Jardine v. One Beacon Insurance

Filing 68

ORDER by Judge Samuel Conti granting (51) Motion for Summary Judgment in case 3:10-cv-03335-SC; granting (52) Motion for Summary Judgment in case 3:10-cv-03336-SC (sclc1, COURT STAFF) (Filed on 12/27/2011)

1
2
3
4

IN THE UNITED STATES DISTRICT COURT

5

FOR THE NORTHERN DISTRICT OF CALIFORNIA

6
7

JAMES JARDINE,

8

Plaintiff,

9

v.

United States District Court

For the Northern District of California

10
11

MARYLAND CASUALTY COMPANY, and
DOES 1 through 50,

12

Defendants.

13
14

JAMES JARDINE,

15

Plaintiff,

16

v.

17
EMPLOYERS FIRE INSURANCE
COMPANY, and DOES 1 through 50,

18
19

Defendants.

20

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Case Nos. 10-3335 SC,
10-3336 SC
Related Cases: 10-3318 SC,
10-3319 SC

ORDER GRANTING DEFENDANT'S
MOTIONS FOR SUMMARY JUDGMENT

21
22
23

I.

INTRODUCTION
Before the Court are four related actions in which Plaintiff

24

James Jardine ("Jardine") brings claims against insurance companies

25

Employers Fire Insurance Company ("Employers") and Maryland

26

Casualty Company ("Maryland").

27

involves Employers' refusal to pay the policy amount after a fire

28

damaged Jardine's property.

Case Number 10-3335 ("10-3335")

Case Number 10-3336 ("10-3336")

1

involves Employers' refusal to pay after a wall on the same

2

property was damaged.

3

("10-3319") concern Maryland's refusal to pay out on a policy after

4

the same fire and wall damage occurred.

Case Numbers 10-3318 ("10-3318") and 10-3319

In March 2011, OneBeacon Insurance Company ("OneBeacon"),

5
6

Employers' predecessor in interest, moved for summary judgment in

7

both 10-3335 and 10-3336.1

8

The Court denied both motions in April 2011.

9

("OneBeacon MSJ Order").

10-3335 ECF No. 30; 10-3336 ECF No. 23.
10-3336 ECF No. 39

Maryland subsequently moved for summary

United States District Court

For the Northern District of California

10

judgment in 10-3318 and 10-3319 on the grounds that Jardine had

11

been fully compensated for his fire damage and Jardine's wall claim

12

was barred under his policy.

13

granted Maryland's motions and entered judgment for Maryland in

14

both 10-3318 and 10-3319.

15

Order"); 55 ("Maryland Judgment").

10-3318 ECF Nos. 35, 36.

The Court

10-3318 ECF Nos. 54 ("Maryland MSJ

Now Employers moves for summary judgment in 10-3335 and 10-

16
17

3336 for a second time; these Motions are fully briefed.

18

ECF Nos. 51 ("Fire MSJ"), 56 ("Fire Opp'n"), 62 ("Fire Reply"); 10-

19

3336 ECF Nos. ("Wall MSJ"), 55 ("Wall Opp'n"), 63 ("Wall Reply").

20

Employers argues that Jardine may not continue to prosecute his

21

claims against Employers in light of the Court's Order granting

22

Maryland's motions for summary judgment.

23

motions involve the same parties, the same legal standard, and many

24

1

25
26
27
28

10-3335

Because the instant

OneBeacon Insurance Company ("OneBeacon") was originally named as
a defendant in the 10-3335 and 10-3336 actions and moved for
summary judgment in April 2011. Employers was later substituted as
a party to the actions in place of OneBeacon because the policy
underlying the disputes was neither issued nor underwritten by
OneBeacon, but rather by Employers acting under the trade name "One
Beacon Insurance." See 10-3336 ECF No. 41 ("Stip. And Order
Substituting Party"). The Court now refers to OneBeacon and
Employers interchangeably.

2

1

of the same facts, the Court addresses them jointly in this Order.

2

For the following reasons, the Court GRANTS Employers' Motions for

3

Summary Judgment in 10-3335 and 10-3336.

4
5

II.

BACKGROUND
The Court has already recounted the relevant facts in its two

6
7

prior orders on OneBeacon and Maryland's motions for summary

8

judgment.

9

7.

See OneBeacon MSJ Order at 2-6; Maryland MSJ Order at 2-

During the relevant time period, Jardine was an insurance agent

United States District Court

For the Northern District of California

10

and owned a commercial building located at 24800-24808 Mission

11

Boulevard in Hayward, California ("the Property").

12

Order at 3; OneBeacon MSJ Order at 2.

13

a portion of the Property to Martha Chavez ("Chavez") and Luz Serna

14

("Serna"), who used it to operate a business, Bridal & Beyond.

15

OneBeacon MSJ Order at 2.

16

14, 2007.

17

Chavez and Serna applied a plaster treatment to the Property's

18

walls to improve the Property's appearance.

19

treatment interacted negatively with the cement block walls,

20

causing damage.

21

("Jones"), concluded that the damage was caused by a sulfate attack

22

on the wall, resulting from a combination of moist conditions, the

23

application of the wrong type of plaster, and inadequate wall

24

preparation.

25

Id. at 2-3.

Id.

Maryland MSJ

In May 2005, Jardine leased

The lease ran from May 15, 2005 to May

During their occupancy of the Property,

Id. at 3.

This

An engineer hired by Jardine, William Jones

See Maryland MSJ Order at 4-5.

On October 28, 2006, Chavez and Serna sold their business and

26

assigned their lease to Raquel Pardo ("Pardo").

27

Order at 3.

28

damage.

Id.

OneBeacon MSJ

Around this time, Plaintiff became aware of the wall
Pardo entered into a new lease with Plaintiff on

3

1

April 25, 2007.

Id.

On May 15, 2007, OneBeacon issued an

2

insurance policy to Pardo that listed both Plaintiff and Pardo as

3

named insureds.

Id.

On June 13, 2007, a halogen light fixture in Pardo's unit set

4
5

fire to some of her dresses, further damaging the property.

6

Maryland MSJ Order at 3.

7

stopped paying rent in October of 2007.

8

whether the fire or plaster damage was a factor in Pardo's decision

9

to breach her lease.

United States District Court

Id. at 4.

It is unclear

Id.

Jardine tendered his claim for fire and wall damage to

10
For the Northern District of California

Pardo breached her rental agreement and

11

Employers on December 20, 2007.

OneBeacon MSJ Order at 3.

12

investigating the fire claim, Employers reviewed the Hayward Fire

13

Department incident report, reports from the Hayward Fire

14

Prevention inspector and ABI Electric, a repair estimate prepared

15

by Jardine's consultant, and an inspection and cost estimate

16

prepared by Erik Quinn, a third party adjuster.

17

consultant estimated the damages at $34,423, plus the unestimated

18

expense of "code upgrades" that might be required by the city of

19

Hayward.

Id.

In

Jardine's

Id.

On January 16, 2008, Jardine commenced an action against

20
21

Chavez, Serna, and Pardo in Alameda County Superior Court (the

22

Chavez Action).

23

contract, waste, and negligence against Chavez, Serna, and Pardo

24

for the damage to the wall.

25

were dismissed without prejudice.

26

se.

27

and against Chavez and Serna in the amount of $1,003,854.20 in

28

damages.

Id. at 4.

Jardine brought claims for breach of

Id.

Jardine's claims against Pardo
Chavez and Serna appeared pro

After a bench trial, judgment was entered in favor of Jardine

Id.

4

As to Jardine's fire loss claim with Employers, Ronald Cook

1
2

("Cook"), Employers' coverage counsel, negotiated a settlement with

3

Plaintiff which was executed on April 2, 2008 ("the Settlement

4

Agreement").

5

to pay Plaintiff $39,781.25 for repair and lost business in

6

exchange for a release of any and all claims against Employers

7

arising out of the fire loss.

8

several drafts of the Settlement Agreement, and Jardine's

9

modifications were ultimately agreed to by Employers.

United States District Court

Under the Settlement Agreement, Employers agreed

Id.

Jardine and Cook exchanged

Id. at 4-5.

Employers denied the wall damage claim in April 2008 on the

10
For the Northern District of California

Id.

11

basis that the damage was visible and known to both Pardo and

12

Jardine as early as November 2006 when Pardo assumed the lease --

13

before the Employers policy incepted on May 15, 2007.

14

Employers also denied Jardine's third-party claim against Pardo,

15

writing: "your policy does not permit liability claims against

16

property you own."

Id. at 5.

Id.

17

On May 5, 2009, Jardine commenced a second state court action

18

against Pardo with the same causes of action as the Chavez action.

19

Id.

20

against Pardo in the amount of $1,224,203.

21

HG09-450634 (Cal. Super. Ct. May 27, 2010) (hereinafter, "the Pardo

22

judgment").

23

After a bench trial, Jardine ultimately received a judgment
Jardine v. Pardo, No.

On September 9, 2009, Jardine sold the Property to the City of

24

Hayward for $1.3 million for the construction of a public

25

improvement project.

26

subsequently destroyed.

27
28

OneBeacon MSJ Order at 5.

The Property was

Id.

In March 2010, Jardine commenced these actions against
Employers and Maryland in Alameda County Superior Court; Defendants

5

1

subsequently removed.

In 10-3335, Plaintiff alleges Employers (1)

2

committed fraud, and (2) breached the implied covenant of good

3

faith and fair dealing ("the implied covenant") when it settled

4

Plaintiff's fire claim.

5

Compl.").

6

him the policy's coverage limits, which induced Jardine into

7

signing the Settlement Agreement.

8

claims for breach of contract and breach of the implied covenant in

9

connection with Employers' handling of his claim for wall and

10-3335, ECF No. 1 Ex. A ("10-3335

Jardine alleges that Employers falsely represented to

Id.

In 10-3336, Jardine brings

United States District Court

For the Northern District of California

10

plaster damage.

10-3336, ECF No. 47 ("10-3336 Am. Compl.").

11

Jardine has also asserted a cause of action under Insurance Code

12

Section 11580 in an attempt to collect on the Pardo judgment under

13

the Employers policy's third-party liability coverage.2

Id.

In March 2011, Employers moved for summary judgment in both

14
15

10-3335 and 10-3336.

See 10-3335 ECF No. 30; 10-3336 ECF No. 23.

16

The Court denied the 10-3335 motion on the grounds that a genuine

17

issue of material fact existed as to the enforceability of the

18

Settlement Agreement and certain elements of Jardine's fraud claim.

19

OneBeacon MSJ Order at 9-10.

20

Employers' conclusory argument that Plaintiff was not damaged by

21

the alleged fraud.

22

motion, finding that there was a triable issue of fact as to

23

whether the wall damage manifested prior to the inception of the

24

Employers policy.

Further, the Court found no merit in

Id. at 11.

The Court also denied the 10-3336

OneBeacon MSJ Order at 16.

Maryland found more success when it subsequently moved for

25
26

summary judgment in 10-3318 and 10-3319.

27

2

28

See 10-3318 ECF Nos. 35,

Jardine also asserted causes of action for violations of the Fair
Claims Settlement Practices Act in both 10-3335 and 10-3336, but
subsequently stipulated to their dismissal. See 10-3335 ECF No.
49; 10-3336 ECF No. 50.
6

1

36.

With respect to Jardine's claim for fire damage in 10-3319,

2

the Court found that the $41,099.22 in insurance payments Jardine

3

received from Employers and Maryland "more than fully compensated

4

[Jardine] for the $34,412.10 repair costs resulting from his fire

5

loss."

6

entitled to code upgrade coverage under his Maryland policy because

7

he never performed any code upgrades after the fire and it was

8

unclear whether code upgrades were even necessary.

9

Finally, the Court determined that Jardine was not entitled to

Id. at 13-15.

The Court also found that Jardine was not

Id. at 17.

United States District Court

For the Northern District of California

10

business income coverage (i.e., coverage for loss of rent) under

11

his Maryland policy because Pardo moved out after the "period of

12

recovery," i.e., the time it would have taken to repair the

13

property with reasonable speed or similar quality.

14

to 10-3318, the Court determined that Jardine's claim for wall

15

damage was barred by a provision in his Maryland policy which

16

excluded coverage for damage resulting from "deterioration."

17

Maryland MSJ Order at 11.

Id. at 19.

As

18

Seizing on the Court's Order granting Maryland's motions for

19

summary judgment, Employers now moves for summary judgment in 10-

20

3335 and 10-3336 for a second time.

21

the Maryland and Employers policies are substantially similar, the

22

Court's Maryland MSJ Order precludes Jardine from proceeding with

23

his claims against Employers.

24

Employers argues that the Court has already found that Jardine has

25

been more than fully compensated for the cost of repairing the fire

26

damage.

27

in the Maryland and Employers policies concerning code upgrade and

28

business income coverage is substantially similar and that the

Fire MSJ at 7.

Employers argues that because

With respect to the 10-3335 action,

Employers further argues that the language

7

1

Court already found that Jardine was not entitled to such coverage

2

under the Maryland policy.

3

Employers argues that its policy contains essentially the same

4

deterioration exclusion that the Court found applicable to

5

Jardine's claim against Maryland.

6

also argues that Jardine may not enforce the Pardo judgment against

7

Employers because Pardo was aware of the wall damage before the

8

inception of the policy and because the policy does not provide

9

coverage for economic losses such as loss of rental income.

United States District Court

For the Northern District of California

10

Id. at 8-12.

As to the 10-3336 action,

Wall MSJ at 6-15.

Employers

Id. at

15-20.

11
12

III. LEGAL STANDARD

13

Entry of summary judgment is proper "if the movant shows that

14

there is no genuine dispute as to any material fact and the movant

15

is entitled to judgment as a matter of law."

16

56(a).

17

require a directed verdict for the moving party.

18

Liberty Lobby, Inc., 477 U.S. 242, 251 (1986).

19

mandates the entry of summary judgment . . . against a party who

20

fails to make a showing sufficient to establish the existence of an

21

element essential to that party's case, and on which that party

22

will bear the burden of proof at trial."

23

477 U.S. 317, 322 (1986).

24

believed, and all justifiable inferences are to be drawn in his

25

favor."

26

of a scintilla of evidence in support of the plaintiff's position

27

will be insufficient; there must be evidence on which the jury

28

could reasonably find for the plaintiff."

Fed. R. Civ. P.

Summary judgment should be granted if the evidence would
Anderson v.
Thus, "Rule 56[]

Celotex Corp. v. Catrett,

"The evidence of the nonmovant is to be

Anderson, 477 U.S. at 255.

8

However, "[t]he mere existence

Id. at 252.

"When

1

opposing parties tell two different stories, one of which is

2

blatantly contradicted by the record, so that no reasonable jury

3

could believe it, a court should not adopt that version of the

4

facts for purposes of ruling on a motion for summary judgment."

5

Scott v. Harris, 550 U.S. 372, 380 (2007).

6

for summary judgment based on an expanded record is always

7

permissible."

8

Inc., 810 F.2d 243, 251 (D.C. Cir. 1987).

"A subsequent motion

Williamsburg Wax Museum, Inc. v. Historic Figures,

9

United States District Court

For the Northern District of California

10
11

IV.

DISCUSSION
Most of the issues raised in Employers' motions for summary

12

judgment have already been addressed in the Court's Order granting

13

summary judgment in favor of Maryland.

14

Jardine's wall and fire damage are the same and the Maryland and

15

Employers' insurance policies are functionally equivalent in most

16

relevant respects, the Court reaches the same conclusions now as it

17

did in the Maryland MSJ Order.

As the facts surrounding

18

A.

Jardine's Claim for Fire Damage (10-3335)

19

Employers argues that it is entitled to summary judgment on

20

Jardine's claims for fraud and breach of the covenant of good faith

21

and fair dealing in 10-3335 because Jardine did not suffer any

22

damages.

23

Order, Employers argues that Jardine was more than fully

24

compensated for his fire damage under his Employers policy and is

25

not entitled to additional insurance proceeds for code upgrades or

26

loss of rental income.

27
28

See Fire MSJ at 2.

Pointing to the Court's Maryland MSJ

See id.

The Court agrees.

As explained in the Maryland MSJ Order, Jardine received a
total of $41,099.22 in insurance proceeds from Employers and

9

1

Maryland to compensate him for damage caused by the fire on the

2

Property.

3

the estimated cost to repair the damage was $34,423.20, excluding

4

the cost of any code upgrades.

5

Jardine was more than fully compensated for the cost of fire damage

6

repairs.

7

basic repairs for the fire damage was $34,423.20, but argues that

8

he was entitled to additional insurance proceeds for code upgrades,

9

depreciation, and lost rental income.

United States District Court

For the Northern District of California

10

Jardine has conceded that

See id. at 14.

Accordingly,

As before, Jardine does not dispute that the cost of

See Fire Opp'n at 7, 11.

These arguments lack merit.
1.

11
12

See Maryland MSJ Order at 13.

Code Upgrade Coverage

Jardine argues that he was entitled to the cost of code

13

upgrades under the "Increased Cost of Construction" coverage in the

14

Employers policy.

15

relevant part:

16
17
18
19
20
21
22
23
24
25
26
27
28

e.

See id. at 8.

This provision states, in

Increased Cost of Construction
. . .
(2) In the event of damage by a Covered Cause of
Loss to a building that is Covered Property, we
will pay the increased costs incurred to comply
with enforcement of an ordinance or law in the
course of repair, rebuilding or replacement of
damaged parts of that property, subject to the
limitations stated in e.(3) through e.(9) of
this Additional Coverage.
. . .
(7) With respect to this Additional Coverage:
(a) We will not pay for the Increased Cost of
Construction.
(I) Until
the
property
is
actually
repaired or replaced, at the same or
another premises; and
(II) Unless the repairs or replacement are
made as soon as reasonably possible
after the loss or damage, not to
exceed two years. We may extend this

10

1

period
years.

2
3

in

writing

during

the

two

10-3335 Silberstein Decl.3 Ex. 1 ("Policy") at OB 00146.
Addressing similar policy language in its Order on Maryland's

4
5

motion for summary judgment, the Court concluded that Jardine was

6

not entitled to coverage because Jardine never performed any code

7

upgrades after the fire.

8

sees no reason why it should reach a different conclusion in the

9

instant action.

See Maryland MSJ Order at 17.

The Court

The Employers policy expressly provides that

United States District Court

For the Northern District of California

10

Employers will not pay for the increased costs of construction

11

"[u]ntil the property is actually repaired or replaced."

12

OB 00146.

13

replaced the Property and, as the Property has been sold to the

14

City of Hayward and the building destroyed, he never will.

15

the Maryland MSJ Order, the Court holds that Jardine cannot recover

16

for code upgrades which were never performed.

17

would award Jardine the kind of windfall payment that is expressly

18

foreclosed by the policy.4

Policy at

Jardine does not dispute that he never repaired or

As in

To hold otherwise

See Maryland MSJ Order at 17.

19
20
3

21
22
23
24

Dawn A. Silberstein ("Silberstein"), attorney for Employers,
submitted declarations in support of Employers' 10-3335 Motion and
Reply Brief. 10-3335 ECF Nos. 51-1 ("10-3335 Silberstein Decl."),
62-1 ("10-3335 Silberstein Reply Decl."). Silberstein also filed
declarations in support of Employers' Motion and Reply in 10-3336.
10-3336 ECF Nos. 52-5 ("10-3336 Silberstein Decl."), 63-1 ("10-3336
Silberstein Reply Decl.").
4

25
26
27
28

Jardine submits identical declarations from two general
contractors, Victor Periera ("Periera") and Gary Fair ("Fair"),
stating that City of Hayward would have required code upgrades had
Jardine applied for a building permit to repair the fire damage on
the property. See 10-3335 ECF Nos. 66 ("Periera Decl.") ¶ 8, 59
("Fair Decl.") ¶ 8. These declarations are irrelevant. Even if
building code upgrades would have been required, it remains
undisputed that Jardine never performed them.

11

Jardine argues that, in the OneBeacon MSJ Order, "the Court

1
2

found that triable issues of fact existed concerning building code

3

upgrade coverage."

4

of the OneBeacon MSJ Order Jardine is referring to as he does not

5

provide any citations, quotations, or page references.

6

is clear that the Court made no such finding in its OneBeacon MSJ

7

Order.5

It is unclear what portion

However, it

Jardine also argues that he is entitled to payment for code

8
9

Fire Opp'n at 11.

upgrades because, in violation of the policy terms, Employers

United States District Court

For the Northern District of California

10

delayed adjusting his claim and failed to "give notice of [its]

11

intentions within 30 days after [it] receive[d] the sworn proof of

12

loss."

13

asserts that he made his claim in June 2007, but, as late as April

14

2008, Employers had not appraised the damage, obtained a repair

15

estimate, or determined if replacement was appropriate.

16

Jardine reasons that Employers should not be able to avoid its

17

responsibility to provide code upgrade coverage by delaying the

18

fire claim until the City of Hayward acquired the property.

19

id.

See Fire Opp'n at 10 (citing Policy at OB 00150).

Jardine

See id.

See

Jardine's argument concerning unreasonable delay fails for at

20
21

least three reasons.

22

point to any language in the Employers policy stating that

23

Employers' delay or failure to give notice within 30 days would

24

trigger an obligation to pay for code upgrades.

25

5

26
27
28

First, and most importantly, Jardine does not

The Employers

Jardine may be referring to the Court's discussion of whether he
had presented sufficient evidence to support his fraud claim. See
OneBeacon MSJ Order at 10-11. In that discussion, the Court
addressed allegations that Employers had misrepresented the scope
of its code upgrade coverage, but never concluded that a triable
issue of fact existed as to Jardine's entitlement to such coverage.
See id.

12

1

policy does state that Employers will not pay for code upgrades

2

unless and until such upgrades are made.

3

undisputed that Jardine never has and never will perform these code

4

upgrades.

5

unreasonably delayed processing his claim is blatantly contradicted

6

by the record.

7

did not tender his claim for the June 2007 fire damage until

8

December 20, 2007.6

9

Ex. A ("Dec. 20, 2007 Tender").

As discussed above, it is

Second, Jardine's conclusory assertion that Employers

Documents submitted by Employers show that Jardine

See 10-3335 ECF No. 62-5 ("Cook Reply Decl.")
On April 2, 2008, Jardine and

United States District Court

For the Northern District of California

10

Employers entered into the Settlement Agreement through which

11

Jardine agreed to accept $39,781.25 to settle his fire claim.7

12

10-3335 Silberstein Reply Decl. Ex. 10 ("Settlement Agreement").

13

In light of these undisputed facts, Jardine cannot seriously

14

contend that Employers unreasonably delayed processing his fire

15

claim.

16

ever submitted a sworn proof of loss to Employers in connection

17

with his claim for fire damage.

18

(declaring that Jardine "never submitted[] a Sworn Statement in

19

Proof of Loss for the fire claim").8

See

Third, Jardine has presented no evidence showing that he

See Cook Reply Decl. ¶ 9

20
21
22
23
24
25

6

Jardine argues that he "made his [fire] claim in June 2007."
Fire Opp'n at 10. However, Jardine's declaration is vague on when
he actually tendered his claim to Employers, stating only that the
fire occurred in June 2007 and that he "eventually submitted the
claim to [Employers]." 10-3335 ECF No. 57 ("Jardine Decl.") ¶ 8
(emphasis added). Jardine has submitted no evidence, testimonial
or otherwise, suggesting that he tendered his claim any earlier
than December 20, 2007.
7

26
27
28

The declaration of Erik Quinn ("Quinn"), a third-party adjustor
who worked on Jardine's fire claim, also shows that Jardine was
contacted about his claim no later than six days after it was
tendered. See Quinn Reply Decl. ¶¶ 3-4.
8

Jardine did submit a proof of loss in connection with his claim
for wall damage in June 2010, almost three years after he submitted
13

For the foregoing reasons, the Court finds that Jardine has

1
2

failed to raise a genuine issue of material fact as to whether he

3

was entitled to coverage for code upgrades.
2.

4

Depreciation Coverage

Jardine argues that "[e]ven if Employers was not obligated to

5
6

pay the full cost of repair, at least they were obligated to pay

7

the value of the fire damaged portion of the building."

8

at 9.

9

to pay for the depreciated value of the Property after the fire.

In other words, Jardine contends that Employers is obligated

10

United States District Court

For the Northern District of California

Fire Opp'n

See id.

This argument runs contrary to the express terms of the

11

Employers policy.

The policy provides:

12
13

4.

Loss Payment
a.

14
15
16
17
18
19
20

b.

21
22
23

In the event of loss or damage covered by this
Coverage form, at our option, we will either:
(1) Pay the value of lost or damaged property;
(2) Pay the cost of repairing or replacing the
lost or damaged property, subject to b.
below;
(3) Take all or any part of the property at an
agreed or appraised value; or
(4) Repair, rebuild or replace the property
with other property of like kind and
quality, subject to b. below.
. . .
The cost to repair, rebuild or replace does not
include the increased cost attributable to
enforcement of any ordinance or law regulating
the
construction,
use
or
repair
of
any
property.

24

Policy at OB 00150 (emphasis added).

25

Employers had the discretion to compensate Jardine for his loss in

26

one of four ways.

Thus, under the policy,

Employers chose option number two and paid for

27
28

his claim.
Loss").

See Cook Reply Decl. Ex D ("June 2010 Sworn Proof of

14

1

the cost of repairs.

2

was under no obligation to choose option number one and pay for the

3

value of the damaged property.9

4

raise a triable issue of fact as to whether he was entitled to

5

compensation for depreciation of the Property.
3.

6

Contrary to Jardine's assertion, Employers

Accordingly, Jardine has failed to

Coverage for Loss of Rental Income

Jardine claims that he is also entitled to loss of rental

7
8

income for the period after Pardo ceased paying rent in October

9

2007.

The Court previously held that Jardine could not recover for

United States District Court

For the Northern District of California

10

loss of rental income against Maryland because Pardo stopped paying

11

rent after the conclusion of "the period of restoration," as

12

defined by the Maryland policy.

13

The period of restoration under the Employers policy is even more

14

limited than the period of restoration under the Maryland policy.

15

Accordingly, Jardine's claim for loss of rental income is barred.

16

The Employers policy provides that "[Employers] will pay for

See Maryland MSJ Order at 18-21.

17

the actual loss of Business Income you sustain due to the necessary

18

suspension of your operations during the period of restoration."

19

Policy at OB 00155 (internal quotation marks omitted).

20

Employers policy defines the period of restoration as the period of

21

time that:

22

///

23

9

24
25
26
27
28

The

Jardine also argues that "he had at least two properties he could
have built a replacement building on, if Employers had only paid
him the replacement costs allowed under the policy." Fire Opp'n at
10. The Court finds that Jardine's ownership of replacement
properties is completely irrelevant to his rights under the
Employers policy. As explained above, under the policy, Employers
had the option of paying Jardine for the cost to repair the
building rather than the cost of building on a replacement
property. Employers was under no obligation to pick Jardine's
preferred method of compensation. Further, Jardine has made no
showing that his $34,423.20 in fire damage entitled him to recover
the replacement cost of the entire building.
15

1

a.

2
3
b.

4
5
6
7

Begins:
(1) 72 hours after the time of direct physical loss
or damage . . . ; or
(2) Immediately after the time of direct physical
loss or damage . . . ; and
Ends on the earlier of
(1) The date when the property at the described
premises
should
be
repaired,
rebuilt
or
replaced with reasonable speed and similar
quality; or
(2) The date when business is resumed at a new
permanent location.

8
9

Id. at OB 00161.

Unlike the Maryland Policy, the period of

United States District Court

For the Northern District of California

10

restoration under the Employers policy "does not include any

11

increased period required due to the enforcement of any ordinance

12

or law[.]"

13

upgrades cannot operate to extend the period of recovery.

14

Id.

In other words, under the Maryland policy, code

Jardine concedes that the fire occurred on June 13, 2007 and

15

that Pardo ceased paying rent on October 1, 2007.

16

at 5, 11.

17

that the period of recovery, i.e., the time it would have taken to

18

repair the property with "reasonable speed and similar quality,"

19

exceeded 106 days.

20

Jardine's contractor, VP construction, the Court previously found

21

that the period of recovery for Jardine's fire damage was only 60

22

days.

23

estimate before and does not challenge it here.

24

facts, the Court finds that Jardine has failed to raise a genuine

25

issue of material fact as to whether he lost rental income during

See Fire Opp'n

Thus, at trial, Jardine would have the burden of showing

Based upon a repair estimate prepared by

Maryland MSJ Order at 19-20.

26
27
28

16

Jardine did not challenge this
In light of these

1

the period of restoration.

Accordingly, his claim is barred by the

2

express terms of the Employers policy.10

Periera and Fair, Jardine argues that repairs on the Property would

5

have taken eight months to complete.

6

declarations state that the "building code upgrade and energy

7

requirements" would have taken an additional eight months to

8

complete.

9

Employers policy expressly provides that the period of restoration

10

United States District Court

Relying on the identical declarations of his contractors,

4

For the Northern District of California

3

does not include any increased period required to perform such code

11

upgrades.

12

Fair declarations are irrelevant to determining the period of

13

restoration.

See Fire Opp'n at 12.

Fair Decl. ¶ 9; Periera Decl. ¶ 9.

See Policy at OB 00161.

Both

However, the

Accordingly, the Periera and

Jardine also argues that he is entitled to lost rent after

14
15

October 2007 because Employers delayed processing his claim until

16

months after the June 2007 fire.

17

lacks merit.

18

December 20, 2007, over two months after Pardo ceased paying rent

19

and six months after the fire.

20

discussed above, once it was tendered, Employers promptly responded

21

to and settled Jardine's claim.

22

provide for an extension of the period of restoration due to a

23

delay in the processing or tendering of a claim.

Fire Opp'n at 12.

This argument

Jardine failed to tender his claim to Employers until

See Dec. 20, 2007 Tender.

As

Further, the policy does not

24

Finally, Jardine argues that this Court has already

25

"acknowledged that Jardine did present evidence necessary to

26

establish a triable issue of fact that he incurred $79,200 in lost

27
10

28

Additionally, there is evidence that Jardine received $9,000 for
lost rent under his settlement agreement with Employers. See Cook
Reply Decl. C at 3.
17

1

rent reimbursable under the Employers policy."

2

Once again, Jardine has failed to provide any citation to the

3

record so the basis for his assertion is unclear.

4

MSJ Order, the Court did reject Employers' argument that Jardine

5

had presented no evidence that he was damaged by Employers' alleged

6

misrepresentation.

7

declaration previously made by Jardine was sufficient to create a

8

genuine issue of material fact concerning his damages, including

9

lost rent.

OneBeacon MSJ at 11-12.

Id. at 11-13.

Fire Opp'n at 12.

In its OneBeacon

The Court found that a

However, in its prior motion for summary

United States District Court

For the Northern District of California

10

judgment, Employers did not raise (and, thus, the Court did not

11

address) the limitations on recovery for lost rental income imposed

12

by the Employers policy.

13

before the Court, it is clear that no genuine issue of material

14

fact exists as to Jardine's entitlement to coverage for lost rent.
4.

15

Based on the expanded record now

Jardine Fails to Raise a Triable Issue of Fact as to
Damages

16
17

See id.

The Court finds that Jardine has been more than fully

18

compensated for his claim for fire damage under the Employers

19

policy.

20

$41,099.22 for $34,423.20 in repair costs for his fire damage and

21

that he is not entitled to additional coverage for code upgrades,

22

depreciation, or loss of rental income.

23

claims for fraud and breach of the covenant of good faith and fair

24

dealing must fail.

25

The undisputed evidence shows that Jardine received

Accordingly, Jardine's

In order to establish a cause of action for fraud, Jardine

26

must prove five distinct elements: (1) that Employers made a

27

material misrepresentation, (2) with knowledge of falsity, (3) with

28

intent to defraud Jardine or induce reliance, (4) that Jardine

18

1

justifiably relied upon the false statement, and (5) that Jardine

2

was damaged thereby.

3

(Cal. 1941); Cicone v. URS Corp., 183 Cal. App. 3d 194, 200 (Cal.

4

Ct. App. 1986).

5

of material fact as to the fifth element -- Jardine received all

6

that he was entitled to under the Employers policy.

7

the Court GRANTS Employers' motion for summary judgment as to

8

Jardine's 10-3335 claim for fraud.

See Seeger v. Odell, 18 Cal. 2d 409, 414

In the instant action, there is no genuine issue

Accordingly,

United States District Court

In order to establish a cause of action for breach of the

10
For the Northern District of California

9

covenant of good faith and fair dealing, Jardine must establish (1)

11

that a benefit was due under the terms of the policy and (2) that

12

the insurer unreasonably withheld that benefit without probable

13

cause.

See Gruenberg v. Aetna Ins. Co., 9 Cal. 3d. 566, 575 (Cal.

14

1973).

Again, there is no genuine issue of material fact as to the

15

second element because Jardine has received everything he is due

16

under the policy.

17

for summary judgment as to Jardine's 10-3335 claim for breach of

18

the covenant of good faith and fair dealing.

Accordingly, the Court GRANTS Employers' motion

19

B.

Jardine's Claim for Wall Damage (10-3336)

20

In 10-3336, Jardine has brought first-party claims for breach

21

of contract and the implied covenant, asserting that Employers

22

violated the terms of the policy when it refused to compensate him

23

for damage to his wall.

24

claim to enforce the Pardo judgment against Employers under

25

California Insurance Code § 11580.

26

first-party claims are barred by the deterioration exclusion in the

27

Employers policy.

28

claim is barred because Pardo and Jardine discovered the wall

Jardine has also brought a third-party

Employers argues that Jardine's

Employers also argues that Jardine's third-party

19

1

damage before the inception of the policy and because the Policy

2

does not provide Jardine with coverage for economic losses such as

3

lost rent.

The Court agrees with Employers.
1.

4

First-Party Claims for Breach of Contract and the
Implied Covenant

5

Employers argues that it is entitled to summary judgment on

6
7

the first party claims in 10-3336 because Jardine's claim for wall

8

damage is barred by the deterioration exclusion in the Employers

9

policy.

10-3336 MSJ at 6.

The Employers policy provides, in

United States District Court

For the Northern District of California

10

relevant part:

"We will not pay for loss or damage caused by or

11

resulting from any of the following: . . . [r]ust, or other

12

corrosion, decay, deterioration, hidden or latent defect or any

13

quality in property that causes it to damage or destroy itself."

14

Policy at OB 00164 (emphasis added).

15

the Court found that Jardine's claim for the same wall damage was

16

barred by almost identical language in the Maryland policy.11

17

Maryland MSJ Order at 8-9, 13.

18

damage resulted from deterioration because Jardine had conceded

19

that the damage "occurred over an approximate year and a half

20

time."

21

Insurance Co., 87 F.3d 387, 389 n.3 (9th Cir. 1996), where the

22

Ninth Circuit held that "a degradation that takes two years to

23

manifest" was "slow-moving" and therefore constituted

24

deterioration.

25

same facts, the same law, and a substantially similar policy, it

Id. at 11.

In the Maryland MSJ Order,

The Court found that the wall

The Court relied on Berry v. Commercial Union

See id. at 11.

As the Court is now faced with the

26
11

27
28

The Maryland policy provides: "We will not pay for loss or
damage caused by or resulting from any of the following: . . .
Rust, corrosion, fungus, decay, deterioration, hidden or latent
defect or any quality in property that causes it to damage or
destroy itself." See Maryland MSJ Order at 8-9.
20

1

reaches the same conclusion -- Jardine's claim for wall damage is

2

barred by the deterioration exclusion in the Employers policy.

3

Jardine raises many of the arguments that were asserted or

4

might have been asserted in his opposition to Maryland's motion for

5

summary judgment in 10-3318.

6

recycled arguments were addressed and rejected in the Maryland MSJ

7

Order, and the Court will not address them again here.

8

10-12.

9

conclusion.

See Wall Opp'n at 9-13.

United States District Court

See id. at

Jardine's new arguments do not change the Court's
Jardine is effectively asking the Court to find that

10
For the Northern District of California

Jardine's

its analysis in the Maryland MSJ Order was incorrect.

11

The Court

declines to do so.
Jardine's causes of action for breach of contract and the

12
13

implied covenant are premised on Employers' refusal to compensate

14

him for his first-party claim for wall damage.

15

wall damage claim is barred by the deterioration exclusion in the

16

Policy, he is not entitled to compensation for the wall damage.

17

Therefore, he cannot possibly prevail on his causes of action for

18

breach of contract and the implied covenant.12

19

Court GRANTS Employers' motion for summary judgment as to Jardine's

20

first cause of action for breach of contract and second cause of

21

action for breach of the implied covenant in 10-3336.

22

///

23

12

24
25
26
27
28

Because Jardine's

Accordingly, the

Jardine argues that summary judgment is inappropriate on his
claim for breach of the implied covenant because substantial
factual disputes exist concerning whether Employers acted in bad
faith in assessing his claim. Wall Opp'n at 18. Jardine asserts
that Employers failed to send an agent to assess the problem or
adjust the claim. Id. Even if this were the case, "a claim for
breach of the implied covenant of good faith and fair dealing
cannot be maintained unless benefits are due under the plaintiff's
insurance policy." Dollinger DeAnza Assocs. v. Chicago Title Ins.
Co., 199 Cal. App. 4th 1132, 1156 (Cal. Ct. App. 2011). As
discussed above, Jardine is not entitled to any additional benefits
under the Employers policy.
21

2.

1
2

Third-Party Claims under Insurance Code § 11580

Section 11580 of the California Insurance Code requires an

3

insurer doing business in California to allow suits by a judgment

4

creditor of its insured.

5

policies must include:

6
7
8

Specifically, Section 11580 mandates that

A provision that whenever judgment is secured against the
insured . . . based upon . . . property damage, then an
action may be brought against the insurer on the policy
and subject to its terms and limitations, by such
judgment creditor to recover on the judgment.

9

United States District Court

For the Northern District of California

10
11

Cal. Ins. Code § 11580(b)(2) (emphasis added).
Jardine asserts that Section 11580 entitles him to enforce the

12

Pardo judgment against Employers, Pardo's insurance carrier.

13

10-3336 FAC 29-30.

14

and attorneys' fees, and Jardine alleges that it "includes [1] the

15

cost of repairing the south wall and the building as a result of

16

the damage to the front section of the wall, and [2] the related

17

lost rental income."

18
19

i.

See

The judgment was for $1,224,203.00, plus costs

Id. at 27.
Third-party claim for wall damage

Employers argues that Section 11580 bars Jardine's third-party

20

claim for wall damage because, under the statute, Jardine's right

21

to enforce the Pardo judgment is "subject to" the "terms and

22

limitations" of the Employers policy.

23

Employers further argues that the policy does not cover the relief

24

awarded by the Pardo judgment.

25

points to Section I of the General Liability Coverage Form of the

26

Employers policy, which provides, in relevant part:

27
28

1.

See Wall WSJ at 14-15.

See id.

Employers specifically

Insuring Agreement
a.
We will pay those sums that the insured becomes
legally obligated to pay as damages because of

22

1
2
3
4
5
6
7
8
9

United States District Court

For the Northern District of California

10
11

b.

. . . property damage. . . . However, we will
have no duty to defend the insured against any
"suit" seeking damages for . . . "property
damage" to which this insurance does not apply.
. . .
The insurance applies to . . . "property
damage" only if:
. . .
(3) Prior to the policy, no insured . . . knew
that the . . . "property damage" had
If such
occurred in whole or in part.
listed insured . . . knew, prior to the
policy period, that the . . . "property
damage" occurred, then any continuation,
change or resumption of such . . .
"property damage" during or after the
policy period will be deemed to have been
known prior to the policy period.

12

Policy at OB 00171 (emphasis added).

13

General Liability Coverage Form bars Jardine's third-party claim

14

because Pardo was aware of the wall damage, "in whole or in part,"

15

as early as November 2006, several months before the Employers

16

policy incepted on May 15, 2007.

17

Employers argues that the

See Wall MSJ at 17.

The Court agrees that Insurance Code Section 11580(b)(2), read

18

in conjunction with the Employers policy, bars Jardine's third-

19

party claim to enforce the Pardo judgment against Employers with

20

respect to the wall damage.

21

Jardine to establish that the Employers policy covers the relief

22

awarded by the Pardo judgment.

23

third-party claims for property damage where any one of the

24

insureds (i.e., either Pardo or Jardine) was aware of the property

25

damage, "in whole or in part," before the inception of policy.

26

Pardo has stated in a sworn statement and testified in a deposition

27

that she was aware of the damage to the front section of the south

28

wall of the Property as early as November 2006.

Insurance Code Section 11580 requires

The Employers policy does not cover

23

See 10-3336

1

Silberstein Decl. Ex. 5 ("Nov. 22, 2010 Pardo Decl.") ¶ 2; Id. Ex.

2

8 ("May 25, 2011 Pardo Dep.") at 18:18-18:25, 24:25-26:8.

3

policy did not incept until May 15, 2007.

4

Accordingly, Jardine's third-party claim for wall damage

5

necessarily fails.

6

The

See Policy at OB 00204.

Jardine's arguments to the contrary are unpersuasive.

First,

7

Jardine argues that, contrary to Pardo's declaration and testimony,

8

the damage to the front section of the south wall did not manifest

9

until after the inception of the policy.

See id. at 17-18.

United States District Court

For the Northern District of California

10

Jardine points to his own declaration, stating that he was aware of

11

damage to the rear section of the south wall in November 2006 but

12

"there were no problems with the front section of the south wall"

13

at any time prior to the inception of the policy in May 2007.

14

3336 ECF No. 61 ("10-3336 Jardine Decl.") ¶¶ 14, 16.

15

declaration does not raise a triable issue of fact.

16

matter, Jardine's declaration does not say anything about Pardo's

17

knowledge of the front wall damage prior to the inception of the

18

policy.

19

damage in November 2006 while Jardine was not.

20

terms of the Policy, Pardo's knowledge of the damage prior to the

21

inception of the policy is sufficient to invoke the policy

22

exclusion.

23

Jardine's knowledge is irrelevant.

24

that he knew about the damage to the rear section of the wall as

25

early as November 2006.

26

does not apply to property damage where, as here, prior to the

27

policy's inception, an insured "knew that . . . property damage had

28

occurred, in whole or in part."

10-

Jardine's
As an initial

It is possible that Pardo was aware of the front wall
Under the express

So long as Pardo knew of the damage in November 2006,
Additionally, Jardine concedes

10-3336 Jardine Decl. ¶ 14.

The policy

See Policy at OB 00171.

24

The

1

damage to the front section of the south wall was merely a

2

"continuation, change or resumption" of the sulfate attack in the

3

rear section that had manifested as early as November 2006.

4

Policy at OB 00171.

5

is "deemed to have been known prior to the policy period."

See

Accordingly, the damage to the front section
See id.

Second, pointing to the OneBeacon MSJ Order, Jardine argues

6
7

that the Court has already determined that a triable issue of

8

material fact exists as to whether damage to the front section of

9

the South wall occurred prior to the inception of the Employers

United States District Court

For the Northern District of California

10

policy on May 15, 2007.

Wall Opp'n at 16 (citing OneBeacon MSJ

11

Order at 16).

12

Court's prior holding.

13

addressed the issue of when Jardine knew about the damage to the

14

south wall in the context of California's "loss-in-progress" rule.

15

See OneBeacon MSJ Order at 15-16.

16

could not recover for damage to the back two sections of the wall

17

but factual issues precluded summary judgment as to the front

18

section of the wall.

19

differed because it did not address when Pardo became aware of the

20

damage to the wall or the more stringent exclusion set forth in the

21

Employers policy.13

Jardine overstates the preclusive effect of the
In the OneBeacon MSJ Order, the Court

See id.

The Court found that Jardine

The Court's previous analysis

For these reasons, the Court holds that Jardine is barred from

22
23

enforcing the Pardo judgment insofar as it applies to Jardine's

24

claim for wall damage.

25

///

26

13

27
28

Jardine also appears to argue that the deterioration exclusion
in the Employers policy does not apply to his third-party claims.
See Wall Opp'n at 15-16. While that may be the case, the argument
is irrelevant since Employers is not attempting to apply the
deterioration exclusion to Jardine's third-party claims.

25

ii.

1
2

Third-party claim for loss of rental income

Employers argues that Jardine is also barred from enforcing

3

the Pardo judgment insofar as it applies to Jardine's claim for

4

lost rent.

5

arising out of (1) bodily injury or (2) property damage and that

6

Jardine's claim for lost rent does not qualify as either.

7

at 20.

8

policy provides:

9

legally obligated to pay as damages because of 'bodily injury' or

Employers contends that the policy only covers damages

The Court agrees.

Wall MSJ

The relevant portion of the Employers

"We will pay those sums that the insured becomes

United States District Court

For the Northern District of California

10

'property damage' to which this insurance applies."

11

00171.

12

property which fall outside the scope the Employers policy.

13

Continental Casualty Co. v. Super. Ct., 92 Cal. App. 4th 430, 439-

14

40 (Cal. Ct. App. 2001).

15

Policy at OB

Damages for lost rent qualify as injuries to intangible
See

Jardine contends that, under Vandenberg v. Super. Ct., 21 Cal.

16

4th 815 (Cal. 1999), Employers is obligated to pay all

17

consequential damages, even lost rent resulting from a breach of a

18

lease agreement.

19

The Vandenberg court held that property damage should have been

20

covered under a commercial general liability policy, regardless of

21

whether that property damage was alleged under a breach of contract

22

or tort cause of action.

23

find that a policy that covers only property damage could be

24

interpreted to indemnify the policyholder against all consequential

25

economic losses.

26

Jardine overstates the holding in Vandenberg.

21 Cal. 4th at 841.

The Court did not

Accordingly, the court also finds that Jardine is barred from

27

enforcing the Pardo judgment against Employers to the extent that

28

it applies to Jardine's claim for lost rental income.

26

As Jardine's

1

third-party claim for wall damage is also barred, the Court GRANTS

2

Employers' motion for summary judgment as to Jardine's fourth cause

3

of action under Insurance Section 11580.

4
5

V.

CONCLUSION

6

For the foregoing reasons, the Court GRANTS Defendant

7

Employers Fire Insurance Company's Motions for Summary Judgment

8

against Plaintiff James Jardine in case numbers 10-3335 and 10-

9

3336.

JUDGMENT is hereby entered in favor of Employers and against

United States District Court

For the Northern District of California

10

Jardine with respect to all of Jardine's claims in 10-3335 and 10-

11

3336.

12

IT IS SO ORDERED, ADJUDGED, AND DECREED.

13
14
15

Dated: December 27, 2011
UNITED STATES DISTRICT JUDGE

16
17
18
19
20
21
22
23
24
25
26
27
28

27