Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_06-cv-01232/USCOURTS-caed-1_06-cv-01232-2/pdf.json

Parties Involved:
Christopher Hergenroeder
Plaintiff
Julie Hergenroeder
Plaintiff
Matthew Hergenroeder
Plaintiff
Michael Hergenroeder
Plaintiff
Natalie Crawford Hergenroeder
Plaintiff
Shelby Hergenroeder
Plaintiff
Steve Hergenroeder
Plaintiff
Travelers Property Casualty Insurance Company
Defendant

Document Text:

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

STEVE HERGENROEDER; JULIE

HERGENROEDER; MATTHEW

HERGENROEDER, a minor, by and

through his Guardian Ad Litem

JULIE HERGENROEDER;

CHRISTOPHER HERGENROEDER, a

minor, by and through his

Guardian Ad Litem JULIE

HERGENROEDER; MICHAEL

HERGENROEDER; NATALIE CRAWFORD

HERGENROEDER; AND SHELBY

HERGENROEDER, a minor, by and

through her Guardian Ad Litem

NATALIE CRAWFORD HERGENROEDER

Plaintiffs,

v.

TRAVELERS PROPERTY CASUALTY

INSURANCE COMPANY; and DOES 1

through 20, inclusive,

Defendant.

1:06-CV-1232 OWW-SMS

MEMORANDUM DECISION RE

GRANTING IN PART AND DENYING

IN PART DEFENDANT TRAVELERS’

MOTION FOR SUMMARY JUDGMENT

(DOC. 19)

1. INTRODUCTION

Defendant Travelers Property Casualty Property Insurance

Company (“Travelers”) moves for summary judgment or partial

summary judgment pursuant to Federal Rules of Civil Procedure 56,

to adjudicate Plaintiffs’ Steve Hergenroeder, Julie Hergenroeder,

Matthew Hergenroeder (a minor), Christopher Hergenroeder (a

minor), Michael Hergenroeder, Natalie Crawford Hergenroeder and

Shelby Hergenroeder (a minor) (collectively, “Plaintiffs”)

complaint for claims related to their home owners’ insurance,

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 1 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiffs argue that due to the fact that most but not 1

all of Defendant Travelers motion for summary judgment papers

were filed on January 31, 2008, not January 30, 2008 the deadline

for filing dispositive motions, the Court should not even

consider the motion on its “merits”. Defendant Travelers

however, filed its notice of motion, motion for summary judgment,

statement of undisputed facts and declarations on January 30,

2008. Then after experiencing technical difficulties filed their

remaining motion for summary judgment papers, including their

proposed order and exhibits on January 31, 2008. Plaintiffs’

objection is OVERRULED.

2

Travelers, response to their December 14, 2004 water flooding

incident at their home which resulted in Plaintiffs being unable

to remain in their home for almost a year. Plaintiffs’ complaint

alleges (1) breach of contract, (2) bad faith, (3) intentional

infliction of emotional distress, (4) negligent infliction of

emotional distress, (5) negligence, and (6) negligent

interference with prospective economic advantage. The matter was

heard on April 7, 2008. 

2. PROCEDURAL BACKGROUND

This suit was removed on September 8, 2006 from Fresno

County Superior Court to the U.S. district court for the Eastern

District of California by Defendant Travelers on the basis of

diversity of the parties and the amount in controversy exceeeds

$75,000, exclusive of interests and costs. (Doc. 1, Notice of

Removal) Defendant filed a motion for summary judgment on

January 30, 2008 and January 31, 2008, including its statement of

undisputed facts. (Doc. 19, Motion for Summary Judgment and Doc.

21, DSUF) Plaintiffs filed their opposition to Travelers’ 1

Motion for Summary Judgment on February 29, 2008, including their

statement of undisputed facts. (Doc. 49, Opposition and Docs. 50-

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 2 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Including personal property owned or used any insured 2

while it is anywhere in the world and coverage for fair rental

value.

3

52, PSUF) Defendant filed its reply to Plaintiffs’ Opposition on

March 10, 2008. (Doc. 57, Reply)

3. JURISDICTION AND VENUE

Plaintiffs are citizens of California. (Doc. 1, Notice of

Removal, ¶ 7) Defendant is a corporation duly organized under

the laws of the State of Connecticut, with its principal place of

business in the State of Connecticut (Id.) The Complaint seeks

damages in excess of $75,000, exclusive of interest and costs, as

Plaintiffs claim Travelers is liable for damages in excess of

$870,290.00. Jurisdiction exists under 28 U.S.C. § 1332. 

Venue is proper in the Eastern District of California,

pursuant to 28 U.S.C. § 1391, because Travelers is subject to

personal jurisdiction in this judicial district and a substantial

part of the events or omissions giving rise to this lawsuit

occurred in the Eastern District of California

4 FACTUAL HISTORY

A. UNDISPUTED FACTS

I. Policy

Travelers issued homeowners insurance Policy No. 977816231-

633-1, effective November 13, 2004 to November 13, 2005, to

Plaintiffs to insure residential property located at 2145 Bedford

Avenue, Clovis, California (“Property”). (Doc. 21, Defendant’s 2

Statements of Undisputed Facts “DSUF” 1) 

II. December 14, 2007 Water Loss at the Property (the

Hergenroeder’s Home)

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 3 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

During the night or the early morning hours of December 14,

2004, Julie and Steve Hergenroeder’s son, Christopher

Hergenroeder used the upstairs bathroom of the Hergenroeders’

home. (Doc. 52, Plaintiffs’ Additional Statement of Disputed

Facts, “PSAUF”, 1) The toilet clogged, and kept running. (PSAUF

2) As the Hergenroeders slept, the water continued to run.

(PSAUF 3) By the time the Hergenroeders awoke, there was “water

everywhere,” including standing water in the upstairs bathroom

floor, 1⁄2 inch to 2 inches deep. (PSAUF 4) 

Ms. Hergenroeder woke up around 6:30 a.m. or 7:00 a.m., when

she heard water running and discovered that the carpet outside

the upstairs bedroom was wet and saw that the water was running

in the bathroom. (DSUF 46-47) 

When she entered the bathroom, Ms. Hergenroeder observed

that there was about half an inch of water. She turned off the

water valve under the toilet. (DSUF 50) Ms. Hergenroeder

observed that the linoleum floor in the bathroom was wet. She

observed that the upstairs carpet in the hallway outside the

bedroom was wet. The carpet on the stairs was wet all the way

down the stairs in the hallway. (DSUF 51) After closing the

valve, Ms. Hergenroeder woke up her husband and they went

downstairs. (DSUF 52) When Ms. Hergenroeder went downstairs, she

observed:

•“it was raining in the family room.”

• “The ceiling was all... it looked wet and it had like

beads of water, like where there might be seams or

something in the ceiling. It looked like there were

strips of water and there was a vent over the sofa and

the water was just pouring out of the vent.”

•“Everything was wet. All the furniture was wet. My son

had some books on the couch that were completely wet.

Everything was wet.”

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 4 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

(DSUF 53) 

Matthew Hergenroeder saw water all over the downstairs

floor, “[i]t was a pool of water like you walked in water. It

splashed as you walk on.” (DSUF 59) The water was “slightly

discolored. It looked like toilet water.” But he could still

see the tile through the water, “it wasn’t like mud.” The

standing water in the downstairs bedroom went over Steve

Hergenroeder’s shoe, maybe 2 inches deep. (PSAUF 6) The standing

water in the family room, bathroom and kitchen was between 2 and

3 inches deep. (PSAUF 7) 

There was “brown and stuff” coming out of the bathroom on

the floor, shreds of toilet paper and what looked like feces,

liquefied brownish material mixed in all the water. (PSAUF 8) 

Dark chocolate brown standing water was on the downstairs floor,

up to an inch deep in the family room. (PSAUF 11) The furniture

in the family room was wet. (PSAUF 12) The water caused a dirty,

musty smell. (PSAUF 13) 

After looking in the family room, Ms. Hergenroeder “started

getting towels out to try to sop up the water.” She threw towels

on the floor in the family room and everywhere where there was

water: in the kitchen, down the hall and on the bathroom floor

upstairs. They used up all the towels in the closet. (DSUF 55) 

After they had placed towels down and called Travelers and

Randrup, Inc., Ms. Hergenroeder made lunch for her son and took

him to school. (DSUF 58) There was no water damage in the home

office. (DSUF 71)

III. Randrup, Inc., Water Clean-up Company

That morning, Steve Hergenroeder called Travelers’ 800

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 5 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

telephone claim center line to report the flood. (PSAUF 37) 

Travelers had a Geo Referral List of company names in December of

2004 [when the Hergenroeders’ loss occurred]. (PSAUF 41) Mr.

Hergenroeder spoke with Felice when he called the 800 number. 

“She said they didn’t have anybody on their vendor list look in

the phone book. I asked her ... I knew about Randrup’s, but I

had to look their phone number up in the phone book and ... and

she said call them or someone out of the phone book.” 

Mr. Hergenroeder had worked with Randrup, Inc. (“Randrup”)

on one occasion prior to December 14, 2004 when he was the plant

manager at Carrington Pointe. The pipes froze and burst during a

cold season. Randrup was the company that came up and “sucked up

the water and all that stuff, did the restoration.” Mr.

Hergenroeder agrees that he had experience with Randrup in terms

of water cleanup and extraction. (DSUF 62) 

Randrup came the same day Mr. Hergenroeder called them. Mr.

Hergenroeder let them in, showed them the house and “they did

their thing.” Mr. and Ms. Hergenroeder signed a contract with

Randrup to do the repair work to their home, authorizing Randrup

to proceed with work that same day that consisted of taking water

up, putting fans and tearing the ceiling out. (DSUF 63, 79) The

Hergenroeders continued to live in, and prepare food in, their

home during December 14, 15 and 16, 2004, even while Randrup

performed demolition work. (PSAUF 88) 

Randrup set up what Mr. Permenter, Travelers’ claim

adjuster, assigned to the Hergenroeders’ water loss claim,

described as “blowers,” “air movers” or “turbo fans.” (PSAUF 55) 

Mr. Permenter saw the turbo fans when he inspected the

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 6 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Hergenroeders’ home on December 15, 2004. (PSAUF 56) Mr.

Permenter could not recall if those turbo fans were vented to the

outside, or filtered. (PSAUF 57) Randrup’s fans did not have

anything to vent them outside or direct air outside the

Hergenroeders’ home. (PSAUF 58) 

Mr. Permenter noted that Randrup’s water extraction failed

to use tarps, and debris was all over the couches below and all

over the floor,” to prevent further damage despite “the close

proximity of the kitchen with all this drywall and insulation

that they just demoed.” (PSAUF 49)

Randrup hung a sheet of plastic between the family room and

kitchen, and did no further work on the Hergenroeders’ home.

(PSAUF 93) After stopping work on the Hergenroeders’ home,

Randrup would not return phone calls from Steve Hergenroeder.

(PSAUF 94) 

a. Randrup’s Discovery of Rat Nests

On December 14, 2004, Plaintiff Steve Hergenroeder was

informed by Randrup that rat nests were pulled from the ceiling

in the family room. Mr. Hergenroeder testified that he saw a

“bunch of stuff all over the ground.” but that he “did not

examine it that well.” (PSAUF 15) The rat nests contained rat

droppings and smelled bad. (PSAUF 16) 

By the morning of December 15, 2004, the house started to

really smell, a musty, thick smell, even though the fans were

running. It was starting to approach the smell of an outhouse.

(PSAUF 17) By the morning of December 16, 2004, their home

smelled like a rabbit cage. (PSAUF 20)

IV. Sean Permenter, Travelers’ Adjuster Assigned to

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 7 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

Plaintiffs’ Water Loss Claim

After Plaintiffs reported their claim to Travelers, Sean

Permenter was assigned to investigate and adjust the claim. (DSUF

3) As part of Travelers’ investigation, Mr. Permenter spoke with

Steve Hergenroeder on December 14, 2004, and agreed to meet with

him at the Property on December 15, 2004. (DSUF 4) 

On December 15, 2004, Mr. Permenter met with Mr.

Hergenroeder at the Property. Mr. Permenter observed that the

initial water extraction had begun, and was informed by Mr.

Hergenroeder that Randrup performed the extraction. (DSUF 6) 

Mr. Permenter came to understand that the water originated

from a toilet in the upstairs bathroom, and he inspected the

bathroom with Mr. Hergenroeder. (DSUF 7) Mr. Permenter observed

damage to the upstairs bathroom floor, walls, carpeting in the

upstairs hallway, and the family room ceiling and walls. He also

observed some damage to the kitchen ceiling as a result of the

removal of the family room ceiling done by Randrup as part of its

water extraction. (DSUF 10) 

On December 16, 2004, Mr. Permenter, spoke to Mr.

Hergenroeder again, and Mr. Hergenroeder stated that Randrup had

found two large rat nests in the family room ceiling during the

water extraction. (DSUF 12) 

On or about December 16, 2004, several days after the water

loss incident, Plaintiffs moved into a Marriott hotel. (DSUF 68)

On December 17, 2004, Mr. Permenter and Jeff Krebbs met with

Steve Hergenroeder at the Hergenroeders’ home. (PSAUF 102) Mr.

Permenter recalls that meeting because it was the last day prior

to his vacation. (PSAUF 103) 

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 8 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

a. Failure of Travelers to Respond to Plaintiffs’

Telephone Call During Mr. Permenter’s Vacation

During the week after Christmas, Steve Hergenroeder made

several calls to Travelers, but no one answered his calls. (PSAUF

105) While Mr. Permenter was on vacation, Mr. Krebs never

returned calls from the Hergenroeders. (PSAUF 106) Mr. Permenter

referred to his vacation as an explanation for what he called a

“huge gap” in his log notes from 12/16/04 to 12/28/04. (PSAUF

108) 

V. Hergenroeders Become Ill

On December 16, 2004, Mr. Permenter testified and indicated

in his Impact Notes that he spoke to Steve Hergenroeder by phone,

and Mr. Hergenroeder told him that he and the family were feeling

sick. (PSAUF 89) By the next day, each member of the

Hergenroeder family was starting to feel nauseous and had

diarrhea. (PSAUF 19) The Hergenroeder family was sick “most of

January.” At one point, all the boys were throwing up. Julie

Hergenroeder had diarrhea on and off for a few weeks. (PSAUF 21) 

Eva Sciascia testified that one of the first questions she asks

is whether the home is livable. (See PSAUF 85 and Doc. 59,

Response to PSAUF 85) 

VI. Travelers’ Decision to Perform Contamination Testing on

the Property: December 28, 2004

On December 28, 2004, fourteen (14) days after the flood,

and after Mr. Permenter returned from vacation, Mr. Permenter

spoke to Steve Hergenroeder by phone and “advised [Steve] that a

bio hazard inspection may be in order”, testing for contamination

should be performed on the Property. (PSAUF 107) Mr.

Hergenroeder informed him that he and his family were on vacation

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 9 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

in Southern California. Mr. Permenter advised Mr. Hergenroeder

that he would be obtaining an estimate to repair the water damage

from Puma Construction. (DSUF 19) 

After the Hergenroeders returned from vacation, Mr.

Permenter met with Mr. Hergenroeder on January 7, 2005 to discuss

the claim. That same day Mr. Permenter contacted another

industrial hygiene expert Troy Brooks of T. Brooks & Associates,

twenty-four (24) days after the water loss incident at the

Property. Mr. Permeneter asked him to perform testing at the

property and to advise as to his findings. (DSUF 21) 

VII. Assignment of Claim to Eva Sciascia, Technical

Specialist

The Hergenroeder claim was assigned to a Technical

Specialist, Eva Sciascia, because the cost to repair the damage

to the Property exceeded Mr. Permenter’s authority. (DSUF 23) 

Eva Sciascia was produced by Travelers as Travelers’ “person

most qualified” to testify on each of the following

subjects:

1. Procedures to be followed, including required

testing and necessary disclosure to insured, in

handling a claim for damage to property insured under a

homeowners policy due to waste water overflowing or

escaping from a toilet that includes human feces or

human urine, in order to avoid causing and/or spreading

air contamination during remediation of the property.

2. Procedures to be followed, including required

testing and necessary disclosure to insured, in

handling a claim under a homeowners policy issued in

California that involve contamination caused by rats’

nests or rat feces, in order to avoid causing and/or

spreading air contamination during remediation of the

property.

3. Procedures to be followed in regard to disclosing to

an insured under a homeowners policy issued in

California that additional benefits may reasonably be

payable under the insured’s policy upon receipt of

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 10 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

additional proofs of claim.

4. Any guidelines or procedures regarding when the St.

Paul Travelers Industrial Hygiene Laboratory will be

involved in the handling of a claim or when a St. Paul

Travelers risk control consultant will be involved in

the handling of a claim.

(PSAUF 196) 

Ms. Sciascia was the person most qualified from Travelers to

testify regarding theses subjects because she handles “a lot of

water damage claims” and because “it’s a contaminate claim.”

(PSAUF 197) Unit Manager John Wolford was responsible for

oversight of Ms. Sciascia’s files, and reviewed them once each

month. (PSAUF 198) Other than claims over her dollar limit of

authority of $60,000, Ms. Sciascia did not need Mr. Wolford’s

approval or supervision for any other aspects of a water loss

claim. (PSAUF 200) Around 12% of the claims that Ms. Sciascia

handled were water damage claims that involved contamination

caused by human feces, urine or waste. (PSAUF 202) 

VIII. T. Brooks & Associates: Contamination Testing

Travelers retained T. Brooks & Associates, an industrial

hygiene company, to test the Hergenroeders’ home and prepare a

remediation protocol. (PSAUF 22) In early January 2005, Troy

Brooks was asked by Travelers to assess bacterial-related issues

at the Property. (DSUF 82) 

Troy Brooks is a Certified Indoor Air Quality Consultant

with Indoor Air Quality Association, an international

organization that promotes training, education and

professionalism related to the field of indoor air quality. Mr.

Brooks also declares that he has multiple state and federal

accreditations in the environmental industry and has conducted

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 11 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

hundreds of tests and investigations involving microbial issues

(fungal spores and bacteria), as well as airborne chemical

hazards affecting structures. (Doc. 23, Declaration of Troy

Brooks, ¶ 1) In response to that request, on January 7 and 10,

2005, Mr. Brooks performed microbial testing at the Property,

almost a month after the December 14, 2004 water loss incident. 

Mr. Brooks performed that testing based upon information provided

to him by both Travelers and the Hergenroeders that there was a

water-related loss at the Property that may have involved sewage.

(DSUF 83) Based upon these results, Mr. Brooks prepared a

written scope of remediation titled “Recommended Scope of

Remediation/Decontamination” for the Property. On January 19,

2005, he sent this Recommendation to Travelers. (DSUF 85)

The remediation protocol prepared by T. Brooks & Associates

for Travelers stated the following in regards to the water loss

incident that occurred:

Background

A ‘black water’ sewage spill occurred within the 2nd

floor bathroom within the referenced residential

structure which contributed to water damage, fungal

growth and suspected bacterial and possible viral

contamination of undefined interior surfaces. Baseline

sampling, consisting of sewage screens, and cultured

and non-cultured microbial samples has been conducted. 

Fungal growth is present on the drywall and possibly

wood framing at 1 and 2 floor locations wetted by st nd

the sewage spill. Based on the results of the

bacterial sewage sampling, it was determined that

bacteria associated with sewage present on interior

surfaces and in the air stream. Based on rodent nest

sites discovered within specified areas of structure,

rodent allergens may be present on surfaces in the air

stream. Workers shall take all safety precautions and

wear appropriate personal protective equipment to

protect themselves against possible bacterial, viral,

allergen, and fungal contamination. 

(Doc. 50, Plaintiffs’ Separate Statement of Disputed Facts,

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 12 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

“PSUF” 25) 

T. Brooks & Associates recommended the following in their report: 

“Contractor shall seal all openings in walls and

ceilings within containment with polyethylene film and

tape.”

“Double-flapped doorway shall be provided at each

entrance to containment area.”

“All remediation work will be conducted under negative

air pressure. Negative pressure will be maintained

until Contractor receives notification that work is

deemed complete based on satisfying the post

remediation sampling criteria as stipulated.”

“Contractor shall exhaust negative air machines outside

structure during remediation/decontamination

operations.”

“Following completion of remediation/decontamination

work, outside flaps shall be taped shut and machines

shall be operated in “scrub” mode until notified to

disassemble containment based on satisfying prescribed

clearance criteria.” 

“Upon completion of remediation/decontamination phase,

install clean pre-filters on air scrubbers for post

remediation scrub phase.” 

“Air Handling System Cleaning All ducting shall be

cleaned by professional duct cleaner. Replace all

disposable filters associated with HVAC system. 

Thoroughly clean and decontaminate reusable filters

using anti-fungal, anti-bacterial, and anti-viral

cleaning agent.” 

(PSAUF 46-54) 

Travelers never put any restrictions on the scope of Mr.

Brooks’ recommendations, and they agreed to each and every

recommendation he made. (DSUF 91) 

a. Gilstrap’s Cleaning and Restoration Services:

Remediation Services

After taking over handling the Hergenroeder claim, Ms.

Sciascia contacted Troy Brooks to determine the results of his

testing. (DSUF 25) Mr. Brooks recommended to Travelers and

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 13 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14

Plaintiffs a qualified remediation expert, Gilstrap’s Cleaning

and Restoration Services (“Gilstrap”), to perform the remediation

work. (DSUF 26) Mr. Brooks is familiar with and has worked with

Gilstrap on numerous occasions. They are known to him as a

contractor that has specialized training in remediation of

contaminated water losses, and his personal interaction with them

has shown this to be true. (DSUF 86) It is Mr. Brooks’

understanding that Gilstrap’s performed remediation at the

Property based upon his Recommendation. (DSUF 87) 

Upon completion of that remediation by Gilstrap’s, Mr.

Brooks again performed microbial testing at the Property. (DSUF

88) The results of those tests indicated that fungal air levels

were below background levels and that there were no viable levels

of any sewage-related bacteria. In other words, the test results

indicated that the Property had been completely remediated. (DSUF

89) 

IX. Ms. Sciascia’s Discussions with T. Brooks & Associates

and Gilstrap’s Cleaning and Restoration Services on

Contamination in Property

Ms. Sciascia was never trained by Travelers regarding

whether the types of bacteria reflected on Troy Brooks’ report

could constitute any type of health hazard. (PSAUF 203) After

receiving the report from Troy Brooks which discussed the

bacteria in the Property, Ms. Sciascia never asked Mr. Brooks if

those bacteria presented any kind of health hazard. (PSAUF 204) 

Ms. Sciascia received no training from Travelers regarding

whether mold is a possible health hazard. (PSAUF 206) Ms.

Sciascia did not ask Mr. Brooks whether mold is possibly a health

hazard. (PSAUF 207)

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 14 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

On February 2, 2005, Ms. Sciascia was informed by Gilstrap

that they found more contamination. (PSAUF 111) Ms. Sciascia

cannot recall what he meant by “additional moisture,” and cannot

recall if there was any concern that additional moisture would

cause or had already caused mold. (PSAUF 119) She also cannot

recall if she contacted Troy Brooks to do additional testing.

(PSAUF 121) 

X. Payment of Benefits

In total, Travelers made payments totaling $333,937.31 for

Plaintiffs’ water loss claim. (DSUF 45) 

a. Additional Living Expenses Benefits: Hotel, Home

Rental and Food Expenses - December 2004 - March

2005

At Plaintiffs’ request, at the end of January 2005, a month

and half after the water loss incident, Ms. Sciascia took action

to direct pay Marriott hotel for additional living expenses

incurred by Plaintiffs. (DSUF 37) Moreover, at Plaintiffs’

request, Travelers sought out and located a rental home

acceptable to Plaintiffs, which Plaintiffs moved into the first

week in March, two and half months after the December 14, 2004

water loss incident. (DSUF 38) Travelers paid the rent on that

rental home directly. (DSUF 39) In total, Travelers paid

$47,021.84 for the additional living expenses portion of

Plaintiffs’ claim. (DSUF 41) 

As of December 21, 2004, Mr. Wolford, of Travelers, noted in

his Impact Notes that Steve Hergenroeder told Travelers they had

to extend their stay in the hotel because their home was still

not habitable. (PSAUF 138) The Impact Notes state that the

insured (the Hergenroeders) had been in the hotel for five days

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 15 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16

and their hotel bill totaled $806.88. Travelers “projected” the

Hergenroeders’ hotel stay through January 1, 2005, (but deducted

the days the Hergenroeders would be on vacation from 12/26 to

12/29). (PSAUF 139) Travelers’ Impact Notes also state that the

insureds informed Travelers it was “nearly impossible” for the

them to cook meals for all six family members in a single hotel

room and Travelers’ Impact Notes reflect their agreement to

advance the insureds (the Hergenroeders) $50 per day for food for

all six members of the Hergenroeder family. (PSAUF 140) 

Travelers’ Impact Notes also calculate that the

Hergenroeders had already incurred $780.90 in hotel bills, and

projected the hotel bill for 13 more days [$1,249.44] and “food”

at $50 per day for all six family members for 13 days [$650.00]. 

Travelers’ entry in its Impact Notes, noted this amount includes

a “partial food expense.” Travelers’ Impact Notes state they

paid the insureds an “advance” of $2,680.34. (PSAUF 141) This

“advance” consisted of the Hergenroeder’s hotel bill through

January 1, 2005. 

Plaintiffs allege this was based on one hotel room for six

people costing the Hergenroeders $156.18 per night. Plaintiffs

allege the purported “advance” payment did not pay for the prior

five days of food expenses already incurred during their stay in

the hotel. And the purported “advance” payment included $780.90

in hotel expenses already incurred. (PSAUF 141)

On January 27, 2005, Travelers’ Impact Notes, noted that Mr.

Wolford spoke to Steve Hergenroeder, who told Mr. Wolford that

the #1 issue was that the Hergenroeders needed some money soon

because their credit cards were maxed out. (PSAUF 142) On

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 16 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17

January 28, 2005, the Impact Notes reflect that Mr. Wolford

approved an ALE payment of only $425.35. (PSAUF 144) According

to the letter stated in the Impact Notes from the Hergenroeders,

dated January 30, 2005, that amount did not even cover the hotel

bill, and was “salt in their wounds.” (PSAUF 145)

On or about January 28, 2005, a month and a half after the

December 14, 2004 water loss incident, Travelers issued several

reimbursement checks to Plaintiffs. Only one check paid benefits

for costs Plaintiffs were seeking reimbursement on through

receipts: 

(1) $1,964.60 for the emergency clean-up performed by

Randrup;

(2) $13,158.48 for the actual cash value of the rebuild

estimate provided by Randrup; 

(3) $13,818.75 for the actual cash value of the cost to

replace the tile floor; and 

(4) $424.35 for additional living expense, which

reflected the amount Travelers determined Plaintiffs

were owed based upon the receipts and bids they had

submitted to Travelers. (DSUF 30) 

On February 2, 2005, Travelers issued another check

(1) $4,606.25, for the holdback amount of the cost to

replace the tile. (DSUF 31) 

Travelers issued another additional living expense

reimbursement check in the amount of $2,297.38 on March 11, 2005.

(DSUF 17)

b. Payment for Services 

Randrup submitted to Travelers a (revised) reconstruction

bid/estimate on April 18. 2005, which Travelers accepted. (DSUF

32-34) Pursuant to the terms of the Policy, Travelers agreed to

pay the actual cash value of this amount, or $136,347.89, less

the $31,583.48 already advanced to Plaintiffs, for a total amount

of $104,764.41. Travelers issued a check to Plaintiffs on or

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 17 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18

about April 21, 2005 in- this amount. (DSUF 34) Steve Gilstrap

was paid for all work related to the Hergenroeder matter. (DSUF

64) Thereafter, Travelers issued additional checks for

miscellaneous items, such as damage to Plaintiffs’ lawn during

reconstruction. In total, Travelers paid $175,419.36 for the

building loss portion of Plaintiffs’ claim. (DSUF 36) 

c. Personal Property Benefits: Sentimental Items

Travelers had a duty not to misrepresent the scope of

coverage afforded by the Travelers policy. (PSAUF 135) The

Hergenroeders’ policy with Travelers provided “Contents” coverage

for damage to personal property. (PSAUF 165)

On October 21, 2005, almost a year after the December 14,

2004 water loss incident, Plaintiffs submitted to Travelers a

seventy-eight (78) page list of personal property contents they

claimed were destroyed by Gilstrap’s as part of the remediation

process, totaling $52,339.96. 

Due to the volume of items, Travelers forwarded the list to

Global Resources, a company that specialized in pricing

voluminous contents claims. Because of the volume of contents,

the evaluation and pricing of the items would take some time,

therefore on or about December 9, 2005, Travelers issued an

advance to Plaintiffs for their destroyed contents in the amount

of $30,000.00, almost a year to the date of the water loss and

about a month and half after the Plaintiffs sent their Personal

Property Inventory Worksheet. (DSUF 43) 

d. Rental Loss Benefits: Home Office

The Hergenroeders’ policy with Travelers provided coverage

for “Fair Rental Value.” (PSAUF 192) Julie and Steve

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 18 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiffs object on the grounds that the multiple facts 3

regarding Hergenroeders’ assets and finances are irrelevant and

immaterial to any issue in this motion. Defendant responds that

this information relates directly to Hergenroeders’ claims at

issue, specifically claims for loss of rents and business

property and shows that Plaintiffs had written rental agreements

between themselves and their company for their other property,

but not for the allegedly rented office space in their home. 

Relevant evidence is any evidence having any tendency to make the

existence of any fact that is of consequence to the determination

of the action more probable or less probable than it would be

without evidence. Fed. R. Evid. Rule 401. Plaintiffs’ objection

is OVERRULED.

Plaintiffs object on the grounds that to the extent this 4

fact is meant to refer to the content of a tax return, any

information regarding the Hergenroeders’ tax returns is

privileged and this is irrelevant, immaterial to any issue

presented in this motion. Plaintiffs’ citation to Cal. Rev. &

Tax C. Section 19452 is not controlling, as it is completely

19

Hergenroeder own a business, Hergie Associates dba Garden Terrace

Assisted Living (“Hergie Associates”). They also own two

residences (other than the one affected by this claim) that they

rent to Hergie Associates for use as residential care facilities. 

The Hergenroeders have written rental contracts with Hergie

Associates for these two properties, under which Hergie

Associates makes fund transfers from its business bank account to

the Hergenroeders’ personal bank account in the amount of

$2,400.00 per month for each residence, for a total of $4,800.00

per month.(DSUF 57)3

There is no written agreement between the Hergenroeders and

Hergie Associates with respect to the rent of the home office.

Other than accounting information, there is no other corporate

documentation used to substantiate the payment of rent as an

expense of the corporation. (DSUF 69) Travelers has not paid 4

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 19 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

inapplicable to these facts. Cal. Rev. & Tax C. Section 19452

makes it a misdemeanor offense for state officials and employees

to disclose certain information contained within tax returns.

Such facts are not before the Court. More importantly, and

precisely on point, any privilege alleged by Plaintiffs

concerning the tax returns has been waived. It is well settled

that when the holder of a privilege voluntarily discloses the

privileged material, the voluntary disclosure constitutes a

waiver of the privilege. 26A Wright and Graham, Federal Practice

and Procedure Section 5726 (1992). Furthermore, where the client

allows its agent to produce privileged materials, the client is

deemed to have waived the privilege. In re von Bulow, 828 F.2d

94, 100-101 (2nd. Cir. 1987). Here, it is undisputed that, in

response to a subpoena, Mr. Slosberg, produced the documents to

which Plaintiffs have now asserted a privilege. However,

Plaintiffs made no motion to quash the subpoena, and they made no

motion for a protective order. Once a privilege is waived, it may

no longer be asserted. United States v. Suarez, 820 F.2d 1158,

1160 (11th Cir. 1987), cert. denied, 508 U.S. 920, 113 S.Ct.

2367. Therefore, even if there were a privilege to assert

concerning the tax returns (which Plaintiffs have failed to

demonstrate), any such privilege has been waived by the voluntary

disclosure and may not now be asserted. Travelers also argues

that the fact is material and relevant as it is indicative of

whether or not Plaintiffs suffered the lost rent they are now

claiming in this lawsuit. Relevant evidence is any evidence

having any tendency to make the existence of any fact that is of

consequence to the determination of the action more probable or

less probable than it would be without evidence. Fed. R. Evid.

Rule 401. Plaintiffs’ objection is OVERRULED.

20

Plaintiffs for the alleged ten months of rent they lost from

Hergie Associates after the Property, including the home office,

became uninhabitable after the December 14, 2004 water loss

incident. (PSAUF 194)

i. The Hergenroeder’s Accountants

Mr. Griffin is Plaintiffs’ accountant. He does Plaintiffs’

business accounting, personal accounting, and tax preparation.

Prior to Ms. Griffin, David Slosberg was Plaintiffs’ accountant.

(DSUF 70) Mr. Griffin prepared two years worth of returns for

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 20 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

21

both the Hergenroeders and Hergie Associates. The Hergie

Associates general ledger submitted to him by the Hergenroeders

showed annual lease payments for the two homes, and the $4200 for

a lease payment on an automobile. (DSUF 81)

e. Business Property Benefits: Office Supplies and

Documents Destroyed by Contamination

The Hergenroeders’ policy with Travelers provided coverage

for loss of “Business Property,” up to the amount of $5,000.

(PSAUF 175-177) The Hergenroeders’ home office contained various

and voluminous business records, including: client files,

business forms that the Hergenroeders had developed over the

years, business receipts, tax returns, business signs, business

cards, marketing materials, and other business records. (PSAUF

179) As part of the remediation clean-up, the Hergenroeder’s

copier was cleaned, but when it was returned, it no longer

worked. (PSAUF 190) Plaintiffs’ home office desk and computer

were removed, cleaned and returned by Gilstrap’s. (DSUF 56) 

XI. Travelers Procedures for Water Loss Claims 

Travelers’ claims handling guidelines are called “Best

Practices.” These “Best Practices” contain no specific

provisions or sections that deal with water damage claims. (PSAUF

27) Eva Sciascia was designated by Travelers as its “person most

qualified” to testify regarding claims handling procedures

associated with water loss claims. (PSAUF 69) 

An insurance company has a duty to provide the insured with

“necessary form, instructions and reasonable assistance” per 10

C.C.R. § 2695.5(e)(2), which states: “(e) Upon receiving notice

of claim, every insurer shall immediately, but in no event more

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 21 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

22

than fifteen (15) calendar days later, do the following unless

the notice of claim received is a notice of legal action: (1) ...

2) provide to the claimant necessary forms, instructions, and

reasonable assistance, including but not limited to, specifying

the information the claimant must provide for proof of claim ...”

Cal.Code Regs.tit. 10, § 2695.5(e)(2). (PSAUF 36) 

Travelers’ claims personnel, including Mr. Permenter and Ms.

Sciascia, were trained by Travelers that an insurance company has

an obligation to conduct a thorough investigation, both under

Travelers’ own “Best Practices” and the Fair Claims Settlement

Practices Regulations. (See, 10 C.C.R. §§ 2695.5(e), 2695.7(d))

(PSAUF 68) Travelers’ claims handling procedures also require

the claims representative to ask as many questions as they can to

get as much detail about the claim as possible. (PSAUF 70) 

While Mr. Permenter told Steve Hergenroeder on December 14,

2004 to prepare an inventory of damaged items, Mr. Permenter did

not recall ever sending an inventory sheet or any other similar

form or document to the Hergenroeders. (PSAUF 110) 

Mr. Permenter and Ms. Sciascia were trained annually by

Travelers, both in regard to Travelers’ “Best Practices” and in

regard to the Fair Claim Settlement Practices Regulations, that

an insurance company is required to explain all applicable

coverages to its insured. (PSAUF 123) Mr. Permenter and Ms.

Sciascia were trained by Travelers that an insurance company is

required to disclose all benefits and coverages that might apply

to the claim. (PSAUF 124) 

Travelers’ claims handling procedures also require the

claims representative to ask as many questions as they can to get

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 22 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

23

as much detail about the claim as possible. (PSAUF 126) Mr.

Permenter said he “normally” goes over the “dec page” with the

insured either in the first conversation or during their first

meeting. (PSAUF 128)

Mr. Permenter, who Travelers assigned to “investigate” the

claim could not recall if he even asked Steve Hergenroeder if the

flood water had any fecal material or discoloration that might be

urine in the water. (PSAUF 71) Mr. Permenter testified that he

understood that meant “the water - - it didn’t flush. It didn’t

go down.” (PSAUF 83) 

B. DISPUTED FACTS

I. December 14, 2007 Water Loss at the Property (the

Hergenroeder’s Home)

a. Telephone call to Travelers’ 800 Number

During the 800 number phone call to Travelers, Mr.

Hergenroeder advised Travelers that he would call out to Randrups

Fire and Water Restoration. (DSUF 2) Plaintiffs allege that the

woman who answered the 800 line informed Mr. Hergenroeder that

Travelers did not have the name of a water extraction and

emergency clean-up company in the Hergenroeders’ zip code in

Clovis, or in the two adjacent zip codes. Mr. Hergenroeder had

to look up Randrup’s phone number in the phone book. (PSUF 2) 

Defendant claims that Mr. Hergenroeder testified that the

Travelers representative suggested that he call either Randrups -

whom Mr. Hergenroeder was aware of- or another company in the

phone book. (Doc. 59, Travelers' response to PSAUF 39) 

II. Timing of Travelers’ Knowledge Toilet Over-Flow

Contained Human Waste

Plaintiffs cite the following from Travelers’ Impact Notes

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 23 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

24

and Mr. Permenter’s deposition, providing indication that Mr.

Permenter should have been aware that the toilet overflow

involved human waste:

1) Travelers' “File Gen Remarks Note" describes the

water source as “pipe clogged – overflow.” (PSAUF 79)

 

2) That same report says, “Clogged –Inside House: Y

[yes].” (PSAUF 80) 

3) Mr. Permenter testified that when he spoke to Steve

Hergenroeder on December 14, 2004, Steve Hergenroeder

told him that the “upstairs bathroom toilet backed up”

and overflowed while he and his wife were sleeping.”

(PSAUF 81) 

4) Mr. Permenter’s Impact Notes state Steve

Hergenroeder told Mr. Permenter, the toilet “must have

backed up, and the water didn’t go down, and kept

spilling out.” (PSAUF 82) 

Despite the information that the toilet had “clogged,” had

“backed up and overflowed” and that it “didn’t flush” and the

water “didn’t go down,” but instead “continued to run,” Travelers

did not contact an industrial hygiene expert to test for

contamination until December 28, 2004, fourteen (14) days after

the flood and twelve (12) days after they reported to Travelers

the family was ill. (PSAUF 84)

Defendant contends that during the December 15, 2004

meeting, none of the Plaintiffs ever mentioned or indicated to

Mr. Permenter in any manner that the water might have contained

any sewage or feces. Based upon Mr. Permenter’s conversation and

inspection of the property with Mr. Hergenroeder, it was his

understanding that the water was simply from an overflow of water

from the “clean” water supply line to the toilet. (DSUF 8, 9)

Defendant alleges that a meeting on December 17, 2004, Mr.

Hergenroeder stated for the first time that he believed the water

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 24 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

25

overflowed from the toilet had contained human feces. (DSUF 15) 

Plaintiffs allege it was Travelers’ responsibility to ask if

there was sewage involved. Travelers had sufficient information

provided to Mr. Permeneter to notify him of the situation. 

III. Rat Nests

Defendant contends that Mr. Permenter did not observe any

rat nests or any evidence of rat nests, and was unaware of the

existence of any rat nests. (DSUF 11) Plaintiffs state that the

rat nests were removed on December 14, 2004, and Mr. Permenter

did not arrive at Plaintiffs’ home until December 15, 2004.

Plaintiffs cite to a report by Tony Brooks which states that

rodent nest sites were discovered and rodent allergens may be

present on surfaces and in the air stream. (PSUF 11) Defendant

rejoins that Troy Brooks’ report was not completed on December

15, 2004, but later. (DSUF 11)

Defendant alleges that this was the first and only claim Mr.

Permeneter adjusted that involved a rat’s nest, so he sought

advice from his Unit Manager, John Wolford. Upon his advice, Mr.

Permenter advised Plaintiffs to have Randrup return and put tarps

around the family room area. He also advised Plaintiffs that

Travelers would reimburse them for additional living expenses to

stay in a hotel while Randrup contained and cleaned up the

debris. The Hergenroeders moved into a motel that same day

(December 16, 2004). (DSUF 13) 

Plaintiffs dispute this and state that only after Steve

Hergenroeder told Mr. Permenter the family was sick did John

Wolford instruct Mr. Permeneter to put the insureds in a hotel

for two nights. They also allege that they were in the home,

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 25 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

26

preparing food and living there from December 14, 2004 through

December 16, 2004 before being moved. 

IV. Response to Hergenroeders becoming Ill

While the Hergenroeders continued to live in, and prepare

food in their home during December 14, 15 and 16, 2004, Randrup

performed demolition work and the fans blew air and dust

throughout their home. (PSAUF 88) 

Plaintiffs allege that instead of Travelers hiring an

industrial hygiene company to test the Property for

contamination, on December 16, 2004, after knowledge that the

entire Hergenroeder family had become sick, Mr. Permenter

testified that Unit Manager John Wolford instructed him to have

Mr. Hergenroeder “call out company to contain and clean up.”

(PSAUF 97) Defendant alleges that it is undisputed that Mr.

Permeneter retained Mr. Brooks to test the home for contaminants.

(Doc. 59, Response to PSAUF 97) Plaintiffs allege that Mr.

Wolford’s instruction regarding “clean up” did not address

testing for contamination (PSAUF 98, 99) Defendant dispute that

Mr. Permenter’s testimony does not state that the “clean up” had

nothing to do with testing for contamination. (Doc. 59, Response

to PSAUF 98, 99)

V. Review of Policy

Defendant alleges that during a December 14, 2004 telephone

conversation, Mr. Permenter reviewed Mr. Hergenroeder’s Policy

deductible, Policy limits and Policy coverages with him. (DSUF 5) 

Plaintiffs dispute this and argue that at Mr. Permenter’s

deposition testimony he could not recall anything said to Mr.

Hergenroeder because it was three years ago and after reviewing

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 26 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

27

his notes, could not recall if he had any other discussion

related to coverages under policy besides policy limit and

deductible. (PSUF 5) 

VI. Unavailability of Travelers One Week after Water Loss

Mr. Permenter, at the December 17, 2004 meeting, informed

Mr. Hergenroeder that for the next week he would be on vacation

because he was moving to a new residence. He also informed Mr.

Hergenroeder that because he was moving, his phone line would be

disconnected and therefore he would be unavailable. He also

informed Mr. Hergenroeder that Mr. Krebs and his manager, Mr.

Wolford, would be available to assist with his claim while Mr.

Permeneter was moving. (DSUF 14) Plaintiffs contend that while

Mr. Permeneter was on vacation, Mr. Krebs never returned calls

from Steve Hergenroeder. (PSUF 14) 

VII. Payment of Policy Benefits

a. Additional Living Expenses Benefits 

Plaintiffs allege that up until the phone conversation on

December 16, 2004 when Steve Hergenroeder told him that the whole

Hergenroeder family was sick, no one from Travelers mentioned the

"Additional Living Expense" coverage to the Hergenroeders. (PSAUF

90) After Steve Hergenroeder told him that the Hergenroeder

family was sick, Unit Manager, John Wolford, instructed Mr.

Permenter to “put the insureds up in a hotel for two nights until

containment decontamination is completed.” (PSAUF 91) 

In regards to the December 21, 2004 “advance payment” of 

$2,680.34, two week after the December 14, 2004 water loss,

Plaintiffs contend that this was not an advance payment as

Plaintiffs had already incurred $806.88 in hotel bills. 

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 27 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

28

Defendant’s projected that Plaintiffs would be in the hotel until

January 1, 2005. Plaintiffs contend that if you calculate the

past hotel bill, $806.88 and the projected costs for staying in

the hotel until January 1, 2005, along with past and projected

food bills, the advance payment did not cover the Plaintiffs’

past and projected expenses through January 1, 2005. (PSUF 16)

Defendant alleges that various checks were issued within days of

Travelers’ receipt of the proof of incurred expenses. Moreover,

by that time, Travelers was directly paying Plaintiffs’ rent on

their rental home. (DSUF 17) Plaintiffs contend that Travelers

does not assert how many days within receipt of Plaintiffs’

documentation, including receipts, that they paid the benefits.

(PSUF 17)

Plaintiffs contend by January 28, 2005, the hotel bills

would have added up to $4,216.86. And the partial food expense,

the Hergenroeders were allotted $50/day for the entire six-member

family, added up to $1,350.00. In total, hotel and food added up

to $5,566.86 and Mr. Wolford only approved an ALE payment of

$425.35. (PSUF 17) 

According to the Impact Notes, on January 24, 2005, the

Hergenroeders sent a 7-page fax to Ms. Sciascia at Travelers,

with their hotel bills from 12/16/04 through 1/23/05. And on

January 26, 2005, the Hergenroeders sent a 33-page fax to Ms.

Sciascia at Travelers, which included many receipts for ALE

expenses, including hotel and food expenses. The hotel bills

alone amounted to $3,992.76. (PSAUF 146) The Travelers’ Impact

Notes include only pages 20 to 33 of that 33-page fax. The

Impact Notes, contain a letter written on February 2, 2005 by Ms.

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 28 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

Sciascia to the Hergenroeders, denying she received any receipts

for food and gas; Ms. Sciascia never admitted receiving the pages

of the fax related to the motel bill of nearly $4,000.00, and she

took no steps to process the motel bills that she did receive.

(PSAUF 148) 

Defendant alleges that Travelers reimbursed Plaintiffs for

all of the receipts they tendered for all of their additional

living expenses, including but not limited to additional food,

gasoline and utility bills, and reimbursed Plaintiffs for meals

and drinks Plaintiffs had at restaurants during their Hawaiian

vacation. (DSUF 40) 

b. Personal Property Benefits

On page 55 of the “Personal Property Inventory Worksheet”

submitted by Hergenroeders, (as provided in Travelers’ Impact

Notes, Exhibit 129, HER CLM 000035-110, at page HER CLM 000088),

the Hergenroeders wrote:

I DO NOT EVEN KNOW HOW TO PUT A PRICE ON THESE ITEMS AS

THEY ARE IRREPLACEABLE – THEY HOLD ONLY SENTIMENTAL

VALUE Variety of ribbons, white Item – According to the

pictures, this is a box that was full of my school

papers, 4-H and FFA ribbons and memories. The white

item is my 4-H hat. These are items that I will never

be able to replace. In the pictures of the stuffed

animals, I saw the 2 stuffed dolls that 2 of my

children made in school. These are irreplaceable. 

There was also a Heart Shaped Chocolate Box. This was

the box from the candy that Steve gave me on our first

Valentines Day. It has sentimental value and can never

be replaced. 

(PSAUF 167) Similarly, on January 9, 2006, the Impact Notes

reflect that the Hergenroeders submitted a “final” inventory of

personal property items which were destroyed because they were

contaminated. (PSAUF 168) The Impact Notes reflect that the list

the Hergenroeder’s provided includes the following entry:

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 29 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

30

All the ornaments that our children have made over the

years were destroyed. The first year that Steve and I

were married, I was working as a cashier at a store in

Fresno called Ardan’s. Steven would come to the store

and buy an ornament kit just so he could go through my

cash register to see me. He took all those ornament

kits and hand painted them for me. There is no way for

me to put a price on any of those items. 

(PSAUF 169) According to testimony of Eva Sciascia, the

procedure at Travelers when the insured says they lost something

of sentimental value, is to ask the insured to provide a value,

but Ms. Sciascia can’t recall if she asked the Hergenroeders to

put a value for certain ornaments. (PSAUF 170) Plaintiffs

contend that Eva Sciascia never asked Julie Hergenroeder to value

any of the items Julie did not put a dollar value on any of them.

(PSAUF 171) 

Plaintiffs dispute that Travelers paid for “all” benefits

due under the Contents coverage as Plaintiffs were not paid for

nor informed of their ability to be paid for items of sentimental

value. (PSUF 18) 

Defendants contend that the fact that on or about December

22, 2005, Travelers issued a check to Plaintiffs in the amount of

$21,165.02 for the remaining actual value of the destroyed

contents, including all of the “office” contents listed on page

48 of the October 2005 list submitted by Plaintiffs demonstrates

they paid benefits under the policy. In total Travelers paid

$111,496.11 for the personal property contents portion of

Plaintiffs’ claim. (DSUF 44)

c. Rental Loss Benefits

The Hergenroeders’ February 3, 2005 letter to Gene Wilson of

Travelers, as documented in Travelers’ Impact Notes, included a

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 30 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

31

breakdown of their average monthly living expenses, and

specifically referenced: “Loss of rent that our Corporation

normally pays us for our home office: $500.00.” (PSAUF 133) 

Plaintiff Steve Hergenroeder alleges in his declaration no one

ever explained the “Business Property” coverage or the “Fair

Rental Value” coverage in their Policy with Travelers. Therefore

they did not submit a claim for those types of losses. (Doc. 53,

Declaration of Steve Hergenroeder, ¶ 2 and PSAUF 136)

Plaintiffs allege that the Hergenroeders' corporation paid

them $500 per month to rent the home office; this was not done

via cash, but by the Hergenroeders using their business credit

card for personal items, then making a credit transfer to pay the

rent. (PSAUF 193)

i. Accountants’ Knowledge of Home Rent

Defendant contends that Plaintiffs never told Mr. Slosberg,

Plaintiffs’ accountant, nor provided him with any information

that Hergie Associates paid any sort of rent to the Hergenroeders

for rental of the home office. (DSUF 77) Plaintiffs dispute this

and state that Mr. Griffen, Plaintiffs’ CPA after Mr. Slosberg,

testified that he saw that Plaintiffs had taken a deduction for

the home office in the past, and instructed them to stop, based

on recent tax regulation. (PSUF 77) Defendant contends that Mr.

Griffen, did not recall a conversation with Plaintiffs pertaining

to rental of the office space at their home. According to Mr.

Griffen the tax returns for 2005 and 2006 do not reflect income

from Hergie Associates’ rent of the home office space. (DSUF 80) 

Plaintiffs dispute this fact and state that Mr. Griffen was asked

if he remembered a “specific conversation” and replied with

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 31 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

32

“kinda.” (PSUF 80)

d. Business Property Benefits

According to the remediation protocol developed by the

industrial hygienist company, T. Brooks & Associates, all porous

items, including papers, in the home office had to be destroyed.

(PSAUF 180) Gilstrap’s Crew Instruction Sheet [Gilstrap

production, 000165] is the first page of a lengthy inventory

prepared by Gilstrap personnel when they removed everything from

the Hergenroeder home. The section titled “Upstairs Office Area;

Furniture & Boxes” contains the following list of items:

Rocking Chair 

Office Chair

2 Beige Chairs

#1 Office Supplies, Large

#2 Sealed Inventory, Small

#3 Breakables, Large

#4 Breakables, Large

#5 Electronics, Large

#6 Books, Large

#7 Misc. Inventory, Large

#8 Bibles, Small

#9 Paper Work, Large

#10 Misc. Papers, Large

Filing Cabinet

Organizer

Gong

Coffee Table

Book Shelf

Sewing Machine

#11 Pamphlets, small

#12 Pamphlets, small

#13 Magazines, Small

#14 Books, small

(PSAUF 182)

Julie Hergenroeder testified that she was not able to remove

any items from the home office after Mr. Brooks informed her not

to return to the inside of her home. Everything was left in

their home office, including records and documents. (PSAUF 183

and Doc. 54, Declaration of Timothy R. Sullivan, Exhibit 1, Julie

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 32 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiffs object to this fact on the grounds it is 5

irrelevant, immaterial, incomplete and misleading. Plaintiffs’

supporting evidence provides additional facts surrounding the

destruction of the documents. Travelers argues that the fact is

material and relevant as it addresses certain elements of the

claims made by Plaintiffs to Travelers for the water loss. 

Relevant evidence is any evidence having any tendency to make the

existence of any fact that is of consequence to the determination

of the action more probable or less probable than it would be

without evidence. Fed. R. Evid. Rule 401. Plaintiffs' objection

is OVERRULED.

33

Hergenroeder Depo., 103:7-24) Julie Hergenroeder testified that

she had to use the Gilstrap inventory list and Gilstrap photos to

try to create a list of “Contents” and their value as requested

by Travelers. (PSAUF 184) Julie Hergenroeder testified that

their fax machine was destroyed by Gilstrap in the process of

cleaning. Gilstrap told her it was cheaper to replace than to

clean. (PSAUF 186)

There is a disputed fact over whether the business documents

that were taken out of the home office a few days after the water

loss incident were ever destroyed or if they still remain in the

shed where Steve and Michael Hergenroeder originally placed them. 

Steve Hergenroeder states that he never gave anyone permission to

destroy anything. (DSUF 72) They put the documents in sealed 5

plastic containers and put them outside in a shed in the back. 

Defendants rejoin that Steve Hergenroeder’s son, Matthew

Hergenroeder, testified that to the best of his knowledge, the

documents are still in the shed. (DSUF 73). 

VIII. Travelers’ Reliance on Randrup to Properly Clean

Property After Water Loss

It was Mr. Permenter’s understanding from conversations with

Mr. Hergenroeder and Brian Randrup that Randrup had expertise in

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 33 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

34

the area of emergency biohazard and water extraction and clean

up. Based on this expertise, Mr. Permenter relied on Randrup to

complete the emergency water extraction clean up after the

Hergenroeder’s December 14, 2004 water loss, and to inform him of

any issues with contamination. (DSUF 24) Plaintiffs dispute this

fact noting that Mr. Permenter testified and noted in his Impact

Notes that the extraction method was carelessly performed and

testified that he had never been involved in claims where Randrup

was hired. (PSUF 24)

a. Travelers Fails to Question Randrup’s Information

Plaintiffs and Defendant dispute whether when Randrup left

the Property on December 17, 2004, the “emergency work” was done

and the home was completely dried out, drywall removed and no wet

portions remained in the house. (DSUF 64, 74 and PSUF 64, 74)

When Mr. Permenter inspected the Hergenroeders’ home on December

15, 2004, Mr. Permenter determined that the water extraction had

been performed “carelessly” by Randrup. (PSAUF 48) Plaintiffs

allege that Randrup’s fans contained no filter. (PSAUF 59)

Plaintiffs contend that according to Travelers’ Impact

Notes, Gilstrap, hired to address the contamination of the home,

found further contamination as of February 2, 2005 and therefore

the emergency clean-up was not complete on December 17, 2004. 

Further, Plaintiffs argue that according to Travelers’ Impact

Notes, on April 14, 2005, Gilstrap called Ms. Sciascia to discuss

black mold and black water remediation and that there was

additional moisture found in various rooms requiring more drywall

to be removed. (PSUF 64)

In late September 2005, Ms. Sciascia spoke with Randrup to

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 34 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

35

confirm that the repairs were complete. Travelers issued a check

to Plaintiffs for the remaining building repaid holdback of

$11,806.78. (DSUF 35) Plaintiffs contend that repairs were not

complete in September 2005 and that Jerry Randrup was aware of

paint problems, stain problems and other unfinished work. (PSUF

35)

IX. Travelers’ Reliance on Brooks and Gilstrap to Properly

Test for Contaminants and Remediate Property

Based on Mr. Brooks alleged expertise, Ms. Sciascia relied

on him to test the Property, analyze the results of that testing,

and provide a protocol for remediation of the Property, if

necessary. (DSUF 28) 

It was also Ms. Sciascia’s understanding from conversations

with Mr. Brooks and Steve Gilstrap that Gilstrap’s had expertise

in the area of remediation. Based on this expertise, she relied

on Gilstrap to effectively remediate the Property pursuant to Mr.

Brooks’ scope and recommendation. (DSUF 29)

Defendants contend that Mr. Hergenroeder hired Gilstrap and

authorized him to proceed with the work at his house. (DSUF 67) 

Plaintiffs contend that Ms. Sciascia’s Impact Notes dated January

13, 2005 notes that Troy Brooks chose Gilstrap as the remediation

company to remove bacteria. (PSUF 67)

X. Failure to Properly Investigate Water Loss Claim

There is a dispute among Plaintiffs and Defendant as to the

criteria and procedures available for Travelers’ claims

representatives’ dealing with a water loss at a home that

involves contamination. 

Plaintiffs allege that there are no set guidelines or

criteria for a Travelers’ claims representative to

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 35 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

36

follow to determine if a home is habitable after a

water loss involving contamination. (PSAUF 28)

Defendant counters that Ms. Sciascia’s testimony is

that in determining the need for Additional Living

Expense, each file is handled on a case by case basis.

(Doc. 59, Travelers’ response to PSAUF 28) 

Plaintiffs allege that Ms. Sciascia testified that

Travelers has no environmental experts within the

company. (PSAUF 33) 

Defendant alleges that Ms. Sciascia testified that

Travelers’ subrogation department does have experts but

that she is not sure if they are inside experts or

outside experts. (Doc. 59, Travelers’ response to PSAUF

33) 

Plaintiffs allege that Ms. Sciascia testified that

Travelers has no industrial hygienists that work for

the company. (PSAUF 34) 

Defendant alleges Ms. Sciascia testified that she is

not aware of any industrial hygienists that work for

Travelers, not that she has affirmative knowledge that

no industrial hygienists do. (Doc. 59, Travelers’

response to PSAUF 34) 

Plaintiffs allege that Ms. Sciascia testified that

Travelers has no testing facilities that test for

contamination. (PSAUF 35) 

Defendant alleges that Ms. Sciascia testified that she

was not aware of any testing facilities, not that she

has affirmative knowledge that no facilities exist.

(Doc. 59, Travelers' response to PSAUF 35) 

Plaintiffs allege that Travelers’ claim handling

procedure for water loss was that Travelers would not

hire the water extraction company, but would recommend

the name of such a company if the insured asked. (PSAUF

38) 

Defendant alleges that Mr. Permenter did not testify

that Travelers would not hire the water extraction

company. (Doc. 59, Travelers' response to PSAUF 38) 

Plaintiffs allege that there is a geo referral list

containing at least some of the same names now as it

did in December of 2004, including Puma Construction.

(PSAUF 42) 

Eva Sciascia and Mr. Permenter testified that if the water

was not clear they would call an expert. And if urine and/or

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 36 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

37

feces in the water overflowed out of the toilet, it was the type

of claim where an expert would be called. According to Eva

Sciascia it is consistent with training received at Travelers.

(See PSAUF 74, 75 and Doc. 59, Response to PSAUF 74, 75)

Ms. Sciascia’s Impact Notes regarding a February 8, 2005

conversation with Mr. Brooks state, "Troy said they reinspected

and found high counts of bacteria in kitchen cabinets." (PSAUF

113) Mr. Brooks did not explain what “high counts of bacteria”

meant nor did Ms. Sciascia ask. Ms. Sciascia also did not ask if

high counts of bacteria posed any health hazard. (PSAUF 114) 

Defendant alleges that Ms. Sciascia testified that she was

relying on Brooks and Gilstrap for their expertise. (Doc. 59,

Response to PSAUF 114) 

On March 8, 2005, Mr. Brooks performed “post remediation

sampling,” and took “nonviable air samples,” “bacterial air

samples,” and “sewage screen swabs.” (PSAUF 115) On March 11,

2005, Mr. Brooks told Ms. Sciascia that all sampling had been

done for remediation clearance, meaning the remediation work was

done. Additional testing showed bacteria and mold counts were

down, and the rebuild can begin. (PSAUF 116) However, on April

14, 2005, Gilstrap called Ms. Sciascia to discuss mold and black

water remediation. (PSAUF 117) Gilstrap informed Ms. Sciascia

that “there was more drywall removed due to additional moisture

found in various rooms.” (PSAUF 118) Gilstrap further informed

Ms. Sciascia that “Extreme damage found in kitchen and bathroom

areas,” but Ms. Sciascia cannot recall if she asked what “extreme

damage” meant. (PSAUF 120)

XI. Travelers Informing Plaintiffs It Was Safe to Stay in

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 37 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

38

Property After Water Loss

At some point Jeff Krebs told Steve Hergenroeder that he had

worked with the Department of Health for many years and feces was

not a contaminant. Mr. Permenter allegedly expressed his

agreement with that statement. Both told Steve Hergenroeder that

it was safe for the Hergenroeders to continue to stay in the

house. Plaintiffs allege these statements were made before his

family moved into the motel and Defendant Travelers asserts it

was after they moved into the motel as Plaintiffs did not meet

with Mr. Krebs (along with Mr. Permenter) until December 17,

2004, after they moved to a motel. (See PSAUF 86, 87 and Doc. 59,

Response to PSAUF 86, 87) 

XII. T. Brooks & Associates: Contamination Testing

Plaintiffs allege that even after Travelers was informed the

entire Hergenroeder family was ill, Travelers did not retain an

industrial hygiene company to test their home for contamination

nor after Mr. Krebbs and Mr. Permenter met with Mr. Hergenroeder

on December 17, 2004. Instead Mr. Permenter went on vacation for

a week and only on December 28, 2004 did Mr. Permenter advise Mr.

Hergenroeder that a bio hazard inspection may be in order (PSAUF

95, 102, 104, 107) Plaintiffs allege that Mr. Permenter had the

authority to order contamination testing, but did not do so.

(PSAUF 96) Defendants contend that it is undisputed that the

Travelers retained T. Brooks & Associates to test the home for

contaminants as stated in DSUF 21 which Plaintiffs did not

dispute. (Doc. 59, Response to PSAUF 95) 

XIII. Explanation of Policy Benefits

Plaintiffs allege that Eva Sciascia, Travelers’ “Person Most

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 38 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

39

Qualified” to testify about its claims procedures related to

water losses, testified that Travelers always sends its insureds

a form for a detailed list of items of contents that were

damaged. (PSAUF 109) Defendant alleges that Ms. Sciascia

testified that in some instances they do not use the form. (Doc.

59, Response to PSAUF 109) 

Ms. Sciascia explained that if a Travelers claims

representative does not see any damage to a home office, they

need not explain the policy’s coverage for “Business Property”

unless the insured “brings it up later.” (PSAUF 125) Defendant

alleges that Ms. Sciascia testified that during her inspections

she does not address areas in the home unaffected by the loss but

if the insured raises the issue, she addresses it. (Doc. 59,

Response to PSAUF 125) Mr. Permenter admitted he never discussed

the “Business Property” coverage with the Hergenroeders. (PSAUF

129) Defendant alleges that Mr. Permenter testified that the

insured never conveyed to Mr. Permenter that it was an issue and

that there was no damage to that area of the home, so it was not

addressed. (Doc. 59, Response to PSAUF 129) Mr. Permenter also

admitted he never discussed the “Fair Rental Value” coverage with

the Hergenroeders. (PSAUF 130) Defendant alleges Mr. Permenter

testified that it was not an issue that had been raised. (Doc.

59, Response to PSAUF 130)

Plaintiffs allege that as shown by the inventory list,

Exhibit D to Ms. Delaney's Affidavit, Travelers did not pay for

the fax machine, the office shredder or the office copier. (PSAUF

187, 189, 191) Defendant contends that the fact that the item is

not on the list attached to Ms. DeLaney's affidavit is not

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 39 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

40

evidence that Travelers did not pay for the item. In other

words, there is no evidence that Travelers did not pay for items

not on the list. (Doc. 59, Response to PSAUF 187, 189, 191) 

XIV. Dr. Raj Banka: Mr. Hergenroeder’s Exposure to TB

Dr. Raj Banka ordered a tuberculosis test on Mr.

Hergenroeder. Mr. Hergenroeder tested positive for PPD, but not

a cough, and his chest test ruled out active tuberculosis, that

meant that Mr. Hergenroeder was not contagious for tuberculosis. 

Mr. Hergenroeder’s exposure to tuberculosis could happen any

place. He could have been exposed in a mall, and he was not

necessarily exposed when his house was flooded. (DSUF 78) 

XV. Defendant’s Expert: Brian Daly

Brian Daly is a Certified Industrial Hygienist holding the

position of President of Hygiene Technologies International,

Inc., a comprehensive health and safety consulting firm. Brian

Daly is certified in comprehensive practice of industrial hygiene

with the American Board of Industrial Hygiene. Mr. Daly has a

Bachelor of Science degree and a Master of Science degree in

Health Science, Environmental and Occupational Health from

California State University at Northridge. Mr Daly declares he

is experienced in the areas of industrial hygiene, safety

engineering, hazard assessment, noise evaluation and control,

indoor air quality, injury and illness prevention, health and

safety training, and emergency response coordination. Mr. Daly

states he has been employed professionally in the health and

safety field since 1980. Mr. Daly is also a Registered

Professional Engineer, Safety with the State of California. (Doc.

24, Declaration of Brian Daly, ¶ 1)

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 40 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

41

Mr. Daly has reviewed the air and surface samples collected

by Troy Brook of T. Brooks & Associates. None of the data

indicates the presence of sewage or sewage contamination from the

toilet overflow on December 14, 2004. The tests show typical

levels of bacteria one would find in homes, particularly one that

had one or more pets. (Doc. 24, Declaration of Brian Daly, ¶ 2) 

No indication is presented of a mold growth problem, nor

bacterial growth problem. Any damage to the building material at

the Property that may be attributable to the toilet overflow is

limited to the water damage rather than microbial growth. (Doc.

24, Declaration of Brian Daly, ¶ 3)

In regard to the work of Randrup, Mr. Daly is of the opinion

that Randrup completed the dehumidification process on December

17, 2004 and any building material that may have remained wet

[after Randrup’s “emergency clean-up”] would result in

improvement of environmental conditions as the building materials

dried passively without any further active dehumidification

measures. (Doc. 24, Declaration of Brian Daly, ¶ 4) Any

additional work to remediate the water damage did not increase

the scope of repairs subsequent to remediation. (Doc. 24,

Declaration of Brian Daly, ¶ 5)

XVI. Plaintiffs’ Expert: Michael Geyer

Defendant Travelers objects to all testimony from

Plaintiffs’ expert Michael Geyer on the basis that Plaintiffs

have not provided facts sufficient to qualify Mr. Geyer as an

expert competent to testify as to industrial hygiene issues. 

Plaintiffs have provided no affidavit from Mr. Geyer describing

his qualifications nor do the portions of deposition testimony

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 41 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

42

provided by Plaintiffs describe Mr. Geyer’s qualifications. 

Defendant Travelers objections are SUSTAINED.

3. STANDARD OF REVIEW

Summary judgment is warranted only “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.” Fed. R. Civ. P. 56(c);

California v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998). To

defeat a motion for summary judgment, the non-moving party must

show (1) that a genuine factual issue exists and (2) that this

factual issue is material. Id. A genuine issue of fact exists

when the non-moving party produces evidence on which a reasonable

trier of fact could find in its favor viewing the record as a

whole in light of the evidentiary burden the law places on that

party. See Triton Energy Corp. v. Square D Co., 68 F.3d 1216,

1221 (9th Cir. 1995); see also Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 252-56 (1986). Facts are "material" if they "might

affect the outcome of the suit under the governing law."

Campbell, 138 F.3d at 782 (quoting Anderson, 477 U.S. at 248). 

The nonmoving party cannot simply rest on its allegations without

any significant probative evidence tending to support the

complaint. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir.

2001).[T]he plain language of Rule 56(c) mandates the entry of

summary judgment, after adequate time for discovery and upon

motion, against a party who fails to make a showing sufficient to

establish the existence of an element essential to the party's

case, and on which that party will bear the burden of proof at

trial. In such a situation, there can be "no genuine issue as to

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 42 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

43

any material fact," since a complete failure of proof concerning

an essential element of the nonmoving party's case necessarily

renders all other facts immaterial. Celotex Corp. v. Catrell, 477

U.S. 317, 323 (1986). The more implausible the claim or defense

asserted by the nonmoving party, the more persuasive its evidence

must be to avoid summary judgment. See United States ex rel.

Anderson v. N. Telecom, Inc., 52 F.3d 810, 815 (9th Cir. 1996). 

Nevertheless, the evidence must be viewed in a light most

favorable to the nonmoving party. Id.; Anderson, 477 U.S. at 255. 

A court's role on summary judgment is not to weigh evidence or

resolve issues; rather, it is to determine whether there is a

genuine issue for trial. See Abdul-Jabbar v. G.M. Corp., 85 F.3d

407, 410 (9th Cir. 1996).

4. EVIDENTIARY OBJECTIONS

Defendant objects to Exhibit 3 and 8, attached to the

Declaration of Timothy R. Sullivan in support of their Opposition

to Travelers’ Motion. See Doc. 54, Sullivan Decl., Exhibit 3 and

8. Defendant objects pursuant to Federal Rules of Civil

Procedure 56(e): “A supporting or opposing affidavit must be made

on personal knowledge, set out facts that would be admissible in

evidence, and show that the affiant is competent to testify on

the matters stated. If a paper or part of a paper is referred to

in an affidavit, a sworn or certified copy must be attached to or

served with the affidavit. The court may permit an affidavit to

be supplemented or opposed by depositions, answers to

interrogatories, or additional affidavits.” Defendant states

that Mr. Sullivan did not sign or was otherwise not the creator

or recipient of any of the documents attached to Exhibit 3 and 8

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 43 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

44

and has provided no facts from which the Court can infer that he

has personal knowledge sufficient to authenticate the documents. 

A. Exhibit 3, Travelers’ Impact Notes 

Exhibit 3 contains relevant portions of Travelers’ claim

file, the Impact Notes. The declaration states that the

documents were produced by Defendant Travelers in response to

discovery requests. The Impact Notes themselves that are batestamped HER CLM000011-000579. Once authenticated, the Impact

Notes are Travelers’ business records under Fed. R. Evid. 803(6),

that document its handling of Plaintiffs’ claims and are party

admissions, both exceptions to the hearsay rule.

Defendant’s objection to Exhibit 3, pursuant to Fed. R. Civ.

P. 56(e) is OVERRULED.

B. Exhibit 8, Gilstrap’s Document Production

The declaration states that Exhibit 8 contains relevant

portions of documents produced by Gilstrap Cleaning and

Restoration in response to Defendant’s deposition subpoena along

with production of documents served in this action. Other than

the statement that the documents were produced by Gilstrap in

response to Defendant’s deposition subpoena no other identifying

statements or documentation is provided. Plaintiffs do not

provide the discovery subpoena request or corresponding

deposition testimony from Gilstrap’s authenticating the

documents. No other documentation, besides the Gilstrap

documentation that are bate-stamped 000001-000228. 

Defendant’s objection to Exhibit 8, pursuant to Fed. R. Civ.

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 44 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Defendant also objects on similar grounds to Exhibit 12 6

and 13 of the Sullivan Decl. (Doc. 54) These exhibits were not

used in any of the relevant facts cited in the fact section to

this order. Therefore, any evidentiary rulings on these exhibits

are not necessary in this order.

45

P. 56(e) is SUSTAINED.6

5. DISCUSSION

A. BREACH OF CONTRACT AND COVENANT OF GOOD FAITH AND FAIR

DEALING

Plaintiffs’ Complaint alleges causes of action for breach of

contract and bad faith under the Policy covering their Property

from the water loss claim of December 14, 2004. A breach of

contract requires Plaintiffs to prove the following elements: (1)

the existence of a contract, (2) performance or excuse for nonperformance, (3) breach, and (4) damage. Smith v. Royal Mfg. Co.,

185 Cal.App.2d 315, 325, 8 Cal.Rptr. 417 (1960).

Furthermore, there is an implied covenant of good faith and

fair dealing in every contract that neither party will do

anything that will injure the right of the other to receive the

benefits of the agreement. Comunale v. Traders & General Ins.

Co., 50 Cal.2d 654, 658, 328 P.2d 198 (1958). This principle

applies equally to insurance policies. Kransco v. American Empire

Surplus Lines Ins. Co., 23 Cal.4th 390, 400, 97 Cal.Rptr.2d 151

(2000).

Tort damages may be available when an implied covenant claim

arises out of an insurer's breach of contractual obligations. Id. 

The gravamen of a claim for breach of the implied covenant is the

insurer's refusal, without proper cause, to compensate the

insured for a covered loss or its unreasonable delay in making

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 45 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

46

payments due. Waters v. United Services Auto. Assn., 41

Cal.App.4th 1063, 1070, 48 Cal.Rptr.2d 910 (1996). 

To establish breach, Plaintiffs must show that (1) benefits

due under the policy were withheld; and (2) the reason for

withholding benefits was unreasonable or without proper cause.

Love v. Fire Ins. Exchange, 221 Cal.App.3d 1136, 1151, 271

Cal.Rptr. 246 (1990) “Where benefits are fully and promptly

paid, no action lies for breach of the implied covenant no matter

how hostile or egregious the insurer's conduct toward the insured

may have been prior to such payment ... absent an actual

withholding of benefits due, there is no breach of contract and

likewise no breach of the insurer's implied covenant.” Id. at

1151-1152, fn. 10.

The gravamen of tortuous behavior in a so-called “bad faith”

suit is the unreasonable withholding of benefits due under the

policy by the carrier “measured against its duty arising under

the implied covenant of good faith and fair dealing present in

every insurance contract.” Blake v. Aetna Life Ins. Co., 99

Cal.App.3d 901, 918, 160 Cal.Rptr. 528 (1978). “In every

insurance policy there is implied by law a covenant of good faith

and fair dealing. [citation] This implied obligation requires an

insurer to deal in good faith and fairly with its insured in

handling an insured's claim against it.” Gruenberg v. Aetna Ins.

Co., 9 Cal.3d 566, 574, 108 Cal.Rptr. 480 (1973) (citations and

quotations omitted). The reasonableness of an insurer’s handling

of the case can only be measured by the particular facts of each

case. Allen v. Allstate Ins. Co., 656 F.2d 487, 489 (9th Cir.

1981) (“What is ‘good faith’ or ‘bad faith’ on an insurer’s part

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 46 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

47

has not yet proved susceptible to pat legal definition. An

insurer’s ‘good faith’ is essentially a matter of fact.”) 

Defendant Travelers alleges that two elements of Plaintiffs

breach of contract claim are wholly unsupported by any evidence. 

Defendant alleges that Plaintiffs cannot prove any “breach”

because there is no evidence of uncompensated loss of “business

property” or “paid rents or lost rents.” Defendant also alleges

that Plaintiffs cannot provide any evidence of damages for this

alleged breach.

Plaintiffs rejoin that Defendant Travelers did not pay for

all benefits due under the Policy, including not paying for items

of personal property that were of sentimental value, nor Business

Property, including, an office shredder, fax machine and several

boxes of business documents, nor the loss of rent received from

the renting of their home office. As evidence Plaintiffs cite to

lists of items of sentimental value in which Travelers never

requested Plaintiffs place a value on and, therefore, as a

result, such items were not paid for under the Policy. 

Plaintiffs also cite as evidence the lack of payment for office

equipment and office documents destroyed by contamination or

through the process of decontamination. Plaintiffs also provide

evidence that they received rent from their home office by their

company, Hergie Associates. 

Defendant Travelers also alleges that there is no evidence

of bad faith because Travelers did not unreasonably withhold

policy benefits from Plaintiffs and did not delay in making

payments. Defendant also argues that it is not responsible for

Randrup’s, the water extraction company, water extraction and

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 47 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

48

clean-up methods.

“The ultimate test of bad faith liability in first party

cases is whether the refusal to pay policy benefits, or alleged

delay in paying, was unreasonable.” Carlton v. St. Paul Mercury

Ins. Co., 30 Cal.App.4th 1450, 1456, 36 Cal.Rptr.2d 229 (1994). 

“While the reasonableness of an insurer's claims handling conduct

is ordinarily a question of fact, it becomes a question of law

where the evidence is undisputed and but one inference can be

drawn from the evidence.” Id. 

Travelers has a special duty to plaintiffs of good faith and fair

dealing.

Plaintiffs rejoin that there is evidence that Defendant

Travelers did not promptly pay for all ALE (Additional Living

Expenses) benefits unreasonably delayed paying for benefits due,

including benefits for Additional Living Expenses such as hotel

and food expenses incurred when removed from their home after it

was contaminated and damaged by the water loss that involved

sewage. Travelers further did not pay for all personal property

lost by Hergenroeders, specifically items of sentimental value

because Travelers failed to ask Plaintiffs to place a dollar

value on the items. Travelers also did not pay all business

property lost including an office fax machine, office shredder,

destroyed after contamination, a copier, cleaned after being

contaminated but non-working, and various business records that

were destroyed in the process of the contamination clean-up. 

Business records not paid for include client files, business

forms Plaintiffs developed over the years, business receipts, tax

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 48 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

49

returns, business signs, business cards, marketing materials and

about 10 Bekin boxes. Plaintiffs also provide testimony that

they received rental income of $500/month from their home office

by their company, Hergie Associates, that Travelers refused to

pay. 

Plaintiffs also cite the following as evidence that

Travelers were inadequate in their investigation of Plaintiffs’

claim:

1. Mr. Permeneter failed to ask Plaintiffs if their

toilet water contained feces or urine.

2. Mr. Permeneter disregarded his typical procedures of

retaining an industrial hygienist to test for

contamination if there was “any doubt” whether the

water was from a clean source.

3. Mr. Permeneter and Mr. Krebs witnessing the

emergency clean-up by Randrup “fell below industry

standards,” including failing to use tarps or plastic

to contain spread of contaminants and said nothing. 

Also was silent with regard to the unfiltered and

unvented fans that spread contaminants throughout home.

4. Ms. Sciascia failure to ask Plaintiffs to put a

value on their items they listed as having sentimental

value.

5. Ms. Sciascia’s failure to inquire on what kind of

contamination and health hazards posed to the

remediation company after they told her they found

“more contamination.” Ms. Sciascia’s failure to

inquire further, including the health hazards posed,

after the industrial hygienist reinspected and found

“high counts of bacteria”. And Ms. Sciascia’s failure

to inquire further, after the industrial hygienist

conducted “post remediation sampling” and had given the

all clear, and then the remediation company called to

discuss “mold and black water” and the spotting of

“additional moisture” in various rooms indicating

“extreme damage.”

Plaintiffs cite the following as evidence that Travelers

failed to pay and inform Plaintiffs of all policy benefits,

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 49 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

50

similar to Baron, Campbell and Hangarter:

1. Travelers paid Plaintiffs a little over $400 of

their nearly $4,000 motel bills.

2. Travelers failure to pay Plaintiffs for items of

sentimental value because they failed to ask Plaintiffs

to place a value when they did not know how to

calculate a “price” for the items.

3. Mr. Permeneter failure to explain to Plaintiffs the

availability of coverage under “Business Property” for

their home office items and loss of rent, even after

Mr. Permenter inspected their home office.

4. Travelers failure to pay for “Business Property”

that was listed as destroyed on the remediation

company’s list of item desotryed, including, office

machinery (fax machine, shredder), client files,

business forms developed by Plaintiffs over many years,

business receipts, tax returns, business signs, cards,

etc., destroyed from contaminated or through the

process of cleaning the contamination

.

5. Mr. Permenter failure to disclose benefits under the

“Fair Rental Value” coverage for the their lost rental

income from their home office of $500/month for ten

months, even after Plaintiffs sent a letter informing

Travelers that they received rent from their company,

Hergie Associates.

Plaintiffs also cite the following as evidence that

Travelers had no procedures for handling claims:

1. Travelers failed to adopt written guidelines to be

followed in a water loss claim involving contamination

from human feces, urine or waste.

2. Travelers failed to train Ms. Sciascia, the “person

most qualified” in Travelers regarding water loss

claims involving human feces, urine or waste, the

health hazards of bacteria and mold, including asking

the industrial hygienist whether bacteria and mold in

Plaintiffs home created a health hazard).

Plaintiffs also cite the following as evidence that

Travelers consciously disregarded safety and health of

Plaintiffs:

1. Travelers’ failure to retain an industrial hygienist

to test for contamination if there was “any doubt”

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 50 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

51

whether the water was from a clean.

2. Ms. Sciascia’s failure to request more information,

including the type of contamination, from the

remediation company, after they told her they found

“more contamination” in Plaintiffs’ home.

3. Ms. Sciascia’s failure to inquire further, including

on whether it would pose any health hazards to

Plaintiffs, after the industrial hygienist reinspected

the home and found “high counts of bacteria.” 

4. Ms. Sciascia’s failure to inquire further and

failing to contact anyone for further testing, after

the industrial hygienist had completed its “post

remediation sampling” and had given his all clear, and

the remediation company called to discuss “mold and

black water” and “additional moisture found in various

rooms” and “extreme damage.”

Plaintiffs have provided sufficient evidence of material

issues of triable facts to survive a summary judgment motion on

their breach of contract and bad faith claims.

Defendant’s motion for summary judgment regarding

Plaintiffs’ breach of contract claim is DENIED.

Defendant’s motion for summary judgment regarding

Plaintiffs’ bad faith claim is GRANTED.

B. PUNITIVE DAMAGES

Defendant Travelers argues that Plaintiffs’ punitive damages

claim fails as a matter of law because there is no evidence that

Travelers acted with the requisite malice, oppression, fraud so

as to justify the imposition of punitive damages and Plaintiffs

cannot assert that Ms. Sciascia is a managing agent to find

Travelers liable for punitive damages. 

“In order to establish that an insurer’s conduct has gone

sufficiently beyond mere bad faith to warrant a punitive award,

it must be shown by clear and convincing evidence that the

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 51 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

52

insurer has acted maliciously, oppressively or fraudulently.”

Mock v. Michigan Millers Mutual Ins. Co., 4 Cal.App.4th 306, 328,

5 Cal.Rptr.2d 594 (1992). Liability for punitive damages is

governed by California Civil Code § 3294 which defines malice,

oppression, and fraud:

(1) “Malice” means conduct which is intended by the

defendant to cause injury to the plaintiff or

despicable conduct which is carried on by the defendant

with a willful and conscious disregard of the rights or

safety of others.

(2) “Oppression” means despicable conduct that subjects

a person to cruel and unjust hardship in conscious

disregard of that person's rights.

(3) “Fraud” means an intentional misrepresentation,

deceit, or concealment of a material fact known to the

defendant with the intention on the part of the

defendant of thereby depriving a person of property or

legal rights or otherwise causing injury.

Cal.Civ.Code § 3294. “Punitive damages for failure to pay or

properly administer an insurance claim are ordinarily, as in this

case, based on ‘malice’ or ‘oppression,’ rather than on the third

possible ground for the award, ‘fraud.’ Both ‘malice’ and

‘oppression’ are defined in Civil Code section 3294 as involving

‘despicable conduct,’ which in the case of malice ‘is carried on

by the defendant with a willful and conscious disregard of the

rights or safety of others,’ and as to oppression is ‘conduct

that subjects a person to cruel and unjust hardship in conscious

disregard of that person’s rights.” Tomaselli v. Transamerica

Ins. Co., 25 Cal.App.4th 1269, 1286-87, 31 Cal.Rptr.2d 433

(1994). “It has been examined many times in appellate decisions,

and we but summarize. First, simple breach of contract, no

matter how willful and hence tortious, is not ground for punitive

damages. Such damages are accessible only upon a showing that

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 52 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

53

the defendant ‘act[ed] with the intent to vex, injure, or annoy.’

Id. at 1286, quoting Neal v Farmers Ins. Exchange, 21 Cal.3d 910,

922, 148 Cal.Rptr. 389 (1978). The law does not favor such

damages unless there is the requisite showing of malice,

oppression or fraud. Beck v. State Farm Mut. Auto. Ins. Co., 54

Cal.App.3d 347, 126 Cal.Rptr. 602 (1976) (they should be granted

with the greatest caution).

I. “Managing Agent”

Defendant Travelers argues that Plaintiffs can only seek

punitive damages against Travelers on the basis of imputed

liability for the conduct of its employees and agents. Defendant

argues that here, Plaintiffs have no admissible evidence that any

of Travelers’ officers, directors, or managing agents ratified

any malicious, oppressive or fraudulent conduct of its claim

adjusters. 

California Civil Code § 3294(b) limits an employer’s

liability to the following situations: 

An employer shall not be liable for damages pursuant to

subdivision (a), based upon acts of an employee of the

employer, unless the employer had advance knowledge of

the unfitness of the employee and employed him or her

with a conscious disregard of the rights or safety of

others or authorized or ratified the wrongful conduct

for which the damages are awarded or was personally

guilty of oppression, fraud, or malice. With respect to

a corporate employer, the advance knowledge and

conscious disregard, authorization, ratification or act

of oppression, fraud, or malice must be on the part of

an officer, director, or managing agent of the

corporation.

Cal. Civ. Code § 3294(b) (emphasis added). 

With respect to corporate employers, liability is limited to

imputation of conduct to the officers, directors or managing

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 53 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

54

agents of the corporation because “[t]his is the group whose

intentions guide corporate conduct.” Cruz v. HomeBase, 83

Cal.App.4th 160, 167, 99 Cal.Rptr.2d 435 (2000). “By so

confining liability, the statute avoids punishing the corporation

for malice of low-level employees which does not reflect the

corporate ‘state of mind’ or the intentions of corporate leaders. 

This assures that punishment is imposed only if the corporation

can be fairly be viewed as guilty of the evil intent sought to be

punished.” Id.

The California Supreme Court has defined “managing agent”

within the meaning of California Civil Code § 3294(b) to be an

employee with “broad discretion” that exercises “policymaking

authority.” Egan v. Mutual Omaha Ins. Co., 24 Cal.3d 809, 823,

169 Cal.Rptr. 691 (1979). “[T]he critical inquiry is the degree

of discretion the employees possess in making decisions that will

ultimately determine corporate policy. When employees dispose of

insureds’ claims with little if any supervision, they possess

sufficient discretion for the law to impute their actions

concerning those claims to the corporation.” Id. at 822-23. In

White v. Ultramar, Inc., 21 Cal.4th 563, 88 Cal.Rptr.2d 19

(1999), the California Supreme Court provided further guidance

stating:

In order to demonstrate that an employee is a true

managing agent under section 3294, subdivision (b), a

plaintiff seeking punitive damages would have to show

that the employee exercised substantial discretionary

authority over significant aspects of a corporation’s

business.

21 Cal.4th at 577.

Plaintiffs rejoin and argue that there is substantial

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 54 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

55

evidence that Ms. Sciascia is a “managing agent” under the

definitions provided in the Egan and White decisions. Egan v.

Mutual Omaha Ins. Co., 24 Cal.3d 809, 822-23, 169 Cal.Rptr. 691

(1979) involved a case brought by the insured against the

insurer. The Court in determining whether the insurer’s claims

manager and claims adjuster could be considered “managerial

employees” to hold their actions -- failing to investigate

adequately claims before denying insurance coverage --- imputed

to the insurer, stated “[t]he determination whether employees act

in a managerial capacity, however, does not necessarily hinge on

their ‘level’ in the corporate hierarchy. Rather, the critical

inquiry is the degree of discretion the employees possess in

making decisions that will ultimately determine corporate policy. 

When employees dispose of insureds’ claims with little if any

supervision, they possess significant discretion for the law to

impute their actions concerning those claims to the corporation.”

Egan, 24 Cal.3d at 822-23. The Court noted that one employee,

had a business card that identified his title as a “Manager”, the

employee testified he was a manager of the Los Angeles claims

department and had ultimate supervisory and decisional authority

over disposition of all claims, like that of plaintiff’s in the

suit, in the Los Angeles office. Although the second employee

testified he had directions from upper levels, there was little

support for his claim, offered to discount the allegation of

being a “managing agent” and with respect to the plaintiff’s

claim possessed broad discretion. The court stated that the

“[t]he authority exercised by McEachen and Segal necessarily

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 55 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

56

results in the ad hoc formulation of policy.” Id. at 823.

The Court in White v. Ultramar, 21 Cal.4th 563, 566-67, 88

Cal.Rptr.2d 19 (1999), decided after Cal. Civ. Code § 3294 was

amended, followed Egan, and stated that the term “managing agent”

includes “only those corporate employees who exercise substantial

independent authority and judgment in their corporate

decisionmaking so that their decisions ultimately determine

corporate policy.” Where a supervisory employee was in charge

of supervising, eight stores, with sixty-five employees,

comprising a significant aspect of the company’s business and the

company testified they delegated, most, if not all responsibility

for running the stores to the supervisory employee, provided

sufficient evidence to establish the supervisory employee

exercised substantial discretionary authority over vital aspects

of the business, therefore deemed a “managing agent” under

Cal.Civ.Code § 3294, subd. (b).

Plaintiffs argue here the following is evidence makes Ms.

Sciascia a managing agent:

1. Travelers failed to adopt written guidelines to be

followed in a water loss claim involving contamination

from human feces, urine and waste. (PSAUF 27-28)

2. Despite lack of written guidelines, Ms. Sciascia did

not need approval from any supervisor for any aspect of

claim handling, unless dollar amount exceeded $60,000.

(PSAUF 200)

3. Despite her authority, all Ms. Sciascia’s files were

reviewed monthly by her supervisor, Unit Manager John

Wolford. (PSAUF 198)

4. Office Manager Gene Wilson reviewed and was aware of

all claims that exceed $100,000. (PSAUF 199)

5. After Plaintiffs complained of claim handling,

Travelers allowed Ms. Sciascia to write response to

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 56 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

57

Department of Insurance. (PSAUF 201) 

Ms. Sciascia does not have the authority to decide the

disposition of Plaintiffs’ claim, since approval of all decisions

exceeding $60,000 require higher supervisory approval. (PAUSF

200) Plaintiffs’ claim was over $300,000. Ms. Sciascia’s

authority over Plaintiffs’ claim amounts to approximately 20% of

the total amount of Plaintiffs’ claims. The undisputed facts

demonstrate that Ms. Sciascia could not have had decisional

authority on Plaintiffs’ claim as she is a lower level claims

handler with authority not exceeding $60,000. She has no policy

making managerial authority that rises to the level of managing

agent. Plaintiffs have provided no other evidence of any other

Travelers’ employees who had the requisite leave of authority to

qualify as a “managing agent” within the meaning of California

Civil Code § 3294(b). Plaintiffs must prove by clear and

convincing evidence that a “managing agent” of Travelers was

consciously aware of the alleged wrongful conduct and expressly

or impliedly ratified it.

Defendant’s motion for summary judgment regarding

Plaintiffs’ request for punitive damages as to corporation

Travelers is GRANTED.

C. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS

Defendant contends that in regards to Plaintiffs’ claim for

intentional infliction of emotional distress (IIED), Plaintiffs

have failed to provide evidence that it intentionally caused or

with reckless disregard of the probability of causing emotional

distress engaged in “outrageous conduct.” Plaintiffs have failed

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 57 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

58

to provide evidence that they suffered severe or extreme

emotional distress to support an IIED claim. And Plaintiffs have

failed to provide evidence that the actual and proximate cause of

the emotional distress was Defendant’s outrageous conduct.

Under California law, the elements of a claim for

intentional infliction of emotional distress are:

(1) extreme and outrageous conduct by the defendant

with the intention of causing, or reckless disregard of

the probability of causing, emotional distress;

(2) the plaintiff’s suffering severe or extreme

emotional distress; and

(3) actual and proximate causation of the emotional

distress by the defendant’s outrageous conduct.

Christensen v. Superior Court, 54 Cal.3d 868, 903, 2 Cal.Rptr.2d

79 (1991), quoting Davidson v. City of Westminister, 32 Cal.3d

197, 209 (1982). “Conduct to be outrageous must be so extreme as

to exceed all bounds of that usually tolerated in a civilized

community.” Id.

Plaintiffs rejoin that Travelers committed a series of acts,

any one of which would be sufficient to allow the Hergenroeder’s

IIED claim to go the jury. Further, California case law provides

examples of IIED claims against an insurance company for

threatened and actual bad faith refusals to make payments under

the policy. Fletcher v. Western Natl. Life Ins. Co., 10

Cal.App.3d 376, 89 Cal.Rptr. 78 (1970) (an insurer’s intentional

conduct and wanton and reckless disregard of consequences to

plaintiff in delaying payments of approved benefits vital to the

support of plaintiff and her children supported an IIED claim);

Hernandez v. General Adjustment Bureau, 199 Cal.App.3d 999, 245

Cal.Rptr. 288 (1988) (an insurer’s ignoring of medical evidence

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 58 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

59

that insured could not work and withholding information from the

insured’s own doctors examining insured and as result cutting off

disability payments on the basis of those doctors’ report);

Little v. Stuyvesant Life Ins. Co., 67 Cal.App.3d 451, 136

Cal.Rptr. 653 (1977).

As to severe emotional distress in an IIED claim, the court

in Fletcher v. Western Natl. Life Ins. Co., 10 Cal.App.3d 376, 89

Cal.Rptr. 78 (1970), stated as follows:

It appears, therefore, that in this context, “severe”

means substantial or enduring as distinguished from

trivial or transitory. Severe emotional distress means,

then, emotional distress of such substantial quantity

or enduring quality that no reasonable man in a

civilized society should be expected to endure it.

10 Cal.App.3d at 397. Further, it is for the Court to determine

whether on the evidence provided severe emotional distress can be

found and for the jury to determine, whether it has in fact

existed. Id. (citing Rest.2d Torts § 46, com. j.)

“It is true that plaintiff's testimony did not indicate that

he suffered any traumatic emotional distress of the character of

shock, horror or nausea, but the requisite emotional distress may

consist of any highly unpleasant mental reaction such as fright,

grief, shame, humiliation, embarrassment, anger, chagrin,

disappointment or worry.” Id. “Moreover, as pointed out

previously, the duration of the emotional distress is one of the

factors to be considered in determining its severity. (Rest.2d

Torts, § 46, com. j., supra), and the jury could reasonably infer

that plaintiff's worry and anxiety persisted for many months

following defendants' letter of August 25, 1966, during their

continued recalcitrance.” Id. at 398.

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 59 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

60

The Court in Hernandez v. General Adjustment Bureau, 199

Cal.App.3d 999, 245 Cal.Rptr. 288 (1988), held on appeal that

plaintiff had sufficiently alleged an IIED claim: “Appellant

alleges, in essence, that, knowing her susceptibility to profound

mental distress, and of her repeated attempts at suicide, as a

result of the incidents which caused her disability, respondents

intentionally delayed payments of approved benefits vital to the

support of appellant and her three children. Under the standards

set forth above, these allegations are sufficient to state a

cause of action for intentional infliction of emotional

distress.” 199 Cal.App.3d at 1007.

In Little v. Stuyvesant Life Ins. Co., 67 Cal.App.3d 451,

136 Cal.Rptr. 653 (1977), on appeal, the Court found, among other

things, that plaintiff’s testimony on emotional distress,

including anger and depression, caused by the insurer’s

termination of payments, and the evidence that plaintiff had

attempted suicide as a result of the her financial problems,

constituted substantial evidence to support jury’s implied

finding that plaintiff suffered severe emotional distress. 

Plaintiff had brought suit against group disability insurer for

compensatory and punitive damages for intentional infliction of

emotional distress as a result of the insurer’s termination of

plaintiff’s disability payments. In affirming the judgment which

found the insurer liable for compensatory and punitive damages,

the court noted that it appeared that defendant purposely ignored

the great bulk of the medical information it had and withheld it

from selected physicians who examined plaintiff, and sought to

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 60 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Upon receiving the letter terminating plaintiff’s 7

disability payments, plaintiff became very deeply depressed and

angry. She had ,as a result of termination of benefits, sell her

beloved home against her wishes for a low price. She became

despondent and overdosed on valium. Eventually plaintiff had to

live in public housing for low income, disabled persons. “It is

inferable that over a period of several years plaintiff suffered

intense grief, chagrin, disappointment, worry, humiliation,

embarrassment and anger.” Id. at 462-63.

61

justify termination of benefits under the policy. The jury was

justified in finding that insurer had acted with reckless

disregard of the probability of causing plaintiff emotional

distress in terminating the benefits. Id. at 467.7

Plaintiffs’ cite the following as evidence of “outrageous”

conduct done with reckless disregard or with intent to cause

Plaintiffs to suffer severe or extreme emotional distress and

which the actual and proximate cause of the emotional distress

caused by the outrageous conduct:

1) Mr. Permenter’s failure to ask if the toilet water that

flooded Plaintiffs’ home contained any feces or urine.

(PSAUF 68-71, 78-83)

2) Mr. Krebs informing Plaintiffs that it was safe to stay

in their contaminated home. (PSAUF 85-87)

3) Mr. Permenter disregarding his procedures requiring him

to retain an industrial hygienist to test for contamination

if there was any doubt whether the water was from a clean

source. (PSAUF 85-108)

4) Mr. Permenter and Mr. Krebs viewing the emergency cleanup company’s progress, and saw that it fell “below industry

standards,” including failing to use tarps or plastic to

contain the spread of contaminants, and unvented fans

spreading contaminants throughout the house and saying

nothing. (PSAUF 46-67)

5) Travelers waiting twelve (12) days to contact an

industrial hygiene company to test for contamination after

halting the emergency clean-up work. (PSAUF 91-107)

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 61 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

62

6) Travelers’ failure to return Plaintiffs’ phone calls

during Mr. Permenter’s vacation. (PSAUF 102-106)

7) Travelers’ denial of receiving Plantiffs’ faxed gas and

food receipts and failure to process motel and food receipts

after being told by Plaintiffs their credit cards were

“maxed out.” (PSAUF 138-148)

8) Travelers’ payment only $400 of a $4000 motel bill.

(PSAUF 146-147)

9) Ms. Sciascia’s failure to inform Plaintiffs’ that items

of sentimental value could be compensated for if they

provided a value. (PSAUF 166-174)

10) Ms. Sciascia’s failure to inquire further in response to

contamination at Plaintiffs’ home (including failing to

inquire further after the industrial hygienist had

reinspected the home and found “high counts of bacteria” and

after the industrial hygienist had performed post

remediation sampling and given an all clear, the remediation

company called to discuss “mold and black water” and

“additional moisture found in various rooms” and “extreme

damage”). (PSAUF 113-122)

11) Travelers’ failure to explain the “Business Property”

coverage, because they did not see any damage. (PSAUF 123-

124, 175-77)

12) Despite knowledge that the remediation protocol stated

all porous items in the home had to be destroyed, and

receiving a list from the remediation company of items

removed from Plaintiffs’ home office, Travelers failed to

pay for “Business Property” (including office shredder, fax

machine, client files, business forms developed over the

years of Plaintiffs’ business, business receipts, tax

returns, business signs, business cards, marketing materials

and other business records, including about 10 Bekin boxes

destroyed due to contamination).(PSAUF 175-191)

13) Mr. Permenter’s failure to explain the “Fair Rental

Value” coverage provided to Plaintiffs under their policy

despite receiving a letter from Plaintiffs explaining that

the corporation paid them for the home office. (PSAUF 130)

14) Mr. Wolford’s statement to Plaintiffs that nothing

related to the business was covered. (PSAUF 135-137)

15) Travelers’ failure to adopt written guidelines to be

followed in water loss claims involving contamination from

human feces, urine or waste. (PSAUF 27-28)

16) Although Ms. Sciascia is the “person most qualified”

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 62 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

63

from Travelers regarding claims handling procedures for

water loss claims involving human feces, urine or waste, she

has never been trained regarding whether bacteria or mold

could constitute a health hazard, and never asked the

industrial hygienist that found the bacteria and mold in

Plaintiffs’ home. (PSAUF 196-207)

Without addressing whether the evidence provided constitutes

“outrageous conduct” such that it would cause severe emotional

distress, Plaintiffs notably fail to point to any evidence of

severe emotional distress, no deposition testimony, no

declarations from any of the Plaintiffs nor from any of

Plaintiffs’ medical doctors, and no medical records were provided

evidencing severe emotional distress. Plaintiffs also do not

address how any alleged extreme emotional distress was caused by

Defendants’ outrageous conduct.

However, the Court is suffering from information overload. 

The facts presented do not individually show extreme and

outrageous conduct, however this decision can be better resolved

at the close of Plaintiffs’ evidence. Defendant’s motion for

summary judgment regarding Plaintiffs’ intentional infliction of

emotional distress claim is DENIED.

D. NEGLIGENCE AND NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS

Defendant Travelers argues that as a matter of law 

Plaintiffs cannot maintain claims for negligent claims handling

and negligent infliction of emotional distress (NIED) because

there is no cause of action for “negligent claims handling.” And

because negligent infliction of emotional distress is not a

separate tort, but part of negligence, and no claim for

negligence can be maintained, Plaintiffs’ negligent infliction of

emotional distress claim also fails.

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 63 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Everett Associates Inc. v. Transamerica, 159 F.Supp.2d 8

1196, 1204 (N.D. Cal. 2001) applied California law to determine

whether a negligent investigation claim supports a claim for

negligence separate from a duty to defend or an implied covenant

of good faith and fair dealing. The Court determined that it did

not. “Plaintiffs do not cite a single example where a court has

found an insurer's failure to properly investigate capable of

supporting a separate negligence cause of action under California

law. Instead, Plaintiffs urge the Court to rely on fundamental

tort principles to recognize its negligence claim. The Court

finds doing so would be an expansion unwarranted by California

case law and declines to do so.” Everett, 159 F.Supp.2d at 1204. 

64

Generally California courts have not permitted general

negligence causes of action in insurance-related cases. Sanchez

v. Lindsey Morden Claims Service, Inc., 72 Cal.App.4th 249, 254

(1999) states the general view of the California courts’ view

towards general negligence causes of actions against insurers:

“negligence is not among the theories of recovery generally

available against the insurers.” Id; see also Benavides v. State

Farm Ins. Co., 136 Cal.App.4th 1241, 39 Cal.Rptr.3d 650 (2006)

(the California court reviewed California case law to determine

whether insurer could be held liable for negligent investigation

absent covered loss under the policy. It found it could not and

discussed the limited circumstances where tort damages were

permitted in contract cases, including in the insurance context

where tort damages have been permitted for a breach of the

covenant of good faith and fair dealing); see also Everett

Associates Inc. v. Transamerica, 159 F.Supp.2d 1196, 1204 (N.D.

Cal. 2001).8

Plaintiffs’ claim for negligent infliction of emotional

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 64 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Whether NIED claims are permitted, California law splits 9

from among cases brought against the insurer by the insured, a

“direct victim” claim versus suits brought by third-parties, a

“bystander claim.” The lack of a preexisting duty owed to thirdparties often negates claims brought against an insurer by a

third-party. 

65

distress claim is presented under the “direct victim” theory.9

Burgess v. Superior Court, 2 Cal.4th 1064, 1071, 9 Cal.Rptr.2d

615 (1992). In Marlene F. v. Affiliated Psychiatric Medical

Clinic, Inc. 48 Cal.3d 583, 770 P.2d 278 (1989), the court stated

that damages for emotional distress are recoverable “when they

result from the breach of a duty owed the plaintiff that is

assumed by the defendant or imposed on the defendant as a matter

of law, or that arises out of a relationship between the two.” 48

Cal.3d at 590. Generally, “there is no duty to avoid negligently

causing emotional distress to another, ... ” Potter v. Firestone

Tire & Rubber Co., 6 Cal.4th 965, 984, 25 Cal.Rptr.2d 550 (1993). 

Therefore, “unless the defendant has assumed a duty to plaintiff

in which the emotional condition of the plaintiff is an object,

recovery is available only if the emotional distress arises out

of the defendant's breach of some other legal duty and the

emotional distress is proximately caused by that breach of duty.”

Id. at 985; Erlich v. Menezes, 21 Cal.4th 543, 555, 981 P.2d 978

(1999). A legal duty “may be imposed by law, be assumed by the

defendant, or exist by virtue of a special relationship.” Potter,

supra, 6 Cal.4th at 985; Marlene F., supra, 48 Cal.3d at 590.

In Johnson v. Mutual Ben. Life Ins. Co., 847 F.2d 600 (9th

Cir. 1988), a Ninth Circuit court decision where an insured

brought an NIED claim against the insurer as well as a claim for

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 65 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

66

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

The court held that genuine issues of material fact existed on

both claims to preclude summary judgment. 

Here, the following indicia of genuineness of Johnson's

mental distress claim exist: Johnson was uninsurable

because of her history of cancer; she received two

incorrect termination notices; she was confronted with

billing errors for two years; and she was required to

seek psychiatric aid. Under Molien, these items are

sufficient to raise a genuine issue of material fact as

to whether Johnson in fact suffered serious emotional

distress as a result of Mutual Benefit's negligent

conduct. See 27 Cal.3d at 930-31, 167 Cal.Rptr. at 839,

616 P.2d at 821. In addition, the existence of an

independent tort for breach of the implied covenant of

good faith and fair dealing provides a further

guarantee of genuineness. Id. at 926-27, 167 Cal.Rptr.

at 837, 616 P.2d at 818-19 (noting traditional

California rule that existence of independent cause of

action provides guarantee of genuineness for emotional

distress claim); Gilchrist, 803 F.2d at 1499;

Commercial Cotton Co., 163 Cal.App. at 517, 209

Cal.Rptr. at 555.

847 F.2d at 604. See also Bogard v. Employers Cas. Co., 164

Cal.App.3d 602, 618, 210 Cal.Rptr. 578 (1985) (California case

where was party given leave to amend for a negligent infliction

of emotional distress claim)

Damages for severe emotional distress, as required to

recover for NIED, can be recovered “when they [damages] result

from the breach of a duty owed the plaintiff that is assumed by

the defendant or imposed on the defendant as a matter of law, or

that arises out of a special relationship between the two.”

Christensen v. Sup. Ct. (Pasadena Crematorium), 54 Cal.3d 868,

890, 2 Cal.Rptr.2d 79 (1991) (mortuaries owing duty to families

of decedents). In a “direct victim” claim, recovery for serious

emotional distress is allowed when it is the “result of a breach

of duty owed that plaintiff that is assumed by the defendant or

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 66 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

67

imposed on the defendant as a matter of law, or that arises out

of relationship between the two...” Burgess v. Sup.Ct. (Gupta), 2 

Cal.4th 1064, 1073, 9 Cal.Rptr.2d 615 (1992) (doctor-patient

relationship). 

Specifically, in insurance litigation suits, an action for

NIED cannot be maintained if there is an absence of a duty of

good faith and fair dealing. “[W]here the insurer owes no duty

of good faith and fair dealing to a claimant, it also owes no

duty giving rise to a claim of negligent infliction of emotional

distress.” Coleman v. Republic Indem. Ins. Co. of Calif., 132

Cal.App.4th 403, 415-16, 33 Cal.Rptr.3d 744 (2005). Plaintiffs

have alleged and have provided evidence of a triable issue of

fact to survive the summary judgment challenge to their bad faith

claim, therefore the presence of an existing duty will permit

Plaintiffs’ NIED claim to survive.

Defendant has only challenged Plaintiffs’ NIED claim as a

matter of law. Despite Defendant’s argument in its Reply brief

which argues that no evidence was provided by Plaintiffs to

support an NIED claim, it did not raise such a challenge in its

Motion for Summary Judgment. Plaintiffs noted this absence in

their Opposition. Only in its Reply, did Defendant argue that

there is a lack the evidence by Plaintiffs of emotional distress. 

Plaintiffs’ failure to provide evidence on this claim is not

sufficient reason to grant summary judgment in Defendant’s favor

for this reason.

For the following reason, Defendant’s motion for summary

judgment regarding Plaintiffs’ negligent infliction of emotional

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 67 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

68

distress claims is DENIED, but GRANTED as to Plaintiffs’

negligence cause of action.

E. NEGLIGENT INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE

(Claim brought by Steve and Julie Hergenroeder only.)

Plaintiffs claim negligent interference with prospective

economic advantage. Defendant Travelers argues that Plaintiffs

Steve Hergenroeder and Julie Hergenroeder have no evidence that

they were exposed to, or contracted, any communicable disease

during the adjustment of the claim. And even if exposed, no

evidence that such exposure was caused by any acts or omissions

of Travelers or that they sustained damages. Furthermore,

Defendant argues that Plaintiffs, in their Opposition pleading,

offered no legal or factual opposition to Travelers’ motion for

summary judgment on their claim for negligent interference with

prospective economic advantage. 

Since Travelers has shown by undisputed facts that this

claim fails as a matter of law as a result of Plaintiffs’ failure

to provide any evidence of a genuine issue of material fact,

summary judgment is granted in favor of Travelers. 

The tort of negligent interference with prospective economic

advantage is established where a plaintiff demonstrates that:

(1) an economic relationship existed between the

plaintiff and a third party which contained a

reasonably probable future economic benefit or

advantage to plaintiff; 

(2) the defendant knew of the existence of the

relationship and was aware or should have been aware

that if it did not act with due care its actions would

interfere with this relationship and cause plaintiff to

lose in whole or in part the probable future economic

benefit or advantage of the relationship; 

(3) the defendant was negligent; and 

(4) such negligence caused damage to plaintiff in that

the relationship was actually interfered with or

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 68 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

69

disrupted and plaintiff lost in whole or in part the

economic benefits or advantage reasonably expected from

the relationship.

North America Chemical Co. V. Superior Court, 59 Cal.App.4th 764,

786, 69 Cal.Rptr.2d 466 (1997).

Defendant’s motion for summary judgment regarding

Plaintiffs’ negligent interference with prospective economic

advantage claim is GRANTED.

//

//

//

//

//

//

//

//

//

//

//

//

//

//

//

//

//

//

//

//

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 69 of 70
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

70

CONCLUSION

For the reasons set forth above, 

(1) Defendant’s motion for summary judgment regarding

Plaintiffs’ breach of contract claim is DENIED.

(2) Defendant’s motion for summary judgment regarding

Plaintiffs’ bad faith claim is DENIED.

(3) Defendant’s motion for summary judgment regarding

Plaintiffs’ request for punitive damages is GRANTED.

(4) Defendant’s motion for summary judgment regarding

Plaintiffs’ intentional infliction of emotional distress claim is

DENIED.

(5) Defendant’s motion for summary judgment regarding

Plaintiffs’ negligent infliction of emotional distress claim is

DENIED.

(6) Defendant’s motion for summary judgment regarding

Plaintiffs’ negligence claim is GRANTED.

(7) Defendant’s motion for summary judgment regarding

Plaintiffs’ negligent interference with prospective economic

advantage claim is GRANTED.

IT IS SO ORDERED.

Dated: April 21, 2008 /s/ Oliver W. Wanger 

bb4ed UNITED STATES DISTRICT JUDGE

Case 1:06-cv-01232-OWW -SMS Document 73 Filed 04/21/08 Page 70 of 70