CAROLYN DIXON, ET AL. VS. CYNDA WATKINS, ET AL.

August 25, 2026 Law and Motion Calendar PAGE 13 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________

2:00 PM LINE 3 24-CIV-02224 CAROLYN DIXON, ET AL. VS. CYNDA WATKINS, ET AL.

CAROLYN DIXON J EDWARD KERLEY CYNDA WATKINS KIRILL DEVYATOV

PLAINTIFFS’ MOTION FOR SUMMARY ADJUDICATION OF PLAINTIFFS’ FIRST CAUSE OF ACTION FOR DECLARATORY RELIEF AND STATE FARM’S TWENTY-SECOND AFFIRMATIVE DEFENSE

TENTATIVE RULING:

Plaintiffs Carolyn Dixon and David Bassi have moved for summary adjudication on their first cause of action for declaratory relief and Defendant State Farm General Insurance’s (“State Farm”) twenty-second affirmative Defense.

Plaintiffs’ motion is DENIED.

The Court declines to rule on the objections filed by Defendant, as the Court does not deem the evidence subject to those objections material to its disposition of this motion. (Code Civ. Proc., § 437c, subd. (q).)

PROCEDURAL ISSUES

The Court greatly appreciates receiving the binder of the pleadings, which made the motion easier to review.

Both Plaintiffs and Defendants improperly include numerous evidentiary facts rather than material facts in their separate statement in contravention of California Rules of Court, rule 3.1350(d)(2) [“The separate statement should include only material facts....”].) “The facts alleged or tendered in a summary judgment proceeding perform two different functions. As material facts they measure whether the plaintiff has alleged a cause of action. As evidentiary facts they establish whether the material facts have been proved.” (Carlsen v.

Koivumaki (2014) 227 Cal.App.4th 879, 884; id. at p. 884, fn. 6.) Courts can use their inherent power to strike undisputed facts that do not comply with the statutory requirements (Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 499–500; Reeves v. Safeway Stores, Inc. (2004) 121 Cal.App.4th 95, 106), but they do not have to strike them. (Young v. RemX Specialty Staffing (2023) 91 Cal.App.5th 427, 431.) The court does not exercise its discretion to strike the facts. Further, both sides appear to admit that the facts are undisputed and the issue is one of law based upon the language of the policies and statute, but then include irrelevant facts, which has made the court’s job harder.

August 25, 2026 Law and Motion Calendar PAGE 14 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ Plaintiffs’ separate statement improperly incorporates by reference other facts.

Plaintiffs improperly incorporates by reference the facts for the summary judgment on the twenty-second affirmative defense. Plaintiffs’ incorporation by reference defeats the purpose of the separate statement requirement, which is to allow the court to look at the disputed fact and the cited evidence to determine whether a triable issue of material fact exists.

LEGAL STANDARD

A motion for summary judgment shall be granted if the papers submitted show there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A defendant has met its burden of showing that a cause of action has no merit if defendant shows that one or more elements of the cause of action cannot be established, or that there is a complete defense to that cause of action. (Id., § 437c, subd. (p)(2). If a defendant meets this burden, the burden shifts to plaintiff to show that a triable issue of one or more material facts exists to that cause of action, or a defense thereto. (Id.) “A triable issue of material fact exists if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion, in accordance with the applicable standard of proof.” (Aguilar v.

Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).)

Because summary judgment denies the adverse party a trial, it should be granted with caution. (Assilzadeh v. California Fed. Bank (2000) 82 Cal.App.4th 399, 409.) Summary judgment law turns on issue finding rather than issue determination. (Diep v California Fair Plan Ass’n (1993) 15 Cal.App.4th 1205, 1207.) The court does not decide the merits of the issues, but merely discovers whether there are issues to be tried and whether the parties possess evidence that demands the analysis of a trial. (Melamed v City of Long Beach (1993) 15 Cal.App.4th 70, 76.)

A motion for summary judgment is not a substitute for a bench trial. (Assilzadeh, supra, at 409.) The trial court’s role involves no findings of fact. (Raghavan v. Boeing Co. (2005) 133 Cal.App.4th 1120.) Declarations of the moving party are strictly construed, those of the opposing party are liberally construed, and doubts as to whether a summary judgment should be granted must be resolved in favor of the opposing party. (Aguilar, supra, 25 Cal.4th at pp. 843-856.)

In most material respects, a motion for summary adjudication applies the same procedures as a motion for summary judgment. (Cal. Prac. Guide Civ. Pro. Before Trial, § 10:26 (TRG June 2026 update).)

BACKGROUND

Brief Factual Summary

Plaintiffs’ home was insured by Defendant State Farm for the period April 15, 2020, to April 15, 2021. (UMF 1.) On December 14, 2020, the Dixon house suffered a fire loss. (UMF 11.)

In a January 25, 2021, letter State Farm informed Plaintiffs: “We have requested a detailed building damage estimate for the repairs to your home . . . . The building damage settlement

August 25, 2026 Law and Motion Calendar PAGE 15 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ amount will be based on the estimate prepared; however, supplemental payments can be considered if additional repairs or increased charges are necessary[.]” The letter further stated: “State Farm® will pay to repair or rebuild covered building property subject to the terms and conditions set forth in your policy” and to “refer to your policy for a complete explanation of your benefits.” (UMF 14, 15.)

On March 22, 2021, State Farm wrote to Plaintiffs stating it was paying $161,718.01 on the dwelling based on its own attached estimate for repairs. The State Farm estimate amount of $161,718.01 was based on Replacement Cost Value (RCV). (UMF, 17.) The State Farm estimate defines Replacement Cost Value (RCV) as the “[e]stimated cost to repair or replace damaged property.” (UMF, 18.)

After Plaintiffs sought appraisal, on December 9, 2022, an appraisal award issued stating the “Replacement Cost Value” ($381,000) of the dwelling repairs, which excluded depreciation. (UMF, 22; Schaffer Decl., Ex. F, Appraisal Award, at p. 1, 2; and Ex. A. (to Appraisal Award), at p. 34.)

On February 26, 2024, Plaintiffs emailed to State Farm their replacement benefits claim submission seeking reimbursement of their incurred repair costs, totaling $1,043,391.10, up to their policy limits, minus amounts already paid by State Farm.

On March 22, 2024, State Farm, through its counsel Demo, informed the Plaintiffs as follows in relevant part:

As you know, State Farm previously paid you the sum of $381,000 under the Policy for the covered cost to repair the limited areas of your house which were damaged by the garage fire that occurred on December 14, 2020. That indemnity was made pursuant to the Policy appraisal award issued by the 3-member appraisal panel on December 13, 2022, in the amount of $381,000. *** Based on the appraisal award, State Farm's prior payment of the full appraisal award amount ($381,000), and all applicable Policy provisions, it is State Farm's position that it has paid all indemnity owed to you under Coverage A for the dwelling loss, with the possible exception of any code upgrade costs actually incurred.

(UMF 27.)

Brief Summary of Relevant Policies

Plaintiffs’ Policy includes Coverage A1 — Replacement Cost Loss Settlement — Similar Construction which states, in part:

We will pay up to the applicable limit of liability shown in the Declarations, the reasonable and necessary cost to repair or replace with similar construction and for

August 25, 2026 Law and Motion Calendar PAGE 16 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ the same use on the premises shown in the Declarations, the damaged part of the property covered under SECTION I - COVERAGES, COVERAGE A - DWELLING.

We will not pay for increased costs resulting from enforcement of any ordinance or law regulating the construction, repair or demolition of a building or other structure, except as provided under Option OL - Building Ordinance or Law Coverage.

(UMF 4.) The Policy also provides increased Coverage A dwelling limits under Option ID:

Option ID - Increased Dwelling Limit. We will settle losses to damaged building structures covered under COVERAGE A - DWELLING according to the SECTION I - LOSS SETTLEMENT provision shown in the Declarations.

If the reasonable and necessary cost to repair or replace damaged building structures exceeds the applicable limit of liability shown in the Declarations, we will pay the additional amounts not to exceed:

1. the Option ID limit of liability shown in the Declarations to repair or replace the Dwelling; or

2. 10% of the Option ID limit of liability to repair or replace building structures covered under COVERAGE A - DWELLING, Dwelling Extension.

(UMF 6; DAMF 19.)

The stated dwelling limit shown in the Declarations was $483,500. (UMF 3; DAMF 18.) Plaintiffs’ Policy also includes an appraisal provision, which states:

In case you and we shall fail to agree as to the actual cash value or the amount of loss, then, on the written request of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within 20 days of the request.

The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with us shall determine the amount of actual cash value and loss.

(UMF 21; DAMF 3.)

August 25, 2026 Law and Motion Calendar PAGE 17 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ LEGAL ANALYSIS

1. Plaintiffs Were Not Entitled Under the Policy or the Law to Recover on Supplemental Claims for Costs Exceeding the Appraisal Award

Insurance Code § 2051.5 (hereinafter statutory references are to the Insurance Code) governs the measure of indemnity under an open policy providing replacement coverage. The statute states, under subsection (a)(1):

Under an open policy that requires payment of the replacement cost for a loss, the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.

(§ 2051.5, subd. (a)(1).) The statute further provides, under subsection (a)(2), a two-step payment structure for open policies requiring the insured to repair or replace the damaged property prior to collecting the replacement cost from the insurer:

If the policy requires the insured to repair, rebuild, or replace the damaged property in order to collect the full replacement cost, the insurer shall pay the actual cash value of the damaged property, as defined in Section 2051, until the damaged property is repaired, rebuilt, or replaced. Once the property is repaired, rebuilt, or replaced, the insurer shall pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property, up to the limits stated in the policy.

(Id., subd. (a)(2).)

Plaintiffs’ State Farm Policy provides replacement coverage but does not require that Plaintiffs repair, rebuild, or replace damaged property prior to collecting the replacement cost. Accordingly, section 2051.5(a)(1) controls here.

Plaintiffs acknowledge that section 2051.5, subdivision (a)(2) does not control. (Reply, at p. 8:16- 18.) Plaintiffs assert that section 2051, subdivision (a)(1) is irrelevant but provides no explanation why. (Id., at p. 8:12-15.) It is unclear to the court how section 2051.5, subdivision (a) – which establishes the measure of indemnity for open policies – would not apply at all to Plaintiffs’ State Farm Policy. Plaintiffs also erroneously assert that Defendant agrees that subsection (a)(1) is irrelevant. (Ibid.) In fact, Defendant correctly asserts that it controls. (Oppo., at p. 17:5-10.)

Under section 2051.5, subdivision (a)(1), “the measure of indemnity is the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.” That is precisely what Plaintiffs received in the appraisal award: the replacement cost value of damaged property, as determined in an appraisal, without a deduction for depreciation. (Schaffer Decl., Ex. F, Appraisal Award, at p. 1, 2; and Ex. A. (Appraisal Award), at p. 34.)

August 25, 2026 Law and Motion Calendar PAGE 18 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________

The plain language of section 2051.5, subdivision (a)(1) – that “the measure of indemnity is the amount that it would cost” to replace the damaged property – supports that the determination of the replacement cost is a prospective exercise. Indeed, it must be, as section 2051.5, subdivision (a)(1) governs replacement policies that do not require repairs to be completed before the collecting replacement costs. Unlike the subsection (a)(2), subsection (a)(1) does not require that the insurer pay the difference between the actual cash value payment made and the full replacement cost reasonably paid to replace the damaged property.

Plaintiffs argue that benefits under Option ID (Increased Dwelling Limit) are measured “[a]fter the necessary replacement/repair is complete and expense incurred.” (PSS 9; Shaffer Decl., Ex. R, State Farm Operations Guide No. 75-107, STF 006929.) However, as Defendant explain – and as the express terms in the Declarations show – Option ID is triggered where the replacement cost to repair or replace damaged structures exceeds the applicable limits under Coverage A:

Option ID – Increased Dwelling Limit. We will settle losses to damaged building structures covered under COVERAGE A – DWELLING according to the SEC TION I – LOSS SETTLEMENT provision shown in the Declarations.

If the reasonable and necessary cost to repair or replace damaged building structures exceeds the applicable limit of liability shown in the Declarations, we will pay the additional amounts not to exceed:

1. the Option ID limit of liability shown in the Declarations to repair or replace the Dwelling; or 2. 10% of the Option ID limit of liability to repair or re place building structures covered under COVERAGE A – DWELLING, Dwelling Extension.

(Shaffer Decl., Ex. A, Policy and Declarations, STF006755.) Here, the replacement cost determined in the appraisal award was $381,000.00, which is below Plaintiffs’ Coverage A policy limit of $483,500.00. Under the terms of the Policy, Option ID was not triggered. Defendant raised this argument in its opposition and Plaintiffs did not address it in their reply. Here, Option ID does not entitle Plaintiffs to supplemental claims for incurred costs, nor does it support an interpretation that Coverage A requires indemnification of actual costs incurred, as opposed to an estimate or appraisal of the replacement cost to be provided up front.

Plaintiffs’ other arguments that the Policy allows for supplemental claims for incurred costs likewise fail. Plaintiffs argue that language in the Policy contemplates loss settlement for actual incurred costs, rather than estimated costs of replacement – including a heading titled “Replacement Cost Loss Settlement” and language promising to pay “the reasonable and necessary cost to repair.” This argument is not persuasive, especially given Defendants’ statutory obligation under section 2051.5, subdivision (a)(1) to indemnify Plaintiffs for the replacement costs of the damage prior to the actual repair or replacement. The language in State Farm’s Policy is consistent with the measure of indemnity established in section 2051.5, subdivision (a)(1).

August 25, 2026 Law and Motion Calendar PAGE 19 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ The arbitration is final and determined the amount of the loss as measured by the replacement value. Plaintiffs agree throughout their briefing that the arbitration award is final is not being challenged. However, they argue that the award does not bar them from obtaining additional monies spent after the arbitration award. Their position is not supported by the law or the insurance policy.

On March 22, 2021, State Farm wrote the Plaintiffs: “Our payment in the amount of $161,718.01 in settlement of your Dwelling claim is enclosed.” (Schaffer Decl., Ex. D, STF3664.) Plaintiffs thought the amount was too low and demanded appraisal pursuant to section 2071 of the value of the loss under Coverage A-Dwelling. (Schaffer Decl., Exs. S, STF745, U, STF3934; UMF 35.) Sections 2070 and 2071 control the appraisal process. “ ‘Since its substance was first enacted in 1909, ... section 2071 has directed that the standard form for fire insurance policies include an appraisal provision to settle disagreements concerning the amount of loss.’ (Gebers v.

State Farm General Ins. Co. (1995) 38 Cal.App.4th 1648, 1651, 45 Cal.Rptr.2d 725, italics added.) The policy must provide for an appraisal when ‘the insured and this company shall fail to agree as to the actual cash value or the amount of loss.’ (§ 2071, subd. (a), italics added.) It must also state the appraisers ‘shall ... appraise the loss ... and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss.’ (Ibid., italics added.)” (Kacha v.

Allstate Ins. Co. (2006) 140 Cal.App.4th 1023, 1032; accord Louise Gardens of Encino Homeowners' Assn., Inc. v. Truck Ins. Exchange, Inc. (2000) 82 Cal.App.4th 648, 652, fn. 2.) “This procedure is mandated by the statute.” (Louise Gardens of Encino Homeowners' Assn., Inc. v. Truck Ins. Exchange, Inc. at p. 652.) The parties submitted their dispute to arbitration and the arbitrators issued an arbitration award which set out the replacement cost value and actual cash value. ((Schaffer Decl., Ex. F at p. 1.)

This appraisal award decides the loss under Coverage A Dwelling and complies with section 2071. Plaintiffs failed to appeal the contest this award.

Plaintiffs claim that they can still seek additional replacement costs because the language in the policy about the appraisal refers to “loss” and not “replacement costs. The policy, however, tracks the language of section 2071, which uses the word “loss.” Their attorney’s demand for the appraisal uses the word “loss.” (Schaffer Decl., Ex. U, STF3934.) Under the plain meaning of the policy, the loss is what Plaintiffs lost, their home, and the replacement cost is the manner of compensating for the lost, i.e., how to value the loss.

The case of Devonwood Condominium Owners Assn. v. Farmers Ins. Exchange (2008) 162 Cal.App.4th 1498 is instructive in demonstrating that the arbitrators’ determination is final. As stated in the opinion: “This dispute centers around Farmers's obligations under a written property insurance policy it issued to Devonwood, a California homeowners association. When a fire occurred in one of Devonwood's units, a Hercules, California, condominium in 2004, Devonwood submitted a claim for fire damage to Farmers.

When the parties could not agree on the value of the loss, Devonwood demanded that an appraisal be conducted by a panel pursuant to the policy's appraisal provision. ... [¶] This appraisal panel, after holding hearings and considered evidence submitted by the parties, issued a unanimous written “appraisal of insurance claim award” in June 2006. The panel stated that it had considered all material facts and available information pertaining to Devonwood’s claim, and decided on “an appraisal Award as described

August 25, 2026 Law and Motion Calendar PAGE 20 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________ below which in the appraisal panel's opinion restores the building to its pre-loss condition,” based on the condition of the property in April 2005. The panel then stated two categories of replacement cost values.” (Id. at p. 1501 [emphasis added].) The parties did not dispute that the appraisal award was a “binding determination of the amount of loss” and did not dispute that “their contractual agreement regarding this appraisal award is consistent with the language contained in the standard form fire insurance policy of section 2071.” (Id. at p. 1504.)

The Court of Appeal reversed the trial court, which had revised the arbitration award, finding that the judgement did not conform to the appraisal award in violation of Code of Civil Procedure section 1287.4.” (Id. at p. 1503.) The judgment was for a different amount than the amount in the appraisal and thus was improper. (Id. at p. 1506.)

The same process occurred here. State Farm offered its settlement for the Dwelling claim, Plaintiffs sought an appraisal for their dwelling, and the award provided compensation for that loss based upon replacement value, the language provided for in the policy. The appraisal was a binding determination on the amount of the loss. While the costs increased after the appraisal, had the costs gone down by the time Plaintiffs rebuilt, they would not have had to reimburse State Farm for the monies paid. Thus, there is nothing inherently unfair about the process. State Farm followed the requirements of the insurance policy and section 2051.5, subdivision (a), the language that controls in this case.

Plaintiffs further argue that State Farm’s July 25, 2021, letter to Plaintiffs stated that an initial payment would be based of its estimate of damage and that “supplemental payments can be considered if additional repairs or increased charges are necessary.” The statement that the initial payment would be based on its estimate is consistent with section 2051.5, subdivision (a), which contemplates a prospective assessment of the replacement cost. And the statement regarding supplemental payments for additional repairs or increased charges are necessary is consistent with Option OL, which provides benefits for repair costs driven by application building codes. Plaintiffs have affirmatively stated that Option OL does not bear on the dispute here. (Reply. at 9:19-24.)

2. The Court Cannot Grant Summary Adjudication on Plaintiffs’ Claim for Declaratory Relief or Defendant’s Twenty-Second Affirmative Defense

Plaintiffs seek a declaratory judgment stating the following:

a. Pursuant to the Policy, State Farm’s limit of liability was for the reasonable and necessary cost to make repairs – that is, the amount necessarily spent to make repairs, up to the limit of the Policy, including the increased limits afforded by Options ID and OL;

b. The filing of the appraisal award under the Policy and pursuant to Insurance Code § 2071 did not set the limit of State Farm’s liability for replacement benefits or benefits under Option ID or Option OL; and

August 25, 2026 Law and Motion Calendar PAGE 21 Judge: HONORABLE NANCY L. FINEMAN, Department 04 ________________________________________________________________________

c. State Farm’s denial of the Dixon’s claims for the reasonable and necessary cost of repair, on the basis that the appraisal award establishes for all purposes and for all time State Farm’s indemnity obligation under the policy, violates the Policy

(FAC, ¶ 120.)

For the reasons addressed above, this motion must be denied as to all three declaratory statements.

To the first statement, as explained above, Plaintiffs have not established that they were entitled to the amounts “necessarily spent” to make repairs. The court interprets “necessarily spent” to mean the actual-incurred replacement costs, and not to include an estimation or appraisal of replacement costs. To the second statement, the appraisal award set the limit on State Farm’s liability because Plaintiffs have not shown that any supplemental claims were required or allowed under the Policy or the law. And to the third statement, State Farm did not violate its Policy by denying Plaintiffs’ supplemental claims for incurred costs, because the language of the policy does not require payment of incurred costs in this case.

For the same reasons, the court cannot grant summary adjudication of Defendant’s twenty-second affirmative defense – “that State Farm satisfied its obligations under the policy by paying the appraisal award, and no further contract benefits are owed to plaintiffs” – in Plaintiffs’ favor.

Accordingly, Plaintiffs’ motion for summary adjudication is DENIED. Since Defendants did not file their own motion for summary adjudication, the court cannot determine the merits of these causes of action. The parties are to meet-and-confer to decide whether they can reach a stipulation regarding the import of the court’s findings.

If the tentative ruling is uncontested, it shall become the order of the Court. Thereafter, counsel for Defendant State Farm shall prepare a written order consistent with the Court’s ruling for the Court’s signature, pursuant to California Rules of Court, rule 3.1312, and provide written notice of the ruling to all parties who have appeared in the action, as required by law and the California Rules of Court.