Judgment Of Dismissal for Large Insurance Company

Walsworth attorneys Helen Luetto, Sadaf Nejat, and Marlene Flores recently obtained a judgment of dismissal for a client, a large insurance company, in an insurance bad faith case pending in Los Angeles County Superior Court after the client’s demurrer to the plaintiff’s operative complaint was sustained by the court without leave to amend-a rare win early in litigation given the strict rules for demurrers to complaints.

This lawsuit was based on the insurer’s partial denial of the plaintiff’s claim under a homeowners’ insurance policy for damages arising from a claim for water damage. Walsworth brought the demurrer on two grounds: first, that the pending action was barred by the doctrine of res judicata as the insured had already separately filed a small claims action which resulted in a minimal judgment in her favor for the same loss, and second, that the plaintiff was contractually time-barred from asserting a bad faith cause of action because she failed to file her action within one year of the date of loss as specifically required by the insurance policy.

The plaintiff argued that her bad faith claim did not arise out of the same primary right previously asserted in the small claims case. Instead, she claimed that the insurer had a “practice” of denying water claims regardless of merit and that that constituted a second primary right sufficient to survive demurrer. She also argued that the complaint was not time-barred because her insurance claim was never formally denied by the insurer, and as such, the contractual limitations period did not begin to run until the small claims judgment was paid, which occurred less than one year before plaintiff filed the bad faith action. In sustaining the demurrer without leave to amend, the court ultimately agreed with all of Walsworth’s arguments. Regardless of the insurer’s purported motives or decision regarding plaintiff’s claim, the plaintiff’s claimed damages from the alleged bad faith arose from the same contractual insurance policy rights claimed in the small claims case. The court also agreed that the plaintiff’s complaint was barred by the subject policy’s one-year contractual limitations period finding that the plaintiff admitted in her complaint that she was notified about the coverage decision more than one year before she filed her complaint and, in fact, filed her initial small claims action on that basis.

Congratulations to Helen, Sadaf, and Marlene for this major victory for the client in this case!