MALIKA MOUSSAVY and KAMRAN SAMAKAR v. FIRE INSURANCE EXCHANGE

(Spring Street Courthouse: Dept. 14) September 2, 2026 DEPARTMENT 14 LAW AND MOTION RULINGS

STATE OF CALIFORNIA¿ ¿ FOR THE COUNTY OF LOS ANGELES DEPARTMENT 14 ¿ ¿ MALIKA MOUSSAVY and KAMRAN SAMAKAR, Plaintiffs,¿ v. FIRE INSURANCE EXCHANGE, Defendant.¿¿ | Case No. 26STCV04355 ¿¿¿¿ Hearing Date: September 2, 2026 Time: 9:00 a.m. ¿ [TENTATIVE] ORDER RE: ¿ DEFENDANT FIRE INSURANCE EXCHANGE'S DEMURRER TO PLAINTIFFS' FIRST AMENDED COMPLAINT | I.

Background

On February 9, 2026, Plaintiffs Mallika Moussavy and Kamran Samakar filed their complaint for breach of contract, insurance bad faith, and violations of California Business and Professions Code section 17200 ("Unfair Competition Law" or "UCL") against Defendant Fire Insurance Exchange ("Defendant").

Plaintiffs allege that they were victims of the 2025 wildfires in Eaton Canyon ("Eaton Fire"), which left their home damaged by smoke. Plaintiffs allege that their insurer, Defendant, used their own network of vendors to undervalue the damage and avoid paying Plaintiffs' insurance claims in full.

On May 20, 2026, the court sustained Defendant's demurrer to the complaint with leave to amend. On June 22, 2026, Plaintiffs filed a first amended complaint.

On July 24, 2026, Defendant demurred to the cause of action for violations of the UCL, arguing that Plaintiffs' insurance policy language does not violate Insurance Code section 2071. Defendant further argues that Defendant did not deny coverage of Plaintiffs' smoke damage claims. Defendant also argues that Plaintiffs' demand for injunctive relief falls outside the scope of the UCL.

On August 20, 2026, Plaintiffs opposed, arguing their UCL claim is properly predicated on their claim for common law insurance bad faith. Plaintiffs also argue that Defendant applied its policy language to limit and deny coverage. Plaintiffs argue that they properly seek injunctive relief

On August 26, 2026, Defendant replied, arguing that Plaintiffs' insurance bad faith allegations alone are insufficient to support their UCL claim. Defendant also reiterates that the request for injunctive relief falls outside the scope of the UCL.

Plaintiffs' theory under Insurance Code section 2071 is without merit, but the complaint states sufficient facts alleging Defendant engaged in bad faith insurance claims handling practices that constitute unfair business practices. The complaint also properly seeks injunctive relief enjoining Defendant from continuing to engage in such practices. Accordingly, the demurrer is overruled.

II. Judicial Notice

Defendant requests that the court take judicial notice of Bulletin 2025-7 dated March 7, 2025, issued by the California Department of Insurance addressing "Insurance Coverage for Smoke Damage and Guidance for Proper Handing of Smoke Damage Claims for Properties Located in or near California Wildfire Areas." (Defendant's RJN, Exh. 1.)

Plaintiffs request that the court take judicial notice of the "Order to Show Cause, Notice of Hearing, Notice of Monetary Penalty, and Order to Cease and Desist," issued by the California Department of Insurance to the California Fair Plan Association on July 31, 2025." (Plaintiffs' RJN, Exh. 1.)

The requests are granted under Evidence Code section 452(c).

III.

Discussion

A.

Legal Standard

As a general matter, in a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿"A demurrer tests the pleading alone, and not the evidence or facts alleged." (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.)

As such, the court assumes the truth of the complaint's properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.)

However, "[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend." (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245.)

B. Whether the UCL claim is supported by any of Plaintiffs' theories.

Added to the First Amended Complaint is a claim that Defendant's policy violated Insurance Code section 2071, rendering the policy "illegal." (FAC P.P. 63-65.) Defendant argues that Plaintiffs' new theory supporting the UCL claim fails because the insurance policy language at issue does not violate section 2071.

Citing Another Planet Entertainment, LLC v. Vigilant Insurance Company, (2024) 15 Cal. 5th 1106 ("Another Planet"), Defendant argues that physical loss or damage to property requires a "distinct, demonstrable, physical alteration to the property." (Motion at p. 7.)

Defendant also cites Gharibian v. Wawanesa General Ins. Co. (2025) 108 Cal.App.5th 730, where the Court of Appeal held that an insurer did not breach an insurance contract because there was no evidence of direct physical loss to an insured's property caused by ash or smoke. (Motion at p. 7.) Defendant argues that these cases "interpreted and upheld similar policy language requiring some form of physical loss or damage" and that the California Department of Insurance ("DOI") is aware of these cases. (Id.)

Defendant also argues that Insurance Code section 2071 likely does not apply to smoke damages because "loss from the peril of smoke is not specifically included within the perils described in Section 2071." (Id. at p. 9.)

In opposition, Plaintiffs argue that Defendant unreasonably applied its policy language to limit coverage to less than what is required under Insurance Code section 2071 and deny coverage for smoke damage. (Opp. at p. 6.) Plaintiffs argue that neither Another Planet nor Gharibian support Defendant's arguments because neither case discussed Insurance Code section 2071. (Id.)

Plaintiffs also argue that regardless of whether the insurance policy language violates Insurance Code section 2071, Plaintiffs' UCL claim is predicated on Defendants' ongoing common law bad faith claims handling. (Id. at pp.3-4.)

In reply, Defendant argues that "Plaintiffs downplay their illegal policy allegation in the FAC" and that Plaintiffs' bad faith claims handling allegations alone do not support a UCL claim. (Reply at p.2.)

a. Unlawful Business Practice

The First Amended Complaint's new allegations include the following: "63. Plaintiffs' Policy insuring clause provides: Section I - Loss or Damage Insured Coverage A (Dwelling), Coverage B (Separate Structures), and Coverage C (Personal Property) We insure accidental direct physical loss or damage to that property described in Section I - Types of Property Insured.

Loss or damage means theft of or distinct and demonstrable, physical injury to or destruction of the property (emphasis added). Loss or damage does not include: 1. functional impairment; 2. economic obsolescence; 3. the loss of use of property unless the property was stolen or sustained accidental, direct, distinct, and demonstrable, physical injury or destruction (emphasis added); 4. any actual or perceived decrease in the market value; 5. any reduction in serviceability of property; or 6. any sentimental value, however measured or determined.

64. In contrast, California Insurance Code Section 2071, setting the minimum requirements for fire insurance policy in California, requires an insurer to insure: "against all LOSS BY FIRE, LIGHTNING AND BY REMOVAL FROM PREMISES ENDANGERED BY THE PERILS INSURED AGAINST IN THIS POLICY, EXCEPT AS HEREINAFTER PROVIDED"

65. There is no exclusion or limitation for direct, distinct, and demonstrable physical injury or destruction in the statute. There is no exclusion or limitation for contamination in the statute. The statute plainly requires coverage for all loss by fire, which includes smoke as a byproduct of fire. Farmers instead determines its coverage obligations and scope in disregard of California law. Farmers decides it will only cover losses that it determines are "direct, distinct, and demonstrable."

66. Farmers' illegal policy language has influenced its investigation, and ultimately, Plaintiffs' recovery and ability to return home safely." (FAC at P.P.63-66.)

To successfully plead a UCL claim for unfair business practices, a plaintiff must allege facts justifying relief in the form of protecting the public from unfair business practices or deceptive advertising. (Day v. AT&T Corp. (1998) 63 Cal.App.4th 325, 331-332.)

A plaintiff must plead and prove that the defendant engaged in a business practice that was either unlawful (i.e., is forbidden by law) or unfair (i.e., harm to victim outweighs any benefit) or fraudulent (i.e., is likely to deceive members of the public). (Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 206.)

"The 'unlawful' practices prohibited by section 17200 are any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made." (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838-839.)

"While the scope of conduct covered by the UCL is broad, its remedies are limited. [Citation.] A UCL action is equitable in nature; damages cannot be recovered. . . . [U]nder the UCL, '[p]revailing plaintiffs are generally limited to injunctive relief and restitution.' " (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1144.)

Insurance Code section 2071 requires coverage for "all LOSS BY FIRE . . . to the property." Under California law, a loss "to" property necessarily connotes physical damage. (California Fair Plan Assn. v. Garnes (2017) 11 Cal.App.5th 1276, 1300 [holding that phrase "total loss to a structure" in a fire insurance statute "unmistakably contemplates a quantum of physical damage."].)

Here, the fact that the policy requires a covered loss to be "direct, distinct, and demonstrable physical injury or destruction" comports with Insurance Code section 2071 because the section is already limited to physical damage.

Additionally, in Another Planet, the California Supreme Court explained that "'direct physical loss or damage to property' occurs in the presence of contaminants such as bacteria, smoke, asbestos, fumes, or mold." (Another Planet, supra, 15 Cal.5th at p.1128, quoting United Talent Agency v. Vigilant Insurance Company (2022) 77 Cal.App.5th 821, 831.)

Like Plaintiffs' insurance policy here, the insurance policy at issue in Another Planet limited coverage to "direct physical loss or damage" to the property at issue. (Id. at p. 1119.) In other words, the California Supreme Court has found that language limiting coverage to a direct physical loss does not preclude claims for smoke damage.

Accordingly, such language does not limit coverage to less than the coverage required under Insurance Code section 2071. Although Plaintiffs argue in the complaint and the opposition that Defendant applied the insurance policy to limit coverage to smoke damage that only its adjusters can visibly observe, the parties' dispute over whether the smoke damage was detectable had no bearing on whether the insurance policy language at issue limited coverage in violation of Insurance Code section 2071.

b. Unfair business practice

As for Plaintiffs' bad faith claims handling allegations, the First Amended Complaint added to the third cause of action under Business & Professions Code section 17200, the following: "178. Farmers' conduct also constitutes "unfair" business practices within the meaning of the UCL. Farmers' actions offend public policy, are immoral, unethical, oppressive, and unscrupulous, and cause substantial injury to consumers that is not outweighed by any countervailing benefit.

179. Specifically, Farmers has engaged in a pattern and practice of deliberately under investigating and minimizing legitimate claims, including Plaintiffs', by exclusively relying on a network of biased vendors, delaying claim resolution without justification, and denying benefits based on pretextual grounds. Farmers has deployed biased vendor networks, delayed resolution, and pretextually denied benefits owed and outstanding because its Policy limitations - specifically limitations requiring direct, demonstrable, distinct physical loss - are subjective, easily manipulated, and impermissible under the minimum insuring requirements provided in California Insurance Code Section 2071.

180. Specifically and further, Farmers retained Hygiene Technologies and PW Stephens to evaluate Plaintiffs' claim, among others to perpetuate and enforce limiting Policy language that violates California Insurance Code 2071. Hygiene Technologies has not tested the Property for contamination in any areas beyond readily accessible surfaces. Put differently, Farmers' preferred testing vendor limited its investigation to surface conditions while leaving major sections, spaces, and materials of the Property unevaluated.

Likewise, PW Stephens does not clean beyond immediately accessible surface areas because embedded contaminants--including lead, cyanide, beryllium, and other contaminants--cannot be removed from interstitial spaces, drywall, mattresses, or the interior of porous materials through ordinary surface cleaning. This is unfair because it systematically excludes a major portion of the investigation that Farmers should have completed and still has not completed. It is also unfair because Hygiene Technologies and PW Stephens include disclaimers designed to insulate them from liability for failing to evaluate or remediate damage outside immediately accessible surface areas, confirming that Farmers' vendors know their evaluations and proposals are incomplete.

Farmers tolerates, encourages, and relies on this preferred vendor network to enforce the limiting language of Plaintiffs' Policy, because it saves Farmers significant money, to the detriment of Plaintiffs Moussavy and Samakar.

181. This preferred vendor network has also forced Plaintiffs to incur substantial investigation costs at their own expense and substantially delayed resolution of Plaintiffs' insurance claim. This preferred vendor network continues to maintain business dealings with Farmers.

182. As Plaintiffs' claim remains unresolved and Farmers' obligations to evaluate Plaintiffs' claim continue during the pendency of litigation, this unfair practice of maintaining exclusive reliance on a preferred vendor network continues to deprive Plaintiffs' right to a full and fair treatment, in good faith, of their insurance claim.

183. The harm to Plaintiffs and the public from Farmers' practices is significant, ongoing, and far outweighs any potential utility or justification." (FAC at P.P.178-182.)

"A business practice is unfair within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits." (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1473.)

Here, the complaint alleges sufficient facts alleging Defendant engaged in unfair conduct because it alleges Defendant directed its vendors to test immediately accessible surfaces for smoke damage in order to underestimate Plaintiffs' damages. (FAC at P.P.179-180.) This practice as alleged constitutes an unfair business practice because the alleged deliberate underestimation of Plaintiffs' damages causes injury to Plaintiffs without conferring any benefits.

Accordingly, the complaint sufficiently alleges that Defendant engaged in unfair conduct. Accordingly, Defendant's demurrer on the grounds that Plaintiff failed to allege unlawful or unfair conduct is overruled.

C. Whether the Complaint Pleads Remedies Available Under the UCL

Defendant argues that Plaintiffs failed to plead remedies that are available under the UCL. Specifically, Defendant argues that Plaintiffs seek improper and impermissible injunctive relief. (Motion at pp. 10-11 ["Plaintiffs' claim fails because Plaintiffs seek improper and impermissible relief. Specifically, Plaintiffs cannot pursue injunctive relief to enjoin an insurer from alleged future breaches of contract. Here, Plaintiffs seek to enjoin FIE from breaching its contractual obligations under the policy in the future or to remedy past wrongs. As previously noted in FIE's initial demurrer to the Complaint, this is improper as California law precludes a court from ordering an injunction to prevent a prospective breach of contract."].)

In opposition, Plaintiffs argue that their demand for injunctive relief is appropriate because the complaint seeks to enjoin Defendant from continuing to engaging in unreasonable claims handling guidelines. (Opp. at p. 11.)

In reply, Defendant reiterates that Plaintiffs' claims are legal claims seeking compensation for breach of contract or bad faith claims handling and that legal remedies are adequate to address Defendant's alleged misconduct. (Reply at p.9 ["To the extent any cause of action is potentially viable as against FIE, it is a legal claim for breach of contract and/or bad faith, both of which entitle Plaintiffs to recover monetary damages. Plaintiffs still have adequate legal remedies to address FIE's alleged claims handling misconduct, and their UCL claim must fail as a matter of law."].) Defendant also argues that Plaintiffs cannot pursue injunctive relief to enjoin an insurer from alleged future breaches of contract. (Id.)

A plaintiffs who prevails on a UCL claims is generally limited to injunctive relief and restitution. (Zhang, supra, 57 Cal.4th at p.371, citing Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 179.) Restitution means restoration of any interest in money or property, real or personal, which may have been acquired by means of unfair competition. (Zhang, supra, 57 Cal.4th at p.371.)

A restitution order against a defendant requires both that a plaintiff lose money or property and that the defendant acquire the lost money or property. (Id., citing Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 336.) Compensatory damages are not recoverable as restitution. (Zhang, supra, 57 Cal.4th at p.371, citing Pineda v. Bank of America, N.A. (2010) 50 Cal.4th 1389, 1402, fn. 14.)

Injunctive relief may not right completed wrongs and may not issue unless the alleged misconduct is ongoing or likely to recur. ((Madrid v. Perot Systems Corp. (2005) 130 Cal.App.4th 440, 464.) Stating a cause of action for unfair competition requires "a viable claim for" one of the "remedies available" under it. (Id. at p.467.)

Here, the complaint now requests the following relief: "A. Prohibit Defendant Farmers from denying, limiting, or closing any wildfire contamination claim based on Hygiene Technologies testing, or any similar vendor testing, unless the report identifies all sample locations and includes representative testing beyond readily accessible surfaces, including concealed wall cavities, attic spaces, crawl spaces, HVAC pathways, insulation areas, and other enclosed building spaces and materials reasonably capable of retaining wildfire-related contaminants;

B. Prohibit Defendant Farmers from using predetermined vendor protocols that limit evaluation or cleaning to readily accessible surfaces, including Farmers' use of its preferred vendor PW Stephens, without first determining whether wildfire contamination migrated into porous materials, HVAC systems, wall cavities, insulation, attics, crawl spaces, or other concealed building assemblies.

C. Enjoin Defendant Farmers from relying on surface-only visual inspections, wipe sampling, or readily accessible surface testing as the sole basis to conclude that wildfire contamination does not require remediation beyond cleaning.

D. Enjoin Defendant Farmers from assigning, relying on, or paying any environmental consultant, hygienist, remediation reviewer, or cleaning vendor to evaluate a wildfire contamination claim unless the vendor discloses to the insured in writing any preferred-vendor relationship, repeat-referral relationship, pricing agreement, program work, or financial arrangement with Defendant.

E. Enjoin Defendant Farmers from closing or reducing any wildfire contamination claim based on ordinary cleaning unless post-cleaning verification testing confirms that the property is reasonably free from wildfire-related smoke, soot, ash, char, lead, cyanide, beryllium, mercury, asbestos, chlorides, and other combustion related contaminants in both accessible and representative concealed areas.

F. Require Defendant Farmers to reserve wildfire contamination claims consistently with the scope of remediation it represents remains available under the Policy, including full remediation where Farmers contends that such remediation will be paid if ordinary cleaning proves insufficient." (FAC at P.190.)

Although the complaint also requests declaratory relief, that relief pertains to Plaintiff's theory under Insurance Code section 2071 which the court already noted has no merit. (FAC at P.191.) Additionally, the complaint continues to seek compensatory damages for Plaintiff's injuries caused by Defendant's alleged unfair, unlawful, and fraudulent business practices. (FAC at P.187.) These damages are not available under the UCL.

Plaintiffs, citing Rosenberg-Wohl v. State Farm Fire & Casualty Co. (2024) 16 Cal.5th 520, argue that their demand for injunctive relief is available under the UCL because they seek to enjoin Defendant from continuing to engage in bad faith claims handling protocols.

In Rosenberg-Wohl, the California Supreme Court concluded that a plaintiff's UCL claim was not an attempt to recover damages associated with the denial of an insurance claim but properly sought declaratory and injunctive relief to prevent an insurer from continuing to engage in unfair claims handling practices. (Rosenberg-Wohl, supra, 16 Cal.5th at p.523.) While the main issue in Rosenberg-Wohl was whether the statute of limitations for Insurance Code 2071 or the UCL applied, the decision nevertheless supports the proposition that injunctive relief enjoining future unfair claims handling practices is appropriate under the UCL.

Defendant, citing Thayer Plymouth Center; Inc. v. Chrysler Motors Corp. (1967) 255 Cal.App.2d 300, 303-304, argues that Plaintiffs improperly seek injunctive relief to prevent a prospective breach of contract. In Thayer, the Court of Appeal explained that an injunction "cannot be granted to prevent the breach of a contract, the performance of which would not be specifically enforced." (Thayer, supra, 255 Cal.App.2d at p.304, citing Poultry Producers of Southern California v. Barlow (1922) 189 Cal. 278, 287.) Additionally, the courts may not decree the specific performance of contracts because "such a decree would impose upon the court the impossible task of supervising continuous performance by the parties." (Id.)

Here, the complaint does not request injunctive relief to prevent future breaches of the insurance policy but to generally prevent Defendant from continuing to engage in the claims-handling policies referenced in the complaint, including directing vendors to limit evaluation of fire damage to readily accessible surfaces and denying coverage based on inadequate testing of the property affected, among other things. (FAC at P.190.) The injunctive relief requested in the complaint is therefore available under the UCL. Defendant's demurrer is overruled.

IV.

Conclusion

Defendant demurs to the First Amended Complaint on the grounds that it fails to state facts sufficient to support Plaintiffs' UCL claim. The First Amended Complaint states facts sufficient to allege Defendant engaged in bad faith insurance claims handling practices that constitute unfair business practices. The complaint also sufficiently alleges injunctive relief enjoining Defendant from continuing to engage in such practices. Accordingly, the demurrer is overruled. Plaintiffs to give notice. | Home -->)" -->