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Raphael and Shirley WEINER, Plaintiffs and Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant and Respondent.
OPINION
Raphael and Shirley Weiner appeal a summary judgment entered against them and in favor of Allstate Insurance Company. The court determined their complaint was not filed, as required by the applicable policy, “within one year after the date of loss.” The Weiners contend the complaint was timely, based on (1) the time they discovered the cause of their damage and (2) tolling while Allstate investigated their claim.
I
The Weiner residence sustained injury in 1980 from a landslide, which caused downward slippage. A claim to Allstate was rejected, the Weiners filed suit, and a settlement was reached in April 1985. In exchange for a negotiated payment, the Weiners agreed to release Allstate from any further claims related to the landslide, which posed a continuing problem due to nonstabilization of the slope. However, the Weiners had learned from an engineer, Donald Clark, who had examined the property in December 1984, that there were also compressible fills underlying the property. For this reason, they refused to include any future subsidence problems in the release, other than those specifically attributable to the landslide.
The present controversy is based on damage to the Weiner residence which allegedly manifested itself on July 8, 1986, coincident with an earthquake. The subsidence damage was immediately reported to Allstate and examined by Clark and Allstate investigator, Robert Gick.
By letter of October 28, Gick informed the Weiners that costs of stabilizing the home were subject to the prior settlement between the parties. He did note Allstate would pay for any damages specifically caused by the July earthquake.1
On August 6, 1987, the Weiners filed suit against Allstate for damages based on breach of insurance contract, negligence, bad faith, and intentional and negligent infliction of emotional distress. The complaint alleged that on July 8, 1986, the Weiners “learned and confirmed an independent soil subsidence problem [which] problem had existed since approximately 1980, but on or about July 8, 1986 was the first time that plaintiffs had knowledge and confirmation of this problem.” A claim was submitted to Allstate. The Weiners had “performed all of their obligations and responsibilities as required by them pursuant to the insurance policy in this case.” Allstate rejected the claim; this action was a breach of the insurance contract because the Weiners' “claim was one covered by the policy.” The additional causes of action were based on an alleged bad faith denial of the Weiners' claim.
In March 1989, Allstate moved for summary judgment, asserting the Weiners failed, as required by the insurance policy, to file suit within one year of their claimed loss.2 The trial court found, as a matter of law, that the breach of contract claim as well as the bad faith causes of action were barred by the policy's one-year limitation provision.
II
A motion for summary judgment is designed to determine whether triable issues of fact exist. “To justify granting a motion for summary judgment, a defendant ‘ “must conclusively negate a necessary element of the plaintiff's case or establish a complete defense and thereby demonstrate that under no hypothesis is there a material factual issue․” ’ ” (Lawrence v. Western Mutual Ins. Co. (1988) 204 Cal.App.3d 565, 571, 251 Cal.Rptr. 319.) The opposing party then “has the burden of showing that triable issues of fact do exist.” (Ibid.) If the facts are undisputed, the decision becomes one of law, and summary judgment is proper here only if the facts show the action is time-barred.
III
The Weiners contend that, pursuant to the “discovery rule,” their cause of action did not accrue until they learned the actual cause of their loss. Thus, they argue, the one-year period in which to file suit did not begin to run until October 1986 when they received a copy of the engineering report commissioned by Allstate, which report suggested the actual cause of the recent damage was settlement from compaction of the underlying fill rather than continued slope movement.3
In the case of soil subsidence, damage may occur continuously over a period of time before it is appreciable or observable. That appears to be the case here—the report states movement has occurred “during the past four years.” But it was not observable until July 1986 and it would be “manifestly unjust to deprive plaintiffs of a cause of action before they are aware that they have been injured.” (Leaf v. City of San Mateo (1980) 104 Cal.App.3d 398, 406, 163 Cal.Rptr. 711.)
The Weiners further claim they did not learn the “cause” of their loss until receipt of the October report. However, the damage to the house was observable in July; and the Weiners attributed the damage to soil subsidence, as stated in their complaint: “The problem had existed since approximately 1980, but on or about July 8, 1986, was the first time that plaintiffs had knowledge and confirmation of this problem.” They knew the cause of the damage was a subsidence or earth movement problem. The complaint itself alleges their policy provided “coverage for damage to the real property and home from earth movement․” Which kind of earth movement occurred, and their discovery of whether the “policy might afford coverage is without import. ‘It is the occurrence of some ․ cognizable event rather than knowledge of its legal significance that starts the running of the statute of limitations.’ [Citation.]” (Abari v. State Farm Fire & Casualty Co. (1988) 205 Cal.App.3d 530, 535, 252 Cal.Rptr. 565.) Consequently, the breach of contract claim, i.e., for payments under the policy, arose in July 1986, “the date of loss.” The first cause of action, filed in August 1987, is time-barred.
IV
The remaining causes of action are not so easily discarded. Counts 2, 3, and 4 generally allege a breach of the implied covenant of good faith and fair dealing in both the handling and denial of the Weiners' claim with dependent mental distress and punitive claims. These allegations, although “related” to the policy, cannot arise at the same time as discovery of the original, physical, risk-insured loss. “Tort liability for breach of the implied covenant of good faith and fair dealing has been variously measured. The primary test is whether the insurer withheld payment of an insured's claim unreasonably and in bad faith. [Citation.] Where benefits are withheld for proper cause, there is no breach of the implied covenant. [Citation.] The duty imposed by law is not unreasonably to withhold payments due under the policy.” (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151, 271 Cal.Rptr. 246, emphasis added.) Until the insurance company has wrongfully denied coverage, there is no cause of action. Any damage only arises upon the bad faith refusal.
We are aware of the language in some of the cases cited by both parties upholding the contractual one-year limitation on tortious bad faith causes of action. However, in each instance, the insured had failed to make a claim or file suit within the 12 month period after awareness of the allegedly-covered loss. (Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 271 Cal.Rptr. 1; State Farm Fire & Casualty Co. v. Superior Court (1989) 210 Cal.App.3d 604, 258 Cal.Rptr. 413; Abari v. State Farm & Casualty Co., supra, 205 Cal.App.3d 530, 252 Cal.Rptr. 565; Lawrence v. Western Mutual Ins. Co., supra, 204 Cal.App.3d 565, 571, 251 Cal.Rptr. 319.)
In Lawrence, the cause of action at issue sought recovery for “tortious bad faith in handling [the] claim because of purported misrepresentations in the policy concerning coverage.” (Id. at pp. 574–575, 251 Cal.Rptr. 319, emphasis added.) Thus, the court, without further discussion, found the claim arose from the contract itself and was therefore subject to the contractual limitations period. In Abari, the plaintiff delayed several years before making a claim or initiating suit against its insurer. Nonetheless, without elaborating on the basis for the bad faith claims (and none appears in the factual recitation), the court merely stated that, because the plaintiff sought only damages in the amount payable under the policies, the charge was subject to the one-year limitation: The “pleading thus reveals his bad faith and unfair practices claims are a transparent attempt to recover on the policy, notwithstanding his failure to commence suit within one year of accrual.” (Abari v. State Farm Fire & Casualty Co., supra, 205 Cal.App.3d 530, 536, 252 Cal.Rptr. 565.) In Magnolia Square, the court declined to allow allegations of estoppel or waiver to deprive the insurer of its reliance on the one-year limitation clause: “[T]he conduct took place after the 12–month limitation period had run.” (Magnolia Square Homeowners Assn. v. Safeco Ins. Co., supra, 221 Cal.App.3d 1049, 1063, 271 Cal.Rptr. 1.) Then the court gratuitously announced the bad faith claims were merely “an attempt to recover ‘[d]amages for failure to provide benefits under subject contract of insurance.’ ” (Id. at p. 1063, 271 Cal.Rptr. 1.) Citing Lawrence and Abari, it found them time-barred.
These courts might just as well have concluded that, absent a timely claim made to the company within the one-year period, any alleged bad faith conduct of the insurer occurring thereafter is not actionable—not because bad faith actions as well as contractual ones are automatically subject to the one-year limitations period, but because it is not unreasonable or tortious for the insurer to refuse to pay an untimely claim. “[T]here are at least two separate requirements to establish breach of the implied covenant: (1) benefits due under the policy must have been withheld; and (2) the reason for withholding the benefits must have been unreasonable or without proper cause. [Citations.] Here, the undisputed facts show that the threshold requirement is absent. No benefits were withheld or delayed, because the ․ claim to benefits was already time-barred.” (Love v. Fire Ins. Exchange, supra, 221 Cal.App.3d 1136, 1151–1152, 271 Cal.Rptr. 246.)
The court in Frazier v. Metropolitan Life Ins. Co. (1985) 169 Cal.App.3d 90, 214 Cal.Rptr. 883 addressed a life insurance policy containing a two–year–plus–90–days limitation period. Upon the death of her husband in March 1975, the plaintiff made a claim for regular benefits as well as double indemnity for accidental death. The basic benefits were immediately paid, but not until February 1976 were the accidental death benefits denied. The company contended the death was a suicide, exempted from coverage. In March 1978, the plaintiff filed suit for breach of contract, fraud, emotional distress and punitive damages. Before trial, the court dismissed the breach of contract count because it was barred by the policy limitation; a jury awarded damages for breach of the covenant of good faith and fair dealing, emotional distress and punitive damages. On appeal, the court noted that plaintiff's election to proceed on a contract theory entitled her to the “four-year statute of limitations permitted by Code of Civil Procedure section 337, subdivision 1, when suing upon breach of the covenant of good faith and fair dealing and for damages for emotional distress based upon such breach.” (Id. at p. 102, 214 Cal.Rptr. 883.)
In Love v. Fire Ins. Exchange, supra, 221 Cal.App.3d 1136, 271 Cal.Rptr. 246, the insured noticed damage in 1980 and was advised by an engineering report in February 1981 that the cause was earth subsidence. A claim was made to the insurance company that same month; it was immediately denied. No action was filed until 1988. All the causes of action, breach of contract and those based on bad faith denial, arose in 1981. And, said the court, all were barred, albeit under differing statutes of limitation. Breach of the written contract and of the covenant of good faith and fair dealing, if based on the implied contractual promise, was governed by Code of Civil Procedure, section 337, subdivision 1, a four-year limitation; “[t]o the extent [the plaintiffs] seek tort remedies on their claim for breach of the covenant of good faith and fair dealing, the claim is governed under ․ the two-year statute of limitations under Code of Civil Procedure 339, subdivision 1.” (Id. at p. 1144, fn. 4, 271 Cal.Rptr. 246.)4
Based on the above, we conclude the trial court erred in dismissing those causes of action based on Allstate's alleged bad faith in handling, investigating and denying the Weiners' claim on the policy. The action was filed well within any of the applicable statutory limitations periods outlined in Code of Civil Procedure sections 337 and 339.
The judgment is reversed. The trial court is directed to vacate its order granting the motion for summary judgment and to enter a new and different order denying the motion except as to the first cause of action for breach of the written contract.
FOOTNOTES
1. The letter provides, in pertinent part: “As you recall back on July 17th you indicated that the earthquake had accelerated an existing problem not related to the recent quake nor the slope failure which occurred back in 1980. You had requested that Allstate incur the cost to stabilize your home as a result of this ongoing subsidence problem. [¶] It is Allstate's position that the cost to stabilize your home was considered and part of the Allstate settlement under claim number 4118450172. It is our understanding that your attorney was in receipt of the Moore & Taber reports which recommended such stabilization. [¶] As mentioned Allstate would be willing to pay for those specific damages caused by the earthquake of July 8, 1986․”
2. The pertinent section of the policy provides: “12. Suit Against Us. [¶] No suit or action may be brought against us unless there has been full compliance with all the policy terms. [¶] Any suit or action must be brought within one year after the date of loss.”Certain minimum provisions are required, in fire insurance policies, by the Insurance Code, one of which is relevant here: “No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss.” (Ins.Code, § 2071.)
3. Under a section entitled “Evaluation,” the report stated: “The structure and related improvements are experiencing on-going distress due to movement of underlying soils. The primary cause of damage is concluded to be consolidation of underlying fill and native soils. Therefore, the recent structure distress is largely due to settlement. This condition is aggravated by the expansive character of very shallow foundation soils. [¶] No evidence of continued slope movement was observed. Data from the slope inclinometer shows no significant change during the past approximately 20 months.”In conclusion, the report reiterated the three geotechnical conditions adversely affecting the house: the earlier landslide, the previously-noted unstable fill, and expansive soil. It noted earlier reports, suggesting remedial repairs, had not been heeded: “Final stability design criteria for the landslide using shear pins were transmitted in our letter of April 12, 1985․ In order to provide adequate long-term stability for the failed slope, we recommend installation of the shear pins and completing any re-grading. [¶] Geotechnical design criteria were also provided for a house deep foundation underpinning system (piles) on February 22, 1985. The purpose of the underpinning is to support the house independently of continued consolidation involving fill and native soils. In addition, the pile support will effectively mitigate the adverse influence of expansive soils. [¶] The recommendations in the above-referenced letter reports are still valid. Recent damages are as anticipated for the property. The current problems will increase in severity as long as remedial repairs are not undertaken. The house underpinning system would have obviated damage-producing movement as has occurred during the past four years.”
4. Although the insurance company had raised a one-year contractual limitation in the trial court, that court based its decision solely on the statutory limitations, as did the reviewing court. Under the facts of that case, it did not matter which period was applied.
SONENSHINE, Associate Justice.
CROSBY, Acting P.J., and WALLIN, J., concur.
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Docket No: No. G008428.
Decided: September 13, 1990
Court: Court of Appeal, Fourth District, Division 3, California.
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