70 Cal.App.5th 374
Cal. Ct. App.2021Background
- In Sept. 2014 Peggy Baltar’s home was destroyed by wildfire; she had a homeowners policy with CSAA that included an endorsement increasing dwelling replacement coverage to 150% (subject to "reasonably necessary").
- CSAA promptly paid ACV for the dwelling, policy limits for personal property, and loss-of-use advances; CSAA also obtained a Direct-Repair-net contractor (Cronic) replacement estimate of ~$181k (with open line items) and advanced replacement funds based on it.
- Baltar retained a public adjuster and submitted a competing Romero estimate (~$347k) and ultimately contracted with J. Carleton to rebuild for about $255k; she delayed providing CSAA her construction contract while the home was built and completed in May 2016.
- CSAA internally adjusted competing estimates (to ~$228k), repeatedly requested documentation, and when Baltar ultimately produced contractor invoices and receipts CSAA paid the amount Baltar actually spent to replace the dwelling (plus code-upgrade and other payments), paid landscaping after the omission was called out, and paid debris-removal based on its records.
- Baltar sued for breach of contract and breach of the implied covenant (bad faith), alleging CSAA’s lowball estimate and failure to provide/adjust replacement-cost estimates forced her to build a cheaper house and seeking punitive and other damages; trial court granted summary judgment for CSAA and the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CSAA breached the policy by failing to provide a complete/accurate replacement-cost estimate or by refusing to adjust Baltar’s Romero estimate and give her the adjusted amount | CSAA’s Cronic estimate was a "lowball" that omitted necessary line items; CSAA had duty under regulations to disclose/adjust and provide the insured the full available replacement-cost amount, and its failure forced Baltar to build a cheaper home | The policy limits recovery to the smallest of (a) policy limit, (b) replacement-cost to rebuild identical structure, or (c) amount actually and necessarily spent; CSAA paid ACV and ultimately paid the amount Baltar actually spent, so no breach | Court: No breach. Because Baltar was paid the amount actually spent (the policy’s (c) measure), she was not entitled to more; regulatory duties cited did not create entitlement to additional payment on these facts. |
| Whether CSAA breached by delaying payment for landscaping costs | CSAA had knowledge/evidence of landscaping loss in 2014 and unreasonably delayed payment | CSAA acknowledges an inadvertent oversight but paid full landscaping amount promptly after it was brought to its attention; insured also delayed providing clear receipts | Court: No triable breach/damages. Any delay was inadvertent, fully remedied, and Baltar produced no evidence of damage from the delay. |
| Whether CSAA breached by failing to pay full debris-removal costs (City bill) | Romero estimate showed a City debris bill far exceeding the Cronic-based payment; CSAA owes the difference | CSAA paid debris-removal per its estimate and records; City of Weed informed property owners they were liable only up to the insurance proceeds designated for debris removal, and the city waived additional collection | Court: No breach as a matter of law on the record — Baltar received the insurer-designated debris proceeds and was not personally liable for amounts beyond those proceeds. |
| Whether any alleged breaches (estimates, landscaping, debris) amounted to bad faith or justify punitive/extra-contractual damages | CSAA’s conduct in lowballing, concealing benefits, delaying payment and refusing to adjust estimates was bad faith and supports punitive and other damages | There was a genuine dispute about coverage/amounts; CSAA paid ACV, investigated, retained experts, and ultimately paid the amount actually spent; any delay was inadvertent and remedied | Court: No bad faith. A genuine dispute over replacement cost and prompt payment of amounts owed precludes bad-faith liability; punitive/Brandt damages not warranted. |
Key Cases Cited
- Kahn v. East Side Union High Sch. Dist., 31 Cal.4th 990 (Cal. 2003) (standard of review and burden for summary judgment)
- Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826 (Cal. 2001) (moving party’s burden to show one or more elements cannot be established)
- Conway v. Farmers Home Mut. Ins. Co., 26 Cal.App.4th 1185 (Cal. Ct. App. 1994) (interpretation of replacement-cost loss-settlement measures and the rule that insurer liability is limited to the smallest measure)
- Fraley v. Allstate Ins. Co., 81 Cal.App.4th 1282 (Cal. Ct. App. 2000) (competing estimates can create a genuine dispute that defeats bad-faith liability)
- Brandt v. Superior Court, 37 Cal.3d 813 (Cal. 1985) (attorney fees may be recoverable as damages when insurer’s tortious conduct compels insured to retain counsel)