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Ventura Kester, LLC v. Folksamerica Reinsurance Co.

California Court of Appeals, Second District, Fifth Division

September 11, 2013

VENTURA KESTER, LLC, Plaintiff and Appellant,
v.
FOLKSAMERICA REINSURANCE COMPANY, Defendant and Respondent

APPEAL from a judgment and an order of the Superior Court of Los Angeles County, Super. Ct. No. BC439607 James R. Dunn, Judge.

Law Offices of Christian J. Garris and Christian J. Garris for Plaintiff and Appellant.

Sedgwick LLP, Susan Koehler Sullivan, Amand K. Mines and Douglas J. Collodel for Defendant and Respondent.

KRIEGLER, J.

An owner of commercial property that was vandalized while vacant brought an action against its insurer to recover for lost rent. The parties filed competing motions for summary adjudication as to whether the insurer was liable for rent in the absence of a tenant. The trial court granted summary judgment in favor of the insurer, from which the owner appeals. We hold that under the terms of the policy, recovery for lost rent did not require the owner to have an existing tenant, and there are triable issues of fact as to whether the property would have been rented but for the vandalism damage. Therefore, we reverse and remand for further proceedings.

FACTS AND PROCEDURAL BACKGROUND

Vandalism Claim

Plaintiff and appellant Ventura Kester, LLC, owns a commercial building in Sherman Oaks. Defendant and respondent Folksamerica Reinsurance Company issued a commercial building owner’s policy to Ventura effective September 7, 2006, to September 7, 2007. At the time the policy was issued, a tenant leased the property.

The policy provided up to $2.76 million for structures and $552, 000 for lost rents as a result of damage to a covered structure. The policy stated: “Subject to the terms, conditions and limitations of this policy, we insure you against financial loss resulting from: [¶] 1. direct physical loss of or damage to covered property caused by an accident; and [¶] 2. the enforcement of any ordinance, law or code which prohibits repair of a covered structure damaged by an accident and requires that any undamaged portion of the structure be demolished; and [¶] 3. rents including accrued rents which become uncollectible, and extra expense incurred to prevent loss of rents, because of damage to or destruction of covered structures caused by an accident.”

The policy also stated: “Subject to the provisions contained in the LIMIT OF INSURANCE section and subject to all other terms and conditions of this policy the amount we will pay is calculated as follows: [¶]... [¶] 5. Rents [¶] We will pay: [¶] a. your net loss of rental income; and [¶] b. rents accrued but rendered uncollectible by reason of a covered loss at a location described on the Declarations Page; and [¶] c. your extra expenses necessarily incurred to minimize your rental income loss, but only to the extent that the rental income loss we would otherwise pay is reduced.”

The tenant vacated the property in late 2006. On April 2, 2007, Ventura received a lease proposal from Equinox Fitness Clubs, but the proposal offered less money than a deal Ventura was negotiating with OfficeMax. Ventura had recently leased another property to OfficeMax as well. On April 30, 2007, OfficeMax and Ventura executed a letter of intent to enter into a lease for the property.

In May 2007, thieves entered the building, stole copper wire and pipes, and caused extensive damage to the property. Ventura received a new lease proposal from Equinox and made a counter-proposal. Ventura reported the vandalism damage to Folksamerica and submitted a notice of loss on June 26, 2007. When adjusters inspected the property in July and August 2007, they discovered additional vandalism, which they treated as a second claim. The cost of repair was estimated to be $1 million.

In August or September 2007, OfficeMax declined to lease the property. In September, Ventura negotiated to lease the property for a Crunch fitness center. Ventura declined to make the deal, because Crunch did not provide a sufficient letter of credit.

On November 21, 2007, Folksamerica provided a check to Ventura in the amount of $383, 989.90 and another in the amount of $128, 973.71. Ventura did not agree the amount was adequate to repair the damage and could not commence repairs until the claim was fully paid. A construction company estimated that it would take up to a year to ...


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