Garcia v. State Farm

Filed 4/11/07 Garcia v. State Farm CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

In this action for breach of contract and bad faith, defendant State Farm General Insurance Company obtained a summary judgment on the ground that the lawsuit was untimely under the terms of the policy. Plaintiff Olivia Garcia appeals, contending that her complaint was timely and the loss was covered. We agree with the trial court that the action was barred by the one-year limitation provision in plaintiff's policy, and we therefore must affirm the judgment.

Background

In December 1996 plaintiff noticed water damage inside the home she owned in Aptos. A State Farm representative inspected the damage in January 1997 and the company paid plaintiff $1,825.37, which represented the estimated cost of repair, less depreciation and plaintiff's $500 deductible. According to the representative, some of this payment pertained to a January 1996 leak, to which plaintiff had called the representative's attention during his inspection.

Shortly thereafter, State Farm retained Andrew H. Petersen, a structural engineer, to inspect plaintiff's home and determine the cause of the water damage. During the inspection plaintiff described the repairs that had been made in prior years and pointed out the sites of new water spots and other damage. In his report on March 13, 1997, Petersen concluded that the roof had sustained "far reaching" damage which had originally been caused by the 1989 Loma Prieta Earthquake. Contributing to the current problem was the "substandard" original construction of the roof and exacerbation of the damage from repair work performed since the earthquake. Petersen declared the roof to be in a "Failed State"[1]and considered its replacement to be mandatory.

Plaintiff made some repairs inside the house and "some roof repairs." She was aware of no further leaks until November 1, 2002, when she noticed "new" water damage that appeared to have resulted from rain entering through the roof. Plaintiff obtained further inspections that revealed "significant" and "active" leaks in the roofing, "significant" mold and water entry inside, rot in the eaves from roofing leaks, and damaged or inadequate flashings.

State Farm assigned a date of loss as January 6, 2003. On March 17, 2003, it paid plaintiff $1,329.39 for the "replacement cost" of repairs to the water-stained ceiling, walls, and carpet to the extent that there was new damage. Having reviewed the photographs and estimates from plaintiff's previous claim, State Farm had determined that some of the damage to the ceiling had been present at that earlier time, and State Farm was unwilling to pay again to repair those areas. The mold also was not covered, nor was hidden rot or decay in the framing above the ceiling. As it had on the prior occasion, State Farm reminded plaintiff of another provision in the policy, that any action against it be brought "within one year after the date of loss or damage," except for the period between her report of the claim and the date of the insurer's notification letter.

Plaintiff initiated this lawsuit on January 5, 2004. In her first amended complaint, she alleged breach of contract and breach of the covenant of good faith and fair dealing. State Farm denied the allegations and asserted several affirmative defenses, including policy exclusions for the damage claimed, plaintiff's failure to notify State Farm of the damage in accordance with the policy terms, and her failure to comply with the policy provision that any lawsuit be brought within one year after the date of loss or damage.

In its ensuing summary judgment motion, State Farm elaborated on these defenses and provided supporting evidence for its position that plaintiff had known of the damage in 1997 and had failed to act in a timely manner. At the hearing on the motion, State Farm noted that there had been three bids in 2000 to replace the roof. State Farm also pointed out that in 2001 plaintiff had tried to compel her husband to pay for a new roof in the course of marital dissolution proceedings. State Farm was willing to pay for new damage, but any additional damage from the earlier cause was, it insisted, properly rejected.

In response, plaintiff represented that after the December 1996 claim was adjusted, some repairs were made to the roof and the leaks stopped. Everything seemed fine until evidence of leaking appeared in November 2002. And State Farm, after initially resisting payment, adjusted the claim and paid the $1,329.39. Plaintiff maintained that State Farm had acknowledged responsibility for the claim and only the amount was in dispute. Had State Farm denied the claim entirely on the ground that it arose from the 1996 loss, then the statute of limitations would have continued to run. But from the date she reported the loss to March 2003 when she received the denial of further payment, "the clock stop[ped]" on the statute of limitations. Thus, according to plaintiff, her January 2004 filing was 10 months after the date she discovered the leak and was therefore timely.

The trial court granted the motion "based on the undisputed evidence . . . that the plaintiff was aware of the appreciable damage here more than a year before she brought the action."[2] Noting the principles discussed in Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674, the court determined that plaintiff was "well beyond" the one-year period, even if the defendant's investigation tolled the limitations period. The court acknowledged (as had State Farm) that the date on which appreciable damage occurs is a factual issue, but it also recognized that such factual issue can become a matter of law when only one inference may be drawn from the evidence. Here, although plaintiff filed her complaint within one year after State Farm denied her claim, there was "some evidence here that she was aware of damage at least as early as October 2001," based on testimony she had given during her marital dissolution case,[3]and possibly as early as 2000, when she obtained three estimates to repair or replace the roof. The court thereafter entered judgment for State Farm.

Discussion

On appeal, plaintiff asserts the following: (1) Her complaint was not filed too late; (2) State Farm waived its right to argue untimeliness of plaintiff's claim; (3) the policy covered the loss, and State Farm should be estopped to deny coverage; (4) triable issues of fact exist as to whether State Farm paid plaintiff enough on the claim; and (5) the court should have determined the issue of bad faith, of which there was clear and convincing evidence. If the first contention is correct, then we must proceed to determine the coverage issues; and if there was coverage for the loss on which plaintiff sued, then the issue of bad faith will command our attention. It is apparent, however, that the questions of timeliness and coverage are intertwined. If the particular damage for which plaintiff seeks compensation was incurred in 1996 or earlier, as State Farm maintains, then the "Suit Against Us" limitation in her policy bars the action. Accordingly, we first address the question of whether the policy provision limiting lawsuits to one year after the "date of loss or damage" precludes plaintiff's lawsuit as a matter of law.

There is no dispute that this contractual condition is enforceable. " '[L]imitation periods on suits are designed to promote justice by preventing surprises through revival of stale claims, to protect defendants and courts from handling matters in which the search for truth may be impaired by loss of evidence, to encourage plaintiffs to use reasonable and proper diligence in enforcing their rights, and to prevent fraud.' " (State Farm Fire & Casualty Co. v. Superior Court (1989) 210 Cal.App.3d 604, 612, quoting Zieba v. Middlesex Mut. Assur. Co. (D.Conn. 1982) 549 F.Supp. 1318, 1321; cf. Sullivan v. Allstate Ins. Co. (1997) 964 F.Supp. 1407 [enforcing one-year policy limit by summary judgment where plaintiffs were aware their home had suffered earthquake damage and allowed it to progress].)

The parties also concur that the trial court's summary judgment ruling is reviewed independently on appeal. As in the trial court, our task is to determine whether State Farm was entitled to judgment as a matter of law, in light of the undisputed facts submitted with the moving and opposing papers. (Code Civ. Proc., 437c, subd. (c); see generally Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849-855.) In examining the supporting and opposing papers, we consider "all of the evidence the parties offered in connection with the motion (except that which the court properly excluded) and the uncontradicted inferences the evidence reasonably supports." (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) Thus, summary judgment is properly granted where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law. (Ibid; Code Civ. Proc., 437c, subd. (c).)

The policy limitation at issue here stated the following: "Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage." The language averting to "date of loss or damage" pertains to "that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered." (Prudential-LMI Com. Insurance v. Superior Court, supra, 51 Cal.3d at p. 687; Doheny Park Terrace Homeowners Ass'n, Inc. v. Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1086; see also Kapsimallis v. Allstate Ins. Co. (2002) 104 Cal.App.4th 667, 674-675 [date of loss must take into account delayed discovery doctrine].)

Plaintiff's position is that she did initiate the action within these constraints. In her opposition papers, she argued that less than one year elapsed between her discovery of the loss in November 2002 and the March 2003 denial letter, after subtracting the tolling period while State Farm considered the claim. On appeal, she modifies her approach, thereby conforming more closely to the language of the policy provision. According to plaintiff, if the loss occurred on the date assigned by State Farm (January 6, 2003) and was reported 56 days later (March 3, 2003, according to State Farm), her lawsuit was timely, as it was filed on January 5, 2004.

The premise of this position is that the assigned date of loss, January 6, 2003, was the actual date the damage occurred for purposes of defining plaintiff's reporting duty. In State Farm's statement of undisputed facts, it noted the January 6 assignment, but plaintiff disputed this date, asserting that she "timely reported a claim that occurred on or about November 1, 2002." But as State Farm pointed out in its reply, the actual assigned date is immaterial if the cause of the loss was discovered to be an unrepaired roof leak of which plaintiff had been aware earlier.

In support of its summary judgment motion, State Farm submitted the declaration of Scott Welsh, who had supervised the investigation and evaluation of plaintiff's most recent claim. Welsh stated that he had considered multiple possible causes of the January 6, 2003 loss, including defective construction of the roof or flashing, unrepaired earthquake damage, deterioration of the roof, damage to the roof tiles, negligent conduct by workers on the roof, plaintiff's failure to preserve her property, surface and subsurface water entering the property, and mold or rot. According to Welsh, all of these were excluded under the policy terms.

The March 2003 inspection of the roof revealed that the original tile roof, installed in 1975, remained on the house in spite of its tendency to leak. Welsh described previous claims made by plaintiff, including the one pertaining to the December 1996 roof leak. He also stated that plaintiff had not replaced the tile roof or made the other repairs recommended by Andrew Petersen in 1997.[4]

Welsh's declaration provides evidentiary support for State Farm's assertion that plaintiff's most recent claim arose from a loss that had occurred more than a year before plaintiff noticed the new water stains on the ceiling. State Farm also cited three inspection reports plaintiff had produced during discovery. The reports of those inspections, conducted in November 2000, November 2002, and February 2003, attributed much of the rotting and wood damage to roof leaks and inadequate flashings. Finally, State Farm referred to estimates plaintiff had received from five roofing contractors on November 21, 1996, December 12, 1996,[5]September 12, 2000, October 4, 2000, and October 16, 2000. Each had inspected the roof and recommended replacement. Thus, State Farm proffered affirmative evidence that long before the most recent claim, plaintiff knew that the deteriorated roof had caused damage and mold in her home and needed to be replaced. Because she did not initiate this action until January 2004, she failed to comply with the one-year limitation specified in the "Suit Against Us" provision of her policy.

By establishing plaintiff's noncompliance with this contractual condition, State Farm met its initial burden to show it was entitled to judgment as a matter of law. The burden then shifted to plaintiff to make a prima facie showing of the existence of a triable material factual issue. To meet this obligation, the plaintiff may not rely on the mere allegations of its pleadings, but must "set forth the specific facts showing that a triable issue of material fact exists as to that cause of action . . . ." (Code Civ. Proc., 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850; Merrill v. Navegar, Inc., supra, 26 Cal.4th at pp. 476-477.) Furthermore, self-serving declarations that contradict prior testimony may be disregarded. (Benavidez v. San Jose Police Dept. (1999) 71 Cal.App.4th 853; Advanced Micro Devices, Inc. v. Great American Surplus Lines Ins. Co. (1988) 199 Cal.App.3d 791, 800.)

Plaintiff did not offer evidence that the damage to her home was not caused by the defective roof. Plaintiff suggests, however, that the delayed discovery rule is applicable here, since she did not learn of the damage until November 2002, when the new leaks began. "To take advantage of the benefits of a delayed discovery rule, however, the insured is required to be diligent in the face of discovered facts. The more substantial or unusual the nature of the damage discovered by the insured (e.g., the greater its deviation from what a reasonable person would consider normal wear and tear), the greater the insured's duty to notify his insurer of the loss promptly and diligently." (Prudential-LMI Com. Insurance v. Superior Court, supra, 51 Cal.3d at p. 687.) Thus, "[o]nce any damage becomes reasonably apparent the time begins to run, even if the full extent of the damage is unknown." (Doheny Park Terrace Homeowners Ass'n, Inc. v. Truck Ins. Exchange, supra, 132 Cal.App.4th at p. 1086.)

Here plaintiff failed to controvert the clear evidence that she knew the roof needed replacement as early as 1997 and unquestionably by late 2000. In her declaration she did state that after receiving the March 1997 Petersen report she "made some roof repairs, and the leaks stopped. I assumed that the problem had been fixed, and no leaks occurred for over five years." But this self-serving statement is contradicted by the inspection reports and estimates she received in late 2000, all of which recommended replacement of the leaky roof. In addition, the December 1996 roofing inspection produced a proposal for a new roof, which plaintiff signed in October 1997, seven months after Petersen submitted his report. Furthermore, her suggestion that she was unaware of the problem is belied by her testimony in February 2004 that before moving out in October 2001, she was "trying to get the roof replaced" because of the damage in several rooms in the house, which she explicitly attributed to leaks.[6] State Farm pointed to this admission in its reply to plaintiff's opposition to summary judgment.

It is true that the date of loss is normally a factual question for trial and is therefore difficult to resolve on summary judgment. (Doheny Park Terrace Homeowners Ass'n, Inc. v. Truck Ins. Exchange, supra, 132 Cal.App.4th at p. 1086.) "When, however, the evidence supports only one conclusion, summary judgment may be appropriate." (Prudential-LMI Com. Insurance v. Superior Court, supra, 51 Cal.3d at p. 699.) Here, the facts presented established that plaintiff either knew or reasonably should have known that the roof needed replacement as early as 1997 and that she sought replacement estimates in 2000, more than a year before the November 2002 discovery of the new leaks.

The moving and opposition papers thus convince us that summary judgment was correctly granted based on the "Suit Against Us" limitation in plaintiff's policy with State Farm. This is not, as plaintiff urges, a question of only the amount State Farm was obligated to pay. The issue instead concerns the source of the damage underlying plaintiff's current claim. In paying plaintiff $1,329.39, State Farm was not representing that this amount represented the cost of repairs for all the damage she reported. State Farm made it clear that it was compensating plaintiff for new water stains, but not for "old damage" for which it had already paid in 1997. Plaintiff's waiver argument therefore cannot succeed, as it turns on the premise that State Farm's payment for new damage constituted an admission that plaintiff's entire claim was covered. Because State Farm established that plaintiff was aware of this "old damage" and its cause yet failed to bring her lawsuit within one year, plaintiff was contractually barred from proceeding on her complaint. It is therefore unnecessary to address the parties' factual dispute over the predominant cause of the damage[7]or whether State Farm is estopped from asserting its argument regarding causation.

Disposition

The judgment is affirmed.

_____________________________

ELIA, J.

WE CONCUR:

_____________________________

RUSHING, P. J.

_____________________________

PREMO, J.

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Analysis and review provided by Escondido Property line Lawyers.

[1] Petersen defined "Failed State" as "the condition of lacking structural integrity. A structure in the state of being insufficient, but not fallen. An example of this is when a structure appears to be safe, but if it is loaded to the design purpose, the chance of collapse is extremely high. Frequently this is seen in termite[-]damaged wood rafter tails where the board looks painted and perfect, but a screw driver will go completely through the board because the termites have eaten it from the inside."

[2] The court added that if it were to reach the merits, it would find triable issues as to whether construction defects constituted a predominant cause of the damage, whether State Farm breached the policy terms, and whether the "genuine dispute doctrine" was applicable.

[3]In the course of those proceedings plaintiff testified that she used the house in January 2002 for guests, but she had to clean up the "horrible black mold" before they arrived. When asked if there was mold before she moved out in October 2001, she said she "didn't know it was mold, but there was damage prior to moving out." When asked if there was "something kind of icky looking on the walls" before she moved out in October 2001, she answered, "Well, yes. That's why I was trying to get the roof replaced, because we had leaks in the kitchen, bathroom, girls' rooms."

[4] Petersen had recommended the following: "[R]emove and replace tile roof over the entire house, except the addition. Remove skipped sheathing and replace with 5/8" T&G CDX plywood. Add a water proof membrane of felt paper or better. Replace all flashings on the roof. Install new tiles according to the 1994 Uniform Building Code and the manufacturer's recommendations. Treat or replace all boards that exhibit 'Dry Rot.' "

[5] The inspection by this contractor was performed in December 1996, but plaintiff signed the proposal in October 1997. The contractor did not thereafter perform any work on the property, however.

[6] See footnote 3, ante.

[7] As noted earlier, the trial court found this to be a triable issue of fact but ruled that this was immaterial, since untimeliness barred plaintiff's lawsuit.