Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-05532/USCOURTS-cand-4_06-cv-05532-6/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Petition for Removal

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1 The parties presented many additional facts in their pleadings, beyond those discussed in this

Order. The Court largely limits its analysis here to Herbert’s criminal history, though it provides his

vehicle loss history for context.

2 Herbert filed in Alameda County Superior Court, alleging California common law actions,

which were removed by State Farm. Def.’s Notice of Removal, Ex. “A,” at 1 (Pl.’s Compl.) [Docket

No. 1]. Thus California provides the substantive law in this matter. Erie R. Co. v. Tompkins, 304

U.S. 64 (1938).

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

OAKLAND DIVISION

RODERICK HERBERT,

Plaintiff,

 v.

STATE FARM MUTUAL

AUTOMOBILE INSURANCE

COMPANY and DOES 1-20, inclusive,

Defendants. 

No. C 06-05532 SBA

ORDER

[Docket No. 63]

Before the Court is defendant State Farm Mutual Automobile Insurance Co.’s Motion for

Summary Judgment or in the alternative, Motion for Summary Adjudication [Docket No. 63]. After

reading and considering the papers presented, and the argument of counsel at the hearing hereon,

held on February 5, 2008, the Court finds plaintiff Roderick Herbert made material representations

regarding his criminal history, during State Farm’s investigation of his claim for motorcycle theft,

and thus GRANTS the motion.

BACKGROUND1

Herbert is a citizen and resident of California. Defendant State Farm is a corporation with its

principal place of business in Illinois. The Court has diversity jurisdiction under 28 U.S.C.

§ 1332(a).2

A. Herbert’s Motorcycle Insurance Policy

Herbert purchased an insurance policy from State Farm on or about February 5, 2002, for his

2002 Harley Davidson Road King motorcycle. See Decl. of Pl. Robert Herbert in Opp’n to Mot. for

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Summ. J. or alternatively Mot. for Summ. Adjudication (“Herbert Decl.”), ¶¶ 4-5 [Docket No. 71]. 

The policy covered theft-related losses. Def.’s Notice of Removal, Ex. “A,” ¶ 6 (Pl.’s Compl.)

[Docket No. 1]. It included a concealment or fraud clause, which read, “[t]here is no coverage under

this policy if you or any other person insured under the policy has made false statements with the

intent to conceal or misrepresent any material fact or circumstance in connection with any claim

under this policy.” See Decl. of Toni Forrester in Supp. of Mot. for Summ. J., or in the alternative,

Mot. for Sum. Adjudication (“Forrester Decl.”), Ex. “B, ” ¶ 7 [Docket No. 66]. 

B. Herbert’s Insurance Claim

On December 7, 2004, Herbert rode his motorcycle to work. Herbert Decl., ¶ 10. Then

around 6:30 P.M., he rode it to the Le Cheval restaurant, in Oakland, for dinner, and parked in its

parking lot. Id. After dinner, when he returned to the parking lot, his motorcycle was missing. Id.,

¶ 11. Herbert called the Oakland Police Department and filed a report. Id.; Decl. of David

McDowell in Supp. of Mot. for Summ. J., or in the alternative, Mot. for Summ. Adjudication

(“McDowell Decl.”), Ex. “L” [Docket No. 67].

The next day, Herbert reported the theft to State Farm. See Forrester Decl., ¶ 7. The

following day, State Farm sent him a letter acknowledging the claim and asking him to complete an

Affidavit of Vehicle Theft (the “Affidavit”). Id., ¶ 8. In the Affidavit, Herbert said the motorcycle

was worth $44,000, as it was in “excellent” condition and had an imported seat, wheels, bags, and

lights, all custom designed. Id., Ex. “C”; McDowell Decl., Ex. “O” at 2. He had purchased it for

about $23,000 in 2002. Herbert Decl., ¶ 4.

C. State Farm’s Investigation

1. Affidavit of Vehicle Theft

On or about January 5, 2005, Herbert sent the Affidavit to State Farm. See Forrester Decl.

at 2. The Affidavit, inter alia, posited the following two questions: (1) “Has Vehicle been damaged

during the past three years?” Forrester Decl., Ex. “C” at 1. And, (2) “Any other claims in the last

three years on this or any other vehicle?” Id. In response to both, Herbert checked the “no” boxes. 

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Id. State Farm referred the claim to its Special Investigation Unit (“SIU”). Id., ¶ 10.

2. Claims Representative Forrester’s Telephone Interview

On January 11, 2005, State Farm SIU Claim Representative Toni Forrester took Herbert’s

recorded statement over the telephone. Id., ¶ 11. During the call, she asked Herbert if he had ever

had a vehicle stolen before. He said a Navigator had been stolen several years ago, but had been

recovered after being vandalized a little bit. Id., Ex.“D” at 5-6. She also asked Herbert if he had

ever been charged or convicted of a misdemeanor or felony. Id. at 7. He said, “A long time ago.” 

Id. at 7. Forrester followed up with, “As a juvenile?” and Herbert responded, “Yeah.” Id.

Understandably, Forrester did not pursue this topic.

3. Claim Representative Forrester’s Claim Search

On or about January 19, 2005, Forrester completed a claim search regarding Herbert’s auto

theft history and found he had three prior theft claims. See Forrester Decl, ¶ 12. One for a Ford

Escort, stolen in 1997, a Lexus, stolen in 2000, and a Lincoln Navigator, stolen in October 2002. Id. 

Forrester then contacted Amex (American Express) Assurance, which insured the Navigator,

and learned the claim was settled as an unrecovered total theft, and approximately $10,000

distributed to Herbert and $18,000 to the lienholder. Id., ¶ 13; See Decl. of Robert S. McLay in

Supp. of Mot. for Summ J., or alternatively, Mot. for Summ. Adjudication (“McLay Decl. ”),

Ex. “T” [Docket No. 69]. It was recovered in October 2002, and sold. McLay Decl., Ex. “T.” 

Forrester contacted Allstate, which insured the Lexus and found the claim was settled as an

unrecovered theft, though it was later recovered with minor damage and sold. Forrester Decl., ¶ 14;

McLay Decl., Ex. “T.” Allstate said it paid approximately $10,000 and $13,000 to Herbert and the

lienholder, respectively. Forrester Decl., ¶ 14.

On January 21, 2005, Forrester sent Herbert a letter advising State Farm would verify his

criminal record and the Navigator’s loss history. Id., Ex. “E.” On January 31, 2005, Forrester had a

non-recorded telephone conversation with Herbert, where he discussed the Navigator loss and a

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second vehicle loss covered by Allstate. Id., Ex. “H.” They also discussed an Alameda Superior

Court criminal matter in which charges were dropped. Id.

4. Herbert’s Oral Examination

a. Herbert’s Criminal History

On May 4, 2005, David McDowell, Esq., State Farm’s counsel, examined Herbert under

oath. McDowell Decl., ¶ 11, Ex. “M” at cover. In February 2005, prior to the examination, State

Farm obtained Herbert’s criminal record and learned he had pled nolo contendre in 1997 to three

counts of motor vehicle theft and eight other counts were dismissed. McDowell Decl., Ex. “O”;

Forrester Decl., ¶ 20. The criminal complaint alleged Herbert, and others, were involved in a chopshop operation. Id. Herbert received 16 months and did time in San Quentin. Id. 

During the examination, McDowell asked Herbert if he had ever been arrested for a crime. 

McDowell Decl., Ex. “M,” ¶ 43:26. Herbert said he had been arrested twice. Id., ¶ 44. First, in

1992 or 1993, for drug possession, and he had pled, though he could not remember the exact plea,

but he received house arrest. Id. at 44-46. He also said he did not know if the matter was still on his

record. Id. at 45. 

As for the second arrest, he was unsure, but believed it was in 1996 for “conspiracy or

possession of stolen property.” Id. at 47. He testified essentially he had been buying and selling

cars, and when he tried to register one of them with the DMV, it turned out to have been stolen. Id.

at 48. He identified the seller to authorities. Id. at 48-49. He could not remember his specific plea,

but said he did ten months in jail, in 1997. Id. at 49-50. He said he was trying to get the conviction

expunged. Id. at 50-51. 

When McDowell noted discrepancies between his testimony that day, and his prior calls with

Forrester, Herbert said there had been a miscommunication. McDowell Decl., Ex. “O,” at 7. 

b. Herbert’s Vehicle Losses

During the examination, McDowell also asked Herbert about his vehicle history. Id.,

Ex. “M” at 58. Herbert said he had owned several vehicles over the years, and three of them had

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been stolen, in addition to the motorcycle. Id. at 63. He believed a Lexus had been stolen in either

1999 or 2000 and had been insured by either Farmers or Allstate. Id. at 64. He testified he did not

recall whether he had received a settlement, though he thought it might have been paid off. Id. at 65.

Herbert could not remember specifically when an Escort had been stolen, or the claim details. Id.

at 65-66. When asked, he said he did not remember receiving a settlement. Id. at 66. Regarding the

Navigator, he said he believed it had been stolen in the 2000s and it had been insured with American

Express. Id. at 67. He also testified it had been was recovered, but he could not recover it due to a

dispute with a towing company, but he believed he had received a settlement of $8,000 to 12,000. 

Id. at 68. 

When asked why he did not identify these prior claims in his Affidavit, Herbert said he

thought it had only asked about to his motorcycle claim, and he believed State Farm knew about his

loss history, or the information it sought was beyond the time frame at which it was looking. Id.,

Ex. “O” at 4, 8. When asked why he had only mentioned the Navigator theft during the recorded

telephone conversation, Herbert said he and the claims adjuster were “in disagreements about the

whole nature of this whole situation and I probably just didn’t go all the way into detail.” Id. at 6. 

D. Claim Denial and Suit

On June 20, 2005, McDowell recommended Sate Farm deny Herbert’s claim, based on his

and State Farm’s investigation, the policy’s concealment or fraud clause, and the California standard

for rescinding policies in the face of false claims, set by Cummings v. Fire Insurance Exchange, 202

Cal.App.3d 1407 (1988). McDowell Decl., Ex. “O.” McDowell prepared a lengthy and detailed 15-

page analysis. Id. He concluded Herbert “has made numerous misstatements, including his criminal

history, loss history, the sequence of events following the alleged loss, and his acquisition and

installation of motorcycle parts.” Id. at 13 para. 3. He further concluded, while individually, the

allege misstatements might be insufficient to support denial, collectively, they were material as they

pertained to “credibility, financial motive, facts of the loss and involvement in the subject loss.” Id.,

at 14 para. 4. 

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State Farm denied Herbert’s claim on June July 13, 2005, and notified him why by letter. 

See Decl. of Laura Campbell-Bishop in Supp. of Mot. for Summ. J., or in the alternative, Mot. for

Sum. Adjudication, ¶ 12 [Docket No. 68]. The letter stated the discrepancies between Herbert’s

various statements amounted to material misrepresentations. Id. Herbert then sued State Farm, on

July 13, 2006, in Alameda County Superior Court, alleging two causes of action, breach of contract

and breach of the implied covenant of good faith and fair dealing, and requesting compensatory and

punitive damages, interest, and attorneys’ fees. Def.’s Notice of Removal, Ex. “A,” at 1, (Pl.’s

Compl.) [Docket No. 1]. On September 11, 2006, State Farm removed the matter to this Court.

LEGAL STANDARD FOR SUMMARY JUDGEMENT

Summary judgment is appropriate if no genuine issue of material fact exists and the moving

party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett,

477 U.S. 317, 322-23 (1986). The party moving for summary judgment must demonstrate there are

no genuine issues of material fact. See Horphag v. Research Ltd. v. Garcia, 475 F.3d 1029, 1035

(9th Cir. 2007). An issue is “genuine” if the evidence is such a reasonable jury could return a

verdict for the non-movant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Rivera

v. Philip Morris, Inc., 395 F.3d 1142, 1146 (9th Cir. 2005). An issue is “material” if its resolution

could affect an action’s outcome. Anderson, 477 U.S. at 248; Rivera, 395 F.3d at 1146. 

In responding to a properly supported summary judgment motion, the non-movant cannot

merely rely on their pleadings, but must present specific and supported material facts, of significant

probative value, to preclude summary judgment. See Matsushita Elec. Indus. Co., Ltd. v. Zenith

Radio Corp., 475 U.S. 574, 586 n.11 (1986); Leisek v. Brightwood Corp., 278 F.3d 895, 898 (9th

Cir. 2002); Federal Trade Comm’n v. Gill, 265 F.3d 944, 954 (9th Cir. 2001). In determining

whether a genuine issue of material fact exists, the Court views the evidence and draws inferences in

the light most favorable to the non-movant. See Anderson, 477 U.S. at 255; Sullivan v. U.S. Dep’t of

the Navy, 365 F.3d 827, 832 (9th Cir. 2004); Hernandez v. Hughes Missile Sys. Co., 362 F.3d 564,

568 (9th Cir. 2004). Other legal standards are addressed below, as needed.

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ANALYSIS

A. Summary judgement is warranted on Herbert’s first claim for breach of contract.

State Farm asserts it has no liability for Herbert’s first claim because he allegedly violated

his policy’s concealment and fraud clause by making material misrepresentations. A concealment or

fraud clause generally voids an insurance policy, when an insured attempts to deceive an insurer. 

Leasure v. MSI Ins. Co., 65 Cal.App.4th 244, 248 (2d.Dist 1998). In California, in an insurance

context, a misrepresentation, is a “false answer as to any matter of fact, material to the inquiry,

knowingly and willfully made, with intent to deceive the insurer ....” Cummings v. Farmers Ins.

Exch., 202 Cal.App.3d 1407, 1416-17, 249 Cal.Rptr. 568 (1988) (quoting Claflin v. Commonwealth

Ins. Co., 110 U.S. 81, 95 (1884)). 

In recommending denial, State Farm’s counsel essentially noted seven categories of alleged

discrepancies in the facts obtained from Herbert and third parties. McDowell Decl., Ex. “O”

at 10-13. The Court need not address all seven, as one category of material misrepresentation

suffices if sufficiently weighty, and as the following analysis shows, the Court finds Herbert’s

failure to disclose his criminal history, is adequate to end the Court’s inquiry.

i. Falsity

The undisputed facts show Herbert pled nolo contest in 1997 to three counts of motor vehicle

theft and eight other counts were dismissed, for which he received 16 months in prison. On

January 11, 2005, when State Farm asked him if he had any felony convictions, he led it to believe

his criminal records consisted only of one or more juvenile adjudications. He thus uttered a falsity. 

His very belated and very inaccurate additional communications, on the phone and under oath, did

not correct his initial falsity, and even if all his statements are viewed in the aggregate, they still do

not convey a reasonably accurate picture of his prior criminal conduct.

ii. Materiality

The materiality of a statement is not defined and determined by the effect it has on

the outcome of the investigation. Rather, a question and answer are material when

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3

The Court, however, expresses no opinion as to the admissibility of such statements or their

underlying facts, in trial.

8

they relate to the insured’s duty to give to the insurer all the information he has as

well as other sources of information so that the insurer can make a determination of

its obligations. Thus, materiality is determined by its prospective reasonable

relevance to the insurer's inquiry.

Cummings, 202 Cal.App.3d at 1416-17.

“[I]f the misrepresentation concerns a subject reasonably relevant to the insured’s

investigation, and if a reasonable insurer would attach importance to the fact misrepresented, then it

is material.” Id. at 1417. “[M]ateriality is a mixed question of law and fact that can be decided as a

matter of law if reasonable minds could not disagree on the materiality of the misrepresentations.” 

Id. 

Here, reasonable minds would agree an auto insurer would reasonably want to inquire as to a

auto theft claimant’s criminal history, as such information is clearly relevant for investigative or

discovery purposes, as it could be admissible or lead to admissible evidence. See FED. R. CIV.

P. 26(b)(1) (“Relevant information need not be admissible at the trial if the discovery appears

reasonably calculated to lead to the discovery of admissible evidence.”) Here, Herbert’s statements

regarding his felony auto theft convictions, were directly relevant for investigative or discovery

purposes, as they would have clearly lead State Farm to guide its investigation in directions it would

otherwise not have gone, had it not believed he had such convictions.3 In sum, Herbert’s statements

regarding his criminal history were material.

iii. Knowingly and Willfully Made, with Intent to Deceive

“Generally, the issue of whether the insured’s false statement was knowingly and

intentionally made with knowledge of its falsity and with intent of defrauding the insurer is a

question of fact.” Cummings, 202 Cal.App.3d at 1417-18. In Cummings, an insured initially

claimed her home, in which she lived alone, had been vandalized by parties unknown, while she was

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4

The evidence presented does not indicate Herbert’s probation term.

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out, and she repeated this in an oral examination. Id. at 1413 fn. 3. When confronted in the

examination by a neighbor’s account, placing her and her son, who lived with her, at home while he

was damaging the property, she admitted they had argued over a utility bill, during which he became

enraged, and drove her from the home at gun point. Id. 

The Cummings court thus held the insured’s knowledge, willfulness, and intent need not be

tried:

First, plaintiff admits that she knew she was lying to the defendant and did so with

the intent that defendant not find out the actual facts. Second, under Claflin, the

intent to defraud the insurer is necessarily implied when the misrepresentation is

material and the insured wilfully makes it with knowledge of its falsity. Thus,

plaintiff’s intent to deceive was established as a matter of law.

Cummings, 202 Cal.App.3d at 1417-18.

Likewise, in Woods v. Independent Ins. Co., 749 F.2d 1493 (11th Cir. 1985) the defendant

conveyed his insured home in fee simple to his mother, to avoid losing it in divorce, but then

claimed it was his when it burned down. Id. at 1494-95. He later conceded the knew the

representation was false, and the court affirmed summary judgment against him. Id. at 1496-97. 

And, in Long v. Insurance Co. of N. Am., 670 F.2d 930 (10th Cir. 1982), a witness saw

homeowners remove their furniture from their home, put in older furniture, then saw one of their

relatives exit the home, shortly before it caught fire. Id. at 931. The homeowners had moved their

real furniture to a storage facility, but denied under oath they had any such facility. Id. at 931-32. 

The court found their denials material misrepresentations, as a matter of law. Id. at 933-34.

In this case, Herbert clearly knew he was lying, and willfully did so, in January 2005, when

he failed to disclose to State Farm his felony conviction and prison stay, for three counts of auto

theft. No reasonable jury would believe that a mere eight years after conviction, and presumably

only seven after imprisonment, and even less after probation,4

 that he forgot his period of

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imprisonment. Nor does Herbert explain how he meant the term “Juvenile,” in his recorded

interview, to account for his adult narcotics conviction. In addition, Herbert did little to correct

these falsehoods in his second phone interview or in his oral examination. Thus, as in Cummings

and the related cases just discussed, no reasonable jury would have difficulty concluding Herbert

knew he was lying to State Farm and did so with the intent it not find out the actual facts. As a

result, Herbert’s intent to deceive is established as a matter of law.

iv. Conclusion

Viewing the evidence and drawing inferences in a light most favorable to Herbert, there are

no genuine issues of material fact which prevent the Court from finding as a matter of law in failing

to disclose his felony auto theft conviction and his prison term, he gave a false answer to a matter of

fact, material to State Farm’s inquiry, knowingly and willfully made, with the intent to deceive State

Farm. Therefore, the Court grants State Farm’s motion for summary judgment with regards to

Herbert’s first claim for breach of contract.

B. Summary adjudication is warranted on Herbert’s second claim for breach of the

implied covenant of good faith and fair dealing.

Summary adjudication is appropriate here, where viewing all the evidence and drawing all

inferences in a light most favorable to Herbert, there is no genuine issue of fact as to: (1) whether or

not State Farm investigated Herbert’s claim reasonably and in good faith, which it did; and

(2) whether, under the facts and circumstances of this matter, State Farm has a genuine dispute with

him regarding its liability, which it does. 

In addition to the duties imposed on contracting parties by the express terms of their

agreement, the law implies in every contract a covenant of good faith and fair

dealing. The implied promise requires each contracting party to refrain from doing

anything to injure the right of the other to receive the benefits of the agreement. The

precise nature and extent of the duty imposed by such an implied promise will depend

on the contractual purposes.

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Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 818, 169 Cal.Rptr. 691 (1979) (citations omitted). 

 “The implied covenant of good faith and fair dealing does not impute an obligation on the

insurer to pay every claim made by its insured.” Wilson v. 21st Century Ins. Co., 42 Cal.4th 713,

721 (2007). But when “the insurer unreasonably and in bad faith withholds payment of the claim of

its insured, it is subject to liability in tort.” Id. at 720 (quoting Frommoethelydo v. Fire Ins. Exch.

42 Cal.3d 208, 214-215, 228 Cal.Rptr. 160, 721 P.2d 41 (1986)). To avoid this, an insurer must

fully investigate a claim’s grounds for denial and approval. Wilson, 42 Cal.4th at 721. Likewise, an

insurer must not deny a claim on grounds unfounded or contradicted by known facts. Id.

“[T]he critical issue [is] the reasonableness of the insurer’s conduct under the facts of the

particular case.... An insurer’s good or bad faith must be evaluated in light of the totality of the

circumstances surrounding its actions.” Wilson, 42 Cal.4th at 723. Under the “genuine dispute”

rule:

[A]n insurer denying or delaying the payment of policy benefits due to the existence

of a genuine dispute with its insured as to the existence of coverage liability or the

amount of the insured’s coverage claim is not liable in bad faith even though it might

be liable for breach of contract. 

Id. at 723 (quoting Chateau Chamberay Homeowners Assn. v. Associated Int’l. Ins. Co., 90

Cal.App.4th 335, 347, 108 Cal.Rptr.2d 776 (2001)).

The genuine issue rule in the context of bad faith claims allows a [trial] court to grant

summary judgment when it is undisputed or indisputable that the basis for the

insurer’s denial of benefits was reasonable-for example, where even under the

plaintiff's version of the facts there is a genuine issue as to the insurer’s liability

under California law. [Citation.] ... On the other hand, an insurer is not entitled to

judgment as a matter of law where, viewing the facts in the light most favorable to

the plaintiff, a jury could conclude that the insurer acted unreasonably. 

Wilson, 42 Cal.4th at 724 (quoting Amadeo v. Principal Mut. Life Ins. Co. (9th Cir. 2002) 290 F.3d

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5 In particular, Herbert provided a box of receipts, which State Farm sent to an appraiser for

evaluation. Forrester Decl. ¶ 16, Exs. “E,” “H”-“I,” “K”; McDowell Decl., Ex. “O” at 3. State

Farm also contacted some of the entities indicated in the receipts to verify whether the work

indicated had been done. McDowell Decl., Ex. “M” at 218-21, 247-48, “O” at 4-5; McLay Decl.,

Ex. “U.” Also, although Herbert claimed to have had the motorcycle appraised twice, Forrester Decl

¶ 16; McDowell Decl., Ex. “O” at 7, he never produced any written appraisals, nor provided contact

information for the appraisers. State Farm also requested cell phone records and his Le Cheval

receipt. Forrester Decl. Exs. “E,” “H”-“I.” Herbert refused to produce the former, on the grounds

State Farm wanted them for multiple days before and after the date of loss, Herbert Decl. ¶ 17, and

he never produced the latter, McDowell Decl., Ex. “O” at 20 ¶ 5.

6 This is not to suggest the evidence supports finding Herbert defrauded State Farm, as a

matter of law. Both Herbert and State Farm could reasonably dispute his denial, without either

violating the implied covenant of good faith and fair dealing, even if State Farm were in breach of

contract. See Wilson 42 Cal.4th at 723.

12

1152, 1161-1162). 

In this case, it is clear, as a matter of law, State Farm did not breach the implied covenant of

good faith and fair dealing. There is nothing in State Farm’s conduct which suggests its

investigation was unreasonable or performed in bad faith. State Farm looked into the facts

surrounding Herbert’s claim, his loss history, his criminal background, and the motorcycle’s value. 

The latter investigation covered Herbert’s appraisals, his work done on the vehicle, and his alleged

customized equipment.5

 As discussed in analyzing Herbert’s first claim for breach of contract, all of

these subjects are material to a claims investigation.

Procedurally, it is also clear as a matter of law that State Farm behaved reasonably and in

good faith in conducting its investigation. It used the Affidavit, telephone interviews, and an oral

examination under oath, and third-party statements and documents to verify Herbert’s statements. 

And, State Farm took pains to advise him as to what it was doing and with whom it was

communicating. While Herbert might complain State Farm was investigating him, rather than his

claim, Herbert Decl. ¶ 16, State Farm was as much ruling him out, as ruling him in. 

Also, Herbert was slow to respond to inquiries, and often gave inconsistent or partial

answers, which created contradictions or raised questions into which State Farm had a right to

follow up. In addition, based on all the inconsistencies State Farm found, it was reasonable for them

to conclude Herbert had defrauded State Farm.6

 Thus, this is not a case where State Farm failed to

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follow up on a reasonable lead or ignored contradictory evidence. See Frommoethelydo, 42

Cal.App.3d at 212-14, 220 (insurer’s denial unreasonable where insured claimed loss of similar sets

of audio-visual equipment twice, due to two burglaries, and insurer failed to interview known

witness who had seen equipment in the insured’s home, between burglaries).

In addition, State Farm consulted with legal counsel, not only to conduct the oral

examination, but to rigorously analyze the evidence discovered, under the pertinent California legal

standards, to reasonably dispose of his claim. The use of counsel tends to support State Farm acted

in good faith. See State Farm Mut. Auto. Ins. Co. v. Superior Ct., 228 Cal.App.3d 721, 725, 279

Cal.Rptr. 116 (1991). 

Thus, under the undisputed facts and circumstances of this matter, viewed with all inferences

drawn in a light most favorable to Herbert, State Farm has a genuine dispute with him regarding its

liability, and any reasonable jury would find it investigated Herbert’s claim reasonably and in good

faith. Thus, summary adjudication is appropriate on Herbert’s second claim for breach of the

implied covenant of good faith and fair dealing.

C. Summary adjudication is appropriate on Herbert’s claim for punitive damages.

Because State Farm is entitled to summary adjudication on Herbert’s second claim for breach

of the covenant of good faith and fair dealing, it is also entitled to summary adjudication on

Herbert’s claim for punitive damages. Under California law:

In an action for the breach of an obligation not arising from contract, where it is

proven by clear and convincing evidence that the defendant has been guilty of

oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may

recover damages for the sake of example and by way of punishing the defendant.

Cal. Civ. Code § 3294(c).

Evidence that an insurer has violated its duty of good faith and fair dealing

does not thereby establish that it has acted with the requisite malice, oppression or

fraud to justify an award of punitive damages. In order to establish that an insurer’s

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conduct has gone sufficiently beyond mere bad faith to warrant a punitive award, it

must be shown by clear and convincing evidence that the insurer has acted

maliciously, oppressively or fraudulently. 

Mock v. Michigan Millers Mut. Ins. Co., 4 Cal.App.4th 306, 327, 5 Cal.Rptr.2d 594 (1992) (citations

omitted) (emphasis in original).

In this case, as already discussed, State Farm is entitled to summary adjudication on

Herbert’s second claim for breach of the covenant of good faith and fair dealing. Thus, as this is

Herbert’s only claim which might allow for punitive damages, State Farm, as a matter of law, under

Mock’s analysis, could not have engaged in malicious, oppressive, or fraudulent conduct. Therefore,

State Farm is entitled to summary adjudication on Herbert’s claim for punitive damages.

CONCLUSION

The Court GRANTS State Farm’s Motion for Summary Judgment or in the alternative, Motion

for Summary Adjudication [Docket No. 63]. 

IT IS SO ORDERED.

February 14, 2008 _________________________________

Saundra Brown Armstrong 

United States District Judge

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