Filed 9/17/18 Dorfman v. State Farm General Ins. Co. CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

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APPEAL from a judgment of the Superior Court of San Diego County, Eddie C. Sturgeon, Judge. Affirmed.

Saccuzzo Johnson & Poplin and Andrew M. Poplin for Plaintiff and Appellant.

Hughes & Nunn, Randall M. Nunn and E. Kenneth Purviance for Defendant and Respondent.

Plaintiff and appellant Robert Dorfman sued defendant and respondent State Farm General Insurance Company (State Farm), alleging breach of his first party unit owner's insurance policy terms and bad faith policy handling. Dorfman's investment property, a third floor condominium unit (the property, unit 304), sustained water damage in the shower area when the shower drain seal in the condominium unit above (unit 404) dried up, leakage began and part of his drywall ceiling failed. State Farm afforded Dorfman only limited coverage under a collapse endorsement but denied coverage under an amended physical loss/water damage endorsement, based on its conclusions that a "continuous or repeated seepage or leakage" had occurred and caused an excluded loss. After a jury trial, judgment was entered for State Farm and Dorfman appeals.

This coverage dispute focuses on whether the trial court abused its discretion in making a ruling in limine, after a holding a hearing under Evidence Code section 402,[1] that excluded certain expert opinion testimony Dorfman sought to offer on the costs of repair for the shower in his property, on the grounds it was speculative and lacked foundation. His construction expert, Sean Scott, relied on materials that included a repair estimate for replacement of the drywall behind the tiled walls of the shower, and formed opinions that a sudden water damage event had occurred and created a need for repair of not only the ceiling but also the drywall behind the tiles.

Dorfman additionally argues that the trial court's evidentiary rulings with respect to other witnesses, State Farm's claims representative and claims handling expert, were based on incorrect interpretations of the water damage exclusionary language in the policy (no coverage for "continuous or repeated seepage or leakage"), and therefore amounted to abuses of discretion. Dorfman further relies on State Farm's payment of benefits under the collapse endorsement as showing that no substantial evidence supports the defense verdict denying additional coverage.

On review of the primary ruling that excluded the offered expert testimony, we apply an abuse of discretion standard of review. (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 771-772, 773 (Sargon Enterprises) [expert testimony excludable if "(1) based on matter of a type on which an expert may not reasonably rely, (2) based on reasons unsupported by the material on which the expert relies, or (3) speculative"].) We consider whether the trial court's exercise of discretion unduly implicated the party's ability to present his case. (Tudor Ranches, Inc. v. State Comp. Ins. Fund (1998) 65 Cal.App.4th 1422, 1432-1433 (Tudor Ranches) [evidentiary ruling entirely foreclosing a party from presenting a supportable factual theory is reversible per se].) The issues include whether Scott's proposed cost of repair expert testimony would have addressed an area within the scope of the pretrial designation of experts, and whether the record shows Dorfman established an adequate foundation for the proposed testimony with a sufficient explanation of the reasoning process. (§§ 801, subd. (a), 802.)

With respect to all of Dorfman's claims of abuse of discretion in admission of testimony, we consider whether the trial court's ruling exceeded reasonable bounds, " 'all of the circumstances before it being considered.' " (Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 281 (Shaw).) The trial court's action must not be arbitrary or " ' "transgress[] the confines of the applicable principles of law." ' " (Ibid.) We conclude the trial court had a substantial basis in the evidence to preclude this cost of repair expert from giving opinions on the probable nature and causation of the water leak, as a sudden one. Dorfman's foundational showing about the observations and photographs from other witnesses did not support the expert's proposed opinions that only a sudden discharge of water occurred, and his explanation of what the materials indicated was predominantly speculative. (§ 801, subd. (b).)

Moreover, the trial court's rulings on admissibility of testimony from State Farm's claims representative and its claims handling expert have not been shown to represent any incorrect policy interpretation, or to fall outside the bounds of a reasoned exercise of discretion. No prejudicial error or lack of supporting evidence has been demonstrated and we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

A. Leak, Repair and Estimate

In August 2014, Dorfman used a company he formed to purchase the property so he could remodel and sell it. The two-bedroom, two-bath condominium unit cost $295,000. As the named insured, Dorfman bought State Farm's Rental Condominium Unitowners Policy (the policy), which had a $1,000 deductible. Property coverage was granted for accidental direct physical loss, except as provided in Section I, "Losses Not Insured." Among other exclusions, no coverage was allowed for any loss caused by "Water Damage, meaning: [¶] (4) continuous or repeated seepage or leakage of water or steam from a: [¶] . . . [¶] (c) plumbing system, including from, within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceiling or floor," regardless of "whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these[.]" Fungus or mold was also an excluded condition.

With respect to "collapse," only limited coverage was added through the "Amendatory Collapse Endorsement," which covered "direct physical loss to covered property involving the sudden, entire collapse of a building or any part of a building. [¶] Collapse means actually fallen down or fallen into pieces. . . . [¶] The collapse must be directly and immediately caused only by one or more of the following: [¶] a. fire, . . . water damage . . . , all only as insured against in this policy . . . ." With respect to collapse, "water damage means accidental discharge or leakage of water or steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam[.]"

Dorfman testified at trial that he normally inspects his potential investments for water damage, and knows what water spots and discoloration from water look like. He saw no such damage in this property. Upon taking possession of the unit in mid-August 2014, Dorfman began remodeling it, and hired workers to help with his renovations, including the two-foot-by-three-foot shower stall in one of the bathrooms, which was located directly below the shower of the unit above. He paid the workers in cash and they could not be identified as witnesses for trial.

It is not disputed that the shower stall had two layers of ceiling above it, and that the workers had opened up the lower "drop[]down" ceiling for the shower. This lower ceiling had been made up of drywall that was attached to metal framing. The upper ceiling was a layer of drywall that was attached to the subfloor and to wooden floor joists supporting the shower above, and its floor drain was connected to plumbing that sloped over to the wall. The workers left the lower metal framing and the upper ceiling intact while they were installing marble tile on the shower walls. Dorfman was involved with the remodeling on a daily basis and saw no signs of water damage.

On Friday August 30, 2014, Dorfman was working alone in the property when he heard a "loud thud." He went to look at the shower and found what looked like rain, which he said was "pouring down everywhere . . . down the sides, coming straight down." He ran upstairs twice, pounding on the door of the above unit, but could not make contact for about 40 minutes. He testified that when he returned, he saw pieces of drywall collecting near the drain in the shower pan, cleared them out and placed a bucket under the leak. He also admitted he earlier said he didn't touch anything in the shower at the time. That day, he took two somewhat indistinct cell phone videos of the leak, showing lines of water dripping into the bucket in the shower, but no pieces of drywall on the floor.

About the time the leak was going on, Dorfman contacted the occupants of the unit directly below him, unit 204, and they showed him their bathroom where "water [was] coming down the sides and then the ceiling of their shower."[2] After about 40 minutes, the upstairs occupant turned off the shower and answered the door, saying he was sorry.

That weekend, the property manager for the owner of the upstairs unit was notified and called David Monroe, a plumber with 23 years of experience, to find and fix the leak. Monroe spoke with the foreman of the workers in Dorfman's property. Working from each floor, he examined the basket floor drain and seal of the upstairs shower, which was exposed because not only the lower ceiling had already been opened up, but also the upper ceiling had a hole in it where the overhead drain had been leaking and where one of Dorfman's workers had punched it out to release the pressure and find the leak. There was a piece of drywall lying on the ground.

In diagnosing the leak problem, Monroe determined that the seal under the drain in the middle of the upper shower pan had dried up, allowing water to escape around the drain basket and go outside of the attached plumbing at the bottom of the shower pan where the seal is supposed to be compressed to the upper plate over the drain. Monroe removed and replaced the drain basket and installed the correct seal for the connection to the pipe, and tested the repair to ensure no leaks remained when the shower was being used. During his work, he saw "[w]atermarks" and "discolorations" in the ceiling drywall that he described as "flash wet." The drywall condition indicated to him that it was not "in water a long time in order to build up any film or anything like that." He had no clue how long the drain had been leaking, but testified in this exchange at deposition:

"Any extended period of time, it will build mold, especially in, you know, a two-section area like that. It's like a humidor, so it will grow, you know, mold fairly rapidly.

"Q. What is fairly rapidly?"

"A. I'm not a mold expert, so I would say probably, you know, a month and you'll have a good mold. Which is why, you know, if it's just flash wet like that, you'll typically just throw a dehumidifier in there for three, four days. It dries out and you are fine. If it gets any major mold buildup, as a plumber, you know, we go—you can have it tested, or just dehu it and let it go.

"Q. Further questioning. Just a follow-up question: Is it common to see these shower basket seals dry up and leak?

"A. Oh, yeah."[3]

On September 3, 2014, a few days after finding the leak, Dorfman took a number of color photos of the ceiling area and the exposed drain. He called a contractor he had used before, Christopher Longwell, to come over and create an estimate to "do a full remodel. Or a fix, I should say, not remodel." When Longwell inspected the opened ceiling in the shower, he saw there was some evidence of water damage and mold on the drywall, metal framing and ceiling joists. He did not perform any demolition or moisture testing behind the shower walls or in the shower floor. There was no way to know whether there was actually mold in the walls without first doing demolition work. However, he testified at his deposition, "When opening up any kind of a moist wall, it's—mold and moisture go a lot further than what you apparently just see from a spot. It will run down with gravity, and it will run horizontal, as much as the flow of water, how much of an amount of water has been spilled. It's been my experience in the past that I have opened up walls that were six to eight feet away, and found mold with an issue from a water leak that distance away." If no mold were found, he would consider the demolition expense to be "part of the demolition and exploratory of looking for the mold." He further explained, "It's collateral, I guess."

Longwell's repair estimate dated September 3, 2014, was prepared on behalf of his company, Techton, making a bid for the repairs in the amount of $18,535. He recommended removing all drywall and marble tile from the shower, mold remediation, and complete retiling of the shower.

B. Investigation; Sale of Property; Complaint Filed

After some telephone calls and confusion about the claims process, Dorfman's claim on the policy was made September 19, 2014.[4] He called State Farm agent Jason Lamb again a few days later, telling him the ceiling had collapsed from the water damage and the drywall and insulation were affected. Lamb explained the difference between continuous repeated leakage and seepage (calling it CRLS) and a sudden discharge of water, and sent the claim to an experienced State Farm mobile assignment claims representative (MACR), Rose Wood, asking her to evaluate whether the loss was consistent with a sudden discharge of water or a more continuous repeated leakage and seepage.

On September 24, 2014, Wood visited Dorfman to inspect the property, spending about an hour to go inside and then complete her paperwork. During the inspection, Wood took color photos and talked to Dorfman. Her notes state that he told her, "the plumber who inspected unit 404 above told [me] that the drain opening seal had failed." He also said that when ceiling and insulation above his shower were removed, black mold was visible. Wood examined the area and saw "rot, rust buildup, and black mold." There was rot on the subfloor around the drain line and on a wooden framing piece below that subfloor, and rust on the metal strip over the framing ("furring"). On the top part of the drywall around the shower stall, she saw black mold. She thought those conditions must have been caused by ongoing leaks from the upper unit's drain line seal, and understood that mold can form within "24 to 48 hours." After completing her inspection, Wood told Dorfman that based on her observations, the water damage exclusion for "continuous or repeated seepage or leakage" applied and no coverage would be afforded.

In Wood's notes, she labeled the event as a "category 3, class 2" loss. Category 3 places used shower water in the same group as sewage. Class 2 indicates that water has presumably had the opportunity to absorb into the walls up to 12 inches, and to cause moisture to be present within the walls.

Ownership of the claim within the office was assigned to specialist Sandra Brooks. She reviewed Wood's notes and photographs and agreed with her conclusions, but did not visit the site. Brooks sent an October 22, 2014 letter to Dorfman's attorney denying the claim based upon the water damage exclusion and exclusions for "deterioration," "rot" and "fungus."[5]

While the insurance claim was pending, Dorfman paid $450 to his worker for the installation and painting of drywall that would cover up the hole and exposed pipe. After owning the property for two months, Dorfman sold it for $400,000 in October 2014, and gave the prospective purchaser a check for $20,000, based on the Techton repair estimate for future work to be done. Dorfman did not notify State Farm that the property had been sold. In December 2014, his attorney provided State Farm with a copy of the Techton estimate and demanded payment of $18,535, based on the leak and collapsed ceiling.

In February 2015, State Farm extended collapse coverage to Dorfman, based on Wood's new estimate for the repair of the shower ceiling in the amount of $1,020.76, including profit and overhead. State Farm paid Dorfman the amount of the estimate, less the $1,000 deductible set out in the State Farm Policy, so he netted $20.76.

Later, Dorfman filed his complaint against State Farm for breach of contract and bad faith denial of benefits. He alleged more than $25,000 in damages was sustained in the form of unreimbursed losses from the damage to the property and lost rents. Dorfman claimed entitlement to such damages for the discounted sale price of the property, "given the stigma it had as a result of the mold that developed after the covered loss."

After discovery began, Dorfman offered to supply his (somewhat murky) video clips to State Farm, showing dripping lines of water and a bucket on the shower floor. He had trouble transmitting them and neither Wood nor Brooks saw them or his photographs from September 3, 2014, until the time of trial. The videos do not clearly show any debris left on the shower floor next to the bucket.

In May 2016, Dorfman designated Scott, a licensed contractor for 37 years, as a cost of repair expert, notifying State Farm that his testimony would relate "to any and all issues regarding the work necessary to address the damage [to] Plaintiff's property and the reasonableness of the costs of repair. Mr. Scott will potentially render opinions regarding the opinions of similar experts. He will also be prepared to rebut the testimony of any opposition experts within his field of expertise." Scott arrived at a repair estimate of $25,570.84 to restore the property to the preloss condition, based on his review of the file he was given, which included photographs, information provided by Monroe, depositions, Techton's repair estimate and correspondence between the attorneys. He did not go to the site.

C. Trial Proceedings and Rulings In Limine

Jury trial began in February 2017. Dorfman's trial brief framed the issues as whether any possible construction of the policy could support denial of coverage, since State Farm had no knowledge that "repeated leakage and seepage" had occurred prior to August 30, 2014, when the leak was discovered. He claimed the evidence would show that the water event should properly be described as a " 'tropical storm.' "

State Farm's trial brief mainly contended that the physical evidence would prove that water had leaked repeatedly over an extended period of time. Specifically, the subfloor and wooden floor joist in the vicinity of the deteriorated drain seal evidenced significant long-term water damage (deterioration and rot). State Farm pointed to the layer of drywall directly beneath the drain as evidencing mold growth and a pattern of water staining indicative of repeated leaks, not a sudden release of water. Since leaks occurred only when the shower was used, they must have occurred intermittently over an extended period of time.

At an initial motion in limine, Dorfman sought the exclusion of any after-acquired evidence that State Farm wanted to present to justify its denial of coverage, in particular, from its cost of repair expert, Timothy DeLise. He had reviewed Wood's photographs and was prepared to rebut Scott's opinion that "it was a sudden one-time event and that it was not a continuous or repeated seepage and leakage." The thrust of Dorfman's motion was evidently to pursue his bad faith theory that any expert opinion, as to the propriety of the denial of the claim, should not be based on anything other than the facts which were in the claim file at the time that the claim was denied. During that portion of the in limine proceedings, Dorfman argued he had designated Scott specifically on the issue of costs of repair, and he was assuming all parties were in agreement that the flood came from the drain above. Thus, Dorfman took the position that "we're really not fighting on the issue of causation per se. [¶] I mean, there is obviously dispute on the whole leakage and seepage issue." His counsel said about Scott, "He's not a causation expert."

Dorfman also wanted to preclude Brooks from testifying about materials she acquired after the denial was made, since she admitted the only evidence she had about "repeated leakage and seepage" that created rot, mold, and deterioration in the ceiling above Dorfman's bathroom, before the reporting date of loss, was the set of Wood's photographs taken about a month later. The court ruled on the motion by saying that as the evidence came in, objections could be made to any after-acquired evidence and it would be excluded. Ultimately, no testimony was taken from DeLise.

On the next in limine matter, State Farm's request to preclude any expert evidence regarding the presence of water and/or mold in the walls behind the tile in the shower, the court decided to hold a later section 402 hearing on the foundation and admissibility of Scott's testimony. The jury heard opening statements and Dorfman called State Farm's representatives Wood and Brooks as witnesses. Wood took into account the plumber's diagnosis that the drain line seal had failed, and she concluded that the only leaks that would occur would be when somebody used that shower. Such use would cause repeated seepages of water from the drain line. From one of her photographs, Wood testified that multiple leaks and drying had occurred, because she could see that the one-foot-by-one-foot hole torn out from the drywall had a ring around it, and saw another ring around that ring. As a claims adjuster, she found indications that "there was some repeated leakage going on; that it would leak, stop, leak again, stop." When Dorfman questioned Wood about her ability to form opinions on the facts underlying the coverage questions, she explained she had been working in the field a long time and had seen how shower enclosures were constructed and what was behind the walls. Wood explained that her label of category 3, class 2 water damage meant that the water presumably traveled through mold and could have wicked or migrated into the walls at least 12 inches.

Both Wood and Brooks acknowledged mold can form within 24 hours. Brooks said Wood had been instructed only to figure out the damage to Dorfman's unit, not to any other units, based on the information they had at the time. Brooks was a first party adjuster, and if other units were clearly involved, that information would have been sent over to the third party adjusters' department, and they would handle that. During Brooks's testimony, the court sustained an objection and reminded the jury that the decision on whether the evidence showed "there has been an ongoing leak for an extended period of time" was for it as the fact finder, and not for Brooks to decide.

Next, State Farm had the deposition testimony from the two nonretained expert witnesses read to the jury, about Monroe's repair work and Longwell's Techton repair estimate (as described ante).

As will be explained in more detail (pt. III, post), the trial court conducted the initial examination of Scott under section 402, asking him about his review of the file and experience in the profession. Counsel then asked questions for five minutes each, and the court granted the defense motion to exclude Scott's expert opinion, on the grounds that it was speculative in nature.

Dorfman testified about how the August 30 leak occurred as a "rainstorm," about his visits to the upstairs and downstairs units, and his taking of two videos at the time and several photos on September 3, 2014. It was stipulated that on the day of the shower incident, water was observed in the bathroom of unit 204 below Dorfman's unit.

In the defense case, State Farm's claims handling expert David Reilly offered opinions on the adequacy of its evaluation of the loss. Over Dorfman's objection that it would not be beyond the common experience of the jurors to have Reilly discuss the opinions he reached on the claim, Reilly was allowed to testify that State Farm came within industry standards on claims handling. Reilly thought that Wood's inspection of the ceiling area, at a time when it had already been torn down in part, had allowed her to observe mold and dry rot and wet rot there. He said, "This is all evidence that would indicate a long-term leak, not a one-time event. [¶] . . . In addition, she knew that the seal had failed above. This would be something that would commonly leak. [¶] Looking at it in the [commonsense] basis, that would be something that wouldn't be a one-time event, necessarily. For instance, if a pipe just broke, that would be a one-time event. But a seal malfunctioning, that would be more indicative of a long-term, a gradual process."

Reilly said he was not concerned that an earlier inspection closer to the time of the leak had not been made, because "[b]efore a loss is reported, no adjuster ever sees the condition of the property." Over Dorfman's objection (after-acquired evidence and legal conclusions), Reilly testified that it was his understanding that State Farm denied coverage predominantly because of the "continued leakage and seepage exclusion, and what Rose Wood saw was indicative of exactly that kind of a loss. [¶] That kind of a loss is not covered by any property policy that I know of. It's commonly—it's put in every policy—property policy I've ever seen."

Also, Reilly understood from the file that issues had been raised about Dorfman's delay and problems in supplying a copy of his videotapes. When Reilly viewed the video, he was "underwhelmed" and said it did not change his opinions in this case and was not essential to the coverage determination. He said, "I think it does lend more credence to State Farm's position that it was a continuous leak because of the way it was dripping out of there." Counsel for Dorfman played the video again, and Reilly clarified that he was seeing "a continuous leak whenever the shower comes on, yes." Dorfman did not present any claims handling expert testimony.

During closing argument, Dorfman reminded the jury that Brooks had testified that it doesn't matter that he sold the unit, and argued he was still entitled to benefits at least in the amount of the Techton bid, for the damage caused when category 3, class 2 sewage-type water suddenly poured into his unit. He contended the water must have migrated into different parts of the drywall, as shown in the photographs.

State Farm responded it had taken Dorfman's word for it that a collapse of the ceiling drywall had occurred and paid him such benefits, less the deductible, even though it questioned why that claim had been made a few months after the event, and why more evidence had not been presented about drywall falling down to damage tiles or other property. State Farm also argued that even though Dorfman claimed mold and moisture existed behind the walls of the shower, the jury did not hear any experts testify that they discovered mold behind the showers. He asked the jurors, "Did you hear any expert testify that they even tested for mold, pulled a piece of tile off to look for mold, anything like that? No. [¶] So Mr. Dorfman is here saying, 'Well, maybe there is, so, therefore, write me a check for $18,535 for this maybe damage.' "

In his rebuttal argument, Dorfman reiterated, "That hole was caused by that water pouring down. And you saw the amount of water, and it doesn't take a rocket scientist to realize it doesn't take a lot of water to knock down drywall." "What about this water behind the walls? Well, it's a stipulated fact that water made it into 204. How does water get into 204? I mean, gravity maybe? Down through the walls?"

During its deliberations, the jury asked for rereading of the deposition testimony from the plumber Monroe and from Longwell, the owner of Techton, and to see the video clips again. It then returned a 10-2 defense verdict in favor of State Farm, finding that Dorfman did not "suffer a loss, all or part of which was covered under an insurance policy with Defendant State Farm General Insurance Company." Judgment was entered in favor of State Farm and this appeal followed.

DISCUSSION

Dorfman contends that the exclusion of Scott's proposed expert testimony unfairly precluded him from fully presenting his theory of the case, that a sudden event led to the loss. We first discuss his argument about policy interpretation. We then apply accepted standards for evaluation of the related discretionary evidentiary rulings.

I

POLICY PROVISIONS AND INTERPRETATION ISSUES

" 'Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation.' [Citations.] 'The rules governing policy interpretation require us to look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it.' " (Brown v. Mid-Century Ins. Co. (2013) 215 Cal.App.4th 841, 851 (Brown); id. at p. 846 [interpreting policy to exclude water damage occurring "over a period of time"].) "Whether a coverage limitation is conspicuous, plain and clear is an issue of law, reviewed de novo." (Id. at p. 856, fn. 7.)

In the subject policy, State Farm provides coverage for "accidental direct physical loss to the property covered under this policy except as provided in Section I - Losses Not Insured." In the California Amendatory Endorsement for that Section I, "Losses Not Insured," paragraph 4 provides: "We do not insure under any coverage for any loss which is caused by one or more of the items below, regardless of whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these: [¶] c. Water Damage, meaning: [¶] (4) continuous or repeated seepage or leakage of water or steam from a: [¶] (c) plumbing system, including from, within or around any shower stall . . . or other plumbing fixture, including their walls, ceiling or floor." (Some capitalization omitted; see Freedman v. State Farm Ins. Co. (2009) 173 Cal.App.4th 957, 964 [summary judgment affirmed on basis that an exclusion for " 'repeated seepage or leakage of water' " precluded coverage, on stipulated facts showing " 'continuous' " or " 'repeated' " water leakage took place].)

State Farm conceded at trial that this policy language could, in an appropriate case, provide coverage for a designated " 'sudden' " or onetime discharge of water. (See Brown, supra, 215 Cal.App.4th at p. 852 [" ' "Sudden" has a temporal element and does not mean a gradual or continuous discharge.' "])[6] The amendatory endorsement replaced a previous version of section I (the exception to losses being insured), that referred to "continuous or repeated seepage or leakage" of water but went on to specify that such seepage or leakage "occurs over a period of time and results in deterioration, corrosion, rust, mold, or wet or dry rot." (Italics added.)

Dorfman seems to claim that the remaining policy terminology, repeated and/or continuous, is difficult to understand, and that the trial court erroneously interpreted it by allowing testimony to the effect that only two leaks, or one 40-minute leak, can be deemed " 'repeated' " or " 'continuous.' " (Brown, supra, 215 Cal.App.4th at p. 857 [in support of a policy ambiguity argument, policyholder must identify language that is not understandable by a layperson].) He points out that the trial briefs mentioned policy interpretation standards, and says the trial court never settled such an issue about alleged ambiguity with an express ruling. He now cites to E.M.M.I. Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470 to argue that his construction of the policy is more reasonable than theirs. (Ibid. ["A policy provision is ambiguous when it is susceptible to two or more reasonable constructions. [Citation.] Language in an insurance policy is 'interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract.' [Citation.] 'The proper question is whether the [provision or] word is ambiguous in the context of this policy and the circumstances of this case. [Citation.] "The provision will shift between clarity and ambiguity with changes in the event at hand." ' "].)

In the midst of trial, the court explained to the jurors that it was their decision on whether the evidence showed "there has been an ongoing leak for an extended period of time," and that was not a decision for the claims representatives to make in testimony. Dorfman cannot show that this was an incorrect application of the policy language. The time of discovery of water damage does not control whether the discharge itself was sudden in nature. (Brown, supra, 215 Cal.App.4th at p. 853.) Generally, the courts have not deemed an event to be sudden if it is " 'a process that occurs slowly and incrementally over a relatively long time, no matter how unexpected or unintended the process.' " (Id. at p. 852.) "In the context of the phrase 'sudden and accidental,' the word sudden 'must, if it is to be anything more than a hiccup in front of the word "accidental," convey a "temporal" meaning of immediacy, quickness, or abruptness.' [Citation.] Thus, 'whatever "sudden" means, it does not mean gradual. The ordinary person would never think that something which happened gradually also happened suddenly.' " (Id. at pp. 852-853, italics omitted.)

During discussions about proposed jury instructions, Dorfman originally requested that an instruction be given about how to evaluate conflicting extrinsic evidence as to what the parties intended the language of their contract to mean. The proposed instruction stated, "While interpretation of a contract can be a matter of law for the Court, it is a question of fact for the jury if ascertaining the intent of the parties at the time the contract was executed depends on the credibility of the extrinsic evidence." (CACI 314.) However, he withdrew that request.

Whatever merit an argument about policy ambiguity may have in other contexts, Dorfman simply does not show that the evidentiary or legal questions raised were directly and understandably framed to the trial court in terms of the current version of the insurance policy language, as opposed to Evidence Code analysis. In particular, the current policy language no longer references noncoverage for a continuous leak "which occurs over a period of time." We cannot resolve legal issues in the abstract, and believe that in this particular instance, Respondent has the better argument on appeal: "Judge Sturgeon never interpreted the water damage exclusion, erroneously or otherwise. He was not asked to do so. Likewise, the jury was not given any instruction interpreting the exclusion. Accordingly, there are no erroneous [policy] rulings to appeal."

To the extent Dorfman claims the payment of policy proceeds for collapse of the drywall ceiling proves that there can be no substantial evidence supporting the defense judgment, he is mistaken. The amendatory collapse endorsement FE-7800 is separate and apart from the physical loss coverage portions, and states in relevant part as follows: "We insure only for direct physical loss to covered property involving the sudden, entire collapse of a building or any part of a building. [¶] Collapse means actually fallen down or fallen into pieces. It does not include settling, cracking, shrinking, bulging, expansion, sagging or bowing. [¶] The collapse must be directly and immediately caused only by one or more of the following: [¶] . . . a. water damage . . . , all only as insured against in this policy; [¶] . . . [¶] (2) water damage means accidental discharge or leakage of water or steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam . . . ." The coverage decision on the collapse endorsement did not preclude State Farm from reaching a different coverage decision on another endorsement.

Accordingly, we next address as evidentiary issues whether an abuse of discretion occurred in the rulings that excluded Scott's expert evidence, but admitted other evidence on different views of the policy criteria for evaluating the nature of the water discharge at the property as continuous or repeated, or as a onetime event.

II

EXERCISE OF DISCRETION ON EXPERT TESTIMONY

A trial court's determinations on the threshold reliability of an expert opinion are reviewed on appeal for abuse of discretion. (Sargon Enterprises, supra, 55 Cal.4th at p. 773; People v. Ramos (1997) 15 Cal.4th 1133, 1175.) The Evidence Code allows experts some latitude in utilizing sources of information in forming an opinion. (Korsak v. Atlas Hotels, Inc. (1992) 2 Cal.App.4th 1516, 1523-1524; § 801, subd. (b).)[7] The trial court has an obligation to require a showing of an adequate foundation for the expert's opinion. (Korsak, at p. 1523; Sargon Enterprises, at p. 772.) Trial courts have a "substantial 'gatekeeping' responsibility" concerning expert testimony, to determine whether the matter relied upon by the expert is "of a type on which an expert may reasonably rely." (Sargon Enterprises, at pp. 769, 770, italics omitted.)

This case-specific inquiry examines not only whether the expert opinion is founded on generally accepted theories and procedures, but also if those were adequately followed in the particular instance. (People v. Henderson (2003) 107 Cal.App.4th 769, 787.) Factual assumptions made by the expert, in arriving at the opinion, must be sufficiently supported by the evidence being relied upon. (Richard v. Scott (1978) 79 Cal.App.3d 57, 63-64 (Richard).) We give deference to the trial court's factual determinations that underlie the ruling. (Henderson, at p. 781.) Based on an examination of the expert's disclosed principles and methodology, " '[a] court may conclude that there is simply too great an analytical gap between the data and the opinion proffered.' " (Sargon Enterprises, supra, 55 Cal.4th at pp. 771, 772 [trial court determines whether the expert used information logically and pursuant to valid general theories or techniques]; Cooper v. Takeda Pharmaceuticals America, Inc. (2015) 239 Cal.App.4th 555, 578, 593 (Cooper) [insufficient basis if expert gives opinion about theoretical possibilities or speculates about causation of injury].)

In exercising its discretion, the trial court must act within the confines of the applicable legal principles and include consideration of whether the ruling "implicates a party's ability to present its case." (Sargon Enterprises, supra, 55 Cal.4th at p. 773; Monroy v. City of Los Angeles (2008) 164 Cal.App.4th 248, 266-267.) Assuming an adequate threshold showing of reliability can be made, any questions concerning the soundness of the material underlying an opinion are matters of weight for the jury, not admissibility. (People v. Sundlee (1977) 70 Cal.App.3d 477, 484-485 (Sundlee) [strength of expert's assumptions that are based upon special knowledge and foundational matters will affect weight, not admissibility of opinion].) Perceived flaws in the reasoning can be "explored in detail through cross-examination and with [opposing] expert witnesses." (Cooper, supra, 239 Cal.App.4th at p. 593.)

In applying the prescribed standards of review, we observe that this preliminary determination by the trial court, on whether the expert opinion is logically sound, "is not a decision on its persuasiveness. The court must not weigh an opinion's probative value or substitute its own opinion for the expert's opinion. Rather, the court must simply determine whether the matter relied on can provide a reasonable basis for the opinion or whether that opinion is based on a leap of logic or conjecture." (Sargon Enterprises, supra, 55 Cal.4th at p. 772.)

III

EXCLUSION OF EXPERT TESTIMONY

A. Conduct of Hearing and Designation of Expert Issues

The parties initially dispute whether the proposed expert testimony would have fallen within the scope of Scott's designation as an expert for Dorfman, as a cost of repair estimator. Scott, who had 37 years of construction experience, was prepared to provide testimony on "any and all issues regarding the work necessary to address the damage [to the] property and the reasonableness of the costs of repair." Scott had not testified as an expert in court before, but State Farm did not dispute he had the ability to render an expert opinion, instead arguing his analysis was unduly speculative and unfounded.

The issue of admissibility of the expert's opinion involves mixed questions of fact and law. (Richard, supra, 79 Cal.App.3d at pp. 63-64.) The factual aspect of the question is whether there was evidentiary support for the assumptions made by the expert in formulating the opinions. (Ibid.) At the outset of trial, when in limine matters were being presented, State Farm represented that this motion was critical because it defined what the case was all about, and suggested Dorfman was proposing a remedy without any diagnosis that there was moisture or mold behind the shower walls. In response, Dorfman argued that based on his "video showing water literally going everywhere," and the stipulation that water was found in the downstairs unit, Scott could offer relevant testimony and a diagram about how the leak progressed by traveling down and behind the walls.[8] Dorfman argued that it was not a reasonable inference that the mold did not follow the water down or that the damage was somehow limited just to the ceiling of his unit. According to Dorfman, the evidence created an "exceedingly strong inference that water got behind the walls and that there was mold that went down," even without any physical testing taking place.

In reply, State Farm pointed out that Scott had not visited the property, and neither he nor Longwell did any thermal imaging, probes or destructive testing for the presence of water behind the walls. Scott was relying on Longwell's estimate. The parties then had a dispute about whether State Farm had already agreed that Longwell could testify about the underlying reasons for his bid, and State Farm said it had agreed only to wait and see what the record would show. The court deferred the matter.

After testimony from Wood, Brooks, and Monroe and Longwell as nonretained experts, the court returned to the section 402 hearing, to determine the extent to which Scott could testify regarding the presence of water and/or mold in the walls behind the tile in the shower. (Sargon Enterprises, supra, 55 Cal.4th at p. 771 [court may examine experts on the type of matter on which opinions are based, as well as reasons given].) The trial judge took the lead in the examination, asking about Scott's experience. Scott explained he had been retained to provide an estimate of repairs to restore water damaged property to its preloss condition. He examined photographs, video, and the information in the file, including the Techton estimate, and reviewed depositions of "all of the parties involved" (specifying Dorfman, Wood, and DeLise). Based on his investigation, he concluded that there was a sudden event where water discharged from the shower above and made its way into both of the downstairs units. The court asked whether he saw rot, and Scott said the wood framing could have been rotted or it could have been cut roughly during construction. When asked if he saw mold, Scott started to say that he saw it on the surfaces of some of the drywall, but the court interrupted him to tell him to slow down. The court then asked if he observed water intrusion anywhere, and Scott said the photos showed what appeared to be water damage to the drywall on the side at the ceiling, going down to the top of the tile.

When the trial court asked Scott what happened, he suggested that the drain must have been dislodged by the person in the shower above, such as sticking his heel into it. He understood from the plumber who repaired the area that the seal for the drain was loose, wiggling and deteriorated, but Scott suggested that there could have been a contributing factor, when "something occurred to where it pushed it over the edge." From the photographs, Scott did not believe there had been a long-term and ongoing leak, due to the absence of apparent "bubbles" on the drywall and to the appearance of rain in the videos.

The court then gave each counsel five minutes for further examination, and Dorfman asked Scott to explain what he saw in the photograph showing rings on the drywall. Scott replied that it showed water was ponding in the area and when it broke through, it flowed down the wall through the opening. He also saw white marks on the wall below the hole which "could be water damage." One of the photographs showed a small gap between the wall and the ceiling drywall, that had "the appearance of water damage." Also, the location where the drainpipe entered the wall from the shower above would have led to water getting into or migrating into the walls, thus necessitating the removal of the tile affixed to it. Since category 3, class 2 contaminated water was diagnosed as being involved, Scott thought the drywall should be removed, which would damage the tile. He was confident that he could justify his $25,000-plus cost of repair estimate.

On cross-examination, State Farm asked Scott whether he knew for a fact that there was water behind the walls of the shower. Scott replied, "In my experience, I would say I would bet that there's water there, based on the slope of the pipe and the way that it's constructed." When counsel asked him if he could be more certain, he said he believed there was water behind the walls, based on the reports that the unit below became wet. Scott understood that thermal imaging could have been used to test for the presence of moisture, but also that it sometimes gave a false positive. He couldn't see any damage behind the shower tile and did not use a moisture level prong assembly or access any exterior walls.

The court then heard argument. Dorfman contended that Scott looked at the images and understood that contaminated water went down the walls, and his opinions should be admissible even if the weight of the underlying evidentiary materials could be challenged. State Farm replied that Scott had not based his opinions on any direct assumptions, but only on unproven assumptions. The court responded that it had conducted many hearings under section 402 and ruled that the proposed testimony would be too speculative and it would all be excluded.

As of the time of the hearing in limine, the parties were presenting conflicting positions on whether the proposed expert testimony provided legally sufficient support for a finding in favor of Dorfman on the issue of coverage. The scope of coverage under the policy depended on whether the conditions that were observable in the shower were consistent with repeated and continuous leakage or seepage, or a onetime flood. The evidence given thus far had addressed causation of the loss. Wood had given testimony about her observations and conclusions about the nature and extent of water damage at the site, three weeks after the leak was discovered. Monroe and Longwell had each seen the property three or four days after the flood, and they described their findings. The special verdict ultimately sent to the jury simply asked whether Dorfman had suffered a loss, "all or part of which was covered" under the policy.

From the manner in which these hearings were conducted, it appears that the court had a reasonable basis to conclude that Dorfman wanted the expert testimony to encompass causation of the loss, based on circumstantial evidence. The court did not expressly hold Dorfman to his attorney's earlier statement in arguing a different motion that Scott was not a "causation" expert. The original scope of designation of the expert, as to costs of repair, was not clearly exceeded by the proposed testimony, because of the way the issues were evolving on whether the leak was repeated and continuing, or sudden in nature.

B. Sufficiency of Factors Considered by Expert Witness; Assumptions

We next consider whether Scott relied upon evidence that was of the type that a construction or repair expert would normally consider, and whether there was sufficient support for his factual assumptions. Under section 802, the trial court may inquire into the factual predicates of an expert's opinion and whether a reasoned explanation connects the facts that were considered and the ultimate opinion being rendered. (Jennings v. Palomar Pomerado Health Systems, Inc. (2003) 114 Cal.App.4th 1108, 1117, 1119, fn. 9.) To assist in a causation determination, the expert must be able to explain why the researched facts convincingly led to a conclusion that it is more probable than not that a given event was a cause-in-fact of loss or injury. (Id. at p. 1118.) It is not sufficient for an expert to base an opinion on theoretical possibilities or speculation on causation of loss or injury. (Cooper, supra, 239 Cal.App.4th at p. 578.)

Scott had handled thousands of water damage-type claims, and it is not dispositive that he did not visit the unit or interview the upstairs or downstairs tenants. By the time he was retained, the property had already been repaired, sold and used for months. Several of his interpretations of the file have no apparent basis in fact, such as his suggestion that the drain must have been physically dislodged by the upstairs tenant's heel. He knew from the original plumber, Monroe, that the drain seal had deteriorated and dried up, thus allowing leakage to occur when the shower was used, but he wasn't sure and had no basis to speculate that some event pushed it over the edge to begin leaking. He wasn't sure whether the wood framing deterioration showed rot, saying only that it was difficult to determine from the photographs whether there were construction-type rough cuts there instead.

From the photos and reports of other witnesses, Scott was aware that the lower ceiling had been removed and a portion of the upper ceiling had been punched out when the leak appeared. He understood from Monroe that a "flash wet" event could have occurred above, such as when a sudden discharge of water leaves no film behind, and he questioned why bubbles were not apparent on some part of the drywall, from repeated soaking. The remaining ceiling drywall showed a few concentric rings, which Scott interpreted as a ponding of water created by a sudden discharge, which would have weakened the drywall fairly quickly. The portion of the drywall that had rings on it had not fallen through or been broken through. He couldn't say how long it would take such ceiling drywall to fail, because it depended on the thickness of the drywall and the amount of water coming down.

From another of the photographs, Scott could see a gap in the drywall between the ceiling and the walls, where water could have intruded based on the structure and slope of the drainpipe. Where contaminated water has touched drywall, it ordinarily should be removed. Since he knew water was found in the lower unit, he tried to figure out how water would go down the walls, and prepared a diagram about it. He believed that some of the water did not pour directly down into the lower shower, but instead must have ponded and then migrated horizontally through the drywall into the walls and gone down below. Scott's conclusion that a more complete repair than just the ceiling portion was required was apparently based on an assumption that the level of dripping shown in the videos was consistent only with the sudden creation of a large volume of water that was forceful enough to spread out both horizontally and vertically. State Farm mischaracterizes his testimony as saying the water flowed uphill, but it does legitimately point out that the strength of Scott's assumption was weakened by other possible interpretations of the videos, showing dripping lines rather than a "rainstorm," as Dorfman claimed.

Further, the lack of any physical testing for moisture in the drywall or physical evidence of mold within the walls weakened the strength of Scott's conclusion that repairs were needed based upon assumptions there could be significant moisture in the walls. He explained that some false positives can occur with thermal imaging but did not discuss other available tests. (Sundlee, supra, 70 Cal.App.3d at p. 484 [arson expert could form opinion on origin of fire even without any physical evidence of gas, etc.].)

To question Wood's ability to form professional opinions on the nature of the leak, Dorfman cites to Kinsey v. Pacific Mut. Life Ins. Co. (1918) 178 Cal. 153, 156-157, in which the Supreme Court held it was appropriate to exclude testimony by lifeguards who had tried to rescue a drowning man, then gave their opinions in court that he died of drowning rather than a heart problem. Although the lifeguards "were skilled in the methods of rescuing drowning persons from the water," it could not be shown that they had the qualifications to observe the body's condition and give opinions about the cause of death. (Id. at p. 156.) This authority is inapposite for evaluating Wood's testimony, because her duties over 23 years involved investigating thousands of claims and making conclusions about the facts for which coverage was sought. When Dorfman tried to challenge her expertise at trial, she explained that although she is not a construction expert, she has examined such claims many times and seen how shower enclosures are built and what's behind them.

When Wood saw and photographed the damage three weeks after the leak was discovered, she found the same type of significant mold, rot, and rust damage that she saw at trial in Dorfman's photographs, taken three days after the discovery. From her own inspection and photographs, she concluded that several different exclusions applied, including wear and tear, wet or dry rot, and mold. Both Wood and Brooks admitted that mold could start forming in 24 to 48 hours after exposure to water, and that some of the water traveled to the downstairs unit.

For purposes of determining whether a water discharge event is sudden in nature, the time of discovery does not control. (Brown, supra, 215 Cal.App.4th at p. 853.) Even though the discovery of the water leak happened suddenly, Dorfman's expert could not explain how the intermittent nature of the upstairs shower use, combined with a deteriorating seal on the drain basket, was consistent only or predominantly with a sudden water damage event. The degree of deterioration found in the metal, wood, and drywall in the upper ceiling of the shower became apparent essentially at the time of discovery, but Scott could not adequately address when it began.

Dorfman stops short of arguing that the trial court did not fully examine all the issues, but he does complain that the section 402 hearing took place too briskly and the ruling consists of only 33 words. From the record of the hearing, we are able to conclude the trial court had an ample basis to question the soundness of the assumptions made by Scott in recommending extensive repairs to the walls of the shower and not just the ceiling. The contents of the file that Scott examined did not substantially support his opinion that a sudden leak had manifested itself that day and immediately created damage within the ceiling and walls, such as if the tenant above dislodged the deteriorating drain assembly, pushing it over the edge. It was a reasonable exercise of discretion for the court to conduct the inquiry in the manner that it did, allowing examination and argument by counsel. The court's conclusions that Scott's investigation and testimony were not reliable enough to assist the jury in determining the actual nature and origin of the water leak, and that his opinions were speculative in nature, are well supported.

Finally, we find no support for Dorfman's argument that despite the severe foundational problems with his expert's opinions, this ruling remains reversible per se because it prevented him from presenting an essential theory of his case, a covered loss resulting from a sudden water discharge event. (Sargon Enterprises, supra, 55 Cal.4th at p. 773; Tudor Ranches, supra, 65 Cal.App.4th at p. 1432 [preclusion of "certain arguments or discrete items of evidence" does not obviate entire case].) The original plumber, Monroe, testified that a "flash wet" event had occurred, and Longwell testified about the costs of repair, assuming that the wall behind the tile must be replaced. The jury saw the videos and was asked to decide if Dorfman had suffered a loss and if it was covered. The record was adequate for them to do so on an informed basis. The challenged evidentiary rulings did not exceed reasonable bounds, under all of the circumstances being considered. (Shaw, supra, 170 Cal.App.4th at p. 281.)

DISPOSITION

The judgment is affirmed. Costs on appeal to Respondent.

HUFFMAN, Acting P. J.

WE CONCUR:

O'ROURKE, J.

GUERRERO, J.