Empey v. Allied Property & Casualty Insurance Company

Filing 150

ORDER by Judge Samuel Conti granting in part and denying in part 19 Motion for Partial Summary Judgment (sclc1, COURT STAFF) (Filed on 1/12/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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CHAD EMPEY,

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Plaintiff,

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v.

United States District Court

For the Northern District of California

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ALLIED PROPERTY & CAUSALTY
INSURANCE COMPANY, and DOES 1 to
50, inclusive,
Defendants.

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Case No. 11-00733 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT

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I.

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INTRODUCTION
Now before the Court is Defendant Allied Property and Casualty

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Insurance Company's ("Allied") motion for partial summary judgment

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regarding Plaintiff Chad Empey's ("Empey") second cause of action

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for breach of the implied covenant of good faith and fair dealing

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as well as Plaintiff's claim for punitive damages.

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("MSJ").

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("Reply").

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in part and DENIED in part.

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This motion is fully briefed.

ECF No. 19

ECF Nos. 65 ("Opp'n"), 112

For the reasons set forth below, the motion is GRANTED

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II.

BACKGROUND1

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A.

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This case arises out of an insurance claim for property damage

Empey's Policy Limits and Property Damage

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that Empey filed with Allied.

Empey is an experienced contractor,

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homebuilder, and glass artist, and owns a specialty glass shop.

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Kimura Decl.2 Ex. 1 ("Empey Dep.") at 27-28, 30.

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home located at 12 Sundance Court in Petaluma, California, that was

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insured by Allied.

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The limits on the Policy were as follows: $648,700 for dwelling

He also owns a

Id. at 33; Gonzalez Decl. Ex. 1 ("Policy").

United States District Court

For the Northern District of California

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repairs; $480,038 for contents; and 12 months for "Additional

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Living Expenses" ("ALE").

Policy at 3345; Gonzalez Decl. ¶ 4.

On February 26, 2009, one of Empey's employees discovered that

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Empey's home had been broken into and extensively vandalized while

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Empey was out of town.

Empey Decl.3 ¶¶ 2-3.

Unidentified

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Each party filed various objections to the other's evidence. ECF
Nos. 70, 113, 114. Allied alone submitted over 40 pages of
objections pertaining to a substantial portion of Empey's evidence,
including evidence which has little relevance to the arguments
before the Court. This practice constitutes a violation of the
page limits set forth in Civil Local Rule 7-2. The Court declines
to rule on these objections -- with a few exceptions -- because it
does not rely on the purportedly objectionable evidence in reaching
its decision.
2

Declarations in support of the Motion were submitted by Rebecca
K. Kimura ("Kimura"), Allied's attorney; David Bergamini
("Bergamini"), a General Manager at Mark Scott Construction, Inc.;
Sandra Lankford ("Lankford"), a field claim specialist assigned to
Empey's claim; and Tony Gonzalez ("Gonzalez"), a field consultant
assigned to Empey's claim. ECF Nos. 20 ("Kimura Decl."), 21
("Bergamini Decl."), 22 ("Lankford Decl."), 23 ("Gonzalez Decl."),
40 ("Kimura Supp. Decl."), 115 ("Kimura Supp. Decl."). At the
request of the Court, Allied filed an index clarifying and
correcting its citations to these declarations and their attached
exhibits. ECF No. 108 ("Defs.' Citation Index").
3

Declarations in opposition to the Motion were submitted by Empey;
Donald T. McMillan ("McMillan"), Empey's attorney; and Paul
Hamilton ("Hamilton"), author of Empey's insurance claims handling
expert's report. ECF Nos. 66 ("McMillan Decl."), 67 ("Empey
Decl."), 68 ("Hamilton Decl.").
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person(s) stole numerous items of personal property, flooded the

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house by opening faucets and breaking a sink, smashed and destroyed

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expensive custom specialty glass surfaces installed throughout the

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house, poured cement into the toilet, and used hammers to damage

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every cabinet, wall, door, counter, and fixture.

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Empey Decl. ¶ 3.

Empey notified Allied of the incident on the same day the

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damage was discovered.

Empey Decl. ¶ 4.

On March 2, 2009,

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Gonzalez, the primary adjuster on the claim, contacted Empey to

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discuss his coverage.

United States District Court

For the Northern District of California

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B.

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Soon after Empey filed his dwelling claim (i.e., his claim for

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property repairs), disputes arose concerning the cost to repair the

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property.

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estimate of $32,000 on March 10, 2009 and a revised preliminary

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estimate of $34,000 on May 8, 2009.

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Decl. Ex. 3.

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work performed by Mark Scott Construction, Inc. ("MSC"), which gets

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95 percent of its work from insurance companies and is one of

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Allied's preferred vendors.

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the estimates excluded a number of items, including marble

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countertops, wood cabinets, replacement of matching tile throughout

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his home, and carpeting, among other things.

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the May 2009 estimate, Allied made an advance payment to Empey of

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$30,964.38.

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Repair Estimates for the Property Damage

Allied presented Empey with a preliminary repair

Gonzalez Decl. Ex. 7; Empey

Empey complains that both estimates were based on

Opp'n at 2.

Empey also contends that

Id. ¶ 7.

Based on

Gonzalez Decl. ¶ 21.

Neither the March nor the May estimate included the cost to

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replace Empey's specialty glass.

See Gonzalez Decl. ¶¶ 18, 20.

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Gonzalez repeatedly contacted Empey about the pricing information

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for the glass between April and December 2009, but Empey did not

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18, 20-30.

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glass contractor in the spring of 2009 but was delayed because

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there are only a limited number of companies in the Bay Area

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capable of doing the type of work needed.

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14.

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assistance of his father's company, Emp's Graphic Eye ("Emp's"),

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and received "final information" from Emp's in late summer 2009.

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Id. ¶¶ 4, 10, 14.

Empey's subcontract bid for the specialty glass

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United States District Court

provide the requested information until January 2010.

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For the Northern District of California

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See id. ¶¶

totaled $172,339.

Id. ¶ 15.

Empey declares that he started the process of finding a

Empey Decl. ¶¶ 10, 12,

Empey ultimately decided to create his own quote with the

On January 6, 2010, Empey sent Allied an estimate for dwelling

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repairs put together by his own general contractor, Ireland,

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Robinson & Hadley ("IRH").

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totaled $559,995.40, and included Empey's $172,339 subcontract bid

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for glass work.

Gonzalez Decl. ¶ 30.

The IRH estimate

Gonzalez Decl. Ex. 23 ("IRH Estimate").4

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On March 24, 2010, Empey, Gonzalez, McMillan (Empey's

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attorney), and representatives from MSC and IRH met for about an

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hour at Empey's home to discuss the differences between the MSC and

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IRH estimates.

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of the meeting are different but not inconsistent.

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that he agreed to add some items to Allied's scope of repair and

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verified that all damages had been addressed.

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Empey claims that Gonzalez promised to get him a revised estimate

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from MSC within 7 to 10 days.

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The parties' accounts
Gonzalez claims

Gonzalez Decl. ¶ 35.

McMillan Decl. Ex. 2.

The revised MSC estimate was not sent to Empey until August

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Id. ¶ 35; Empey Decl. ¶ 18.

31, 2010, over five months after the March 24, 2010 meeting.
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Empey

Empey claims that he informed Gonzalez in October 2009 that the
IRH quote would be in the $559,000 range. Empey Decl. ¶ 16
Gonzalez allegedly responded: "We have a problem." Id.
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Decl. ¶¶ 19-20.

MSC's final written estimate for dwelling repairs

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was $297,859.63.

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contained a bid for specialty glass at a cost of $165,141, and

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excluded items left open such as the central vacuum system, solar

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system, HVAC unit, alarm system.

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letter to Gonzalez, McMillan pointed out that there was a

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difference of $154,485 between the MSC and IRH estimates.5

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McMillan Ex. 6 (Oct. 15, 2010 McMillan Ltr.) at 2.

Empey Decl. Ex. 7 ("MSC Estimate").

Id.

The estimate

In an October 15, 2010

The largest divergence in the repair estimates was for "tile"

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United States District Court

For the Northern District of California

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replacement; MSC's bid was $1,123 and IRH's was $40,328.

Id.

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Empey claims that Allied only intended to replace the tile in the

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front entry hall of the house (where tile had been damaged by

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vandals), as opposed to replacing all of the tile in Empey's home.

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Id.

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be exactly the same, just as it had been prior to the vandalism.

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Id.

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See Reply at 9.

Empey insisted that the tile in every room in his house should

Allied takes issue with this characterization of the MSC bid.

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Empey also claims that the MSC estimate omitted repairs

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necessary to return the sheetrock walls to their original "laser

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finish."

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installation of 5/8 inch sheet rock and the application of three

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coats of "mud."

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1/2 inch sheet rock and one coat of mud.

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Ex. 29 ("Bergamini Dep.") at 121-22.

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estimate did call for 5/8 inch sheetrock and that there is no

Opp'n at 16.

Id.

Empey insisted that this would require

Empey claims MSC's estimate only called for
Id.; see McMillan Decl.

Allied responds that the MSC

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It is unclear how McMillan arrived at this figure as the MSC bid
was $297,859.63 and the IRH bid was $559,995.40. In any event,
neither party disputes the accuracy of McMillan's math.
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evidence that Empey's walls ever had laser finish.

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See MSJ at 11;

Gonzalez Decl. Ex. 40.
Between October 2010 and January 2011, the parties conferred

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several more times about the differences between the MSC and IRH

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estimates, but, evidently, they did not reach any resolution on the

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issue.

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MSC agreed that MSC would perform the work described in its bid for

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the amount stated.

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C.

United States District Court

In January 2011, Allied and

Id. at 49-50.

Personal Contents Claim

Empey was also dissatisfied with Allied's handling of his

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For the Northern District of California

See Gonzalez Decl. ¶¶ 47-50.

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personal contents claim.

Soon after the property damage was

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discovered, Allied arranged for ServiceMaster to remove damaged

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items and pack-up and store cleanable items so as to protect them

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from water-damage.

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Gonzalez requested that, within 60 days, Empey complete and return

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a sworn statement in proof of loss ("Proof of Loss") in connection

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with his contents loss.

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subsequently granted an extension of time to complete the form.

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Lankford Decl. ¶ 12.

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Proof of Loss, Allied made advance payments of $5,000 and $26,801

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to Empey towards his contents loss.

Lankford Decl.6 ¶ 9.

On March 2, 2009,

Gonzalez Decl. ¶¶ 5-6, Ex. 2.

Empey was

In March of 2009, before Empey submitted his

Id. ¶¶ 9, 11.

On July 30, 2010, Empey provided Allied with his Proof of

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Loss, claiming a total combined contents loss of $260,580.

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Lankford Decl. Ex. 21 ("Proof of Loss").

Empey claims that his

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Empey objects to the entire Lankford Declaration on the grounds
that it is not based on Lankford's personal knowledge. ECF No. 70
at 2. The objection is overruled. Lankford's declaration almost
exclusively deals with Allied's handling of Empey's personal
contents claim. Lankford clearly had personal knowledge of these
facts as she was assigned to the claim and fully reviewed the claim
file. See Lankford Decl. ¶ 3.
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Proof of Loss was delayed because Allied failed to provide an

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inventory of the items collected from his house in a timely manner.

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See Empey Decl. ¶¶ 21, 24-26.

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obtain a complete list in the spring of 2009, but he had technical

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difficulties opening the electronic files sent by Allied.

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received the list of inventory compiled by ServiceMaster in a

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useable format.

Empey states that he attempted to

Id. ¶

The parties dispute exactly when Empey received or could have

Compare id. with Empey Decl. ¶ 24.

United States District Court

Allied determined that the Proof of Loss was incomplete since

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For the Northern District of California

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it failed to include a number of requested items, such as dates of

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ownerships and receipts.

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Gonzalez informed Empey that he needed to provide additional

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information and that his Proof of Loss would be held in abeyance

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until the matter could be resolved.

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additional receipts on August 24, 2010, but explained that many

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receipts were missing because they had been stored in a box which

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ServiceMaster had either misplaced or thrown out.

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11.

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concerning the contents claim in the subsequent months, during

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which time each party accused the other of being non-responsive.

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See Lankford Decl. ¶¶ 34-37; McMillan Exs. 16, 22, 17, 26, 33.

Gonzalez Decl. ¶ 28.

On August 10, 2009,

Id. Ex. 23.

Empey provided

Empey Decl. Ex.

Allied and Empey exchanged a number of communications

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On March 16, 2011, Lissa Cooley ("Cooley") provided an

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appraisal report for the replacement values of certain of Empey's

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items.

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provide Cooley with information pertaining to replacement cost

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quotes which had been included in his Proof of Loss.

Lankford Decl. ¶ 39.

Empey complains that Allied failed to

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McMillan Ex.

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26 ("Lankford Dep.") at 137-38.

It is unclear what impact these

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documents would have had on Cooley's ultimate appraisal.7
Finally, on June 15, 2011, Lankford informed Empey that Allied

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had completed an undisputed inventory for contents that were

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damaged or stolen and provided him with a check for $95,835.80.

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Lankford Decl. ¶ 40.

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D.

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Empey's Allied policy also provided coverage for twelve months

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of ALE.

Additional Living Expenses ("ALE")

Policy at 3345.

ALE covers any "necessary increase in

United States District Court

For the Northern District of California

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living expenses incurred" so that a "household can maintain its

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normal standard of living" when a covered loss renders a property

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"not fit to live in."

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ALE coverage when he first spoke with him, only a few days after

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the property damage was first discovered.

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Gonzalez also sent Empey a letter explaining various aspects of his

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ALE coverage -- the letter did not include any information on the

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twelve month limit on ALE.

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after the property damage, Empey rented temporary housing while his

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property was being repaired.

Id. at 3353.

Gonzalez informed Empey of his

Gonzalez Decl. ¶ 6.

See Empey Decl. Ex. 12.

In the months

Empey Decl. ¶ 32.

The parties dispute when Empey's ALE coverage expired.

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Empey

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complains that Allied did not notify him that there was a 12 month

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limit to his ALE coverage until March 15, 2010, almost a year after

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the property damage.

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informed Allied that it was estopped from terminating ALE coverage

Empey Decl. ¶ 30.

Around this time, McMillan

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Empey also complains that the staffing turnover on his contents
claim delayed the entire process. Four contents adjusters were
assigned to the claim -- (1) Jennifer Schultz ("Schultz"), (2)
Gonzalez, (3) Jill Rankin ("Rankin"), and (4) Lankford. When
Lankford replaced Rankin on the claim in December 2010, she noted
"I will have to start from scratch." McMillan Ex. 22 at 1512.
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because it failed to provide Empey with written notice of the

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applicable limits.

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disagreed, but approved a payment of $12,425 for 90 days of

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additional ALE coverage, effectively extending the coverage to June

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15, 2010.

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after June 15, 2010, but Allied refused.

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39.

See Gonzalez Decl. ¶ 36.

Id. ¶¶ 37-38.

Allied stated that it

Empey later demanded ALE for the period
See Gonzalez Decl. Ex.

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E.

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On January 20, 2011, Empey filed suit against Allied in

Empey's Lawsuit

United States District Court

For the Northern District of California

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California Superior Court.

ECF No. 1 ("Not. of Removal") Ex. A

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("Compl.").

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contract, (2) breach of the implied covenant of good faith and fair

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dealing ("bad faith claim"), and (3) declaratory relief.

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his second claim for bad faith, Empey sought general, special, and

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punitive and exemplary damages.

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removed to federal court on diversity grounds.

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6.

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faith claim as well as his claim for punitive damages.

The Complaint alleged claims for (1) breach of

Id. at 10.

Id.

For

Allied subsequently
Not. of Removal. ¶

Allied now moves for partial summary judgment on Empey's bad

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III. LEGAL STANDARD

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A.

Summary Judgment

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

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

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is entitled to judgment as a matter of law."

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56(a).

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require a directed verdict for the moving party.

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

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

Fed. R. Civ. P.

Summary judgment should be granted if the evidence would

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Anderson v.
Thus, "Rule 56[]

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

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

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will bear the burden of proof at trial."

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

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

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favor."

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

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

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could reasonably find for the plaintiff."

Celotex Corp. v. Catrett,

"The evidence of the nonmovant is to be

Anderson, 477 U.S. at 255.

However, "[t]he mere existence

Id. at 252.

"When

United States District Court

For the Northern District of California

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opposing parties tell two different stories, one of which is

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blatantly contradicted by the record, so that no reasonable jury

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

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

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

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B.

Bad Faith

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California law recognizes in every contract, including

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insurance policies, an implied covenant of good faith and fair

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dealing.

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(Cal. 2007).

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good faith and fair dealing requires the insurer to refrain from

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injuring its insured's right to receive the benefits of the

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insurance agreement.

Egan v. Mutual of Omaha Ins. Cos., 24 Cal. 3d

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809, 818 (Cal. 1979).

In order to state a claim for bad faith, a

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plaintiff has the burden of showing that (1) the insurer withheld

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policy benefits, and (2) that the withholding was unreasonable and

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without proper cause.

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1136, 1151 (Cal. Ct. App. 1990).

Wilson v. 21st Century Ins. Co., 42 Cal. 4th 713, 720
In the insurance context, the implied covenant of

Love v. Fire Ins. Exch., 221 Cal. App. 3d

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Under the "genuine dispute rule," "an insurer's denial or

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2

delay in paying benefits only gives rise to tort damages if the

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insured shows the denial or delay was unreasonable."

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Cal. 4th at 723.

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existence of a genuine dispute may give rise to liability for

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breach of contract, but not bad faith.

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exists only where the insurer's position is maintained in good

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faith and on reasonable grounds."

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insurer's claims-handling conduct is ordinarily a question of

Wilson, 42

Thus, denial or delay of benefits due to the

Id.

Id.

"A genuine dispute

"The reasonableness of an

Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1161

United States District Court

For the Northern District of California

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fact."

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(9th Cir. 2002).

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court to grant summary judgement on bad faith claims where it is

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undisputed that the basis for the insurer's decision was

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reasonable.

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judgment as a matter of law where, viewing the facts in the light

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most favorable to the plaintiff, a jury could conclude that the

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insurer acted unreasonably."

Id.

The genuine dispute rule only allows a district

"On the other hand, an insurer is not entitled to

Id. at 1162.

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IV.

DISCUSSION

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Allied argues that it is entitled to summary judgment on

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Empey's bad faith claim because any denial or delay in benefits was

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due to a genuine dispute concerning Empey's coverage under the

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Policy.

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a reasonable basis for its decisions concerning Empey's coverage

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for (1) repair costs, (2) ALE, and (3) loss of personal contents.

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Allied also contends that there is no clear and convincing evidence

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of malice, oppression, or fraud to support Empey's claim for

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punitive damages.

Allied contends that the undisputed facts show that it had

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1

A.

Dwelling Claim

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The Court finds that triable issues of fact exist as to

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whether Allied acted in bad faith in handling Empey's dwelling

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claim.

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approximately $154,485 lower than the estimate prepared by Empey's

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general contractor.

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this stage, the Court cannot determine which of these estimates was

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right, let alone whether Allied had a reasonable basis for choosing

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the lower estimate.

Allied ultimately adopted a repair estimate which was

Compare MSC Estimate with IRH Estimate.

At

United States District Court

For the Northern District of California

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Further, triable issues of fact exist as to whether all

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necessary and covered repairs were included in the lower estimate

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chosen by Allied.

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estimate did not include the cost to replace all of the custom tile

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in his home.

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See Reply at 9.

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determine who is right without making a credibility determination,

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which would be inappropriate on a motion for summary judgment.9

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these repairs were in fact excluded from Allied's estimate, it is

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unclear whether Allied had a reasonable basis for its decision.

For example, Empey contends that the lower

See Oct. 15, 2010 McMillan Ltr.8

Allied disagrees.

Based on the evidence presented, the Court cannot

If

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Allied objects to the October 15, 2010 McMillan letter based on
Federal Rules of Evidence 401, 402, 602, and on "asserted privilege
at deposition." ECF No. 113 at 6. The Court overrules these
objections to the extent they apply to the portions of the letter
concerning the contents of the MSC bid.
9

Allied does not point to anything in the MSC estimate which
indicates that the estimate called for the replacement of all of
the tile in Empey's home. Deposition testimony by Randy Seiz
("Seiz"), an MSC contractor, indicates that a document from August
21, 2009 included "a proposal to replace all of the tile in the
house." See Kimura Supp. Decl. Ex. A ("Seiz Dep.") at 136-137. It
is unclear whether Seiz was referring to the MSC proposal. Even if
he was, the Court lacks sufficient information to determine whether
his interpretation of the proposal is correct.
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Triable issues of fact also exist as to whether Allied

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2

unreasonably delayed processing the dwelling claim.

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evidence suggests certain delays were due to Empey's failure to

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provide Allied with requested information, such as information

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pertaining to his custom glass works.

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to find that the total amount of time Allied took to process the

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claim was reasonable as a matter of law.

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jury.

United States District Court

For the Northern District of California

However, the Court declines

This is an issue for the

Accordingly, the Court DENIES Allied's motion for partial

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The undisputed

summary judgment with respect to Empey's dwelling claim.

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B.

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The Court also finds that triable issues of fact exist with

Personal Contents Claim

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respect to Empey's personal contents claim.

For example, it is

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unclear from the record whether Allied's delay in processing

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Empey's personal contents claim was reasonable.

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his sworn proof of loss statement to Allied on July 30, 2010, but

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Allied did not provide Empey with a final payment for his contents

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claim until nearly a year later.

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40.

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as well as Empey's failure to provide Allied with documentation of

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his loss.

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Whether or not this delay was reasonable is ultimately a question

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for the jury.

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to provide the drafter of Empey's appraisal report with potentially

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pertinent information that had been included in Empey's proof of

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loss statement.

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issue of fact as to whether excluding such evidence from the

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appraisal report was reasonable.

Empey submitted

Proof of Loss; Lankford Decl. ¶

This delay was due in part to the complexity of Empey's claim

However, other factors may have also contributed.

Further, the evidence suggests that Allied neglected

See Lankford Dep. at 137-38

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There is a triable

Accordingly, the Court DENIES Allied's motion for partial

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2

summary judgment with respect to Empey's personal contents claim.

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C.

Additional Living Expenses ("ALE")

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Summary judgment is appropriate with respect to Empey's claim

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for ALE because he received all that he was entitled to under his

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Allied policy.

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coverage for 15 months of ALE, see Gonzalez Decl. ¶¶ 37-38, even

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though the Policy only provided coverage for 12 months, Policy at

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3345.

The undisputed facts show that Empey received

Empey contends that he was entitled to more than 15 months

United States District Court

For the Northern District of California

10

coverage under the California Administrative Code ("the

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Administrative Code") because Allied failed to provide proper

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notice of the twelve month cap on ALE.

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argument lacks merit.

See Opp'n at 19-20.

The Administrative Code provides, in relevant part:

14

This

"Every

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insurer shall disclose to a first party claimant or beneficiary all

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benefits, coverage, time limits or other provisions of any

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insurance policy issued by that insurer that may apply to the claim

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presented by the claimant."

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The Administrative Code further provides "every insurer shall

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provide written notice of any statute of limitation or other time

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period requirement upon which the insurer may rely to deny a claim.

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. . .

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Id. § 2695.7(f).

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month ALE time limit in a telephone conversation on March 15, 2010

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and by letter dated April 14, 2010.

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admits that the April 14, 2010 letter notified him that his

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coverage had been extended to June 15, 2010.

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accordance with the Code, Allied notified Empey of the time limits

Cal. Code Regs. tit. 10 § 2695.4(a).

not less than sixty (60) days prior to the expiration date."
Here, Empey admits that he was notified of the 12

14

Opp'n at 19-20.

Empey also

Id. at 20.

Thus, in

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for his ALE over 60 days prior to their expiration.

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to argue that Allied was precluded from ever terminating his ALE

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benefits because it purportedly failed to notify him of the time

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limits "at the inception of his loss."

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However, the Administrative Code does not impose such a requirement

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and Empey cites no other authority to support his position.

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Empey appears

See Opp'n at 19-20.

For these reasons, the Court GRANTS Allied's motion for

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partial summary judgment with respect to Empey's claim that his ALE

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claim was handled in bad faith.

United States District Court

For the Northern District of California

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D.

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Allied also argues that Empey's claim for punitive damages

Punitive Damages

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fails because (1) Empey has presented no evidence of malice,

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oppression, or fraud; and (2) no officer, director, or managing

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agent of Allied ratified any malicious, oppressive, or fraudulent

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conduct.

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liability for punitive damages is much higher than the standard for

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bad faith.

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with respect to punitive damages.

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The Court agrees.

The standard for establishing

Empey has not come remotely close to meeting his burden

The California Civil Code provides that a plaintiff is

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entitled to punitive damages "where it is proven by clear and

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convincing evidence that the defendant has been guilty of

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oppression, fraud, or malice."

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is defined as "conduct which is intended by the defendant to cause

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injury to the plaintiff or despicable conduct which is carried on

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by the defendant with a willful and conscious disregard of the

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rights or safety of others."

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means despicable conduct that subjects a person to cruel and unjust

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hardship in conscious disregard of that person's rights."

Cal. Civ. Code § 3294(a).

Id. § 3294(c)(1).

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Malice

"'Oppression'

Id. §

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3294(c)(2).

Summary judgment on the issue of punitive damage is

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only proper "when no reasonable jury could find the plaintiff's

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evidence to be clear and convincing proof of malice, fraud, or

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oppression. "

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61 (Cal. App. Ct. 1994).

Hoch v. Allied-Signal, Inc., 24 Cal. App. 4th 48, 60-

In the instant action, no reasonable jury could find by clear

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7

and convincing evidence that Allied is guilty of despicable conduct

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or oppression, fraud, or malice.

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that Allied: responded to Empey's claim almost immediately; agreed

The undisputed evidence shows

United States District Court

For the Northern District of California

10

to pay for almost $300,000 in dwelling repairs; paid out over

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$100,000 on Empey's personal contents claim; made a number of

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advance payments to Empey before he had submitted information

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required to verify his claim; and granted Empey an additional 90

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days of ALE coverage.

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that Allied has paid Empey a total of $576,160.29 for his vandalism

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claim.

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there were delays in the processing of Empey's claims, they were

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due in large part to Empey's failure to provide requested

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information.

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any direct evidence establishing fraud, malice, or oppression, and

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the high standard for establishing punitive damages, Empey's claim

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for punitive damages must fail.

Allied asserts, and Empey does not dispute,

The current value of Empey's home is only $402,000.

While

In light of these facts, Empey's failure to produce

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The California Civil Code also provides that a corporate

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entity, such as Allied, may not be held liable for punitive damages

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unless an officer, director, or managing agent10 of the corporation

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authorizes or ratifies an act of oppression, fraud, or malice.

27

Cal. Civ. Code § 3294(b).

28

Empey argues that Gonzalez's decisions

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A managing agent is an employee with "broad discretion" who
"determines corporate policy." Egan, 24 Cal. 3d at 822-23.
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regarding his dwelling claim were ratified by Teresa Mitchell

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("Mitchell"), Property Claims Director, and Chad Zierke ("Zierke"),

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Assistant Vice President.

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unpersuasive.

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and Zierke's involvement with the dwelling claim was almost

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exclusively limited to authorizing an increase in the amount Empey

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could potentially recover for his claim.

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18-20, 24 at 49.

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include periodically reviewing files and ensuring claims managers

Opp'n at 14.

This argument is

According to the evidence offered by Empey, Mitchell

See McMillan Exs. 14 at

Mitchell testified that her job responsibilities

United States District Court

For the Northern District of California

10

follow procedures, but there is no evidence that she had any

11

knowledge of wrongdoing in connection with Empey's claim.

12

Ex. 24 at 49.

13

ratified or authorized oppression, fraud, or malice by increasing

14

the reserve on his account strains credulity.11

See id.

Empey's claim that Mitchell and Zierke somehow

Accordingly, the Court GRANTS Allied's motion for partial

15
16

summary judgment with respect to Empey's claim for punitive

17

damages.

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19

V.

CONCLUSION
For the foregoing reasons, the Court GRANTS in part and DENIES

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21

in part Defendant Allied Property & Insurance Company's motion for

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partial summary judgment.

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Empey's claim for breach of the implied covenant of good faith and

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fair dealing as it applies to Empey's insurance claim for

25

Additional Living Expenses.

The Court DISMISSES Plaintiff Chad

The Court also DISMISSES Empey's claim

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27
28

11

Empey also contends that Mitchell was aware of disputes
concerning his ALE claim. Opp'n at 24. However, as discussed in
Section IV.C supra, there is no evidence that Allied engaged in bad
faith, let alone fraud, malice, or oppression, in connection with
this claim.
17

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for punitive damages.

2

Empey's other claims for relief remain

undisturbed.

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4

IT IS SO ORDERED, ADJUDGED, AND DECREED.

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Dated: January 12, 2012
UNITED STATES DISTRICT JUDGE

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United States District Court

For the Northern District of California

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