Randy Stevens, et al -v- Zurich American Insurance Company

Filing 48

ORDER by Judge Samuel Conti granting 36 Motion for Summary Judgment (sclc1, COURT STAFF) (Filed on 9/9/2015)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court

For the Northern District of California

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RANDY STEVENS, ELISSA STEVENS,
dba FLAMINGO PROPERTIES,

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Plaintiffs,
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v.
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ZURICH AMERICAN INSURANCE
COMPANY,

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Defendant.
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) Case No. 3:14-CV-02043 SC
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) ORDER GRANTING DEFENDANT'S
) MOTION FOR SUMMARY JUDGMENT
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Now before the Court is Zurich American Insurance Company's

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("Zurich") motion for summary judgment.

ECF No. 36 ("Mot.").

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motion is fully briefed,1 and the Court finds it suitable for

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disposition without oral argument pursuant to Civil Local Rule 7-

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1(b).

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forth below, Zurich's motion for summary judgment is GRANTED.

The essential facts are undisputed.

The

For the reasons set

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I. BACKGROUND

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This case involves an insurance dispute between Plaintiffs

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Randy Stevens, Elissa Stevens, and Flamingo Properties

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ECF Nos. 44 ("Opp'n"); 46 ("Reply").

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(collectively "Plaintiffs" or "Stevens") and Defendant Zurich

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regarding business income that was allegedly lost as a result of

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water intrusion and property that was allegedly stolen by Stevens's

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landlord, F&A Properties.

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insurance policy at issue ("the Policy") from Zurich in February

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2010, with a coverage period from February 19, 2010 to February 19,

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2011.2

United States District Court

For the Northern District of California

See ECF No. 36-29 at ZA6838.

Stevens owned and operated a Jiffy Lube Service Center

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Stevens purchased the commercial

franchise in Rohnert Park, California from July 1, 2005 to April 9,

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2010.

Throughout that time, the facility's basement would flood

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during rainstorms due to cracks in the foundation and basement

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walls.

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forced to close for half a day to clean up the water in the

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basement.

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lost thousands of dollars of business income.

Stevens claims that whenever it rained, the business was

As a result of having to close, Stevens alleges that he

In 2009, Stevens's Jiffy Lube store began facing financial

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difficulties and fell behind on rent.

By March 9, 2010, total

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unpaid rent amounted to $34,447.

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landlord, F&A Properties, delivered a "Three Day Notice to Pay Rent

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or Quit."3

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the Rohnert Park location.

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cash from the store, and instructed his employee, Ben Turnbow, to

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remove inventory and equipment.

On April 5, 2010, Stevens's

Upon receiving the Notice, Stevens began to move out of
Stevens personally removed all of the

See ECF Nos. 36-11 ("Phillips

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Stevens cancelled his coverage on April 23, 2010. See ECF No.
36-32.
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A "Three Day Notice to Pay Rent or Quit" is a step in the
unlawful detainer and eviction process. See generally, Cal. Civ.
Proc. Code § 1161(2). F&A Properties later filed an unlawful
detainer action against Stevens, which was subsequently amended as
a breach of contract claim.

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("4/15/15 Turnbow Depo.") at 43:17.

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remove the inventory and some, but not all, of the equipment.

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ECF No. 36-5 ("6/5/12 Turnbow Depo.") at 121:9-25; 4/15/15 Turnbow

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Depo. at 39:19-20.

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Turnbow stopped removing equipment from the store "because it

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appeared that [the store was] going to be reopening" in light of

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United States District Court

Depo.") at 10:3-9; 36-12 ("EUO Vol. II") at 257:1-15; 36-13

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For the Northern District of California

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new negotiations between Stevens and his landlord.

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Depo. at 38:1-6; see also id. at 55:11-18.

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Mr. Turnbow proceeded to
See

Upon receiving a phone call from Stevens, Mr.

4/15/15 Turnbow

Mr. Turnbow returned several days later with the intention of

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reopening the store for business.

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longer open the door.

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that day, a new oil change company had moved into the facility.

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Mr. Turnbow testified that he did not attempt to remove anything

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else from the facility at that point because an individual at the

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facility told Mr. Turnbow that Mr. Turnbow "didn't really belong

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there."

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His key, however, could no

Id. at 58:25-59:2.

When he returned later

Id. at 65:9-12.

Neither Mr. Turnbow nor Mr. Stevens ever returned to the

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Rohnert Park store to remove the remaining equipment.

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Stevens testified that he filed a police report and hired an

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attorney to help recover his remaining property.

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("Stevens Depo. Vol. I") at 81:6-10.

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evidence, however, of specific efforts made, if any, by his

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attorney or anyone else to recover the equipment.

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Instead,

ECF No. 36-14

Stevens has not provided any

On June 3, 2010, the landlord's attorney advised Stevens's

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attorney that Stevens could return to the store and remove certain

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property, but Stevens did not do so.

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addition, both the landlord and the tenants that replaced Stevens

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See ECF No. 36-19.

In

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at the facility testified that Stevens was free to remove any of

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the equipment that he left behind at the store.

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("Oroz Decl.") ¶¶ 14-16; 36-21 ("Shifflet Depo.") at 65:19-21.

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Stevens, however, never attempted to make any arrangements to do

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so.

See ECF No 36-20

Several months after Stevens moved out of the Rohnert Park

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United States District Court

facility, Stevens's landlord filed a complaint for breach of

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For the Northern District of California

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contract for unpaid rent and other damages.

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Stevens then filed a cross-complaint seeking, among other claims,

See ECF No. 36-24.

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damages for equipment remaining at the property.

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receiving $150,000.

See ECF No. 36-

The lawsuit settled on August 8, 2013 with Mr. Stevens
See ECF No. 36-27.

Stevens submitted several insurance claims to Zurich relating

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to the dispute with his landlord, but each of those claims was

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denied.

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County Superior Court on April 3, 2014.

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("Compl.").

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the terms of the Policy by failing to provide coverage for (1)

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theft of personal property and (2) the loss of business income due

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to basement flooding.4

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have since been voluntarily dismissed.

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seeks $103,729 to replace the allegedly stolen property and $4,789

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for the loss of business income caused by flooding during the

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Policy's coverage period.

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Zurich removed the case to federal court.

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Subsequently, Stevens filed the instant action in Napa
See ECF No. 1-1

The Complaint alleges, in part, that Zurich breached

All other claims asserted in the Complaint
See Opp'n at 2.

ECF No. 37 at 3, 23.

Stevens

On May 2, 2014,

Plaintiffs also bring a related claim for breach of the covenant
of good faith and fair dealing.

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II. LEGAL STANDARD

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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party must either produce evidence negating an essential element of

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United States District Court

A.

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For the Northern District of California

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Summary Judgment

the nonmoving party's claim or defense or show that the nonmoving

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party does not have enough evidence of an essential element to

Fed. R. Civ. P.

"In order to carry its burden of production, the moving

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carry its ultimate burden of persuasion at trial."

Nissan Fire &

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Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th

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Cir. 2000).

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all justifiable inferences are to be drawn in his favor."

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v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

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should be entered against a party that fails to make a showing

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sufficient to establish the existence of an element essential to

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its case.

"The evidence of the nonmovant is to be believed, and
Anderson

Summary judgment

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

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B.

Insurance Contract Interpretation

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Where the underlying facts are undisputed, interpretation of

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an insurance policy is a question of law.

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Mendez, 213 Cal. App. 3d 41, 45 (1989); see also Legacy Vulcan

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Corp. v. Super. Ct., 185 C.A. 4th 667, 688 (2010) ("Contract

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interpretation, including the resolution of any ambiguity, is

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solely a judicial function, unless interpretation turns on

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credibility of extrinsic evidence.").

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Merced Mut. Ins. Co. v.

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III. DISCUSSION
Zurich's motion makes three main arguments.

First, Zurich

was not stolen.

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claim, Zurich argues that Stevens's purported loss falls outside of

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the Policy's scope.

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should be granted as to both of Stevens's claims because they are

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United States District Court

argues that the undisputed facts show that the equipment at issue

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For the Northern District of California

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barred by the Policy's two year contractual suit limitation period.

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The Court addresses each of Zurich's arguments in turn.

Second, as to Stevens's business income loss

Third, Zurich asserts that summary judgment

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A.

Coverage for Stolen Property

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The Policy provides coverage for physical loss or damage to

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covered property as a result of theft.

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ZA6860.

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insurance policy, as here, theft

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See ECF No. 36-29 at

California courts have held that when undefined in an

should be given the usual meaning and understanding
employed by persons in the ordinary walks of life, and
should be construed as common thought and common speech
now imagine and describe it. Accordingly, theft involves
the idea of a knowingly unlawful acquisition of property;
that is, a felonious taking of it.

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. . .
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[Thus,] there must exist a criminal intent to steal . . .
that consists of the intent, without a good faith claim
of right, to permanently deprive the owner of possession.

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Barnett v. State Farm Gen. Ins. Co., 200 Cal. App. 4th 536, 543,

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(2011) (quoting Granger v. New York Ins. Co., 108 Cal. App. 290,

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294 (1930)).

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Stevens has not presented any evidence to support his claim

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that Stevens's landlord, F&A Properties, stole the equipment in

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question.

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criminal manner, rather than by due process of law."

Theft requires the deprivation of property "in a

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Id. at 544.

delivered a Three Day Notice to Pay Rent or Quit and later filed an

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unlawful detainer and breach of contract action in which Stevens

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counterclaimed for the value of his property.

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Stevens pursued their rights and settled their dispute regarding

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the equipment through "due process of law."

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Stevens was deprived of his property, it was not done "in a

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United States District Court

In response to Stevens' failure to pay rent, F&A Properties

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For the Northern District of California

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criminal manner."

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F&A Properties and

To the extent that

Stevens contends that his property was stolen because F&A

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Properties allegedly locked him out of the Jiffy Lube facility.

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lockout, without more, does not amount to theft.

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locked out because he did not pay his rent, not because F&A

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Properties wanted to steal his property.

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committed theft, F&A Properties must have intended to permanently

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deprive Stevens of his equipment.

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evidence to support such a claim, by inference or otherwise.

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only evidence on this issue is the landlord's declaration, in which

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he testified that Stevens was free to pick up the equipment at any

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point.

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to demonstrate that he attempted to retrieve the property or that

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his attempts to retrieve the property were denied.

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opposite, the attorney for F&A Properties advised Stevens's

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attorney that Stevens could return to the store and remove certain

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equipment, but Stevens failed to do so.

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Oroz Decl. ¶¶ 14-16.

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Stevens was

In order to have

Stevens does not present any
The

Nor has Stevens provided any evidence

Quite the

See ECF No. 36-19.

In short, Stevens's theft claim fails for lack of any evidence

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showing that the equipment was stolen.

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motion for summary judgment as to Plaintiffs' theft claim is

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GRANTED.

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As a result, Zurich's

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B.

Coverage for Loss of Business Income

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The Policy provides coverage for lost business income

restoration.'"

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"the period of restoration" begins "72 hours after the time of

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direct physical loss or damage . . . ."

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addition, the Policy dictates that "[t]he suspension must be caused

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United States District Court

sustained due to a suspension of operations "during the 'period of

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For the Northern District of California

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by direct physical loss of or damage to property at [the]

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premises . . . ."

ECF No. 36-30 at ZA6890.

The Policy specifies that

Id. at ZA6897.

In

Id. at ZA6890.

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Even if one were to assume that a flooded basement constitutes

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a "direct physical loss of or damage to property,"5 Stevens's claim

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for lost business income fails because Stevens's business was

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closed for only four hours each time it rained.

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restoration, however, did not commence until 72 hours after each

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flood.

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close to meeting the required 72 hour deductible.

The period of

Thus, the four hour closures of the business never came

Stevens argues that the 72 hour deductible does not apply

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because his claim qualifies as an "Extra Expense," for which the

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"period of restoration" commences "[i]mmediately after the time of

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direct physical loss or damage . . . ."

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Expense" is defined as "the necessary expenses you incur during the

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'period of restoration' which you would not have incurred if there

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had been no direct physical loss or damage to property caused by or

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resulting from a Covered Cause of Loss."

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claim is comprised of lost revenue, payroll expenses, and rent

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Id. at ZA6897.

Id. at ZA6890.

"Extra

Stevens's

Zurich argues that the floods are not covered because they merely
required cleanup and did not result in physical loss or damage.
The Court does not address this issue given the various other
reasons Stevens's claim should be denied.

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expenses are normal ongoing expenses, not necessary expenses that

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would not have been incurred if there had been no direct physical

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loss or damage.

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No additional expenses, such as outside cleaning companies,

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restoration services, or repairs were incurred.

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claim is for a business income loss which requires a 72 hour

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United States District Court

expenses.

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For the Northern District of California

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waiting period before the period or restoration begins, rather than

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an Extra Expense claim that does not have a 72 hour waiting period.

Payroll expenses and rent

Lost revenue is an income loss, not an expense.

Thus, Stevens's

For these reasons, Zurich's motion for summary judgment as to

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See ECF No. 36-41 at 23.

Plaintiffs' loss of business income claim is GRANTED.

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C.

Contractual Suit Limitation Period

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The Policy also includes a two year contractual suit

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limitation period restricting an insured's ability to bring a suit

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related to the Policy.

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may bring a legal action against us under this Coverage Part

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unless: . . . The action is brought within 2 years after the date

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on which the direct physical loss or damage occurred."

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29 at ZA6874.

The relevant clause states that "[n]o one

ECF No. 36-

California follows the reasonable discovery rule and the

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equitable tolling doctrine.

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Ct., 51 Cal. 3d 674, 686-87, 693 (1990).

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contractual limitations period begins to run when the insured

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discovers or should have discovered the property loss or damage,

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but it is tolled between the time the insured reports the loss to

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the insurer and the time the insurer denies the claim.

Accordingly, the

See id.

Stevens alleges that his property was stolen on April 12,

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See Prudential-LMI Com. Ins. v. Super.

2010.

The theft claim was first made on August 12, 2010.

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Zurich

tolled during the 674 day investigation between August 12, 2010 and

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June 15, 2012.

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2014.

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2010) and the date the Complaint was filed (April 3, 2014).

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subtracting 674 days for the tolling period, the total equals 779

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days.

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United States District Court

denied his claim on June 15, 2012.

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For the Northern District of California

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Thus, Stevens's theft claim

for stolen property was filed 49 days late.

Stevens did not file his Complaint until April 3,

Thus, 1453 days passed between the date of loss (April 12,
After

Given that two years is equal to 730 days, Stevens's claim

Stevens submitted his claim for loss of business income from

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water intrusion on August 3, 2010.

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investigation between August 3, 2010 and June 15, 2012, for a total

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of 683 days.

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2010) and the date the Complaint was filed (April 3, 2014) is 1500

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days.

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total equals 817 days.

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Stevens's claim for loss of business income from water intrusion

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was filed 87 days late.

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The claim tolled during the

The total days between the date of loss (February 23,

After subtracting 683 days for the investigation period, the
Given that two years is equal to 730 days,

Stevens disputes these calculations.

He argues that the June

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15, 2012 letter denying his claim "was not absolute and asked . . .

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for more information."

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ask for more information and was unequivocal in its denial of

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coverage:

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Opp'n at 8.

The letter, however, did not

This letter is to advise the Insured that Zurich American
respectfully denies Flamingo Properties Jiffy Lube's
claim for first-party benefits under the Policy in its
entirety because there has not been a covered loss or
damage to the Insured's property. The claim the Insured
has presented to Zurich American is in essence a business
and legal dispute with the landlord Francisco Oroz over
disputed property and is not a covered loss under the
Policy.
ECF No. 36-38 at 1.

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Stevens also argues that there was a second tolling period

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between October 31, 2013 and January 13, 2014.

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however, relates to Stevens's separate claim for legal costs

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associated with the lawsuit filed against him by his landlord.

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ECF No. 44-35.

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property and lost business income.

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This period,

See

Thus, it did not toll his claims for stolen

Because this action is barred by the Policy's two-year

United States District Court

For the Northern District of California

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contractual suit limitation period, Zurich's motion for summary

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judgment as to all claims is GRANTED for this independent reason.

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IV. CONCLUSION
For the foregoing reasons, Zurich's motion for summary
judgment is GRANTED.

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IT IS SO ORDERED.

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Dated: September __, 2015

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UNITED STATES DISTRICT JUDGE

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