Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-02848/USCOURTS-caed-2_09-cv-02848-0/pdf.json

Parties Involved:
Cindy Elmer
Plaintiff
Infinity Insurance Company
Defendant

Document Text:

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

CINDY ELMER, No. 2:09-cv-02848-MCE-GGH

Plaintiff,

v. MEMORANDUM AND ORDER

INFINITY INSURANCE COMPANY 

and DOES 1-100, inclusive,

Defendants.

----oo0oo----

Plaintiff Cindy Elmer (“Plaintiff”) seeks damages stemming

from the denial of her insurance claim and subsequent

cancellation of her insurance policy by Defendant Infinity

Insurance Company (“Defendant”). She brings two causes of

action: breach of contract and breach of the implied covenant of

good faith and fair dealing. Plaintiff originally filed in state

court; Defendant then removed this case to federal court, citing

diversity jurisdiction pursuant to 28 U.S.C. § 1332. 

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 The Court notes that Defendants have also requested 1

summary judgment as to all tort damages sought by Plaintiff. 

Because Plaintiff’s tort claim survives this motion, she retains

her claims for tort damages. This Court need not address whether

these damages could also be sought under the breach of contract

claim.

 Because oral argument will not be of material assistance, 2

the Court orders this matter submitted on the briefing. E.D.

Cal. Local Rule 230(g).

2

Presently before the Court is Defendant’s Motion for Partial

Summary Judgment. Defendant claims that Plaintiff’s tort claim

for breach of the implied covenant of good faith and fair dealing

is barred by the two-year statute of limitations. For the 1

reasons set forth below, Defendant’s request for summary

adjudication as to the implied covenant claim will be denied.2

BACKGROUND

In January of 2007, Plaintiff insured her 2007 Dodge Nitro

SXT with Defendant. Her policy covered both damage caused by a

collision as well as damage not caused by a collision. On

April 23 of that year, she submitted a claim to Defendant

regarding damage to her car. Plaintiff and Defendant hotly

dispute the cause of that damage. 

According to Plaintiff, her car was struck by a hit-and-run

driver while parked on the street during the night of April 21 or

early morning of April 22. She claims to have left her car on

the street overnight, locked and unharmed, and to have discovered

collision damage to the front end of the car the next morning. 

Plaintiff’s neighbor reports hearing a loud bang at 4 a.m. from

the direction of Plaintiff’s vehicle. 

Case 2:09-cv-02848-MCE -GGH Document 17 Filed 07/01/10 Page 2 of 10
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 Defendant has requested that the Court judicially notice 3

Plaintiff’s initial complaint in this matter, filed in the

Superior Court of the State of California for the County of

Placer, as well as the County of Placer’s 2009 Superior Court

Holiday Schedule. These requests are unopposed and will be

granted.

3

After Defendant investigated Plaintiff’s claim, the company

concluded that Plaintiff’s story was a fabrication and that the

car had been hurt while being driven off-road “through heavy

brush” by the Plaintiff or her family. Both parties cite to

expert evaluation as to the source of the damage. Plaintiff’s

mechanic found the damage to be consistent with a hit-and-run

accident, as Plaintiff alleges, while Defendant’s mechanic

thought that the car had been damaged while being driven offroad. 

As a result of this investigation, Defendant denied

Plaintiff’s claim via fax and telephone on May 29, 2007. 

Defendant then cancelled Plaintiff’s policy coverage on June 13,

2007, citing “fraud discovered during investigation of 4/22/07

loss.” 

The above-enumerated dates are central to Defendant’s Motion

for Partial Summary Judgment now before the Court. Through that

motion, Defendant seeks summary adjudication as to Plaintiff’s

claim for breach of the implied covenant of good faith and fair

dealing on grounds that said claim is time-barred. Defendant

argues that because the statute of limitations on an implied

covenant claim is two years, and the statute began running on

May 29, 2007, the present lawsuit, filed on June 1, 2009, was 3

commenced three days after the statute of limitations expired. 

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4

Plaintiff, on the other hand, contends that the statute was not

triggered until the policy was cancelled on June 13, 2007,

inasmuch as the denial of the claim and the cancellation of the

policy arise from the same set of facts: Plaintiff’s alleged

fraud. 

STANDARD

The Federal Rules of Civil Procedure provide for summary

judgment when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law.” Fed. R. Civ. P. 56(c). One of the

principal purposes of Rule 56 is to dispose of factually

unsupported claims or defenses. Celotex Corp. v. Catrett, 477

U.S. 317, 325 (1986).

Rule 56 also allows a court to grant summary adjudication on

part of a claim or defense. See Fed. R. Civ. P. 56(a) (“A party

seeking to recover upon a claim...may...move...for a summary

judgment in the party’s favor upon all or any part thereof.”);

see also Allstate Ins. Co. v. Madan, 889 F. Supp. 374, 378-79

(C.D. Cal. 1995); France Stone Co., Inc. v. Charter Township of

Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).

The standard that applies to a motion for summary

adjudication is the same as that which applies to a motion for

summary judgment. See Fed. R. Civ. P. 56(a), 56(c); Mora v.

ChemTronics, 16 F. Supp. 2d. 1192, 1200 (S.D. Cal. 1998).

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5

Under summary judgment practice, the moving party

always bears the initial responsibility of informing

the district court of the basis for its motion, and

identifying those portions of “the pleadings,

depositions, answers to interrogatories, and admissions

on file together with the affidavits, if any,” which it

believes demonstrate the absence of a genuine issue of

material fact.

Celotex Corp. v. Catrett, 477 U.S. at 323 (quoting Rule 56(c)).

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

585-87 (1986); First Nat’l Bank v. Cities Serv. Co., 391 U.S.

253, 288-89 (1968).

In attempting to establish the existence of this factual

dispute, the opposing party must tender evidence of specific

facts in the form of affidavits, and/or admissible discovery

material, in support of its contention that the dispute exists. 

Fed. R. Civ. P. 56(e). The opposing party must demonstrate that

the fact in contention is material, i.e., a fact that might

affect the outcome of the suit under the governing law, and that

the dispute is genuine, i.e., the evidence is such that a

reasonable jury could return a verdict for the nonmoving party. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52

(1986); Owens v. Local No. 169, Assoc. of Western Pulp and Paper

Workers, 971 F.2d 347, 355 (9th Cir. 1987). 

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6

Stated another way, “before the evidence is left to the jury,

there is a preliminary question for the judge, not whether there

is literally no evidence, but whether there is any upon which a

jury could properly proceed to find a verdict for the party

producing it, upon whom the onus of proof is imposed.” Anderson,

477 U.S. at 251 (quoting Improvement Co. v. Munson, 14 Wall. 442,

448, 20 L. Ed. 867 (1872)). As the Supreme Court explained,

“[w]hen the moving party has carried its burden under Rule 56(c),

its opponent must do more than simply show that there is some

metaphysical doubt as to the material facts....Where the record

taken as a whole could not lead a rational trier of fact to find

for the nonmoving party, there is no ‘genuine issue for trial.’” 

Matsushita, 475 U.S. at 586-87.

In resolving a summary judgment motion, the evidence of the

opposing party is to be believed, and all reasonable inferences

that may be drawn from the facts placed before the court must be

drawn in favor of the opposing party. Anderson, 477 U.S. at 255. 

In judging evidence at the summary judgment stage, the court does

not make credibility determinations or weigh conflicting

evidence. See T.W. Elec. v. Pacific Elec. Contractors Ass’n,

809 F.2d 626, 630-631 (9th Cir. 1987), citing Matsushita Elec.

Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

Nevertheless, inferences are not drawn out of the air, and it is

the opposing party’s obligation to produce a factual predicate

from which the inference may be drawn. Richards v. Nielsen

Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985),

aff’d, 810 F.2d 898 (9th Cir. 1987).

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7

ANALYSIS

Under California law, tort damages for breach of the implied

covenant of good faith and fair dealing are generally not

available. Jonathan Neil & Assocs., Inc. v. Jones, 33 Cal. 4th

917, 923 (2004). The covenant is a “contract term,” and as such,

“compensation for its breach has almost always been limited to

contract rather than tort remedies.” Id. at 937. There is a

recognized exception, however, “when the breach occurs in the

context of an insurance company’s failure to properly settle a

claim against an insured, or to resolve a claim asserted by the

insured.” Id. at 923. This is because of the “special

relationship between the insurer and the insured,” id. at 937,

which imposes on the insurer an “obligation not to impair the

right of the insured to receive the benefits of the agreement.” 

Id. at 938.

 The Jonathan Neil court addressed the question as to what

actions on the part of an insurance company fall within the

rubric of “settling” or “resolving” a claim. Id. In doing so,

it enumerated three factors that weighed against permitting tort

damages for the alleged breach on the part of the defendant

insurer. First, the action on the part of the insurer did not

“deny the insured the benefits of the insurance policy.” Id. at

939. Second, the action did not “require the insured to

prosecute the insurer in order to enforce its rights.” Id. at

939. Third, traditional tort remedies were available to the

insured. Id. at 939. 

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8

However, the holding in Jonathan Neil was expressly limited “only

to retroactive billing cases in which the billing is separate and

distinct from any allegations of claim mishandling.” Id. at 941

n.10. 

By contrast, the California Court of Appeals held in

Security Officers Service that the defendant insurance company’s

overcharging of premiums was directly linked to its claims

handling practices, and therefore was bound by the implied

covenant of good faith and fair dealing. Sec. Officers Serv. v.

State Comp. Ins. Fund, 17 Cal. App. 4th 887 (1993). The Jonathan

Neil court distinguished Security Officers Service,

characterizing the overcharging of premiums as “inextricably

linked to the mishandling of claims–precisely the kind of bad

faith behavior that goes to the heart of the special insurance

relationship and gives rise to tort remedies.” Jonathan Neil,

33 Cal. 4th at 940. 

Although the California Supreme Court has not ruled on

whether cancellation provisions fall under the implied covenant,

Jonathan Neil, 33 Cal. 4th at 941, California’s appellate courts

have held that “[c]ancellation provisions in an insurance

contract are subject to the implied covenant of good faith and

fair dealing just like any other clause.” Helfand v. Nat’l Union

Fire Ins. Co., 10 Cal. App. 4th 869, 903 (1992) (citing Spindle

v. Travelers Ins. Cos., 66 Cal. App. 3d 951, 958 (1977)). 

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9

Both the Helfland and the Spindle courts affirmed the

availability of tort damages when a policy was cancelled for

“improper motive,” in the Spindle case to “pressure members of a

doctors group to consent to a large increase in their medical

malpractice premiums.” Jonathan Neil, 33 Cal. 4th at 90. 

The issue now before the Court is whether or not the

cancellation of Plaintiff’s insurance policy on June 13, 2007,

was “inextricably linked” to the May 29 denial of her claim, or

whether the two events are separate and unrelated. Defendant

takes the latter position and argues that because Plaintiff’s

complaint was filed more than two years after the denial of the

claim, her cause of action for tort damages is time-barred. 

The Court disagrees with Defendant’s contention in this

regard. The cancellation of the policy was not, as Defendant

argues, “an entirely distinct and subsequent act” (Def.’s Mot.

Summ. J. 6), but rather was “inextricably linked” to the denial

of her claim. Both actions taken by the Defendant stemmed from

Plaintiff’s alleged fraud in reporting her claim. The “Reason

for Cancellation” cited in Defendant’s Notice of Cancellation is

“Fraud discovered during investigation of 4/22/07 loss.” (Pl.’s

Opp’n to Mot. Summ. J. Ex. A.) The act of cancelling the policy

was part and parcel of the denial of policy benefits to Plaintiff

(first Jonathan Neil factor) and forms a part of the behavior

that requires Plaintiff to prosecute to enforce her rights

(second Jonathan Neil factor). 

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 Because the Court finds that the policy cancellation was 4

“inextricably linked” to the denial of Plaintiff’s claim, the

Court need not decide whether, as Plaintiff argues, the

continuing violation doctrine applies. 

10

Because this Court finds that Defendant’s cancellation of

Plaintiff’s policy was tied to the denial of her claim, which she

alleges breached the implied covenant of good faith and fair

dealing, the statute of limitations for Plaintiff’s implied

covenant claim was not triggered until June 13, 2007. 

Plaintiff’s complaint, filed June 1, 2009, is therefore not timebarred and may continue. 

4

CONCLUSION

Based on the foregoing, Defendant is not entitled to summary

adjudication as to the tort claims pled in Plaintiff’s complaint. 

Defendant’s Motion (Docket No. 9) is accordingly DENIED.

IT IS SO ORDERED.

Dated: June 30, 2010

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

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