James Copelan v. Infinity Ins. Co.

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 6, 2018
• Docket: 16-55980
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION JUN 06 2018 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

JAMES B. COPELAN, on behalf of No. 16-55980 himself and all others similarly situated; BRIAN M. LOWENTHAL, on behalf of D.C. No. 2:16-cv-01355-R-JPR himself and all others similarly situated,

Plaintiffs-Appellants, MEMORANDUM*

v.

INFINITY INSURANCE COMPANY; LIBERTY MUTUAL FIRE INSURANCE COMPANY,

Defendants-Appellees.

Appeal from the United States District Court for the Central District of California Manuel L. Real, District Judge, Presiding

Argued and Submitted February 5, 2018 Pasadena, California

Before: W. FLETCHER, BERZON, and OWENS, Circuit Judges.

Plaintiffs-Appellants James B. Copelan and Brian M. Lowenthal

(“Plaintiffs”) appeal the district court’s dismissal of their six causes of action. We

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. have jurisdiction under 28 U.S.C. § 1291. We reverse in part, affirm in part, and

remand for further proceedings.

Much of this case turns on whether Lowenthal’s policy with Infinity

Insurance Company (“Infinity”) covered damages for the diminution in value of

Copelan’s car. We hold that the policy does provide such coverage. Lowenthal’s

policy covers “damages . . . for . . . property damage for which an insured person is

legally liable because of an accident.” “Property damage” is defined as “physical

damage to tangible property, including destruction or loss of its use.” Although

diminution in value is not itself a form of physical damage, it is an accepted way of

measuring damage. See Pruyn v. Agric. Ins. Co., 42 Cal. Rptr. 2d 295, 300 n.6 (Ct.

App. 1995); State Farm Fire & Cas. Co. v. Superior Court, 264 Cal. Rptr. 269,

274–75 (Ct. App. 1989). The damage measured in terms of diminution in value

could be physical damage, which Lowenthal’s policy covers; it could be so-called

stigma damage, which Lowenthal’s policy does not cover, see Carson v. Mercury

Ins. Co., 148 Cal. Rptr. 3d 518, 528 (Ct. App. 2012); or it could be both. Here, on

the facts Plaintiffs alleged, it is the first; the diminution in value was caused by

“physical damage to tangible property.” We therefore reverse the dismissal of the

first cause of action as to Infinity.

2 However, we affirm the dismissal of the first cause of action as to Liberty

Mutual Fire Insurance Company (“Liberty”). Plaintiffs have failed to allege that

Liberty’s pursuit of its subrogation claims prevented Copelan and other putative

class members from recovering from their tortfeasors. See Chandler v. State Farm

Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010) (“Plaintiff must show that

he was foreclosed from recovering from the tortfeasor because of Defendant’s act

of seeking and obtaining reimbursement.”). Plaintiffs may amend their complaint

on remand to specify that Lowenthal’s policy with Infinity, properly interpreted to

cover diminution in value measuring physical damage, and Lowenthal’s personal

assets are insufficient to satisfy Copelan’s judgment, and to make similar

allegations for the other putative class members.

We affirm the dismissal of the second cause of action as to Liberty and

Infinity. Plaintiffs stated in their complaint that this cause of action was “brought

pursuant to” California Insurance Code § 790.03. That provision does not

authorize a private cause of action. See Zhang v. Superior Court, 304 P.3d 163,

177 (Cal. 2013).

We affirm the dismissal of the third cause of action. Under its policy with

Copelan, Liberty had discretion to repair the Mercedes. Plaintiffs have not alleged

that Liberty’s repairs left the car “unsafe,” Baldwin v. AAA N. Cal., Nev. & Utah

3 Ins. Exh., 204 Cal. Rptr. 3d 433, 442 (Ct. App. 2016), or otherwise failed to return

it to its “normal running condition,” Ray v. Farmers Ins. Exh., 246 Cal. Rptr. 593,

595 (Ct. App. 1988). As a result, Liberty’s “election to repair is conclusive,”

regardless of any diminution in value. Ray, 246 Cal. Rptr. at 595. The third cause

of action also sought relief based on Liberty’s pursuit of its subrogation claims.

For the reasons discussed above, we affirm the dismissal of this part of the third

cause of action, as well, subject to any amendments Plaintiffs may make to their

complaint.

We affirm the dismissal of the fourth cause of action, given that the object of

the alleged conspiracy entailed the same conduct we rejected as a basis for liability

under the third cause of action. See Applied Equip. Corp. v. Litton Saudi Arabia

Ltd., 869 P.2d 454, 457 (Cal. 1994) (“Standing alone, a conspiracy does no harm

and engenders no tort liability. It must be activated by the commission of an actual

tort.”).

We reverse the dismissal of the fifth cause of action. California law

authorizes Copelan to enforce the judgment he obtained directly against Infinity.

See Cal. Ins. Code § 11580(b); Clark v. Cal. Ins. Guarantee Ass’n, 133 Cal. Rptr.

3d 1, 4 (Cal. App. 2011). We reject Infinity’s argument that Copelan cannot

pursue a diminished-value claim as a lessee, as Copelan is not pursuing a

4 diminished-value claim before us. He seeks only to enforce his state small-claims

judgment against Infinity’s insured Lowenthal, which was upheld after a trial de

novo in state superior court.

Finally, we reverse the dismissal of the sixth cause of action. As discussed

above, Lowenthal’s policy covers diminution-in-value damages. Plaintiffs did not

waive this argument below. They have adequately alleged a breach of contract and

the duty of good faith.

On remand, leave to amend the dismissed causes of action should be granted

“unless [the district court] determines that the pleading could not possibly be cured

by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.

2000) (en banc) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)).

We grant Liberty’s motion to take judicial notice (Dkt. 23). Such notice is

limited to the fact of the pleadings; it does not extend to the truth of what is

pleaded.

Each party shall bear its own costs on appeal.

REVERSED in part, AFFIRMED in part, and REMANDED.