. (UMF 52-55.) Interstate’s work cost $6,191,047.48, and Walton refused to pay for the remediation. (UMF 60-61.)

DISCUSSION

A plaintiff moving for summary adjudication must satisfy the initial burden of proof by proving each element of a cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) Then the burden shifts to the defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.) A motion for summary adjudication may be made only as to a cause of action, affirmative defense, claim for damages or issue of duty. (Code Civ. Proc., § 437c, subd. (f)(1).)

According to the notice of motion states, Berendos seeks “an order stating that Walton has a contractual duty to indemnify the Berendos Entities for the damages sustained by two apartment buildings during the course of renovation work,” “an order establishing that Walton must indemnify the Berendos Entities for the cost of the remediation and related expenses, without regard to Walton’s negligence,” and “an order stating that to the extent that the Court concludes the indemnification provisions require a showing of negligence on the part of Walton, there is no dispute of material fact with regard to any question of comparative fault on the part of the Berendos Entities, and therefore Walton’s indemnity extends to the full extent of any damage for which Walton is found negligent without regard to any alleged comparative fault.”

These requested orders go beyond simply the adjudication of whether “ ‘one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.’” (Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, 243-244.) In Paramount, the plaintiff had sought summary adjudication of the issue of the defendant’s liability for breach of contract but not the issue of damages. (Id. at p. 229.) The court explained that “there is no statutory basis for summary adjudication on the issue of breach,” and that a plaintiff cannot turn a summary adjudication motion into a partial adjudication of a cause of action. (Id. at pp. 243-244.) That is what Berendos is trying to do, at least in part, with its request for orders that Berendos is not at fault and Walton must pay the “full extent of any damage,” which seems to mean the full amount that Berendos owes Interstate. Those issues go beyond the issue of whether Walton owes a contractual duty to Berendos.

As for the issue of a contractual duty, Berendos argues that Walton is required to pay it for the amounts it incurred in remedying the water damage based on two sections of the agreement.

Section 3.3.2

Under Section 3.3.2, Walton agreed that it would bear full responsibility for “any damages, losses, costs, expenses, including, but not limited to, reasonable attorneys’ fees resulting from” the acts and omissions of its “employees, Subcontractors and their agents and employees, and other persons or entities performing portions of the Work for, or on behalf of, [Walton] or any of its Subcontractors.” (UMF 6.) Berendos contends that Walton “is obligated to fully indemnify” Berendos because the losses the buildings sustained were the result of Walton’s acts or omissions as Walton was the only party responsible for the construction and protection of the buildings. (Motion at pp. 10-11.) In opposition, Walton contends that Section 3.3.2 is not an indemnity provision, but instead is a respondeat superior provision through which Walton merely accepted responsibility for the acts and omissions of its employees, subcontractors, and their agents and employees. (Opposition at pp. 10-11.)

Regardless of whether Section 3.3.2 can be considered an indemnity provision, and even if the purpose of the section was to make Walton responsible for the acts and omissions of its employees, it is those acts and omissions of Walton’s employees that are at issue here. By the plain language of Section 3.3.2, Walton is responsible for losses to Berendos resulting from the acts and omissions of Walton’s employees. This reading of Section 3.3.2 does not conflict with Section 3.18.1. Section 3.18.1 specifically states that the indemnification obligation in Section 3.18.1 “shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Section 3.18.” Therefore, Section 3.18.1 does not reduce the rights Berendos has, or the obligations Walton has, under Section 3.3.2.

But that is not the end of the discussion because Berendos has not shown by undisputed facts that a duty under Section 3.3.2 exists here. Section 3.3.2 states that Walton “shall be responsible to [Berendos] for acts and omissions of [Walton’s] employees . . . and for any damages, losses, costs, expenses, . . . resulting from such acts or omissions.” (Emphasis added.) Thus, Walton’s duty is limited to those losses resulting from its acts or omissions; it does not encompass any and all losses Berendos suffered. There must be a causal connection, regardless of whether Walton’s alleged failure to prevent the water damage is considered a breach of contract or a tort. (Civ. Code § 3300 [damage must be “proximately caused” by, or “in the ordinary course of things, would be likely to result” from, “the breach of an obligation arising from contract”]; State Dept. of State Hospitals v. Superior Court (2015) 61 Cal.4th 339, 352, fn.11 [“Proximate cause is also a necessary element of plaintiff’s negligence claims”].) Usually “proximate cause is a question of fact.” (State Dept. of State Hospitals, supra, 61 Cal.4th at p. 353.)

The facts are disputed concerning whether the losses Berendos is seeking to recover resulted from Walton’s acts or omissions. For example, Berendos submits UMF 24: “The sequencing and timing of roof removal was decided by Walton.” Walton disputes that fact, arguing that Walton was not responsible for Berendos’ delay in responding to a request for information or for the city inspector’s decision that roof parapets needed to be repointed, and that Berendos’ delay pushed the roof project from the summer when it is usually dry into September when rain occasionally occurs. (Response to UMF 24; Norris Decl., ¶¶ 6-9.) Walton also submits evidence that unexpected wind caused the damages. The weather forecast was for drizzle or light rain, but high winds entailed. (Quintero Decl., ¶¶ 4, 9; Norris Decl., ¶¶ 12, 14.)

Due to the disputed facts about causation, the Court cannot conclude as a matter of law that all of Berendos’ claimed losses resulted from acts or omissions of Walton and that Walton has a contractual duty to pay for all of the losses Berendos allegedly sustained in remedying the water damage.

Section 3.18.1

In the alternative, Berendos argues that Walston is required to indemnify it under Section 3.18.1, which provides that “[t]o the fullest extent permitted by law [Walton] shall indemnify and hold harmless [Berendos]. . . from and against claims, damages, losses and expenses, including but not limited to attorneys’ fees, arising out of the or resulting from performance of the Work . . . but only to the extent caused by the negligent acts or omissions of the Contractor . . . .” (UMF 8.) Berendos contends that Walton, not Berendos, was in control of the construction work, and therefore Berendos bears no comparative fault. (Motion at pp. 18-19.)

However, Berendos’ argument as to its lack of comparative fault first requires a finding of Walton’s negligence. Berendos failed to meet its burden of showing that Walton was negligent. The agreement imposes a duty on Walton to “take reasonable precautions for safety of, [and] provide reasonable protection to prevent damage, injury or loss to the Work and materials and equipment to be incorporated therein, whether in storage on or off the site, under care or custody or control of the Contractor or the Contractor’s Subcontractors or Sub-subcontractors.” (UMF 16.) In anticipation of the rainstorm, Walton covered the buildings with Visqueen plastic sheets. (UMF 31.) Although this did not prevent rain from entering the building, Berendos has not established that Walton’s actions were not “reasonable precautions” and did not provide “reasonable protection to prevent damage.” Also, as discussed above, there are disputed facts concerning the causation of the water damage and resulting losses.

Accordingly, summary adjudication is not appropriate on this ground.

Correspondence

Berendos argues that correspondence in September 2015 and Walton’s payment of other damages are evidence that Walton agreed to indemnify Berendos. (Motion at p. 15.) Berendos’ Managing General Partner emailed Walton’s President stating that Berendos expected that Walton would “return the buildings to their former state prior to this flooding event wholly at [Walton’s] expense. Furthermore, all other costs associated beyond normal daily building operations will be borne by Walton . . . .” (UMF 36.) Walton’s President replied that those “expectations are correct, and be assured that [Walton] has been and will continue to be diligent in restoring the Berendos to their former state.” (UMF 38.) This exchange shows an agreement that Walton would be diligent in restoring the buildings, but does not expressly state that as part of that diligence, Walton agreed to pay any and all costs Berendos incurred in hiring a third party to perform restoration work. And Walton’s and its insurer’s payments for other costs after the storm and rain damages—including tenant relocation, tenant property storage, tenant per diems, and tenant personal property—do not clearly reflect an agreement by Walton to pay all costs of third party restoration services.

CONCLUSION

The motion for summary adjudication is DENIED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: September 11, 2020    Dept: 48

[TENTATIVE] ORDER RE: CROSS-COMPLAINANTS’ MOTION FOR SUMMARY ADJUDICATION RE: BREACH OF CONTRACT, NEGLIGENCE, AND DECLARATORY RELIEF

On April 2, 2019, Cross-Complainant LTD Construction Services, GP d/b/a Walton Construction Services (“Walton”) filed its second amended cross-complaint (“SACC”) against Cross-Defendant Berendos L.P. (“Berendos”). On January 6, 2020, Berendos moved for summary adjudication of Walton’s causes of action for breach of contract, negligence, and declaratory relief. The notice of motion states that 235 Berendos L.P. and A Community of Friends also bring this motion for summary adjudication, but Walton’s SACC does not name those two entities as cross-defendants.

EVIDENTIARY OBJECTIONS

The Court did not rely on the Declaration of Robert Begland.

FACTUAL BACKGROUND

In 2014, Berendos began renovating two apartment buildings located at 226 and 235 South Berendo Street, and in July 2014, Berendos hired Walton. (Undisputed Material Facts “UMF” 1-2.) The parties entered into an agreement based on AIA forms that the parties modified, Walton had an opportunity to review the agreement, and Walton executed the agreement and initialed every page. (UMF 3, 5-6.)

Berendos was required to hire a licensed architect for the renovation project. (UMF 17.) The agreement provided a mechanism for Walton to report issues to Berendo and the architect through requests for information (“RFI”). (Additional Material Facts “AMF” 5.) The architect was required to respond in writing to RFIs within a reasonable time, not more than seven days. (UMF 18-19; AMF 6.) Berendos was also required to approve information in a timely manner and with reasonable promptness. (AMF 7-8.) The agreement provides, in Section 8.3.3, that an extension of the contract time “shall be the sole remedy of the Contractor for any (1) delay in the commencement, prosecution, or completion of the Work, (2) hindrance [or] obstruction in the performance of the Work, (3) loss of productivity, or (4) other similar claims . . . whether or not such Delays are foreseeable. The Contractor shall not be entitled to any compensation or recovery of any damages in connection with any Delay, including, without limitation, consequential damages, lost opportunity costs, impact damages, or other similar remuneration.” (UMF 21.)

Berendos were permitted to perform construction or operations and to award separate contracts in connection with other portions of the project, during which Berendos was required to supervise and direct the work “using [Berendos’] best skill and attention.” (UMF 35-36.) The agreement also required Berendos to purchase and maintain a builder’s risk “all-risk” policy with certain mandatory coverage provisions. (UMF 38-29.)

During the renovation, Walton removed the roofs from both buildings. (UMF 8.) After removal of the roof at 235 South Berendo, a city inspector expressed concern about the structural integrity of the parapet walls surrounding the roof and directed Walton to stop work. (AMF 3.) If the parapets needed reinforcement with new mortar (known as repointing), this work had to be performed before the new roof membrane could be installed. (AMF 4.) Walton submitted RFI No. 74, regarding the city inspector’s concerns, on August 6, 2015. (AMF 9.) Berendos’ structural engineer provided instructions on September 3, 2015. (AMF 12.) Berendos approved Walton’s chose of subcontractor, and they began the repointing work on September 10, 2015. (AMF 13.)

On September 14, 2015, Walton became aware of forecasts of rain, and it covered the buildings with Visqueen plastic sheets. (UMF 10-11.) These efforts did not prevent all rainwater from entering the buildings. (UMF 12.) Berendos hired American Technologies, Inc. and Interstate Restoration California LP (“Interstate”) to perform remediation after the storm. (UMF 13.)

A dispute arose between Berendos, Walton, Interstate, and various insurers regarding the scope of work performed, charges billed, and liability. (UMF 15.) The Court bifurcated this action into two phases. (UMF 15.) In Phase One, the jury returned a verdict in favor of Interstate and against Berendos and A Community of Friends for breach of contract and goods and services rendered.

LEGAL STANDARD

For each claim in the complaint, a plaintiff moving for summary adjudication must satisfy the initial burden of proof by proving each element of the cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) Then the burden shifts to the defendant to show that a triable issue of material fact exists as to the cause of action or a defense. (Code Civ. Proc., § 437c, subd. (p)(2).) To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163.)

DISCUSSION

Twelfth Cause of Action – Breach of Contract

Walton alleges that Berendos breached their contract by “failing to furnish, in a timely manner and with reasonable promptness, information required by [Walton] in RFI #74.” (SACC ¶ 115.) According to Walton, the delay in providing the information caused the repointing work for the parapets to be delayed until September 10, 2015. (See SACC ¶ 13.) The work was scheduled to be completed on September 15, but rain in the early morning caused water damage. (Id. at ¶¶ 13-15.) As a result of the water damage, Walton paid a total of $3,825,494.57 related to restoration work, relocating displaced tenants, and storing tenants’ belonging during the remediation and restoration work. (Id. at ¶ 19.) Walton seeks at least $3,800,000 for Berendos’ alleged breach of contract. (Id. at ¶ 116.)

Berendos contends that Walton’s twelfth cause of action for breach of contract fails as a matter of law because the parties’ contract does not entitle Walton to recover damages caused by delay. (Motion at p. 8.) Berendos relies on the language of section 8.3.3, which states that “an extension in the Contract Time, to the extent permitted under Subparagraph 8.3.1 shall be the sole remedy of the Contractor for any (1) delay in the commencement, prosecution, or completion of the Work, (2) hindrance [or] obstruction in the performance of the Work, (3) loss of productivity, or (4) other similar claims . . . whether or not such Delays are foreseeable. The Contractor shall not be entitled to any compensation or recovery of any damages in connection with any Delay, including, without limitation, consequential damages, lost opportunity costs, impact damages, or other similar remuneration.” (UMF 21.) Based on these provisions, Berendos contends the sole remedy was an extension of time. Because the renovation project was fully completed at the time that Walton filed the SACC (Gallo Decl. ¶ 4), Berendos contends this cause of action is moot.

Walton argues it is not seeking damages attributable to delay, but rather is seeking reimbursement of subcontractor restoration costs and tenant losses paid by Walton. (Opposition at p. 9.) But the SACC expressly states that Berendos “breached the Contract by, among other things, failing to furnish, in a timely manner and with reasonable promptness” the required information. (SACC, ¶ 115.) In listing the relevant contract provisions, Walton’s opposition emphasizes the terms requiring promptness and timeliness. (Opposition at pp. 9-10.) The opposition sums up Walton’s argument, “In other words, if Berendos had complied with its contractual obligation to respond to RFI No. 74 within 7 days (or even 21 days), no water loss would have ever occurred.” (Opposition at p. 12.) Thus, the SACC and the opposition all emphasize delay as the cause of the losses and the basis of Berendos’ breach.

Walton contends that “even if there had not been a delay to the construction schedule, Walton would still be pursuing a claim against Berendos for the restoration costs and tenant losses.” (Opposition at p. 9.) But Walton does not explain the contractual basis for any such reimbursement claim. Walton does not point to any contract provision upon which it would make such a claim not based on delay and does not identify any contract provision Berendos breached apart from the provisions requiring promptness and timeliness.

The basis for Walton’s breach of contract cause of action is Berendos’ delay in responding to RFI No. 74, which hindered its ability to continue work on the project and caused the project to be incomplete during the September 15, 2015 rainstorm. The damages Walton seeks are consequential damages of Berendos’ breach. Section 8.3.3 of the agreement states Walton “shall not be entitled to any compensation or recovery of any damages in connection with any Delay, including, without limitation, consequential damages . . . .” Under the contract, Walton is not entitled to damages caused by Berendos’ breach of the provisions requiring prompt and timely action.

Accordingly, the Court grants summary adjudication on the twelfth cause of action for breach of contract.

Thirteenth Cause of Action – Negligence

The thirteenth cause of action alleges that Berendos was negligent in failing to obtain an appropriate builder’s risk policy without a rain exclusion and in failing to exercise reasonable care in hiring and supervising Interstate such that the costs of remediation were too high. (SACC ¶¶ 118-128.) Berendos argues that Walton improperly attempts to convert breach of contract claims into tort claims. (Motion at p. 10.) “A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.” (Aas v. Superior Court (2000) 24 Cal.4th 627, 643.) However, “conduct amounting to a breach of contract becomes tortious when it also violates a duty independent of the contract arising from principles of tort law.” (Ibid.) Generally, “the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 552.)

Regarding the first act of alleged negligence, the parties’ contract stated that Berendo was to purchase and maintain a builder’s risk insurance policy in the same amount as the total value for the entire project. (UMF 38.) The policy was to be an “all-risk” policy and to include coverage for fire and physical loss or damage including theft, vandalism, malicious mischief, collapse, flood (if the site was in a flood zone), windstorm, falsework, testing and startup, temporary buildings and debris removal including demolition occasioned by enforcement of any applicable legal requirements. (UMF 39.) Walton alleges that Berendos negligently failed to state on its application for the policy that the roof would be replaced, and that this failure resulted in a “unsuitable” policy without a rain exclusion. (SACC ¶¶ 120-121.)

In other words, Walton alleges that Berendos acted negligently in trying to comply with the contract provision that required a builder’s risk insurance policy, and due to Berendos’ negligence, the policy was inadequate. Such allegations do not give rise to a completely independent tort and do not allege “conduct which is both intentional and intended to harm.” (Erlich, 21 Cal.4th at p. 552.) If a negligent act, which resulted in a breach of contract, also constituted a negligence cause of action, many more breaches of contracts would also be torts. That is contrary to the law. “[T]he mere negligent breach of a contract” is not sufficient. (Ibid.) Therefore, summary adjudication of the negligence cause of action based on the failure to obtain an adequate policy is granted.

Regarding the allegations that Berendos acted negligently in hiring and supervising Interstate, Berendos also argues Walton improperly turns a breach of contract claim into a negligence claim. The SACC alleges Berendos had a duty to exercise reasonable care in hiring and supervising Interstate and breached that duty by failing to exercise restraint of Interstate and the extent of its work, which caused Interstate to run up the remediation costs. (SACC ¶¶ 125-128.)

Berendos argues these allegations are nothing more than a claim for breach of the parties’ contract. Section 6.1.4 states that when Berendos performs construction work with its own forces, Berendos is subject to the same obligations and rights that apply to Walton under various articles of the contract, including Article 3. Section 3.3.1 states, “The Contractor shall supervise and direct the Work, including the work of all Subcontractors, using the Contractor’s best skill and attention.” Walton agrees that Berendos was responsible for the supervision of Interstate under the contract. (Opposition at pp. 13-14.)

Walton does not address why its allegations that Berendos failed to exercise restraint of Interstate and the extent of its work do not merely allege a breach of section 3.3.1, which required Berendos to supervise and direct Interstate’s work using Berendos’ best skill and attention. Tort damages are not available for negligent breach of a construction contract, which is what the negligence claim amounts to here. (Erlich, 21 Cal.4th at p. 558; see also Aas, supra, 24 Cal.4th at p. 636 [“the difference between price paid and value received . . . [is] primarily the domain of contract and warranty law or the law of fraud, rather than of negligence”]; Sands v. Walnut Gardens Condominium Assn. Inc. 35 Cal.App.5th 174, 177.) Walton cites no legal authority allowing a negligence cause of action for failure to supervise subcontractors as required by a construction contract.

Accordingly, summary adjudication is granted on the thirteenth cause of action.

Ninth Cause of Action – Declaratory Relief

The ninth cause of action for declaratory relief seeks a judicial declaration of the rights and duties of the parties regarding (a) whether Walton is responsible to defend, indemnify, and hold Berendos harmless from damages and claims arising from the September 15, 2015 storm; (b) whether Berendos breached its contractual obligation to timely provide information in response to RFI No. 74; (c) whether Berendos breached its contractual obligation to provide appropriate builder’s risk insurance; and (d) whether Berendos breached its contractual obligation to supervise Interstate. (SACC ¶ 97.) Twice in its opposition, Walton states that it has “three affirmative claims for declaratory relief, each of which is based on breach of contract,” specifically requests (b), (c) and (d). (Opposition at pp. 15-16, 21.) Walton apparently is not pursuing the request for declaratory relief (a).

Berendos contends that there is no basis for declaratory request (b) because this request is duplicative of the breach of contract cause of action. (Motion at p. 17.) That is correct. But the requests for declaratory relief (c) and (d) are not duplicative of the breach of contract cause of action.

“Declaratory relief generally operates prospectively to declare future rights, rather than to redress past wrongs. [Citations.] It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs. In short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.) When there is a controversy about past conduct and money damages would be an adequate remedy, declaratory relief is not appropriate. (Ibid.) When a party “has a fully matured cause of action for money, he must seek damages, and not pursue a declaratory relief claim.” (Ibid.)

The requests for declaratory relief (b)-(d) are all about past conduct – past breaches of contract – not about future rights, and they are the type of claims where money damages would be an adequate remedy. Therefore, declaratory relief is not proper. The motion for summary adjudication is granted on the ninth cause of action.

CONCLUSION

The motion for summary adjudication is GRANTED.

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are STRONGLY encouraged to appear remotely.

Case Number: BC609793    Hearing Date: December 20, 2019    Dept: 48

(1) MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT;

(2) MOTION FOR LEAVE TO FILE CROSS-COMPLAINT;

(3) MOTION TO TAX COSTS

MOVING PARTY: (1) Defendants/Cross-Complainants/Cross-Defendants Berendos, L.P., and Defendants/Cross-Complainants 235 Berendo, L.P., A Community of Friends and Cross-Defendant Interstate Restoration California;

(2) Defendant/Cross-Complainant Philadelphia Indemnity Insurance Company;

(3) Defendants/Cross-Complainants/Cross-Defendants Berendos, L.P., and Defendants/Cross-Complainants 235 Berendo, L.P., A Community of Friends

RESPONDING PARTY(S): (1) Defendant/Cross-Complainant/Cross-Defendant Ltd Construction Services, GP d/b/a Walton Construction Services; Plaintiff/Cross-Defendant Liberty Surplus Insurance Corporation;

(2) Defendant/Cross-Complainant/Cross-Defendant Ltd Construction Services, GP d/b/a Walton Construction Services; Plaintiff/Cross-Defendant Liberty Surplus Insurance Corporation;

(3) Plaintiff/Cross-Defendant Liberty Surplus Insurance Company

PROOF OF SERVICE:

ANALYSIS

Motion for Good Faith Settlement

Joinder

Plaintiff/Cross-Defendant Liberty Surplus Insurance Corporation’s notice of joinder in the opposition filed by LTD Construction Services, GP dba Walton Construction Services is GRANTED as timely.

Discussion

Defendants/Cross-Complainants/Cross-Defendants Berendos, L.P., and Defendants/Cross-Complainants 235 Berendo, L.P., A Community of Friends and Cross-Defendant Interstate Restoration California brings a motion for determination of good faith settlement.

Opposing parties have objected on the ground that the written settlement agreement has not been provided for their review. It appears that on a contested motion for application of good faith settlement, the contesting party is entitled to see a copy of the written settlement agreement:

Relying on City of Grand Terrace v. Superior Court (1987) 192 Cal. App. 3d 1251 [238 Cal. Rptr. 119], the developer argued the court does not need to review the written agreement since it may approve a settlement under section 877.6 based on a "barebones" declaration describing the general terms. Rejecting the argument and issuing the writ, the First District explained: "Developer overstates the impact of Grand Terrace. The court there merely suggested that because many settlements are uncontested the settlor's initial papers need only 'set forth the ground of good faith accompanied by a declaration which sets forth a brief background of the case.' . . . This does not excuse settlors in a contested case from making available to nonsettlors and the court the details of the settlement. We note that a party may not both seek confirmation of a settlement agreement and withhold it from nonsettling defendants on the grounds of confidentiality. . . . , , ,

Nor are we persuaded by Lawco's argument that parties may withhold the written agreement as long as they have revealed the important terms. That may be true absent an objection to the settlement as suggested in Grand Terrace, but that is not the case on a contested motion. (Alcal Roofing & Insulation v. Superior Court, supra, 8 Cal. App. 4th at p. 1127.)

Mediplex of California, Inc. v. Superior Court (1995) 34 Cal.App.4th 748, 752-753 (italics in original, bold emphasis and underlining added).

Accordingly, the hearing on the motion for determination of good faith settlement is CONTINUED to February 20, 2020. A copy of the written settlement agreement is to be provided to the parties which file opposition briefs, i.e., Walton and Liberty, by January 6, 2020. Further oppositions are due January 31, 2020. Further reply is due February 14, 2020.

Motion for Leave to File Cross-Complaint

Request for Judicial Notice

Philadelphia and Tokio Marine’s request that the Court take judicial notice of the various cross-complaints filed in this action and the Court’s tentative ruling on the Berendos’ entities’ motion for leave to file a second amended complaint is GRANTED per Evid. Code § 452(d)(court records).

Discussion

Defendant/Cross-Complainant Philadelphia Indemnity Insurance Company moves for leave to file a cross-complaint pursuant to CCP § 428.50.

A motion to file a cross-complaint at any time during the course of the action must be granted unless bad faith of the moving party is demonstrated where forfeiture would otherwise result. Factors such as oversight, inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless accompanied by bad faith.” Silver Orgs. v. Frank (1990) 217 Cal.App.3d 94, 99 (bold emphasis and underlining added).

For purposes of CCP § 426.50, bad faith means:

actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake . . ., but by some interested or sinister motive[,] . . . not simply bad judgment or negligence, but rather . . . the conscious doing of a wrong because of dishonest purpose or moral obliquity; . . . it contemplates a state of mind affirmatively operating with furtive design or ill will. (Citations omitted.)”

Silver Orgs, supra, 217 Cal.App.3d at 100 (bold emphasis added).

“[The] principle of liberality requires that a strong showing of bad faith be made in order to support a denial of the right to file a cross-complaint under this section.” Foot's Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897, 902 (bold emphasis added).

Here, the opposing parties have failed to demonstrate the requisite bad faith sufficient to preclude the filing of a cross-complaint, as there is an insufficient showing that the delayed cross-complaint would work a substantial injustice to the opposing parties and would prejudice their position in some way. Id. at 114 Cal.App.3d at 903-04. The Court notes that Philadelphia’s cross-claims arise out of the same series of transactions and occurrences as are already the subject of the various cross-complaints. A copy of the proposed Cross-Complaint is attached as Exhibit A to the Declaration of Margaret Miglietta.

The Court finds that leave to file the proposed Cross-Complaint is proper.

The motion for leave to file a cross-complaint is GRANTED. A stand-alone copy of the cross-complaint is to be filed today and is deemed to be served as of the date of this order.

Motion to Tax Costs

Defendants/Cross-Complainants/Cross-Defendants Berendos, L.P., and Defendants/Cross-Complainants 235 Berendo, L.P., A Community of Friends (hereinafter referred to as “ACOF”) move to tax costs sought by Liberty Surplus Ins. Corp.

Moving parties’ argument that awarding costs at this stage is premature because there may be an offset based on the outcome of Liberty’s claims against the ACOF asserted in the operative complaint. Liberty prevailed as to ACOF”s cross-claims asserted against Liberty in the 2AXC. See September 20, 2019 minute order. Judgment of dismissal was entered in favor of Liberty and against ACOF as to ACOF’s 2AXC.

A cross-complaint is treated as a separate action. Bertero v. National General Corp. (1974) 13 Cal.3d 43, 51-52; Lori, Ltd. v. Wolfe (1948) 85 Cal.App.2d 54, 61. Accordingly, Liberty is the prevailing party in whose favor a dismissal was entered. CCP § 1032(a)(4). Accordingly, Liberty is entitled to recover costs. CCP § 1032(b).

ACOF’s attempt to limit Liberty’s recovery of costs to those incurred in defending against the 2AXC is misplaced. Liberty is entitled to recover all costs incurred in defending against ACOF’s cross-claims from the date the original cross-complaint was filed on August 17, 2016.

In this regard, the attachment to the Memorandum of Costs Worksheet (Errata) reflects that costs being sought pertain to Berendos/ACOF’s cross-complaint and to the underlying facts pertaining to remediation, which are relevant the coverage issues. In general, Liberty is entitled to recover such costs without apportionment as to the remaining parties.

¿ Item 1: Filing and Motion Fees.

ACOF argues that $901 in fees for filing predominately predate the 2AXC. As noted above, the Court rejects this proffered limitation on recovery of costs.

The motion to tax Item No. 1 – Filing and Motion Fees is DENIED in its entirety.

¿ Item 2: Jury Fees.

This $150 in jury fees was paid for Liberty’s own claims against remaining parties. The Court agrees that these fees are not recoverable as against ACOF based upon dismissal of the 2AXC.

The motion to tax item No. 2 – Jury Fees is GRANTED in the amount of $150.00.

¿ Item 4: Deposition Costs.

As noted, the attachment to the Memorandum of Costs Worksheet (Errata) reflects that costs being sought pertain to Berendos/ACOF’s cross-complaint and to the underlying facts pertaining to remediation, which are relevant the coverage issues. In general, Liberty is entitled to recover such costs without apportionment as to the remaining parties. The Court finds such deposition costs to have been reasonably necessary in preparation for defense of the Cross-Complaint; such costs are recoverable in the Court’s discretion. Chaaban v. Wet Seal, Inc. (2012) 203 Cal.App.4th 49, 57; Moss v. Underwriters' Report, Inc. (1938) 12 Cal.2d 266, 275-276.

The motion to tax Item No. 4 – Deposition Costs is DENIED in its entirety.

¿ Item 5: Service of Process.

As noted, the attachment to the Memorandum of Costs Worksheet (Errata) reflects that costs being sought pertain to Berendos/ACOF’s cross-complaint and to the underlying facts pertaining to remediation, which are relevant the coverage issues. Even if subpoenas were eventually quashed, the prevailing party is entitled to an award of costs incurred as to unsuccessful aspects of the litigation. Michell v. Olick (1996) 49 Cal.App.4th 1194, 1199-1201.

The motion to tax Item No. 5 – Service of Process is DENIED in its entirety.

¿ Item 14: Electronic Filing or Service.

ACOF argues that $178.62 in electronic filing fees are not directly related to the 2AXC. As noted above, the Court rejects this proffered limitation on recovery of costs.

The motion to tax Item No. 14 – Electronic Filing or Service is DENIED in its entirety.

¿ Item 16: Other.

Moving parties seek to tax costs incurred for attorney service calls, court call fees and photocopies for trial exhibit fees unrelated to ACOF’s claims against Liberty. The Court finds moving parties’ argument to be persuasive. Any such costs were “merely convenient or beneficial” to the preparation of litigation and/or were not “reasonably necessary to the conduct of the litigation” pertaining to ACOF’s cross-claims. CCP § 1033.5(c)(2).

Accordingly, the motion to tax Item 16 – Other is GRANTED in the amount of $15,478.39.

Case Number: BC609793    Hearing Date: December 06, 2019    Dept: 48

(1) MOTION TO SEVER LIABILITY CLAIMS, COVERAGE CLAIMS AND CLAIMS OF BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING;

(2) DEMURRER TO SECOND AMENDED CROSS-COMPLAINT

MOVING PARTY: (1) Plaintiff/Cross-Defendant Liberty Surplus Insurance Corporation;

(2) Cross-Defendant LTD Construction Services, GP d/b/a Walton Construction Services

RESPONDING PARTY(S) (1) Defendant LTD Construction Services, GP d/b/a Walton Construction Services; Defendants/Cross-Defendants Berendos, L.P., 235 Berendos, L.P. and A Community of Friends; Defendant/Cross-Defendant Philadelphia Indemnity Insurance Company and Cross-Defendant Tokio Marine Specialty Insurance Company

(2) Defendant/Cross-Complainant Berendos L.P. and Defendants/Cross-Complainants 235 Berendos, L.P. and A Community of Friends

PROOF OF SERVICE:

Plaintiff/Cross-Defendant Liberty Surplus Insurance Corporation moves to sever ate the Phase II trial based upon three broad but distinct issues: (1) liability/cause of the loss; (2) coverage based upon the cause of the loss including priority of coverage and contribution issues; and (3) breach of the duty of good faith if any duty of coverage is found.

The Court does not find a persuasive reason why the convenience of witnesses, the ends of justice, avoidance of prejudice, or expedition and economy would be served by the proposed severance of Phase II into three separate phases.

The Court finds the various arguments in opposition to be persuasive. Most significantly, Philadelphia and Tokio Marine’s argument that a finding that Walton was not liable or negligent would not necessary resolve the Philadelphia and Tokio Marine coverage issues, as the quality of Walton’s workmanship would still need to be tried. This, in turn, will lead to a duplication of witnesses and evidence in the second phase of the proposed severed trials.

Accordingly, the motion to sever is DENIED.

Demurrer

1. First Cause of Action (Breach of Contract).

The first cause of action is based upon two alleged agreements: (1) the written contract attached as Exhibit 3 to the 2AXC, allegedly made for the benefit of each of the Berendos’ Entities as third party beneficiaries; (2) a separately agreement to pay for the remediation necessary to cure the damage resulting from the September 15, 2015 rain storm. 2AXC, ¶¶ 78, 79.

¶ 17 alleges that the Berendos contract with Walton contains an express indemnity provision (without specifying the particular section of the contract).

Cross-Defendant calls the Court’s attention to § 3.18—Indemnification in the General Contract (2AXC, Exhibit 3, Page 077):

§ 13.18.1 To the fullest extent permitted by law the Contractor shall indemnify and hold harmless the Owner (and its officers, directors, employees, agents, affiliates, and partners or members), Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property, but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Section 3.18.

. . .

§ 3.18.3 The Contractor's indemnity obligations under this Paragraph 3.18 shall also specifically include, to the extent caused by the negligent acts or omissions of the Contractor, without limitation, all fines, penalties, damages, liability, costs, expenses (including, without limitation, reasonable attorneys' fees), and punitive damages (if any) arising out of or in connection with any (i) violation of or failure to comply with any Applicable Requirements that bears upon the performance of the Work by the Contractor, a Subcontractor, or any person or entity from whom either is responsible, (ii) means, methods, procedures, techniques, or sequences of execution or performance of the Work, and (iii) failure to secure and pay for permits, fees, approvals, licenses, and inspections as required under the Contract Documents, or any violation of any permit or other approval of a public authority applicable to the Work, by the Contractor, a Subcontractor, or any person or entity for whom either is responsible.

§ 3.18.4 The Contractor shall defend the Owner and the Owner's affiliates, employees, and successors in any and all actions brought by the Subcontractors or material suppliers against the Owner to foreclose a mechanic's lien on the real property of the Work, to enforce any stop notice against the Work or for common counts or any other claim arising out of the Work, except if such actions or claims are caused solely by the Owner's failure to pay the Contractor in breach of its obligation under the terms of this Contract. The Contractor shall indemnify the Owner and its affiliates and employees and successors with respect to such actions or claims, including, but not limited to, reasonable attorneys' fees, and for amounts paid by the Owner in good faith settlement of mechanic's lien foreclosure, stop notice and common counts actions against the real property of the Work.

§ 3.18.5 The Contractor shall indemnify and hold harmless all of the persons or entities to be indemnified pursuant to Paragraph 3.18 from and against any costs and expenses (including reasonable attorney's fees) incurred by any of the indemnitees in enforcing any of the Contractor's defense, indemnity and hold harmless obligations under this Contract.

(Bold emphasis and underlining added).

Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation. ( Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 [44 Cal. Rptr. 2d 370, 900 P.2d 619] (Waller).) “The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the ‘mutual intention’ of the parties. ‘Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.) The “clear and explicit” meaning of these  [*648]  provisions, interpreted in their “ordinary and popular sense,” unless “used by the parties in a technical sense or a special meaning is given to them by usage” (id., § 1644), controls judicial interpretation. (Id., § 1638.)’ [Citations.] A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. [Citation.] But language in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract.” ( Waller, supra 11 Cal.4th at p. 18.)

MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 647-48 (bold emphasis added).

Here, the Court agrees with demurring Cross-Defendant’s argument. The Court finds that a reasonable interpretation of the contract language as a whole is that Cross-Defendant’s indemnity obligations under § 3.18 et seq. only arise upon either an admission of negligently causing injury/destruction, or a court finding the existence of negligently caused injury/destruction. Negligence is not a concept that is capable of objectively being determined among lay persons; it requires a court’s determination in that regard (absent an admission of fault for falling below the standard of care). Indeed, § 3.18.3 refers to the Contractor’s (i.e., Walton’s) liability for punitive damages caused by its negligent acts or omissions—damages which can only exist after a court trial.

Accordingly, the Court finds that the 2AXC fails to state a cause of action for breach of contract. The Court notes that this ruling does not leave Cross-Complainant without a remedy: the third cause of action for declaratory relief against Walton will address whether Walton’s indemnity obligation is triggered by its negligence.

The demurrer to the first cause of action is SUSTAINED without leave to amend.

Case Number: BC609793    Hearing Date: November 18, 2019    Dept: 48

(1) DEMURRER TO SECOND AMENDED CROSS-COMPLAINT;

(2) MOTION TO STRIKE RE: SECOND AMENDED CROSS-COMPLAINT

MOVING PARTY: (1) Cross-Defendant Tokio Marine Specialty Insurance Company;

(2) Cross-Defendant Philadelphia Indemnity Insurance Company

RESPONDING PARTY(S): (1) & (2) Defendants/Cross-Complainants/Cross-Defendants Berendos, L.P., and Defendants/Cross-Complainants 235 Berendo, L.P., and A Community of Friends;

ANALYSIS

Cross-Defendant Tokio Marine Specialty Insurance Company’s Demurrer

Request for Judicial Notice

Defendant’s request that the Court take judicial notice of court records filed in this case is GRANTED per Evid. Code § 452(d)(court records).

Analysis

The notice of demurrer identifies Tokio Marine Specialty Insurance Company as the sole demurring party. This demurrer will be treated as such.

Fifth Cause of Action (Declaratory Relief); Ninth Cause of Action (Breach of Contract).

Having considered, the relevant Tokio Marine insurance policy, which is attached as Exhibit 9 to the Berendos entities’ 2AXC, the Court finds that the 2AXC on its face demonstrates that Cross-Complainant Berendos Entities has pled fact sufficient to constitute causes of action for declaratory relief and breach of contract against Tokio Marine.

The fifth cause of action seeks a declaration as to whether Tokio Marines owes the Berendos Entities a duty to indemnity and/or defend. 2AXC, ¶ 97. The ninth cause of action for breach of contract alleges that Tokio Marine has refused to honor its obligation to pay the Berendos Entities’ claims, including certain fees and costs of defense, as required by the terms of the policy. 2AXC, ¶ 118.

Liberty’s 1AC filed on February 16, 2017 alleges that the rainfall event caused rainwater to infiltrate the buildings, causing approximately 50 apartment units to be flooded, and causing damage to the tenants’ personal property from mold. Liberty 1AC, ¶ 25. These damages are part of what Liberty refers to as the “Claim.” Id. at ¶ 28. Liberty alleges that, subject to a reservation of rights, it has agreed to pay certain expenses related to the Claim, which are subject to reimbursement by the Defendants. Id. at ¶ 32.

Liberty brings claims for subrogation, equitable indemnification, equitable contribution and reimbursement against the Berendos Entities. Liberty 1AC, second through fifth causes of action. Notably, these bases of recovery against the Berendos Entities are, at least in part, equity-based (i.e., not pursuant to an express contractual assumption).

Looking at the Tokio Marine policy attached as Exhibit 9 to the Berendos Entities’ 2AXC, the language therein expressly recognizes that Tokio Marine has a duty to defend against any suit seeking damages because of “property damage” to which the insurance policy applies. (“COMMERCIAL GENERAL LIABILITY COVERAGE FORM” Section I – Coverages [Page 1 of 16])

Accordingly, Tokio Marine has a duty to defend because Liberty’s claims in its 1AC, i.e., a “suit,” against the Berendos Entities suggest a claim potentially covered by the Tokio Marine policy to recover for amounts paid by Liberty to tenants for mold damage to their personal property which amounts Liberty seeks to recover from the Berendos Entities.

Accordingly, the fifth cause of action for declaratory relief and the ninth cause of action for breach of contract are sufficiently pled.

The demurrer to the fifth and ninth causes of action is OVERRULED.

Cross-Defendant Tokio Marine to answer the 2AXC within 10 days.

Cross-Defendant Philadelphia Indemnity Insurance Company’s Motion to Strike

The motion to strike is DENIED in its entirety because it is in fact a demurrer.

Preliminarily, we note a motion to strike is generally used to reach defects in a pleading which are not subject to demurrer. A motion to strike does not lie to attack a complaint for insufficiency of allegations to justify relief; that is a ground for general demurrer.

Pierson v. Sharp Mem'l Hosp. (1989) 216 Cal.App.3d 340, 342.

To the extent Philadelphia would seek to bring a motion for judgment on the pleadings following this ruling, Philadelphia is to consider whether it would be successful in light of the above analysis re: Tokio’s demurrer and the fact that the relevant language in the Philadelphia policy (attached as Exh. 5 to the 2AXC) is identical to that found in the Tokio Marine policy (Exh. 9 to the 2AXC).

Cross-Defendant Philadelphia Indemnity Insurance Company is ordered to answer the 2AXC within 10 days

Case Number: BC609793    Hearing Date: November 15, 2019    Dept: 48

MOTION TO QUASH BUSINESS RECORDS SUBPOENA AND/OR FOR A PROTECTIVE ORDER

MOVING PARTY: Defendants/Cross-Complainants/Cross-Defendants Berendos, L.P, 235 Berendos, L.P. A Community of Friends

RESPONDING PARTY(S): Plaintiff/Cross-Defendant Liberty Surplus Insurance Corporation

PROOF OF SERVICE:

ANALYSIS

Motion to Quash/Protective Order

Defendants/Cross-Complainants/Cross-Defendants Berendos, L.P, 235 Berendos, L.P. A Community of Friends moves to quash the subpoena duces tecum for production of records served upon third party Barker Management Inc. and/or for a protective order excusing compliance with the subpoena.

The business records subpoena issued to Barker Management Inc. by Liberty Surplus seeks production of the following documents:

For the period January l, 1995 to the present date, any and all documents and records pertaining to the PROPERTY addresses, including but not limited to:

a) Any and all DOCUMENTS which embody agreements, contracts, subcontracts, addenda, purchase orders, bids, proposals, change orders, extensions, releases, and settlement agreements RELATING TO the PROPERTIES;

b) Any and all correspondence, memorandum, meeting minutes, emails, notices, logs, journals, databases, request for information and/or schedules RELATING TO the PROPERTIES.

c) Any and all photographs, images, recordings and/or videos RELATING TO the PROPERTIES;

d) Any and all budgets, ledgers, accounting records, pay requests, statements, invoices, and/or bids RELATING TO the PROPERTIES;

e) Any and all warranties, request for repairs, instruction manuals, maintenance manuals, maintenance schedules, inspection schedules, repairs, customer service requests and/or logs, repairs to common areas/property, and repair work orders RELATING TO the

PROPERTIES;

f) Any and all DOCUMENTS regarding invoices for work or material supplied RELATING TO the PROPERTIES;

g) Any and all DOCUMENTS regarding or referring to the scheduling of work RELATING TO the PROPERTIES.

In the opposition, Liberty has demonstrated good cause only as to documents pertaining to repair and maintenance to address water intrusions, water leaks and mold remediation. Liberty is entitled to production of these particular documents for the period January 1, 1995 up until the date the subject mold remediation was billed, but not to the present. Even though the storm which caused the loss occurred on September 15, 2015, subsequent remediation of the damage caused by that loss is relevant to compare to areas of prior incidences of water intrusion, water leaks and mold remediation. Once that damage was repaired/remediated, subsequent incidents are not relevant to the condition of the property as of September 15, 2015.

Note that even if responsive documents have already been produced, this does not excuse compliance with the subpoena:

A party is permitted to use multiple methods of obtaining discovery and the fact that information was disclosed under one method is not, standing alone, a proper basis for refusing to provide discovery under another method. ( Coy v. Superior Court (1962) 58 Cal.2d 210, 218-219 [23 Cal.Rptr. 393, 373 P.2d 457].) 

Irvington-Moore, Inc. v. Superior Court (1993) 14 Cal.App.4th 733, 739.

Accordingly, although the motion to quash the subpoena and alternative motion for a protective order is DENIED, the Court orders the subpoena modified as follows: The only documents to be produced are those pertaining to repair and maintenance to address water intrusions, water leaks and mold remediation for the period January 1, 1995 up until the date the subject mold remediation was billed, but not to the present.

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