Grebow v. Mercury Insurance
241 Cal. App. 4th 564
| Cal. Ct. App. | 2015Background
- Arthur and Helen Grebow owned a Tarzana residence insured by Mercury under a 2002 homeowner’s policy.
- In May 2013 a contractor and structural engineer found severe hidden corrosion of steel beams/poles supporting the rear deck and upper story and warned of imminent failure; the Grebows shored and replaced structural members and spent >$91,000 on repairs.
- The Grebows notified Mercury and sought reimbursement; Mercury investigated and denied the claim, asserting the loss did not meet the policy’s defined term “collapse” and that exclusions (corrosion, deterioration, wear/tear) applied.
- Grebows sued for breach of contract and tortious breach (bad faith); they moved for summary adjudication of coverage; Mercury moved for summary judgment.
- The trial court granted Mercury’s summary judgment, denied the Grebows’ summary adjudication and new trial motion; the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether damage constituted a policy “collapse” | Grebow: parts of supporting structure had detached and collapse was caused by hidden decay, so collapse coverage applies | Mercury: policy defines collapse as “sudden and complete” falling/crumbling; no such actual collapse occurred; exclusions apply | Held: No collapse under the policy’s clear definition; exclusions (corrosion, deterioration, rust) apply |
| Whether insurer must reimburse costs to prevent imminent insured loss (mitigation/prevention) | Grebow: entitled to reimbursement for reasonable preventive/mitigation work to avoid imminent collapse | Mercury: mitigation duty in policy applies only “in case of a loss to which this insurance may apply” (i.e., after a covered loss); no contractual obligation to reimburse preventive measures | Held: Duty to mitigate arises only after a covered loss; no contractual or implied duty to reimburse pre-loss prevention costs |
| Whether equitable doctrines (sue-and-labor, quasi-contract, estoppel) require reimbursement | Grebow: equitable principles or implied duties (and some authorities) justify recovery for prevention costs | Mercury: no sue-and-labor clause in the policy; express contract controls; cannot imply terms or permit quasi-contract where contract exists | Held: No implied duty or restitution/estoppel basis for reimbursement absent express contractual provision; Reliance/Escapade distinguishable |
| Whether tortious breach (bad faith) claim survives | Grebow: insurer’s denial and delay amounted to bad faith | Mercury: benefits were not owing under the policy as a matter of law | Held: Bad faith claim fails because no policy benefits were due; summary judgment proper |
Key Cases Cited
- MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635 (2003) (rules for interpreting insurance contracts; infer intent from policy language)
- Rosen v. State Farm Gen. Ins. Co., 30 Cal.4th 1070 (2003) (policy that covers actual collapse does not cover merely imminent collapse)
- Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1 (1995) (courts will not rewrite clear policy language; limits on bad faith recovery)
- Panico v. Truck Ins. Exchange, 90 Cal.App.4th 1294 (2001) (partial falling of structural elements can raise triable issue whether a collapse occurred)
- Young’s Market Co. v. Am. Home Assur. Co., 4 Cal.3d 309 (1971) (discussion of sue-and-labor clauses and reimbursement for preventive measures)
- Reliance Ins. Co. v. The Escapade, 280 F.2d 482 (5th Cir. 1960) (insurer estopped from denying salvage expense where insurer directed mitigation while concealing defense)