NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LINDA TAYLOR; RAYMOND MAGEE, 

Plaintiffs-Appellants, 

 v. 

GARRISON PROPERTY AND 

CASUALTY INSURANCE COMPANY; 

DOES, 1 through 50, inclusive, 

Defendants-Appellees.

No. 18-55687 

D.C. No. 

2:17-cv-07550-RGK-GJS 

MEMORANDUM*

Appeal from the United States District Court

for the Central District of California

R. Gary Klausner, District Judge, Presiding

Argued and Submitted November 14, 2019

Pasadena, California

Before: FERNANDEZ, M. SMITH, and MILLER, Circuit Judges.

Linda Taylor and her husband, Raymond Magee, appeal from the district

court’s grant of summary judgment in favor of their insurer, Garrison Property and 

Casualty Insurance Company. Taylor and Magee sued Garrison for breach of 

contract and breach of the duty of good faith and fair dealing after Garrison denied 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

FILED

DEC 19 2019

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
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coverage for fire-related damage to a detached structure behind their home. We 

have jurisdiction under 28 U.S.C. § 1291. We affirm in part, reverse in part, and 

remand for further proceedings.

1. Taylor and Magee created genuine issues of fact material to whether 

Garrison breached any express or implied contractual duties with respect to their

claims for lost rental income and personal property. Magee testified that on the 

night of the fire, he called Garrison’s claims representative and reported that the 

studio apartment they rented out for $900 per month had been destroyed along with 

Taylor’s art collection and other personal property. According to Magee, the 

claims representative explained that because Taylor had been operating her 

business out of the detached structure, their coverage was limited to lost rental

income and $10,000 in personal property. A transcript of this call and a claims 

report support Magee’s testimony that he notified Garrison of those losses.

Garrison counters that Magee’s call was insufficient to make a claim 

because Taylor and Magee did not submit an inventory list detailing each loss. But 

under the terms of the policy, it was Garrison’s duty to investigate the claims and 

to request an inventory list if it believed one was needed. See Waller v. Truck Ins. 

Exch., Inc., 900 P.2d 619, 639 (Cal. 1995) (“‘[D]elayed payment based on 

inadequate or tardy investigations . . . may breach the implied covenant because’ 

[it] frustrate[s] the insured’s right to receive the benefits of the contract . . . .”
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(quoting Love v. Fire Ins. Exch., 271 Cal. Rptr. 3d 1136, 1153 (Cal. Ct. App. 

1990))); see also Cal. Ins. Code § 790.03(h)(2) (prohibiting an insurer’s “[f]ail[ure] 

to acknowledge and act reasonably promptly upon communications with respect to 

claims arising under insurance policies”). Garrison made no such request.

The district court noted that Garrison’s claims denial letter “did not deny a 

claim for lost rent or personal property.” That is true, but the fact remains that 

Garrison has not paid any such claims. We reverse the district court’s order in part

and remand for further proceedings to determine whether Garrison breached a 

contractual duty or an implied duty of good faith and fair dealing by failing to

investigate, delaying payment for, or effectively denying Taylor and Magee’s

claims for lost rental income and personal property.

2. We reject Taylor and Magee’s challenge to the policy’s business-use 

exclusion under the California Insurance Code. Taylor and Magee’s policy is a

mixed-peril policy, so it “need not comply with the provisions of the standard form

of fire insurance policy . . . ; provided, that coverage with respect to the peril of 

fire, when viewed in its entirety, is substantially equivalent to or more favorable to 

the insured than that contained in [the] standard form.” Cal. Ins. Code § 2070. 

Taylor and Magee’s policy meets this standard. The standard form does not contain 

use exclusions, but at least one California court has upheld them. See Rizzuto v. 

Nat’l Reserve Ins. Co., 206 P.2d 431, 431–33 (Cal. Ct. App. 1949) (upholding a 
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fire insurance policy provision covering the insured’s building “while occupied 

only for barber shop purposes”). California courts have also emphasized that an 

insurance company “has the unquestioned right to select those whom it will insure 

and to rely upon [the insured] for such information as it desires as a basis for . . . 

selecting its risks.” Mitchell v. United Nat’l Ins. Co., 25 Cal. Rptr. 3d 627, 633–34 

(Cal. Ct. App. 2005) (quoting Robinson v. Occidental Life Ins. Co., 281 P.2d 39, 

42 (Cal. Ct. App. 1955)). The policy’s business-use exclusion merely reflects the 

character of risk that Garrison agreed to assume: to cover fire-related damage to 

Taylor and Magee’s home, not their business. It does not impermissibly reduce 

statutorily mandated coverage.

3. Nor should Garrison be estopped from enforcing the policy’s 

business-use exclusion. Even assuming that Garrison understood at the time of 

issuance that Taylor was operating a business out of the detached structure, there is 

no evidence that Taylor and Magee justifiably relied on Garrison’s alleged

omissions. They had a duty to read the policy and discover the business-use 

exclusion, yet they apparently failed to do so. See Granco Steel, Inc. v. Workmen’s 

Comp. App. Bd., 436 P.2d 287, 295 (Cal. 1968) (concluding that to apply the 

estoppel doctrine, the insured must be “ignorant of the true state of facts” and must

detrimentally rely on the insurer’s conduct); see also Hadland v. NN Inv’rs Life 

Ins. Co., 30 Cal. Rptr. 2d 88, 94–95 & 94 n.9 (Cal. Ct. App. 1994) (holding that an 
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insurer was not liable for misrepresenting its policy because the insureds never 

read it and thus failed to discover that the insurer’s representations were at odds 

with the policy’s terms). In the absence of any showing of justifiable reliance by 

Taylor and Magee, we cannot rewrite the policy to include a risk that the parties 

agreed to exclude.

4. The district court held that Taylor and Magee were not entitled to 

punitive damages because they failed to raise genuine issues of fact material to 

their claim for breach of the duty of good faith and fair dealing. Because we 

reverse and remand that claim with respect to lost rental income and personal 

property, we also vacate the district court’s punitive-damages determination. We

express no opinion on whether Taylor and Magee are entitled to such damages.

AFFIRMED in part, REVERSED in part, and REMANDED.

The parties shall bear their own costs.