Pfuhl v. Mercury Casualty Co. CA4/2 (2016) · DecisionDepot
Pfuhl v. Mercury Casualty Co. CA4/2
California Court of Appeal Sep 14, 2016 No. E063064Unpublished
Filed 9/14/16 Pfuhl v. Mercury Casualty Co. CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
CARIN PFUHL et al.,
Plaintiffs and Appellants, E063064
v. (Super.Ct.No. RIC1301375)
MERCURY CASUALTY COMPANY, OPINION
Defendant and Respondent.
APPEAL from the Superior Court of Riverside County. John D. Molloy, Judge.
Affirmed.
J R Tyler Law and J. Russell Tyler, Jr., for Plaintiffs and Appellants.
Hager & Dowling, John V. Hager and Christine W. Chambers, for Defendant and
Respondent.
Plaintiffs and appellants Carin Pfuhl and Charles Pfuhl II own a house in
Riverside insured by defendant and respondent Mercury Casualty Company (Mercury);
their adult children, plaintiffs and appellants Charles Pfuhl III, Clair Pfuhl, and Cathrin
Pfuhl, reside with them in the house. Plaintiffs claimed the house was damaged by a 1
flood caused by a “failure in the plumbing system” that occurred on November 18, 2009.
Mercury has paid plaintiffs a total of $81,004.10 on the claim. Plaintiffs contend, among
other things, that this sum was neither timely paid nor sufficient.
The operative first amended complaint asserts five causes of action against
Mercury, for breach of contract, breach of the implied covenant of good faith and fair
dealing, intentional interference with contractual relations, intentional infliction of
emotional distress, and negligence. The trial court granted summary judgment in favor of
Mercury on statute of limitations grounds, and awarded Mercury costs in the amount of
$54,549.
In this appeal, plaintiffs argue that their suit was timely filed. They also challenge
in part the trial court’s award of costs, focusing in particular on the discretionary award of
$34,232 in expert witness fees. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs are homeowners, whose property was insured by Mercury under a
homeowner’s insurance policy. The policy contains the following one-year limitations
provision: “Suit Against Us. No action shall be brought unless there has been
compliance with the policy provisions and the action is started within one year after the
loss or damage.” (Original boldface.)
2
It is undisputed, at least for purposes of this appeal, that plaintiffs sought coverage
under the policy for damage that occurred on November 18, 2009.1 According to
plaintiffs, on that date the first floor of their house was flooded with sewage, which
backed up out of several toilets and a bath tub.
The parties dispute, however, when plaintiffs sought coverage for that damage.
Mercury contends that plaintiffs first reported the flood to it on July 26, 2010, and that it
opened a claim immediately. Plaintiffs contend that they (specifically, Carin Pfuhl) first
reported the flood on the day that it occurred, November 18, 2009, to the broker who had
procured the homeowner’s insurance policy for them, defendant Cheryl Joseph, a
principal of defendant Raphael John Joseph Insurance Services, Inc. (the Joseph
Agency).2 Additionally, plaintiffs assert that Carin Pfuhl contacted Mercury directly by
means of a letter, dated December 10, 2009. That letter makes reference to a telephone
conversation between Carin Pfuhl and a Mercury representative “last week,” and Carin
Pfuhl states in her declaration submitted in opposition to Mercury’s motion that she
personally telephoned Mercury in “late November 2009.”
In a letter dated July 27, 2010, Mercury informed plaintiffs of certain terms of
their policy, including the one-year limitation period quoted above. The letter further
1 The date of loss listed in many of Mercury’s documents regarding the claim is November 22, 2009, a date apparently reported by plaintiffs in July 2010 based on a receipt from a plumber that had that date. Plaintiffs later contended that report to be in error, and that the actual date of loss was November 18, 2009, the date alleged in the complaint.
2Cheryl Joseph and Raphael John Joseph Insurance Services were named as defendants in the present lawsuit, but are not party to this appeal.
3
explained that the limitations period “begins the date the claim is closed,” except that “if
there is a lapse of time between the date the loss occurred and the date you reported it to
Mercury, those days will be subtracted from your one-year period.”
After an investigation, in April 2011, Mercury paid plaintiffs a total of $43,086.10
on their claim, and by means of a letter on April 14, 2011, informed plaintiffs that the
claim was closed as of that date. The letter again recited the policy language regarding
the one-year limitation on actions against Mercury, and used the same language as the
July 27, 2010, letter to describe how the duration of the limitations period is calculated.
In June 2011, in response to an email from plaintiffs contesting the adequacy of
the amount paid on the claim, Mercury paid plaintiffs an additional $9,280, while
emphasizing that the claim remained closed.
In February 2012, plaintiffs, through a letter to Mercury by their counsel,
expressed their view that Mercury had acted inappropriately in a number of ways, and
demanded among other things, $7.5 million as a “starting figure.” In a letter dated
February 28, 2012, Mercury agreed “to re-open this claim and to re-evaluate our position
in an effort to determine whether any additional amounts are due under the policy.” It
did so “under a reservation of rights” based on the reasons expressed in its
correspondence with plaintiffs, and reserving the right “to assert any other policy
provisions or defenses that might become apparent at any later time.”
On December 24, 2012, Mercury sent plaintiffs’ current counsel (plaintiffs had
changed counsel in September 2012) a letter describing the findings of its further review
and investigation, and reclosing the claim. Mercury agreed to pay plaintiffs an additional
4
$28,638, bringing its total payments to plaintiffs to $81,004.10. This letter again quoted
the policy language providing for a one-year limitations period on any action against
Mercury, but did not include any additional explanation of how the limitation period was
calculated.
Plaintiffs filed suit on February 4, 2013, and amended their complaint on May 10,
2013. Mercury’s motion for summary judgment was filed August 1, 2014. After several
hearings, and various supplemental submissions by both parties, on October 21, 2014, the
trial court granted summary judgment in favor of Mercury, finding that “the statute of
limitations has run.” Judgment was entered on November 13, 2014.
Mercury had previously made offers of compromise pursuant to Code of Civil
Procedure section 998,3 which plaintiffs did not accept.4 On December 4, 2014, Mercury
filed a memorandum of costs, seeking $57,593. After hearing a motion to tax costs by
plaintiffs, the trial court awarded Mercury $54,549 in costs, including $34,232 in expert
fees.5
3 Further undesignated statutory references are to the Code of Civil Procedure.
4Mercury offered to pay Carin Pfuhl $100,000, and $1,500 each to Charles Pfuhl III, Cathrin Pfuhl, and Clair Pfuhl. No offer to compromise specifically addressed to Charles Pfuhl II appears in our record, but no party has argued that this circumstance is material to any issue in this appeal.
Additional facts will be discussed below as necessary to address plaintiffs’ 5 claims of error.
5
II. DISCUSSION
A. Summary Judgment Was Properly Granted on Statute of Limitations Grounds.
Plaintiffs contend that the trial court erred in determining their lawsuit to be barred
by the applicable one-year limitations period, arguing that the limitations period was
tolled (1) from November 18, 2009, when they reported the loss to their broker, to
April 14, 2011, when Mercury formally closed the claim, and (2) from February 28,
2012, when Mercury reopened the claim, to December 24, 2012, when Mercury again
closed the claim. Plaintiffs further argue that Mercury is estopped from asserting the
limitations period because it did not adequately explain the deadline for bringing suit in
its December 24, 2012, letter, and it failed to deliver a copy of the policy to plaintiffs.
We find that summary judgment was properly granted because plaintiffs filed suit after
the limitations period had expired, and Mercury should not be equitably estopped from
asserting the limitations period as a defense.
1. Standard of Review.
Under section 437c, subdivision (c), a motion for summary judgment shall be
granted if all the papers submitted show there is no triable issue as to any material fact
and the moving party is entitled to judgment as a matter of law. A defendant meets its
burden on summary judgment by showing that the plaintiff cannot prove its causes of
action, or by establishing a complete defense to the plaintiff’s causes of action. (§ 437c,
subd. (p)(2).) The burden then shifts to the plaintiff to show a triable issue of fact
material to the causes of action or defense. (Ibid.)
6
We evaluate a summary judgment ruling de novo, independently reviewing the
record to determine whether there are any triable issues of material fact. (Saelzler v.
Advanced Group 400 (2001) 25 Cal.4th 763, 767.) “In practical effect, we assume the
role of a trial court and apply the same rules and standards that govern a trial court’s
determination of a motion for summary judgment.” (Distefno v. Forester (2001) 85
Cal.App.4th 1249, 1258.) In general, we give no deference to the trial court’s ruling or
reasoning, and only decide whether the right result was reached. (Carnes v. Superior
Court (2005) 126 Cal.App.4th 688, 694.)
2. The Limitations Period Was Not Tolled By Plaintiffs’ Report of the Loss to
Their Broker on November 18, 2009.
The parties agree that the limitations period applicable to plaintiffs’ claims was
equitably tolled from July 26, 2010, to April 14, 2011, while Mercury investigated the
claim. (See Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674,
678 (Prudential-LMI) [limitations period “equitably tolled from the time the insured files
a timely notice, pursuant to policy notice provisions, to the time the insurer formally
denies the claim in writing”].) Plaintiffs contend, however, that they first gave Mercury
notice of the loss not on July 26, 2010, but on November 18, 2009, when they reported
the claim to the broker, Cheryl Joseph, who had procured the homeowner’s insurance
policy for them. On the undisputed facts in the record, however, notice of the loss to the
broker did not constitute notice to Mercury.
“Equitable tolling is a judge-made doctrine ‘which operates independently of the
literal wording of the Code of Civil Procedure’ to suspend or extend a statute of
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limitations as necessary to ensure fundamental practicality and fairness. [Citations.]
[The California Supreme Court] has applied equitable tolling in carefully considered
situations to prevent the unjust technical forfeiture of causes of action, where the
defendant would suffer no prejudice. . . . [¶] [T]he effect of equitable tolling is that the
limitations period stops running during the tolling event, and begins to run again only
when the tolling event has concluded.” (Lantzy v. Centex Homes (2003) 31 Cal.4th 363,
370.)
An insurance broker is defined as one who, “for compensation and on behalf of
another person, transacts insurance other than life, disability, or health with, but not on
behalf of, an insurer. (Ins. Code, § 33.) The insurance broker is ordinarily the agent of
the insured and not of the insurer. (Fraser-Yamor Agency, Inc. v. County of Del Norte
(1977) 68 Cal.App.3d 201, 213, superseded by statute on other grounds as stated in
People v. Honig (1996) 48 Cal.App.4th 289, 318.) More specifically, in securing a policy
for its client a broker “acts only as agent for the [in]sured . . . .” (Maloney v. Rhode
Island Ins. Co. (1953) 115 Cal.App.2d 238, 244.) However, the facts of a case may show
the broker was acting in a “dual capacity,” as agent for both insured and insurer, in
specific respects. (Mark Tanner Construction, Inc. v. HUB Internat. Ins. Services, Inc.
(2014) 224 Cal.App.4th 574, 584.)
The undisputed facts demonstrate that Cheryl Joseph and the Joseph Agency were
not acting as agents for Mercury with respect to taking reports of losses, at least on
November 18, 2009. Indeed, Carin Pfuhl’s own declaration, submitted in opposition to
Mercury’s motion for summary judgment, forecloses any argument regarding even
8
ostensible agency, stating that Ms. Joseph “refuse[d] to send our claim to Mercury,” and
“never told us that she was making any decision on behalf of Mercury, or communicating
any decision to us on behalf of Mercury.” For her part, Ms. Joseph declared that she did
not remember speaking to Carin Pfuhl with respect to her loss, but that her general
practice was to provide Mercury’s phone number and the policy number to the insured,
and to instruct the insured to call Mercury directly to make a claim.6
Furthermore, despite plaintiffs’ assertions to the contrary, there is no evidence in
the record that Ms. Joseph or the Joseph Agency were in fact designated to act as agents
of Mercury for purposes of receiving loss reports. The name and address of the Joseph
Agency appears in plaintiffs’ policy—indeed its name and address are the only ones that
appears there—but it is identified as the “producer” of the policy, not as a Mercury
representative to whom losses should be reported. (See Carlton v. St. Paul Mercury Ins.
agent’” and the “‘Agency’” for the policy on application form was not an agent for
insurer].)
Plaintiffs also submitted evidence of a Mercury website, which they characterize
as stating that the Joseph agency is a “Mercury Agent” and containing “testimonials that
Mercury Agents help its insureds make claims.” Plaintiffs ignore that the “testimonial”
appears under a heading “Mercury Television Commercials,” and is a description of an
6 Plaintiffs have disputed this characterization of the general practice between Mercury and the Joseph Agency, but it is not a dispute that raises a triable issue of material fact under the circumstances of this case.
9
advertisement for the services Mercury provides to its policy holders, not services
provided by the Joseph Agency. Although a header on the website uses the phrase
“Authorized Agent,” the text of the site identifies the Joseph Agency more specifically as
an “authorized, independent Mercury Insurance Agency,” and the services that the Joseph
Agency is described as providing in that role all relate to procuring insurance; making
sure that the insured gets “every discount possible,” working “to create a protection plan
tailored to your needs,” and the like. Nothing on the website raises a triable issue of
material fact regarding whether Ms. Joseph or the Joseph Agency should be treated as
agents of Mercury, rather than an agent of the insured for purposes of procuring
insurance.
Plaintiffs cite also to a letter from Mercury that specifically directed them to report
any new losses to the Joseph Agency. In their briefing, however, plaintiffs fail to address
the circumstance that the letter is dated August 22, 2011—after their claim was initially
closed. The letter establishes that the Joseph Agency was designated to serve as
Mercury’s agent for receiving notice of any new losses after that date. But plaintiffs are
able to point to nothing establishing the Joseph Agency to be Mercury’s agent for the
purpose of receiving reports of new losses as of November 2009.
In short, on the undisputed facts in the record, Ms. Joseph and the Joseph Agency
were not Mercury’s agent, so notice to Ms. Joseph or the Joseph Agency did not
constitute notice to Mercury of plaintiffs’ loss. (Carlton, supra, 30 Cal.App.4th at p.
1457.) Plaintiffs’ arguments in briefing and in oral argument, that Carin Pfuhl
reasonably, even if mistakenly, understood that her claim was properly and successfully
10
made by reporting the loss to the Joseph Agency, are foreclosed by her own declaration
testifying that Ms. Joseph explicitly refused to send her claim to Mercury. The statute of
limitations therefore was not tolled, but on the contrary began to run on November 18,
2009.
3. Plaintiffs Produced Some Evidence Supporting Tolling of Limitations Period
from November 30, 2009, to April 14, 2011.
The parties are in agreement that the limitations period was equitably tolled from
the date Mercury was notified of plaintiffs’ loss until April 14, 2011, when Mercury
wrote to plaintiffs closing their claim. The date that begins this period, however, is
disputed.
Mercury asserts that its first knowledge of plaintiffs’ loss came from a phone call
by plaintiffs on July 26, 2010. As noted, however, plaintiffs produced some evidence
that they reported the flood directly to Mercury substantially sooner. According to
plaintiffs, Carin Pfuhl contacted Mercury directly by means of a letter, dated
December 10, 2009. And that letter makes reference to a telephone conversation between
Carin Pfuhl and a Mercury representative “last week.” The Monday of the week before
Thursday, December 10, 2009, was November 30, 2009, and Carin Pfuhl states in her
declaration submitted in opposition to Mercury’s motion that she personally telephoned
Mercury in “late November 2009.” Plaintiffs therefore presented at least some evidence,
albeit not indisputable evidence, that they reported their loss to Mercury on
November 30, 2009.
11
In light of plaintiffs’ evidence, the undisputed facts regarding when plaintiffs gave
Mercury notice of their loss establish only that the limitations period ran from
November 18, 2009, to November 30, 2009, a period of 12 days.
4. The Limitations Period Was Tolled When Mercury Reopened the Claim.
The parties agree that the clock was running on the limitations period from
April 14, 2011, when Mercury wrote to plaintiffs closing their claim, to February 28,
2012, when Mercury agreed to reopen the claim—by our calculations a period of 320
days.7 The parties do not agree with respect to whether the limitations period was tolled
from February 28, 2012, until Mercury again closed the claim on December 24, 2012.
Mercury contends that the limitations period was not tolled during that period. Plaintiffs
disagree, as do we.
Mercury is incorrect that “[t]here is no reason to apply a second period of
equitable tolling.” The same policy reasons that led the Supreme Court to endorse
equitable tolling of limitations periods in insurance contracts apply equally well to
periods when a claim has been reopened as they do to initial processing of claims. “First,
it allows the claims process to function effectively, instead of requiring the insured to file
suit before the claim has been investigated and determined by the insurer. Next, it
protects the reasonable expectations of the insured by requiring the insurer to investigate
the claim without later invoking a technical rule that often results in an unfair forfeiture
7 Plaintiffs have calculated this period to be 319 days, while Mercury counts 323. The differences between the three calculations are not, however, material to the disposition of this appeal, so we do not attempt to reconcile them.
12
of policy benefits. . . . Third, a doctrine of equitable tolling will further our policy of
encouraging settlement between insurers and insureds . . . .” (Prudential-LMI, supra, 51
Cal.3d at p. 692.) Mercury was under no obligation to formally reopen plaintiffs’ claim,
but by expressly doing so, it acknowledged to plaintiffs that further investigation of the
claim would be conducted, and its prior determination of the claim would be
reconsidered. For the reasons articulated in Prudential-LMI, equity dictates that plaintiffs
should not be required to file suit before that continuing claims process had been
completed, regardless of whether Mercury had previously closed the claim.
Ashou v. Liberty Mutual Fire Ins. Co. (2006) 138 Cal.App.4th 748, is instructive.
In that case, the insurer expressly agreed to “reopen” the claim, when the insured
requested reconsideration. (Id. at p. 754.) The claim had been settled years before, but
legislative action had created a one-year extension of the filing period for certain claims;
at issue was whether that one-year period was tolled when the insurer agreed to reopen
the claim. (Id. at p. 755.) The Court of Appeal concluded that tolling did apply, but only
for the period after the claim is explicitly reopened, not while the insurer is considering a
request to reopen a claim: “As one of the purposes of equitable tolling is to allow the
insurers time to conduct full investigations into claims made, equitable tolling should
only apply—in the context of a previously denied claim—when the insurer has agreed to
reopen and reinvestigate the claim.” (Id. at p. 762.)
Mercury relies on Singh v. Allstate Ins. Co. (1998) 63 Cal.App.4th 135 (Singh) to
support its argument that the equitable tolling should not be applied for the period when
plaintiffs’ claim was reopened. That reliance is misplaced. In Singh, after an
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unequivocal denial of a claim, the insured requested that the insurer reopen it. (Id. at p.
142.) The insurer responded by denying the request. (Ibid.) The Singh court concluded
that the limitations period was not equitably tolled during the 30-day period when the
insurer was considering the request to reopen the claim, stating that the “justifications for
equitable tolling are absent, once the carrier has initially denied the claim.” (Id. at p.
142.)
The court of appeal in Singh did not face a circumstance where the insurer
explicitly agreed to reopen the claim, as the Ashou court did, and as we do in this case.
Singh teaches that equitable tolling does not apply to the period between plaintiffs’
request that Mercury reopen the claim and Mercury’s February 28, 2012, letter agreeing
to do so. Similarly, equitable tolling does not apply to the period in June 2011, when
plaintiffs’ claim had been closed, but Mercury nevertheless considered plaintiffs’
objection to the adequacy of Mercury’s payments on the claim, eventually agreeing to
pay an additional amount, while emphasizing that the claim remained closed. Mercury’s
broader interpretation of the Singh case is unpersuasive.
In sum, the undisputed facts demonstrate that the deadline for plaintiffs to file their
lawsuit had not run on December 24, 2012, when Mercury informed plaintiffs that it was
again closing their claim; the limitations period had run for 12 days, between
November 18, 2009, and November 30, 2009, and for 320 days between April 14, 2011,
and February 28, 2012. Mercury’s arguments based on the proposition that the
limitations period had already elapsed on December 24, 2012, are rejected on that basis.
14
Nevertheless, as noted, plaintiffs did not file suit until February 4, 2013, a period
of another 42 days. Subtracting out days when the limitations period was equitably
tolled, based on the undisputed facts, plaintiffs did not file suit until 374 days after their
loss, and therefore after the one-year limitations period in their policy had already run.
We turn, then, to plaintiffs’ arguments as to why Mercury should be equitably estopped
from asserting the limitations period as a defense.
5. Mercury Is Not Estopped from Asserting the Limitations Period for Failure to
Adequately Notify Plaintiffs of the Deadline for Bringing Suit.
Plaintiffs contend that Mercury should be equitably estopped from asserting the
limitations period because it did not clearly state the deadline for bringing suit in its
December 24, 2012, letter. We disagree.
“A defendant may be equitably estopped from asserting a statutory or contractual
limitations period as a defense if the defendant’s act or omission caused the plaintiff to
refrain from filing a timely suit and the plaintiff’s reliance on the defendant’s conduct
was reasonable. [Citations.] The act or omission must constitute a misrepresentation or
nondisclosure of a material fact, rather than law. [Citation.] The defendant need not
intend to deceive the plaintiff to give rise to an equitable estoppel.” (Superior Dispatch,
Inc. v. Insurance Corp. of New York (2010) 181 Cal.App.4th 175, 186 (Superior
Dispatch).)
Ordinarily, to establish an equitable estoppel, “(1) [t]he party to be estopped must
be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must
so act that the party asserting the estoppel had a right to believe it was so intended; (3) the
15
other party must be ignorant of the true state of facts; and (4) he must rely upon the
conduct to his injury.” (Skulnick v. Roberts Express, Inc. (1992) 2 Cal.App.4th 884, 890
(Skulnick).)
The undisputed facts demonstrate that Mercury explicitly informed plaintiffs of
the one-year limitations period in their policy on at least three occasions, in letters dated
July 27, 2010, April 14, 2011, and December 24, 2012. This case is therefore unlike
(Spray), a case on which plaintiffs rely. In Spray, the court of appeal found a triable issue
of material fact as to whether the insurer should be estopped from asserting a one-year
contractual limitations period; the insured presented evidence that the insurer never
advised it of the limitations period, and that it was in fact unaware of the policy’s
limitation period. (Id. at pp. 1264-1265, 1269.)
Plaintiffs point out that Mercury’s “December 24, 2012, letter does not clearly
state that the statute of limitations had only a few days left to run.” Plaintiffs cite no
authority, however, that stands for the proposition that Mercury was required to calculate
for plaintiffs precisely when the limitations period expired. Spray teaches only that
insurers have a duty to inform the insured of a contractual limitations provision, and that
the failure to perform that duty could give rise to an equitable estoppel. (Spray, supra, 71
Cal.App.4th at pp. 1264-1265, 1269.) In other words, the insurer must explicitly disclose
the material fact of the existence of the contractual limitations period; there is no
requirement that it advise the insured on the legal question of when, precisely that
16
limitation period expires.8 (Superior Dispatch, supra, 181 Cal.App.4th at p. 186 [to
support application of equitable estoppel, the “act or omission must constitute a
misrepresentation or nondisclosure of a material fact, rather than law”].)
Furthermore, this is not a situation where Mercury lulled plaintiffs into sleeping on
their rights. Nothing Mercury told plaintiffs is reasonably understood to suggest that
their time for bringing suit was restarted when Mercury agreed to reopen their claim, and
began to run only when the claim was reclosed. The claim was reopened under an
express reservation of rights. And if anything, by omitting any discussion of tolling,
Mercury’s December 24, 2012, letter suggests the limitations period expired sooner than
it actually did, not later.9
We conclude that Mercury gave plaintiffs adequate notice of their policy’s
contractual limitations period for bringing suit, precluding plaintiffs from asserting any
equitable estoppel on that basis.
6. Mercury Is Not Estopped from Asserting the Limitations Period for Failure to
Deliver Plaintiffs a Copy of the Policy.
Plaintiffs assert that they were never given a copy of their policy, only a summary
“Declarations Page” that does not mention the one-year limitations period, so Mercury
may not enforce that limitations period. We disagree.
8 It is perhaps worth noting again here that Mercury’s December 24, 2012, letter was sent to plaintiffs’ counsel.
9 Importantly, plaintiffs did not submit any evidence that their delay in bringing suit was motivated by a belief that the limitations period had already expired, so that bringing suit would be futile.
17
As discussed above, even if plaintiffs were never delivered a copy of their policy,
they had actual notice of the limitations period contained therein. Mercury informed
them of the provision on no fewer than three separate occasions, and well in advance of
its expiration. Plaintiffs’ actual notice of the policy provision precludes any application
of equitable estoppel to prevent Mercury’s enforcement of the provision. (Skulnick,
supra, 2 Cal.App.4th at p. 890.)
Plaintiffs cite Espree v. Western Pioneer Ins. Co. (1958) 159 Cal.App.2d Supp.
875 (Espree) for the proposition that Mercury may not “attempt to enforce the language it
never delivered.” In Espree, the court of appeal refused to enforce a policy exclusion that
could have provided a basis for denying coverage, because the insured had never been
given a copy of the portion of the policy containing the exclusion, and the insured was
unaware of the exclusion. (Id. at pp. 877-879.)
The present case is distinguishable from Espree. In Espree, the insured was
essentially denied the opportunity to seek other coverage for an excluded risk, because
the exclusion was not timely disclosed to it. Equity therefore dictated that the insurer be
estopped from invoking the exclusion as a basis for denying coverage. Here, in contrast,
plaintiffs received actual notice of the contractual limitations period for bringing suit long
before it expired, when Mercury first began to process the claim. The equitable
considerations here, therefore, weigh differently, and require a different conclusion
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regarding the enforceability of the policy provision at issue.10 Where policy provision at
issue was, one way or another, plainly and clearly brought to the attention of the insured
in a timely manner, as it was in this case, it is enforceable, regardless of whether a
complete copy of the policy was delivered to the insured. (See Russell v. Bankers Life
Co. (1975) 46 Cal.App.3d 405, 413-414 [insurer may not rely on limitations or
exclusions not reasonably expected by insured “unless those limitations were plainly and
clearly brought to the attention of the insured”].)
7. The One-year Contractual Limitations Period Applies to Each of Plaintiffs’
Causes of Action.
Plaintiffs assert that their claim for breach of the covenant of good faith and fair
dealing is not governed by the one-year limitations period provided by their policy, but
rather the longer statutory limitations period that applies generally to bad faith claims.
This is a matter that has previously generated some controversy among the California
courts of appeal. (See Jang v. State Farm Fire & Casualty Co. (2000) 80 Cal.App.4th
1291, 1296-1302 [discussing split of authority on the issue].) Neither party, however,
attempts any discussion of that controversy in their briefing.
10 Moreover, Espree, a decision of the appellate division of the superior court, is not binding precedent for this court. (See People v. Gipson (2013) 213 Cal.App.4th 1523, 1529 [“It is true that we typically follow the decisions of other appellate districts or divisions, but only if we lack good reason to disagree.”].) To the extent Espree must be read as plaintiffs read it, to state a bright line rule that the insurer may not enforce a policy exclusion or limitation if the full policy was not delivered to the insured, regardless of actual notice of the provision at issue, we decline to follow it.
19
In any case, the approach that is currently most widely accepted, and the one that
we find most appropriate, is that actions for breach of the implied covenant are
considered actions on the policy, governed by the contractual limitations period, so long
as the essential aim of the action is the recovery of benefits that were owed under the
policy. (Blue Shield of California Life & Health Ins. Co. v. Superior Court (2011) 192
Cal.App.4th 727, 736, fn. 12.) The essential aim of plaintiffs’ action is to recover
benefits that they contend were owed under the policy, and which Mercury refused to
pay. The one-year contractual limitations period in their policy therefore applies to each
of their causes of action, including their cause of action for breach of the covenant of
good faith and fair dealing.
In sum, the undisputed facts demonstrate that plaintiffs’ lawsuit was filed after the
applicable one-year limitations period had expired, despite the equitable tolling of
substantial periods of time, and Mercury is not equitably estopped from asserting the
limitations period as a defense. Summary judgment in favor of Mercury was therefore
properly entered. We turn, then, to plaintiffs’ claims of error regarding the trial court’s
award of costs to Mercury.
B. The Trial Court’s Award of Costs Was Not an Abuse of Discretion.
Plaintiffs argue that the trial court’s discretionary award of expert fees to Mercury
was an abuse of discretion in several respects, requiring reversal of that portion of the
trial court’s award of fees and costs. We find no abuse of discretion.
Section 998 allows for any party in a civil suit to serve a settlement offer to any
other party before the commencement of trial. (§ 998, subd. (b).) It further provides that
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“[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more
favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and
shall pay the defendant’s costs from the time of the offer. In addition . . . the court or
arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover
postoffer costs of the services of expert witnesses . . . actually incurred and reasonably
necessary in . . . preparation for trial or arbitration . . . of the case by the defendant.”
(§ 998, subd. (c)(1).)
“In reviewing a trial court’s award of costs pursuant to section 998, the appropriate
standard of review is abuse of discretion. [Citation.] The party appealing the trial court’s
decision to award costs bears the burden ‘“to establish an abuse of discretion, and unless
a clear case of abuse is shown and unless there has been a miscarriage of justice a
reviewing court will not substitute its opinion and thereby divest the trial court of its
discretionary power.” [Citations.]’ [Citation.] To meet its burden, a complaining party
must therefore show that the trial court exercised its discretion in an ‘arbitrary, capricious
or patently absurd manner.’ [Citation.]” (Adams v. Ford Motor Co. (2011) 199
Cal.App.4th 1475, 1482.)
We find nothing arbitrary, capricious, or patently absurd in the court’s exercise of
discretion. Nothing in the record supports the conclusion that Mercury’s section 998
offers were not made in good faith or otherwise invalid. Nothing in the record supports
the conclusion that the expert witness costs claimed by Mercury were not actually
incurred, or not reasonably necessary preparations for trial (which had been set for
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October 31, 2014, very shortly after Mercury’s motion for summary judgment was
heard).
The arguments presented by plaintiffs in support of a contrary conclusion are
unpersuasive. Plaintiffs cite to Seever v. Copley Press, Inc. (2006) 141 Cal.App.4th 1550
for the proposition that “the trial court must consider the relative financial position of the
parties in determining how much to award in costs.” The record here establishes that the
trial court did consider plaintiffs’ financial situations when setting the award of expert
witness fees. Plaintiffs would have preferred that the trial court give that issue greater
weight than it did, but can point to nothing in the record that would compel the trial court
to exercise its discretion differently.
Plaintiffs also assert that Mercury’s expert fees were not reasonably necessary
because their work duplicated inspections already conducted during the claims process.
It is not apparent why a home inspection conducted during the claims process, or expert
reports generated from such an inspection, would necessarily be adequate for litigation
purposes. Plaintiffs identify nothing specific in the record compelling the conclusion that
Mercury’s experts were simply “reinvent[ing] the wheel” and “double charg[ing] their
fees to this case,” as they assert.
Plaintiffs note that summary judgment was granted in Mercury’s favor on statute
of limitations grounds, which had “nothing to do with any work performed” by
Mercury’s litigation experts. This argument ignores that Mercury’s summary judgment
motion was heard only shortly before trial; Mercury reasonably needed to be fully
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prepared to try the case, on any and all possible grounds. The litigation expert costs were
reasonably incurred under the circumstances, even if they turned out not to be necessary.
Plaintiffs object in particular to the award of expert witness fees as imposed
against Clair Pfuhl, Cathrin Pfuhl, and Charles Pfuhl III, contending that they are young
adults “just starting out in life” who “should not be saddled with a large judgment against
them.” Plaintiffs emphasize that the damages sought by the Pfuhl children were modest,
compared to those sought by their parents. Nevertheless, the Pfuhl children are adults,
who chose to press their claims, despite a request by Mercury that they dismiss their
claims against Mercury, in light of an adverse ruling with respect to their claims asserted
against other defendants, and despite section 998 offers of settlement to each of them.
Mercury’s trial preparations, including the fees expended on litigation experts,
necessarily had to address the claims asserted by all plaintiffs. Plaintiffs have
demonstrated no abuse of discretion in the trial court’s decision to make plaintiffs each
jointly and severally liable to Mercury for the entire amount of fees and costs.
III. DISPOSITION
The judgment is affirmed. Mercury is awarded its costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
HOLLENHORST Acting P. J. We concur:
MCKINSTER J.
CODRINGTON J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that the plaintiffs' lawsuit was barred by the insurance policy's one-year contractual limitations period because the suit was filed after the period had expired, and the insurer was not equitably estopped from asserting this defense.
Issues
Whether notice of a loss to an insurance broker constitutes notice to the insurer for purposes of equitable tolling.
Whether an insurer's agreement to reopen a claim triggers a second period of equitable tolling.
Whether an insurer is equitably estopped from asserting a limitations defense for failing to calculate or disclose the specific expiration date to the insured.
Disposition. Affirmed.
Quotations verified verbatim against the opinion
“The insurance broker is ordinarily the agent of the insured and not of the insurer.”
“The same policy reasons that led the Supreme Court to endorse equitable tolling of limitations periods in insurance contracts apply equally well to periods when a claim has been reopened as they do to initial processing of claims.”
“Insurers have a duty to inform the insured of a contractual limitations provision, and that the failure to perform that duty could give rise to an equitable estoppel.”