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Kelly Minich et al v. Allstate Insurance Company

March 11, 2011

KELLY MINICH ET AL., PLAINTIFFS AND APPELLANTS,
v.
ALLSTATE INSURANCE COMPANY, DEFENDANT AND RESPONDENT.



(Super. Ct. No. 37-2008-00067995-CU-BC-EC) APPEAL from a judgment of the Superior Court of San Diego County, Laura W. Halgren, Judge.

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

CERTIFIED FOR PUBLICATION

Affirmed.

I. INTRODUCTION

Allstate Insurance Company (Allstate) issued Kelly and Debbie Minich (the Minichs) a homeowner's insurance policy (Policy) that provided that Allstate would pay the Minichs the "actual cash value" of their house, in an amount not to exceed the "limit of liability shown on the Policy Declarations," if the house were damaged or destroyed.*fn1 The "Building Structure Reimbursement" provision of the Policy provided that Allstate would pay the Minichs an amount in excess of the actual cash value if the Minichs were to "repair, rebuild or replace" their house. An endorsement to the Policy modified the "Building Structure Reimbursement" provision to state that this additional payment would not exceed "150% of the limit of liability."

After the Minichs' house was destroyed by a fire, Allstate paid the Minichs $129,590--the limit of liability as shown on the Policy's declarations, minus a $250 deductible. However, Allstate refused to pay the additional $64,920 provided for in the endorsement until the Minichs furnished Allstate with evidence that they were, in fact, rebuilding their house. Allstate paid the Minichs the additional $64,920 approximately 15 months after the fire, once the Minichs demonstrated to Allstate that they were rebuilding their house.

The Minichs filed this action against Allstate, claiming that Allstate should have paid them the $64,920 immediately after the fire. The Minichs contend that Insurance Code sections 2051 and 2051.5*fn2 require that an insurer pay the "policy limit" (§ 2051, subd. (b)(1)) of a homeowner's policy whenever the house is destroyed, irrespective of whether the insured rebuilds the house, and that the "policy limit" (ibid.) of their Policy includes the $64,920 provided for in the endorsement.

Allstate filed a motion for summary judgment in which it argued that it had timely paid the Minichs the full "policy limit" under section 2051, subdivision (b)(1), and that the additional $64,920 represented an amount above the policy limit. Allstate maintained that it was not required to pay the additional $64,920 until and unless the Minichs rebuilt their house. The trial court granted Allstate's motion, and entered judgment in its favor. The Minichs appeal. We affirm the judgment.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual background

On October 23, 2007, the Minichs' house was destroyed by a wildfire. At the time of the fire, the Minichs insured their house though the Policy. The Policy's declarations state that the "Limits of Liability" for "Dwelling Protection" coverage is $129,840, subject to a $250 deductible. The declarations also indicate that the Policy contains an endorsement entitled "Building Structure Reimbursement Extended Limits" (BSREL Endorsement). The BSREL Endorsement modifies a portion of the Policy that describes the manner by which Allstate would pay for a loss. As modified by the BSREL Endorsement (shown in italics below), the Policy states in relevant part:

"5. How We Pay for a Loss

"Under Coverage A--Dwelling Protection . . . payment for covered loss will be by one or more of the following methods:

"[¶] . . . [¶]

"b) Actual Cash Value. If you do not repair or replace the damaged, destroyed or stolen property, payment will be on an actual cash value basis. This means there may be a deduction for depreciation. Payment will not exceed the limit of liability shown on the Policy Declarations for the coverage that applies to the damaged, destroyed or stolen property, regardless of the number of items involved in the loss.

"You may make claim for additional payment as described in paragraph 'c' . . . if you repair or replace the damaged, destroyed or stolen covered property within 180 days of the actual cash value payment.

"c) Building Structure Reimbursement. Under Coverage A--Dwelling Protection . . . we will make additional payment to reimburse you for cost in excess of actual cash value if you repair, rebuild or replace damaged, destroyed or stolen covered property within 180 days of the actual cash value payment. . . .

"Building Structure Reimbursement will not exceed the smallest of the following amounts:

"1) the replacement cost of the part(s) of the building structure(s) for equivalent construction for similar use on the same residence premises;

"2) the amount actually and necessarily spent to repair or replace the damaged building structure(s) with equivalent construction for similar use on the same residence premises; or

"3) 150% of the limit of liability applicable to the building structure(s) as shown on the Policy Declarations for Coverage A--Dwelling Protection . . . regardless of the number of building structures and structures other than building structures involved in the loss." (Italics added.)

On November 7, 2007, approximately two weeks after the fire, Allstate paid the Minichs $129,590. In December 2007, the Minichs' representative, Geoff Moyle, informed Allstate that the Minichs had received a bid in the amount of $373,884.38 to replace their house. Moyle requested that Allstate immediately pay the Minichs additional funds, pursuant to the BSREL Endorsement.*fn3 In January 2008, Allstate offered to release an additional $64,920 upon the Minichs' submission of an acceptable rebuild estimate and a copy of a signed contract to rebuild the house.

In May 2008, after further negotiations between Moyle and Allstate concerning Allstate's release of the $64,920, Allstate offered to pay the Minichs the additional $64,920 if the Minichs provided a copy of approved building permits for their new house, a copy of the rebuild plans, and evidence that construction of the foundation on the new house was completed. On November 21, 2008, Moyle provided Allstate with approved building permits for the Minichs' new house; on January 7, 2009, Moyle informed Allstate that the foundation of the new house was ready for inspection. A few days later, Allstate inspected the property and confirmed that the foundation had been completed. On February 7, 2009, Allstate paid the Minichs the remaining $64,920, as provided for in the BSREL Endorsement. As of May 28, 2009, the Minichs' new house was approximately 50 percent complete.

B. Procedural history

In October 2008, the Minichs filed a complaint against Allstate alleging numerous causes of action, including breach of contract and tortious breach of contract (bad faith). In their breach of contract claim, the Minichs alleged that Allstate was required to pay the entire $194,760 of benefits available under the Policy, "prior to and regardless of whether any provision of the [P]olicy required payment to be made only upon repair, rebuilding, or replacement pursuant to the provisions of California Insurance Code [sections] 2051 and 2051.5." In their bad faith claim, the Minichs claimed that Allstate had violated the covenant of good faith by, among other actions, delaying payments that were due under the Policy. The Minichs also alleged that Allstate's tortious conduct entitled them to an award of punitive damages.

In July 2009, the Minichs dismissed all of their causes of action except the claims for breach of contract and bad faith. Allstate subsequently filed a motion for summary judgment or summary adjudication in which it claimed that the Minichs' breach of contract and bad faith claims failed as a matter of law. In its motion, Allstate maintained that the Minichs' breach of contract claim failed because Allstate had paid the Minichs all policy benefits that were due under the Policy. Allstate claimed that it had paid the Minichs the full $129,590 policy limit within two weeks of the fire, and that because the Minichs "still have not rebuilt their house, Allstate's contractual obligation to pay the extended limit has not been triggered (even though Allstate paid it anyway)." Allstate noted that payments under the Building ...


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