Yacullo v. AIG Property Casualty Company

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 VICTOR YACULLO, Case No. 23-cv-2019-MMA (MSB) 12 Plaintiff, ORDER DENYING MOTION FOR 13 v. SUMMARY JUDGMENT 14 AIG PROPERTY CASUALTY [Doc. No. 15] COMPANY, 15 Defendant. 16 17 18 19 20 21 Plaintiff Victor Yacullo (“Plaintiff”) brings this insurance coverage dispute against 22 Defendant AIG Property Casualty Company (“Defendant”). Doc. No. 1. Presently 23 before the Court is Defendant’s motion for summary judgment or, alternatively, partial 24 summary judgment. Doc. No. 15. Plaintiff filed an opposition, Doc. No. 16, to which 25 Defendant replied, Doc. No. 17. The Court found the matter suitable for determination 26 on the papers and without oral argument pursuant to Federal Rule of Civil Procedure 27 78(b) and Civil Local Rule 7.1.d.1. See Doc. No. 18. For the reasons set forth below, the 28 Court DENIES Defendant’s motion. 1 I. BACKGROUND 2 Defendant issued Plaintiff a “Private Collections” insurance policy with policy 3 number PCG 0029174764, which was effective November 28, 2021 through November 4 28, 2022 (the “Policy”). Doc. No. 16-1 (“Plaintiff’s Response to Defendant’s Separate 5 Statement” or “PRS”) at No. 1; see also Doc. No. 15-5 (“Defendant’s Exhibit B” or 6 “Exh. B”) at 2–4.2 The Policy was a renewal of an insurance policy Plaintiff initially 7 obtained through Defendant’s authorized agent, Burns & Wilcox of San Diego,3 on 8 November 28, 2016. Doc. No. 16-2 (“Declaration of Victor Yacullo” or “Yacullo Decl.”) 9 ¶ 2. Among other things, the Policy covered various items of jewelry through a 10 “Schedule of Items” endorsement, which described each item of jewelry and assigned a 11 specific insured amount for each item. Id. ¶ 3. 12 On or around September 8, 2021, Plaintiff proposed to his then-fiancée, Ashley 13 Harris, and presented her with a diamond engagement ring (the “Ring”). PRS at No. 3; 14 Yacullo Decl. ¶ 4; Doc. No. 15-7 (“Examination Under Oath of Victor Frank Yacullo” or 15 “Yacullo EUO”) at 5–6. Ms. Harris accepted Plaintiff’s proposal and the Ring. Yacullo 16 Decl. ¶ 4. That same day, Plaintiff requested that Defendant add coverage for the Ring to 17 the Policy’s Schedule of Items. Yacullo Decl. ¶ 5. On September 9, 2021, Defendant 18 issued Plaintiff a revised “Declarations Page” that confirmed the Ring was added to the 19 Policy’s Schedule of Items for an additional premium. Id. ¶ 6; Doc. No. 16-4 20 21 1 These material facts are taken from Defendant’s separate statement and Plaintiff’s response thereto, as 22 well as the parties’ supporting declarations and exhibits. Disputed material facts are discussed in further detail where relevant to the Court’s analysis. Facts that are immaterial for purposes of resolving the 23 current motions are not included in this recitation. 2 All citations to electronically filed documents refer to the pagination assigned by the CM/ECF system. 24 3 Plaintiff requests judicial notice of the “California Department of Insurance’s identification of insurers 25 on whose behalf Burns & Wilcox Insurance Services, Inc. is authorized to transact.” Doc. No. 16-11 at 2. Defendant does not oppose Plaintiff’s request. The Court finds this document proper for judicial 26 notice and therefore GRANTS Plaintiff’s request. Fed. R. Evid. 201(b) (stating that a court may take judicial notice of facts not subject to reasonable dispute); see Associated Indus. Ins. Co., Inc. v. Bandari, 27 No. 22-cv-05477-CAS-ASx, 2023 WL 5174901, at *5 (C.D. Cal. Aug. 10, 2023) (granting request for judicial notice as to California Department of Insurance’s license details of insurance broker) (quoting 28 1 (“Plaintiff’s Exhibit 2” or “Exh. 2”) at 2–4. Ms. Harris was never listed as an insured 2 under the Policy. PRS at No. 8. The Ring is described in the Schedule of Items as 3 follows: 4 ONE 18KT WHITE GOLD CUSTOM DESIGNED DIAMOND 5 ENGAGEMENT RING DESIGNED BY UNEEK. SET TO CENTER IN 4- 6 PRONG HIDDEN DIAMOND HALO HEAD IS ONE 5.52CT OVAL BRILLIANT CUT DIAMOND MEASURING 14.78 X 9.61 X 6.10MM OF 7 E COLOR, SI1 CLARITY WITH EXCELLENT POLISH AND 8 SYMMETRY. THIS DIAMOND IS GIA CERTIFIED AND LASER INSCRIBED: GIA 1216246657. THE CENTER DIAMOND IS SECURED 9 ON A 2MM BAND 4-SHARED PRONG HEADS WITH (24) ROUND 10 BRILLIANT CUT DIAMONDS. SI1 CLARITY AND F-G COLOR, GOING 3/4 WAY DOWN SHANK AND (26) ROUND B RILLIANT CUT 11 DIAMONDS IN HIDDEN HALO UNDER CENTER DIAMOND AND AT 12 BASE OF HEAD, 0.82CTTW. STYLE #5228935. SIZE 6.5. 13 See Exh. 2 at 3–4 ; see also Exh. B at 3–4. The Ring is listed with an “Amount Insured” 14 of $207,690. PRS at No. 2; see also Exh. B at 3. 15 After Ms. Harris accepted the Ring and Plaintiff’s marriage proposal, Plaintiff later 16 gave Ms. Harris a handwritten card.4 PRS at No. 4; Yacullo Decl. ¶ 15; Doc. No. 15-8 at 17 6–7 (“Examination Under Oath of Ashely Belle Harris” or “Harris EUO”) at 6–7. The 18 following was written on the card: 19 20 This ring was meant for you and symbolizes my undying eternal love for you. 21 I so want you 2B my wife and 2B your husband . . . But if you choose otherwise, the ring is my gift 2U . . . always will be. Love, Victor. 22 23 PRS at No. 5; see also Harris EUO at 7–8. 24 25 26 4 The record includes several different dates that Plaintiff gave Ms. Harris the card. See, e.g., PRS at No. 4; Yacullo Decl. ¶ 15. However, it appears most likely that the card was given to Ms. Harris on 27 September 23, 2021. See Harris EUO at 6–7 (noting that the card was dated September 23, 2021). Importantly, neither party alleges that the card was given to Ms. Harris before the proposal or 28 1 On July 19, 2022, Plaintiff reported to Defendant that the Ring was lost. PRS at 2 No. 6. At the time of the loss, Plaintiff and Ms. Harris were still engaged to be married, 3 however, they did not have a wedding date set.5 PRS at No. 14; Yacullo Decl. ¶ 8. In 4 addition, although Ms. Harris spent more than half her time living with Plaintiff, Plaintiff 5 and Harris maintained separate homes. PRS at No. 7; Yacullo Decl. ¶ 8. On January 23, 6 2023, Plaintiff purchased a replacement diamond engagement ring for $195,000. PRS at 7 No. 25; Yacullo Decl. ¶ 14. 8 The Policy states that Defendant “will not pay for any loss to property in which 9 you or a family member does not have an insurable interest at the time of the loss.” PRS 10 at No. 22; Exh. B at 15. The Policy defines “family member” as “a person related to you 11 by blood, marriage or adoption that lives in your household.” PRS at No. 24; Exh. B at 12 12. In addition, the Policy states: 13 The words “you[,]” “your” and “yours” refer to the person, persons, LLCs, 14 trusts, corporations or entities named on the Declarations Page as the Named 15 Insured and any family members who live in the same household. 16 PRS at No. 23; Exh. B. at 12. Moreover, the Policy defines “valuable article” as “the 17 personal property you own or possess for which an amount of coverage is shown on the 18 Declarations Page.” PRS at No. 26; Exh. B at 12. 19 On June 23, 2023, Defendant denied Plaintiff’s claim because “the [R]ing in 20 question was given by [Plaintiff] to Ms. Harris unconditionally before the reported loss” 21 and therefore, Plaintiff had no insurable interest in the Ring. PRS at No. 20; see also 22 Doc. No. 15-11 (“Coverage Letter”) at 20. In addition, Defendant stated that “because 23 [Plaintiff] neither owned nor possessed the . . . [R]ing” at the time of the loss, “the [R]ing 24 is not a covered valuable article.” Coverage Letter at 20. 25 26 27 28 1 Following the denial of his claim, Plaintiff filed this lawsuit on November 1, 2023. 2 Doc. No. 1. Plaintiff brings three causes of action against Defendant: (1) breach of 3 contract; (2) breach of the implied covenant of good faith and fair dealing; and 4 (3) declaratory relief. See generally id. 5 II. LEGAL STANDARD 6 A principal purpose of the summary judgment procedure is to identify and dispose 7 of factually unsupported claims. Celotex Corp. v. Cattrett, 477 U.S. 317, 323–24 (1986). 8 Summary judgment is proper “if the movant shows that there is no genuine dispute as to 9 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. 10 P. 56(a). “In considering a motion for summary judgment, the court may not weigh the 11 evidence or make credibility determinations, and is required to draw all inferences in a 12 light most favorable to the non-moving party.” Freeman v. Arpaio, 125 F.3d 732, 735 13 (9th Cir. 1997). 14 The party moving for summary judgment bears the initial burden of identifying 15 those portions of the pleadings, discovery, and affidavits that demonstrate the absence of 16 a genuine issue of material fact. Celotex, 477 U.S. at 323. An issue of fact is “genuine” 17 only if there is sufficient evidence for a reasonable fact finder to find for the non-moving 18 party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986). A fact is 19 “material” if it may affect the outcome of the case. Id. at 248. If the party moving for 20 summary judgment does not have the ultimate burden of persuasion at trial, that party 21 must produce evidence which either negates an essential element of the non-moving 22 party’s claims or that party must show that the non-moving party does not have enough 23 evidence of an essential element to carry its ultimate burden of persuasion at trial. Nissan 24 Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). 25 Once the moving party meets his or her initial burden, the non-moving party must 26 go beyond the pleadings and, by its own evidence, set forth specific facts showing that 27 there is a genuine issue for trial. Nissan Fire & Marine Ins. Co., 210 F.3d at 1102. In 28 order to make this showing, the non-moving party must “identify with reasonable 1 particularity the evidence that precludes summary judgment.” Keenan v. Allan, 91 F.3d 2 1275, 1279 (9th Cir. 1996). In addition, the party seeking to establish a genuine issue of 3 material fact must take care to adequately point a court to the evidence precluding 4 summary judgment because a court is “not required to comb the record to find some 5 reason to deny a motion for summary judgment.” Carmen v. San Francisco Unified 6 School Dist., 237 F.3d 1026, 1029 (9th Cir. 2001) (citation omitted). If the non-moving 7 party fails to point to evidence precluding summary judgment, the moving party is 8 entitled to judgment as a matter of law. Celotex, 477 U.S. at 323. 9 III. EVIDENTIARY OBJECTIONS 10 Plaintiff appears to object to Defendant’s use of Plaintiff’s handwritten card to Ms. 11 Harris as evidence because it did not “provide the entirety of the content of the card or a 12 copy of the card” and because he no longer has access to the card. Doc. No. 16 at 17 n.2. 13 Because of this, Plaintiff argues Defendant’s “attempt to prove the content of the card 14 through the testimony of Ms. Harris, who is not a party to this action, violates the best 15 evidence rule. Id. The Court notes that Plaintiff does not dispute the existence of the 16 card, that he gave Ms. Harris the card, or that the card contained the above language. 17 PRS at Nos. 4–5. 18 Defendant asserts several objections to paragraph 12 of Plaintiff’s declaration, 19 which states the following: 20 Shortly after acknowledging the Claim, AIG requested several broad 21 categories of documents, some of which appeared to have no relevance to the Claim, including all photographs and video recordings depicting the 22 Engagement Ring, my monthly cell phone statement for the month of July 23 2022, and all of my bank, credit card, and other financial account statements for the month of July 2022. AIG’s broad requests for information and overall 24 handling of the Claim gave me the distinct impression that it suspected the 25 Claim was somehow fraudulent. 26 Yacullo Decl. ¶ 12. Defendant argues that the above paragraph violates the best evidence 27 rule because Plaintiff’s “declaration does not provide the original correspondence” from 28 1 Defendant “that Plaintiff describes as overly broad and irrelevant to his claim.” Doc. No. 2 17-1 at 2. In addition, Defendant argues that paragraph 12 of Plaintiff’s declaration lacks 3 foundation and personal knowledge regarding Defendant’s “alleged suspicion that 4 Plaintiff’s claim ‘was somehow fraudulent.’” Id. 5 After reviewing the parties’ evidence and their respective objections, the Court 6 finds that the parties’ objections concern evidence that could be presented in an 7 admissible form at trial. See Fonseca v. Sysco Food Servs. of Ariz., Inc., 374 F.3d 840, 8 846 (9th Cir. 2004) (“Even the declarations that do contain hearsay are admissible for 9 summary judgment purposes because they ‘could be presented in an admissible form at 10 trial.’”); Hal Roach Studios, Inc. v. Richard Feiner and Co., Inc., 896 F.2d 1542, 1551 11 (9th Cir. 1990) (holding trial court’s consideration of unauthenticated document on 12 summary judgment was harmless error where a “competent witness with personal 13 knowledge could authenticate the document”); Garlick v. Cnty. of Kern, 167 F. Supp. 3d 14 1117, 1125 (E.D. Cal. 2016) (summarily overruling objections at summary judgment on 15 the basis of relevance, hearsay, lack of foundation, lack of personal knowledge, 16 prejudice, improper character evidence, and assuming facts not in evidence); Hunt v. City 17 of Los Angeles, No. CV 17-8064 JFW (PVC), 2021 WL 768248, at *11 (C.D. Cal. Jan. 18 26, 2021) (noting that objections that evidence violates the “best evidence” rule go to the 19 form of the evidence rather than its ultimate admissibility), report and recommendation 20 adopted, 2021 WL 765418 (C.D. Cal. Feb. 26, 2021), aff’d, No. 21-55310, 2022 WL 21 3714490 (9th Cir. Aug. 29, 2022). Indeed, at the summary judgment stage, district courts 22 consider evidence with content that would be admissible at trial, even if the form of the 23 evidence would not be admissible at trial. See Fraser v. Goodale, 342 F.3d 1032, 1036 24 (9th Cir. 2003); Block v. City of Los Angeles, 253 F.3d 410, 418–19 (9th Cir. 2001). 25 Therefore, the Court OVERRULES the parties’ objections at this time. The 26 parties may reassert their evidentiary objections at a later stage in the proceedings. See 27 Tijerina v. Alaska Airlines, Inc., No. 22-CV-203 JLS (BGS), 2023 WL 4280794, at *13 28 (S.D. Cal. June 28, 2023). 1 IV. DISCUSSION 2 Defendant moves for summary judgment on Plaintiff’s breach of contract cause of 3 action, contending that Defendant appropriately denied policy benefits because Plaintiff 4 did not have an insurable interest in the Ring at the time of the loss. Doc. No. 15-1 at 9– 5 12. In addition, Defendant argues that Plaintiff neither owned nor possessed the Ring at 6 the time of the loss, and therefore the Ring did not constitute a covered valuable article 7 under the Policy. Id. at 16. As to Plaintiff’s cause of action for breach of the implied 8 covenant of good faith and fair dealing, Defendant contends that it is entitled to summary 9 judgment “because [Defendant’s] position in denying coverage was reasonable given the 10 genuine dispute as to whether Plaintiff possessed an insurable interest in the Ring at the 11 time of the loss.” Id. at 16–17. These arguments will be addressed in turn. 12 A. Breach of Contract 13 1. General Legal Principles 14 Jurisdiction in this case is based upon diversity, and neither party disputes that the 15 interpretation of the Policy is governed by California law. See, e.g., Manzarek v. St. Paul 16 Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008) (applying California 17 insurance law in diversity case). 18 “Interpretation of an insurance policy is a question of law and follows the general 19 rules of contract interpretation.” MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647 20 (2003) (citation omitted); see also Great Minds v. Office Depot, Inc., 945 F.3d 1106, 21 1110 (9th Cir. 2019) (“Under California law, the interpretation of contract language is a 22 question of law.”) (quotation omitted). The goal of such interpretation is to “give effect 23 to the ‘mutual intention’ of the parties.” MacKinnon, 31 Cal. 4th at 647 (citing Cal. Civ. 24 Code § 1636). A contract’s provisions are given their “ordinary and popular sense,” 25 unless “used by the parties in a technical sense or a special meaning is given to them by 26 usage.” Id. at 647–48 (citing, inter alia, Cal. Civ. Code §§ 1638, 1644). “A policy 27 provision will be considered ambiguous when it is capable of two or more constructions, 28 both of which are reasonable. But language in a contract must be interpreted as a whole, 1 and in the circumstances of the case, and cannot be found to be ambiguous in the 2 abstract.” Id. at 648 (quoting Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 18 (1995)); 3 see also Int’l Bhd. of Teamsters v. NASA Servs., Inc., 957 F.3d 1038, 1042–43 (9th Cir. 4 2020) (“[M]ost importantly, ‘[t]he whole of a contract is to be taken together, so as to 5 give effect to every part, if reasonably practicable, each clause helping to interpret the 6 other.’”) (quoting Cal. Civ. Code § 1641)). “[W]here contract language is ambiguous 7 and unresolved by the more fundamental principles of interpretation,” “ambiguous 8 contract provisions should be construed against the drafter.” Int’l Bhd. of Teamsters, 957 9 F.3d at 1042 (citing, inter alia, Cal. Civ. Code § 1654). 10 “[I]nsurance coverage is interpreted broadly so as to afford the greatest possible 11 protection to the insured, whereas exclusionary clauses are interpreted narrowly against 12 the insurer.” MacKinnon, 31 Cal. 4th at 648 (quotation omitted). “[A]n insurer cannot 13 escape its basic duty to insure by means of an exclusionary clause that is unclear . . . the 14 burden rests upon the insurer to phrase exceptions and exclusions in clear and 15 unmistakable language.” Id. (quotations omitted). “The burden is on the insured to 16 establish that the claim is within the basic scope of coverage and on the insurer to 17 establish that the claim is specifically excluded.” Id. (citation omitted). However, “[i]n 18 the absence of any ambiguity, the courts have no alternative but to give effect to the 19 contract of insurance as executed by the parties. Accordingly, when the terms of the 20 policy are plain and explicit the courts will not indulge in a forced construction so as to 21 fasten a liability on the insurance company which it has not assumed.” First Am. Title 22 Ins. Co. v. XWarehouse Lending Corp., 177 Cal. App. 4th 106, 115 (2009) (quotation 23 omitted). 24 2. Insurable Interest 25 The doctrine of insurable interest is codified in California Insurance Code § 280 et 26 seq. “If the insured has no insurable interest, the contract is void.” Cal. Ins. Code § 280. 27 An “insurable interest” is defined as follows: “Every interest in property, or any relation 28 thereto, or liability in respect thereof, of such a nature that a contemplated peril might 1 directly damnify the insured, is an insurable interest.” Id. § 281. The word “damnify” 2 has been construed by its dictionary definition to mean “‘to cause loss or damage to.’” 3 Wexler v. California FAIR Plan Assn., 63 Cal. App. 5th 55, 72 (2021). “An interest in 4 the property insured must exist when the insurance takes effect and when the loss 5 occurs.” Liberty Mut. Fire Ins. Co. v. McKenzie, 88 Cal. App. 4th 681, 689 (2001) 6 (citing Int’l Serv. Ins. Co. v. Gonzales, 194 Cal. App. 3d 110, 117–18 (1987)); see also 7 Cal. Ins. Code §§ 280, 286. 8 The California Supreme Court established long ago that an insurable interest in 9 property may exist without the insured having legal title to the property: 10 [I]t is not necessary that the insured person have a legal interest, but that an 11 equitable interest is sufficient. The title, whether legal or equitable, may be 12 defective or even bad, provided the insured has possession and use; even a valid equitable title is not requisite. It is held sufficient that the insured has a 13 direct pecuniary interest in the preservation of the property, and that he will 14 suffer a pecuniary loss as an immediate and proximate result of its destruction. 15 Davis v. Phoenix Ins. Co., 111 Cal. 409, 414 (1896) (citations omitted). 16 3. Analysis 17 The crux of Defendant’s argument is that it did not err in denying Plaintiff’s 18 insurance claim because Plaintiff did not have an insurable interest in the Ring due to the 19 fact that he gave Ms. Harris the Ring as an unconditional gift. Doc. No. 15-1 at 6, 9. 20 Defendant relies on Plaintiff’s handwritten card and Plaintiff’s deposition testimony as 21 evidence that Plaintiff intended the Ring to be an unconditional gift. Id. at 6–7, 9. 22 Plaintiff argues that his card “did not abandon his insurable interest in” the Ring and that 23 “the referenced excerpt from the card does not reflect the conferral of an immediate, 24 unconditional gift. Rather, the statement reveals an intent to make a future gift in the 25 event Ms. Harris later decided [to] not marry [Plaintiff].” Doc. No. 16 at 17 (citations 26 omitted). 27 28 1 The Court finds that the dispositive question underlying Defendant’s motion as to 2 Plaintiff’s breach of contract claim is whether a genuine issue of fact exists as to whether 3 the Ring was an unconditional gift or a conditional gift dependent on the anticipated 4 marriage of Plaintiff and Ms. Harris. There is no doubt that this issue is material, as 5 Defendant’s liability on each of Plaintiff’s causes of actions is affected by it. See 6 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (observing that “material 7 facts” are those facts that “might affect the outcome of the suit under the governing 8 law”). The question is whether the factual dispute over the status of the Ring is 9 “genuine,” i.e., whether “the evidence is such that a reasonable juror could return a 10 verdict for the nonmoving party.” Id. 11 As stated by the Ninth Circuit in United States v. Alcaraz-Garcia, 79 F.3d 769 (9th 12 Cir. 1996), “[i]n California, a gift is “a transfer of personal property, made voluntarily, 13 and without consideration.” Id. at 775 (citing and quoting California Civil Code § 1146). 14 According to the Ninth Circuit, under California law, the elements of a gift are: 15 (1) competency of the donor to contract; (2) a voluntary intent on the part of the donor to 16 make a gift; (3) delivery, either actual or symbolic; (4) acceptance, actual or imputed; 17 (5) complete divestment of control by the donor; and (6) lack of consideration for the gift. 18 Id. (citing, inter alia, Jaffe v. Carroll, 35 Cal. App. 3d 53, 59 (1973) and Turnbull v. 19 Thomsen, 171 Cal. App. 2d 779, 783 (1959)). 20 A gift in contemplation of marriage, such as an engagement ring, is still a gift as 21 recognized by California statutory law, which provides: 22 Where either party to a contemplated marriage in this State makes a gift of 23 money or property to the other on the basis or assumption that the marriage 24 will take place, in the event that the donee refuses to enter into the marriage as contemplated or that it is given up by mutual consent, the donor may 25 recover such gift or such part of its value as may, under all of the 26 circumstances of the case, be found by a court or jury to be just. 27 Cal. Civ. Code § 1590. 28 1 That is, such a gift is still a gift, but it is a conditional gift because the donor can bring an 2 action to recover the gift if the donee refuses to enter into marriage as contemplated or 3 the parties give up the contemplated marriage by mutual consent. 4 Upon review of the record, the evidence is undisputed that Plaintiff made a gift of 5 the Ring to his fiancée, Ms. Harris, when he proposed marriage in early September 2021, 6 and she accepted. PRS at No. 3; Yacullo Decl. ¶ 4; Yacullo EUO at 5–6. Thus, at the 7 time Plaintiff first gave Ms. Harris the Ring, it was a conditional gift pursuant to 8 California Civil Code § 1590. Defendant contends that Plaintiff’s handwritten card 9 stating “[b]ut if you choose otherwise, the ring is my gift 2U” is evidence that Plaintiff 10 intended the Ring to be an unconditional gift, which would eliminate any claim, 11 ownership, or interest Plaintiff had in the Ring. Doc. No. 15-1 at 6–7, 9. However, 12 Defendant does not dispute the fact that Plaintiff did not give Ms. Harris the card until, at 13 least, multiple days after his initial proposal and Ms. Harris’s acceptance of the Ring. In 14 addition, Defendant concedes that if the Ring was not an unconditional gift, “Plaintiff 15 would have had the right to recover the Ring if the engagement had been called off 16 provided under California Civil Code section 1590.” Doc. No. 17 at 7. Here, the Court 17 finds that Plaintiff’s intent and the meaning behind his handwritten card is disputed by 18 the parties, i.e., whether Plaintiff intended to confer an immediate and unconditional gift 19 of the Ring, or a future gift at some point in time when Plaintiff and Ms. Harris decided 20 to not get married.6 See Doc. No. 16 at 17. Moreover, the Court is not yet persuaded that 21 even if Plaintiff never intended to seek return of the Ring, as evidenced by his deposition 22 testimony—see PRS at No. 10, that this would change the conditional nature of the gift. 23 Indeed, Defendant has presented the Court with no authority to support the assertion that 24 the conditional nature of an engagement ring can be changed to an unconditional gift if 25 the donor does not request the return of the Ring or that the nature of the Ring can be 26 27 6 Defendant has not pointed to any undisputed evidence that Plaintiff and Ms. Harris were not engaged 28 1 altered by words or actions by the donor after the gift was already initially accepted by 2 the donee. Therefore, because the Court finds that there is a genuine issue of material 3 fact as to whether the engagement ring was an unconditional gift at the time of the loss, 4 and thus whether Plaintiff had an insurable interest in the Ring, the Court DENIES 5 Defendant’s summary judgment motion on the breach of contract cause of action. 6 B. Breach of Implied Covenant of Good Faith and Fair Dealing 7 Plaintiff’s second claim for breach of the implied covenant of good faith and fair 8 dealing is partially contingent upon the success of his breach of contract claim, and, as 9 discussed above, Plaintiff defeats the instant motion with respect to his breach of contract 10 claim. See Waller, 11 Cal. 4th at 36 (“[T]he covenant [of good faith and fair dealing] is 11 based on the contractual relationship between the insured and the insurer.”) Defendant 12 argues that even if the Court finds a genuine dispute regarding Plaintiff’s breach of 13 contract claim, summary judgment should be granted in its favor because its position in 14 denying coverage was “reasonable given the genuine dispute as to whether Plaintiff 15 possessed an insurable interest in the Ring at the time of the loss.” Doc. No. 15-1 at 16. 16 Plaintiff counters that the Court should deny Defendant’s motion because Defendant 17 “dragged out its investigation” for over six months and “failed to conduct a reasonable, 18 fair, and unbiased investigation.” Doc. No. 16 at 27. 19 In order to establish a breach of the implied covenant of good faith and fair dealing 20 by an insurer under California law, a plaintiff must show: (1) benefits due under the 21 policy were withheld; and (2) the reason for withholding benefits was unreasonable or 22 without proper cause. Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001). 23 Unreasonable delays in claim handling can support a finding of bad faith. Orange County 24 Plastering Co., Inc. v. Am. Home Assurance Co., No. CV 11-06364 DDP (FMOx), 2011 25 WL 5117766, *2 (C.D. Cal. Oct. 28, 2011). In first-party insurance cases, as here, the 26 “ultimate test of liability . . . is whether the refusal to pay policy benefits was 27 unreasonable.” Austero v. Nat’l Cas. Co., 84 Cal. App. 3d 1, 31 (1978), overruled on 28 other grounds by Egan v. Mutual of Omaha Ins. Co., 24 Cal. 3d 809 (1979). An insurer 1 that unreasonably delays or fails to pay benefits due under the policy may be held liable 2 in tort. Maslo v. Ameriprise Auto-Home Ins., 227 Cal. App. 4th 626, 633 (2014) (citing 3 Rappaport-Scott v. Interinsurance Exch. of the Auto. Club, 146 Cal. App. 4th 831, 837 4 (2007)). While the reasonableness of an insurer’s claims-handling conduct is ordinarily a 5 question of fact, it becomes a question of law where the evidence is undisputed and only 6 one reasonable inference can be drawn from the evidence. Chateau Chamberay 7 Homeowners Assn v. Associated Int’l Ins. Co., 90 Cal. App. 4th 335, 346 (2001) (citing 8 Paulfrey v. Blue Chip Stamps, 150 Cal. App. 3d 187, 198 (1983)). 9 Plaintiff’s most compelling argument is that Defendant unreasonably delayed its 10 investigation because it did not process his claim within forty days, as required by 11 California insurance regulations. “Upon receiving proof of claim, every insurer . . . shall 12 immediately, but in no event more than forty (40) calendar days later, accept or deny the 13 claim, in whole or in part.” 10 Cal. Code Regs. § 2695.7 (b). However, the insurance 14 regulations also provide a mechanism for an insurer to notify an insured where it will 15 take additional time to make a determination as to whether it will accept or deny the 16 claim. Id. § 2695.7(c)(1). Under the provision, an insurer must provide written notice to 17 the claimant of any additional information needed to evaluate the claim as well as the 18 reasons the insurer is unable to make a determination, and must also provide written 19 notice to the claimant every thirty days until a determination is made or notice of legal 20 action is served. Id. In addition, “[i]f the determination cannot be made until some 21 future event occurs, then the insurer shall comply with this continuing notice requirement 22 by advising the claimant of the situation and providing an estimate as to when the 23 determination can be made.” Id. Plaintiff provides a declaration from his attorney 24 Joshua D. Franklin, as well as email correspondences with Defendant’s coverage counsel, 25 Kevin D. Hansen, that demonstrate that although Plaintiff requested several updates on 26 the status of Defendant’s investigation, Defendant did not provide an estimate as to when 27 it would make its decision. See Doc. No. 16-5 ¶¶9–13; Doc. No. 16-7; Doc. No. 16-8, 28 Doc. No. 16-9. l In its reply, Defendant does not point the Court to any evidence to the contrary. 2 || Instead, Defendant only argues “[a]lthough Plaintiff asserts that [Defendant] acted in bad 3 || faith by violating provisions of the [California insurance regulations] in failing to respond 4 ||to requests for estimates as to when a coverage decision would be made, there is no 5 || private right of action for such violation.” Doc. No. 17 at 8 (citation omitted). This 6 argument is unpersuasive. Although not dispositive, Defendant’s violation of the 7 || California insurance regulations is a factor that may be considered by a jury in 8 || determining whether Defendant acted in good faith. See Helus v. Equitable Life Assur. 9 || Society of U.S., 309 F. Supp. 2d 1170, 1176, n.5 (C.D. Cal. 2004) (recognizing that 10 || violations of California insurance regulations are not dispositive and are “simply one 11 || factor that the jury may consider in determining whether an insurance company acted in 12 ||bad faith’’); see also Judicial Council of California Civil Jury Instruction 2337 (2024) 13 || (noting that there is no private cause of action under the insurance code, but confirming 14 || the “instruction may be given in an insurance bad-faith action to assist the jury in 15 || determining whether the insurer’s conduct was unreasonable or without proper cause). 16 || Therefore, at this stage, the Court finds that Plaintiff has presented evidence suggesting 17 || there is a genuine issue of material fact as to whether Defendant’s delay in evaluating his 18 |/claim was reasonable. Accordingly, the Court DENIES Defendant’s summary judgment 19 || motion on the breach of implied covenant of good faith and fair dealing cause of action. 20 V. CONCLUSION 21 For the reasons set forth above, the Court DENIES Defendant’s motion for 22 ||summary judgment in its entirety.’ 23 IT IS SO ORDERED. Ju 24 ||Dated: June 12, 2024 ae Ae MICHAEL M. ee 5 United States District Judge 26 7 To the extent Defendant also seeks summary judgment on Plaintiff's claim for declaratory relief, Doc. 27 No. | at 3, its motion is also DENIED because, as discussed above, genuine issues of material fact exist 28 regarding whether Defendant breached the contract and whether it breached the covenant of good faith and fair dealing in connection with Plaintiff's insurance claim.