Filed 6/16/23 Chang v. Farmers Insurance Company CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opini o n has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

WILD CHANG et al.
,

Plaintiff s and Appellant s ,

v.

FA RMERS INSUR A N CE COMPANY, INC. et al.
,

Defen dant s and Respondent s

. B 3 21411

(Los Angeles County Super. Ct. No. BC650876 )

APPEAL from a judgment of the Superior Court of Los Angeles County. Teresa A. Beaudet , Judge. Affirmed

. W ild Chang, in p r o

. per

. , Kenneth Lo, in pro

. per

. , Wild Chang, Jr., in pro

. per

. , for Plain tiff s and Appellant s

. Wool l s Peer Dollinger & Scher
, Gregory B. Scher and
H. Douglas Galt for Defendant and Respondent Farmers Insurance Company, Inc.

______________

____ _____2 IN TROD U CT ION

Plaintiffs Wild Chang and Kenneth Lo were insured under a policy issued by defendant Fire Insurance Exchange . Plaintiffs submitted a claim under the policy, which plaintiffs allege was handled in bad faith. P laintiffs Chang, Lo
, and Wild Cha ng , J r. (Chang Jr.), sued Farmers Insurance Company, Inc. (Farmers), Fire Insurance Exchange, a nd agent Stacy Chern for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud
, and other rela ted causes of actio n. The trial court

s ustained F a rmers ’ d emurrer to the third am ended complaint
without leave to amend and entered a judgment of dismissal in Farmers ’ favor. We a ffirm.

FACTUAL AND PROCEDURAL HISTORY

These consolidated actions arise out of an insu ranc e claim
that p laintif

f s Chan g and Lo submitted for losses caused by a h ouse fire on December 16, 2014. On February 16, 2017, Chang and Lo filed their original comp laint against Farmers
, Fir e Insurance Exchange
, Stacy Chern Insura n ce A g ency , and Stacy Cher n

. On August 21, 2017, Chang and Lo filed a second amended complaint that substituted Farmers Insurance Gr oup of Compan ie s for Farmers

. On Jan ua ry 26, 2018, plain tiffs voluntarily dismissed the action with p r ej udice as to Farmers Insurance G roup of Compa nies

. On Jan uary 28, 2021, plaintiffs C hang, Lo
, and Chang Jr. filed a second action against Farmers , Fire Ins uranc e Exchange, Stacy Chern, and defense couns el Woolls Peer Dollinger & Sche r3

(Wo ol l s Pe er). Th e actions wer e consolidated and t he operative

t hird amended complaint was deemed filed on July 22, 2021.
In the third amended com p laint , p laint iffs allege Farmers and Fire Insurance Exchange, acting in bad faith , m ad e a gross ly deficient set tlement offer for the claim plaintiffs submitted for their fi re loss. Pla intiffs also allege Farmers, Fire Insurance Exchange, and Chern enga ged in a fraudulent scheme to “convert the ‘insurance’” plaintiffs allege d ly p urc hased from Farmers “into

a me re ‘self

- owned membership’ in an unincorporated association, i.e. , [Fire Insur ance Exchange] . . . i n order to insulate [Farmers] and its agents fro m all of the legal liabilit ies arising from the deceptive and non

- confo rmi ng in suranc e sold to [p]laint iffs. ” The de clarations page attached to the third amended complaint shows the pol icy was issued by Fire Insurance Ex change. Plaintif

fs allege they never agree d to subscribe to Fire Insurance Exchange or to ob tai n cove rage from that ent ity. Among other things, they never signed a subs cripti on agreement. Instead, they und erstood they would be insured by Farmers. Plaintiffs attach a document entitl ed “ Evidence of Property Insurance ” that identif ied t he “ compa ny ” as “ Farmer s Insu ra nce. ”
Under the “ coverage information ” section, p laintiffs are directe d
to “ remit payment to [ ] Farmers Ins urance. ” Plaintiffs allege that this is a legally b inding co ntrac t and that they relied on the fact Far me rs In sura nce is identified as th e insur er in paying the premium s

. Plaintiffs attach numerous documents bearing the logo of Farmers Insur a nce Group of C ompan ies or using the term

“ Farmers ” in connection with the insurance purchased by plaintiffs.
P lainti ffs allege tha t F armers acted as the “principal/agent” of other defendants, including Fire Insurance Exchange , and that4

Fire Insurance Ex c hang e “ act[ed ] as a ‘ veil ’ ” so that Farmers could limit its lia b ility

. The cover age pl aintiffs purchased f rom Fa r mers wa s p rovided by F ire Insurance Ex change to “ insulate [Farmers] and its agents from al l the legal liabilities arising from
the de cept ive a nd non

- confor ming insurance sold to [p] laintiffs

. ” Plaintiffs further alleg e Fire Insu r ance Exchang e is “ only

re sp onsible for the administration of ‘ membership ’ affairs for the members . . . [b]ut
, in fact, [ Farmers] is the real entity tha t has financial gains t h rough st affing, managing and control ling the affairs of [Fire Insura nce Exchang e ]. ” Pl aint iff s also allege Stacy Chern acted as an agent of Farmers, not Fire Insurance Exchange. Plaintiffs allege that , after the fire, defenda nts failed to properl y investigate the da mage caus ed by the fire, failed to provide tempo rary hou s ing a s r e quir ed by the policy, and failed to provide adequate co mpensat ion for the claim. Plaintiffs also allege defendants threatened to terminate the policy at a time they knew plaintiffs c ould no t obtain co verage elsew here. D e fendants to ok more than a year to comp lete their investigation and finally issued a check for the grossly deficient a mount of $19,925.9 1 , even though estimates for rep airs exceeded $150,000

. P laintiffs a llege the off er to pay $19,925.91 was made in bad fai th

. Plaint iffs rej ecte d the of fer, deciding inst ead to sue. Plaintiffs al so allege that stress from the experience c aused Chang to suffer a stroke
, the aftermath of which his minor son, Chang Jr., w i tnessed

. Pl a intiff s p urport to asse rt ca uses of a ction for fraud, breach of the covenant of goo d faith and fair dealing, breach of contract, unfair business practices, profess ional negligence, and5

intentio nal and negligent inflic tion of emotional dis tress against all defendan t s. F armers (along with other defendant s) demurred to the third am ended complaint. 1 Farmers argued the claims for breach of contract, bad faith , and unfair competition failed as against F armers because Farmers was not a party to the insura nce

con tract ; the claim for fraud faile d because plaintiffs did not allege t he elements of fraud with sufficient particularity and did not allege causation or damages ; and the claim s for n egligence and n eg ligent infliction of em otional distress f aile d because Far mers did not owe plaintiffs any duty and Chang Jr. could not

recover as a bystander

. Farmers requested that the court take judicial notice of

, among other things, plaintiffs ’ motion for leave to file a third amended complaint and exhibits the reto ; the

com pany profile for Fire Insurance Exchange from the Calif ornia Department of Insurance website ; and the license status information for ag ent Stacy C hern from that website . The trial court gr anted the reques t for judicial notice

. In oppositio n to the demu rrer as to Farmers
, pl aintiffs

a rgued the claims for breach of contract, bad fai th
, pro fessional negligence , intentional infliction of emotional distress, and unfair competition were sufficiently alleged because plaintiffs
contracted with Farm ers, as shown by the evidence of property ins urance and other documents , and all defendants acted in
concert with each other in bad faith to depri ve plaintiffs of the benefits of the contract ; the cl aim for fra ud was suffi ciently alleged because plaintiff s were told th ey were buying an

1 Fire Insurance Exchange did not demur to the br each of contrac t or the b rea ch of the co venant of go o d faith and fair dealing claims.6

insurance poli cy from Farmers but received a subs cri ption agreement from F ire Insurance Exchange; and the claim for negligent infliction of emotional distress was sufficiently all eged because Chang Jr. suffere d emotional dist ress when he witnessed the aftermath of his f

ather ’ s stroke , wh ich had been caused by Farmers ’ ba d faith

. P laintiffs requested that the court take judicial notice of various court filings, including declarations that Fire Insurance Exchange had filed in s upport of an anti

- SLAPP
motio n, a nd other documents purportedly re lated to the purchase of insura nce. The court to ok judicial notice of the fact the de clarations and certain othe r documents had been filed but declined to take judicial notice of the truth of th e m att er s asserted therein

. The court otherwise denied the request

. The court sustain ed Far mers ’ dem urrer in it s entirety and entered a judgment of dismissal as to Farmers

. The court
concluded the f

raud claim failed because it had not been alle ge d with suffic ient particulari ty; the claims for breach of co n tract , bad faith
, intentional i nfliction of emotional distress
, and unfa ir

comp etition failed b ecause Farmers was not a party to insurance contract; the prof

essional negligence claim fail ed bec au se Farmers ow ed no duty to plaintiffs; and the negligent infliction of emotional dis tress claim failed because Chang Jr. had not alle ged
the elements of a claim based on a bystander theory . The court denied leave to amend.
Farmers t ime ly appeale d.7 D ISC U SSION

A. Stan dard of Review A demurrer te sts the legal sufficiency of the factual allegations in a complaint. “In rev iewing an orde r susta ining a demurrer, we ex amine the operative c omplaint de novo to
determine whether i t al leges fa c ts sufficie nt to sta te a cause of action under any legal theor y. [Citation.] Where the demurrer
was sustained without leave to amend , we consider wheth er the plaintiff could cure th e defect by an amendm ent.” ( T.H. v. Novartis Pharmaceutical s Co rp. (201 7 ) 4 Cal.5th 145, 162 ; accord, Cen tinela Freeman Emergency Medi cal Associates v. Health Net of Califor nia, Inc. (2016) 1 Cal.5th 994, 1010 .)
We assume the tru th of the properly plea ded factual all egatio ns and matters of which judicial notice has be en ta k en. ( Lee v . Hanl ey (2015) 61 Cal .4th 1225, 1230 ; Evans v. City of Ber keley (2006) 38 Cal.4th 1, 20; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1 074, 10 81 ( S c hifando ) ; see C ode Civ. Proc.
, § 430.3 0
, subd. (a) .) We liberal ly construe th e plead ing w i th a view t o subs ta ntial justice between the parties. (Code Civ. Proc
., § 452; Schifando, at p. 1081.) “ However, the assumption of truth does not apply to con tentions, deductions, or conclusions of law and fact. [Citations.] Furthermore, a ny alle gatio n s that are
contra ry to the law o r to a fact of which judicial notice m ay be taken will be treated as a nullity. ” ( C .R. v. Tenet Healthcare Corp. (2009) 169 Cal .App.4th 1094, 1102 .) “ ‘ While the

“ allegati ons [of a co mplaint] must be accepted a s true for

p u rposes of d emurre r, ” the “ facts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleadin g, will be given precedence. ” ’ ”8

( Moran v. P rime Healthcare Management, Inc. (2016)
3 Cal. App.5 t h 1131, 114 5

- 1146 ; accord
, Ivano ff v. Bank of America, N.A. (2017) 9 Ca l.App.5th 719, 726 .) We review the trial court ’ s decision to deny leave to amend for an abuse of discretion. A trial court abuses i t s discretion by sustaining a demurrer without leav e to amend w here “ ‘t here is a

rea sonable pos sibility that the defect can be cured by amendment.’ ” ( Loeffler v. Target Corp. (2014) 58 Cal.4th 1081,
1100 ; accord
, City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865 .) “ ‘The plaintiff has the burd e n of provin g that [ an] amendment would cure the legal defect, and may [even] meet thi s burden [for the first time] on appeal.’ ” ( Sierr a Palms Homeowners Assn. v . Metro Gold Line Foothill Extension Constr u ction Authority (2018) 19 Cal.App.5th 1127, 1132 ; a c cord, Aubr y v. T ri

- City Hospita l Dist. (1992 ) 2 Cal.4th 962, 971 .)

B. The Trial Court Did Not Err in Sustaining F armers ’
Demurrers
1. B reach of c ontrac t and b reach of the i mplied c ovenant of g ood f a ith and f

a ir d ealing
To establish a cause of actio n fo r brea ch of contra ct , the plainti ff must plead and prove (1) the existence of a contract, (2) the plaintiff's performance or excuse for nonperformance, (3 ) the d efendant’s breach, and (4) resulting damages to the plaintiff. ( Oasis West R ealty, LLC v. Gold m an (2 011) 51 Cal. 4t h 811, 821; M

axwell v. Dolezal (2014) 231 Cal.App.4th 93, 97

- 98.) “California law recognizes in every contract, including insurance

p olicies , an implied covenant of good faith a nd fair dealing. [Citations.] In the i nsurance conte xt t h e imp lied covenan t requires the insurer to refrain from injuring its insured’s right to9

receive the benefits of the insurance agreement .” ( Brehm v. 21st Centur y Ins. Co. (2008) 166 C al.App.4th 1225, 1235 .)
T he trial court sustained F armers ’ demurr er s t o the breach of c on tract and bre ach of implied covenan t of good faith and fair dealing causes of action on the gr ound that Farmers was not a party to the insura nce contract

. T h e decl aration page attached
as an exhibit to the third amen ded complaint shows the coverage

was pr ovided by def

endant Fire Insuran ce Exchange

. Fire Insurance Exchange is a reciprocal insurer, also known as an interinsuranc e excha nge, go verned by Insurance Code s ection 1 280 et se q. ( Tran v. Farmers Grou p, Inc. (2002) 104 Cal.App. 4 th 1202, 1210 ( Tran ).) “An inte rinsurance exchange is an unincorporated business organization made up of subscribers and managed by an attorney

- i n

- fact. The e xchange is the insu rer and the sub scribers are the insu reds. The su bscribers execute powers of attorney appointing the attorney

- in

- fact to act on their behalf. The attorney

- in

- fact executes the exchange ’ s insurance contracts.” ( Ibid. ; see Ins. Co de, §§ 1303, 1305; Lee v. Interin surance Exchange (1996) 50 Ca l.App.4th 694 , 702

- 704 [describing histo r y of reciprocal ins urance and s t ructure of interinsurance exchanges]; Delos v. Farmers Group, Inc. (1979) 93 Cal.App.3d 642, 651 ( D elos ) [discussi ng mana gerial role of attorney

- in

- fact]. ) “ The written instrument, in which [the] contract of insurance is s e t forth, is the pol icy. ” (Ins. Code, § 380.) Gen erally
, c auses of act ion for breach of contract and for breach of the implied covenant of good faith an d fair dealing will lie only against the insure r . ( Gr uenberg v. Aetna Ins urance Co. (1973) 9 Cal.3d 5 6 6 , 576.) Howe ver, under certai n circums tances, the att orney

- in

- fact fo r a reciprocal insurer may be held liable for10

breach of the covenant o f good fa ith and fa ir dealing. ( Tran,

supra, 104 Cal.App.4th at pp. 1218

- 1219 ; Delos , supra, 93 Cal.App.3d at p. 6 52

. ) Courts have c ome to var yi n g con clusions about when a reciprocal i nsurer ’ s attorney

- in

- fact can be held liable for bad faith . In Delos , supra, 93 C al.App. 3d at p. 652, the court he ld that the attorney

- in

- fact of a reciprocal insurer could be held li a b le for bad fai t h r egardl ess wh e ther the attorney

- in

- fact was

an alter ego of the ex change , concluding: “If we were to

. . . adhere to the general rule that ‘b ad faith’ liability may be imposed only against a party to an insu rance contract, we would

not o nly permit t he insu r er to insul a te itself from liability by the simple technique of forming a management company, but we would also deprive a plaintiff f rom red ress against the party pri marily responsible for damages.” ( Ibid. ) By contras t, in Tr a n , supr a , 104 C al. A pp. 4th a t pp. 1218

- 1 2 19
, the court concluded “ the attorney

- i n

- fact of a reciprocal
insur er is not liable for breach of the covenant of go od fa ith and fair dealing merely beca use of its status as the insurer ’ s manageri al agent

. ” T he court h e ld t he attorney

- in

- fact c ould be
he l d liable only where the plaintiff prove s the attorney

- in

- fact is the alter ego of the reciprocal insurer or where th e “ si ngle

en terprise ” doctrine a pplies. ( Id. at p. 1218 [declining to follow Delos , supra , 9 3 Cal

. App.3 d a t p. 652] .)

“ Two co nditions are generally required for application of

t he doctrine to two related corporations: (1) such a unity of
interest and own ershi p that the separate corporate personalities are merged, so that one corporatio n is a mere adj unct o f a nother or the two c ompanies for m a single enterprise ; and (2) an inequit able result if the acts in question are treated as those of11

one corporation a lone. ” ( Tr a n, supra, 104 Cal.App.4th at

p. 1219. )
In Tra n , the plaintiff sued the att orneys

- in

- fact fo r t wo reciprocal insur ance exc h ang e s for bad faith. T he trial court grante d summary judgment in favor of t he attorney s

- in

- fact on the bad faith c laim s becau se the y were not parties to the
insurance contract s

. The Court of A ppeal reversed, concluding

t he p l a intiff had raised a triable iss u e on the two alter ego
elements quoted ab ove

. 2 As to the first elem ent , the court stated t he defendant s had made “ n o cl aim th a t the unity of interest requirement is not met
in this case

. ” 3 ( Tran, supra, 104 Cal.App.4t h a t p. 1219

. ) As to

t he second, t he court rejected the defendants ’ conten tion that “ no inequity would fl ow from res tricting Tran to pursui ng her claims against the ex c hanges . . . [ because] there [was] no showing the exchanges have inadequate assets to mee t any judgment [the insured] mig h t recover, includi ng punitive damages. ” ( Ibid. ) The

c ourt concluded the m ere fact the exchange was adequately capitalized was ins uf

f icient to negate the inequity element of an

2 One of the defendants in Tran and Delos wa s Fa rmers Group, Inc. T h e defendant here is Far mers Insurance C ompan y, I nc., a di fferent entity.

3 The court s tated: “ An interinsurance e xchan g e is ‘ owned ’ by the subscri b ers, not by the attorne y

- in

- fact. However, given that the subscribers are requi red to appoint the attorney

- in

- fact as manageria l agent, the ‘ ow nersh ip ’ element of the alter ego doctrine is not applicable in this context. ” ( Tr a n, supra, 104 C al.App.4 th a t p. 1219, fn. 7 ; see also T royk v. Farmers Gr oup , Inc. (2009) 171 Cal. App. 4th 13 05, 1341

- 43 [ attorney

- in

fact can be held liable as an a lter ego even t ho ugh there is no shared ownership ] .)12

alter ego claim in this context , ho lding: “ W h en a reciprocal ins urer functio n s as a mere instru mentality of an attorney

- in

- fact
in the co nduct of a unified i nsurance business, it would be inequitable to p ermit t he attorney

- i n

- fact to escape liabil ity for breach of the covenant of good fait h and fair dealing. ” 4 ( I d. at

p. 122 0 .) We need not decide whether to follow Delos or Tran because exhibits attached to the third amended complaint show
that Farmers is not F ire Insurance Exchange ’ s attorney

- in

- fact. Although p laintiffs allege “ [Farmers] is the r eal entity that ha s financial g a ins through staffing, managing and controlling the

a ffairs o f [Fire In surance Exchange]
, ” exhibit s atta ched to the third amended com p l aint show that Fire Insurance Exchange ’ s attorney

- in

- fact is Fir e Underwriters Associatio n

. “ ‘ While the

“ all egations [ of a comp laint ] must be accep ted as t rue for

purposes of demurrer
, ” the “ facts appearing in exhibits attached
to t h e complaint will also be accepted as true and, if contrary to the allegations in the plead i ng, will be given pr ecedence. ” ’ ” ( Moran v. Prime He a lthcare M anagement , Inc.

, supra, 3 Cal. App. 5th at pp. 1145

- 11 46 .) We accept th e represe ntation s in the exh ibit s that Fire Under writers Association is the attorney

- in

- fact. Plaintiffs have not alleged a ny rel ationship
between Farmers and Fire U nderwriter s Association to support a

4 In concluding a triable issue had b e en rais ed, the court stated : “ [Defendants] were managerial agents without whom the exchanges could not tran sact their business. Farmer s Group,
appa rently acting through Truck Un de rwriters Association in some instances, made the critical decisions r egard i ng Tran ’ s polic y for her a nd for the exchanges, manipulating the exchanges as parts of a single enterprise. ” ( T ran, supra, 104 Cal.App. 4th at p. 122 0.)13

conclusi on that Farmers should be treated as Fire Ins urance Exchange ’ s attorney

- in

- fa c t. Nor have p laintiffs sufficiently alleged that Farmers could otherwise be held liable a s an alter ego of Fire Insurance Exchang e on some ba s is other th an as an attor ney

- in

- f act

. Plaintiffs have not suff iciently allege d a unity of int erest between
Far m ers and Fire Insur ance Exchange and have not sufficiently alleged facts showing the separa t e existence of the enti ties would
sancti on a fraud o r promote inju stice. The bare all egation tha t Far mers i ssued the policy throug h Fire Insurance Exchange “ to i ns u late [Farmers] and its agents from all of the legal liabilities ” is not sufficient to stat e a claim based on alter ego theory. P laintiffs ar g ue they have ad equately a lleged t hey had a
contract wit h Farmers because Farme rs’ agent provid ed them with a do c u ment ent itled “ E vidence of P roperty I nsurance ” that
list s “Farmers Insurance ” as the “ c om p any ” and directs plaint iffs to remit the ir premium p a y ment to “ Farmers In suran ce

. ” Plaintiff s argue the document is a binder as defined in Insuranc e Code section 382.5. 5 (See Chicago Title In s

. Co. v. AMZ Ins. Ser vices, Inc. (20 10) 188 C a l.App.4th 401, 423 [ docu ment entit led

“ Evidence of Prope rty Insuranc e ” was a binder under
sect ion 382.5 ] .)
A bi nder “ temporarily obligate s the insurer to pro vide ” insurance c overage described in the binder “ pending is s uance of
the i nsurance policy. ” (I n s. Cod e, § 382.5 , su bd. (a) ; accord, Chicago Ti tle Ins. Co. v. AMZ I n s. Services, Inc. , supra ,

5 The e vidence of p rope rty i nsurance does not q ua lify as a

c ertifica te of i nsurance under Insurance Co de section 384,

su bdivi sio n (a) . The do cument does not contain the language required in that section to con stit ute a c ertificate of i nsurance

.14

188 Cal.App.4th at p. 423 .) “ [A] binder s hall b e valid for [a] perio d . . . not ex ceeding 90 days from the date of execution of the
binder

. . . No binder sha ll remain valid on or after the date th e insuranc e policy is issued w i th respect to which th e binder was given. ” (Ins. Code, § 382.5, subd. (c) .) Here, even if we w ere to assume the document was a binder, it would not provid e coverage for the loss at is su e here because the loss occurred more than 90 days afte r it was iss u ed

. T he document was issued on April 2 9, 201 4, with an effective date of May 5
, 2014. As s uming it was a binder, it was v alid for a maximum period of 90 days, until A ugust 3 , 2014, at t he latest. (See Ins . Code, § 382.5, subd. (c) .) The fir e occurred o n December 16, 2014

. Further, the in s urance contract i ssued by Fire Insurance Exch ange superseded the purported binder. Both the bind er and
declar ations pag e attached to the third ame nd ed complaint list the same policy number, so it is cle a r both docum e nts concern the

same contract

. The de clarations page s t ates: “ This Declarations page i s part of your policy. It super sedes and c ontrols anything to the contrary. ” The de clarations pa ge makes c lear the insurer
is Fire Insurance Exchange and not “ F armer s Insurance. ” Plaintiffs have no claim against F armers f o r breach of contract or
breach of the covenant of fair dealing based on th e fact that

“ Farmers Insurance ” is the “ co mpany ” identi f ie d in th e purported
binder

. 6

6 Farmers argues the policy wa s al ready in place at t he time the document entitled “ Evidence of Property Insurance ” was issu ed , and the re fore the document could not be a binder . In support of the argument, Farmers id enti fied a declaration page attached to plaintiffs ’ motion for leave to amend reflecting a15 In sum, the trial court p roper ly sust a ined Farmers ’ de murrers to causes of action for brea c h of contract and breach of
the covenant of good faith and fair dealing. Pl aintiffs have not identified any add itiona l f ac ts the y w ould allege against Farmers
that would cure the deficienci es in the cl a ims. The trial court thus did not abuse its discret i on in denying leave to amend.

2

. Fraud
To s tate a cause of action for fraud, a plaintiff must plead the following el em ents: (1) mi srepresentation, (2) knowledge of fals ity, (3) intent to defraud, ( 4) jus tifiable reliance, and (5) resulting damage. ( Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184 .) “[F]raud must be pled specif ically; general and conclusory allegatio ns do not suf fi ce

. ” ( Lazar v. Superi or Court (1996) 12 Cal.4th 631, 645 .)
Plai n tiffs a llege Farmers engaged in a fraudulent scheme

t o “convert the ‘ insurance’ plaintiffs alleged ly purchased from
Farmers into a m ere ‘self

- owned membership’ in an unincorp or a ted asso ci ation, i.e., [Fire Insur ance Exchange] . . . in order to insulate [F a rmers] and its agents from all of the legal
liabilit i e s arising from the deceptive and non

- conformin g insurance sold to [p]laintiffs .” Although the allegati on s are no t entirely clear, plaintif fs a ppear to contend Farmers and its purported age nt Stacy Che r n represented plaintiffs w o u ld be
i nsured by Farmer s, but instead of an insurance policy issue d by

policy period from January 30, 2014 to J anu a ry 30, 2015. The document c ontains the n otation
, “ Transact ion type: Offer of renewal. ” The court cannot dete rmine from the fa ce of the document whether th e declaration page reflects a consummated
contract or an offer.16

Farmers they received a subscr iption agreement with Fire I ns u rance Exchange.
This cl aim fa il s because, among other t hings, plaint i ffs have no t alleged th e pu rported misrepresentations caused any damage. The trial court took judicial notice of docume nts from the web site of the Department of Ins urance showing t hat Fire Insurance Exchange is duly a ut horized by the d epartment to issue i nsurance co ntracts to C a lifornia insureds. The exhibits
attached to the third am ended complaint show that the coverage in the in su rance contract issued by Fir e Insurance Exchange

m atc hed the coverage set forth in the purported bin der

. Plaintiffs do no t a llege that Fire Insuran c e Exchange would not be able to satisfy any j udgment or that plaintiffs were otherwise damaged b y being insured by Fire Insurance Exchange as

opp o sed to any oth er entity affi liated with the Farmers Insurance Group of Companies. Pl a intiffs hav e not identi f ied any additional facts they w ould allege to show the purported misrepresentations caused damag e if leave to amend were granted. Accordingly, the trial co urt did not err i n sustaining
F a rmer ’ s demurrer to this ca use of actio n an d did not ab use its disc r etion in denying leave to amend.

3

. Unf

air b usiness p ractices
The trial court also sustained t he demurrer to plaintiffs’ claims under the unfair competit ion law (UCL) (Bu s. & Prof. Code, § 17200 et seq.) Plaintiffs mention thi s claim only in passing i n their appellate briefs and provide no argument or authority for why the trial court erred in s us taining the demurrer to this cause of action. Plaintiffs h ave thus forfeite d any17

argument as to this claim. ( Dinslage v. City and C o unty of San Francisco ( 2 016) 5 Cal.App.5th 368, 37 7, fn. 3.) In any event, the trial court correctly ruled that plainti ffs have not sufficiently alleged a UCL claim against Farmers

. Unfair compet i t ion under the UCL means “any unlawful, unfair
, or fraudu l ent busines s act or pra c tice an d unfair,
dec eptiv e, untrue , or misleading advertising. ” “Written in the disjunctive, Busi n ess and Professions Code se ction 17200 establishes ‘ “ thre e v arieties of unfair competition

— acts or practices which are unlawful, or u nfair, or f raudulent. ” ’ ” ( I vanoff v. Ban k of Ame rica, N.A. , supra, 9 Cal.App.5th a t p. 730, quoting C el

- Tech Communications, I nc. v. Los Angeles Cellular Telephone Co. (1999) 20 C al. 4th 163, 180; accord, Kasky v. Nike,
Inc. (2002) 27 Cal.4th 939, 949.) A plaintiff making a cla i m unde r the UCL mus t plea d that the defendant engaged in a business practice t hat was either “unlawful (i.e., is forbidden by law) , unfair (i.e., harm to vi cti m outweighs any benefit) or fraudulent (i.e., is likely to deceive mem ber s of the pu blic )

. ” ( Al b illo v. Intermodal Contain er Services, Inc. (2003)
114 Cal. App. 4th 190, 206. )
A UCL claim against a n insurer may be based on al legations of bad fa ith cla ims handling practices. ( Zhang v. Superior Court (2013) 57 Cal.4th 364
, 383. ) A plain tiff may als o assert a UCL claim agains t the at torney

- in

- fact of a reciprocal
insurance e xchange when the unfair, u nlawful
, or fraudulent acts fell within the scope of t he p ower of attorney . ( Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4 th 1 305, 1337 [ “ because [F a rmer s Group, Inc.] , as [F a rmers Insurance Exchange ’ s ] managing agent, was directly invol ved in the dr a fting and

exe cution of the class members ’ policies, it mus t at least share18

with [F armer s Insurance Exchange] responsibility for the UCL unlaw ful business practice resulting from [F armer Insurance Exchange ’ s ] violation ” of a specified statute ] ; R&B Auto Center

, Inc. v. Farmers Group

, Inc. (2006) 140 Cal.App.4t h 32 7 [a reciprocal insurance exchange’s attorney

- in

- fact can be held lia ble for unfair , unlawful o r fraud ulent acts under the UCL or for breach of fiduciary duty arising out of claims handling if the attorney

- i n

- fact assumed responsibility for claims hand ling in the power of attorney].) Plaintiffs allege that defendants, incl udin g Farmers, violated th e UCL by (1) engaging in th e fraudulent bait

- and

switch and issuing a policy underwritten by Fire Insurance Ex cha nge instead of Farmers Insurance; and (2) fa ilin g to adjust their claim promptly and i n good faith. As to the UCL claim based on t he allege d b a it and switch, plaintiff s ha ve not alleged they “suffered injury in fact” or “los t m oney or property as a result of the [allege d] u nfair competition.” (See Bus. & Prof. Code, § 17204 [setting forth stan ding requirements for a UCL claim].) Th us, plain tif f s lack standing as to this claim. As to the UCL claim based on bad faith claim s h andling, the basis for plaintiffs’ allegati ons that Farmers w as involved in the claims handling process is unclear. As previously discussed, any allegation to the effe ct t hat Farmers was Fire Insurance Exchange’s attorney

- in

- fact or managing agent is c ont radicted by the exhibits showing that Fire Unde rwriters Assoc iation is the attorney

- in

- fact. 7

7 Plaintiffs allege i n a co nclusory fashion that Farmers act ed as Fire In surance Exchange’s agent, and state that Jeremy Gump “from Farmers Ins urance” was involved in inv estig ating the claim. Plaintiffs provide no argument or authority to support the19 Plaintiffs h ave not i den ti fied any additional facts they could a llege to sav e this claim. The trial court properly sustained
the demurrer to the un fair bus iness practices claim as to Farmers without leav e to amend.

4. Professional n egli gence To state a cause of action for pro fessiona l negligence, a plaintiff must a llege the fo l lowing elements : “ (1) the duty of t he professional to use such skill, p rudence , and di li gen c e as other members of his professi on c ommonly possess and exercise; (2) a breach of that duty; (3) a proxi mate causal connection between the negligent c onduct and the resulting inju ry; and (4) actual loss or damage resulting from the p rofessi onal ’ s n eg ligence. ” ( Paul v.
Patton (2015) 235 Cal. App.4th 1088, 1095
, quotation m arks omitted .)

“ ‘ The threshold el em en t of a cause of action for negl igence is the exis tenc e of a duty to use due car e toward an interest of
another that enjoys legal pro tecti o n against unintentional invasion. ’ ” ( Giaco mett i v. Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137 ( Giacometti ) , quo tin g Bily v. Arthur Young & Co. (1992) 3 Cal. 4th 370, 397

. ) “Wh ere th ere is n o lega l duty, the issue of professional ne gligence cannot be pl ed be cause with the absence of a breach of d uty, an essential element of the cause of action for professional negli gen c e is missing.” ( Major Clients Agency v. Diemer ( 1998 ) 67 Ca l.App. 4th 1116, 1132

. )

conclu sion t hat a plaintiff may assert a claim for violation of the UCL aga in st an agent of an insurer (other than an exchange ’s

a ttorney

- in

- fact), and pla intif fs do not contend on appeal that they have stated a valid UCL claim because Farmer s acted as an agent of Fire In surance Exchange.20 Here, plaintiffs have not adeq uately alleged t hat F armers owed them any duty. While a n attorne y

- in

- fact of a reciprocal insurance exchange owes limited fiduciary dut ies to insureds ( Tran, supra

, 104 Cal.App.4th at p p. 1213

- 1215), again the
exhibits attach ed to the third amended complaint sh ow that Fa rmers is not the attorney

- in

- fact. Plaintiffs al so a ppear to allege that Farmers acted as Fire Insurance Exchange ’ s a ge nt i n investigating and otherwise responding to plain tiff s ’ clai m , but
Farmers owed no dut y to plaintiffs in acting in that ro le. (See Sanch ez v. Lindsey Morden Claims Service s, Inc.

, supr a, 72 Cal.App.4th at pp. 254

- 255 [agents of insurers involved in th e cl aim s handling process owe no duty to insu reds and are not li able to insureds for economic loss ].) The trial court properly su staine d the demurrer to this cause of action without le ave to amend.

5. Emotional d istress Plaintiffs appear to base their cla im for emotional distre ss on two differen t theori es

. First, they con tend Farmers is li able for intentional infliction of e motional distr ess because it “ failed to adjust and pay the ful l value of [p]laintiffs ’ claim. ” This claim fails bec ause , as discussed, Farmers was not the insurer or th e
att orney

- in

- fac t and o wed no duty to plaintiffs with respect to the handling or payment of the c laim. Sec on d, plaintiff C hang Jr. 8 ap pears to contend Farmers is liable for ne gligent infliction of em otio nal di stress because
Farmers ’ actions c aused Chang to suffer a str o ke, and Cha ng Jr. suffered emotional dis tress when he could not wake his f ather

.

8 Ch a ng Jr. is not an insure d on the po li cy.21

Th is theory fails for many reasons. Farmers cannot be held li able for any adverse effects flowing from a lleged defi cienci es in the claims handling process becau se it owed n o dut ies to plaintiffs. Moreover, e ven if F armers did have a duty to the policyh olde rs and even if plaintiffs had adequately alleged Farmer s ’ ac tions

cau sed Chang to suffer a stroke
, Chan g Jr. w ould s till not have a
claim for negligent inflict ion of emoti o nal distress

. “ [ A ] plai ntiff

may reco ver d amages for emotional distress caused by o bserving the negligently inflicted injury of a third perso n if, b ut o nly if, said plaintiff : (1) is cl osely related to the injury victim; (2) is present at th e scene of t h e injury

- producing eve nt at the time i t

occ urs and is then aware that it is caus ing injury to the victim; and (3) as a result suffers serious em otion al d istress

. ” ( Thing v.
La Chusa (198 9) 48 Cal.3d 644, 667

- 668.) Here, the all eged

“ injury

- p roducing eve n t [s] ” are Farmer s ’ all eged act ions wit h

res pect to the claims. Chang Jr. does n ot a llege that he was present for those events or th at Farmers ’ actio ns

c onte mporaneously caused the stroke . Further, Chang Jr. does not allege that while he was wit ness ing a n y act by Farmers he simultaneously knew the acts were causing his fa ther to have a

s troke

. Chang Jr. has no claim against Farmers based on a bystand er t heory. The trial court properly su stained the demurrer to this claim wit hout leave to a men d.22 DIS P OSITION

The jud gment is affirmed. Farmers shall recover its cos ts on appeal.

E SCALANTE, J. *

We concur:

SEGAL
, Acting P. J.

FEUE R
, J.

* Judge of the Los Ange les County Superior Cour t, assigned by t he Chief Justice pursuant to article VI, section 6 of the California Constitution.