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Barnett v. First National Insurance Company of America

May 26, 2010


APPEALS from a judgment and orders of the Superior Court of Los Angeles County, Ronald M. Sohigian, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC346657).

The opinion of the court was delivered by: Jackson, J.



Plaintiffs Richard and Paula Barnett appeal from a judgment on special verdict in favor of defendant First National Insurance Company of America and an order denying their motion for new trial. Defendant appeals from the judgment and an order awarding costs.

On appeal, plaintiffs contend numerous errors led to a judgment erroneous as a matter of law and unsupported by substantial evidence. For this reason, they also contend, the trial court abused its discretion in denying their new trial motion.

On its cross-appeal, defendant claims error in the trial court's denial of its request for expert fees under Code of Civil Procedure section 998.

For the reasons set forth below, we disagree and affirm.



A. Plaintiffs' Property

Plaintiffs Richard and Paula Barnett (individually, Richard and Paula; collectively, plaintiffs or the Barnetts) purchased a house on Boris Drive in Encino in 1996. The house is located in the foothills of the Santa Monica Mountains. The Barnetts lived there with their two sons, William and Alex.

Boris Drive runs roughly north-south. The house is on the west side of the street. The master bedroom is at the southwest corner of the house, Alex's bedroom is at the southeast corner of the house, and William's bedroom is north of the master bedroom. The master bedroom and William's bedroom face the backyard and pool area.

The house was constructed with a wood frame on a slab foundation. It has a detached garage/office of similar construction. The Barnetts had a new roof installed in 2001 or 2002.

The property is on a slope running downhill from west to east. The majority of the runoff from the slope to the west of the property goes down the driveway on the north side of the property.

B. Defendant's Insurance Policy

During all relevant time periods, the Barnetts had a homeowners insurance policy issued by defendant. In section I, Property Coverages, the policy sets forth "Building Property Losses We Do Not Cover" as follows:

"We do not cover loss caused directly or indirectly by any of the following excluded perils. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss: [¶] . . . [¶]

"6. a. wear and tear, marring, scratching, deterioration;

"b. inherent defect, mechanical breakdown;

"c. smog, rust, corrosion, electrolysis, mold, fungus, wet or dry rot; [¶] . . . [¶]

"9.Water Damage, meaning:

"a. flood, surface water, waves, tidal water, tsunami, overflow of a body of water, or spray from any of these, whether or not driven by wind;

"b. water below the surface of the ground, including water which exerts pressure on, or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool, hot tub or spa, including their filtration and circulation systems, or any other structure; [¶] . . . [¶]

"16. Weather that contributes in any way with a cause or event excluded in this section to produce a loss. However, any ensuing loss not excluded is covered.

"17. Planning, Construction or Maintenance, meaning faulty, inadequate or defective:

"a. planning, zoning, development, surveying, siting;

"b. design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;

"c. materials used in repair, construction, renovation or remodeling; or

"d. maintenance; [¶] of property whether on or off the insured location by any person or organization. However, any ensuing loss not excluded is covered."

C. Rainstorms of 2005

In January and February of 2005, severe rainstorms hit Los Angeles County. The county received over 18 inches of rain in January, with over 12 inches falling between January 7 and January 10.

The county received almost 14 inches of rain in February. Between February 17 and February 23, it rained almost 11 inches, with almost half of that falling in the 24-hour period between the morning of February 20 and the morning of February 21.

The rainfall in this two-month period was double the 16-inch average annual rainfall for Los Angeles County.

D. January Damage to Plaintiffs' Property and Report to Defendant

On the morning of January 8 or 9, Richard and Paula were awakened by rain and wind hitting the house. At 10:00 a.m., Paula went to the garage/office and discovered wet walls and a couple of inches of water on the floor. She and Richard walked around the garage/office but did not see any pooling or streaming water which would account for the water in the garage/office. They moved some of the contents of the garage/office to the house.

On January 9, Richard was lying in bed. Paula went to the master bedroom and saw what appeared to be wet footprints on the carpeting. She then realized that there were two to three inches of water on the floor. She and Richard checked the house and discovered water coming into William's bedroom as well. They moved things out of the two bedrooms and into the living room, on the east side of the house.

Richard and Paula walked around the property to try to determine how the water was entering the house. Although there was water everywhere, they saw no obvious source of the water in the house. They did not see water running down the slope to the west of the house, and the drain at the bottom of the slope appeared to be working. They saw no pooling or streams of water, and no water buildup against the house.

Within a few days, about a third of the house, including all three bedrooms, had water in it. In addition to the water on the floors, there appeared to be water coming in through the window casings, and there were water stains near the beams in the living room.

On January 10, Paula hired ProDry, which began the process of drying out the house. Among other things, it removed the carpeting from the master bedroom and some of the carpeting from William's bedroom, removed recently installed closets, and cut out portions of the walls.

Also on January 10, Paula called defendant to make a claim. Ordinarily, when a claim came in to defendant, the computer would assign it to a control adjuster, who would handle the claim. Because so many claims were coming in, however, defendant deemed the situation a catastrophe, in which claims would be handled by a catastrophe team. The control adjuster would take the claim and let the insured know that it would be handled by the catastrophe team.

The Barnetts' claim was initially assigned to Karen Hemphill (Hemphill). She spoke to Paula, who described the water damage. Hemphill asked where the water was coming from, and Paula said, "down low." Hemphill explained that the claim would be sent to a catastrophe team, which would be contacting Paula. When Paula added that she had called a water extraction company, which was drying out the wet areas, Hemphill explained that surface water was not covered,*fn3 but defendant would be inspecting the damage, so Paula should save all her documents for the catastrophe adjuster.

Once the claim was sent to the catastrophe team, Melba Brazile became the control adjuster. Craig Bowman (Bowman) became the control adjuster on January 29. Steve Doiron became the control adjuster on April 8. Hemphill assisted the control adjuster from April 7 to April 14. After Hemphill visited the property on April 14, defendant transferred the claim to the large loss unit, with the mold unit assisting with the claim. At that time, Stephen Rawlings (Rawlings) became the control adjuster and Larry Thomas (Thomas), of the mold unit, assisted.

Defendant sent inspector David De Tinne (De Tinne), of the catastrophe team, to the property on January 18. De Tinne reported: "Our investigation revealed surface water intrusion to the master bedroom, bathroom and rear bedroom. There was also surface water damage to the detached garage, office and bathroom located in the garage. There was water damage to the front bedroom ceiling. The source and origin of the water appeared to be wind driven rain through the roof flashing." He recommended payment of $1,496, less the $500 deductible for a total payment of $996.

Inspector Luster Drink (Drink) met with Paula on January 31 "to discuss her concerns on this claim." These were that De Tinne had "left two rooms off the . . . estimate that were not surface water [damage]," and "[s]urface water damage to the detached office." Drink reinspected the property and agreed that there were additional damages to the home caused by wind-driven rain. He advised Paula, however, that surface water damage to the office was not covered. He recommended payment of $4,278, less the deductible and depreciation, for a total payment of $3,160.*fn4

E. February Damage to Plaintiffs' Property

On February 18, it began raining heavily. Again, water entered the garage/office and the house. Richard and Paula used shop vacs to vacuum up the water and dump it outside, but the rain continued for four days. They observed water damage around the bay window in the master bedroom, in both boys' bedrooms, and in the living room. Once again, they could not determine how the water was entering the house.

In late February, the Barnetts rented blowers and dehumidifiers. They used these to do the drying out work themselves.

Paula made repeated calls to defendant regarding the damage. In late February she spoke to Bowman. She did not recall telling him about the flooding in February.*fn5

F. Discovery of Mold and Additional Flooding in March

In early March, the Barnetts discovered mold on some of the walls. Paula called defendant about the mold within a week of the discovery. The Barnetts had a mold inspection company, Safeguard, test the property on March 10.

There was a third incident of flooding at the end of March. Paula called Service Master to do the clean-up work. Paula did not tell any of defendant's representatives about the incident.*fn6

In April, Service Master did mold remediation work on the property. When it was done, Safeguard again tested the property.

G. Defendant's Handling of Plaintiffs' Claim

On March 10, Bowman wrote to the Barnetts on behalf of defendant. He wrote, "After careful review of the facts of the loss and the damage to your home, we regret to inform you that we are unable to provide coverage for the damage to your detached office. Our investigation revealed the cause of loss was surface water." He went on to explain that damage caused by surface water was excluded from coverage. He added that defendant "continues to reserve all rights and defenses which may now exist or which may arise in the future . . . ."

On April 7, Hemphill called the Barnetts and spoke to Paula. Hemphill noted that Paula "says it looks like some more water stains are evident now as things have dried out." They discussed hiring a general contractor to handle the repair work. Paula "advised that she got a mold report $3200.00 from Safeguard," and Hemphill "explained that if there is mold we will need to address it and explained [there was a $]10,000 policy limit." Hemphill therefore requested that Paula submit the mold report as soon as possible so that the control adjuster could review it and, if necessary, transfer the claim to the mold unit. They agreed that Paula would contact her for an appointment once she selected a contractor.

They subsequently arranged for Hemphill to inspect the property on April 14. According to Hemphill's notes, however, Paula "said I'd better bring the definition of surface water in writing with me. [S]he advised she is done playing games and she expects to be paid money this week[]. [¶] She said we are already dealing with an attorney and she has also consulted with a high powered insurance attorney so no more games. [S]he said we can lie but she has eyeballs and she makes a lot of money and went to a prestigious law school so she knows there are no limits on mold, and there is no depreciation on replacement cost. We had better start acting in good faith, no low-balling and no more bad faith or she will be filing a lawsuit Monday morning. '[Y]ou be ready tomorrow.'"

The April 14 inspection did not go well. According to Paula, she was trying to find out how Hemphill could say that the damage was caused by surface water when she and her husband saw no surface water and the inspectors said the damage was caused by wind-driven rain. Hemphill was smirking and dismissive. She accused Paula of having work done on the house to cover up the fact that the damages were caused by surface water. Hemphill began yelling at Paula, who yelled back at her. Finally, Paula told Hemphill "you have to leave. Get out of my house."

According to Hemphill, Paula "immediately advised that we better take care of all her issues or she is filing a big lawsuit. She wanted [the] definition of surface water. Whenever I tried to explain or ask anything, [she] cut me off." Paula kept raising her voice and threatening to sue. When Hemphill asked questions about the damage, Paula "was not very forthcoming with information" but instead would tell Hemphill to look for herself or ask her what her report said. When Hemphill "repeatedly asked her to please not ...

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