Court Opinion

ID: 4703225
Source: CourtListenerOpinion
Date Created: 2021-07-13 19:04:57.546603+00
Date Added: 2024-06-11T08:06:30.333041
License: Public Domain

Filed 7/13/21 Stewart v. USAA General Indemnity CA4/1
                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

JOSEPH D. STEWART,                                                   D076992

         Plaintiff and Appellant,

         v.                                                          (Super. Ct. No.
                                                                      37-2019-00011137-CU-IC-CTL)
USAA GENERAL INDEMNITY
COMPANY,

         Defendant and Respondent.

         APPEAL from a judgment of the Superior Court of San Diego County,
Kenneth J. Medel, Judge. Reversed and remanded with directions.
         Joseph D. Stewart, in pro. per., for Plaintiff and Appellant.
         Daniels, Fine, Israel, Schonbuch & Lebovits and Maureen M. Michail,
Karina A. Villa, for Defendant and Respondent.
         Plaintiff and Appellant Joseph D. Stewart appeals from a judgment
entered after the trial court sustained without leave to amend the demurrer
of USAA General Indemnity Company (USAA) on Stewart’s complaint for
breach of contract and other causes of action based on USAA’s asserted
refusal to defend under Stewart’s renter’s insurance policy (the Policy).
Stewart alleged in part that USAA had a duty to defend and indemnify him
from claims asserted against him in an unlawful detainer action, which was
premised on an accidental fire for which USAA had accepted responsibility.
He asks this court to determine as a matter of law that the Policy language is
reasonably susceptible to Stewart’s interpretation and thus is ambiguous,
warranting the overruling of USAA’s demurrer. We conclude the trial court
improperly sustained the demurrer on the breach of contract cause of action,
as Stewart’s complaint states a cause of action on at least one other theory,
namely that USAA breached its agreement under the Policy to pay loss of use
benefits arising from the fire. Stewart further alleges USAA misstated the
nature and extent of insurance coverage, and used improper standards or
interpretations to deny available coverage, and in view of our conclusion on
his breach of contract cause of action we conclude his pleading likewise states
a cause of action for breach of the covenant of good faith and fair dealing.
Finally Stewart has shown he should have been granted leave to amend his
negligence cause of action brought against USAA in its capacity as an
insurance agent. We reverse and remand with directions.
              FACTUAL AND PROCEDURAL BACKGROUND
      We state the facts from the properly pleaded allegations from Stewart’s
complaint, disregarding contentions, deductions or conclusions of fact or law.
(See Century-National Inc. Co. v. Garcia (2011) 51 Cal.4th 564, 566, fn. 1;
Brown v. USA Taekwondo (2021) 11 Cal.5th 204, 209; Mathews v. Becerra
(2019) 8 Cal.5th 756, 768.) We also consider matters that may be judicially
noticed. (Mathews, at p. 768.)
      Stewart is the named insured on a “Renter’s Protection Policy” that he
purchased from USAA in June 2014, and subsequently renewed through
June 2017. The insured premises is an apartment on Sunset Cliffs Boulevard
in San Diego. The Policy contains a “Personal Liability” provision, describing

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such liability as “the protection you have against liability arising out of your
residence and your personal activities.” (Some capitalization omitted.) That
provision has a “Liability” section that provides: “If a claim is made or a suit
is brought against an insured for damages because of bodily injury or
property damage caused by an occurrence to which this coverage applies, we
will: 1. pay up to our limit of liability for the damages for which the insured
is legally liable; and [¶] 2. provide a defense at our expense by counsel of our
choice, even if the suit is groundless, false or fraudulent. We may investigate
and settle any claim or suit that we decide is appropriate. . . . This coverage
does not provide defense to any insured for criminal prosecution or
proceedings. [¶] Occurrence means an accident, including continuous or
repeated exposure to substantially the same general harmful conditions,
which results, during the policy period, in: [¶] a. bodily injury; or [¶] b.
property damage. [¶] We will not pay for punitive damages or exemplary
damages, fines, or penalties.”
      The Policy defines “property damage” as “physical injury to, destruction
of, or loss of use of tangible property.”
      The Policy also covers “Loss of Use,” with “no limit,” and provides: “If a
covered loss to covered property or to the building containing the property
makes the place where you reside not fit to live in, we cover, at your choice,
either of the following: [¶] a. Additional Living Expense—meaning any
necessary increase in living expenses incurred by you to maintain your
normal standard of living; or [¶] b. Fair Rental Value—meaning the fair
rental value of that part of the place where you reside less any expenses that
do not continue while the premises is not fit to live in. [¶] . . . [¶] The
amount we pay under a. or b. will be for the shorter of: [¶] the period of time

                                            3
reasonably required to repair or replace the damage, [¶] or [¶] the period of
time needed to permanently settle your household in new quarters.”
      In December 2016, a grease fire ignited in the insured premises’
kitchen. Stewart notified USAA the same day and initiated a claim under
the Policy. USAA determined the cause of the fire was accidental and
accepted financial responsibility under the Policy.
      In February 2017, the owner of the insured premises filed an unlawful
detainer complaint in San Diego Superior Court alleging that Stewart caused
the fire and damage to the insured premises, and thereby committed a non-
curable breach of his rental agreement. That action sought damages for each
day that Stewart remained in possession through the entry of judgment. The
next day, Stewart tendered defense of the action to USAA. The claims
adjuster denied the tender, stating the Policy did not offer legal defense for
an unlawful detainer action.
      Stewart renewed his tender on February 13, 2017, telling USAA the
Policy provided a defense for any lawsuit arising out of a covered incident. At
this time, the insured premises was still under repair, Stewart was displaced,
and the funds paid by USAA on the claim for loss of use had been exhausted.
On February 14, 2017, Stewart sought an additional loss of use payment but
USAA denied the request. Stewart asked USAA to provide a legal defense in
the unlawful detainer action on three additional occasions in March 2017. In
April 2017, USAA formally denied tender by letter.
      Judgment was thereafter entered against Stewart in the unlawful
detainer action and the owner retook possession. The unlawful detainer
judgment includes a money judgment of $6,469.33. In August 2018, Stewart
offered USAA one last opportunity to reimburse him the costs of his defense
but it again denied coverage.

                                       4
      Stewart filed a complaint against USAA for breach of contract, breach
of the covenant of good faith and fair dealing, and negligence. In part,
Stewart alleged USAA breached the contract by misrepresenting relevant
facts or policy provisions relating to coverage. He made other allegations
relating to his claim that USAA owed him a duty to defend the unlawful

detainer action.1 Stewart also alleged USAA breached the covenant of good
faith and fair dealing by misstating the nature and extent of coverage
available under the Policy, failing to affirm or deny coverage within a
reasonable time after he notified it of his claims, failing to inform him of his
legal rights after denying his tender of defense, and using improper and
inapplicable standards and unduly restrictive interpretations of the Policy

1     Specifically, Stewart alleged USAA failed to conduct a prompt and full
investigation of the facts and circumstances giving rise to his claim in the
unlawful detainer action, failed to defend or indemnify him, failed to conduct
any investigation after it rejected his tender, failed to promptly give a
reasonable explanation for denying coverage and rejecting his tender, failed
and refused to advise him in a timely manner regarding the status of his
claim, and did not promptly respond to communications. He alleged in part
that had USAA conducted a reasonable investigation, it would have
discovered that the unlawful detainer action “was for damages because of
property damage to the Insured Premises caused by an ‘occurrence[,’]
meaning an accident that resulted in property damage during the policy
period”; the “property damage was not caused by his intentional acts; and the
alleged liability did not arise under any contract or agreement other than a
written contract that directly related to the ownership, maintenance or use of
an insured location.” He alleged: “The facts alleged in the [unlawful
detainer] complaint and the information which was available to [USAA] at or
about the time of the tender revealed: [¶] A. A potential for liability existed
under the ‘Personal Liability’ and ‘Liability’ coverage in that the Plaintiff had
allegedly caused property damage to the Insured Premises; [¶] B. The
property damage to the Insured Premises was caused by an accident during
the policy period that resulted in the property damage; [¶] C. The property
damage to the Insured Premises was the alleged factual and legal basis of the
[unlawful detainer action]; and [¶] D. The [unlawful detainer action] sought
damages.”
                                        5
language to deny or reduce available coverage. For his negligence cause of
action, Stewart alleged USAA breached its duty to recommend he purchase
an insurance policy from a company that engaged in fair business practices,
and breached various other duties it owed as insurance agents to exercise
reasonable care to ensure USAA’s business practices did not deprive insureds
of their rights or increase USAA’s profits.
      Stewart attached as an exhibit to his complaint his renter’s policy
packet including a declarations page and general provisions. He also
attached the Judicial Council form unlawful detainer complaint. The
unlawful detainer complaint alleges in part that Stewart had committed a
non-curable breach of his lease agreement. It alleges the landlord relied on
the fact Stewart’s lease requires him to maintain the premises and further
states: “32. Damage to Premises: . . . If damage occurs as a result of an act
of Tenant or Tenant’s guests, only Landlord shall have the right of
termination, and no reduction in rent shall be made.” The unlawful detainer
complaint alleges: “On or about December 21, 2016, a grease fire was started
from improper use of the stove in your kitchen, and water was poured on the
fire, causing significant structural damage to the subject premises.
According to the assessment drawn by both the insurance agencies
investigating the claim, you, the tenants, were the cause of the fire and
damages to the premises. Per Paragraph 32 of your Lease Agreement,
Landlord chooses to terminate the Lease Agreement without any obligation
to provide tenant an abatement in owed rent and/or damages.” The unlawful
detainer complaint sought forfeiture of the lease agreement as well as
“damages at the rate [of $83.33 per day] from . . . 02/01/2017 for each day that
defendants remain in possession through entry of judgment.”

                                       6
      USAA demurred to Stewart’s complaint on grounds the undisputed
facts and Policy language showed it had no duty to defend or indemnify
Stewart. Specifically, it argued the underlying action did not assert an
“occurrence” under the Policy or seek damages for bodily injury or property
damage within the Policy’s meaning. This deficiency assertedly rendered
Stewart’s bad faith claim invalid because such a claim was absent any breach
of contract. USAA argued Stewart’s negligence claim was likewise subject to
demurrer for the absence of a duty of care between its adjuster to the insured.
It argued Stewart in any event relied on conclusory and vague language, and
failed to allege any ultimate facts of duty, breach or causation needed to
support a negligence claim.
      In opposition, Stewart argued that USAA was asking the court to
accept USAA’s interpretation of the Policy language, which was not
permissible on a demurrer unless it could show its interpretation was the
only reasonable one. Stewart pointed out that a duty to defend may exist
even where coverage is in doubt and ultimately does not develop, and that
doubts as to whether facts establish a duty to defend must be resolved in the
insured’s favor. He argued his complaint alleged the facts in the unlawful
detainer complaint revealed a potential for liability or coverage in that he
had allegedly caused property damage to the premises. He argued the
complaint alleged the unlawful detainer action arose from an “occurrence”
under the Policy; but for the fire, that action would not have moved forward.
      Stewart further argued USAA misstated the Policy when it argued it
provided coverage only for bodily injury or property damage. He argued that
under the plain Policy language, USAA was to provide a legal defense “ ‘[i]f a
claim is made or a suit is brought against an insured for damages because of
bodily injury or property damage caused by an occurrence covered by the

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policy . . . .’ ”2 Based on these points Stewart argued his complaint stated a
cause of action for breach of the covenant of good faith and fair dealing. He
argued he properly pleaded negligence against USAA in its capacity as a
licensed insurance agent, which unlike insurers could be held accountable for
negligence. Stewart asked the court to grant him leave to amend if it found
any basis to sustain USAA’s demurrer.
      The court sustained the demurrer without leave to amend. It ruled:
“Based on the allegations in the complaint, there is no potential for coverage
under the policy and thus no duty to defend. As alleged, the underlying suit
is an unlawful detainer action. Landlord sought possession of the premises
and monetary damages as a result of plaintiff[’]s breach of the lease. The
relief in the unlawful detainer is not the sort of relief that is afforded with an
occurrence[-]based policy such as the one that plaintiff has with USAA.
Further, plaintiff[’]s policy only provides coverage for bodily injury or
property damage; neither of which is sought against plaintiff in the unlawful
detainer suit.” The court ruled USAA’s motion to strike was moot in light of
its ruling. (Some capitalization omitted.)

2     On this point, Stewart argued the unlawful detainer suit met the
coverage requirements because “(1) a suit was brought against defendant; (2)
the suit was for damages; and (3) the suit was because of property damage
caused by an occurrence to which the coverage applies.” He argued that it
would create an ambiguity to combine the second and third statements, since
the word “because” could be applied either as a condition of the claim or
lawsuit, or a condition of the damages. Finally Stewart pointed out that the
Policy provided “this coverage does not provide defense to any insured for
criminal prosecution or proceedings.” He argued USAA took care to exclude
particular types of proceeding and did not specify unlawful detainers, a
proceeding to which renters are susceptible. Stewart argued that in testing
the sufficiency of his complaint, his interpretation of the contract must be
accepted because it was reasonable, sound and intelligible.
                                        8
      In September 2019, the court dismissed Stewart’s complaint with
prejudice. Stewart appeals from that order as a judgment of dismissal.
                                  DISCUSSION
                             I. Standard of Review
      We review de novo the trial court’s order sustaining a demurrer.
(Gomez v. Regents v. University of California (2021) 63 Cal.App.5th 386, 391.)
Our sole task is to determine whether the complaint states a cause of action
under any legal theory. (Ibid.; Mathews v. Becerra, supra, 8 Cal.5th at p.
762.) “We assume the truth of all facts properly pleaded, and we accept as
true all facts that may be implied or reasonably inferred from facts expressly
alleged, unless they are contradicted by judicially noticed facts. [Citations.]
Inconsistent general statements are modified and limited by specific factual
allegations. [Citation.] We give the complaint a reasonable interpretation
and we read it in context. [Citation.] But we do not assume the truth of
contentions, deductions or conclusions of fact or law. [Citation.] We will
affirm an order sustaining a demurrer on any proper grounds, regardless of
the basis for the trial court’s decision.” (Cansino v. Bank of America (2014)
224 Cal.App.4th 1462, 1468; see also Brown v. Deutsche Bank National Trust
Co. (2016) 247 Cal.App.4th 275, 279.)
      “Where, as here, ‘the trial court sustains a demurrer without leave to
amend, we review the determination that no amendment could cure the
defect in the complaint for an abuse of discretion. [Citation.] The trial court
abuses its discretion if there is a reasonable possibility that the plaintiff
could cure the defect by amendment. [Citation.] The plaintiff has the burden
of proving that amendment would cure the legal defect, and may meet this
burden on appeal.’ ” (Brown v. Deutsche Bank National Trust Co., supra, 247

                                         9
Cal.App.4th at p. 279, quoting Cansino v. Bank of America, supra, 224
Cal.App.4th at p. 1468.)
            II. Denial of Leave to Amend Original Complaint
      Stewart first contends the trial court abused its discretion when it
denied him leave to amend his original complaint without any finding that
the pleading was incapable of amendment. He maintains the court
disregarded settled principles that a plaintiff should be offered at least one
opportunity to amend, and misconstrued his pleading by ignoring other
pleaded theories or causes of action.
      Generally it is a plaintiff’s burden to “ ‘show in what manner he can
amend his complaint and how that amendment will change the legal effect of
his pleading.’ ” (HFH, Ltd. v. Superior Court (1975) 15 Cal.3d 508, 513, fn. 3.)
But because the court did not give Stewart any opportunity to amend his
complaint, resolution of his contentions turns not on whether Stewart
proffers specific facts that state a viable cause of action, but on whether the
complaint “does not on its face foreclose any reasonable possibility of
amendment.” (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747;
Eghtesad v. State Farm General Insurance Company (2020) 51 Cal.App.5th
406, 411, 413-414 [“ ‘[I]n the case of an original complaint, plaintiff need not
even request leave to amend’ ” because it is improper to deny leave unless the
complaint shows it is incapable of amendment].) “[L]eave to amend is
properly granted where resolution of . . . legal issues does not foreclose the
possibility that the plaintiff may supply necessary factual allegations.
[Citation.] If the plaintiff has not had an opportunity to amend the complaint
in response to the demurrer, leave to amend is liberally allowed as a matter
of fairness, unless the complaint shows on its face that it is incapable of
amendment.” (City of Stockton, at p. 747; JPMorgan Chase Bank, N.A. v.

                                        10
Ward (2019) 33 Cal.App.5th 678, 684; Apple Inc. v. Superior Court (2017) 18
Cal.App.5th 222, 258-259.) “Denial of leave to amend is appropriate only
when it conclusively appears that there is no possibility of alleging facts
under which recovery can be obtained.” (Eghtesad, at p. 412.)
      Here, the only way we could conclude the complaint is incapable of
amendment is if applicable law or the Policy language precludes any of
Stewart’s various breach of contract or negligence theories. We assess each
cause of action to determine whether that is the case.
A. Cause of Action for Negligence
      “To establish a cause of action for negligence, the plaintiff must show
that the ‘defendant had a duty to use due care, that he breached that duty,
and that the breach was the proximate or legal cause of the resulting injury.’
[Citation.] Recovery for negligence depends as a threshold matter on the
existence of a legal duty of care.” (Brown v. USA Taekwondo, supra, 11
Cal.5th at p. 213.) The existence of a tort duty of care presents a question of
law and policy. (See Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 837.)
      Stewart’s cause of action for negligence alleges that USAA had a duty
to recommend to him that he purchase an insurance policy from a company
that engaged in fair business practices and did not have an ordinary business
practice designed to keep from paying policy benefits legitimately owed to
policyholders. He further alleged USAA “as insurance agents” had a duty of
care to him to ensure USAA had certain business practices that would not

                                       11
deprive him of his rights and increase USAA’s profits.3 Citing Sanchez v.
Lindsey Morden Claim Services, Inc. (1999) 72 Cal.App.4th 249, USAA
argues that cause of action is not viable as a matter of law because negligence
is not generally available against insurers and insurer-retained adjusters do
not owe a duty of care to an insured.
      This is not a question of whether a duty of care can be imposed on an

outside insurance adjuster as was the case in Sanchez,4 but whether there
can be no duty of care on USAA as an insurance agent as a matter of law,
such that Stewart’s complaint is incapable of amendment. It is in fact well-
settled that insurance agents or brokers owe a limited duty to their clients,
which is only “ ‘to use reasonable care, diligence, and judgment in procuring
the insurance requested by an insured.’ ” (Pacific Rim Mechanical
Contractors, Inc. v. Aon Risk Ins. Services West, Inc. (2012) 203 Cal.App.4th
1278, 1283, citing Jones v. Grewe (1987) 189 Cal.App.3d 950, 954; see also
Murray v. UPS Capital Insurance Agency, Inc. (2020) 54 Cal.App.5th 628,

3      Stewart alleged USAA as the insurance agents had a duty to exercise
reasonable care to ensure USAA did not have an ordinary business practice
designed to: keep from paying policy benefits legitimately owed to policy
holders; inadequately train claims adjusters; attract and evoke the trust and
confidence of military members, veterans and family; or refuse to carry out
their obligations to investigate, defend, indemnify and promptly communicate
their coverage position.

4      In part, the court in Sanchez reasoned: “[A]djusters hired by insurers
have no contract with insureds, and thus no ability to define or circumscribe
their potential risks or liabilities to insureds. If adjusters faced negligence
liability to insureds, market forces would tend to drive adjusting activities in-
house, where they could be shielded with contractual exclusions, disclaimers,
and limitations. Thus, imposing a duty would reduce, perhaps severely, the
offering of independent adjuster services.” (Sanchez v. Lindsey Morden
Claims Services, Inc., supra, 72 Cal.App.4th at p. 254.)

                                        12
639; Travelers Property Casualty Co. of America v. Superior Court (2013) 215
Cal.App.4th 561, 578; Kotlar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th
1116, 1123; Kurtz, Richards, Wilson & Co. v. Insurance Communicators
Marketing Corp. (1993) 12 Cal.App.4th 1249, 1257.) “These duties do not
disappear because the agent is also an agent for an insurer. Dual agencies
are not uncommon, and do not negate the agent’s duty to the client.” (Kurtz,
at p. 1257.) “ ‘ “The rule changes, however, when—but only when—one of the
following three things happens: (a) the agent misrepresents the nature,
extent or scope of the coverage being offered or provided . . . , (b) there is
a request or inquiry by the insured for a particular type or extent of coverage
. . . , or (c) the agent assumes an additional duty by either express agreement
or by ‘holding himself out’ as having expertise in a given field of insurance
being sought by the insured . . . .” [Citation.] The agent who assumes
additional duties, by holding herself out as having expertise in the insurance
being sought by the insured, “may be liable to the insured for losses which
resulted as a breach of that special duty.” ’ ” (Travelers Property Casualty
Co., at pp. 578-579; Pacific Rim, at p. 1283, quoting Fitzpatrick v. Hayes

(1997) 57 Cal.App.4th 916, 927.)5
      Because insurance agents may have a duty of care under these
circumstances, such liability is not precluded as a matter of law. As a
consequence, we cannot say Stewart’s negligence cause of action is completely
incapable of amendment. Though Stewart alleged that USAA itself had a
duty in connection with recommending a policy of insurance, Stewart should

5     An agent may also commit an independent tort such as
misrepresentation or deceit in the course of handling a third party claim, and
in such a case they can be held personally liable even though they are not a
party to the insurance contract. (Bock v. Hansen (2014) 225 Cal.App.4th 215,
228.)
                                        13
be afforded an opportunity to amend that allegation and others. In sum, the
court erred by sustaining USAA’s demurrer to this cause of action without
leave to amend.
B. Breach of Contract Cause of Action
      1. Pleaded Breach of Contract Theories Apart From Duty to Defend
      Stewart contends the trial court erred by denying leave to amend his
breach of contract cause of action because it ignored the fact that his
allegation of USAA’s failure to provide a defense was only one of several
theories by which it breached the insurance contact. He points out that in
addition to alleging USAA breached the contract by failing to provide a
defense, he alleged USAA breached the contract by denying tender in a one-
line reply lacking an explanation; denying his request for an additional loss of
use payment based on a misrepresentation of the Policy; failing to respond to
his dispute over its denial of a defense; failing to promptly respond or provide
a reasonable explanation for denying coverage; and misrepresenting facts or
policy provisions relating to coverage. Stewart maintains that even if the
court was correct in ruling there was no duty to defend, it erred by sustaining
USAA’s demurrer because his allegations otherwise stated a breach of
contract cause of action apart from USAA’s failure to provide a defense.
      As stated, if Stewart’s complaint, liberally construed, can state a cause
of action under any theory or if there is a reasonable possibility amendment
could cure a defect, the trial court abused its discretion by sustaining the
demurrer without leave to amend. (See JPMorgan Chase Bank, N.A. v.
Ward, supra, 33 Cal.App.5th at p. 684.) We agree with Stewart that he can
allege USAA breached the insurance contract on a different theory than
USAA’s duty to defend, namely that USAA committed a breach by failing to
cover his claim for loss of use when in February 2017 he requested additional

                                       14
funds for that purpose. Stewart alleged that at the time he asked for an
additional loss of use payment, the premises was still under repair and he
was still displaced, but USAA denied his request. Stewart’s USAA renter’s
policy covered loss of use in two alternate ways when “a covered loss to
covered property or to the building containing the property makes the place
where you reside not fit to live in . . . .” Stewart alleges USAA treated the
fire causing his displacement as an occurrence. Not only is there a
reasonable possibility that Stewart can amend his pleading to state a claim,
but it appears to us that the complaint’s allegations reasonably and liberally
construed state a good breach of contract cause of action. As Stewart states a
basis for breach of the insurance contract, the court was obligated to overrule

USAA’s demurrer to that cause of action.6

6      Though we need not reach whether Stewart adequately alleged USAA
breached its duty to defend under the policy, we in any event would conclude
that the complaint plausibly alleges the unlawful detainer action against
Stewart was a “suit . . . for damages because of . . . property damage caused
by an occurrence to which this coverage applies . . . .” There is no doubt the
unlawful detainer action would not have occurred if not for the accidental
fire: the fire triggered the breach of lease and the ensuing unlawful detainer
action. The phrase “because of” in the policy denotes a causal connection.
(Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th
744, 757.) The policy in this case does not define the phrase “because of,” and
it introduces an ambiguity as to whether the unlawful detainer action or even
the damages in that action were because of property damage caused by an
occurrence (the accidental fire, treated as an occurrence by USAA). An
insurer owes a duty to defend where there is potential for coverage, even if
the claims are groundless or there ultimately may be no duty to indemnify.
(Scottsdale Insurance. Co. v. MV Transportation (2005) 36 Cal.4th 643, 654;
Horace Mann Insurance. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081.) And
doubts or ambiguity must be resolved in the insured’s favor. (Horace Mann,
at p. 1081.) Under the unique circumstances of this case (an underlying
occurrence that caused the landlord to file the unlawful detainer action, a
suit for damages) there is a plausible construction of the policy that triggered
USAA’s duty to defend such that the demurrer was improperly sustained.
                                       15
C. Cause of Action for Breach of the Covenant of Good Faith and Fair
Dealing
        “ ‘In addition to the right to sue an insurer in contract, if the insurer
acts unreasonably and without proper cause in failing to investigate a claim,
refusing to provide a defense, or either delaying or failing to pay benefits due
under the policy, the insured can sue in tort for breach of the covenant of
good faith and fair dealing.’ [Citation.] ‘Since a tort action for breach of the
covenant of good faith and fair dealing “is one seeking recovery of a property
right, not personal injury,” to prevail the insured must show proof of
economic loss.’ ” (Richards v. Sequoia Ins. Co. (2011) 195 Cal.App.4th 431,
438.)
        Here, Stewart alleges he suffered special damages, as well as damages
for eviction, loss of personal property, and costs incurred for relocation.
Having stated a claim for breach of contract due to USAA’s refusal to cover
his claim of loss of use, we conclude the complaint adequately states a cause
of action for breach of the covenant of good faith and fair dealing.

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                                DISPOSITION
      The judgment of dismissal is reversed and the matter remanded with
directions that the trial court overrule USAA’s demurrer to Stewart’s causes
of action for breach of contract and breach of the covenant of good faith and
fair dealing and grant Stewart leave to amend his negligence cause of action.
Stewart is entitled to his costs on appeal.

                                                                O’ROURKE, J.

WE CONCUR:

BENKE, Acting P. J.

GUERRERO, J.

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