ORDER GRANTING DEFENDANT ALLSTATE INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT AGAINST PLAINTIFFS THOMAS AND JULIA EN-NIS
KELLEHER, District Judge.
On June 17, 2002, the Court heard Defendant Allstate Insurance Company’s (“Allstate”) motion for summary judgment of Plaintiffs Thomas and Julia Ennis’ claims for breach of contract, breach of the covenant of good faith and fair dealing (the “contract claims”), negligent and intentional misrepresentation (the “fraud claims”) and civil RICO (collectively, the “remaining claims”). The Court took the motion under submission following oral argument. After considering the papers submitted by the parties, the case file and oral argument, the Court GRANTS Allstate’s motion.
I. BACKGROUND
Plaintiffs’ claims arise out of the adjustment of their insurance claim for property damage sustained in the 1994 Northridge earthquake and their subsequent retention of Shadowbrook Design Group (“Shadow-brook”) to make repairs. Shortly after the earthquake, Plaintiffs reported to Allstate that their home had suffered damage. (Pretrial Conference Order (“PTO”), ¶ 5 at p. 3.) Allstate retained Shadowbrook to conduct a “Phase I structural engineering investigation” of the damage.
(Id.)
Sha-dowbrook prepared a “Structural Investigation and Report” (“Shadowbrook report” or “report”) following its investigation of Plaintiffs’ home.
(Id.)
Plaintiffs ultimately hired Shadowbrook to perform repair work on their home.
(Id.)
In May of 1998, Plaintiffs and nine others filed suit against Defendants Allstate, Shadowbrook and Western States Companies (‘Western States”). The Ennises are the sole remaining Plaintiffs. Allstate is the sole remaining defendant.
The final pretrial conference was held on April 1, 2002. The PTO alleges five claims: (1) RICO violations, 18 U.S.C. §§ 1961-1968; (2) negligent misrepresentation; (3) intentional misrepresentation; (4) breach of the
covenant of good faith and fair dealing; and (5) breach of contract. Trial is currently set for October 1, 2002.
On May 17, 2002, Allstate filed a motion for summary judgment.
On May 24, 2002 Plaintiffs filed their opposition. On June 3, 2002, Allstate filed a reply. On June 4, 2002, the Court ordered Plaintiffs to file a sur-reply. On June 11, 2002, Plaintiffs filed their sur-reply.
At the hearing on June 17, 2002, the Court denied Plaintiffs’ request for judicial notice of the Amended Second Superseding Indictment and the Guideline Presen-tence Report and Recommendation in
United States of America v. LeAndre Drake Davis,
Case No. CR99-896(B)-CAS. Plaintiffs indicated that they would subsequently lodge the judgment of conviction in the
Davis
case for purposes of judicial notice.
The Court also denied Allstate’s motion to strike Plaintiffs’ exhibit “O” (the addendum to the report of Plaintiffs’ expert, Charles Randle) as moot in light of the anticipated disposition of the motion.
II. DISCUSSION
A. Summary Judgment Standard
Summary judgment is proper if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R.Civ.P. 56(c). A fact is material only if it is relevant to a claim or defense and its existence might affect the suit’s outcome.
See T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Assoc.,
809 F.2d 626, 630 (9th Cir.1987). The court must view the facts and draw inferences in the manner most favorable to the non-moving party.
See Chaffin v. United States,
176 F.3d 1208, 1213 (9th Cir.1999).
The moving party bears the burden of demonstrating the absence of a genuine issue of material fact for trial.
See Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “[T]he burden on the moving party may be discharged by ‘showing’ — that is, pointing out to the district courtr-that there is an absence of evidence to support the no’nmoving party’s' case.”
Celotex Corp. v. Catrett,
477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986);
see Musick v. Burke,
913 F.2d 1390, 1394 (9th Cir.1990). To demonstrate that the non-moving party has no evidence, the moving party must affirmatively show the absence of such evidence in the record, either by deposition testimony, the inadequacy of documentary evidence or by any other form of admissible evidence.
See Celotex, 477
U.S. at 322, 106 S.Ct. 2548. The moving party has no burden to negate or disprove matters on which the opponent will have the burden of proof at. trial.
See id.
at 325, 106 S.Ct. 2548.
A non-moving party’s allegation that factual disputes persist between the parties will not automatically defeat an otherwise properly supported motion for summary judgment.
See
Fed.R.Civ.P. 56(e) (non-moving party “may not rest upon the mere allegations or denials of the adverse party’s pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial”). “[A] mere ‘scintilla’ of evidence will be insufficient to defeat a properly supported motion for summary judgment; instead, the nonmoving party must introduce some ‘significant probative evidence tending to support the complaint.’ ”
Fazio v. City and County of San
Francisco, 125 F.3d 1328, 1331 (9th Cir.1997) (quoting
Anderson,
477 U.S. at 249, 252, 106 S.Ct. 2505). If the adverse party does not so respond, summary judgment shall be entered against the adverse party.
B. Analysis
Allstate seeks summary judgment on the ground that Plaintiffs cannot establish a prima facie case as to any of their claims. In support of their claims, Plaintiffs allege that Allstate: (1) inaccurately assessed the damage to Plaintiffs’ house; (2) recommended inaccurate methods to repair the damage; and (3) “approved” Plaintiffs’ use of Shadowbrook as the contractor to complete the repairs. (PTO, ¶ 7 at p. 6, 9; Opp. 5,10,18-19.)
1. Allstate Is Entitled To Summary Judgment Of The Contract Claims
a. Breach of Contract
To prevail on its claim for breach of contract, Plaintiffs must establish: (1) the existence of a contract; (2) Plaintiffs’ performance or excuse for nonperformance; (3) Allstate’s breach; and (4) damage to Plaintiffs therefrom.
See Regan Roofing Co., Inc. v. Superior Court,
24 Cal.App.4th 425, 435, 29 Cal.Rptr.2d 413 (1994). Allstate argues, in part, that Plaintiffs cannot prevail on their breach of contract claim because Plaintiffs cannot establish a denial of policy benefits
(i.e.,
breach) nor any damage stemming therefrom. (Mot. at 4, 6, 20; Reply at 7,12-15.)
In support of their claims, Plaintiffs argue that they “settled their [insurance] claim for less than they were entitled to receive because the real damage to their home was never properly addressed.” (Opp. at 11.) Specifically, Plaintiffs argue that the Shadowbrook report on which both Allstate and Plaintiffs allegedly relied in settling Plaintiffs’ insurance claim (1) failed to consider the full extent of the damage to their home and (2) made improper repair recommendations.
(Id.
at 4, 17-19.)
(1) The Damage Assessment
To the extent Plaintiffs argue that Allstate breached the insurance contract by inaccurately assessing the extent of damage to Plaintiffs’ home, Plaintiffs have failed to present any evidence of injury therefrom. Plaintiffs’ insurance contract obligates Allstate to pay the actual cash value of the damage caused by the earthquake.
(See
Pis.’ Ins. Contract, p. 20.)
By June of 1996, when Allstate finalized Plaintiffs’ insurance claim, Allstate had paid Plaintiffs a total of $158,080.04 for the
damage to their dwelling.
(See
Declaration of Gregory MacGregor (“MacGregor Deel”), Ex. B [Dep. of Thomas Ennis], pp. 122-124; Ex. E [letter from Allstate], p. 141.) To establish injury, therefore, Plaintiffs must show that Allstate underpaid Plaintiffs for the actual cash value of the damage to their dwelling,
i.e.,
that the damage to their house exceeded $158,080.04.
Plaintiffs present the report of their engineering expert, Charles Randle, to establish that Allstate’s assessment of the damage was inaccurate and, consequently, Plaintiffs were underpaid. Mr. Randle opines, in part, that the damage to Plaintiffs’ house has been “extensive” and that the Shadowbrook report on which Allstate allegedly relied is “inaccurate ... and vague” in its assessment of that damage. (Declaration of Ruth Segal (“Segal Deel.”), Ex. O [addendum to report of Charles Randle], p. 72-73.) Mr. Randle concludes that, “[b]ased on the vagueness and inaccuracies noted in the Shadowbrook ... report, any attempt at determination of estimates to repair would be impossible.”
(Id.,
p. 74.)
Although Mr. Randle’s opinion, if otherwise admissible, may be probative of whether Allstate’s assessment of the damage was inaccurate, it does not address the issue of whether Plaintiffs were damaged thereby. Mr. Randle does not express an opinion on the amount Plaintiffs should have received based on an accurate assessment of the damage nor the amount necessary to correct the deficiencies he observes.
Plaintiffs apparently take the position that if the report inaccurately assessed the extent of damage, Plaintiffs were necessarily underpaid on their insurance claim. However, Plaintiffs must establish both breach
and
damage to prevail on their breach of contract claim.
See Regan Roofing Co., Inc.,
24 Cal.App.4th at 435, 29 Cal.Rptr.2d 413. Plaintiffs present no evidence of (or even identify) what amount they should have received for the damage to their house. Furthermore, Plaintiffs do not address whether the $158,080.04 they received is insufficient to cover the cost of repair. Because Plaintiffs have not established a triable issue of fact as to injury, they cannot prevail on their theory that Allstate breached the contract by failing to accurately assess the extent of the damage to their dwelling.
(2) The Repair Recommendations
To the extent Plaintiffs allege that Allstate breached the insurance contract by providing inaccurate recommendations for repairing the damage to their home, Plaintiffs have failed to establish that Allstate had a duty to make repair recommendations. Breach of contract arises where a party to the contract fails to perform as obligated under the terms of the contract. Thus Plaintiffs must demonstrate that Allstate had a contractual duty to make repair recommendations before its alleged nonperformance constitutes breach.
See Collin v. American Empire Ins. Co.,
21 Cal.App.4th 787, 803, 807, 26 Cal.Rptr.2d 391 (1994) (insured has the burden of showing that claim falls within terms of policy).
Plaintiffs identify nothing (and the Court can find nothing) in their insurance contract that obligates Allstate to make repair recommendations.
(See
Plaintiffs’ Ins. Contract, pp. 7-9 (“Dwelling Protection”), p. 20 (“Conditions” “How We Pay for a Loss”).) Further, Plaintiffs identify no law imposing such an obligation. Because Plaintiffs have not established a triable issue of fact as to whether Allstate had a duty to make repair recommendations, they cannot prevail on their theory that Allstate breached the contract by failing to provide accurate recommendations.
b. Breach of the Covenant of Good Faith and Fair Dealing
Allstate seeks summary judgment of Plaintiffs’ claim for breach of the covenant of good faith and fair dealing (the “covenant”) on the ground that such a claim cannot be maintained unless policy benefits are due and the insurer acted unreasonably. (Mot. at 6, 21-23.) Plaintiffs argue that Allstate breached its duty under the covenant by inadequately investigating Plaintiffs’ insurance claim and failing to warn Plaintiffs against using Shadowbrook as their contractor to make repairs. (Opp. at 13-17.)
The covenant acts as a “supplement to express contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the other party’s rights to the benefits of the agreement.”
Waller v. Truck Ins. Exchange, Inc.,
11 Cal.4th 1, 36, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). “Absent [a] contractual right, however, the implied covenant has nothing upon which to act as a supplement, and ‘should not be endowed with an existence independent of its contractual underpinnings.’ ”
Id.
(citing
Love v. Fire Ins. Exchange,
221 Cal.App.3d 1136, 1153, 271 Cal.Rptr. 246 (1990));
see Rattan v. United Servs. Autombile Ass’n,
84 Cal.App.4th 715, 722-23, 101 Cal.Rptr.2d 6 (2000) (reasoning that insurer is not liable for breach of contract or bad faith based on conduct of insureds’ contractor unless conduct amounts to denial of policy benefits by the insurer).
Therefore, to establish breach of the covenant, Plaintiffs must demonstrate that Allstate withheld policy benefits due under the contract
{i.e.,
breach of contract).
Love,
221 Cal.App.3d at 1151, 271 Cal.Rptr. 246. As discussed above, Plaintiffs have failed to establish a triable issue of fact as to whether they were denied any policy benefits due under the contract. As such, Allstate is entitled to summary judgment of Plaintiffs’ claim for breach of the covenant.
2. Allstate Is Entitled To Summary Judgment Of The Fraud Claims
To prevail on their claims for intentional and negligent misrepresentation, Plaintiffs must establish, among other things: (1) a material misrepresentation; (2) justifiable reliance; and (3) resulting damage.
Anderson v. Deloitte & Touche, LLP,
56 Cal.App.4th 1468, 1474, 66 Cal.Rptr.2d 512 (1997) (intentional misrepresentation);
Home Budget Loans, Inc. v. Jacoby & Meyers Law Offices,
207 Cal.App.3d 1277, 1285, 255 Cal.Rptr. 483 (1989) (negligent misrepresentation).
Allstate argues, in part, that Plaintiffs cannot prevail on their fraud claims because they cannot establish any of the above.
(Mot. at 7-8, 16-20;- Reply at 5-6.) Plaintiffs argue that Allstate committed fraud by making misrepresentations (1) in the Shadowbrook report and (2) about Shadowbrook’s qualifications as a contractor.
a. Alleged Misrepresentations in the Shadowbrook Report
Plaintiffs argue that the Shadowbrook report misrepresented (1) the qualifica
tions of one of the investigators and authors of the report (who is also the president of Shadowbrook), LeAndre Davis; (2) the extent of the damage; and (3) the appropriate methods of repair. (Opp. at 14AL9.) However, Plaintiffs have failed to produce evidence of injury resulting from any of the alleged misrepresentations. “In order to recover for fraud, as in any other tort, the plaintiff must ... prove the ‘detriment proximately caused’ by the defendant’s tortious conduct.”
Service by Medallion, Inc. v. Clorox Co.,
44 Cal.App.4th 1807, 1818, 52 Cal.Rptr.2d 650 (1996) (citation omitted).
(1)Qualifications of LeAndre Davis
In support of their argument that Allstate committed fraud by misrepresenting the qualifications of the company it sent to investigate Plaintiffs’ insurance claim, Plaintiffs point to the testimony of Mr. Ennis. Mr Ennis states that an Allstate adjuster informed him that Shadow-brook would be responsible for the “structural engineering report” and that “he [sic ] was appropriately qualified.” (Segal Deck, Ex. C [Dep. of Thomas Ennis], p. 37.) In addition, Mr. Ennis testifies that “subsequent adjusters ... continued to support [his] belief that LeAndre Davis was an engineer and an architect.”
{Id.,
Ex. D [Dep. of Thomas Ennis], p. 50.) Plaintiffs also point to the Shadowbrook report itself, which was signed by Mr. Davis as an “Architect/Staff Engineer,” and who placed upon it an embossed stamp indicating that he was a licensed architect.
{Id.,
Ex. A [Shadowbrook report], p. 27.) It is undisputed, however, that Mr. Davis was not actually a licensed architect or engineer.
Even assuming that Allstate misrepresented Mr. Davis’ architectural and engineering qualifications, Plaintiffs have failed to produce evidence that they were injured thereby. Plaintiffs point to no evidence demonstrating that Allstate’s alleged misrepresentation of Mr. Davis’ qualifications as an engineer or architect contributed to the underpayment of their insurance claim. As discussed above, Plaintiffs have failed to establish a triable issue of fact as to whether they were underpaid for their insurance claim. Therefore, Plaintiffs’ claims of fraud as to the qualifications of Mr. Davis must fail.
See Hill v. Wrather,
158 Cal.App.2d 818, 825, 323 P.2d 567 (1958) (“fraud without damage or injury is not remediable”);
Service by Medallion, Inc.,
44 Cal.App.4th at 1818, 52 Cal.Rptr.2d 650.
(2)The Damage Assessment
Failure to produce evidence of injury is similarly fatal to Plaintiffs’ argument that Allstate committed fraud in misrepresenting the extent of the damage to Plaintiffs’ home. As with their contract claims, Plaintiffs rely on the opinion of their expert, Mr. Randle, to the effect that the Shadowbrook report is so “inaccurate ... and vague” in its assessment of the damage to Plaintiffs’ home that “any attempt at determination of estimates to repair would be impossible.”
{Id.,
Ex. O, p. 72-74.) As with Plaintiffs’ contract claims, however, Plaintiffs have failed to establish a triable issue of fact as to whether they were underpaid as a result. And as with Plaintiffs’ contract claims, evidence of such an injury is an essential element of Plaintiffs’ fraud claim.
See Hill,
158 Cal.App.2d at 825, 323 P.2d 567;
Service by Medallion, Inc.,
44 Cal.App.4th at 1818, 52 Cal. Rptr.2d 650. Without such evidence, Plaintiffs’ claim of fraud as to the damage assessment also fails.
(3)The Repair Recommendations
To the extent Plaintiffs allege that Allstate committed fraud by misrepresenting the necessary method to repair the damage to their home, Plaintiffs again fail to establish damage therefrom. Plaintiffs
contend that they relied on the repair recommendations in the Shadowbrook report “in determining ... the necessary repairs[.]” (Opp. at 17; Sur-reply at 2.) Plaintiffs argue that “the repair work is improper and inadequate, not only because it was not done properly, but because it was not properly guided by recommendations for repairs by a qualified engineer or achitect[.]”
(Id.
at 19.) However, Plaintiffs fail to identify any evidence supporting their argument.
Plaintiffs again rely on the report of their expert, Mr. Randle, who opines that the information in the Shadowbrook report “is quantitative and inaccurate as related to methods of stucco repair” and “vague” as to the method of repairing “framing distress[.]” (Segal Deck, Ex. 0, p. 73.) In addition, Mr. Randle states that “[t]he remedial work ... is inadequate and lacks the control of a qualified designer, engineer or architect.”
(Id.,
p. 74.) However, nothing in Mr. Randle’s report establishes that the allegedly inadequate repairs undertaken by Shadowbrook or its subcontractors were based upon the recommendations in the report. Indeed, Plaintiffs identify no evidence whatsoever that the recommendations from the report were the basis for the repairs.
Even assuming the Shadowbrook report misrepresents the necessary repair methods and Plaintiffs’ relied thereon, Plaintiffs have not established a triable issue of fact regarding whether they were injured as a result. Therefore, for the same reasons previously discussed, Plaintiffs’ claim of fraud as to the repair recommendations must fail.
b. Alleged Misrepresentations Regarding Shadowbrook’s Role as a Contractor
Plaintiffs also contend that Allstate committed fraud by misrepresenting Shadow-brook’s qualifications as a contractor. Specifically, Plaintiffs argue that they would not have hired Shadowbrook as their contractor if: (1) Allstate had not “approved” and “encouraged” the decision; and (2) Mr. Davis had not falsely represented his company as a “division” of Allstate. (Opp. at 5,10,13-15.)
(1) Allstate’s “Approval”
Plaintiffs point to the testimony of Mr. Ennis in support of their claim that Allstate “approved” Plaintiffs’ decision to hire Shadowbrook (despite Allstate’s alleged knowledge of Shadowbrook’s fraudulent conduct). Mr. Ennis testifies that he approached Mr. Davis about the possibility of undertaking the repair work when Sha-dowbrook first inspected Plaintiffs’ house. (MacGregor Deck, Ex. B [Dep. of Thomas Ennis], p. 153.) Subsequently, Mr. Ennis informed an Allstate adjuster “that [he] was hiring [Shadowbrook] as the contractor.” (Segal Deck, Ex. E [Dep. of Thomas Ennis], p. 63.) Mr. Ennis testifies that he “can’t recall” whether his adjuster told him Shadowbrook was licensed as a contractor.
(Id.,
p. 64.) Further, Mr. Ennis testifies that no one told him directly to hire Sha-dowbrook as his contractor, but that he “assumed when [he] told [the adjuster] that if [the adjuster] felt that it was not an appropriate move, [the adjuster] would have told [him].”
(Id,
pp. 62, 64.)
Even assuming Allstate knew of Shadowbrook’s wrongdoing at the time, Plaintiffs’ evidence establishes only that Allstate failed to warn Plaintiffs. For an omission to constitute an actionable misrepresentation, Plaintiffs must establish that Allstate had a duty to disclose.
Scafidi v. Western Loan & Bldg. Co.,
72 Cal.App.2d 550, 562, 165 P.2d 260 (1946) (silence or concealment alone will not establish fraudulent concealment absent a fiduciary or confidential relationship or circumstances otherwise creating a duty to speak). Allstate, as an insurer, is sub
ject to some of the duties of a fiduciary but is not in a strict fiduciary relationship with its insureds.
Thompson v. Cannon,
224 Cal.App.3d 1413, 1417, 274 Cal.Rptr. 608 (1990). Short of arguing that Allstate, as a “quasi fiduciary,” has failed in its duty, Plaintiffs identify no case law supporting (or even addressing) the imposition of a duty to disclose on an insurer under the facts of this case. Therefore, Plaintiffs have failed to establish a triable issue of fact regarding whether Allstate made an actionable misrepresentation.
(2) Mr. Davis’ Representations
To the extent that Plaintiffs argue that Allstate committed fraud based on the misrepresentations of Mr. Davis, Plaintiffs have failed to establish that the alleged misrepresentations can be imputed to Allstate. Plaintiffs point to evidence that at one point, Mr. Davis had a sign on his vehicle reading “You’re in Good Hands With Allstate, Catastrophic Disaster and Structural Engineering Team.” (Segal Decl., Ex. B, p. 36.) Further, Plaintiffs state (without citing any evidence) that “Mr. Davis told Mr. Ennis that he was ‘considered a valuable team member of Allstate’.” (Opp. at 13.)
Plaintiffs apparently contend that Mr. Davis’ conduct and statements amount to a misrepresentation by Allstate as to the relationship between itself and Shadow-brook on the ground that Allstate allegedly knew about the misrepresentations.
(Id.
at 15-16.) However, aside from referring to Shadowbrook as Allstate’s “agent,” Plaintiffs make no showing that Mr. Davis was an employee or agent of Allstate such that it is liable for his conduct. (Surreply at 3-4.) Without such a showing, the alleged misrepresentation of a third party cannot be imputed to Allstate.
Inglewood Teachers Ass’n v. Public Employment Relations Bd.,
227 Cal.App.3d 767, 780, 278 Cal.Rptr. 228 (1991) (“the burden of proving agency, as well as the scope of the agent’s authority, rests upon the party asserting the existence of agency and seeking to charge the principal with the representation of the agent”). Therefore, Plaintiffs again fail to establish a triable issue of fact as to whether Allstate made an actionable misrepresentation.
3. Allstate Is Entitled To Summary Judgment Of The RICO Claim
The predicate act upon which Plaintiffs base their RICO claim is mail fraud.
(See
PTO, ¶ 7 at p. 11.) Plaintiffs allege that Allstate committed mail fraud by mailing the allegedly fraudulent Sha-dowbrook reports to Plaintiffs and others.
(Id.)
To prevail on their RICO claim, Plaintiffs must prove that they were injured by the conduct constituting the predicate act.
Sedima, S.P.R.L. v. Imrex Co.,
473 U.S. 479, 495-96, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985).
As discussed above, Plaintiffs have not established a triable issue of fact as to whether they were injured by the alleged fraud concerning the Shadowbrook report. Plaintiffs cannot, therefore, survive summary judgment on their RICO claim.
III. DISPOSITION
For the foregoing reasons, the Court GRANTS Allstate’s motion for summary judgment of Plaintiffs’ remaining claims.
IT IS SO ORDERED.
JUDGMENT IN FAVOR OF DEFENDANT ALLSTATE INSURANCE COMPANY AGAINST PLAINTIFFS THOMAS AND JULIA EN-NIS
This action came on for hearing on June 17, 2002, Honorable Robert J. Kelleher, United States District Court Judge Presiding, on the motions of Defendant Allstate Insurance Company for Summary Judgment, or in the Alternative, Summary Adjudication of Issues. The Court having read the moving, opposing and reply papers on file herein, and having heard oral argument from counsel, and the Court having granted said Motion for Summary Judgment,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Plaintiffs shall take nothing by way of their complaint, that the action be dismissed on the merits and that Defendant Allstate Insurance Company recover its costs in the amount of_