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James Sedlar v. Usaa Casualty Insurance Company

April 30, 2012

JAMES SEDLAR, PLAINTIFF AND APPELLANT,
v.
USAA CASUALTY INSURANCE COMPANY, INC., DEFENDANT AND RESPONDENT.



(Super. Ct. No. 06AS04177)

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

Sedlar v. USAA Casualty Ins. Co.

CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

This case presents the issue of whether an insured may sue an insurer for negligence after the insurer's agent has lost the evidence against the manufacturer of a product alleged to have caused damage exceeding the limits of the insurance policy. Appellant James Sedlar was paid the insurance policy limit by respondent USAA Casualty Insurance Company, Inc. (USAA). Sedlar was underinsured, and informed USAA that the policy limit was inadequate to cover all his losses. USAA filed its own subrogation action against Homedics-USA, Inc., (Homedics) to recoup the amount paid to Sedlar under his policy. However, USAA's agent, John Ford, lost the product. As a result, a judgment was entered against USAA in its action against Homedics in federal court.

In this subsequently filed case, Sedlar sued USAA, Ford, and Homedics.*fn1 USAA demurred to the causes of action against it for negligence, breach of contract, and bad faith. The trial court sustained the demurrer without leave to amend.

On appeal, Sedlar contends (1) USAA acted in bad faith by failing to name him as a co-plaintiff in the insurer's action against Homedics, and (2) he had a valid cause of action for negligence against USAA even if there is no viable tort cause of action for negligent spoliation of evidence.

We conclude that USAA had no duty to name Sedlar as a co-plaintiff in seeking to recover from Homedics, and Sedlar's negligence cause of action constituted a nonviable cause of action. Accordingly, we affirm.

STANDARD OF REVIEW

In reviewing a judgment of dismissal following the sustaining of a demurrer without leave to amend, we apply well settled principles of review. "'The function of a demurrer is to test the sufficiency of the [pleading] as a matter of law, and it raises only a question of law. [Citations.] On a question of law, we apply a de novo standard of review on appeal.' (Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413, 1420.)" (First Aid Services of San Diego, Inc. v. California Employment Development Dept. (2005) 133 Cal.App.4th 1470, 1476.) We begin by examining the complaint to determine whether it alleges facts stating a viable cause of action under any legal theory. (Aguilera v. Heiman (2009) 174 Cal.App.4th 590, 595.) If the complaint fails to state a cause of action, we consider whether the trial court abused its discretion by sustaining the demurrer without leave to amend. (Ibid.) "Under both standards, appellant has the burden of demonstrating that the trial court erred. [Citation.] An abuse of discretion is established when 'there is a reasonable possibility the plaintiff could cure the defect with an amendment.' (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)" (Aguilera v. Heiman (2009) 174 Cal.App.4th 590, 595.)

FACTUAL AND PROCEDURAL HISTORY

The pertinent facts of this case are undisputed. As alleged in the complaint, Sedlar bought a chair massager manufactured by Homedics that caught fire and caused more than $700,000 in property damage. The damaged property belonged to Sedlar and was insured against loss by USAA. Sedlar tendered a claim for the loss. USAA paid the policy limit of $366,903.96 to Sedlar, and hired Ford to examine the chair massager in preparation for a subrogation action against Homedics. Ford determined that the chair massager was defective and had caused the extensive fire damage.

USAA sued Homedics in an action that was removed to federal court on the basis of diversity of citizenship between the parties. USAA did not name Sedlar as a co-plaintiff in its claims of strict liability and negligence against Homedics. Homedics demanded production of the chair massager, but USAA was unable to comply because Ford had lost it. As a result, a stipulated judgment was entered against USAA in its action against Homedics.

Sedlar filed the present action against USAA, Ford, and Homedics in Sacramento County Superior Court. As relevant to this appeal, Sedlar's complaint alleged causes of action against USAA for negligence, breach of contract, and bad faith. USAA filed a demurrer, which the trial court sustained without leave to amend. In pertinent part, the court's order sustaining the demurrer explained:

"3rd cause of action negligence: Sustained without leave to amend since there is no cause of action for negligent spoliation of evidence. Farmers Insurance Exchange v Superior Court (2000) 79 Cal.App.4th 1400, 1404. Moreover, since [Sedlar] admits he has been paid all benefits due to him under the insurance agreement, there is no breach of contract, and consequently no breach of duty arising from the contract. [¶] . . . [¶]

"6th cause of action bad faith: Sustained without leave to amend for failure to state a cause of action. [Sedlar] alleges [USAA] committed bad faith when they [sic] 'usurped' his claims against Homedic [sic] by failing to name him in the subrogation action in federal court against Homedic [sic], and failed to name him in as [sic] a plaintiff in the pending action against John Ford. However, there is no cause of action for tortious bad faith when no benefits are due. Progressive West Ins. Co. v Superior Court (2005) 135 Cal.App.4th 263, 279. ...


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