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Date: 04-17-2020

Case Style:

501 East 51st Street, Long-Beach-10, LLC v. Kookmin Best Insurance Co., Ltd.

Case Number: B293605

Judge: Grimes, J.

Court: California Court of Appeals Second Appellate District, Division Eight on appeal from the Superior Court, County of Los Angeles

Plaintiff's Attorney: Richard E. Donahoo, Stuart B. Esner and Holly N. Boyer

Defendant's Attorney: Gregory De La Peña and K. Anderson Franco


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This is an insurance bad faith lawsuit. Plaintiff 501 East
51st Street, Long Beach-10 LLC appeals the judgment following
summary adjudication in favor of defendants Kookmin Best
Insurance Co., Ltd., doing business as Leading Insurance
Company, and Leading Insurance Group Insurance Ltd., doing
business as Leading Insurance Company, on plaintiff’s claim for
breach of the covenant of good faith and fair dealing relating to
the parties’ insurance contract. Plaintiff sued after defendants
denied plaintiff’s claim for damages to its Long Beach apartment
complex allegedly caused by a ruptured underground water main.
Experts hired by plaintiff and defendants provided conflicting
reports on the cause of the damage. We agree with the trial court
there is no material dispute whether defendants denied the claim
in good faith based on an expert report concluding the damage
was not caused by the broken water main, and affirm the
Plaintiff sued defendants for breach of the covenant of good
faith and fair dealing, fraud in the inducement, breach of
contract, estoppel, negligence, negligent misrepresentation, and
declaratory relief based on defendants’ denial of plaintiff’s
insurance claim.
Defendants moved for summary adjudication of plaintiff’s
claim for breach of the covenant of good faith and fair dealing.
Defendants argued the “genuine dispute doctrine” provided a
complete defense to a finding of bad faith. Defendants presented
evidence the denial of plaintiff’s claim was based on expert
opinions that the damage to plaintiff’s building was caused by
long-term settlement and earth movement, which was not a
covered loss under the policy. The parties do not dispute that
settlement-related damage was not covered under the policy.
1. Facts Supporting the Summary Adjudication Motion
a. Plaintiff’s insurance claim and expert report
The subject property is a 10-unit, two-building apartment
complex, built in 1963. Plaintiff purchased the property in 2012,
and defendants first issued a policy insuring the property in
Sometime between December 31, 2015 and January 2,
2016, an underground water main burst next to the southwest
side of the building. Plaintiff alleged the “building moved and
cracked because of the soil movement triggered by the pipe
Plaintiff presented its claim to defendants on March 8,
2016, claiming damage to the building caused by the ruptured
water main. In April 2016, plaintiff provided defendants with a
report prepared by American Geotechnical, Inc. (AGI). AGI
performed a “limited geotechnical investigation” of the property
to “evaluate site conditions relating to the reported building
distress following a waterline break near the south end of the
building.” The scope of the evaluation was limited to
“observation, photo documentation of the site conditions, [and] a
floor-level survey of the interior of the first level units . . . .” The
investigation did not involve any subsurface investigation or soil
The report noted cracks in the interior walls and the
concrete slab floors of units 1 and 4. Regarding the exterior of
the building, the report noted “significant cracks on the
foundation stem wall in the south side of the building near the
reported water leak.” There were also “[n]umerous stucco
cracks.” The report noted “significant floor deformation,” with
“downward tilting to the rear as well as to the right and left sides
of the building. The steepest floor tilt . . . occurs at the left side of
Unit 1, close to the reported water leak.”
AGI opined that “existing building distress was
substantially contributed to by the water main break. The water
introduced to the soil medium appears to have triggered
differential foundation movement causing the stress features to
develop. Some of the distress may have pre-existed and be due to
longterm soil influences as well as inadequate original design
and/or construction. [¶] Further investigation including soil
sampling and testing can be performed to determine the site soil
AGI recommended the building’s foundation be reinforced
with piers, going at least 20 feet deep, as well as repairs to the
slab foundation. The preliminary cost to repair the damage, and
relocate tenants, was estimated to be $258,900.77.
b. Defendants’ investigation and expert
At the time the claim was tendered, David Koch was
defendants’ Property Supervisor. He was responsible for
determining whether the loss was covered under plaintiff’s policy,
and to retain experts to help make that determination. Irene
Bernardo worked under Mr. Koch, administering the
investigation of the claim.
After receiving AGI’s report and repair estimate,
defendants retained J.S. Held LLC, a construction consulting
firm, to assist in investigating the claim. Upon J.S. Held’s
recommendation, defendants also retained Wiss, Janney, Elstner
Associates (WJE) to inspect plaintiff’s property and determine
the cause of the damage.
On June 4, 2016, WJE associates Ann Harrer and Adrienne
Goetz conducted a site survey. John Machin, a cost estimator
with J.S. Held, and plaintiff’s representative, Alex Stamires,
were also present during the site survey.
WJE issued its report on June 29, 2016, detailing its
investigation and findings. As part of its investigation, WJE
reviewed AGI’s report, and inspected the interior and exterior of
the complex. WJE did not conduct any soil tests. According to
the report, Mr. Stamires told WJE the water line supply break
occurred three to four feet underground, at the southwest corner
of the building. During a two- or three-day period, water leaked
from the broken pipe, creating a mud slurry that traveled along
the western façade of the building, and down a sloped
embankment away from the building.
WJE noted numerous previous repairs to the stucco on the
building, at the west and south facades, and near the water leak.
Mr. Stamires informed WJE that no exterior repairs or
repainting had been done since the property was purchased in
2012. WJE noted that “[a]t some locations, particularly at the
sound end of the main building, some of the [previously repaired]
cracks have opened up . . . .”
Unit 1 is a ground floor apartment, closest to the leak. The
glass for unit 1’s window had been replaced with an acrylic sheet,
as the glass for the unit had broken three times since the pipe
break. Sealant had been applied to a crack on the bottom of the
window frame following the pipe break, and the crack had
widened since its application because the crack was no longer
sealed. Cracks were noted throughout the interior of the
apartment, but were predominantly in the southwest bedroom
closest to the water leak, and the living room. The tenants
reported that they had filled drywall cracks emanating from the
corner of a closet door following the pipe leak, but that the cracks
had since widened. Also, the door to their unit was sticking, and
there was “vertical offset” of the slab floor in the living room
which was not noticeable before the leak. The floor noticeably
sloped to the south.
WJE concluded that “[t]he previously repaired interior and
exterior cracking, and the [floor level] survey performed by [AGI],
indicate that away from the vicinity adjacent from the reported
water supply line break location there are changes in elevation
across the slab of the main building. The changes in elevation
noted indicate that at least some settlement and movement of the
building occurred prior to the water supply line break event and
subsequent running water from the broken line. However, the
reopening of previously repaired cracks, presence of open cracks,
observed discontinuity with vertical offset in Unit 1, and the
multiple occurrences of glass breakage of the window in Unit 1 as
reported by residents, indicate that there has been some
movement or settlement of the building since the early 2016
water supply line break event. Existing settlement-related
conditions were likely exacerbated as a result of the water
released due to the supply line break. However, it is of note that
there has been ongoing, general settlement of the building,
downwards towards the west, which will likely continue, and
which is not a result of the recent water supply line break and
subsequent running water.”
WJE recommended that “floor finishes in Unit 1 be
removed to investigate further the noted floor slab discontinuity
and vertical offset. This investigation should be completed to
determine potential extent of distress as well as to determine a
repair procedure.” WJE made no recommendations on how the
damage should be repaired.
c. Defendants retain coverage counsel
On June 30, 2016, defendants retained Mark R. Israel of
Daniels, Fine, Israel, Schonbuch & Lebovits, LLP to provide legal
advice regarding coverage for the damage under the policy.
Mr. Israel was asked to determine whether there was coverage
for plaintiff’s damages under the “efficient proximate cause”
standard. He reviewed the policy, and the AGI and WJE reports.
On July 27, 2016, Mr. Israel provided defendants with an
opinion letter summarizing his conclusions. Under the policy,
damage to the building caused by earth movement and
settlement are excluded, but water damage resulting from an
“accidental discharge” of water was covered. He noted that both
AGI and WJE agreed there was “pre-existing, ongoing general
settlement” of the building. He noted that “there are a number of
candidates for the ‘efficient proximate cause’ of loss,” but that
“both experts concur that the water leak set in motion forces that
seriously exacerbated the preexisting condition of the property
and likely caused new damage.”
Mr. Israel ultimately concluded “damage to the insured
apartment building attributable to the recent water line break is
covered. There was undoubtedly pre-existing settlement and
cracking at the insured location. To the extent the experts can
reasonably segregate the repair cost between the two types of
damage, then coverage would exist only for damage allocable to
the pipe break.” He recommended that “in addition to having
your experts assess that issue, you may wish to request water
usage records from the insured location to verify that this leak
was a sudden occurrence in the December-January time frame as
opposed to a chronic condition at the property.”
d. Defendants seek further expert opinions
Because neither the AGI nor the WJE reports provided a
definitive opinion that the water main break was the efficient
proximate cause of the damage, on September 16, 2016, Mr. Koch
requested that WJE perform additional testing. Also, on
October 5, 2016, defendants retained Geotechnical and
Environment Sciences Consultants, Ninyo & Moore. Ninyo &
Moore provided a report on December 6, 2016, and on
December 5, 2016, WJE provided a supplemental report.
Ninyo & Moore visited the site on October 11, 2016,
reviewed the regional geological setting and site geology, and
conducted “subsurface exploration consisting of the excavation,
logging, and sampling of two hand excavated test pits and
four hand-augered exploratory borings around the subject
building.” Soil samples were taken from the borings and test pits
and sent to a laboratory for testing.
Ninyo & Moore observed numerous previously patched
cracks in the stucco. Some of those cracks experienced “minor reopening.” They also inspected the exposed slab floor in unit 1,
and noticed large cracks in the concrete. The “slab cracks were
generally noted to have aged characteristics including rounded
and worn edges,” and were filled with debris. They also noted
that “topping slab/replacement slab” had been applied to the
southwest bedroom floor, attempting to level the sloping floor.
Ninyo & Moore formed the following opinion: “Based on
our evaluation, the cracks in the walls and floor slab and the tilt
of the floors of the subject building were caused by long-term
differential soil movement. The soil movement that has affected
the building is attributable to settlement of soils along the west
side of the building, as indicated by the low areas and contour
pattern of the . . . floor level survey . . . , and heave of expansive
clayey soil under the eastern portion of the building. Based on
our site observations, the settlement is related to the poor surface
drainage conditions observed along the west side of the building.
Long-term infiltration of water into the foundation soils on the
west side of the structure due to roof runoff and incident rainfall
has resulted in long-term settlement in this area.”
“Based on our evaluation, we conclude that the reported
December 31, 2015, pipe leak did not contribute to the tilt of the
building floor or the cracks in the building. The tenants of the
building reportedly observed water from the leaking pipe flowing
into the drainage channel property to the north of the subject
site. Based on our . . . surveying around the southwest part of
the site, surface drainage in the vicinity of the reported pipe leak
location would tend to flow away from the building toward the
south and west into the drainage channel property adjacent to
the subject site. . . . This suggests that water from the leaking
pipe escaped to the ground surface and flowed away from the
building and that a significant amount of water did not infiltrate
the subsurface soils at the location of the leak. Additionally, the
tilt of the slab-ongrade is relatively consistent from the south end
of the building to the north end and cracks in the building walls
were observed to be widespread across the structure. . . . We did
not observe indications that the distress was isolated at the
location of the reported pipe leak at the southwest corner of the
building. . . .”
As part of its supplemental report, WJE reviewed water
bills for the subject property for the months between August 2015
and January 2016. The January bill reflected water use that was
9,500 gallons higher than previous months. WJE also inspected
the exposed slab floor for unit 1, and noticed significant cracking,
and that topping cement had been added to the southwest corner
of the bedroom. WJE used ground penetrating radar (GPR) to
examine the conditions below the slab. “GPR surveys performed
in several locations throughout the exposed slab revealed that the
slab is largely unreinforced, and as a result, does not have the
tensile strength to resist differential movement, which results in
cracking. Some areas of the slab exhibit evidence of previous
WJE concluded that “the previous repairs to the exterior
cracks and evidence of the slab-on-ground cracking indicates that
the cracks initiated prior to the water supply line break of
December 2015. Previous repairs to the exterior walls and
interior slab also indicate that ongoing attempts to mitigate the
long-term settlement of the building have occurred, including
installation of a topping or leveling material in the bedroom. In
conclusion, there has been ongoing, general settlement of the
building, downwards toward the south and west, resulting in the
observed cracking in the slab and walls of Unit I, which will
likely continue without remediation of the conditions that are
causing this settlement, and which is not a result of the
December 2015 water supply line break and subsequent
discharge of water.”
Mr. Israel reviewed both the Ninyo & Moore report and
WJE’s supplemental report, and on December 7, 2016, Mr. Israel
forwarded these reports to plaintiff.
On January 23, 2017, plaintiff provided defendants with a
2012 property inspection report which had been prepared in
connection with plaintiff’s purchase of the property. The report
noted cracking and bubbling in the stucco requiring repairs and
further evaluation, and problems with the window in unit 1. The
window would fall out of its tracks and required further
evaluation. The inspector also noted cracking in the drywall, and
that the slab in unit 4 is “badly cracked and feels as though the
crack is offset. Cause of the cracking is unknown and . . . needs
to be determined.”
e. Defendants deny plaintiff’s claim
After reviewing all these reports, Mr. Israel prepared a
second coverage evaluation concluding the “efficient proximate
cause of the foundation damage was long-term differential soil
movement which cause of loss is explicitly excluded by the terms
of the policy.” Mr. Israel sent this coverage opinion to plaintiff on
February 6, 2017.
2. Plaintiff’s Facts in Opposition to Summary
Plaintiff argued there were triable issues as to whether
there was a “genuine dispute,” reasoning there was ample
evidence from which a jury could conclude that defendants “acted
unreasonably and that [their] investigation was biased.”
Specifically, plaintiff argued that the property was in good
condition when it was purchased and when defendants first
extended coverage to plaintiff; WJE initially concurred with
plaintiff’s expert that the leak caused new damage to the
building; defendants received an initial coverage opinion that
there was coverage under the policy that defendants did not
disclose to plaintiff; the decision to extend coverage changed
when defendants received a higher than expected estimate to
repair the damage; WJE changed its opinion without conducting
any further investigation; new experts were hired only to “pursue
coverage denial”; and defendants anticipated litigation, from
which it could be inferred their denial was in bad faith.
a. Condition of property at time of purchase
In 2013, defendants had the property inspected as part of
their due diligence before issuing an insurance policy. The
report, written by E&S Inspections, Inc. provided no in-depth
description of the condition of the property, but instead noted
that the property was in “satisfactory” or “average” condition, and
included 11 general photographs of the building, none of which
included sufficient detail to show cracking to the building’s stucco
or settlement of the building.
Mr. Koch testified in his deposition that if the inspection
revealed “apparent damage or issues,” an insurance policy would
not likely have been issued. He also testified that the 2013 report
was not provided to defendants’ experts, WJE and Ninyo &
b. Defendants initially decided to extend coverage
Claim file notes entered on July 26, 2016 by Ms. Bernardo
recorded that Mr. Israel “[j]ust completed the analysis, we will
extend coverage to unit 1 only, he wanted to see previous water
bill for this property first for review then finalize[] his report,
submit to KBIC Mr. Koch and move forward.”
Plaintiff provided the water bills to defendants on
August 8, 2016. That same day, Mr. Machin, the cost estimator
with defendants’ construction consulting firm, told defendants in
his opinion, “9,537 gallons more in the month of DecemberJanuary over the monthly average . . . is representative of enough
water to cause the settling and deformation described.”
August 10, 2016 notes in the claim file record that
Mr. Israel told defendants that if the experts agreed the water
line break caused the damage to plaintiff’s property, the next step
would be to “formulate cost[s]” of repair. However, he cautioned
that further investigation might be warranted.
Defendants provided the water bills to WJE, and on
August 16, 2016, WJE informed defendants that the water bills
did not change their findings from their earlier report that preexisting settlement of the building “was likely exacerbated as a
result of the water supply line break.” WJE also maintained that
settlement of the building would likely continue, unrelated to the
water line break.
According to Mr. Stamires, defendants did not provide
plaintiff with WJE’s initial June report which stated in part,
“Existing settlement-related conditions were likely exacerbated
as a result of the water released due to the supply line break.”
Moreover, “[t]he Carrier never disclosed to me the decision to
extend coverage in July 2016” or that they asked “Mr. Machin to
prepare an estimate for repair of damages related to the loss.”
Defendants also did not give Mr. Israel’s July coverage opinion to
plaintiff. Mr. Israel advised defendants that the letter was for
their use, and that the opinion was privileged.
c. J.S. Held LLC prepares repair estimate
On July 27, 2016, defendants forwarded a copy of WJE’s
June report to Mr. Machin of J.S. Held LLC “so he can start
writing estimate for unit 1.” According to July 28, 2016 notes in
the claim file, Mr. Machin told defendants there were “lots of
issues” with writing an estimate for unit 1. He recommended
further evaluation by the engineers, including evaluation of the
slab to “get a better picture and write a report” of the damage.
On September 3, 2016, Mr. Machin provided an estimate to
repair unit 1 to his colleague at J.S. Held, Mr. John Gillen. The
total repair costs for unit 1 were estimated to be $227,752.90.
On September 5, 2016, Mr. Gillen emailed Mr. Machin,
asking him to “clarify the extent of slab replacement and
releveling” because the estimate was “more than . . . expected and
quite a bit more than the Insured’s estimate, so I want to be sure
before we send.”
On September 8, 2016, Mr. Machin discussed the estimate
with defendants, and again explained there were a lot of
“unknowns” that made providing an estimate difficult, and that
WJE had not recommended the scope of work or how to repair the
damage to the building. He suggested having a conference call
with defendants, Mr. Gillen, WJE, and Mr. Israel to discuss how
to proceed.
The conference call was held on September 9. Mr. Machin
expressed concerns that “there is something going on [in] the
middle of the building that we do not know” and that there was
extensive settlement on the north side of the building, away from
the pipe leak. The parties decided that WJE would write a
proposal for further investigations so that they “can tell for sure
if all the cracks are related to [the water pipe leak] or . . .
d. Defendants hire new expert
Ms. Harrer with WJE sent a proposal to perform additional
investigations to J.S. Held on September 13, 2016. She
recommended that the floor finishes in unit 1 be removed so that
the floor could be further investigated. She proposed that WJE
visually survey the exterior of the building for any noticeable
changes since its June investigation. WJE would use GPR to
determine the condition of the slab including its thickness and
reinforcement. WJE’s investigation would not include samples or
material testing, but these services were recommended.
In addition to this proposal, Ms. Harrer cut and pasted
some background information from WJE’s June report. Other
than reviewing the water bills, and participating in the
September 9 conference call, WJE had not performed any
additional investigations since its June report. Nevertheless,
the proposal phrased some matters differently than the June
report. For example, the proposal substituted the term “may”
for the phrase “has been” in stating that there “may have been
some movement or settlement of the building since the early
2016 water supply line break event.” Ms. Harrer also
tempered her previous conclusion that “[e]xisting settlementrelated conditions were likely exacerbated as a result of the
water released due to the supply line break,” by adding,
“however, the extent of damage, if any, caused by the January
2016, even[t] are not known at this time” to the end of the
According to Ms. Bernardo, it was Mr. Koch who suggested
that new experts be hired. On October 3, 2016, she wrote an
email to Mr. Koch asking him to approve Ninyo & Moore’s
budget of $15,000. On October 5, 2016, Mr. Koch responded by
asking “Why is budget so expensive?” Later that same day,
Mr. Koch approved the budget, writing to Ms. Bernardo, “Seems
expensive in pursuit of coverage denial. OK for engineer.”
e. Defendants deny claim
In December 2016, following the receipt of reports from
WJE and Ninyo & Moore, the claim file includes notes
indicating a “potential lawsuit” and “this file will be in
litigation.” The context for these notes was that the reports
concluded the damage was not attributable to the water main
break, and that the coverage attorney, Mr. Israel, was going to
provide these reports to plaintiff.
f. Plaintiff seeks denial of motion pursuant to
Code of Civil Procedure section 437c,
subdivision (h)
Plaintiff argued the motion should be denied under
section 437c, subdivision (h), because defendants’ person most
knowledgeable about the investigation and denial of plaintiff’s
claim, William Walker, was instructed by counsel not to answer
53 questions during his July 20, 2018 deposition. Specifically, he
refused to answer “Was the denial of the claim appropriate?”
Counsel objected that the question improperly called for expert
Plaintiff’s counsel’s declaration in support of the opposition
averred: “The refusal of Defendant to answer questions in
deposition prevented me from obtaining essential discovery
regarding the denial of the claim, which I would have found
useful in preparing the opposition to this motion.” “There were
other similar questions to which the PMK witness was so
instructed and refused to answer. The instruction and refusal to
answer each of the 53 questions severely limited the usefulness of
the deposition and was prejudicial to Plaintiff in that facts
essential to justify opposition may exist but cannot, for reasons
stated, be presented. On this ground alone, per CCP §437(c)(h)
the Court should deny the motion and make any other order as
may be just.”
3. Defendants’ Reply
Defendants’ reply argued that plaintiff’s evidence did not
show that defendants acted unreasonably, or refute their
evidence that there was a genuine dispute. The reply did not
address plaintiff’s argument that the motion should be denied
pursuant to section 437c, subdivision (h).
4. Trial Court’s Ruling
The trial court granted the motion, finding defendants had
satisfied their burden under the genuine dispute doctrine, and
that plaintiff’s opposition evidence did not raise a triable issue of
material fact. The trial court’s ruling did not address plaintiff’s
request for denial of the motion under section 437c,
subdivision (h). Plaintiff dismissed its remaining claims without
prejudice, judgment was entered in favor of defendants, and this
timely appeal followed.
“[T]he party moving for summary judgment [or
adjudication] bears the burden of persuasion that there is no
triable issue of material fact and that he is entitled to judgment
as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001)
25 Cal.4th 826, 850 (Aguilar).) “Once the [movant] has met that
burden, the burden shifts to the [other party] to show that a
triable issue of one or more material facts exists as to [that] cause
of action . . . .” (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, at
p. 850.) The party opposing summary judgment “shall not rely
upon the allegations or denials of its pleadings to show that a
triable issue of material fact exists but, instead, shall set forth
the specific facts showing that a triable issue of material fact
exists . . . .” (§ 437c, subd. (p)(2).) A triable issue of material fact
exists where “the evidence would allow a reasonable trier of fact
to find the underlying fact in favor of the party opposing the
motion in accordance with the applicable standard of proof.”
(Aguilar, at p. 850.)
Our Supreme Court has made clear that the purpose of the
1992 and 1993 amendments to the summary judgment statute
was “ ‘to liberalize the granting of [summary judgment]
motions.’ ” (Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th
536, 542; Aguilar, supra, 25 Cal.4th at p. 854.) It is no longer
called a “disfavored” remedy. “Summary judgment is now seen as
a ‘particularly suitable means to test the sufficiency’ of the
plaintiff’s or defendant’s case.” (Perry, at p. 542.) On appeal, “we
take the facts from the record that was before the trial court . . . .
‘ “We review the trial court’s decision de novo, considering all the
evidence set forth in the moving and opposing papers except that
to which objections were made and sustained.” ’ ” (Yanowitz v.
L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037, citation omitted.)
a. Genuine dispute doctrine
California law requires insurers to pay for covered losses
caused by an insured risk. If a loss was caused by more than
one occurrence, including covered and not-covered events, then
the insurer is liable only if the “efficient proximate cause” or the
“predominate” cause was a covered risk. (City of Carlsbad v.
Insurance Co. of State of Pennsylvania (2009) 180 Cal.App.4th
176, 183.)
“ ‘Before an insurer can be found to have acted in bad faith
for its delay or denial in the payment of policy benefits, it must be
shown that the insurer acted unreasonably or without proper
cause.’ . . . ‘Where 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.’ . . . [¶] ‘The “genuine
dispute” doctrine may be applied where the insurer denies a
claim based on the opinions of experts.’ . . . Reliance on an
expert . . . ‘will not automatically insulate an insurer from a bad
faith claim based on a biased investigation.’ . . . Although an
insurer may rely on experts, summary judgment on a bad faith
claim must be denied where the evidence shows ‘the insurer
dishonestly selected its experts[,] the insurer’s experts were
unreasonable[,] [or] the insurer failed to conduct a thorough
investigation.’ ” (McCoy v. Progressive West Ins. Co. (2009)
171 Cal.App.4th 785, 793, citations omitted.)
Here, defendants presented evidence that there was a
genuine dispute that the pipe rupture (a covered loss) was not the
efficient proximate cause of the damage, and that the efficient
proximate cause was earth movement or settlement (an excluded
loss). Specifically, defendants presented evidence that its
experts, WJE and Ninyo & Moore, concluded the damage to the
building was caused by earth settlement and not the pipe
Plaintiff makes much of the fact that there was evidence
defendants initially decided the damage may have been covered,
and only sought additional expert opinions after the estimate for
repairs exceeded their expectations. However, plaintiff ignores
evidence that both AGI and WJE noted extensive pre-existing
settlement damage to the building in their initial reports, and
cautioned that further investigations and testing should be
conducted to determine the cause of the damage and the
necessary repairs. Moreover, when asked to provide a repair
estimate, Mr. Machin cautioned there were many “unknowns,”
and further investigation was warranted. Mr. Israel similarly
guarded his initial coverage evaluation, cautioning there were
other possible causes of the damage, and that the experts should
attempt to apportion the damage between the various causes,
including pre-existing earth movement and the pipe rupture.
Plaintiff also complains that WJE changed its opinion in its
September 13 proposal, without conducting any further
investigation. Nothing in the record supports this inference.
WJE had participated in the September 9 conference call, where
Mr. Machin raised concerns about his ability to write an accurate
repair proposal based on the number of “unknowns” before WJE
drafted its proposal. We can infer no dishonesty or
unreasonableness from these facts.
Plaintiff also makes much of Mr. Koch’s email approving
the $15,000 budget for an additional expert report and stating it
seemed expensive “in pursuit of coverage denial,” and the claim
file notes stating litigation was anticipated. We do not find it is
reasonable to infer bad faith from the email or from these file
notes. Mr. Koch may have been of the opinion that defendants
already had enough expert information on which to deny the
claim, and another $15,000 was too much to spend, but he
approved the budget anyway, and defendants’ coverage denial
was indisputably based on the additional expert report. As for
the file notes, litigation often results from coverage denial, and
file notes stating the obvious are not reasonably viewed as
evidence of bad faith.
We agree with the trial court’s assessment that none of
plaintiff’s evidence raised a triable issue that this was not a
genuine coverage dispute. There is no dispute that defendants
based their claim denial on the final expert report, and there is
no evidence that report was contrived or false. As the trial court
aptly stated, “Initial opinions are often superseded by further
b. Section 437c, subdivision (h)
Section 437c, subdivision (h) provides: “If it appears from
the affidavits submitted in opposition to a motion for summary
judgment or summary adjudication, or both, that facts essential
to justify opposition may exist but cannot, for reasons stated, be
presented, the court shall deny the motion, order a continuance to
permit affidavits to be obtained or discovery to be had, or make
any other order as may be just.” A party seeking continuance or
denial of a motion under section 437c, subdivision (h) must show
that the facts to be obtained are essential to opposing the motion,
that there is reason to believe such facts may exist, and that
additional time is needed to obtain these facts. (Wachs v. Curry
(1993) 13 Cal.App.4th 616, 623.) The party’s supporting
declarations must show: “(1) ‘Facts establishing a likelihood that
controverting evidence may exist and why the information sought
is essential to opposing the motion’; (2) ‘The specific reasons why
such evidence cannot be presented at the present time’; (3) ‘An
estimate of the time necessary to obtain such evidence’; and
(4) ‘The specific steps or procedures the opposing party intends to
utilize to obtain such evidence.’ ” (Johnson v. Alameda County
Medical Center (2012) 205 Cal.App.4th 521, 532, italics omitted.)
Here, the sum total of plaintiff’s argument on this point in
the trial court was one heading, and two sentences, at the
conclusion of plaintiff’s opposition brief: “Other facts may exist
essential to denial, however, Defendants refused to answer
53 questions in PMK deposition. Denial is proper pursuant to
CCP 437(c)(h).” Counsel’s supporting declaration was very
general, and did not explain why the answer to any of the
questions at the PMK deposition was essential to opposing the
summary adjudication motion. The only testimony that plaintiff
complains it was unable to obtain was an opinion about whether
denial of the claim was “appropriate,” and we see no reason to
conclude the PMK’s opinion, whether yes or no, would be a
material fact, or that it was essential to oppose the motion.

Outcome: The judgment is affirmed. Respondents are awarded their costs on appeal.

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