Filed 2/3/14 Lopez v. Allstate Ins. Co. CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication 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

FIFTH APPELLATE DISTRICT

MILTON LOPEZ et al.,

Plaintiffs, Cross-defendants and 

Appellants,

v.

ALLSTATE INSURANCE COMPANY,

Defendant, Cross-complainant and 

Appellant.

F065514

(Super. Ct. No. 10CECG01035)

OPINION

APPEAL from a judgment of the Superior Court of Fresno County. Jeffrey Y. 

Hamilton, Judge.

Lang, Richert & Patch, William T. McLaughlin II and Ashley N. Emerzian for 

Plaintiffs, Cross-defendants and Appellants.

MacGregor & Berthel, Gregory Michael MacGregor, Deborah A. Berthel and 

Joshua N. Willis for Defendant, Cross-complainant and Appellant.

-ooOoo-
2.

Plaintiff Milton Lopez, purchased insurance from defendant Allstate Insurance 

Company (Allstate), for his rental property, a single family residence on West Robinson 

Avenue in Fresno (the house). In the insurance applications, Lopez represented that the 

house was 1,600 square feet with eight rooms, that it contained “1” “Apts./Family Units,” 

and that the “[t]otal number of residents in household including children” was “1.” 

However, the house was in fact over 3,000 square feet, contained eight bedrooms and 

five bathrooms, and six of the bedrooms were rented to individual tenants. 

After the house was destroyed by a fire, Allstate denied Lopez’s claim. Lopez and 

his ex-wife, plaintiff Anamaria Cornejo, filed the underlying complaint against Allstate 

alleging breach of contract. Thereafter, Allstate rescinded the policy due to 

misrepresentations made by Lopez during the application process. Allstate further argued 

there was no coverage in any event because the policy limited coverage to a “one-, two-, 

three- or four-family building structure” and this property contained more than four rental 

units. Along with its answer, Allstate filed a cross-complaint against plaintiffs for 

rescission. 

The jury returned a verdict in favor of Allstate. The jury found that Lopez made 

material misrepresentations in applying for the policy and therefore the policy was void 

from its inception. The trial court had previously granted summary judgment in favor of 

Allstate as to Cornejo’s claims because Cornejo was not a named insured on the policy. 

Plaintiffs contend the trial court erred when it failed to interpret the unambiguous 

insurance policy and instead gave the coverage question to the jury. Plaintiffs further 

argue that their loss was covered because rented bedrooms are not “dwellings” as defined 

in the policy. Additionally, Cornejo asserts that the court erred in summarily 

adjudicating her claim against Allstate because, while her name does not appear on the 

policy, there is a triable issue of material fact as to whether she can sue based on the 

conduct of Allstate’s agent. 
3.

Contrary to plaintiffs’ position, the jury did not decide the coverage issue. Rather, 

the jury found that Lopez made material misrepresentations regarding the size of the 

house and/or the number of residents and that the policy was therefore void. Substantial 

evidence supports this factual finding. Further, even if a contract had been formed, there 

is no coverage under the plain language of the policy. The “dwelling” was more than a 

“four-family building structure” because the house was divided into six units that were 

rented to more than four unrelated individuals. In light of this conclusion, the issue of 

whether Cornejo had standing to sue Allstate is moot. Accordingly, the judgment will be 

affirmed.

BACKGROUND

Plaintiffs bought the house in February 2004. In March 2004, Lopez went to 

Allstate agent Gary Gonzales to purchase homeowner’s insurance. The insurance 

application, signed by Lopez, states the house has eight rooms, the number of 

“Apts./Family Units” is “1” and the total number of residents in the household is “1.” 

However, the house in fact had considerably more than eight rooms and, at that time, 

there were three tenants living in the house. This policy was cancelled after 30 days due 

to the house having had unmitigated prior losses. 

In 2005, Lopez replaced the roof on the house. In October 2005, Lopez again 

contacted Allstate and requested a landlord’s policy for the house. Lopez spoke with 

Sandra Rios, an agent in Gonzalez’s office, over the telephone and gave Rios the 

necessary information. The application states the house has 1,600 square feet of total 

living area. In answer to number of apartments or family units, the application states “1.” 

Based on this application, Allstate issued a landlord’s policy to Lopez providing a 

limit of $106,723 on the “Dwelling” and $10,672 on “Other Structures” for a total 

premium of $438. The policy rating was based on the house being of frame construction 

and occupied by one family. This policy was renewed annually. The policy provided that 

“‘Dwelling’ -- means a one-, two-, three- or four-family building structure which is used 
4.

principally as a private residence and located at the address stated on the Policy 

Declarations.” “‘Building structure’ -- means a structure with walls and a roof.” 

In July 2009, a fire destroyed the house. Cornejo reported the loss to Allstate and 

informed Allstate that the house had six tenants in “studio suites.” Shortly thereafter, 

Lopez provided Allstate with the six separate lease agreements for the rented rooms. 

Each room had a lockable door, a table, a chair, a microwave and a refrigerator. The 

tenants shared bathrooms and did not have access to the kitchen. Allstate paid Lopez 

$13,800 for loss of rents. 

Allstate inspected the house in order to ascertain the scope of repairs. The 

inspector noted both the multiple units and the discrepancy between the square footage 

insured and the actual size of the house. While the policy insured 1,600 square feet, the 

house was over 3,000 square feet. The estimate to repair the house was approximately 

$371,000 but the policy limit in effect at the time of the loss was $133,121 for the 

“Dwelling” and $13,312 for “Other Structures.” 

Upon further investigation, Allstate referred the claim to coverage counsel. On 

counsel’s recommendation, Allstate rescinded the policy and declared it void on the 

ground that Lopez materially misrepresented the property to be insured in the application 

process. Allstate refunded $438 and $1,542 in premiums to Lopez.

Plaintiffs filed the underlying action against Allstate alleging Allstate breached the 

landlord’s policy by denying plaintiffs’ fire loss claim. Plaintiffs sought damages and 

reformation. Allstate filed a cross-complaint for rescission and declaratory relief. 

Allstate also asserted rescission as an affirmative defense.

Both sides moved for summary judgment or summary adjudication of issues. The 

trial court denied plaintiffs’ motion. The trial court granted Allstate’s motion as to 
5.

Cornejo. The court concluded Cornejo did not have standing to prosecute the action 

because she was not named on the policy.1

The case was tried to a jury. The jury returned a verdict in Allstate’s favor finding 

that Lopez made “material misrepresentations or conceal[ed] material facts in the 

application for insurance with Allstate Insurance Company such that the Landlord’s 

insurance policy was void from its inception.” 

DISCUSSION

1. The trial court did not submit a coverage question to the jury.

Plaintiffs argue that the policy, when interpreted correctly under the plain meaning 

rule, provides coverage for their loss. According to plaintiffs, the trial court erred when it 

did not interpret the policy itself but, rather, submitted the coverage question to the jury. 

Plaintiffs assert that the jury could not have made its finding that Lopez committed fraud 

with respect to the number of rented bedrooms in the house without first interpreting the 

policy.

Plaintiffs correctly note that the interpretation of an insurance contract is a 

question of law that is reviewed de novo on appeal. (E.M.M.I. Inc. v. Zurich American 

Ins. Co. (2004) 32 Cal.4th 465, 470.) However, contrary to plaintiffs’ position, the jury 

was not asked to interpret the policy. Regarding Allstate’s claim that no insurance 

contract was created because Lopez made a false representation in his application for 

insurance, the jury was instructed:

“... To establish this claim, Allstate Insurance Company must prove all of 

the following. One, that Milton Lopez submitted an application for 

insurance with the Allstate Insurance Company. Two, that in the 

application for insurance Milton Lopez intentionally represented the 

 

1 Allstate has filed a cross-appeal challenging the trial court’s denial of its motion 

for summary adjudication on the coverage issue. In light of our disposition, this issue is 

moot.
6.

number of residents and/or the size of the dwelling. Three, that Milton 

Lopez knew that this ... representation was not true. Four, that Allstate 

Insurance Company would not have issued the insurance policy if Milton 

Lopez had stated the true facts in the application. Five, that Allstate 

Insurance Company gave Milton Lopez notice that it was rescinding the 

insurance policy. And six, that Allstate Insurance Company returned the 

insurance premiums paid by Milton Lopez.” (Italics added.) 

The jury returned its verdict in favor of Allstate answering “Yes” to the question 

“Did Milton Lopez make material misrepresentations or conceal material facts in the 

application for insurance with Allstate Insurance Company such that the Landlord’s 

insurance policy was void from its inception?” Reading the jury instructions and the 

verdict together, the jury found that Lopez misrepresented “the number of residents 

and/or the size of the dwelling” in the insurance application. 

In making this finding, the jury was not required to interpret the policy. The jury’s 

conclusion that Lopez made material misrepresentations or concealed material facts 

regarding the size of the house and the number of residents was not dependent on the jury 

determining whether the house was more than a “four-family building structure” and 

therefore not covered by the policy. Rather, the jury merely found that Lopez understated 

the size of the house and/or the number of people who would be living there and, because 

of these misrepresentations, a contract was never formed. For this purpose, the policy 

language was irrelevant. 

Moreover, the record supports the jury’s finding. Lopez understated the size of 

the house on more than one occasion. In applying for insurance immediately after the 

purchase, Lopez stated the house had eight rooms when it in fact had eight bedrooms. 

The second insurance application and the policy declarations that were sent to Lopez 

each time the policy was renewed stated the house was 1,600 square feet. However, the 

house had over 3,000 square feet of living area. Lopez also understated the number of 

people living in the house. In the initial application, Lopez stated there would be one 

resident when there were at least three tenants in the house. Later, Lopez claimed the 
7.

house had one apartment/family unit while there were six unrelated individuals living 

there. 

The policy provided that it was “void if it was obtained by misrepresentation, 

fraud or concealment of material facts.” Further, under California law, the insurer is 

entitled to rescind a policy when a policy holder conceals or misrepresents a material fact 

on the insurance application. (LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. 

(2007) 156 Cal.App.4th 1259, 1266 (LA Sound).) Such a “‘rescission effectively renders 

the policy totally unenforceable from the outset so that there was never any coverage and 

no benefits are payable.’” (Id. at p. 1267.) 

Whether misrepresentations are material is determined solely by the probable and 

reasonable effect that truthful answers would have had on the insurer. (LA Sound, supra,

156 Cal.App.4th at p. 1268.) However, the fact that the insurer has demanded answers to 

specific questions in an insurance application is itself usually sufficient to establish 

materiality as a matter of law. (Ibid.) Further, such misrepresentation or concealment 

need not be intentional to be a ground for rescission. (Id. at p. 1270.) 

Here, Allstate specifically requested the square footage of the house and the 

number of “family units” it contained. The fact that Allstate asked these questions 

supports the jury’s finding that the misrepresentations regarding these facts were 

material. Further, common sense dictates that the size of the residence and the number of 

families living there are important factors with regard to how, or if, a policy is written 

and what premium is charged. 

In sum, the jury was not interpreting the policy when it found that the policy was 

void from its inception based on Lopez’s material misrepresentations. Moreover, the 

record supports the jury’s finding. 

2. Even assuming a contract was formed, the policy did not cover the loss.

Coverage A in the landlord’s policy covers “sudden and accidental direct physical 

loss” to the insured’s “dwelling” with various exclusions. “‘Dwelling’” is defined as “a 
8.

one-, two-, three-, or four-family building structure which is used principally as a private 

residence and located at the address stated on the Policy Declarations.” A “‘Building 

structure’” is simply “a structure with walls and a roof.” Thus, a covered “dwelling” is a 

single structure with walls and a roof that can accommodate up to four families. 

In addition to the dwelling, the policy’s coverage D insures lost rental income 

when a covered loss to the dwelling makes a “rental unit” uninhabitable. “‘Rental Unit’”

is defined as “that portion of your dwelling which forms separate living space intended 

for tenant occupancy.” 

Plaintiffs argue that the insuring language is unambiguous and that this language 

cannot be interpreted to impose a limit on the number of rented bedrooms. According to 

plaintiffs, “the term ‘dwelling’ cannot be construed to be synonymous or interchangeable 

with the term ‘rental unit’ or the word ‘bedroom.’” Plaintiffs assert no one would 

reasonably understand the terms “dwelling” and “rental unit” to share the same meaning. 

Accordingly, plaintiffs read coverage A as containing a limit on the number of insurable 

“dwellings” but not the number of rented bedrooms.

When determining whether a particular policy provides coverage, the court must 

first look to the contract language in order to ascertain its plain meaning or the meaning a 

layperson would ordinarily attach to it. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 

Cal.4th 1, 18.) The fundamental rules the court follows in interpreting contracts are 

premised on giving effect to the “‘mutual intention’ of the parties,’” to be inferred, if 

possible, solely from the contract’s written provisions. Such judicial interpretation is 

controlled by the “‘“clear and explicit” meaning of these provisions, interpreted in their 

“ordinary and popular sense,” unless “used by the parties in a technical sense or a special 

meaning is given to them by usage ....”’” (Ibid.) Moreover, the construction of the 

language must be both reasonable and in the context of the instrument as a whole. (Bay 

Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 867.) 
9.

In the context of the landlord’s policy, “dwelling” is singular. The policy covers 

one dwelling, i.e., a structure with walls and a roof that may accommodate up to four 

“families.” Plaintiffs are correct that “dwelling” is not interchangeable with “rental unit” 

or bedroom. The “dwelling” is the whole that consists of up to four separate living 

spaces for tenant occupancy. Thus, the policy does not cover up to four “dwellings” as 

claimed by plaintiffs. Rather, it covers one dwelling that may contain as many as four 

family units. 

In its ordinary and popular sense, “family” means a group of people who form a 

household. Thus, under the policy, a reasonable construction of a “four-family building 

structure” is a building that includes four separate living spaces intended for occupancy 

by four separate households. In other words, reading the policy as a whole, a dwelling is 

a structure with walls and a roof that can contain up to four “rental units.”

Here, plaintiffs’ house had six separate living spaces intended for six unrelated 

tenants. Each bedroom had its own lock and each tenant had his or her own lease. 

Although the term “family” generally connotes more than one person, it is unreasonable 

to construe the policy as covering more than four separate living spaces as long as those 

separate spaces are occupied by only one tenant. Moreover, while it might have been 

cramped, the rented bedrooms could have accommodated more than one person. Thus, 

each separate living space must be considered a family unit. The fact that the six tenants 

shared five bathrooms does not cause these private living spaces to be anything other than 

family units. The bedrooms, as modified and furnished, formed separate living spaces 

intended for tenant occupancy. Accordingly, because the house was not a one, two, three 

or four family building structure, the landlord’s policy did not cover the loss. 

In light of this conclusion, the issue of whether Cornejo was improperly dismissed 

from the action is moot.
10.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to defendant Allstate 

Insurance Company.

_____________________

LEVY, Acting P.J.

WE CONCUR:

_____________________

KANE, J.

_____________________

FRANSON, J.