Opinion ID: 681237
Heading Depth: 2
Heading Rank: 2

Heading: The Fraudulent Misrepresentation Claim

Text: 5 Plaintiff contends that at the December 1989 meeting between Breshears' officers and Federated's Marketing Representative, Dale Williams, Williams represented that plaintiff would be fully covered for all damages if an above ground tank were to spill gasoline as a result of vandalism. Williams denies that he made any such representation. 6 For the purposes of a Rule 50 motion, the district court must accept as true plaintiff's account that such misrepresentations were made. The district court nevertheless granted Federated's Rule 50 motion for judgment as a matter of law, concluding that the plaintiff had failed to meet the requirements for a valid claim of fraudulent misrepresentation. We disagree with the district court's conclusion. 7 Under California law, for a fraudulent misrepresentation claim, the plaintiff must show, among other things, that its reliance on the misrepresentation was justified and that it suffered injury as a result of its reliance. Hunter v. Up-right Inc., 6 Cal.4th 1174, 1183-84 (1993). The absence of either one of these elements precludes recovery. Gonsalves v. Hodgson, 38 Cal.2d 91, 101 (1951). The district court concluded that neither of these two elements was shown by plaintiff. We review the district court's Rule 50 judgment de novo, reversing if there is substantial evidence to support a verdict for the nonmoving party. See Peterson v. Kennedy, 771 F.2d 1244, 1256 (9th Cir.1985).
8 Plaintiff contends that the following evidence was sufficient for a jury to find that its reliance was reasonable: (1) testimony that Williams had said that Breshears would be fully covered if vandals caused a gasoline spill from an above ground tank; (2) Williams testified that he intended his customers to rely upon his descriptions of coverage; (3) Williams testified that he knew Federated would deny coverage for such a claim; (4) testimony that plaintiff's President believed the CGL part of the policy applied to above ground tanks; and (5) testimony that plaintiff's President did not have a copy of the 1990 Commercial Package Policy (containing the CGL part) when Williams made the alleged misrepresentations because no copy of the renewed policy was delivered to plaintiff before the spill occurred. We agree with plaintiff that these facts constitute sufficient evidence to support a finding for Breshears on the reasonable reliance issue. 9 Federated argues that other evidence showed that reliance on Williams' statements would be unreasonable as a matter of law. Federated also contends that the language of the policy was clear in explicitly not covering damage of this type, thereby precluding justifiable reliance on Williams' representations as a matter of law. Neither contention has merit. The evidence that Federated points to does not prove that plaintiff's version of the events is untrue or that plaintiff's reliance on Williams' statements was unreasonable. Under California law, even though the policy indeed might not have been reasonably read to cover the losses incurred, absent notice to that effect the insured may still justifiably rely on the contrary representations of the insurer's agent. Clement v. Smith, 16 Cal.App.4th 39, 45 (1993). Although Federated claims to have sent notices to Breshears regarding the effect of the pollution exclusion clauses in the policy, there is no evidence of notice given to Breshears that a vandalism -caused spill would not be covered. Thus we conclude that there was sufficient evidence to support a finding that Breshears reliance on Williams' representations was justifiable.
10 The district court noted that the plaintiff's president testified at trial that he had decided to cancel his specific pollution coverage policy with Federated, regardless of representations made by Williams, because of the high cost of the policy. In fact, Breshears dropped pollution coverage for the site at issue before the meeting with Williams even took place, thus Williams' statements cannot have caused Breshears to give up its insurance protection for the gas spill. Federated thus argues, and the district court agreed, that the only way plaintiff could have been damaged by Williams' misrepresentations would be for plaintiff to have shown that it could have obtained pollution insurance from another insurer at a cost it would have been willing to pay. Plaintiff did not produce any such evidence, thus the court held that the plaintiff did not meet the injury requirement as a matter of law. 11 Plaintiff contends that the evidence it produced, showing that it would have looked for other insurance had the alleged misrepresentations not been made, was sufficient to satisfy the resulting damage element. Indeed, plaintiff's President also testified that if he had not been able to obtain pollution insurance from another insurer, he would have probably looked to sell the site. If successful, either option would have avoided the pecuniary damage plaintiff has suffered in this case as a result of its liability for the spill. Plaintiff contends that, in reliance on Williams' statements that it was insured for incidents such as gasoline spills, it did not look for viable alternatives during the period between its dropping of its pollution insurance and the time of the accident. 12 Under California law, a plaintiff may recover for fraud when he shows that, because of the defendant's misrepresentations, he has sustained some pecuniary damage or injury by reason of having been put in a position worse than he would have occupied had there been no fraud. R.D. Reeder Lathing Co. v. Cypress Ins. Co., 3 Cal.App.3d 995, 999 (1970). We conclude that plaintiff was not obligated under California law to show that it would have been successful, in either trying to sell the site or obtaining another insurance policy at a low price, in order to have met its burden. Plaintiff produced sufficient evidence that it has sustained injury by having been put in a worse position by Williams' statements. Whether plaintiff's position of looking for coverage, or to sell the site, is a better position than that of still believing it is fully covered is a question that the jury should have decided in this case as a factual matter. 13 Therefore, we conclude that the district court erred in ruling for Federated as a matter of law on the fraudulent misrepresentation claim, and we remand that claim to the district court for retrial.