JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al.

If a litigant has been granted a fee waiver and requests a court reporter, the party must submit a Request for Court Reporter by a Party with a Fee Waiver (CV/E-211) and it must be filed with the clerk at least 10 days prior to the hearing or at the time the proceeding is scheduled if less than 10 days away. Once approved, the clerk will be forward the form to the Court Reporter’s Office and an official reporter will be provided.

TENTATIVE RULING: *** The Court finds in its file no proof of service demonstrating moving defendant’s service of the Notice of Disclosure issued on 3/14/2025, despite being directed to serve all other parties with the Notice of Disclosure “forthwith.” Moving defendant is directed to serve the Notice of Disclosure on all other parties forthwith and to file proof of service within five (5) court days. ***

The notice of hearing on demurrer does not provide notice of the Court’s tentative ruling

24CV023707: JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al. 10/02/2025 Hearing on Demurrer to the Third, Fourth, and Fifth Causes of Action to Complaint in Department 53

system, as required by Local Rule 1.06. Moving counsel is directed to contact opposing counsel and advise him/her of Local Rule 1.06 and the Court’s tentative ruling procedure and the manner to request a hearing. If moving counsel is unable to contact opposing counsel prior to the hearing, moving counsel is ordered to appear at the hearing in person, by Zoom or by telephone.

Defendant National Union Fire Insurance Company’s demurrer to the complaint of plaintiff Johannsen is ruled upon as follows.

*** If oral argument is requested, the parties must at the time oral argument is requested notify the clerk and opposing counsel of the specific issues and/or causes of action discussed below that will be addressed at the hearing. Counsel are also reminded that pursuant to local rules, only limited oral argument is permitted on law and motion matters. ***

Factual Background

This action arises out of a motor vehicle accident occurring when while plaintiff was driving her own vehicle while working for her employer, co-defendant AccentCare, and the denial of plaintiff’s subsequent claim for underinsured motorist benefits pursuant to an automobile insurance policy issued by the demurring defendant to plaintiff’s employer, co-defendant AccentCare. The complaint filed on 11/20/2024 purports to assert six (6) separate causes of action for breach of contract, insurance bad faith, reformation of contract, breach of reformed contract, insurance bad faith relative to reformed contract, and declaratory relief.

Defendant now demurs to the third, fourth and fifth causes of action on the grounds each fails to plead sufficient facts, as described in greater detail below. Plaintiff opposes.

Legal Standards for Demurrer

A demurrer tests the legal sufficiency of the pleadings, raising issues of law, not fact, regarding the form or content of the opposing party’s pleading. (Code of Civil Procedure §422.10, §589.) A demurrer may only challenge defects on the face of the complaint or from matters that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) However, the face of the complaint includes facts contained in exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) A demurrer can be utilized where a complaint itself is incomplete or discloses some defense that would bar recovery. (Guardian North

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV023707: JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al. 10/02/2025 Hearing on Demurrer to the Third, Fourth, and Fifth Causes of Action to Complaint in Department 53

Bay, Inc. v. Superior Court (Myers) (2001) 94 Cal.App.4th 963, 971-972.)

In reviewing the sufficiency of a complaint against a general demurrer, courts treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. Matters which may be judicially noticed may also be considered. The complaint is to be given a reasonable interpretation, reading it as a whole and its parts in their context. (Farmers v. Zerin (1997) 53 CaI.App.4th 445, 451.) Consideration of extrinsic evidence or facts asserted in the memorandum supporting or opposing the demurrer is improper. (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

A demurrer may be sustained only if the complaint lacks any sufficient allegations to entitle the plaintiff to relief. (Financial Corp. of America v. Wilburn (1987) 189 Cal. App. 3d 764, 778.) “Plaintiff need only plead facts showing that he may be entitled to some relief, we are not concerned with plaintiff’s possible inability or difficulty in proving the allegations of the complaint.” (Highlanders, Inc. v. Olsan (1978) 77 Cal.App.3d 690, 696-697.) “[Courts] are required to construe the complaint liberally to determine whether a cause of action has been stated, given the assumed truth of the facts pleaded.” (Picton v.

Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.) Still, the plaintiff has the burden of showing that the facts pleaded are sufficient to establish every element of the cause of action. (See, e.g. Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031; Sui v. Price (2011) 196 Cal.App.4th 933, 938.) The allegations must be factual and specific, not vague or conclusionary. (Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43–44.)

A demurrer admits the truth of all material facts properly pled and the sole issue raised by a general demurrer is whether the facts pled state a valid cause of action - not whether they are true. (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Finally, a demurrer may only be sustained where it disposes of an entire cause of action. (See, e.g., Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

Discussion

Reformation. According to the demurring defendant, plaintiff’s third cause of action for reformation of the insurance contract issued to co-defendant AccentCare fails because it is premised on insufficiently-pled conclusory allegations and does not include any properly-alleged facts entitling plaintiff to reformation based either on mutual or unilateral mistake or on fraud. (Mov. MPA, p.5:2-16.) In particular, defendant insists the complaint current allegations are “nearly identical to what [was] found to be insufficient in Mercury [Ins. Co. v. Pearson (2008) 169 Cal.App.4th 1064]” and plaintiff fails to allege

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV023707: JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al. 10/02/2025 Hearing on Demurrer to the Third, Fourth, and Fifth Causes of Action to Complaint in Department 53

facts essential to establish the existence of either a mutual or unilateral mistake. (Id., at p.5:17-p.6:25.) Finally, the complaint does not meet the standard for pleading with specificity those facts necessary to establish fraud and similarly, reformation is not available even if plaintiff’s allegation that the policy fails to comply with California law is true. (Id., at p.6:26-p.7:19.)

The opposition counters, claiming that the complaint need only allege “ultimate facts” and adequately pleads not only the “first two elements of reformation” but also “ultimate facts establishing fraud, mistake and inequitable conduct,” the latter of which was not discussed in the moving papers. (Opp., p.4:18-p.9:3.) Plaintiff further asserts that defendant “cannot use its own unlawful drafting as a shield” to the reformation claim and the authorities cited in the moving papers are inapposite. (Id., at p.9:4-p.10:12.)

The demurrer to the reformation cause of action is overruled. While the First District Court of Appeal in Mercury Ins. Co. v. Pearson, supra, did find that the crosscomplaint’s “only allegation concerning reformation” (i.e., “[T]o the extent that the written terms of the policy may be read to exclude [Pearson's] entitlement to uninsured motorist benefits, said terms do not comport with the express intent of the parties and the course of dealings of the parties, and should, therefore, be reformed”) was insufficient to state a claim for reformation based on mistake (Mercury Ins.

Co., supra, at 169 Cal.App.4th 1073), this excerpt is not necessarily dispositive of the reformation cause of action at issue here since the third cause of action includes a number of additional allegations bearing on the alleged existence of unilateral and mutual mistake claimed to support reformation including but not limited to the following:

44. Prior to the accident at issue here, plaintiff intended and reasonably expected that the Policy would provide uninsured/underinsured motorist benefits. Defendants all intended and expected that the Policy would provide up to $1,000,000 in uninsured/underinsured motorist benefits. All of the parties reasonably expected and intended that the Policy would conform to California law.

45. Insurance Defendants now contend that they do not owe any underinsured motorist benefits to Plaintiff, that there is a basis in the Policy for refusing to provide those benefits, and that the Policy is written in a fashion that is both enforceable and that lawfully excludes Plaintiff from such benefits.

46. If it is determined that the Policy as written does not actually provide Plaintiff with uninsured/underinsured motorist benefits, then that is because the Policy, as written, does not comply with California law. It must therefore be reformed to comply with the law.

47.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV023707: JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al. 10/02/2025 Hearing on Demurrer to the Third, Fourth, and Fifth Causes of Action to Complaint in Department 53

48. Alternatively, if it is determined that the Policy does not actually provide the Plaintiff with uninsured/underinsured motorist benefits, then it resulted from a mutual mistake of fact, or from the unilateral mistake of Plaintiff and/ or of AccentCare, of which Insurance Defendants knew or suspected. The unilateral mistake which defendants knew, or suspected was that plaintiffs and/or AccentCare believed the Policy would provide up to $1,000,000 of underinsured motorist benefits. Insurance Defendants knew that Plaintiff and/or AccentCare believed that there was $1,000,000 of uninsured/underinsured motorist coverage, and allowed that belief to persist, while knowing that once Plaintiff (or others similarly situated) sought to be paid those benefits, Insurance Defendants would refuse to do so and take the position that the Policy did not provide uninsured/underinsured motorist coverage for parties like Plaintiff or vehicles like the Plaintiff’s vehicle.

49. Plaintiff therefore requests that this Court reform the contract to conform with the true understanding of the parties and/or to protect Plaintiff against the mutual mistake, unilateral mistake and/or defendants' misrepresentations as alleged above. Plaintiff requests that this Court apply the reformation to Insurance Defendants and defendant AccentCare, who were the contracting parties, as well as to Plaintiff, who is and was an insured under the Policy and intended third party beneficiaries of the Policy and the contracts between AccentCare and Insurance Defendants (including the Policy and the contract(s) to obtain insurance coverage to cover Plaintiff). (Compl., pp.11-12.)

Moreover, defendant’s reliance on Girard v. Miller (1963) 214 Cal.App.2d 266 for the proposition that the complaint here “fails to plead any facts demonstrating how, when, and why any [mutual] mistake occurred” is misplaced. (See, Opp., p.6:6-13.) Under more recent California law, a plaintiff need only plead facts showing that he may be entitled to some relief (see, e.g., Highlanders, Inc. v. Olsan (1978) 77 Cal.App.3d 690, 696-697) and complaints must be construed liberally and as a whole to determine whether a cause of action has been stated, given the assumed truth of the facts pleaded (see, e.g., Picton v.

Anderson Union High School Dist. (1996) 50 Cal.App.4th 726). Under Code of Civil Procedure §425.10, a complaint need only include a statement of the facts constituting the cause of action “in ordinary and concise language” and California Supreme Court precedent indicates only “ultimate facts” are essential, without the need for each “evidentiary fact” which might eventually form proof of the allegations. (See, e.g., CA v. William S. Hart Union High School District (2012) 53 Cal.4th 861, 872.) This is especially true since “[t]he distinction between conclusions of law and ultimate facts is not at all clear and involves at most a matter of degree. (See, e.g., Perkins v.

Superior Court (1981) 117 Cal.App.3d 1, 6.) For these same reasons,

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV023707: JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al. 10/02/2025 Hearing on Demurrer to the Third, Fourth, and Fifth Causes of Action to Complaint in Department 53

defendant’s contentions relating to plaintiff’s failure to plead specific facts supporting reformation based on unilateral mistake likewise fall short. (See, Mov. MPA, p.6:14-26.)

Defendant’s reference to case law holding that fraud must be pled with a heightened degree of factual particularity (see, Mov. MPA, p.6:26-p.7:9) is inapposite insofar as the third cause of action does not purport to state cause of action for fraud but rather only reformation of contract based on various different theories. The moving papers identify no binding authority which requires such factual specificity in the context of a cause of action for reformation but nevertheless, the authorities cited in the previous paragraph which demonstrate a plaintiff need only plead “ultimate facts” rather than “evidentiary facts” are equally applicable here.

Additionally, even under the stricter rules of pleading under common law, it is well-stablished that less factual particularity is required when the relevant facts lie more within the knowledge of the opposing party. (See, e.g., Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.) When viewed in this light, this Court cannot conclude that the third cause of action fails to adequately plead facts sufficient to support a claim of reformation of contract based on fraudulent conduct.

Finally, defendant’s reliance on Armendariz v. Foundation Health (2000) 24 Cal.4th 83 for the proposition that “reformation is not available to cure any alleged illegality in a contract” is similarly unavailing. First, Armendariz is factually distinguishable inasmuch as the primary issues there related to the enforceability of an arbitration agreement against an employee making statutory claims under the Fair Employment and Housing Act and the severability of the unconscionable terms of arbitration agreement.

Second, to the extent Armendariz does indicate that “reformation is not available to cure any alleged illegality in a contract” as claimed by defendant, plaintiff has correctly cited California Fair Plan Assn. v. Garnes (2017) 11 Cal.App.5th 1276 for the more specific proposition that where an insurance policy contains terms which conflict with the law, the impermissible terms will not be enforced and courts shall “read into the policy the terms required by [law].” (Id., at 1307-1308.) Thus, the allegations in Paragraph 46 that the subject insurance policy, “as written, does not comply with California law” may well be shown to justify a different interpretation of the policy.

For all these reasons, defendant’s demurrer to the reformation cause of action shall be overruled and the Court need not address the remaining arguments advanced in opposition.

Breach of Reformed Contract. Defendant next contends this fourth cause of action fails as a matter of law “because it is derivative of the failed reformation claim and because the policy has never been reformed to express any intention by the parties to

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV023707: JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al. 10/02/2025 Hearing on Demurrer to the Third, Fourth, and Fifth Causes of Action to Complaint in Department 53

insure plaintiff.” (Mov. MPA, p.7:22-p.9:16.)

The Court overrules the demurrer to the fourth cause of action as well. First, the mere characterization of this cause of action as “derivative” of the third cause of action for reformation is of no legal consequence since defendant’s challenge to the reformation cause of action has already been rejected. Second, this Court does not read R & B Auto Center, Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327, the sole support cited for defendant’s suggestion that plaintiff cannot at this time plead a valid claim for breach of the reformed insurance contract (see, Mov.

MPA, p.8:8-p.9:12), as broadly as defendant. According to defendant, “R & B stands for the proposition that a cause of action for breach of reformed contract necessarily requires an already reformed contract.” (Id., at p.9:5-7.) This Court is not persuaded by this characterization especially when, as conceded by defendant, the Court of Appeal clarified in Footnote 11 that the plaintiff, R & B, is not “precluded from seeking damages with respect to the breach of a reformed insurance contract, should R & B prevail on a reformation theory on remand.” (R & B Auto Center, Inc., supra, 140 Cal.App.4th at 349, Fn. 11.)

Indeed, aside from constituting non-binding dicta, this footnote not only falls short of demonstrating that plaintiff in the case at bar cannot currently allege a cause of action for breach of the reformed insurance policy (the outcome of which will necessarily turn of the success or failure of the preceding reformation claim) but also at a minimum tends to show that plaintiff’s claim for breach based on the reformed insurance contract is actually permitted.

Bad Faith based on Reformed Contract. Defendant argues this fifth cause of action for bad faith based on the yet-to-be reformed contract is subject to demurrer “because it is derivative of the failed reformation claim and because bad faith cannot be applied retroactively.” (Mov. MPA, p.9:17-p.10:18.)

Defendant’s demurrer to the fifth cause of action for bad faith is overruled as well. First, as already noted, defendant’s challenge to the third cause of action for reformation fell short. Second, while the Court of Appeal explained in R & B Auto Center, supra, that if an insurer acted reasonably at the time it denied the insurance claim, it may not later “be held liable for bad faith for failing to have the foresight to know that the policy would be reformed,” this does not necessarily constitute a bar to the fifth cause of action inasmuch as defendant has not yet been found to have acted reasonably in denying plaintiff’s underinsured motorist claim.

Third, this Court cannot overlook the commentary found in Footnote 12 of R & B Auto Center, supra, where the Court of Appeal explained “it would be inequitable to use a judgment of reformation to provide a retroactive basis for a bad faith claim in the particular context before us.” (R & B Auto Center, supra, 140 Cal.App.4th at 354, Fn. 12 [underline added for emphasis].)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

24CV023707: JOHANNSEN vs NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al. 10/02/2025 Hearing on Demurrer to the Third, Fourth, and Fifth Causes of Action to Complaint in Department 53

Notably, as pointed out by the opposition, R & B Auto Center did not come to the Court of Appeal after a challenge to the operative complaint but rather only after the trial court ruled on “dozens of motions in limine” and granted two motions for nonsuit, all of which “largely gutted the [plaintiff’s] case.” (Id., at 332-333.) As such, defendant’s suggestion that plaintiff’s cause of action for bad faith based on the reformed contract is categorically barred as a matter of law does not withstand scrutiny.

Disposition

For the reasons explained above, defendant National Union Fire Insurance Company’s demurrer to the complaint OVERRULED in its entirety.

If not already done, defendant to file and serve its answer to complaint within 10 court days.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)