Filed 4/19/21 (unmodified opn. attached)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

BROOKE WEXLER,

Plaintiff and Appellant,

v.

CALIFORNIA FAIR PLAN 

ASSOCIATION, 

Defendant and Respondent.

 B303100

 (Los Angeles County

Super. Ct. No. 

19VECV00057)

ORDER MODIFYING 

OPINION AND 

DENYING PETITION 

FOR REHEARING

[NO CHANGE IN 

JUDGMENT]

THE COURT: 

IT IS ORDERED that the opinion in the above-entitled 

matter filed on April 14, 2021, be modified as follows:

On page 6 of the majority opinion, last paragraph, the last

sentence is deleted: “In other words, the Talbots have 

abandoned their dispute with FAIR Plan.”
2

The petition for rehearing filed by Appellant Brooke Wexler 

is denied.

There is no change in the judgment. 

____________________________________________________________ 

GRIMES, Acting P. J. STRATTON, J. WILEY, J.
Filed 4/14/21 (unmodified opinion)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

BROOKE WEXLER,

 Plaintiff and Appellant,

 v.

CALIFORNIA FAIR PLAN 

ASSOCIATION,

 Defendant and Respondent.

B303100

(Los Angeles County

Super. Ct. No. 19VECV00057)

 APPEAL from a judgment of the Superior Court of Los 

Angeles County, Huey P. Cotton, Judge. Affirmed.

 Kerley Schaffer and Dylan L. Schaffer for Plaintiff and 

Appellant.

Lewis Brisbois Bisgaard & Smith, Raul L. Martinez, Elise 

D. Klein and Celia Moutes-Lee for Defendant and Respondent.

____________________
2

Brooke Wexler lived with her parents in their home. Her 

parents insured the place with a California FAIR Plan 

Association owner-occupied dwelling policy. Under “INSURED 

NAME,” the FAIR Plan policy listed Wexler’s parents James M. 

Talbot and Kimberly A. Talbot. FAIR Plan expressly disclaimed 

coverage for unnamed people. The policy does not name Wexler. 

Wexler sued FAIR Plan, not for breach of contract, but on bad 

faith insurance allegations only. The trial court sustained FAIR 

Plan’s demurrer to Wexler’s claim. We affirm.

I

Kimberly and James Talbot own a home in a mountainous 

area facing fire danger. They lived together with their sevenyear-old son and their daughter Wexler, whose age is not in the 

record. The Talbots alleged smoke from the Woolsey wildfire 

damaged their home in 2018. They made claims on their home 

insurance policy with FAIR Plan. 

The Legislature created FAIR Plan in 1968. FAIR Plan is a 

joint reinsurance association to give homeowners in high risk 

areas access to basic property insurance. (California FAIR Plan 

Assn. v. Garnes (2017) 11 Cal.App.5th 1276, 1283.)

Wexler, together with the Talbots, sued FAIR Plan on bad 

faith insurance allegations founded in their dissatisfaction with 

how FAIR Plan handled their claim of smoke damage to the 

home’s contents. They attached FAIR Plan documents to their 

complaint and said these documents comprised the policy and its 

declarations. We describe these documents.

One page was on FAIR Plan letterhead. It lists the Talbots’ 

address and policy number and is titled “IMPORTANT 

RENEWAL POLICY INFORMATION.” This letter urged the 

Talbots to contact insurers to see if other insurance was available 
3

in the standard market. “The FAIR Plan is an insurer of last 

resort and generally provides more limited coverage than does 

the standard market.” The letter noted the insurance 

marketplace changes regularly, and so property not eligible for 

standard market coverage in the past may become eligible. The 

letter counseled the Talbots to ask neighbors and insurance 

brokers which insurance companies to use and urged the Talbots 

themselves to telephone insurance companies. 

This letter told the Talbots carefully to consider their 

insurance needs and to shop around.

“If you cannot secure a policy with an insurance company 

operating in the standard market, you should talk to your broker 

about purchasing a Difference in Conditions (DIC) policy in 

addition to your FAIR Plan Dwelling Fire policy. A DIC policy 

can supplement your FAIR Plan policy by providing important 

coverages not in a FAIR Plan policy (e.g. theft, water damage and 

liability coverage).” 

FAIR Plan advised the Talbots that “[s]electing the amount 

and type of insurance coverage appropriate for your needs is your 

responsibility. Do your best to make sure that your policy limits 

and coverages are sufficient to protect you in the event of a total 

loss.” 

“Check to see if your property is eligible for our dwelling 

replacement cost coverage, which is available at no additional 

charge. (This coverage does not increase your policy limits.)” 

“For additional premium the FAIR Plan offers numerous 

other coverages that broaden or increase the insurance provided 

by our basic policy.” 

“Review the insurance we have issued to you to make sure 

it matches your needs as nearly as possible.” 
4

Another page stressed the limited extent of the FAIR Plan 

coverage as compared to more typical California homeowners 

insurance policies. This page has a comparison chart, which 

FAIR Plan cautioned was “NOT ALL-INCLUSIVE”: “For a 

complete, specific understanding of all of the similarities and 

differences between the FAIR Plan dwelling policy and the 

insurance available in the standard market, you should consult 

with a licensed insurance broker.” 

This chart summarized the limited character of FAIR 

Plan’s homeowner coverage. Unlike more typical California 

homeowners insurance policies, the FAIR Plan policy did not 

insure against all physical loss unless specifically excluded. That 

more typical approach yields comprehensive coverage. Rather, 

FAIR Plan’s coverage was minimal: it insured the dwelling and 

its contents only against damage from fire, lightning, and 

internal explosion, with “limited” coverage for smoke damage. 

Somewhat broader coverage was optional. In contrast to a typical 

homeowners policy, the FAIR Plan policy offered no coverage for 

losses from theft, falling objects, weight of ice, snow, or sleet, 

water damage, freezing, or sudden accidental damage from 

artificially generated electrical current. 

FAIR Plan’s coverage was barebones in other ways as well. 

FAIR Plan emphasized it provided no liability coverage. It did 

not cover personal liability or damage to property of others, and it 

excluded medical payments for others. The chart also identifies 

other ways in which FAIR Plan’s coverages, limits, and 

conditions were less favorable to the homeowner than would be a 

more typical homeowners policy. 

A companion page, also on FAIR Plan letterhead, is titled 

“DWELLING INSURANCE POLICY DECLARATIONS.” This 
5

page says the transaction type is “Dwelling - Renewal Offer.” It 

identifies the date of issue and the policy number. Under 

“INSURED NAME AND MAILING ADDRESS,” this page listed 

James M. Talbot and Kimberly A. Talbot. It did not list Wexler, 

whose name does not appear in any FAIR Plan document 

concerning the policy. 

Under “COVERAGES, LIMITS, PERILS AND 

PREMIUMS,” this page identifies $686,446 as the coverage limit 

for the dwelling and $456,000 as the coverage limit for “Personal 

Property.” This page does not define “Personal Property.” That 

definition appears in a document titled “Dwelling Property 

Policy.” We come to that document in a moment.

The next page is headed:

“READ YOUR INSURANCE POLICY

Selecting the amount and type of insurance coverage appropriate 

for your needs is your responsibility.” 

At the bottom, this page states: “This policy is a contract 

between us and the Named Insured(s) and any loss payees 

identified on this Declarations Page. This policy does not provide 

coverage to any person or entity not named here.” The italics are 

ours. 

As will appear, this last provision is important to our 

analysis. We call it the no-coverage-for-unnamed-persons clause. 

At oral argument, FAIR Plan’s counsel reported this language is 

unique to its policies. We will return to it.

An additional policy page is headed as follows: 

“California FAIR Plan Association

SCHEDULE OF ADDITIONAL INFORMATION.” 
6

This page again lists “INSURED NAME AND ADDRESS” 

and again lists James M. Talbot and Kimberly A. Talbot and 

their home address. Wexler’s name does not appear. 

The document entitled “Dwelling Property Policy” 

contained a section called “DEFINITIONS.” This section 

contains this definition: “In this policy, ‘you’ and ‘your’ refer to 

the ‘named insured’ shown in the Declarations and the spouse if a 

resident of the same household.” 

The next page of “Dwelling Property Policy,” with our 

italics, made this promise:

“If there is a checkmark next to C - Personal Property 

in the Declarations, the following applies:

“Coverage C – Personal Property 

“We cover personal property usual to the occupancy as 

a dwelling and owned or used by you or members of your 

family residing with you while it is on the Described 

Location. At your request, we will cover personal property 

owned by a guest or household employee while the property 

is on the Described Location.” 

The Talbots’ Declarations page has a check mark 

confirming they had personal property coverage.

Returning to the lawsuit, the trial court sustained 

FAIR Plan’s demurrer to Wexler’s claims, ruling she lacked 

standing to sue the insurer for bad faith. Wexler appealed. 

The Talbots’ claims are not at issue. Indeed, the 

Talbots asked the court to dismiss their complaint without 

prejudice after the trial court barred their daughter’s claim. 

In other words, the Talbots have abandoned their dispute 

with FAIR Plan.
7

II

Wexler lacks standing to sue FAIR Plan for bad faith.

A

We independently review an order sustaining a demurrer. 

We take the facts as pleaded, but we disregard the legal 

conclusions, like whether the Talbots have an insurable interest 

in Wexler’s property in the house. (See Gulf Ins. Co. v. TIG Ins. 

Co. (2001) 86 Cal.App.4th 422, 429 (Gulf).) 

Despite special features, insurance contracts remain 

contracts to which ordinary contract interpretation rules apply. 

The fundamental goal of contract interpretation is to effectuate 

the parties’ intention. Clear and explicit contractual language 

governs. This rule protects not subjective beliefs but objectively 

reasonable expectations. The court must interpret language in 

context, with regard to its intended function in the policy. 

(Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1085 

(Harper).)

B

We summarize some law concerning insurance bad faith.

Every contract, insurance or otherwise, imposes on each 

party a covenant of good faith and fair dealing in its performance 

and enforcement. (Foley v. Interactive Data Corp. (1988) 47 

Cal.3d 654, 683 (Foley).) Good faith logically subsumes fair 

dealing, so it is accurate and less redundant to call this implied 

covenant the duty of good faith.

Because the implied good faith duty is a contract term, 

compensation for its breach has almost always been limited to 

contract rather than tort remedies. (Foley, supra, 47 Cal.3d at p. 

684.) We italicize almost because there is an exception to the 

general rule: insurance contracts. The landmark Foley decision 
8

traced the development of and rationale for this judicial 

exception, which is that, against insurance companies, courts will 

enforce the duty of good faith with tort damages and not just 

contract damages. (See id. at pp. 684–690.) 

These insurance cases were a major departure from 

traditional principles of contract law. (Foley, supra, 47 Cal.3d at 

p. 690.) Our Supreme Court has confined the reach of this 

insurance exception. The Foley decision held, for instance, that 

violations of the good faith duty in the employment context did 

not give rise to tort damages. (Id. at p. 663.) The court again 

fenced in the exception in Cates Construction, Inc. v. Talbot 

Partners (1999) 21 Cal.4th 28, 34–35 (Cates), which denied tort 

recovery to developers for a surety’s breach of the good faith duty 

in a performance bond. 

In developing the insurance exception that plaintiffs could 

enforce the good faith duty in tort, the Supreme Court for a time 

used the rubric of “special relationship.” The idea was that the 

tort duty applied whenever a “special relationship” existed, as 

between an insurer and an insured. (See Foley, supra, 47 Cal.3d 

at pp. 685–691.) Yet the Foley court, when cabining the 

expansion of the insurance exception, quoted critics of the 

“special relationship” rubric. One quoted critic charged the 

“special relationship” rubric is illusory because it is but a label 

and it lacked a principled basis for decision. (Id. at p. 691.) 

Another quoted critic said this rubric fails because it is opaque, 

imprecise, incomplete, and unjustified. (Id. at p. 692.) 

After these rebukes in Foley, the special relationship rubric 

disappeared in the later majority opinion in the Cates case. We 

thus speak no further of special relationships.
9

C

Only one with the right to sue an insurance company for 

contract damages for breach of the insurance policy can also sue 

the insurance company for tort damages for breach of the 

covenant of good faith. Wexler cannot sue for bad faith because 

she had no contractual relationship with FAIR Plan. Wexler was 

not a signatory; she was not an additional insured; and she was 

not a third party beneficiary. We set forth these three separate 

analyses.

1

Wexler was not a signatory to the policy. The policy named 

her parents as the contracting parties. They are the signatories 

and the named insureds. Wexler is neither. Wexler was not a 

party to this contract.

This does not mean Wexler’s things at her parents’ house 

were uninsured. Nor does it mean the insurer gains some unfair 

advantage by collecting a premium to cover these items. They 

were insured—but by Wexler’s parents and for her parents. 

FAIR Plan agrees it is on the hook for covered damage to 

Wexler’s property in her parents’ house. It is on the hook to her 

parents. 

This policy states FAIR Plan will indemnify property 

owned by “members of your family residing with you.” That is a 

benefit Wexler’s parents enjoy. Her parents’ benefit does not 

make Wexler a party to the contract.

Wexler points to additional language in this clause that 

states (with our italics):

“We cover personal property usual to the occupancy as 

a dwelling and owned or used by you or members of your 

family residing with you while it is on the Described 
10

Location. At your request, we will cover personal property 

owned by a guest or household employee while the property 

is on the Described Location.” 

This italicized wording does not aid Wexler. This provision 

presumes “members of your family residing with you” will be in a 

familiar kind of long-term relationship with the named insured. 

Extending coverage to possessions of family members living 

together benefits the policyholder and poses no adverse selection 

or moral hazard problem. (Cf. Davis v. Phoenix Ins. Co. (1896) 

111 Cal. 409, 415–416 (Davis) [example of moral hazard].) 

Shortly we shall take up the topic of moral hazard at greater 

length. The key point is no side has voiced any concern about the 

problem of moral hazard in this case. That will prove significant.

The italicized sentence about guests and employees gave 

the Talbots a beneficial option to gain extended coverage for no 

extra charge. This provision is logical and an advantage to the 

Talbots. It does not assist Wexler.

2

Wexler was not an additional insured person under this 

particular policy. FAIR Plan’s no-coverage-for-unnamed-persons 

clause expressly disclaimed coverage for unnamed people like 

Wexler.

Other types of insurance policies can have different 

provisions. Some policies indeed do expressly name classes of 

people as additional insureds. We give two examples from cases 

Wexler cites.

First, a car insurance policy might define the insureds to be 

the contracting person, relatives of the contracting person, and 

any other person the contracting person allows to drive that car. 

That was the situation, for instance, in the policy in Northwestern 
11

Mutual Insurance Co. v. Farmers’ Insurance Group (1978) 76 

Cal.App.3d 1031, 1038 and footnote 2 (Northwestern). People you 

allow to drive your car—so-called “permissive users”—are 

additional insureds under that sort of policy. 

A second example is Cancino v. Farmers Insurance Group

(1978) 80 Cal.App.3d 335 (Cancino). Once again, a policy 

expressly included additional insureds. Cancino involved an auto 

policy that included unnamed people within its coverage by 

stating “ ‘[i]nsured means (1) the named insured or a relative, (2) 

any other person while occupying an insured motor vehicle . . . .’ ” 

(Id. at p. 337, italics added.) 

The Talbots’ policy was different from these examples. The 

difference is the no-coverage-for-unnamed-persons clause. 

Wexler notes she alleges in her amended complaint that 

she has standing because she “is an express insured under the 

Policy.” The policy attached as an exhibit to her complaint and 

incorporated by reference provides otherwise, however, and the 

policy controls. (See Hoffman v. Smithwoods RV Park, LLC

(2009) 179 Cal.App.4th 390, 400.)

Wexler therefore was not an insured, additional or express.

3

Wexler was not a third party beneficiary of the FAIR Plan 

contract.

California third party beneficiary law begins with Civil 

Code section 1559: “A contract, made expressly for the benefit of 

a third person, may be enforced by him at any time before the 

parties thereto rescind it.” 

Civil Code section 1559 excludes enforcement of a contract 

by persons who benefit from the agreement in only an incidental 

or remote way. (Lucas v. Hamm (1961) 56 Cal.2d 583, 590 
12

[section 1559 serves “to exclude enforcement by persons who are 

only incidentally or remotely benefited”]; Harper, supra, 56 

Cal.App.4th at p. 1087 [“ ‘A third party should not be permitted 

to enforce covenants made not for his benefit, but rather for 

others. He is not a contracting party; his right to performance is 

predicated on the contracting parties’ intent to benefit him.’ ”]; 

see also Hartman Ranch Co. v. Associated Oil Co. (1937) 10 

Cal.2d 232, 244; Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 

944; accord, Coleman v. Gulf Ins. Group (1986) 41 Cal.3d 782, 

794–795.)

Most recently our Supreme Court grappled with the law of 

third party beneficiaries in Goonewardene v. ADP, LLC (2019) 6 

Cal.5th 817, 826–832 (Goonewardene). Writing for a unanimous 

court, Chief Justice Cantil-Sakauye upheld the trial court’s order 

sustaining a payroll company’s demurrer to an employee’s wage

and hour suit against her employer. The employee had named 

the payroll company, which performed payroll services for the 

employer. The Goonewardene decision ruled the employee was 

not a third party beneficiary of the contract between the 

employer and the payroll company. (Id. at pp. 832–834.)

The Goonewardene decision noted courts had “struggled” to 

formulate the doctrine of third party beneficiaries. 

(Goonewardene, supra, 6 Cal.5th at p. 828.) Indeed, few areas of 

contract law “ ‘have consistently raised more thorny theoretical 

and practical difficulties for lawyers, judges, and scholars than 

the rights of nonparties to enforce contractual promises.’ ” (Ibid.,

quoting Crawford, Chief Justice Wright and the Third Party 

Beneficiary Problem (1977) 4 Hastings Const. L.Q. 769, 771–772.)

For doctrinal assistance, the Goonewardene court turned to 

the pathbreaking article by the esteemed contract law scholar 
13

Professor Melvin Eisenberg. (Goonewardene, supra, 6 Cal.5th at 

pp. 828, 830–832, citing Eisenberg, Third-Party Beneficiaries

(1992) 92 Colum. L.Rev. 1358.) 

The court set forth a three-part test. The test is this: 

carefully examine the express provisions of the contract at issue, 

as well as the relevant circumstances of contract formation, to 

determine not only (1) whether the third party would benefit 

from the contract, but also (2) whether a motivating purpose of 

the contracting parties was to provide a benefit to the third party, 

and (3) whether permitting a third party to bring its own breach 

of contract action against a contracting party would be consistent 

with the objectives of the contract and the reasonable 

expectations of the contracting parties. All three elements must 

be satisfied to permit the third party action to go forward. 

(Goonewardene, supra, 6 Cal.5th at p. 830.)

Under this governing formulation, there are two reasons 

why Wexler is not a third party beneficiary of the contract 

between FAIR Plan and the Talbots.

First, Wexler cannot show a motivating purpose of the 

contracting parties was to benefit her. (See Goonewardene, 

supra, 6 Cal.5th at p. 830.) Knowing a benefit may flow to 

Wexler is not enough. (Ibid.) The contracting parties were her 

parents and the insurance company. If a motivating purpose of 

the contracting parties had been to benefit Wexler, the policy 

would not have included the no-coverage-for-unnamed-persons 

clause or it would have named Wexler. This clause expressly 

negates what Wexler seeks. 

Second, permitting a bad faith action by Wexler also is 

unnecessary to effectuate the insurance contract’s objectives. The 

Talbots can sue—indeed, here did sue—regarding FAIR Plan’s 
14

handling of the family’s insurance claim, a claim Wexler alleges, 

and FAIR Plan acknowledges, does cover Wexler’s personal 

property. (See Goonewardene, supra, 6 Cal.5th at pp. 830 & 836 

[no third party right to enforce contract if unnecessary to 

effectuate the contract’s objectives].) As mentioned, FAIR Plan 

agrees it is on the hook to Wexler’s parents for covered damage to 

Wexler’s property. It agrees it must uphold its promise to the 

Talbots to pay for this damage. If Wexler has any real dispute, it 

is with her parents and fellow plaintiffs, the Talbots. Yet the 

same lawyer represents Wexler and the Talbots, and the papers 

contain no hint of acrimony within this family.

Wexler is not a third party beneficiary. Even if we had 

doubts regarding Wexler’s status—which we do not—we would 

resolve them against Wexler. (See Shaolian v. Safeco Ins. 

Co. (1999) 71 Cal.App.4th 268, 275 (Shaolian) [courts resolve 

doubts against the existence of a third party beneficiary].) 

In sum, Wexler cannot sue for bad faith because she was 

not a named signatory, not an additional insured, and not a third 

party beneficiary. She lacked a contractual relationship with 

FAIR Plan and so lacked standing.

C

Wexler claims she must be allowed to proceed because 

the policy is ambiguous, and we are to construe ambiguities 

against the insurer: on one hand, the policy extends 

coverage to her possessions in her parents’ home, and the 

Declarations page confirms the personal property coverage; 

on the other hand, that same page contains the no-coveragefor-unnamed-persons clause. 

These provisions are unambiguous. They afford coverage to 

the Talbots—and only the Talbots—for the specified contents in 
15

their home, including contents owned or used by family members 

residing there. The no-coverage-for-unnamed-persons clause 

does not absolve FAIR Plan of its duty to cover this property.

D

Wexler incorrectly claims precedent supports her. We 

survey her six citations. 

1

Hatchwell v. Blue Shield of California (1988) 198 

Cal.App.3d 1027, 1029 held a spouse who was not a party to an 

insurance contract lacked standing to bring a bad faith action for 

wrongful denial of benefits to her insured husband. This holding 

supports FAIR Plan, not Wexler.

2

Northwestern, supra, 76 Cal.App.3d at page 1038 and 

footnote 2 concerned an auto policy that included the disputed 

person as an additional insured because that person was both a 

permissive user and a relative—two statuses that were material 

in that case. By contrast, the no-coverage-for-unnamed-persons 

clause here excludes additional insureds. The Northwestern

holding is irrelevant.

3

Cancino, supra, 80 Cal.App.3d 335 concerned an insurance 

policy that expressly identified a category of additional insureds. 

As noted, the Cancino policy covered “any other person while 

occupying an insured motor vehicle.” (Id. at p. 337, italics added.) 

The no-coverage-for-unnamed-persons clause in this case 

distinguishes it from the Cancino policy. Cancino’s holding does 

not apply here.

To rephrase this point, Cancino “recognized a distinction 

between the ‘parties’ to the insurance contract—who will 
16

generally also be named insureds—and ‘insureds’ who are neither 

parties to the insurance contract nor specifically named therein. 

A person can be deemed an ‘insured’ by virtue of fitting into an 

expressly defined category of those for whose benefit the policy 

was created. This distinction does not assist [Wexler].” (Seretti 

v. Superior Nat. Ins. Co. (1999) 71 Cal.App.4th 920, 928–929 

(Seretti).) 

Wexler was neither a party to the insurance contract nor 

an additional insured. Cancino does not support Wexler’s cause.

4

Harper, supra, 56 Cal.App.4th 1079 concerned a 

fundamentally different insurance policy from the one here. 

Harper involved a broad commercial policy that insured generally 

against liability, not a limited owner-occupied dwelling policy of 

last resort that insured against only fire, lightning, internal 

explosions, and, to a limited degree, smoke. (Id. at p. 1083.)

The Harper policy provided liability protection for a 

corporation called L.A. City Tower, Inc. Geneva Harper slipped 

and fell outside L.A. City Tower. Harper sued L.A. City Tower, 

which prevailed because Harper could not establish it reasonably 

could have discovered the dangerous condition. Harper then sued 

Wausau Insurance Company, a subsidiary of which sold L.A. City 

Tower insurance extending medical coverage to people who 

suffered bodily injury “[o]n ways next to premises you own or rent 

. . . . We [Wausau] will make these payments regardless of fault.” 

The only exclusion from this coverage was people employed by or 

connected to L.A. City Tower. (Harper, supra, 56 Cal.App.4th at 

p. 1084, italics added; id. at pp. 1082–1084.) 

The Harper court confronted an open issue in California 

where the authority from other jurisdictions was split. (Harper, 
17

supra, 56 Cal.App.4th at p. 1089.) The difficulty that divided the 

authorities was that an injured person (there, Harper) was 

asking the courts to find the insured’s liability insurer liable 

when the insured itself was not liable. This might seem 

paradoxical. But the Harper court quoted an insurance law 

treatise explaining the purpose of this particular policy language 

was to create a fund so injured people could recover. (Id. at p. 

1090.) This same treatise also noted, however, that insurers 

could limit coverage so as to make it inapplicable to activities 

away from the premises or as to persons not on the premises, if 

not injured by an act of the insured. (Shaolian, supra, 71 

Cal.App.4th at p. 273.) So the result would depend on how the 

insurance policy was written.

Here the insurance policy was written in a decisively 

different way from the Harper policy. The Harper policy 

extended medical payment coverage to people injured while 

walking by the insured’s premises, without regard to whether the 

insured was to blame. That coverage was broad. FAIR Plan’s 

coverage, by contrast, is narrow. It has no liability or medical 

payments coverage. And coverage is limited to people named in 

the policy. Wexler is not named. Wexler is not covered.

FAIR Plan’s slender coverage makes sense. By design, 

FAIR Plan is an insurer of last resort. To make basic insurance 

available and affordable to homeowners in high risk areas, FAIR 

Plan is barebones. 

In sum, the Harper holding does not support Wexler 

because the policy here is nothing like the one in Harper.

5

In a string cite in a footnote and without further comment, 

Wexler cites San Diego Housing Commission v. Industrial 
18

Indemnity Co. (1998) 68 Cal.App.4th 526, which held a bad faith 

cause of action should not have gone to the jury. (Id. at pp. 532, 

544–545.) This holding is not germane.

6

Wexler cites a provision of a treatise, which in turn cites 

one case. This provision reads as follows:

“Privity of contract with the insurer is essential to an 

implied covenant action against the insurer. Thus, persons 

entitled to benefits under a policy have standing to sue for bad 

faith if those benefits are wrongfully withheld. This includes the 

contracting parties (persons named as insureds) as well as others 

entitled to benefits as ‘additional insureds’ or as express 

beneficiaries under the policy. But persons not entitled to 

benefits under a policy cannot maintain an implied covenant 

action . . . .” (Croskey et al., Cal. Practice Guide: Insurance 

Litigation (The Rutter Group 2020) ¶ 12:55 (Rutter Group), citing 

Seretti, supra, 71 Cal.App.4th at p. 929.) 

This treatise provision supports FAIR Plan. When the 

treatise states persons entitled to benefits have standing to sue, 

those persons are the Talbots. The treatise continues that the 

group with standing “includes the contracting parties (persons 

named as insureds) as well as others entitled to benefits as 

‘additional insureds’ or as express beneficiaries under the policy.” 

(Rutter Group, supra, at ¶ 12:55.) As we have explained, Wexler 

is neither an additional insured nor a third party beneficiary. 

Wexler lacks standing. 

Additionally, the cited Seretti holding went the wrong way 

for Wexler. (See Seretti, supra, 71 Cal.App.4th at p. 931 [“In 

accordance with the overwhelming weight of authority, we affirm 

the trial court’s ruling on appellants’ lack of standing as 
19

shareholders to assert a claim against the corporation’s insurer”

(italics added)].) 

In logic as well as holding, Seretti is contrary to Wexler’s 

case. The logic of the Seretti opinion was that the plaintiffs lost 

because they “were not parties to the insurance contract; they 

were not specifically named insureds; and to the extent they fit 

into the general category of those for whom the policy was 

created to benefit—employees, officers, and directors of Post 

Sound—they were specifically excluded.” (Seretti, supra, 71 

Cal.App.4th at p. 929, italics added.) The no-coverage-forunnamed-persons clause specifically excluded Wexler from the 

Talbots’ policy in precisely the same way.

E

Wexler’s complaint pleaded her parents had no insurable 

interest in the property she had in their house. We disregard 

legal conclusions in a complaint; they are just a lawyer’s 

arguments. (See Gulf, supra, 86 Cal.App.4th at p. 429.) Whether 

an interest is insurable is a question of law. (See Ins. Code, § 281 

[giving legal definition of insurable interest].)

Wexler’s position on insurable interest is all wrong. She 

urges an unprecedented and incorrect expansion of the insurable 

interest doctrine, which is a tool insurance companies use to 

invalidate policies and to avoid paying claims. A sound view of 

this legal doctrine reveals the Talbots obviously had an insurable 

interest in Wexler’s property in their home. It is perverse for 

Wexler as a plaintiff to suggest otherwise, for expanding this 

doctrine would hurt claimants like her to the advantage of 

insurance companies everywhere. 

Wexler cites no case squarely on point. The California 

precedents we have found go against Wexler. (See, e.g., State 
20

Farm Mutual Automobile Ins. Co. v. Price (1966) 242 Cal.App.2d 

619, 624 [mother had insurable interest in son’s car]; Osborne v. 

Security Ins. Co. (1957) 155 Cal.App.2d 201, 204–206 (Osborne)

[same].)

Many decisions from other jurisdictions also go against 

Wexler. (See, e.g., Georgia Mutual Ins. Co. v. Nix (Ga.Ct.App. 

1966) 113 Ga.App. 735, 737 [149 S.E.2d 494, 496] [father has 

insurable interest in son’s car]; MemberSelect Ins. Co. v. Flesher

(Mich.Ct.App. 2020) 332 Mich.App. 216, __ [__ N.W.2d __, __] 

[2020 WL 1968631 at *6] (MemberSelect) [parent’s interest in 

adult child’s welfare creates an insurable interest]; Hedrick v. 

Kelley (Mo.Ct.App. 1987) 734 S.W.2d 529, 532–533 (Hedrick) 

[rejecting insurer’s insurable interest argument where mother 

and daughter lived in same house]; Stauder v. Associated General

Fire Co. (Ohio Ct.App. 1957) 105 Ohio App. 105, 108–110 [151 

N.E.2d 583, 585–586] [father had an insurable interest in 

children’s clothing]; cf. Central Manufacturers’ Mutual Ins. Co. v. 

Friedman (Ark. 1948) 213 Ark. 9, 11–14 [209 S.W.2d 102, 103–

104] [father prevails against insurance company concerning loss 

of son’s property]; Balzer v. Globe Indemnity Co. (N.Y. 1924) 206 

N.Y.S. 777, 778–779 [211 A.D. 98, 99–101] [son recovers on his 

policy for theft of mother’s jewelry]; but see Sayah v. 

Metropolitan Property & Casualty Ins. Co. (Neb. 2007) 273 Neb. 

744, 747–749 [733 N.W.2d 192, 196] [parents had no insurable 

interest in son’s car].)

None of these holdings is on all fours. We therefore look to 

the purpose of the doctrine to guide our thinking.

At the outset, we summarize our analysis of statutory 

purpose. The insurable interest doctrine aims to suppress 

gambling and to curb moral hazard by refusing to enforce 
21

insurance policies that are contrary to public policy. But nothing 

about the circumstances of this case suggests that the Talbots 

were gambling: that they bought the FAIR Plan policy to 

increase their personal risk, the way a gambler does when 

chancing a bet in Las Vegas. Nor is there a reason to fear moral 

hazard. The outlandish notion the Talbots might burn their 

daughter’s home-stored property to collect an insurance payoff 

has no support. Lacking any relevance in purpose, then, the 

insurable interest doctrine does not invalidate the Talbots’ 

insurance contract as contrary to public policy. To the contrary, 

California public policy strongly supports this kind of insurance 

for California families living in areas exposed to wildfire. In sum, 

the insurable interest doctrine entirely favors the trial court 

result, which we affirm.

We now explain more fully. In doing so, we inspect the 

foundations of a doctrine one scholar calls “erratic, ambiguous, 

and inconsistent.” (Loshin, Insurance Law’s Hapless Busybody: 

A Case Against the Insurable Interest Requirement (2007) 117 

Yale. L.J. 474, 487 (Hapless Busybody).) We seek, not a new 

understanding, but knowledge of the original basis for the 

doctrine and thus of the legislative intent behind our old 

California statute.

The insurable interest doctrine is venerable: its taproot 

goes deep into the earth of English common law. The place to 

start is 18th century London. 

In Georgian England, people needed no connection to some 

ship or celebrity to buy insurance on ships or celebrities. This 

common law freedom led to unadorned gambling. Imagine, for 

instance, buying life insurance on Jane Austen or Henry Fielding, 

during their lifetimes, just as a lark. Or perhaps it would be fun 
22

to buy an accident policy on some ocean vessel. In revulsion, 

Parliament passed statutes in 1746 and 1774 to outlaw “gaming 

or wagering” of this sort. Thus was born the doctrine of insurable 

interest. (Hapless Busybody, supra, at pp. 479–480; cf. Amory v. 

Gilman (Mass. 1806) 2 Mass. 1, 3–6 [describing common law and 

Parliament’s reaction].) 

Long ago, the United States imported the insurable 

interest doctrine from England. Massachusetts took this step in 

1815. (See Lord v. Dall (Mass. 1815) 12 Mass. 115.) Pre-Erie, 

the Supreme Court of the United States also adopted and 

continued developing the doctrine as federal common law. (E.g., 

Grigsby v. Russell (1911) 222 U.S. 149, 155, 156, 157 (Grigsby) 

(Holmes, J.) [referring to English law].) 

California passed its version of the insurable interest 

doctrine in 1872 by adding section 2546 to the Civil Code, which 

our Legislature recodified in 1935 as section 281 of the Insurance 

Code. (See Stats. 1935, ch. 145, p. 503.)

So the source of law for our decision today is section 281 of 

the Insurance Code, which is a century and a half old.

This California statute defines insurable interest: “[e]very 

interest in property, or any relation thereto, or liability in respect 

thereof, of such a nature that a contemplated peril might directly 

damnify the insured, is an insurable interest.” (Ins. Code, § 281, 

italics added.)

A dictionary definition of “damnify” is “to cause loss or 

damage to.” (The Random House Dictionary of the English 

Language (2d ed. unabridged 1987) p. 504.) What kind of loss 

counts? The law of insurance can comprehend what every parent 

understands. (Cf. MemberSelect, supra, 2020 WL 1968631 at *5–
23

*6 [“the interest of a parent in an adult child’s welfare” means 

the child’s “loss” creates an insurable interest for the parent].)

When construing this statute, our job is to effectuate its 

purpose. (E.g., Apple Inc. v. Superior Court (2013) 56 Cal.4th 

128, 135.) “The dominant mode of statutory interpretation over 

the past century has been one premised on the view that 

legislation is a purposive act, and judges should construe statutes 

to execute that legislative purpose. This approach finds lineage 

in the sixteenth-century English decision Heydon’s Case, which 

summons judges to interpret statutes in a way ‘as shall suppress 

the mischief, and advance the remedy.’ ” (Katzmann, Judging 

Statutes (2014) p. 31, italics added.) 

The insurable interest doctrine aims to suppress two 

mischiefs: gambling and moral hazard. Gambling has a common 

meaning; it needs no further explanation at the moment, 

although we do return to it. Moral hazard is more arcane; we 

define it shortly. 

We know about these twin goals from the old case law on 

insurable interests. The Supreme Court of the United States, in 

its first insurable interest decision, wrote that, for all valid life 

insurance policies, “there must be a reasonable ground, founded 

upon the relations of the parties to each other, either pecuniary 

or of blood or affinity, to expect some benefit or advantage from 

the continuance of the life of the assured. Otherwise the contract 

is a mere wager, by which the party taking the policy is directly 

interested in the early death of the assured.” (Warnock v. Davis

(1882) 104 U.S. 775, 779, italics added.) 

This final sentence identifies the twin goals. Warnock’s 

“mere wager” language condemned gambling, while its fear of a 
24

“direct” interest favoring “the early death of the assured” was 

aversion for moral hazard.

Moral hazard is the incentive that insurance can give an 

insured to increase risky or destructive behavior covered by the 

insurance. (E.g., May Dept. Stores Co. v. Federal Ins. Co. (7th 

Cir. 2002) 305 F.3d 597, 601 (Posner, J.) [abrogated on other 

grounds by Americold Realty Trust v. ConAgra Foods, Inc. (2016)

__ U.S. __ [136 S.Ct. 1012], as recognized in RTP LLC v. ORIX 

Real Estate Capital, Inc. (7th Cir. 2016) 827 F.3d 689, 691–692].) 

Economists began writing about “moral hazard” in the 

1960s, and this usage has gained currency since then. (Baker, 

On the Genealogy of Moral Hazard (1996) 75 Tex. L.Rev. 237, 

237–238, 267–268, 272–275.) The phrase is useful here; it 

precisely encapsulates the relevant meaning.

A classic illustration of moral hazard is the novel Double 

Indemnity, first published in 1936. James M. Cain painted this 

hazard in his Los Angeles noir masterpiece: the corrupt 

insurance salesman falls for an unhappy wife, and the two plot 

against her unloved and well-insured husband. Cain wrote for 

the ages: “there’s many a man walking around today that’s 

worth more to his loved ones dead than alive, only he don’t know 

it yet.” (Cain, Double Indemnity (Vintage Books 1978) p. 11.) 

The malign incentive of moral hazard is not just fiction. 

The cases prove it. (E.g., Ramey v. Carolina Life Ins. Co. (S.C. 

1964) 244 S.C. 16 [135 S.E.2d 362] (Ramey) [wife insures 

husband’s life without his knowledge and then gives him 

arsenic]; cf. O’Hara v. Carpenter (Mich. 1871) 23 Mich. 410, 415 

[“all reasonable men would concede that it was indiscreet and 

dangerous to contract with him on a basis which might quiet his 
25

vigilance and bribe his integrity by such pecuniary 

considerations, as might incline him to desire a loss to occur”].) 

Thus the insurable interest rule: no insurance policy can 

be allowed to create a profitable temptation to commit murder or 

other wrongdoing. A contrary rule would open “ ‘ “a wide door by 

which a constant temptation is created to commit for profit the 

most atrocious of crimes.” ’ ” (Ramey, supra, 244 S.C. at p. 27 

[135 S.E.2d at p. 367], italics omitted.) 

The logic of this rule is national. Together with sister 

states, California subscribes to it. (See Davis, supra, 111 Cal. at 

p. 416 [“To permit such a recovery would greatly tend to the 

destruction of like property under like circumstances, and open 

the door and tempt men to enter therein for fraudulent 

purposes.”].)

With his signature style and his penetrating insight, 

Justice Holmes likewise drove home these two goals: suppress 

moral hazard and discourage wagering. Holmes wrote that “[a] 

contract of insurance upon a life in which the insured has no 

interest is a pure wager that gives the insured a sinister counter 

interest in having the life come to an end.” (Grigsby, supra, 222 

U.S. at p. 154, italics added.) 

Holmes elaborated.

Concerning moral hazard, Holmes explained the evil of 

inducing a potential murderer to collect life insurance by taking 

someone else’s life. To allow a recovery like that “may prove a 

sufficient motive for crime [that] is greatly enhanced if the whole 

world of the unscrupulous are free to bet on what life they 

choose.” (Grigsby, supra, 222 U.S. at p. 155.)

Concerning gambling, Holmes observed English authorities 

created the doctrine because “such wagers came to be regarded as 
26

a mischievous kind of gaming.” (Grigsby, supra, 222 U.S. at p. 

156.) 

Gambling suppression was and remains a traditional 

objective of the insurable interest doctrine in California. (See 

Osborne, supra, 155 Cal.App.2d at p. 205 [“The object to be 

obtained by this rule, the reason for its being, is avoidance of 

wagering contracts.”].) 

In sum, twin goals steer the insurable interest doctrine. To 

repress gambling and to arrest moral hazard, the insured must 

have an insurable interest in the object of the insurance 

contract—or else the insurable interest doctrine bars enforcing 

the contract as contrary to public policy.

This fundamental understanding of the insurable interest 

doctrine makes it plain the Talbots had an insurable interest in 

Wexler’s property stored in their house while Wexler lived there 

with them. 

The Talbots were not gambling. They did not buy the FAIR 

Plan policy as some casino opportunity, the way someone in 1956 

might have tried to buy life insurance on Elvis right after his big 

Ed Sullivan show. Rather, the Talbots shared the quotidian and 

legitimate insurance interest of tapping into a pool and using the 

law of large numbers to reduce personal risk. The transaction 

beneficially reduced social risk as a whole. (See Posner & Weyl, 

An FDA for Financial Innovation: Applying the Insurable 

Interest Doctrine to Twenty-First-Century Financial Markets

(2013) 107 Nw. U. L.Rev. 1307, 1308–1319, 1322–1323.) This 

insurance policy was a social good, not a social bad.

Neither did the Talbots’ policy create moral hazard. The 

Talbots did not propose to FAIR Plan that it should extend 

coverage for their daughter’s belongings. This was FAIR Plan’s 
27

idea. It was on FAIR Plan’s form policy. No one suggests the 

Talbots bought this policy to game the system in the hopes of 

destroying their daughter’s things for an insurance check. (See 

Hedrick, supra, 734 S.W.2d at p. 533 [the term insurable interest 

should be broadly construed when close family members reside in 

the same house and the policy was obtained in good faith].)

There is irony to Wexler’s misunderstanding of the 

insurable interest doctrine. The doctrine is a defense to benefit 

insurance companies against policyholders’ claims. (Ins. Code, § 

280 [“If the insured has no insurable interest, the contract is 

void.”]; Jenkins v. Hill (1939) 35 Cal.App.2d 521, 524; see also 

Countrywide Home Loans, Inc. v. Tutungi (1998) 66 Cal.App.4th 

727, 732; Rutter Group, supra, at ¶ 6:202 [the insurer is the only 

party that may challenge whether the insured has an insurable 

interest].) 

The effect of Wexler’s attempted expansion, if successful, 

would have been to disadvantage policyholders in other disputes. 

Insurance companies would gain. Wexler’s position on insurable 

interest is paradoxical. It is also incorrect as a matter of law.

Wexler cites the Davis case, which concerned a plaintiff 

who possessed property under a contract for which he had in part 

paid the purchase price, and which upon his completion of the 

contract would entitle him to a conveyance of the legal title. This 

enjoyment and expenditure gave him an insurable interest in the 

property. (Davis, supra, 111 Cal. at p. 414.) It is not apparent 

how this holding pertains to this case.

Wexler also cites Burns v. California FAIR Plan 

Association (2007) 152 Cal.App.4th 646, 654, which held the 

holder of a life estate and the holder of the remainder interest 

could not both recover the full value of the insured house that 
28

burned down. That would be double recovery. Each holder 

indeed did have an insurable interest in the house. (Id. at p. 

652.) But that conclusion did not imply the insurers were liable 

for more than the full value of the house: “the nature of 

insurance does not provide for recovery in excess of the value of 

the property destroyed where there is but one loss.” (Id. at p. 

653.) This case has no issue about double recovery. The Burns

holding has no bearing on this appeal.

Wexler cites another holding with no relation to this case, 

California Food Service Corp. v. Great American Insurance Co.

(1982) 130 Cal.App.3d 892, 896–897. The decision held a binding 

letter of intent gave a buyer an insurable interest in restaurant 

premises damaged by fire.

In conclusion, Wexler lacks standing to sue FAIR Plan for 

bad faith.

III

Wexler bore the burden of showing it is reasonably possible 

she can amend her complaint to state a cause of action. (Blank v. 

Kirwan (1985) 39 Cal.3d 311, 318.) Wexler did not brief this 

issue on appeal and thereby forfeited it. And in the trial court, 

Wexler simply stated she should be afforded leave to amend 

without making any showing on this point. The trial court 

properly sustained the demurrer to Wexler’s cause of action 

without leave to amend.
29

DISPOSITION

We affirm the judgment and award costs to California 

FAIR Plan Association.

 WILEY, J.

I CONCUR: 

 GRIMES, Acting P. J. 
1

Stratton, J., Dissenting.

Everyone check your homeowners insurance policy. Be 

especially vigilant if you live in the quarter of California 

households which are multigenerational, or are one of the 40

percent of California parents whose adult children have moved 

back home. Those other adults in your household have probably 

accumulated personal property of their own. According to the 

majority, if you, as the homeowner and a named policyholder, try 

to protect your family members by paying a premium for a policy 

that purports to provide coverage for the personal property of 

resident family members, you are benefitting the insurance 

company, not your family members. If your family member’s 

personal property is damaged, you will not be able to recover for 

that damage because you do not have an ownership interest in 

that property. Your family member will not be able to recover 

because the insurance company, which did not request or require 

you to identify the family member by name, will be able to deny 

coverage because you did not identify the family member by 

name. The insurance company gets to keep your premiums, 

which is a pretty sweet deal for the insurer but not for you or 

your family member.

Here the Talbots and their adult daughter Brooke Wexler 

alleged the Talbots purchased a fire insurance policy that 

expressly insured against damage to and loss of possessions of 

other resident family members. Wexler was residing at the 

property when the Woolsey fire blew through the neighborhood, 

causing smoke damage to the Talbots’ and Wexler’s possessions.
2

The Talbots and Wexler each made claims against the 

policy for damage to their respective possessions.1 Insurer FAIR

Plan disallowed both claims. The First Amended Complaint 

(FAC) alleges FAIR Plan denied their claims for smoke damage 

based on the opinion of defendant SGD, an outside adjusting firm 

which is neither a licensed contractor nor qualified to determine 

the extent of fire damage to a California dwelling or the 

appropriate method of repairs in the event of fire damage.

As a result, the Talbots and Wexler sued FAIR Plan and

SGD, alleging, among other things, breach of the covenant of 

good faith and fair dealing. The FAC alleges that Wexler had an 

insurable interest in personal property which was damaged or 

destroyed by the Woolsey fire. It also alleged the Talbots had no 

insurable interest in Wexler’s damaged personal property. The 

FAC alleges “Wexler is an express insured under the Policy and 

as such has standing to sue FAIR Plan for breach of the implied 

covenant of good faith and fair dealing.”

The majority allows the Talbots to proceed with their cause 

of action against the insurer, but bars Wexler from proceeding 

with hers because she is neither an insured nor a beneficiary of 

the policy. In effect, the majority says, “Don’t worry, the Talbots 

can enforce the policy on behalf of Wexler.” To say Wexler is 

neither an insured nor a beneficiary of the policy ignores the 

express language of the insurance policy and turns insurance law 

on its head.

First, the majority states the policy expressly limits 

coverage to the named insureds only. I disagree. The policy 

1 The parties have not challenged Wexler’s capacity to sue as 

an adult.
3

expressly provides coverage to resident family members who have 

personal property located in the premises which are the subject of 

the policy. The majority relies on the Declarations page to 

support its mistaken conclusion that the policy itself limits 

coverage. Preliminarily, the majority is correct that at the 

beginning of the Declarations page, the Policy lists the named 

insureds: James M. Talbot and Kimberly A. Talbot. At the end 

of the Declarations page is this statement: “This policy is a 

contract between us and the Named Insured(s) and any loss 

payees identified on this Declarations Page. This policy does not 

provide coverage to any person or entity not named here.”

The Declarations page, which displays a chart for 

“Coverages, Limits, Perils and Premiums.” Section C under 

“Selected Coverages” sets a limit of $456,000 for coverage of 

personal property. There is also a box for a checkmark next to 

each category of items eligible for coverage. The box next to 

personal property is checked. Thus the Declarations page has 

expanded the homeowner’s coverage to include personal property 

and has done so before the disclaimer at the end of the page.

The scope of covered personal property is defined in the 

policy itself (or, as FAIR Plan entitled it, the “Agreement”), which 

follows the Declarations page. Under “Agreement,” it states, “We 

will provide the insurance described in this policy in return for 

the premium and compliance with all applicable provisions of this 

policy.” It continues, “If there is a checkmark next to C-Personal 

Property in the Declarations, the following applies: We cover 

personal property usual to the occupancy as a dwelling and 

owned or used by you or members of your family residing with 

you while it is on the Described Location. At your request, we 
4

will cover personal property owned by a guest or household 

employee while the property is on the Described Location.”

Under long-standing California law, “A person can be 

deemed an ‘insured’ by virtue of fitting into an expressly defined 

category of those for whose benefit the policy was created.” 

(Seretti v. Superior Nat. Ins. Co. (1999) 71 Cal.App.4th 920, 

928-929, relying on Cancino v. Farmers Ins. Grp. (1978) 

80 Cal.App.3d 335.) The Talbots’ policy provision contains just 

such an express category of persons who benefit from the policy—

resident family members with personal property on the 

premises—and Wexler is just such a person.

The majority nevertheless holds that the disclaimer of 

coverage at the end of the Declarations page trumps expansion of 

coverage on the same page and requires that a resident family 

member be identified by name to be covered for the loss of her 

personal property. I disagree. At most it creates an ambiguity. 

When the Declarations page does not purport to define or set 

forth the operative terms of a policy provision, “any ambiguity ‘is 

resolved by’ the terms of the policy.” (Hervey v. Mercury Casualty

Co. (2010) 185 Cal.App.4th 954, 965; accord George v. Automobile

Club of Southern California (2011) 201 Cal.App.4th 1112, 1129.)2 

Thus, if the bare use of the phrase “personal property” on the 

Declarations page creates an ambiguity about whose personal 

property is covered, it is resolved by the terms of the policy itself, 

2 More generally, ambiguities are to be resolved against the 

insurer. “The ‘tie-breaker’ rule of construction against the 

insurer stems from the recognition that the insurer generally 

drafted the policy and received premiums to provide the agreed 

protection. (Minkler v. Safeco Ins. Co. of America (2010) 

49 Cal.4th 315, 321.)
5

which expressly provides coverage for resident family members 

who have personal property on the premises. Therefore, I would 

hold Wexler is an insured for purposes of personal property 

coverage.

The majority is unconcerned with Wexler’s inability to 

assert her own interests because it mistakenly believes that the 

Talbots can recover on behalf of Wexler. The Talbots cannot 

make a claim to recover the value of Wexler’s property unless 

they suffered a pecuniary loss because of the damage. The FAC 

alleges they have no insurable interest in Wexler’s property.3 It 

is bedrock California insurance law that “No person may recover 

on a policy of insurance unless that person has an insurable 

interest in the property insured.” (California Food Service Corp. 

v. Great American Ins. Co. (1982) 130 Cal.App.3d 892, 897.) 

Indeed, our Insurance Code provides: “If the insured has no 

insurable interest, the contract is void.” (Ins. Code, § 280.) The 

3 Notably the majority calls this allegation a “legal 

conclusion” it can ignore. If the FAC had quoted the statutory 

definition of “insurable interest” set out in Insurance Code 

section 281 (“Every interest in property, or any relation thereto, 

or liability in respect thereof, of such a nature that a 

contemplated peril might directly damnify the insured, is an 

insurable interest.”), would that have been sufficient? It sounds 

like the majority wants the FAC to restate in plain language 

what insurable interest means—to wit, the insured had an 

ownership interest in the property, damage to which resulted in a 

direct and certain pecuniary loss. (Alexander v. Security-First 

Nat. Bank of Los Angeles (1936) 7 Cal.2d 718; Burns v. California 

FAIR Plan Assn. (2007) 152 Cal.App.4th 646, 651.) If that is a 

real problem, Wexler should be given an opportunity to amend 

her complaint.
6

Code provides further that the parties cannot agree otherwise: 

“Every stipulation in a policy of insurance for the payment of loss 

whether the person insured has or has not any interest in the 

property insured, or that the policy shall be received as proof of 

such interest, is void.” (Ins. Code, § 287.) There is nothing in the 

FAC to support the majority’s belief that Wexler’s personal 

property is “family property” and so the Talbots can recover for 

its loss. To analyze around the concept of insurable interest is 

not only strained, but it ignores a keystone of California 

insurance law. The current definition of insurable interest is 

clear and does not turn on the insured’s intent. Nor can it be 

reasonably understood to protect only the insurer. As the 

majority acknowledges by way of example, the ability to insure 

against the death of another person can put that person in 

danger of being killed for insurance proceeds.

In sum, FAIR Plan has charged the Talbots a premium for 

personal property coverage for family members which the Talbots 

cannot pursue because they lack an insurable interest; it then 

has argued that the owner of the personal property cannot seek 

recovery herself. The majority sees no problem with this. I do. 

(See Ins. Code, § 790.03, subd. (h)(1) [an unfair business practice 

is “Misrepresenting to claimants pertinent facts or insurance 

policy provisions relating to any coverages at issue.”].) That 

FAIR Plan may have told the Talbots to read the entire policy is 

not a substitute for explaining that the disclaimer at the end of 

the Declarations page absolves it of coverage expressly provided 

for in the policy itself. (See Haynes v. Farmers Ins. Exchange

(2004) 32 Cal.4th 1198, 1211 [“ ‘Precision is not enough. 

Understandability is also required.’ ”].)
7

Nevertheless, if Wexler is not an insured, she is a third 

party beneficiary of the contract. The majority’s second holding 

that Wexler did not satisfy the three-factor test for determining 

whether a party is a third party contract beneficiary is too 

narrow. Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817

(Goonewardene) is our Supreme Court’s most recent explanation 

of the third-party beneficiary doctrine. There are still three 

elements to the doctrine: “(1) whether the third party would in 

fact benefit from the contract, . . . (2) whether a motivating 

purpose of the contracting parties was to provide a benefit to the 

third party, and (3) whether permitting a third party to bring its 

own breach of contract action against a contracting party is 

consistent with the objectives of the contract and the reasonable 

expectations of the contracting parties.” (Id. at p. 830.)

It is indisputable Wexler would benefit from the contract 

under the allegations of the FAC. She would receive recompense 

for the damage to her property. As to the second factor, 

“motivating purpose” is a new term, but the Goodewardene Court 

explains that “this opinion uses the term ‘motivating purpose’ in 

its iteration of this element to clarify that the contracting parties 

must have a motivating purpose to benefit the third party, and 

not simply knowledge that a benefit to the third party may follow 

from the contract. To avoid any possible confusion, however, we 

emphasize that our intent-to-benefit caselaw remains pertinent 

in applying this element of the third party beneficiary doctrine.” 

(Goodewardene, supra, 6 Cal.5th at p. 830.)

One of the cases cited with approval in Goodewardene on 

the intent-to-benefit standard is Murphy v. Allstate Ins. Co. 

(1976) 17 Cal.3d 937. This case is useful as it explains: “A third 

party beneficiary may enforce a contract expressly made for his 
8

benefit. (Civ. Code, § 1559.) And although the contract may not 

have been made to benefit him alone, he may enforce those 

promises directly made for him.” (Murphy, at p. 943.) This 

certainly suggests that resident family member coverage is not 

voided just because its addition to the contract may not have 

been the primary motivation of the named insureds. The 

provision is express and under Murphy, Wexler would have the 

right to enforce it.

Factually, any assumptions about whether the Talbots had 

a motivating purpose to benefit Wexler are not based on any 

allegations in the complaint, which control on a demurrer. There 

are no allegations in the FAC that the Talbots “decided” not to 

include Wexler’s name. The majority refers to the insurance 

policy itself, which shows Wexler is not a named insured, but that 

fact does not reveal the Talbots’ motivation or thought processes. 

Even assuming Wexler’s name could somehow have been added 

to the policy, it would be a question of fact as to why the Talbots 

did not add it. Given the express coverage language, why would 

they have believed they needed to add her name? She perfectly 

fit the category of resident family member beneficiaries.

Moreover, the policy states that personal property of 

resident family members is covered, but coverage for the personal 

property of guests and employees must be requested by the 

named insured. This certainly suggests no further action is 

required to obtain family member coverage. I conclude the 

majority improperly strays outside the four corners of the FAC to 

add its own factual suppositions about the Talbots’ motivating 

purpose in paying for the policy.

Along the same lines, there is no obligation under 

California law to repair destroyed property with insurance 
9

proceeds. (Burns v. California FAIR Plan Assn. (2007) 

152 Cal.App.4th 646, 650–651.) Under the majority’s reasoning, 

the Talbots could have recovered on a claim for Wexler’s property 

and then not made Wexler whole for her loss, possibly sparking 

another law suit, this time intra-family. In all events, without an 

insurable interest in Wexler’s property, the Talbots had no 

rightful control over whether and how Wexler sought 

recompense.

Finally, if the FAC’s allegation that the Talbots purchased 

and paid for this coverage to unnamed resident family members 

is not sufficient to survive a demurrer on the issue of their 

“motivating purpose,” at the very least, Wexler should be given 

leave to amend to add facts relevant to the analysis.

As to the third element of the third party beneficiary 

analysis, the question is whether permitting an action by the 

third party beneficiary is necessary to effectuate the contract’s 

objective. (Goonewardene, supra, 6 Cal.5th at pp. 830, 836.) 

Given the Talbot’s lack of insurable interest in the damaged 

property, permitting an action by Wexler is the only way to 

effectuate the contract’s objective.

I conclude this disposition relies on a strained reading of 

the policy language and is contrary to California’s public policy, 

which holds insurers to their promises. Accordingly, I dissent.

STRATTON, J.