MARDIROSSIAN v. FARMERS INSURANCE GROUP (1997)

Petitioner, Garabet Mardirossian, obtained homeowners insurance from Farmers Insurance (Farmers) ¹ through an insurance agent, Sevan Hallajian (Hallajian).²  Petitioner's swimming pool was damaged by the Northridge earthquake.   Farmers refused to pay the costs of reinforcing the pool which code upgrades required.   Petitioner sued, and respondent superior court granted Farmers' motion for judgment on the pleadings as to four causes of action contained within petitioner's' second amended complaint.   This petition for writ of mandate followed.

I. FACTUAL AND PROCEDURAL HISTORY

A. Complaint Allegations

On August 20, 1992, Farmers issued a “Protector Plus” homeowners insurance policy to petitioner covering his residence in the City of Simi Valley.

Sometime after the homeowners policy was issued, petitioner added a swimming pool to his property.   On June 10, 1993, petitioner asked Hallajian to add earthquake coverage to his policy of insurance.   Petitioner also informed Hallajian that he had added a pool, and specifically requested Hallajian “to add all coverages and endorsements that [would] fully and completely insure [petitioner's] property in the event of an earthquake.”   Petitioner “stated that he [would] pay the higher premiums in return for full and complete protection on his property.  [Hallajian] promised [petitioner] that she [would] obtain all these coverages on behalf of [petitioner].” ³

On August 20, 1993, the policy was modified to contain earthquake coverage.   On January 17, 1994, the Northridge earthquake damaged petitioner's house and pool.   Petitioner's pool deck and patio “sustained major cracks,” and “became tilted downward toward the slope into the neighbor's properties below.”

After the earthquake, the City of Simi Valley changed its construction codes to require that, before rebuilding, swimming pools must be reinforced with retaining walls and a system of caissons and grade beams.

In April 1994, petitioner made a claim for the earthquake damage, demanding that Farmers pay “the amount required to build the retaining wall and that system of caissons and grade beams necessary to reinforce the pool.”   Although Farmers paid benefits on the claim, Farmers refused to pay the costs of reinforcement as required by the City of Simi Valley.   Farmers took the position that petitioner's homeowners policy specifically excluded the cost of code upgrades and also the cost of repairs to land.

Petitioner then sued Farmers for (1) breach of contract, (2) bad faith, (3) intentional infliction of emotional distress, (4) negligent misrepresentation, (5) fraud, and (6) professional negligence.   Petitioner also named Hallajian in the counts for negligent misrepresentation and professional negligence.

B. Motion for Judgment on the Pleadings

Farmers moved for judgment on the pleadings on the first, second, third, fourth and sixth causes of action contained in petitioner's second amended complaint.   Hallajian joined in the motion as to the fourth and sixth counts.

C. The Trial Court's Ruling

The superior court granted Farmers' motion as to the first, second, third, and fourth causes of action, but denied it as to the sixth cause of action for professional negligence.⁴  Petitioner then filed this petition for writ of mandate.

II. CONTENTIONS

Petitioner contends the superior court “abused its discretion by granting the motion for judgment on the pleadings because controlling precedent shows the subject insurance policy is ambiguous as a matter of law.”

III. DISCUSSION

A. Writ Relief

 Where, as here, the trial court has deprived a party of an opportunity to plead a substantial portion of his case and extraordinary relief may prevent a needless trial and reversal, mandamus review is appropriate.  (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1223, 44 Cal.Rptr.2d 197.)

B. Standard of Review

 A motion for judgment on the pleadings is the functional equivalent of a demurrer.   An appellate court reviews a ruling sustaining a demurrer without leave to amend de novo, exercising independent judgment on whether a cause of action has been stated as a matter of law.  (Hoffman v. State Farm Fire & Casualty Co. (1993) 16 Cal.App.4th 184, 189, 19 Cal.Rptr.2d 809.)   All facts properly pleaded are deemed admitted, and we are not concerned with a plaintiff's possible inability to prove the claims made in the complaint at trial.  (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125, 271 Cal.Rptr. 146, 793 P.2d 479;  Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 572, 108 Cal.Rptr. 480, 510 P.2d 1032.)

C. The Policy is Ambiguous

1. Policy Provisions

The homeowners policy contains two provisions which expand coverage.   These clauses are entitled “Guaranteed Replacement Cost Coverage” and “Value Protection Clause.”   Several clauses purport to exclude coverage, including “ordinance or law” and “damage to land” provisions.

The policy provision entitled “Guaranteed Replacement Cost Coverage-Buildings,” states:  “We will settle covered loss to buildings under Coverage A-Dwelling and Coverage B-Separate Structures at replacement cost regardless of the limits of insurance shown on the Declarations Page, subject to the following provisions:  [¶] a. You have insured your dwelling and separate structures to 100% of their replacement cost as determined by our Building Replacement Cost Guide. [¶] b. You have accepted each annual adjustment in building amounts in accordance with the Value Protection Clause in the policy. [¶] c. You have notified us within 90 days of the start of any physical changes which increase the value of your insured buildings by $5,000 or more, and pay any additional premium.   This includes any new structures and any additions to or remodeling of your dwelling or other structures on the residence premises. [¶] d. You have complied with all of the ‘Loss Settlement’ provisions shown in Condition 3 of Section I of the policy applicable to Coverages A and B. [¶] We do not cover any costs required to replace, rebuild, stabilize or otherwise restore the land.”  (Emphasis in original.)

The “Value Protection Clause,” states:  “We may increase the limit of insurance applying to Coverage A, B [separate structures], C and D to reflect changes in costs of construction and personal property values.   Any such increase will be made on the renewal date of this policy, or on the anniversary date of 3-year policies paid annually.”

The “ordinance or law” exclusion is found within “Section I-Losses Not Insured” which provides as follows:  “Applying to Coverage A and B-Dwelling and Separate Structures ․ [¶] We do not insure for loss either consisting of, or caused directly or indirectly by:  [¶] 5. Enforcement of any ordinance or law regulating construction, repair or demolition of a building or other structure, unless endorsed to this policy.”

The policy also contains a “damage to land” exclusion.   The insuring portion of the policy contains, under “Coverage B-Separate Structures,” the following language:  “We do not cover land or the value of land, including land on which the separate structure is located or the cost to restore, replace, repair or rebuild land.   If a covered loss causes damage to a separate structure and to the land on the residence premises, we do not cover any increased cost to repair or rebuild the separate structure because of damage to the land.”  (Emphasis in original.)

As previously noted, under the provision entitled, “Guaranteed Replacement Cost Coverage-Buildings,” the policy provides:  “We will settle covered loss to buildings under Coverage A-Dwelling and Coverage B-Separate Structures at replacement cost regardless of the limits of insurance shown on the Declarations Page, subject to the following provisions: [¶] We do not cover any costs required to replace, rebuild, stabilize or otherwise restore the land.”

2. The Parties' Contentions

Farmers contends that the “ordinance or law” and “damage to land” exclusions bar petitioner's claim.

Petitioner, on the other hand, contends that the “expansive nature of the two [coverage expanding provisions] trumps the rather vague and ill-defined exclusions,” and that Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 55 Cal.Rptr.2d 276 (Desai ) “requires a finding that coverage for the work needed to restore [petitioner's] pool exists as a matter of law.”

3. Rules of Policy Interpretation

 “ ‘We begin with established principles applicable to the interpretation of insurance policies.   Words used in an insurance policy are to be interpreted according to the plain meaning which a layman would ordinarily attach to them.   Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists.  [Citations.]  [¶] On the other hand, “any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer and ․ if semantically permissible, the contract will be given such construction as will fairly achieve its object of providing indemnity for the loss to which the insurance relates.”  [Citations.]   The purpose of this canon of construction is to protect the insured's reasonable expectation of coverage in a situation in which the insurer-draftsman controls the language of the policy.’  [Citation.]   The insurer-draftsman will not be rescued from the consequences of the imprecise terminology used in the insurance contract, especially where it would defeat the reasonable expectations of the insured.  [Citation.]”  (Desai, supra, 47 Cal.App.4th at pp. 1116-1117, 55 Cal.Rptr.2d 276.)

4. Does The “Ordinance or Law” Exclusion Bar Petitioner's Claim?

 Farmers, relying primarily on Bischel v. Fire Ins. Exchange (1991) 1 Cal.App.4th 1168, 2 Cal.Rptr.2d 575 (Bischel ) ⁵ , contends that the guaranteed replacement cost coverage is unambiguously limited by the code upgrade exclusion-so that there is no coverage for building a retaining wall and system of grade beams and caissons to reinforce the pool as now required by code.  Bischel is distinguishable.

In Bischel, a homeowner sued his insurer for breach of contract and insurance bad faith stemming from a claim under his homeowners insurance policy for damage to the boat dock adjacent to his home.   The insurer had paid policy benefits to rebuild the dock to its preloss condition, but refused to pay additional benefits to rebuild the dock to upgraded municipal regulations.   The policy contained the following exclusion:  “We do not cover direct or indirect loss from:  ․ [¶] ․ Enforcement of any ordinance or law regulating construction, repair or demolition of a building or other structure․”   (Bischel, supra, 1 Cal.App.4th at p. 1173, 2 Cal.Rptr.2d 575.)   The trial court ruled in favor of the homeowner on the contract claim, concluding the insurer should have paid to demolish and rebuild the dock to the new code standards.  (Id. at p. 1170, 2 Cal.Rptr.2d 575.)   The Court of Appeal reversed with directions to enter judgment for the insurer.  (Id. at p. 1179, 2 Cal.Rptr.2d 575.)   It held that the purpose of a replacement cost policy is to compensate the insured for the actual loss sustained and not to place him in a better position than before the casualty.  (Id. at p. 1173, 2 Cal.Rptr.2d 575.)   It also held that the “ordinance or law” exclusion foreclosed coverage beyond rebuilding the dock to its preloss condition, since a reasonable person would interpret “enforcement of any ․ law” to include the municipality's withholding of permits for projects not complying with the new regulations.  (Id. at pp. 1177-1178, 2 Cal.Rptr.2d 575.)

The policy involved in Bischel also contained guaranteed replacement coverage.   However, that provision applied only to “Buildings” and not to a boat dock.  (Id. at p. 1175, 2 Cal.Rptr.2d 575.)

The Bischel court found that the “ordinance or law” exclusion should not be strictly construed against the insurer because it was based on language found in Insurance Code section 2071, which sets forth the California Standard Form Fire Insurance Policy.  (Bischel, supra, 1 Cal.App.4th at p. 1173, 2 Cal.Rptr.2d 575.)   However, section 2071 includes language that requires an insurer to indemnify the insured for the costs of repair or replacement of property lost “without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair,․”  (Ins.Code, § 2071, emphasis added.)   The exclusion contained within petitioner's policy does not, as the policy in Bishel did not, contain the language highlighted above.   The policy merely says the insurer will not cover any losses caused by “[e]nforcement of any ordinance or law regulating construction or repair or demolition of a building or other structure, unless endorsed to this policy.”

The Bischel court was understandably influenced by the fact that Insurance Code section 2071 authorizes an insurer to exclude from coverage building code upgrades.   However, after Bischel was decided, our Legislature enacted Insurance Code sections 10101 through 10107.   Section 10101 provides that “[o]n and after July 1, 1993, no policy of residential property insurance may be first issued or, with respect to policies already in effect on January 1, 1994, initially renewed in this state by any insurer unless the named insured is provided a copy of the California Residential Property Insurance disclosure statement as contained in Section 10102.”   Section 10102 sets forth the information which must be contained within the form.   For example, the form must tell the insured whether the coverage includes “guaranteed replacement cost coverage” with “full building code upgrade” coverage, or is without such coverage.

 Farmers contends that it was not required to provide the disclosure form because petitioner's policy was issued in 1992, and it was not renewed.   Petitioner contends that where, as here, an insurer issued an endorsement which changed the coverage, the insurer was required to issue the disclosure form.   We believe that this is the intent of Insurance Code section 10101.   Had Farmers issued such a disclosure form, it could have disclosed the lack of building upgrade coverage.

 Unlike the Bischel insured, petitioner specifically asked for an earthquake policy to replace his pool if damaged by the earthquake and, petitioner alleges, Farmers, through its agent, represented that the earthquake endorsement was obtained for petitioner's benefit.   Petitioner asked for a specific protection (replacement) arising from a specific risk (earthquake).⁶

In our opinion, the principles which must be applied are those set forth in Desai.   There, the insured, Desai, purchased property insurance from Farmers Insurance Exchange for three structures on his property in Santa Monica.   The structures were destroyed in the Northridge earthquake and a subsequent fire, and Desai made a claim under his policy.  (Desai, supra, 47 Cal.App.4th at p. 1115, 55 Cal.Rptr.2d 276.)   The policy covered either “(1) ‘the replacement cost of ․ the building,’ or (2) ‘the amount actually and necessarily spent to repair or replace the damaged building,’ or (3) ‘the limit of liability’ under the policy, whichever is smaller.”  (Id. at p. 1116, 55 Cal.Rptr.2d 276, emphasis in original.)   The smallest was item (3), the policy's $150,000 limit of liability.  (Ibid.)

The policy also contained, however, a “Value Protection Clause,” which provided:  “We [Farmers] may increase the limits of insurance to reflect changes in costs of construction and personal property values.   Any such increase will be made on the renewal date of this policy or on the anniversary date of 3-year policies paid annually.   If a Replacement Cost provision forms a part of this policy, we guarantee that the limits of insurance meet the replacement cost requirements.”  (Desai, supra, 47 Cal.App.4th at p. 1116, 55 Cal.Rptr.2d 276.)

Although Desai's loss totaled $546,757, Farmers paid only the $150,000 policy limit.   Desai then sued for breach of contract.   The trial court sustained Farmers' demurrer and dismissed the action.   This court reasoned that “[t]he ‘Value Protection Clause’ in Desai's policy seriously undermines the purported liability clause stated elsewhere in the policy,” and “the $150,000 coverage amount is completely incompatible with other policy language [in the Value Protection Clause] guaranteeing replacement cost and providing automatic protection with increased coverage.”  (Desai, supra, 47 Cal.App.4th at pp. 1117-1118, 55 Cal.Rptr.2d 276.)   Thus, “[r]eading the policy language as a whole, and interpreting it in favor of the insured as [the court] must where there is a patent ambiguity of this sort, [the court] conclude[d] that an objectively reasonable insured layperson would believe the policy guaranteed replacement coverage, regardless of what the purported policy limits were.”  (Id. at p. 1118, 55 Cal.Rptr.2d 276.)

Desai involved two provisions which both purported to state the liability cap under the policy:  on the one hand, the maximum benefit was the $150,000 policy limit;  on the other hand, according to the Value Protection Clause, the policy limits were guaranteed to equal the current replacement cost, which amounted to almost $550,000.   In other words, the provisions of the policy were in direct, irreconcilable conflict over the computation of the amount that could be paid under the policy.

The question here is whether the guaranteed replacement cost coverage and value protection provisions, and the code upgrade and repair to land exclusions can coexist.   In our opinion, they are incompatible.   We conclude, therefore, that the policy is ambiguous as a matter of law.

Insurance Code section 2071 authorizes the code upgrade exclusion, and the Legislature has specifically determined that guaranteed replacement cost coverage can coexist with a code upgrade exclusion.   However, these circumstances do not mean that the policy issued to petitioner is unambiguous.   When petitioner's policy was issued in 1992, it specifically provided an exclusion for “[e]nforcement of any ordinance or law regulating construction, repair or demolition of a building or other structure, unless endorsed to this policy.”   When petitioner obtained his earthquake insurance endorsement in 1993, he received earthquake insurance which required replacement of the pool (a separate structure under the policy) at current replacement value.   However, the 1993 endorsement did not include code upgrade coverage.   Moreover, the endorsement was not presented to petitioner with the disclosure statement required by Insurance Code section 10101.

The problem, of course, is that the Value Protection Clause creates an ambiguity.   The clause states, in relevant part:  “We may increase the limit of insurance applying to Coverage ․ B [separate structures] ․ to reflect changes in costs of construction and personal property values.   Any such increase will be made on the renewal date of this policy, or on the anniversary date of 3-year policies paid annually.”   In other words, policy limits will be adjusted to keep pace with inflation.   The clause does not refer to, nor does it contradict the guaranteed replacement cost coverage provision.   It does, however, contradict the “ordinance or law” exclusion.   We must resolve this ambiguity in favor of the insured.

5. “Damage to Land” Exclusion

 Farmers also contends that there is no coverage for petitioner's loss because the policy excludes coverage for “damage to land.”   This argument is meritless.

 First, petitioner paid for and received an earthquake endorsement.   The specific provisions of an endorsement control over more general policy language.  (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 431, 296 P.2d 801.)   Here, the endorsement covers damage directly caused by earthquake, which is elsewhere defined as any “shaking of the earth,” whether caused by volcanic or tectonic activity.   The earthquake endorsement, therefore, specifically qualifies and prevails over the general exclusionary provisions.

It seems obvious that “shaking of the earth” would, by definition, cause damage to the earth, and that therefore damage to land caused by earthquake is covered under the policy.   Farmers, however, attempts to distinguish between damage to a covered structure and damage to the land, arguing the former is covered but the latter is not.   This distinction is without a difference.   A reasonable insured might understand this exclusion to mean that reinstating a hillside or reinforcing it against collapse is not covered.   Such an insured would not reasonably perceive that costs of reinforcing a swimming pool are excluded by this provision.

The “damage to land” provision is ambiguous and undefined by the policy.   The policy does define, sometimes with illustrative examples, a number of other terms, such as “earth movement” and “water damage.”   Petitioner submits that the failure of the policy to define “damage to land” makes it impossible to apply the exclusion in a principled way, because in the present circumstances it is virtually impossible to separate damage to land from damage to a covered structure.   If Farmers truly intended, as they now state, the policy to guarantee that a structure be replaced, but not to guarantee that the replaced structure be in any way usable, they should have said so explicitly.

The failure to define “damage to land” is particularly egregious here where an earthquake, a covered risk, undeniably caused the damage to the property.   It requires a feat of imagination to envision a situation where the earth could shake and the land would not be “damaged” in one way or another.   Common sense tells us that a “damage to land” exclusion is incompatible with a “top of the line” Protector Plus Policy, which has earthquake plus Guarantee Replacement Cost Coverage and Value Protection coverage.

The above ambiguity or uncertainty must be resolved against Farmers.   As explained in Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 180 Cal.Rptr. 628, 640 P.2d 764, “ ‘any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer and ․ if semantically permissible, the contract will be given such construction as will fairly achieve its object of providing indemnity for the loss to which the insurance relates.’  [Citations.].” (Id. at pp. 807-808, 180 Cal.Rptr. 628, 640 P.2d 764.)

D. Farmers' Alleged Bad Faith

 Farmers contends that “[e]ven if denial of additional benefits for the cost of code upgrades to the land surrounding the pool was erroneous ․ in light of Bischel the denial was not bad faith as a matter of law.”

 “ ‘[A]n erroneous interpretation of an insurance contract by an insurer does not necessarily make the insurer liable in tort for violating the covenant of good faith and fair dealing;  to be liable in tort, the insurer's conduct must have also been unreasonable.’ ”  (Brandt v. Superior Court (1985) 37 Cal.3d 813, 819, 210 Cal.Rptr. 211, 693 P.2d 796;  see also Congleton v. National Union Fire Ins. Co. (1987) 189 Cal.App.3d 51, 59, 234 Cal.Rptr. 218 [when the bad faith conduct consists of the insurer's interpretation of its ambiguous policy to exclude coverage, that interpretation is not conclusive evidence of bad faith unless it is “inherently unreasonable”].)  An insurer's action is not unreasonable and “bad faith liability cannot be imposed where there ‘exist[s] a genuine issue as to [the insurer's] liability under California law.’  [Citation.]”  (Opsal v. United Services Auto. Assn. (1991) 2 Cal.App.4th 1197, 1205-1206, 10 Cal.Rptr.2d 352;  see also Dalrymple v. United Services Auto. Assn. (1995) 40 Cal.App.4th 497, 519-520, 46 Cal.Rptr.2d 845 [a genuine issue as to liability may be created by uncertainties in controlling case law].)

Farmers notes that at the time it denied petitioner's demand for payment of the cost of code upgrades to the land surrounding his pool, Bischel held that guaranteed replacement cost coverage does not encompass the cost of code upgrades, and no other case held to the contrary.   Farmers claims that under the state of the law at the time Farmers denied petitioner's claim for additional benefits, its liability was uncertain.   Farmers concludes that by following Bischel, as a matter of law Farmers did not act in bad faith, and that the superior court's order granting Farmers' motion for judgment on the pleadings as to the second cause of action for bad faith was correct.

Without additional information surrounding Farmers' decision to deny benefits to petitioner, we cannot conclude, as a matter of law, that Farmers' denial of benefits was not bad faith.   Therefore, the bad faith cause of action must be reinstated.

E. Transfer of This Case to Another Court

 Petitioner contends that “in the interests of justice” this case should be remanded to a different trial judge.

Code of Civil Procedure section 170.1, subdivision (c) provides as follows:  “At the request of a party or on its own motion an appellate court shall consider whether in the interests of justice it should direct that further proceedings be heard before a trial judge other than the judge whose judgment or order was reviewed by the appellate court.”

Petitioner claims that on January 9, 1997, the superior court denied petitioner's motion for leave to amend the complaint, and that during the hearing, the court “displayed hostility toward petitioner's counsel, interrupting and refusing to allow counsel to explain his point, and speaking to counsel in an angry and demeaning way.”   We have reviewed both the reporter's transcript and the tape recording of the January 9, 1997 hearing.   As petitioner claims, the superior court refused to allow petitioner an opportunity to amend the complaint.   In so doing, the court referred to the case as a “junk” case, and refused to allow counsel to continue arguing the matter after the ruling was announced.   Judge Soven's demeanor can fairly be described as intense, and her tone as brusque.   However, we cannot conclude that she treated counsel unfairly, or that she acted in any manner which would mandate disqualification.  (See Ryan v. Welte (1948) 87 Cal.App.2d 888, 893, 198 P.2d 351.)

IV. DISPOSITION

The superior court is directed to set aside its order granting real parties' motion for judgment on the pleadings, and to issue a new and different order denying the motion.   Petitioner's motion to transfer this case to another judge is denied.   The temporary stay is vacated.   Real parties to bear the cost of this petition.

FOOTNOTES

1.   Our collective designation for real parties in interest Farmers Insurance Group, Fire Insurance Exchange and Farmers Insurance Group of Companies.

2.   Hallajian dba Sevan Hallajian Insurance Agency (hereafter “Hallajian”) is also a real party in interest.

3.   Also contained within the second amended complaint is the allegation that Farmers unreasonably withheld sums due and owing to petitioner for his earthquake losses, “so as to prevent [him] from completing the required pool reinforcement in compliance with the legal requirements of the City of Simi Valley ․ despite knowledge that its own agent, failed to obtain the coverage explicitly requested by [petitioner].”  In opposition to Farmers' motion for judgment on the pleadings, petitioner was more specific with respect to his allegations concerning Hallajian.   He claimed that Hallajian, when deposed, testified that when she added the earthquake endorsement, she forgot to add the so-called “Building Code Upgrade” endorsement to the policy, and that Farmers knew about her negligence prior to Farmers' denial of benefits.   Petitioner repeats these allegations in this petition for writ of mandate.

4.   The court, apparently inadvertently, granted judgment on the pleadings as to the fifth count for fraud, even though the defendants had not moved on this count.   The court denied the motion as to Hallajian.

5.   Farmers also relies, to a lesser extent, on McCorkle v. State Farm Ins. Co. (1990) 221 Cal.App.3d 610, 270 Cal.Rptr. 492.   In that case, the reviewing court upheld a ruling that plaintiffs were not entitled to have a garage with a wooden floor replaced with one with a cement floor at twice the cost.   The court, however, based this ruling on the loss settlement portion of the policy (which apparently did not guarantee replacement value) and expressly did not rule on the effect of similar exclusionary language.  (Id. at pp. 615-616, 270 Cal.Rptr. 492.)

6.   Petitioner also argued in his opposition to Farmers' motion for judgment on the pleadings (and again in this petition) that he is entitled to be paid for the cost of code upgrades because the reason the earthquake endorsement did not contain building code upgrade coverage was because, although it was requested by petitioner, Hallajian failed to obtain the coverage from Farmers.   After petitioner filed his complaint, he deposed Hallajian who testified that she was negligent in failing to provide the building code upgrade coverage.   If, as petitioner contends, Hallajian is Farmers' agent, Hallajian's negligence will be imputed to Farmers.   Petitioner has pleaded alternative theories.   The first is that the policy is ambiguous on its face.   The second is that even if the policy is unambiguous, he is entitled to be paid for the cost of code upgrades because it was Farmers' own negligence, i.e., Hallajian's negligence imputed to Farmers, which caused the earthquake endorsement to be issued without building code upgrade coverage.   Farmers suggests that petitioner is not allowed to plead these alternative theories.   Under the liberal pleading rules in California, petitioner may do so.  (4 Witkin, Cal. Procedure (4th ed.   1997) Pleading, § 363, pp. 466-467.)

BOREN, Presiding Justice.

FUKUTO and NOTT, JJ., concur.