Wilshire Manor Apartments, LLC v. State Farm General Insurance

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 25, 2018
• Docket: 17-55216
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION JUL 25 2018 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

WILSHIRE MANOR APARTMENTS, No. 17-55216 LLC, a California limited liability company, D.C. No. 2:16-cv-04363-R-GJS Plaintiff-Appellant,

v. MEMORANDUM*

STATE FARM GENERAL INSURANCE COMPANY, an Illinois corporation,

Defendant-Appellee,

and

DOES, 1 through 50, Inclusive,

Defendant.

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

Argued and Submitted July 9, 2018 Pasadena, California

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: BERZON and N.R. SMITH, Circuit Judges, and NYE,** District Judge.

Wilshire Manor Apartments LLC appeals the grant of summary judgment in

favor of State Farm General Insurance Company in this insurance coverage action.

Wilshire alleged State Farm breached the contract and breached its implied

covenant of good faith and fair dealing. We have jurisdiction under 28 U.S.C.

§ 1291, and we reverse and remand.

1. Issues of material fact exist as to whether State Farm paid for all repairs

required to put Wilshire Manor Apartments back to its pre-loss condition.

Specifically, there are issues of material fact with regard to (1) whether the repairs

paid for to date were for temporary repairs only; (2) whether State Farm paid for

all of the temporary repairs; and (3) whether additional repairs were required to put

both elevators to their pre-loss condition (as outlined in the Lerch Bates report).

The fact that this contract allowed for replacement of damaged property is

not relevant to the resolution of this appeal. State Farm elected to repair the

damage to the apartment building. It did not elect to pay actual cash value for the

loss. See Fire Ins. Exch. v. Superior Court, 10 Cal. Rptr. 3d 617, 635 (Cal. Ct.

App. 2004). Thus, the discussion surrounding whether the elevators need to be

** The Honorable David C. Nye, United States District Judge for the District of Idaho, sitting by designation. 2 replaced is only relevant to the extent it raises issues of fact as to whether State

Farm repaired them to their pre-loss condition.1

The district court’s alternative ground for issuing summary judgment also

fails. Issues of material fact also exist with regard to whether Wilshire failed to

comply with the duties outlined in the Policy. State Farm received the Lerch Bates

report before it closed its claim file. To the extent that Wilshire provided evidence

of previously unreported damages after the lawsuit was initiated, there are issues of

material fact with regard to whether State Farm had notice of these damages from

its claim investigation. See White v. W. Title Ins. Co., 710 P.2d 309, 316-17 (Cal.

1985) (rejecting the argument that “all evidence relating to events after plaintiffs

filed suit should have been excluded”).

2. California law provides a cause of action for breach of an implied covenant

of good faith and fair dealing where benefits owed under an insurance policy were

unreasonably withheld. See Love v. Fire Ins. Exch., 271 Cal. Rptr. 246, 255 (Cal.

Ct. App. 1990) (“[T]here are at least two separate requirements to establish breach

1 State Farms asserts that Wilshire’s claims for repair or replacement are excluded because they related to code upgrades required by the Los Angeles Department of Building and Safety. A review of the record establishes that this assertion is not accurate. The Lerch Bates report outlines damages and repairs associated with the fire, which do not rely on any code upgrades. Thus, the issue of whether the elevators and the hoistways must be brought up to code (which is disputed) is not relevant to the summary judgment determination. 3 of the implied covenant: (1) benefits due under the policy must have been

withheld; and (2) the reason for withholding benefits must have been unreasonable

or without proper cause.”). Because issues of material fact exist with regard to

whether State Farm breached the contract, it follows that issues of material fact

also exist with regard to whether State Farm breached its implied covenant of good

faith and fair dealing.

3. Because we remand for further proceedings, we need not determine whether

the district court abused its discretion in denying Wilshire’s Federal Rule of Civil

Procedure 56(d) motion or in denying Wilshire’s motions to supplement the

record.

REVERSED and REMANDED.