Opinion
Case No. 2:19-CV-10142-AB (SSx)
2021-07-26
Arsine SHAMIRYAN and Norik Bazikyan, Plaintiffs, v. ALLSTATE NORTHBROOK INDEMNITY COMPANY, and Does 1 through 50, Defendant.
Glenn M. Kenna, Curtis Legal Group, Modesto, CA, Hov Kachatoorian, Advo Law, APC, Glendale, CA, for Plaintiffs. Peter H. Klee, Joseph E. Foss, Sheppard Mullin Richter and Hampton LLP, San Diego, CA, for Defendant Allstate Northbrook Indemnity Company.
Glenn M. Kenna, Curtis Legal Group, Modesto, CA, Hov Kachatoorian, Advo Law, APC, Glendale, CA, for Plaintiffs.
Peter H. Klee, Joseph E. Foss, Sheppard Mullin Richter and Hampton LLP, San Diego, CA, for Defendant Allstate Northbrook Indemnity Company.
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
ANDRÉ BIROTTE JR., UNITED STATES DISTRICT COURT JUDGE Before the Court is Defendant Allstate Northbrook Indemnity Company's ("Defendant") Motion for Summary Judgement, or in the alternative, Partial Summary Judgment filed on April 9, 2021. ("MSJ," Dkt. No. 20). Plaintiffs Arsine Shamiryan and Norik Bazikyan (collectively "Plaintiffs") filed an Opposition, ("Opp'n," Dkt. No. 21), and Defendant filed a Reply, ("Reply," Dkt. No. 22). The Court heard oral arguments on May 28, 2021, and took the matter under submission. (Dkt. No. 29).
Having carefully considered the parties arguments, for the following reasons, the Court GRANTS Defendant's Motion for Summary Judgment.
I. BACKGROUND
Plaintiffs—Allstate-insured motorists—bring breach of good faith and fair dealing and related claims arising out of its insurance policy coverage with Defendant—Allstate, an insurance company. (See Complaint ("Compl."), Dkt. No. 1-2). The following facts are undisputed. (See Separate Statement of Uncontroverted Facts and Conclusions of Law ("SUF"), Dkt. 20-2, ¶ 1).
A. Factual Background
On January 10, 2016, Plaintiffs were involved in an accident. (SUF ¶ 1). At the time of the accident, Plaintiffs were insured under an Allstate auto policy that provided uninsured motorist ("UM") coverage with limits of $30,000 per person and $60,000 per accident (the "Policy"). Under the terms of the Policy, UM benefits were not available for an accident caused by an unidentified vehicle unless that vehicle had physical contact with the insured's car. Plaintiff claimed that a "black pickup truck with large tires" coming from the left side of her vehicle made physical contact with her car pushing it into the guardrail on the right shoulder of the freeway. (SUF ¶ 7). Several days after the accident, Defendant's expert inspected and photographed Plaintiff's vehicle and declared it a total loss. (SUF ¶ 4). As a result, Defendant offered to settle Plaintiff's property damage claim, which Plaintiff accepted on January 18, 2016. (SUF ¶ 5). Accordingly, Allstate arranged for a third-party vendor to take possession and sell Plaintiff's vehicle. (SUF ¶ 5). Plaintiff's car was sold at a car auction on February 26, 2016. (SUF ¶ 11).
On January 21, 2016, Defendant requested a copy of the police report from Plaintiff's counsel. (SUF ¶ 6). On January 27, 2016, Allstate's fraud investigation unit flagged the Plaintiffs’ insurance claim for further investigation. (SUF ¶ 8). On August 9, 2016, Plaintiffs submitted a UM claim. (SUF ¶ 19) Over the next two years, Defendant investigated Plaintiff's UM claim. (See SUF ¶¶ 9–42). As part of their investigation, Defendant requested a copy of the incident's police report and medical records, inspected and photographed plaintiff's vehicle, and deposed Plaintiffs. (See SUF ¶¶ 4; 6;13; 34.) Defendant retained an accident reconstruction expert and an orthopedic surgeon to examine and report on Plaintiff's physical injuries. (See SUF ¶¶ 26, 33).
On October 28, 2016, Defendant denied Plaintiffs’ claim because the evidence did not establish that there was physical contact with the other vehicle, as required under the Policy. (SUF ¶ 28). In response, Plaintiff's demanded an inspection of its vehicle. (SUF ¶ 29). However, since Plaintiff's vehicle had already been sold, Plaintiffs were unable to inspect it. Plaintiff requested arbitration and demanded $100,000.00 to settle their UM claim. (SUF ¶ 30). The arbitrator concluded (i) that the accident had in fact damaged the driver's side mirror of Plaintiffs’ vehicle; (ii) awarded $17,394 to Bazikyan, and (iii) awarded $9,765 to Shamiryan. (SUF ¶ 43). Defendant paid off the award in full. (SUF ¶ 44).
B. Procedural Background
On March 6, 2019, Plaintiffs sued Defendant in Los Angeles County Superior Court for breach of the implied covenant of good faith and fair dealing and punitive damages on the ground that Defendant unreasonably delayed payment of their claim. (See Compl.). Defendant subsequently removed the action to this Court. (Dkt. No. 1). The instant Motion followed.
II. LEGAL STANDARD
Summary judgment on a claim or defense is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue of fact is "genuine" only if there is sufficient evidence for a reasonable fact finder to find for the nonmoving party. Anderson , 477 U.S. at 248–49, 106 S.Ct. 2505. A fact is "material" if it may affect the outcome of the case. Id. at 248, 106 S.Ct. 2505.
The moving party bears the initial burden of identifying the elements of the claim or defense and evidence that it believes demonstrates the absence of an issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to identify "specific facts showing there is a genuine issue for trial." Id. at 324, 106 S.Ct. 2548. Where the nonmoving party will have the burden of proof at trial, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case. Id. The nonmoving party then "must set forth specific facts showing that there is a genuine issue for trial." Anderson , 477 U.S. at 248, 106 S.Ct. 2505.
"Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.’ " Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The Court must draw all reasonable inferences in the nonmoving party's favor. In re Oracle Corp. Sec. Litig. , 627 F.3d 376, 387 (9th Cir. 2010) (citing Anderson , 477 U.S. at 255, 106 S.Ct. 2505 ). Nevertheless, inferences are not drawn out of thin air, and the nonmoving party must produce a factual predicate from which the deduction may be removed. Richards v. Nielsen Freight Lines , 602 F. Supp. 1224, 1244–45 (E.D. Cal. 1985), aff'd , 810 F.2d 898 (9th Cir. 1987). "[M]ere disagreement or the bald assertion that a genuine issue of material fact exists" does not preclude summary judgment. Harper v. Wallingford , 877 F.2d 728, 731 (9th Cir. 1989).
III. REQUEST FOR JUDICIAL NOTICE
"As a general rule, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Lee v. City of Los Angeles , 250 F.3d 668, 688 (9th Cir. 2001) (citation and quotation marks omitted). A court is, however, entitled to consider (1) documents incorporated into the complaint by reference and (2) matters subject to judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). A court may only take judicial notice of facts that are "not subject to reasonable dispute." Fed. R. Evid. 201(b). Here, Plaintiffs request that the Court take judicial notice of three court filings. (Dkt. No. 21-2, Request for Judicial Notice). Because these filings are matters of public record and not subject to reasonable dispute, Plaintiffs request is GRANTED .
IV. EVIDENTIARY OBJECTIONS
The parties offer numerous objections to the proffered evidence. (See generally Dkt. 22-1; 22-2; 22-3) It is "often unnecessary and impractical for a court to methodically scrutinize each objection and give a full analysis of each argument raised." Doe v. Starbucks, Inc. , No. SACV 08-00582 AG, 2009 WL 5183773, at *1 (C.D. Cal. Dec. 18, 2009). Accordingly, to the extent any of the objected-to evidence is relied on in this Order, those objections are OVERRULED . Any remaining objections are also OVERRULED AS MOOT . See Burch v. Regents of Univ. of Cal. , 433 F. Supp. 2d 1110, 1118, 1122 (E.D. Cal. 2006) (concluding that "the court will [only] proceed with any necessary rulings on defendants’ evidentiary objections").
V. DISCUSSION
Defendant argues that this Court should grant summary judgment in its favor for two main reasons: (1) Defendant actively investigated Plaintiff's claim and there were "genuine disputes" with respect to the claim and thus the delayed payment was not unreasonable; (2) Defendant's sale of Plaintiff's vehicle was not bad faith, and the arbitrator's conclusions suggesting otherwise are irrelevant and inadmissible. The Court will address each in turn.
A. Whether Defendant's withholding of Plaintiff's insurance payment was reasonable.
In California, an insurer that refuses without reasonable cause "to compensate its insured for loss covered by the [insurance] policy, may give rise to a cause of action against insurer for breach of implied covenant of good faith and fair dealing." Gruenberg v. Aetna Ins. Co. , 9 Cal.3d 566, 574, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973). To succeed on a bad faith claim, the insured must show: (1) benefits due under the policy were withheld; and (2) the reason for withholding benefits was unreasonable or without proper cause. Wilson v. 21st Century Ins. Co. , 42 Cal. 4th 713, 721, 171 P.3d 1082, 1087, 68 Cal.Rptr.3d 746 (2007), as modified (Dec. 19, 2007). "[T]he adequacy of the insurer's claims handling is properly assessed in light of conduct by the insured delaying resolution of a claim." Case v. State Farm Mut. Auto. Ins. Co. , 30 Cal. App. 5th 397, 413, 241 Cal. Rptr. 3d 458, 473 (2018). Withholding benefits due under the insurance policy is not bad faith as long as the insurer conducts a reasonable, "thorough and fair" investigation of the claim. Bravo v. U.S. Life Ins. Co. in City of N.Y. , 701 F. Supp.2d 1145, 1159 (E.D. Cal. 2010). Inadequate or tardy investigations and other conduct seeking to reduce a legitimate claim may breach the implied covenant. Waller v. Truck Ins. Exch., Inc. , 11 Cal. 4th 1, 36, 900 P.2d 619, 639, 44 Cal.Rptr.2d 370 (1995), as modified on denial of reh'g (Oct. 26, 1995).
Here, Defendant withheld payment under Plaintiffs’ Policy because there were disputes regarding the claim amount and the physical contact requirement under such Policy. (SUF ¶¶ 37; 40). Thus, the remaining issue is whether such withholding of Plaintiff's was reasonable so as to defeat a bad faith claim.
The Court finds that undisputed facts show that Defendant actively investigated the claim from Plaintiffs’ first report on January 11, 2016 and continuously until arbitration in May 2018. (SUF ¶¶ 4–41). During this time, Defendant continuously requested Plaintiffs’ medical records and bills, (SUF ¶¶ 16; 18; 20; 21; 27; 32), retained an accident reconstruction expert, (SUF ¶ 26), retained an orthopedic surgeon to examine Bazikyan and opine on the cause of his injuries, (SUF ¶ 32), retained counsel to conduct discovery and prepare for arbitration, (SUF ¶¶ 31–33), deposed Plaintiffs, (SUF ¶ 34), and continued to investigate until arbitration, (SUF ¶¶ 36–37). The Court finds that Defendant thoroughly and actively investigated Plaintiffs’ claim until it was ordered to pay a combined total of $27,149 at arbitration (which Defendant paid in full). (SUF ¶ 43.).
An active investigation, however, need also be based on genuine disputes. "[W]here there is a genuine issue as to the insurer's liability under the policy for the claim asserted by the insured, there can be no bad faith liability imposed on the insurer for advancing its side of that dispute." Chateau Chamberay Homeowners Ass'n v. Associated Int'l Ins. Co. , 90 Cal. App. 4th 335, 347, 108 Cal.Rptr.2d 776 (2001).
Here, two facts show that a genuine dispute existed as to the amount payable on the claim such that Defendant's continuous investigation was reasonable: (1) disputes surrounding whether Plaintiffs’ vehicle made physical contact with another vehicle, and (2) the substantial disparity between Plaintiffs’ demand and the ultimate arbitration award. First, Defendant's investigation team concluded that Plaintiffs’ claim was inconsistent with the evidence available to the parties including testimony, the police report, and photographs. (SUF ¶ 28). For example, Plaintiffs reported a "black truck with big tires" had struck Plaintiffs’ vehicle on left side. However, the pictures of Plaintiff's vehicle showed white paint transfer not black paint transfer. (SUF ¶ 27). Plaintiffs also failed to specify damage to the driver's side mirror. (SUF ¶ 35). Additionally, based on the vehicle's photos, the Defendant's accident reconstruction expert reported that "damage to the left side of the [Plaintiff's car] was inconsistent with being a result of a single event involving another vehicle as claimed." (SUF ¶ 27). The accident reconstruction expert further concluded, "[i]t is our opinion that the damage to the left side of the Toyota was not compatible with the claim of contact by a ‘black pickup truck with large tires." (Id.). Thus, based on the vehicle's photos, the police report, the plaintiff's sworn statements, and the accident reconstruction expert's conclusions, the Court finds there is was at least a genuine dispute as to whether Plaintiffs’ vehicle made physical contact with another vehicle and thus Defendant's continued investigation was not unreasonable.
Second, Plaintiffs initially demanded the $60,000 policy limit, later raised such demand to $100,000, and then was ultimately awarded $27,149 at arbitration. The Court finds that this disparity also points to the presence of a genuine dispute as to the amount payable on the claim such that Defendant's continued investigation was not unreasonable. Rappaport-Scott v. Auto. Club , 146 Cal. App. 4th 831, 53 Cal.Rptr.3d 245 (2007) (finding that where there is a substantial disparity between the amount an insured demands and the arbitrator's award, that fact can establish the existence of a genuine dispute as to the amount payable on the claim).
Ultimately, Defendant reasonably withheld the insurance award because Defendant was thoroughly conducting an investigation in light of genuine disputes as to the amount of coverage. Thus, the Court finds that no reasonable juror could find that Defendant acted in act bad faith and summary judgment is appropriate. See , e.g., Maynard v. State Farm Mut. Auto. Ins. C. , 499 F. Supp. 2d 1154, 1160 (.C.D Cal. 2007). ("Mistakenly withholding policy benefits, if reasonable or legitimately disputed, does not give rise to liability. Neither does delay while the insurer seeks information and investigates the insured's claim.").
B. Defendant's Sale of Plaintiffs’ Vehicle
Despite the facts above, the crux of Plaintiffs’ Opposition is that Defendant's sale of Plaintiffs’ vehicle prior to the completion of the investigation was done in bad faith. First, Plaintiffs argue that collateral estoppel should apply because the arbitrator decided that Defendant acted in bad faith when it sold Plaintiffs’ vehicle. Second, Plaintiffs argue that by selling Plaintiffs’ vehicle, Defendant could not have fairly investigated Plaintiffs’ claim.
1. Collateral Estoppel
Collateral estoppel or issue preclusion "prevents part[ies] from relitigating an issue of fact or law that has already been adjudicated." DKN Holdings LLC v. Faerber , 61 Cal. 4th 813, 825, 189 Cal.Rptr.3d 809, 352 P.3d 378 (Cal. 2015) ; Resolution Trust Corp. v. Keating , 186 F.3D 1110 at 1115 (1999). In other words, the issue of preclusion applies: "(1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party." DKN Holdings LLC v. Faerber , 61 Cal. 4th 813, 189 Cal. Rptr. 3d 809, 352 P.3d 378, 386 (Cal. 2015).
First, with respect to the identical issue prong, to determine whether two issues are identical for purposes of collateral estoppel, the Court considers (1) whether there is substantial overlap between the evidence or argument to be advanced in the second proceeding and that advanced in the first; (2) whether the new evidence or argument involved the application of the same rule of law as that involved in the prior proceeding; (3) whether pretrial preparation and discovery relate to the matter sought to be represented in the second; and (4) how closely related the claims involved in the two proceedings are. Sec. & Exch. Comm'n v. Alexander , 115 F. Supp. 3d 1071, 1082 (N.D. Cal. 2015). The issue must be understood broadly enough "to prevent repetitious litigation of what is essentially the same dispute." United States v. Stauffer Chemical Co. , 464 U.S. 165, 172, 104 S. Ct. 575, 78 L.Ed.2d 388 (1984). However, "issues are not identical if the second action involved application of different legal standard, even though the factual setting of the suits may be the same." 18 C. Wright, A. Miller, & E. Copper, Federal Practice and Procedure section 4417, p. 449 (2d ed. 2002).
Plaintiffs fail to show that identical issues were before the arbitrator. The question before the arbitrator was whether the insured shall be legally entitled to recover damages, and if so entitled, the amount thereof. ( Ins. Code § 11580.2(f) ). More specifically, given the inconsistencies in evidence that led Defendant to deny the UM claim, the arbitrator was asked to resolve whether plaintiff vehicle made physical contact with the other vehicle. The arbitrator concluded that (1) Plaintiffs were entitled to damages under the UM claim because the evidence supported the physical contact requirement, (SUF ¶ 42), and (2) the amount of those damages totaled a combined amount of $27,149 in UM benefits under the policy. (SUF ¶ 43). In the present matter, Plaintiffs ask this court to decide whether Defendant breached its duty of good faith and fair dealing by unreasonably withholding payment from Plaintiffs until the ultimate arbitration award.
While the facts of this case are identical to the facts before the arbitrator, for purposes of collateral estoppel, issues are nonetheless "different" if the second action involved application of a different legal standard. The arbitrator did not carry out an investigation to determine Defendant's liability under a bad faith claim. Instead, the arbitrator assessed information to assess whether damage to the driver's side mirror was caused by the hit-and-run vehicle. In connection with that question, the arbitrator imposed evidentiary sanctions against Defendant for its sale of Plaintiffs’ vehicle prior to the close of arbitration. Such sanctions were imposed with reference to Evidence Code section 423, which concerns the willful suppression of evidence. The arbitrator made no specific finding that Defendant unreasonably withheld insurance benefits via some conscious and deliberate act of bad faith. Indeed, and as discussed below, the evidence does not show that the sale of the vehicle was the sole reason payment was delayed in the first place. Accordingly, because the issue of whether Defendant unreasonably withheld insurance benefits was not actually decided by the arbitrator, collateral estoppel does not apply and the Court will consider whether the sale of the vehicle was bad faith in the first instance.
2. Whether Defendant's sale of the vehicle was bad faith.
Plaintiffs argue that Defendant acted in bad faith when Defendant sold Plaintiffs’ vehicle prior to completing the investigation of Plaintiffs’ claim. Defendant responds that its sale of Plaintiffs’ vehicle was, at worst, an oversight by adjusters in a different unit handling a different claim (i.e. , Plaintiffs’ property damage claim). The Court agrees with Defendant.
To show bad faith, an insurer's conduct must demonstrate that the insurer's failure or refusal to award Plaintiff's claim was prompted "by a conscious and deliberate act." State Farm Fire & Cas. Co. v. Superior Court , 45 Cal.App.4th 1093, 1105, 53 Cal.Rptr.2d 229 (1996). Courts do not consider unreasonable honest mistakes, bad judgment, or negligence to be bad faith. Careau & Co. v. Sec. Pac. Bus. Credit, Inc. , 222 Cal. App. 3d 1371, 1395, 272 Cal. Rptr. 387, 399 (Ct. App. 1990), as modified on denial of reh'g (Oct. 31, 2001). Indeed, "mere negligence is not enough to constitute unreasonable behavior and does not establish a breach of the implied covenant of good faith and fair dealing. Aceves v. Allstate Ins. Co. , 68 F.3d 1160, 1166 (9th Cir. 1995). "Bad faith implies dishonesty, fraud and concealment." Merritt v. Reserve Ins. Co. , 34 Cal. App. 3d 858, 876, 110 Cal.Rptr. 511 (1973).
Here, the timing of the sale of Plaintiffs’ vehicle may be questionable, but the Court is without evidence to show that Defendant's actions were unreasonable or akin to dishonesty, fraud, or concealment. First, Defendant disposed of Plaintiff's vehicle as part of a settlement of a separate claim (the property damage claim). (SUF ¶ 5). On January 11, 2016, a day after the accident, Plaintiff's reported the accident and their vehicle's physical damage to Defendant. In response to Plaintiff's report, Defendant sent an agent to inspect and take photographs of the vehicle. (SUF ¶¶ 1; 4). After conducting the inspection, Defendant declared the vehicle a total loss and offered a property damage settlement offer to Plaintiffs. (SUF ¶ 4). On January 18, 2016, Plaintiff's accepted Defendant's property damage settlement offer and in return agreed to have Defendant transfer the vehicle to a third party auction vendor. (SUF ¶¶ 5, 9, 12). The Defendant liquidated Plaintiff's property damage claim on February 11, 2016, and the third party vendor sold the vehicle at an auction on February 26, 2016 (SUF ¶¶ 10;11). On August 9, 2016, Plaintiff submitted its bodily injury claim that is at the crux of the current dispute. (SUF ¶ 19).
While the Court understands that it would have been easier to investigate the UM claim and the issue of physical contact with the actual vehicle on hand, the evidence shows that Defendant was nonetheless able to diligently investigate the issue via photographs, medical records orthopedic surgeons, and accident reconstruction experts. (See generally SUF ¶¶ 4–41). Moreover, the evidence does not suggest that the investigation would have gone any faster or reached a different result had the vehicle not been sold at auction. Indeed, any delay in payment seems to have been based on several factors stemming from an active investigation (e.g. , waiting for medical authorizations, police reports, and expert reports), not solely on any alleged difficulty in determining coverage due to the absence of the actual vehicle. Id.
Although the court recognizes it may have been bad judgment or a mistake to sell the vehicle before all of Plaintiffs’ claims were finalized, the evidence does not show that this was done to unreasonably withhold benefits from Plaintiff or that Defendant's actions were otherwise dishonest or in bad faith. Based on the facts of this case and the evidence submitted, the Court finds that Defendant's actions were not unreasonable so as to support a bad faith claim. Accordingly, summary judgment in Defendant's favor is appropriate.
VI. CONCLUSION
For the foregoing reasons, Defendant's Motion for Summary Judgment is GRANTED . Defendant is ORDERED to file a Proposed Judgment within 5 days of the issuance of this Order. The Pretrial Conference and Jury Trial dates are vacated.