1260 BB PROPERTY LLC V. CERTAIN UNDERWRITERS AT LLOYD’S AND LONDON MARKET COMPANIES, ETC., ET AL
1260 BB PROPERTY LLC V. CERTAIN UNDERWRITERS AT LLOYD’S AND LONDON MARKET COMPANIES, ETC., ET AL
Case Number
23CV00285
Case Type
Hearing Date / Time
Wed, 03/12/2025 - 10:00
Nature of Proceedings
1) Mtn for Summ Adj re increased ins premiums; 2) Mtn for Summ Adj re Coral Casino Membership Fees; 3) Mtn for Summ Adj re Interest; 4) Mtn for Summ Adj of the 10th, 11th Affirmative Def; 5) MSJ; 6) Mtn for Summ Judgment or Alt Adj of 3rd Cause of Action
Tentative Ruling
Jared M. Katz of Mullen & Henzell LLP and Gregory J. Scandaglia / Therese L. Tully / Eric J Muñoz / Joseph R. Swee / Samuel C. Halter of Scandaglia Law LLP (Chicago) for plaintiff 1260 BB Property, LLC
Tyler M. Costanzo of Clausen Miller P.C. (Mission Viejo) and Sava Alexander Vojcanin / Charles W. Deutsch of Clausen Miller P.C. (Chicago) for all defendants other than Liberty Mutual.
Nicholas J. Boos of Maynard Nexsen LLP for defendant Liberty Mutual Fire Insurance Company.
RULINGS
For the reasons more fully articulated below:
(1) The motion for summary adjudication re increased insurance premiums is denied as improper under California law; and
(2) The motion for summary adjudication re Coral Casino membership fees is denied as improper under California law; and
(3) The motion for summary adjudication re interest is denied as improper under California law; and
(4) The motion for summary adjudication re the number of occurrences is denied as improper under California law; and
(5) The motion by all defendants other than Liberty Mutual for summary judgment is continued to April 23, 2025, on the court’s own motion; and
(6) The motion by Liberty Mutual for summary judgment or alternate adjudication is continued to April 23, 2025, on the court’s own motion.
BACKGROUND
On January 23, 2023, plaintiff 1260 BB Property, LLC (“plaintiff”) filed its complaint against multiple entity defendants. The complaint contains four causes of action for: (1) Breach of Contract; (2) Declaratory Judgment against primary insurers; (3) Declaratory Judgment against excess insurers; and (4) Breach of the Implied Covenant of Good Faith and Fair Dealing.
As alleged in the complaint: Plaintiff is the owner of the Four Seasons Resort the Biltmore Santa Barbara. (Complaint, ¶ 2.) The hotel was insured under insurance policies procured by Four Seasons Hotel Ltd. for a policy period of April 1, 2017, to April 1, 2018. (Ibid.) During the policy period, the hotel suffered substantial property damage and economic loss from the Thomas Fire and the ensuing debris flow and mudslide totaling in excess of $64,000,000.00. (Ibid.) On the claims related to the fire, plaintiff suffered in excess of $6,700,000.00 in insured losses, of which certain defendant insurers have paid $5,953,000.00 but have refused to pay in excess of $793,000.00. (Id., at ¶ 3.) On the claims related to the mudslide, plaintiff suffered in excess of $58,000,000.00 in insured losses, of which certain defendants responsible for the first layer of primary insurance of $50,000,000.00 have paid $46,670,264.00. (Id. at ¶ 4.) The excess insurers have refused to pay any amount of the losses above the $50,000,000.00 primary policy limits. (Ibid.) Attached to the complaint as Exhibits B through M are copies of relevant insurance policies related to the claimed losses.
In December 2024, multiple motions for summary judgment and for summary adjudication were filed. Defendant Liberty Mutual Fire Insurance Company (Liberty Mutual) filed a motion for summary judgment and for alternate adjudication of the third cause of action for declaratory judgment, fourth cause of action for breach of the implied covenant of good faith and fair dealing, and punitive damages. All defendants other than Liberty Mutual jointly filed a motion for summary judgment, and four motions for summary adjudication.
On its own motion, the Court will continue the hearings on (1) the Liberty Mutual motion for summary and alternate adjudication, and (2) the motion by all defendants other than Liberty Mutual for summary judgment, to April 23, 2025.
The Court will proceed to address the motions for summary adjudication filed by the defendants other than Liberty Mutual.
MOTIONS FOR SUMMARY ADJUDICATION
The motions for summary adjudication seek adjudication of the following:
Motion for summary adjudication re increased insurance premiums: The moving defendants seek summary adjudication that: 1260 BB’s claimed increase in insurance premiums is not an “Extra Expense” or a “Soft Cost” as defined by the policies.
Motion for summary adjudication re Coral Casino member ship fees: The moving defendants seek summary adjudication of:
(1) 1260 BB’s loss of income related to the suspended Coral Casino Club membership dues was not caused by physical loss or damage; rather it was caused by a voluntary and gratuitous gesture made by 1260 BB to accommodate its members. Thus, this element of 1260 BB’s claim is not covered under the Policies’ Business Interruption coverage.
(2) 1260 BB’s decision to suspend and/or refund the dues was not “necessary,” and the loss of income does not meet the Policies’ definition of “Extra Expense.”
Motion for summary adjudication re interest expense: The moving defendants seek summary adjudication that: 1260 BB’s claim for interest expense does not meet the Policies’ definition of “soft Cost;” therefore, 1260 BB’s claim for interest is not covered under the Policies.
Motion for summary adjudication re number of occurrences: The moving defendants seek summary adjudication of the following:
(1) The 20177 Wildfire and 2018 Mudslide were separate “Occurrences” as defined by the Policies, and each Occurrence is subject to a separate deductible and application of the limits and sublimits in the Policies. Thus, this Court should enter judgment in favor of Insurers on their Tenth Affirmative Defense.
(2) 1260 BB’s claim for losses related to the 2019 Evacuation Orders are barred because such losses constitute a separate occurrence arising after the expiration of the Policies. Thus, this Court should enter judgment in favor of Insurers on their Eleventh Affirmative Defense.
The Tenth Affirmative Defense provides:
As a separate affirmative defense, Defendant alleges that Plaintiff’s claims for losses related to wildfire and mudslide losses each constitute a separate occurrence as defined under the Policy. Each occurrence is subject to a separate deductible and application of the limits and sublimits set forth in the Policy. The Policy defines “Occurrence” in relevant part as follows:
7. Definitions
a). Occurrence Clause
The term “occurrence” shall mean any one loss, disaster, casualty or series of losses, disasters, or casualties, arising out of one event. When the term applies to loss or losses from the perils of tornado, cyclone, and/or wind, windstorm, hail, flood, earthquake, landslide, volcanic eruption, riot, riot attending a strike, civil commotion, theft, vandalism and malicious mischief one event shall be construed to be all losses arising during a continuous period of 168 hours unless otherwise stated. When filing proof of loss, the Insured may elect the moment at which the 168 hour period shall be deemed to have commenced, which shall not be earlier than the first loss to the covered property occurs.
* * *
c). Landslide
Landslide shall include rockslide and mudslide and any earth sinking, rising, or shifting related to such event.
The Eleventh Affirmative Defense provides:
As a separate affirmative defense, Defendant alleges that Plaintiff’s claims for loss related to evacuation orders occurring after April 17, 2018, are barred because such losses constitute occurrences arising after the expiration of the defendant’s Policy.
OPPOSITIONS
In opposition to each of the first three motions for summary adjudication (related to increased insurance premiums, Coral Casino Club membership dues, and interest expense), plaintiff opposed the motion on the ground that none of these are proper subjects of summary adjudication under California law. Out of an apparent abundance of caution, 1260 BB proceeded to further oppose each motion on its merits.
In opposition to the fourth motion (related to the number of occurrences), 1260 BB objects that the motion must be denied, because defendants have not pled a proper affirmative defense that can be disposed of through summary adjudication under Section 437c(f), since an affirmative defense must not merely controvert the original cause of action, but must serve as a complete defense to plaintiff’s cause of action (Cahill Bros., Inc. v. Clementine Co. (1962) 208 Cal.App.2d 367, 385-386), and neither of these affirmative defense does so. Further, while the adjudication might have been appropriate under Code of Civil Procedure section 437c(t), moving defendants failed to follow the procedures required to do so, including obtaining plaintiff’s consent—which it will not provide.
REPLYS
In their reply related to the motion to summarily adjudicate the issue of increased insurance premiums, the moving defendants respond to the objection to the propriety of summary adjudication of this issue, by contending that they are entitled under Code of Civil Procedure section 437c(f)(1) to adjudicate affirmative defenses, and each of their twelfth Affirmative Defenses is that “1260 BB’s claim for “Extra Expense” is barred or limited.” They therefore conclude the court has authority hear and rule on the motion.
In their reply related to the motion to summarily adjudicate the issue of Coral Casino Club membership fees, the moving defendants respond to the objection to the propriety of summary adjudication by contending that they are entitled under Code of Civil Procedure section 437c(f)(1) to adjudicate affirmative defenses, and each of their Twelfth Affirmative Defenses provide that “1260 BB’s claim for “Extra Expense” is barred or limited,” and each of their Fourth Affirmative Defenses provide that 1260 BB’s claim for loss of income is “barred or limited to the extent Plaintiff’s claimed losses, including those associated with the suspension of casino membership dues, do not meet the Policy’s definition of Business Interruption losses. . . .” They therefore conclude the court has authority hear and rule on the motion.
In their reply related to the motion to summarily adjudicate the issue of interest expense, the moving defendants respond to the objection to the propriety of summary adjudication by contending that they are entitled under Code of Civil Procedure section 437c(f)(1) to adjudicate affirmative defenses, and each of their Fifth Affirmative Defenses is that “Plaintiff’s claim for ‘Soft Costs’ and ‘Interest Expense’ is barred or limited to the extent Plaintiff’s claimed damages do not meet the definition of ‘Soft Costs’ and/or ‘Interest Expense’ set forth in the Policy . . . .” They therefore conclude the court has authority to hear and rule on the motion.
In their reply related to the motion to summarily adjudicate the Tenth and Eleventh Affirmative Defenses related to the number of occurrences, the moving defendants argue that if these affirmative defenses were not proper under California law, plaintiff’s recourse was to timely file a motion to strike or a demurrer, and that objecting at this time is insufficient to defeat the motion.
ANALYSIS
Each of the motions for summary adjudication is denied as improper, since each seeks adjudications which are not permitted under California law.
1. Law Regarding Summary Adjudication in California.
Pursuant to Code of Civil Procedure section 437c provides, in relevant parts:
(f)(1) A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.
* * *
(p)(2) A defendant or cross-defendant has met that party’s burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or defense thereto. . . . [Emphasis added.]
As expressly specified in Section 437c(f)(1), items of claimed damage may only properly be the subject of a summary adjudication motion if the motion seeks to find that there is no merit to a claim for punitive damages under Civil Code section 3294. In Decastro West Chodorow & Burns v. Superior Court (1996) 47 Cal.App.4th 410, 419-421, the defendant attempted to summarily adjudicate a plaintiff’s claim for damages for an alleged lost business opportunity. In that case, the Court of Appeal affirmed the trial court’s denial of the motion, based upon the inability to summarily adjudicate an item of damages other than punitive damages since it would not completely dispose of a cause of action. In doing so, it found that the reference in subdivision (f)(1) to “one or more claims for damages” is “qualified by, and limited to, punitive damages.” (Decastro West Chodorow & Burns v. Superior Court, supra, 47 Cal.App.4th at p. 421.) As a result, Section 437c(f)(1) does not permit summary adjudication of a single item of compensatory damage which does not dispose of an entire cause of action, and a motion which seeks to do so is properly denied. (Id. at p. 422.)
Under the express authority of Section 437c(f)(1), the only way to directly summarily adjudicate an affirmative defense is to make a motion which contends that the affirmative defense has no merit. (Code Civ. Proc., § 437c(f)(1).) If a defendant wishes to make a motion for summary adjudication based upon one of its own pleaded affirmative defenses, that defendant may do so only if the defendants shows that it constitutes a complete defense to a cause of action. (See California Summary Judgment (Cal CEB), § 2.21 [Individual affirmative defense].)
2. Defendants’ motions related to increased insurance premiums, Coral Casino Club membership dues, and interest expenses all impermissibly seek to adjudicate individual components of plaintiff’s damage claims, requiring that the motions be denied as improper under California law.
Each of the first three motions improperly seeks to summarily adjudicate the propriety of an individual item or component of the damages claim made by plaintiff in this action. As such, they are improper under both Section 437c(f)(1) and Decastro, supra.
Contrary to defendants’ claims made in their reply papers, the fact that they have pleaded as “Affirmative Defenses” challenges to certain components or individual items of plaintiff’s claimed damages, does not transform that which is clearly an improper motion to summarily adjudicate an item of damages (other than punitive damages, which can permissibly be the subject of a summary adjudication motion) to one to summarily adjudicate an “affirmative defense,” within the meaning of Section 437c(f)(1).
As noted above, under the express terms of Section 437c(f)(1) the only way to directly seek summary adjudication of an affirmative defense is a motion which seeks to establish that it has no merit. Because of that statutory limitation, a defendant may only seek summary adjudication of its own pleaded affirmative defense if its motion seeks to show that the affirmative defense constitutes a complete defense to a cause of action. That is clearly not the case with these motions, which seek to adjudicate only individual components or elements of plaintiff’s damage claims in this action, which is impermissible under the express terms of Section 437c(f)(1).
Further, while summary adjudication of an element of damages may be permissible under the terms of Section 437c(t), none of defendants’ motions were filed in compliance with the strict requirements of that section. No stipulation of the parties and no declaration of stipulating parties supporting the filing of such a motion has been submitted, nor has this Court provided permission for the filing of the motion.
Because each of these motions was filed in contravention of California law, they must be summarily denied, in seeking adjudications which are impermissible under California law.
3. The motion for summary adjudication of the Tenth and Eleventh “Affirmative Defenses” is likewise improper, because the matters raised therein merely controvert.
Unlike the other three motions for summary adjudication, the motion for summary adjudication regarding the number of occurrences does not directly seek to adjudicate an element of plaintiffs’ damage claim, although the requested adjudications would certainly have impacts on plaintiffs’ total damages. Also, unlike the other three motions, this motion appears to directly seek adjudication of two of the defendants’ pleaded affirmative defenses. However, just as is true with the other summary adjudication motions, even the quickest glance at those defenses discloses that they merely controvert claims and/or allegations made by plaintiff in this action, and in spite of their pleading as such, do not truly constitute “affirmative” defenses within the meaning of Section 437c(f)(1), requiring that the motion be summarily denied because it seeks adjudications which are not permissible under California law.
As noted above, plaintiffs’ FAC, although detailed and lengthy, separately alleges only four causes of action: (1) Breach of contract (against primary insurers); (2) Declaratory judgment (against primary insurers); (3) Declaratory judgment (against excess insurers); and (4) Breach of the implied covenant of good faith and fair dealing (insurance bad faith) against all defendants.
As also articulated above, the first adjudication sought by the motion is that “the 2017 Wildfire and 2018 Mudslide were separate “Occurrences” as defined by the Policies, and each Occurrence is subject to a separate deductible and application of the limits and sublimits in the Policies. Thus, this Court should enter judgment in favor of Insurers on their Tenth Affirmative Defense.” The requested adjudication is essentially a restatement of the Tenth Affirmative Defense, which also proceeds to set forth the Policy definitions of an “occurrence.”
This requested adjudication does not claim that any of the events did not constitute an “occurrence” within the meaning of the policies at all, such that there could be any claim that the adjudication would constitute a complete defense to a cause of action. Rather, it only seeks to parse plaintiff’s claim for damages against each of the moving defendants, by contending that plaintiff’s damages should be reduced by the amount of a second deductible for claims arising from the wildfire and from the mudslide, and subject to additional limits or sublimits set forth in the policies.
The second adjudication sought by the motion is that “1260 BB’s claim for losses related to the 2019 Evacuation Orders are barred because such losses constitute a separate occurrence arising after the expiration of the Policies. Thus, this Court should enter judgment in favor of Insurers on their Eleventh Affirmative Defense.” This is a recharacterization of the actual Eleventh Affirmative Defense, which provides: “As a separate affirmative defense, Defendant alleges that Plaintiff’s claims for loss related to evacuation orders occurring after April 17, 2018, are barred because such losses constitute occurrences arising after the expiration of the defendant’s Policy.”
Given the manner in which the FAC is alleged, the requested adjudication, if granted, would not constitute a defense to any cause of action alleged by plaintiff, and would instead only eliminate but a portion of the damages which plaintiff alleges it has sustained arising from defendants’ conduct.
As noted above, under the express terms of Section 437c(f)(1) the only way to directly seek summary adjudication of an affirmative defense is a motion which seeks to establish that it has no merit. Because of that statutory limitation, a defendant may only seek summary adjudication of its own pleaded affirmative defense if its motion seeks to show that the affirmative defense constitutes a complete defense to a cause of action. That is clearly not the case with this motion.
Further, because defendants’ motion failed to comply with the strict requirements of Section 437c(t), it cannot proceed under that provision, and is therefore limited to proceeding under Section 437c(f)(1)—under which it is also impermissible.
Because this motion, like the others discussed above, was filed in contravention of California law, it must be summarily denied, in seeking adjudications which are impermissible under California law.