California Case Law Update

Author: Alla Policastro

Guest Editor: Tiffany Rouhi

January 7, 2019 9:00am

Thee Sombrero, Inc. v. Scottsdale Insurance Company (2018) 28 Cal.App.5th 729

In November, the California Court of Appeals expanded the potential basis for property damage claims when it held that property damage and loss of use claims can be based on intangible damage to property.

Facts

Thee Sombrero, Inc. (Sombrero) owned a commercial property in Colton, CA.  Sombrero obtained a conditional use permit (CUP) allowing its lessees to operate the property as a nightclub.  Crime Enforcement Services (CES) provided security services at the nightclub. In 2007, due to non-permitted property modification by CES, there was a fatal shooting at the nightclub.  Following the shooting, the CUP was revoked and replaced with a modified CUP, which allowed the property to be operated only as a banquet hall.  Revenues from operation of the property as a banquet hall were significantly lower than revenues when it was operated as a nightclub.

Sombrero sued CES, alleging that CES’s negligence caused the shooting, which in turn caused the revocation of the CUP, which in turn caused a diminution in value of the property when it was limited to operating as a banquet hall. It won a default judgment against CES.  Sombrero then filed a direct action against Scottsdale Insurance Company (Scottsdale), CES’s liability insurer.  Scottsdale argued the policy issued to CES covered property damage and loss of use due to damage to tangible property and that in an absence of such damage to Sombrero’s commercial property, there was an absence of coverage for the loss.  The trial court granted summary judgment in favor of Scottsdale, ruling Sombrero’s claim against CES was for an economic loss, rather than for “property damage” as defined in and covered under the policy issued to CES.  Sombrero appealed.

Holding

The Court of Appeals held Sombrero’s loss of the ability to use the property as a nightclub, and the resulting loss of profits, constituted property damage and loss of use of property and was covered by the Scottsdale policy.  Scottsdale argued the policy provided coverage for damage of tangible property only.  The Court reasoned, although the loss of the CUP is not a loss of tangible property, its loss means the owner of the property can no longer use the property in a particular way, thereby losing a particular use of the property.  It went on to hold a reasonable expectation of the policyholder would construe “loss of use” to include the loss of any significant use of the property, not only a total loss of all possible uses.

Takeaway

The Court’ holding may provide policy holders with coverage that may extend beyond what was intended in the drafting of the policy language.  Insurance carrier are urged to review the express language granting property damage and loss of use coverage and work with counsel to ensure that where intended, explicit limits are in place to outline the scope of coverage available for loss of use of intangible property.

 

Morgan v. Davidson (2018) 29 Cal.App.5th 540.

California Court of Appeals’ finding of malice and the consequential decision to award punitive damages in battery case rests on the number of times defendant struck plaintiff during a physical altercation.

Facts

Morgan (“plaintiff”) and Davidson (“defendant”) were next-door neighbors in Riverside, CA.  Plaintiff kept horses and alpacas on his fenced in property.  On occasion, plaintiff had witnessed two of defendant’s dogs run loose on an access road between the properties, and bark aggressively at plaintiff’s animals.  On May 10, 2011, plaintiff saw defendant’s two dogs enter plaintiff’s fenced in property and act aggressively towards his animals.  When plaintiff captured the dogs, he refused to return them to defendant and indicated that he would be calling animal control to pick up the dogs.

Defendant and his family member then entered plaintiff’s property and punched plaintiff’s face. Plaintiff fell to the ground on his knees. Plaintiff did not strike anyone. Defendant and his family member continued striking plaintiff, approximately five to 10 times each. Defendant and his family member both kicked plaintiff while plaintiff was bent forward on the ground.  Thereafter, defendant and his family member left plaintiff on the ground, in pain, took their dogs, and left the property.

Plaintiff suffered extensive injuries including significant damage to his vision and mild head trauma.  The trial court awarded plaintiff $9,000 in special damages and $100,000 in general damages. The trial court found defendant and his family member acted with malice and oppression. As a result, the Court awarded plaintiff $100,000 in punitive damages.  Defendant appealed the punitive damages award and argued that there was insubstantial evidence of malice or oppression.

Holding

Punitive damages may be awarded when a defendant acted with malice, fraud, or oppression.  (Civ. Code. §3294(a).)  Malice means conduct which is intended by the defendant to cause injury or is despicable conduct which is carried out by the defendant with a willful and conscious disregarding of the rights and safety of others.  The Court of Appeals held because defendant punched and repeatedly kicked plaintiff, a trier of fact could reasonably concluded defendant acted intentionally.  The repeated strikes to plaintiff were not an accident and reflect defendant’s intention to cause an injury because repeatedly striking a person indicates a desire to cause harm. This desire to cause harm, supports a finding that defendant acted with malice and in turn the imposition of punitive damages.

Takeaway

Carriers and defense counsel are urged to be proactive in conducting thorough interviews with insureds in cases where battery is alleged.  Interviews should delve into all possible facts which could support a finding of an intent to injure, such as repeated blows, which may support an award of punitive damages.  If punitive damages are excluded from policy coverage, insurers and their counsel would be well served to advise insured of the realistic potential for a punitive damages award and that such an award could and would expose the insured to liability beyond the applicable policy.

 

 

Levingston v. Kaiser Foundation Health Plan Inc. (2018) 26 Cal.App.3d 45

Although the California Supreme Court views summary judgment as a favorable remedy for case adjudication, recent Court of Appeal decisions demonstrate that intermediate courts are still split on the amount of discretion trial courts should have to grant summary judgment motions.

Facts

On April 1, 2015, Kaiser (“defendant”) filed a motion for summary judgment to Levingston’s (“plaintiff”) lawsuit.  On June 2, 2015, plaintiff’s counsel filed an opposition which contained privileged documents that Kaiser’s counsel had disclosed inadvertently.  As a result, on July 17, 2015, the opposition was struck in its entirety and plaintiff’s counsel was disqualified.  The trial court ordered plaintiff to find new counsel and continued the hearing date for the motion for summary judgment to January 22, 2016 to allow time for plaintiff to find new counsel.  In November 2015, plaintiff substituted in new counsel.  Plaintiff’s new counsel failed to file a timely opposition to the motion for summary judgement.

Plaintiff’s new counsel claimed they had not known that they needed to file a new opposition.  Plaintiff’s counsel requested relief from default under Code of Civil Procedure §473(b), and a continuance. The trial court found that new counsel’s failure to file an opposition was inexcusable neglect.  It therefore denied plaintiff’s request and granted summary judgment.  Plaintiff appealed.

Holding

The Court of Appeals upheld the trial court’s finding that plaintiff’s new counsel committed inexcusable neglect when they failed to file the opposition.  Nonetheless, the Court of Appeals found plaintiff was still entitled to a continuance to file an opposition to the motion for summary judgment.   Analogizing the grant of summary judgment to terminating sanctions, the Court of Appeals held the trial court abused its discretion in granting summary judgment unless the violation of the procedural rule was willful, preceded by a history of abuse of pretrial procedures, or less severer sanctions would not produce compliance with the procedural rule.  The case was remanded to the trial court and plaintiff was permitted to file an opposition.

This holding is in direct contrast to the ruling in Leyva v. Garcia (2018) 20 Cal.App.5th 1095, issued just months before Levingston.  In contrast to the “terminating sanctions” analysis, the court in Leyva held a trial court may properly grant summary judgment when the moving papers satisfy the initial burden of proof and the opposing party fails to file a separate statement in support to the opposition.

Takeaway

This divergence in approaches to the granting of summary judgment reveals the appellate court’s ambivalent attitude towards summary judgment.  The Leyva holding follows the express provisions of the Code of Civil Procedure, California Rules of Court, and the public policy in support of the liberal granting of summary judgments.  The Levingston holding on the other hand, demonstrates the long-standing skepticism of the courts towards summary judgement and a reluctance to rely on summary judgment as a legitimate remedy.  In the face of this ambivalent attitude towards summary judgment motions, litigants are encouraged to pursue summary judgment in cases that warrant such disposition but are cautioned that there is no telling whether courts will strictly enforce the procedural rules governing summary judgment.

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