United States District Court, S.D. California
ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [Dkt. Nos. 123, 136.]
GONZALO P. CURIEL, District Judge.
Before the Court is Defendant Travelers Property Casualty Company of America's motion for summary judgment, or alternatively partial summary judgment as to claims brought against it by Plaintiffs La Jolla Spa MD, Inc. and Fay Avenue Properties, LLC. Plaintiff La Jolla Spa MD, Inc. filed an opposition. (Dkt. No. 128.) A reply was filed by Defendant. (Dkt. No. 133.) The Court finds that there are genuine issue of material fact whether the insurance policy was voided based on Plaintiff's failure to comply with the Examination Under Oath ("EUO") condition and violation of the concealment, misrepresentation and fraud provision in the insurance policy. After a review of the briefs, supporting documentation, and the applicable law, the Court DENIES Defendant's motion for summary judgment.
Plaintiffs Fay Avenue Properties, LLC ("Fay") and La Jolla Spa MD, Inc. ("LJS") filed a complaint against Defendant Travelers Property Casualty Company of America ("Travelers") on August 26, 2011. (Dkt. No. 1.) The Complaint alleges causes of action for breach of contract; breach of the implied covenant of good faith and fair dealing; fraudulent concealment; and negligence for Defendant's failure to pay under the insurance policy. (Id.) Plaintiff also seeks to recover punitive damages. (Id.)
As of September 18, 2009, Fay owned a two-story spa and medical facility located at 7630 Fay Avenue, La Jolla, California ("Fay Avenue property"). (D's Separate Statement of Undisputed Material Facts ("UF") 1.) During that time, Fay's sole member and owner was Dianne York-Goldman ("York"). (UF 2.) York was the CEO, President and owner of LJS. (UF 4.) LJS occupied the bottom floor of the Fay Avenue property, where it operated a spa and retail shop, as well as having two offices on the second floor of the Fay Avenue property. (UF 3.)
Travelers issued Policy Number I-680-5223M909-TIL-09 to Fay and LJS, which was effective July 1, 2009 through July 1, 2010 ("Policy"). (UF 5.) The Policy provides coverage for building, business personal property, and business income/extra expense losses (hereinafter "business income"), subject to certain terms, conditions, and exclusions. (UF 6.)
The claim giving rise to this suit emanates from York's divorce from Dr. Goldman. Prior to the divorce, the two owned multiple businesses, including Fay, LJS, Cosmetic Vein Surgery Center ("CVSC"), and Dermatology Cosmetic Laser Associates ("DCLA"). (UF 7.) CVSC and DCLA leased offices, exam rooms, and a surgical suite on the second floor of the Fay Avenue property. (UF 8.) Pursuant to the divorce settlement between York and Mr. Goldman signed on or about August 22, 2009, York was awarded Fay and LJS, while Dr. Goldman was awarded CVSC and DCLA. (UF 9.) The divorce judgment further provided:
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Respondent [Dr. Goldman] take as part of CVSC & DCLA, the equipment on the second floor of La Jolla Spa MD, including but not limited to the liposuction equipment, except for all equipment in the surgical suites, which includes the lights and anesthesia equipment and other fixtures attached to the building...
(UF 10.) The judgment also ordered Dr. Goldman to vacate the Fay Avenue property by December 31, 2009. (UF 11.) If he moved out before that date, he was to provide 30 days' notice. (Dkt. No. 128-10, LJS Exs., Ex. 8 at 45.)
On or about September 18, 2009, Plaintiff alleges that the Fay Avenue property was the subject of a large-scale theft ("Loss"), perpetrated by Dr. Goldman and his associates. (UF 12.) Four months later, on or about January 25, 2010, Plaintiffs Fay and LJS submitted their insurance claim ("Claim") to Travelers. (UF 13.) On February 22, 2010, Travelers' adjuster, Erin Farley ("Farley"), wrote a letter requesting documents including a "detailed inventory of the contents being claimed." (UF 15.)
In that letter, Farley stated that the coverage for business personal property was $2.1 million. (Dkt. No. 128-10, LJS Exs., Ex. 9.) On March 1, 2010, Farley and Travelers' representative Fabiana Greenwell met with York and Plaintiff's CFO Karin Wise ("Wise") at the Fay Avenue property. (UF 16.)
During March 2010, Plaintiff provided Farley with documents she requested in her February 22, 2010 letter. (Dkt. No. 128-10, LJS Exs., Ex. 17 at 335-500.) On March 29, 2010, Wise emailed Defendant an insurance claim spreadsheet detailing about 230 line items and asserting a claim valuation of $2.8 million. (Dkt. No. 123-11, Daza-Luu Decl, Ex. 13 at 110.)
On April 2, 2010, Travelers' outside coverage counsel, Alan Jones ("Jones") of Jones & Turner, wrote to Plaintiff, confirming that his firm had been retained to take Plaintiff's EUOs in connection with the Claim. (UF 19.) In that letter, Jones listed the topics that would be addressed at the examinations and requested a list of fourteen documents or category of documents to determine rights, obligations and to assess the amount of the covered loss. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 118.) Wise indicated that she would provide the documents by April 30, 2010. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 125.)
As a follow up to the documents, on May 7, 2010, and June 7, 2010, Jones wrote to Jennifer Hasso, ("Hasso") York's attorney, requesting the documents. (Dkt. No. 123-3, D's RJN, Ex. 1, Jones Decl. ¶¶ 4, 5 at 2; Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 125-28.) On June 14, 2010, Hasso forwarded some documents but the production was not complete as it specifically failed to address eight specific categories of documents in the April 2, 2010 letter. (Dkt. No. 123-3, D's RJN, Ex. 1, Jones Decl. ¶ 6.) On June 23, 2010, Jones sent another letter to York, through Hasso, specifically stating "many" documents were received but stated what documents were missing and also requested to schedule an EUO. (Dkt. No. 123-3, D's RJN, Ex. 1 at 2, Jones Decl. ¶ 7; Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 129.) On August 4, 2010, Steven Turner ("Turner") wrote a letter to York stating that he had not yet received the remaining documents and requested to have the documents a week prior to the EUO examination. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 131.) These documents were not received by the scheduled August 25, 2010 EUO. (Dkt. No. 123-3, D's RJN, Ex. 3, Turner Decl. ¶ 4 at 34.)
The first EUO was held on August 25, 2010. (Dkt. No. 123-13, Daza-Luu Decl., Ex. 16, EUO Vol. 1.) At the EUO, York testified that Wise, the CFO for both properties, prepared the March 29, 2010 inventory. (Dkt. No. 123-13, Daza-Luu Decl., Ex. 16, EUO Vol. 1 at 12:8-15.) In preparing the document, York and Wise walked through the entire building and itemized everything that was in the building. (Dkt. No. 123-13, Daza-Luu Decl., Ex. 16, EUO Vol 1 at 13:4-11.) According to Plaintiff, the inventory was what they were asked to give Travelers. (Id. at 13:12-14.) When asked whether the document listed all the losses and damages that were claimed, she responded that she didn't know and would have to go through it. (Id. at 13:15-18.) When asked again whether the document include all loses, York responded "I provided everything that was asked." (Id. at 14:8-14.) When Travelers stated it was still waiting for documents in categories, D, G, I, J, K, L, M, and N in the April 2, 2010 letter, York responded that she produced everything she had and she also asserted that she did not know if the document production was complete. (Id. at 72:1-7.) She stated she made a diligent search to produce the documents requested. (Id. at 72:17-25.) At the end of the EUO, the parties agreed to reschedule the EUO session and York's counsel would work on getting additional documents. (Id. at 169:15-25.)
On September 7, 2010, Turner wrote a follow up letter requesting that the additional documents be provided by September 30, 2010. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 132.) On October 1, 2010, Turner sent Hasso an email regarding the lack of response to his letter of September 7, 2010. (Dkt. No. 123-3, D's RJN, Ex. 3 at 48.) In a letter dated October 12, 2010, Hasso acknowledged receipt of the September 7, 2010 letter and stated that the additional documents would be provided no later than October 20, 2010 along with a confirmation that all documents responsive to the request have been produced. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 133.) On October 22, 2010, Turner wrote a letter to York, through Hasso, that he had not received the documents as promised in Hasso's letter. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 136.)
On November 8, 2010, Hasso emailed Turner apologizing for the delay and indicated she received all documents previously not produced per the April 2 letter. (Dkt. No. 123-11, Daza-Luu Decl., Ex 13 at 137.) On November 18, 2010, Turner visits Hasso's office and is provided with some documents. (UF 38.)
On January 25, 2011, the second EUO session was held. (UF 39.) At the EUO, the parties agreed that there were still outstanding documents and Hasso was going to make her best efforts to get those documents as quickly as possible. (Dkt. No. 123-13, Daza-Luu Decl., Ex. 17 at 167.) They agreed to suspend the EUO and reconvene as soon as Travelers received and reviewed the documents. (Id.)
At the conclusion of the EUO, Plaintiff asked for an advance as there was a $360, 000 note due on the Fay Avenue property. (UF 41.) On January 31, 2011, Travelers issued an advance payment of $250, 000. (Dkt. No. 123-11, Ex. 13 at 180.) York denied ever having received the payment but states she received funds from that check. (Dkt. No. 123-11, Ex. 13, York Depo. at 226:15-19; 227:1-5; 24-25.)
From January 26, 2011 to April 2011, Plaintiff produced additional sets of documents to Travelers. (UF 43.) On February 8, 2011, Plaintiff's new counsel Kenneth Fitzgerald, requested an additional advance from Travelers. (UF 44.) On February 9, 2011, Travelers denied the request for an additional advance payment because Travelers still did not have critical documents concerning the ownership and value of the claimed property. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 187.)
On April 7, 2011, April 8, 2011, and April 15, 2011, Turner asked Plaintiff for confirmation that all requested documents have been produced so that the third EUO session could proceed. (Dkt. No. 123-3, D's RJN, Ex. 3, Turner Decl. ¶¶ 16, 17, 19; Dkt. No. 123-3, D's RJN, Ex. 3, Turner Decl., Exs. 21, 22, 23.) On April 15, 2011, York stated in an email, "[y]es, there are more further documents, but these should not cause significant delay." (Dkt. No. 123-3, D's RJN, Ex. 3 Turner Decl., Ex. 24; Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 191-92.) She asked that the EUO proceed on April 22, 2011. (Id.) In that email, she also expressed concern that an unreasonable amount of time had gone by, about a year, since Turner was engaged by Travelers. (Id.) She stated that all material facts were revealed at the first two EUOs and that any further examinations were unnecessary and unreasonable. (Id.) She also suggested that a payment should be made as to those claims which are clearly not in dispute. (Id.)
On April 22, 2011, at the third EUO session, York produced a new box full of documents. (Dkt. No. 123-3, D's RJN, Ex. 3, Turner Decl. ¶ 21.) During the examination, York testified to the additional items that should have been part of the claim that were not on the original March 29, 2010 claim spreadsheet. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13, York Depo. at 244:9-15; Dkt. No. 123-14, Daza-Luu Decl., Ex. 18, EUO Vol. 3 at 331:21-334:13.) The EUO was suspended until additional documents could be provided. The parties also discussed Travelers' refusal to provide an additional advance. (Dkt. No. 123-14, Daza-Luu Decl., Ex. 18, EUO Vol. 3 at 360:4-362:11.) Fitzgerald emphasized that while Travelers did not have everything "perfectly organized", it had all the pictures showing equipment that was taken. (Id.) He stated that it is undisputed that twenty-nine lasers were taken and that the claim would be much more than the $250, 000 that was advanced. (Id. at 361-362.) Fitzgerald asserted there was no reason why Travelers could not make another advance payment. (Id.) Turner responded stating that they have been asking for documents for quite some time, are still getting documents, and are still getting additional claim items. (Id. at 360:4-24.) Therefore, since Travelers did not have a clear understanding of the Claim, it was unable to make another advance. (Id.)
On April 25, 2011, Fitzgerald sent an email to Turner asking for the equipment valuation consultant's spreadsheet that Travelers agreed to provide and where Plaintiff agreed to work off of to supplement Plaintiff's claim spreadsheet. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 190.) He also commented that the delay in moving the process is exacerbating York's financial distress. (Id.) In response, on the same day, Turner sent an email to Plaintiff's counsel asking her to complete a claims worksheet and to meet with Travelers' experts to identify "any additional information that is missing." (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 189.)
On April 27, 2011, Turner sent an email to Fitzgerald asking about the status of the inventory and to confirm the planned meeting with Travelers' experts. (UF 56.) York confirmed that a meeting between Plaintiffs and Travelers' experts never took place. (UF 57.) On the same day, Travelers sent a letter denying Plaintiff's request for an additional advance payment and asked Plaintiff to provide information necessary for Travelers to complete its claim investigation. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 201.)
On April 29, 2011, Plaintiff's counsel sent a revised claim inventory containing over 1000 line items. (Dkt. No. 123-12, Daza-Luu Decl., Ex. 13 at 2.) On May 4, 2011, York responded "yes" to Turner's email asking whether the revised spreadsheet represents an insurance claim to Travelers for the property damaged or taken by Mr. Goldman when he vacated the building in September 2009. (Dkt. No. 123-12, Daza-Luu Decl., Ex. 13 at 39.) At the 30(b)(6) deposition held on July 9, 2014, York stated that as she is now looking at the May 4, 2011 email, she should have answered "no" to Turner's question. (Dkt. No. 123-11, Daza-Luu Decl., Ex. 13 at 60, LJS Depo. at 264:19-266:10.) She stated that she was giving Travelers everything it asked for and stated that Dr. Goldman did not take or damage everything listed on the spreadsheet. (Id.)
On May 5, 2011, Plaintiff's counsel sent another revised claim inventory. (Dkt. No. 123-12, Daza-Luu Decl., Ex. 13 at 41.) On May 20, 2011, Tobi Blatt, Plaintiff's consultant, sent another revised claim inventory. (Dkt. No. 123-12, Daza-Luu Decl., Ex. 13 at 99.) On May 27, 2011, Farley responded to York's emails about delays stating that the May 20, 2011 revised claim inventory was still missing key information. (Dkt. No. 123-12, Daza-Luu Decl., Ex. 13 at 137.)
On June 2, 2011, Blatt emailed the latest or "final" claim inventory to Turner and stated that a complete binder with supporting documentation was being delivered to Turner's office. (Dkt. No. 123-12, Daza-Luu Decl., Ex. 13 at 147.) On June 6, 2011, Blatt requested information about the claim amount since York was working with a company to advance her money against the claim with Travelers stating that she sent the binder "with an itemized inventory of stolen property for approximately $13, 056, 220.01." (Dkt. No.123-15, Daza-Luu Decl., Ex. 22 at 20.)
On June 11, 2011, Farley denied Plaintiff's request for an advance payment. (Dkt. No. 123-3, D's RJN, Ex. 2 at 28.) On June 14, 2011, York responded to Farley's letter of June 11, 2011. (Dkt. No. 124-5, Brown Decl., Ex. 12 at 18.) In that email, York stated that she did not have all available documents when she submitted the prior worksheets and it was not until about two weeks ago, after reviewing thousands of documents that she was able to submit "all of the inventory in the format you requested detailing each item." (Id.)
On July 12, 2011, York appeared at the fourth EUO session. (Dkt. No. 123-13, Daza-Luu Decl., Ex. 14, York Depo. at 150:7-9.) At the fourth EUO session, York testified that the June 2, 2011 inventory was her insurance claim document seeking reimbursement for each item listed in the document as items stolen by Dr. Goldman or his associates on or before September 2009. (Dkt. No. 123-14, Daza-Luu Decl., Ex 19, EUO Vol. 4 at 372:14-374:3.) At the end of the day, the parties agreed to continue the EUO to July 18, 2011 but with reservations by Mr. Fitzgerald stating that he was not happy they were not finished and that many questions were asked that did not seem relevant to the claim and all the while York has been forced to file bankruptcy to avoid foreclosure. (Dkt. No.123-14, Daza-Luu Decl., Ex. 19, EUO Vol. 4 at 602:3-24.)
On July 20, 2011, Farley denied Plaintiff's request for an advance and asked that the parties complete the EUO. (UF 76.) Due to scheduling conflicts, the parties rescheduled the fifth EUO session from July 18, 2011 to August 4, 2011. (Dkt. No. 123-3, D's RJN, ...