Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Milhouse v. Travelers Commer. Ins. Co.

United States District Court, C.D. California, Southern Division

November 5, 2013


Page 1089

[Copyrighted Material Omitted]

Page 1090

For Craig Milhouse, Pamela Milhouse, Plaintiffs: Anthony Lawrence Cannon, Julia A Mouser, Cannon and Nelms APC, Anaheim, CA; Debra K Cook, Cannon & Nelms, Anaheim, CA; Robert W Nelms, Cannon Nelms PC, Anaheim, CA.

For Travelers Commercial Insurance Company, Defendant: Jennifer N Wahlgren, LEAD ATTORNEY, Edward Patrick Murphy, G Edward Rudloff, Jr, Marjie D Barrows, Foran Glennon Palandech Ponzi & Rudloff PC, Emeryville, CA; Matthew S Ponzi, PRO HAC VICE, Foran Glennon Palandech Ponzi & Rudloff PC, Chicago, IL.



Page 1091



Plaintiffs Craig Milhouse and Pamela Milhouse owned a home in Yorba Linda,

Page 1092

California. Their home was insured by Defendant Travelers Commercial Insurance Company (" Travelers" ). In November 2008, the Yorba Linda Freeway Complex fire swept through Dr. and Mrs. Milhouse's neighborhood and consumed their home. A total loss resulted, with the structure of the home itself and the personal property contained within it all lost in the blaze. Dr. and Mrs. Milhouse tendered a claim to Travelers on their homeowner's insurance policy to be compensated for their loss. Unable to settle their claim with Travelers out of court, in October 2010, the Milhouses filed suit against Travelers, alleging breach of contract and breach of the covenant of good faith and fair dealing. The Milhouses additionally sought punitive damages. On August 13, 2013, this Court empaneled a jury and commenced a two-week trial of the Milhouses' claims. After considering the evidence and testimony presented by both parties, the jury returned a verdict in favor of Dr. and Mrs. Milhouse on their breach of contract claim, awarding them $1,949,634 in damages, or $974,817 each. The jury also found, however, that in breaching its contract with the Dr. and Mrs. Milhouse, Travelers did not act in bad faith, and that the Milhouses were not entitled to punitive damages. Before the Court are competing post-trial motions filed by both parties.

Dr. and Mrs. Milhouse move for a new trial on only their cause of action for breach of the covenant of good faith and fair dealing, or alternatively, for a new trial on both of their causes of action. (Dkt. No. 372 [" Pls.' Mot. for New Trial" ].) They additionally move to alter the judgment to account for pre-judgment interest. (Dkt. No. 365.) Travelers moves for judgment as a matter of law, (Dkt. No. 380 [" Def.'s Mot. for JMOL" ]), or for remittitur of the damage award or a new trial on the Milhouses' breach of contract cause of action, (Dkt. No. 378 [" Def.'s Mot. for New Trial" ]). For the reasons stated herein, Travelers' motion for a remittitur, or in the alternative a new trial, is GRANTED. Its motion for judgment as a matter of law, and the Milhouses' motion for a new trial on breach of the covenant of good faith and fair dealing or on all causes of action, are DENIED. Additionally, the Milhouses' motion to alter the judgment to include pre-judgment interest is DENIED. [1]

The Court finds that the jury faithfully discharged its duties and, with one limited exception, returned a reasonable verdict supported by the evidence presented. The jury only overestimated the damages recoverable by Dr. and Mrs. Milhouse for breach of contract. The Court therefore upholds the jury's verdict in all other respects, and reduces the contract damages award to the maximum amount supportable by the evidence.


I. Travelers' Motion for Judgment as a Matter of Law

Under Federal Rule of Civil Procedure 50(a) and (b), a court may enter judgment as a matter of law if " a reasonable jury would not have a legally sufficient evidentiary basis to find for the [prevailing] party" as to an issue on which that party has been fully heard during trial. A party seeking judgment as a matter of law has a " very high" standard to meet. Costa v. Desert Palace, 299 F.3d 838, 859 (9th Cir. 2002). The jury's verdict must be upheld if, viewing the facts in the light most favorable to the nonmoving party, there is sufficient evidence for a reasonable jury to have found in the nonmoving party's favor.

Page 1093

Johnson v. Paradise Valley Unified Sch. Dist., 251 F.3d 1222, 1227 (9th Cir. 2001).

In its motions for judgment as a matter of law and for renewed judgment as a matter of law, (Dkt. No. 336; Def.'s Mot. for JMOL), Travelers argues that it was not in breach of contract by naming the IRS as a co-payee on a benefits check issued to the Milhouses, that the policy's Additional Replacement Cost Protection (" ARCP" ) Endorsement was not triggered, and that the Ordinance or Law coverage of the policy was not triggered. It additionally argues that the Milhouses cannot establish through the evidence presented that Travelers was in breach of its dwelling, alternative living expenses, or loss of use coverage obligations. As described more fully in the context of Travelers' motion for a new trial, both its legal conclusions and its argument that the evidence does not support a verdict in favor of Dr. and Mrs. Milhouse on the issue of breach of contract fail. Substantial evidence was presented at trial by which the jury could hold Travelers liable for breach of contract.

II. Travelers' Motion for a New Trial on Breach of Contract

Federal Rule of Civil Procedure 59(a) provides that a new trial may be granted after a jury trial " for any reason for which a new trial has heretofore been granted." Courts are thus " bound by those grounds that have been historically recognized" for a new trial, including claims " that the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving." Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007). Where the moving party's motion is premised on a claim that the jury's verdict is against the clear weight of the evidence, a new trial should be granted where, after giving full respect to the jury's findings, the judge " is left with the definite and firm conviction that a mistake has been committed." Landes Constr. Co., Inc. v. Royal Bank of Can., 833 F.2d 1365, 1371-72 (9th Cir. 1987); see also Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir. 2001) (" [E]ven if substantial evidence supports the jury's verdict, a trial court may grant a new trial if 'the verdict is contrary to the clear weight of the evidence, or is based upon evidence which is false, or to prevent, in the sound discretion of the trial court, a miscarriage of justice.' " ) (quoting United States v. 4. 0 Acres of Land, 175 F.3d 1133, 1139 (9th Cir. 1999)). Of course, the district court " may not grant a new trial simply because it would have arrived at a different verdict." Id.

In deciding a motion for a new trial, the district court may, in its discretion, " grant the motion and order a new trial on damages or deny the motion and reinstate the judgment in favor of [Defendant] and against [Plaintiff], or grant a remittitur with the alternative of a new trial if the remittitur is not complied with." Minthorne v. Seeburg Corp., 397 F.2d 237, 244-45 (9th Cir. 1968). Where the court decides to offer the option of a remittitur, the jury's verdict should be reduced to the " maximum amount sustainable by the proof," so as to ensure that the court's judgment is not substituted for that of the jury. D& S Redi-Mix v. Sierra Redi-Mix & Contracting Co., 692 F.2d 1245, 1249 (9th Cir. 1982). " If the prevailing party does not consent to the reduced amount, a new trial must be granted." Fenner v. Dependable Trucking Co., 716 F.2d 598, 603 (9th Cir. 1983). On the other hand, " [i]f the prevailing party accepts the remittitur, judgment must be entered in the lesser amount." Id.

Page 1094

Travelers argues that the limits of the Milhouses' insurance policy constitute their maximum recoverable damages under a breach of contract theory. (Def.'s Mot. for New Trial at 9.) Travelers contends that the maximum possible recovery to which the Milhouses could have been entitled was $674,634, rather than the $1.8 million recovery the jury awarded Dr. and Mrs. Milhouse. Travelers is mistaken. Basic principles of contract law provide that where a party is in breach of its contractual obligations, it is responsible not only for damage incurred under the contract's terms but also for those reasonably foreseeable damages that arise out of the breach. See Lewis Jorge Constr. Mgmt., Inc. v. Pomona Unified. Sch. Dist., 34 Cal.4th 960, 970, 22 Cal.Rptr.3d 340, 102 P.3d 257 (2004) (" [T]he nature of the contract or the circumstances in which it is made may compel the inference that the defendant should have contemplated the fact that such a loss would be 'the probable result' of the defendant's breach." ). California courts view this principle as having been incorporated into California Civil Code section 3300's definition of the damages available for breach of contract. Id. The jury's award must therefore be examined for evidence of breach and for damages available under the policy itself, as well as for those damages that were reasonably foreseeable as a result of the breach.

After so evaluating the jury's verdict, the Court finds it necessary to remit the damage award. Based on the evidence presented, the maximum award supportable by the evidence is $1,076,634. The Milhouses may accept this remitted damage award and judgment will be entered accordingly, or reject it, in which case a new trial will be had on only their breach of contract claim.

A. Dr. and Mrs. Milhouse's Recovery Under the Insurance Policy

Under their policy, Dr. and Mrs. Milhouse claimed damages arising from Travelers' breach of six different policy coverages: (1) for loss of their dwelling and to replace their dwelling; (2) for their personal property; (3) for their other structures including driveways, walkways, and fences [2]; (4) for their trees, plants, and lawns; (5) for building ordinance and code costs to replace their dwelling; and (6) for additional living expenses. (Dkt. No. 346 [" Jury Instr." ] No. 26.) Given the stated policy limits, there is no dispute that the maximum possible recovery the jury could have awarded the Milhouses under the policy itself was $674,634. [3] ( See Dkt. No. 406 [" Aug. 19, Vol. 2 Transcript" ] at 103:2-106:5 (McKinnon).)

1. Dwelling Coverage

Dr. and Mrs. Milhouse's dwelling coverage provides them protection " against risk of direct physical loss" of their home, not including the land upon which it is located. (Dkt. No. 379-12 [" Policy" ] at 10, 17.) Under the policy, until repair or replacement of their dwelling is complete, the Milhouses are entitled to " no more than the actual cash value of

Page 1095

the damage," (Policy at 22), which is further defined to mean " the amount it would cost to repair or replace the covered property, at the time of the loss, with material of like kind and quality, subject to a deduction for deterioration, depreciation or obsolescence." (Policy at 38.) If the actual cash value of the dwelling is found to be more than the policy limits, set at $742,000 under their 2008 insurance policy, the Milhouses are entitled to recover the policy limits. See Cal. Ins. Code § § 2051(b)(1), 2051.5. In light of the substantial evidence that was presented, the jury reasonably could have found that the actual cash value of Dr. and Mrs. Milhouse's home, as defined under the policy, exceeded the policy limits even when including the ARCP Endorsment, and that therefore, the Milhouses were entitled to recover the policy limits of their dwelling coverage. Because Travelers has not paid the policy limits, the jury could find such failure to be a breach of its contractual obligations to the Milhouses.

a. Evidence Presented at Trial

Travelers presented testimony to establish that the replacement cost of Dr. and Mrs. Milhouse's home was $692,000. ( See Dkt. No. 407 [" Aug. 20 Transcript, Vol. 2" ] at 26:7-19 (Thomas).) The $692,000 bid to rebuild the Milhouse home was provided to Travelers by Associated Construction Services, Inc. (" ACS" ), a construction consulting firm. (Aug. 19 Transcript, Vol. 2 at 147:5-11 (Reid).) Travelers relied on the ACS bid to determine that its obligations under the policy's dwelling coverage was no greater than $692,000, the home's actual cash value. (Dkt. No. 349 [" Aug. 13 Transcript" ] at 221:1-4 (Ballinger).)

Competing testimony was presented by which the jury could have reasonably found that the ACS estimate of $692,000 understated the actual replacement cost of the Milhouse home. At trial, the jury was presented with descriptions of the Milhouse home. It heard, for example, that prior to the fire, the home was approximately 4,000 square feet, with four bedrooms, three-and-a-half bathrooms, and an additional 800 square foot garage. (Dkt. No. 354 [" Aug. 14 Transcript" ] at 178:11-15 (Ellis).) It additionally heard that the home had upgraded floors, countertops, and bathroom fixtures, as well as crown molding. (Dkt. No. 351 [" Aug. 16 Transcript" ] at 42:1-4 (P. Milhouse).)

The jury also heard testimony that the Milhouses had obtained an estimate from a construction contractor, Clark Canright, placing the replacement cost of the home at approximately $922,000, not including " soft costs" like architectural fees and engineering. ( See, e.g., Aug. 16 Transcript at 67:16-70:22 (P. Milhouse); Dkt. No. 405 [" Aug. 19 Transcript, Vol. 1" ] at 71:18-72:21 (C. Milhouse).) Mrs. Milhouse explained that Mr. Canright, in forming his estimate, had undertaken action such as measuring a neighbor's similar home. (Aug. 16 Transcript at 69:2-21 (P. Milhouse).) Putting the Canfield bid in context for the jury, William Reid testified to the differences between the ACS estimate and the Canfield estimate, as well as the different assumptions made by the competing bids as to framing costs and supervisory costs that would be incurred in building the home. (Aug. 20 Transcript, Vol. 1 at 15:16-16:4 (Reid).)

Finally, the jury heard evidence about the market price at which the Milhouse home would have sold had it not been lost in the fire. Real estate appraisers placed the value of the home, excluding the land upon which it was built, at between $830,000 and over $1 million. (Aug. 13 Transcript at 138:13-22 (Chatfelter); Aug. 13 Transcript at 187:10-16, 196:6 (Ellis).) Further, Travelers itself had insured the

Page 1096

home at nearly $1,000,000, which the Milhouses' expert, Edward McKinnon, testified was a " red flag" that ACS's $692,000 estimate to replace the home was too low. (Aug. 19 Transcript, Vol. 2 at 165:25-168:1 (McKinnon).)

Weighing the competing expert opinions and estimates regarding the cost to replace the Milhouse home, and applying its own reasonable inferences as to the cost of building a home worth more than $1 million on the market, the jury reasonably could have found that the actual cash value of replacing the Milhouse home exceeded the dwelling coverage limits as amended by the ARCP Endorsement, even after subtracting its depreciated value. Because Travelers has not yet paid Dr. and Mrs. Milhouse the policy limit for their dwelling coverage, the jury reasonably found that Traveler's was in breach of its contractual obligations. [4] Based on the evidence presented at trial, the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.