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Court of Appeal:
Non-Insured Under Policy May Not Sue for Bad Faith
Dissenter Stratton Argues That Coverage for Property Owned by Resident Family Member Renders Her an Insured
By a MetNews Staff Writer
A justice of the Court of Appeal for this district yesterday contended in a dissent that an insurance policy that expressly disclaimed coverage to anyone not named as insured nonetheless afforded standing to someone not mentioned in the policy to sue for a bad-faith refusal to settle claims.
The dissenter was Justice Maria Stratton of Div. Eight. Justice John Shepard Wiley wrote the majority opinion affirming a judgment of dismissal which followed Los Angeles Superior Court Judge Huey P. Cotton’s sustaining a demurrer, without leave to amend, to a cause of action brought by Brooke Wexler. She lived with her parents in their home in Calabasas which was rendered temporarily uninhabitable by smoke from the 2018 Woolsey fire.
Wexler, her parents, James M. Talbot and Kimberly A. Talbot, and her brother, then age 7, were forced to reside, with their dog, in a motel room in the aftermath of the blaze.
The parents—and only they—were the beneficiaries named in a fire insurance policy with the California FAIR Plan Association. It was a barebones policy for homeowners in high-risk areas who could not otherwise obtain insurance.
The policy spells out:
“This policy does not provide coverage to any person or entity not named here.”
Despite that language, Stratton maintained that because the policy covered the personal property of a resident family member “and Wexler is just such a person,” she was an insured under the policy.
Cotton’s Ruling
The Talbots and Wexler sued the insurer. In finding that Wexler had no standing to maintain an action for a tortious failure to settle, Cotton said:
“Ms. Wexler is not a named insured under the policy. The named insureds are Mr. and Mrs. Talbot. Plaintiffs rely on the coverage in Coverage C-Personal Property which covers personal property of members of the insureds’ family residing with the insured that is in the home at the time of loss. They are alleging this makes Ms. Wexler an express insured. The court disagrees. Ms. Wexler is not included under the definition of insured or additional insured. Plaintiffs fail to allege any facts showing the policy was made expressly for her benefit. The Talbots may recover for items lost by Wexler for an insured loss but…Ms. Wexler is not owed a duty of good faith and fair dealing.”
Following that ruling, the Talbots dismissed their action. Wexler appealed.
Wiley’s Opinion
Wiley said in an opinion in which Acting Presiding Justice Elizabeth A. Grimes joined:
“Only one with the right to sue an insurance company for contract damages for breach of the insurance policy can also sue the insurance company for tort damages for breach of the covenant of good faith. Wexler cannot sue for bad faith because she had no contractual relationship with FAIR Plan. Wexler was not a signatory; she was not an additional insured; and she was not a third party beneficiary.”
He went on to say:
“This does not mean Wexler’s things at her parents’ house were uninsured. Nor does it mean the insurer gains some unfair advantage by collecting a premium to cover these items. They were insured—but by Wexler’s parents and for her parents. FAIR Plan agrees it is on the hook for covered damage to Wexler’s property in her parents’ house. It is on the hook to her parents.
“This policy states FAIR Plan will indemnify property owned by ‘members of your family residing with you.’ That is a benefit Wexler’s parents enjoy. Her parents’ benefit does not make Wexler a party to the contract.”
Stratton’s Dissent
Stratton said in her dissent:
“Everyone check your homeowners insurance policy. Be especially vigilant if you live in the quarter of California households which are multigenerational, or are one of the 40 percent of California parents whose adult children have moved back home. Those other adults in your household have probably accumulated personal property of their own. According to the majority, if you, as the homeowner and a named policyholder, try to protect your family members by paying a premium for a policy that purports to provide coverage for the personal property of resident family members, you are benefitting the insurance company, not your family members.”
She continued:
“If your family member’s personal property is damaged, you will not be able to recover for that damage because you do not have an ownership interest in that property. Your family member will not be able to recover because the insurance company, which did not request or require you to identify the family member by name, will be able to deny coverage because you did not identify the family member by name. The insurance company gets to keep your premiums, which is a pretty sweet deal for the insurer but not for you or your family member.”
The jurist went on to scoff:
“The majority allows the Talbots to proceed with their cause of action against the insurer, but bars Wexler from proceeding with hers because she is neither an insured nor a beneficiary of the policy. In effect, the majority says, ‘Don’t worry, the Talbots can enforce the policy on behalf of Wexler.’ To say Wexler is neither an insured nor a beneficiary of the policy ignores the express language of the insurance policy and turns insurance law on its head.”
Although the policy says it covers property belonging to a family member, it actually doesn’t, because, the justice said, the Talbots had no “insurable interest” in their daughter’s property.
While asserting that Wexler is an insured, Stratton said that if she isn’t, she is at least a third party beneficiary, thus lending her standing.
The case is Wexler v. California Fair Plan, 2021 S.O.S. 1541.
Dylan L. Schaffer of the Oakland form of Kerley Schaffer was appellate counsel for Wexler. Raul L. Martinez, Elise D. Klein and Celia Moutes-Lee of the Los Angeles firm of Lewis Brisbois Bisgaard & Smith represented the California FAIR Plan Association.
Copyright 2021, Metropolitan News Company