BERKSHIRE HATHAWAY DIRECT INSURANCE COMPANY VS THE BETTER MOVING COMPANY, ET AL.

Tentative Rulings

Case Number: *******0558 Hearing Date: August 24, 2023 Dept: G

Defendant Isom Innis’s Demurrer to First Amended Complaint

Respondent: Plaintiff Berkshire Hathaway Direct Insurance Company

TENTATIVE RULING

Defendant Isom Innis’s Demurrer to First Amended Complaint is SUSTAINED with ten (10) days leave to amend as to the first cause of action and OVERRULED as to the remaining causes of action.

BACKGROUND

This is a breach of contract action arising from an insurance policy. From February 2021 to February 2022, Berkshire Hathaway Direct Insurance Company (BHDIC) provided business owners’ insurance coverage to The Better Moving Company (BMC). In June 2021, Isom Innis filed a civil action against BMC, Ahmed Elsayed Ellakkany, and Anna K. Ellakkany, alleging they mishandled or stole personal property that Innis had entrusted to BMC for storage. Although BHDIC provided defense counsel for BMC and the Ellakkanys, BHDIC alleges counsel had to withdraw after BMC and the Ellakkanys refused to cooperate.

On February 24, 2023, BHDIC filed a complaint for declaratory relief against BMC, the Ellakkanys, Innis, and New York Marine and General Insurance Co. (NYMGI), alleging the following causes of action: (1) breach of contract, (2) intentional concealment or misrepresentation with the policy, (3) intentional concealment or misrepresentation with the claim, (4) breach of duty to cooperate, (5) no “occurrence,” (6) no “property damage” during the policy period, (7) no “property damage,” (8) expected or intended acts exclusion, (9) care, custody, or control exclusion, (10) impaired property or property not physically injured exclusion, (11) criminal acts exclusion, (12) willful acts pursuant to Insurance Code section 533, (13) no recovery from BHDIC by other insurers, and (14) no coverage for punitive damages.

On March 14, 2023, BHDIC filed a First Amended Complaint (FAC) against the same defendants alleging the same causes of action with a fifteenth cause of action to bind Innis to the judgment.

On May 15, 2023, Innis filed the present demurrer. Prior to filing on May 11, Innis’s counsel met and conferred telephonically with BHDIC’s counsel and was unable to reach a resolution. (Ruttenberg Decl., 2.)

A hearing on the demurrer and a case management conference are set for August 24, 2023. A hearing on an extension of time to obtain default judgments is also set for October 9.

ANALYSIS

Innis demurs to BHDIC’s entire FAC on the grounds that it fails to state a claim against Innis. For the following reasons, the court SUSTAINS Innis’s demurrer to BHDIC’s first cause of action with leave to amend and OVERRULES Innis’s demurrer to the remainder of BHDIC’s FAC.

Legal Standard

A party may demur to a complaint on the grounds that it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., 430.10, subd. (e).) A demurrer tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 (Hahn).) When considering demurrers, courts accept all well pleaded facts as true. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, at p. 747.)

Discussion

Innis argues BHDIC’s FAC fails to plead sufficient facts to state a claim against Innis because Innis was not a party to the insurance policy and declaratory relief is improper. With regards to the first cause of action for breach of contract, the court agrees.

To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Here, while BHDIC alleges the existence of an agreement between BHDIC and BMC, BHDIC fails to allege Innis was a party or third-party beneficiary of the insurance policy. (FAC, 9; Cf. Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 944 [third-party beneficiary doctrine generally does not apply to injured claimants suing an insured’s insurer for bad faith].) Accordingly, because BHDIC has failed to allege sufficient facts to state a claim for breach of contract against Innis, Innis’s demurrer to this cause of action is SUSTAINED with leave to amend.

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) “The courts do not issue advisory opinions about the rights and duties of the parties under particular agreements, if no actual, justiciable controversy has yet developed.” (Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 563 (Otay).)

In this case, Innis argues declaratory relief is inappropriate. But “[i]t has long been recognized that injured third parties are proper defendants in an insurer’s action for declaratory relief to determine the scope of coverage under its policy.” (State Farm Mut. Auto. Ins. Co. v. Crane (1990) 217 Cal.App.3d 1127, 1135 (Crane); see Otay, supra, 169 Cal.App.4th at p. 565 [“It is also well established that . . . a liability insurer has the option to join an injured third party as a codefendant in the insurer’s declaratory relief action to determine coverage . . . .”]; Canadian Ins. Co. v. Rusty’s Island Chip Co. (1995) 36 Cal.App.4th 491, 496 (Canadian) [“[A]n injured third party . . . is a proper defendant in an insurer’s action for declaratory relief to determine the scope of coverage under its policy.”]; see also State Farm Gen. Ins. Co. v. Majorino (2002) 99 Cal.App.4th 974, 978, n.2 (Majorino).)

Innis attempts to distinguish these authorities by arguing they can be distinguished on the facts. In Crane, Innis notes the issue was whether the defendants’ insurer would owe prejudgment interest to the plaintiff. (Crane, supra, 217 Cal.App.3d at p. 1131.) Innis also argues Canadian was not a blanket endorsement for suing claimants in coverage disputes with the insured. But this argument ignores the fact that these cases were cited with approval by Otay and Majorino. In fact, Otay went so far as to say it was “well established” that the type of declaratory relief BHDIC seeks is available against Innis.

Accordingly, because BHDIC can seek declaratory relief against Innis as a third-party claimant, Innis’s demurrer to the remaining causes of action in BHDIC’s FAC is OVERRULED.

CONCLUSION

Based on the foregoing, Innis’s demurrer to BHDIC’s FAC is SUSTAINED with ten (10) days leave to amend as to the first cause of action and OVERRULED as to the remaining causes of action in the FAC.