Capitola complaint

Document Sample
Capitola complaint Powered By Docstoc
					                         Joel P. Gumbiner (State Bar No. 111586)
                         GUMBINER & ESKRIDGE LLP
                         2950 Buskirk Avenue, Suite 300
                         Walnut Creek, California 94597
                         Telephone:    (925) 933-5800
                         Facsimile:    (925) 933-5837
                         Email: Joel@insuredlaw.com


                         Attorneys for Plaintiff
                         City of Capitola




                  10

                                                       SUPERIOR COURT OF CALIFORNIA
                  II

                  L1                     COUNTY OF SANTA CRUZ - UNLIMITED JURISDICTION

                  n      CITY OF CAPITOLA,                         )    Case No.:
                  i -i                   Plaintiff,                 )   COMPLAINT FOR DAMAGES:
                  15                                               )     1. BREACH OF INSURANCE
                                 v.                                )        CONTRACT AGAINST
                  16                                               )        DEFENDANT INSURER;
                         LEXINGTON INSURANCE                       )     2. BREACH OF COVENANT OF
                  17     COMPANY, and DOES 1 through 100,          )        GOOD FAITH AND FAIR
                         inclusive,                                )        DEALING AGAINST
                  18                                                        DEFENDANT INSURER
                                                                   )
                                         Defendants.               )
                  19

                  20

                  21
                                 Plaintiff, City of Capitola ("Plaintiff) by and through their legal counsel, Gumbiner and
                         Eskridge, LLP, complain against defendant Lexington Insurance Company and Does One
                         through Twenty-Five, ("Defendants"), inclusive, as follows:


                  25
                                                         I. INTRODUCTION / PARTIES

                  26
                                 1.     This case arises out of the sudden rupture of a subterranean pipe running below a
                         mobile home park located in, and owned by, the City of Capitola on or about March 24, 2011.
                  27

                         The pipe was made of corrugated metal and was attached in 1963 to a pre-existing concrete
                  28
GUMBINER
& ESKRIDGE LLI»                                                          1
                  ]
                             culvert under Bay Avenue in the City of Capitola. The inlet of the Bay Avenue concrete culvert
                  2
                             was located at the upstream (east side) limit of Bay Avenue. The outfall of the Bay Avenue
                  3
                             concrete culvert was located approximately 20 feet downstream (west side) of Bay Avenue. The
                  4
                             corrugated metal pipe (CMP) that was placed into what had been the Noble Creek drainage
                  5
                             channel, and connected to the Bay Avenue culvert in 1963, ran underground approximately 1000
                  6
                             feet beneath the entire length of the City's mobile home park.
                  7
                                    2.      At approximately 4:15 pm on March 24 2011, the corrugated metal pipe (CMP)
                             was caused to separate from the concrete culvert just after a 1.5 hour winter rain. Drainage water
                             that flowed in the Noble Creek channel upstream of Bay Avenue, and then through the Bay
                      10
                             Avenue culvert, discharged directly into the ground at the outfall of the culvert once the CMP
                      11
                             broke away from it. That water, no longer picked up by the broken and separated pipe, flowed
                      IJ
                             directly into the ground below the City's mobile home park.
                      I ',
                                    3.      Immediately thereafter, the water exiting the culvert created a sinkhole allowing
                      I)     the water to come up through the ground. Nearly simultaneously with the pipe break, water
                      15     began running through the mobile home park damaging mobile homes in its way including three
                      In
                             owned by Plaintiff. As the water flowed out of the City-owned mobile home park, and onto City
                  17         Hall property it entered and damaged the City's Police Building and then flowed into the streets
                      is     of Capitola. In the very next rain, the water again flowed through the City's mobile home park
                      19     and onto the City Hall property causing additional damage to City owned coaches and structures
                  20         and additional damage to the City Hall building, all of which has been repaired by the City at its
                  21         own expense.

                  22                4.      All the March, 2011 damage described herein was to City owned property

                  2;         (hereinafter referred to as the "Property") insured under the Policy.

                  24                5.      At all times mentioned herein, Plaintiff City of Capitola was a General Law city in

                  2~<        the State of California, County of Santa Cruz, and was an insured party under the subject

                  26
                             insurance Policy.

                  27


                  28           COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
COMBINER                       DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE Li.i                              DEALING AGAINST DEFENDANT INSURER
                  1
                               6.      At all times mentioned herein Plaintiff is informed and believes that Defendants
                  1
                        LEXINGTON INSURANCE COMPANY, and DOES ONE through TWENTY FIVE
                  3
                        (hereinafter "Defendants" or ""Lexington"), were entities whose precise legal form (corporation,
                  4
                        partnership, sole proprietorship, unincorporated association) are unknown to Plaintiff. DOES
                  5
                        TWENTY SIX through ONE HUNDRED are individuals or business entities of unknown origin
                  6
                        whose actions are legally and proximately responsible for Plaintiffs damages.
                  7
                               7.      Plaintiff does not know the true names or capacities, whether individual,
                  8
                        corporate, associate or otherwise, of the Defendants sued herein as DOES ONE through ONE
                  9
                        HUNDRED, inclusive, and therefore sue said Defendants by such fictitious names. On
                  in
                        information and belief, said DOE Defendants have acted improperly, jointly and severally, so as
                  11
                        to cause injury to, and damage to, Plaintiff as herein alleged. Plaintiff prays leave to amend this
                  12
                        complaint to show their true names and capacities when ascertained.
                  13
                                8.     At all times herein mentioned, each Defendant was the agent, representative,
                  I I
                        servant, employee, principal, affiliate, subsidiary, management company and/or joint venturer of
                  15    each of the other Defendants and was acting within the course and scope of said agency,
                  16    representation, service, employment, affiliation, corporate relationship, joint venture, with the
                  17    authority, permission and/or consent of the other defendants.
                  18
                                                II. PLAINTIFF'S INSURANCE COVERAGE
                  i'i
                               9.      Plaintiffs Property was insured by Defendants under a program entitled Public
                  20
                        Entity Property Insurance Program (PEPIP). Under the PEPIP, the primary insurer was Lexington
                  .'I
                        under an insurance Policy Number P101654-104 (hereinafter the "Policy").        The named insured
                  22
                        under the Policy was the Monterey Bay Area Self Insurance Authority (MBASIA), which is an
                  23
                        entity comprised of seven cities, one of which is City of Capitola. The Policy specifically names
                  24
                        the seven cities comprising MBASIA, each as additional insureds. At all times relevant, the
                  25
                        premiums for Policy were paid and the insurance under Policy was in place.
                  26

                  27

                  28      COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                  DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLI-                         DEALING AGAINST DEFENDANT INSURER
                                   10.     Policy "insures all property of every description of an insurable nature, both real and
                         personal (including improvements, betterments and remodeling), of the Insured" up to a limit of
                         $25 million. Specifically, coverage under Policy provided: "Subject to the terms, conditions and
                         exclusions stated elsewhere herein, this Policy provides insurance against all risk of direct physical
                         loss or damage occurring during the period of this Policy." Plaintiff expected and intended, and
                         Policy terms provided, that Policy covered all of the City's real and personal property against all
                         risks of loss except those causes specifically excluded.
                                   11.     Policy coverage for "Unscheduled Tunnels, Bridges, Dams, Catwalks (except those
                         not for public use), Roadways, Highways, Streets, Sidewalks, Culverts, Street Lights and Traffic
                  Id
                         Signals         " had an applicable sublimit of $500,000 and a deductible of $500,000.
                  Ii
                                   12.     Policy also contained the following exclusion:
                  II'
                                            "...the following Exclusion is added to the Policy:
                  13
                                           "Flood, meaning a general condition of partial or complete inundation of normally
                  I 1                      dry land area from:

                  15                       a) Overflow of inland or tidal water;
                  16
                                           b) Unusual and rapid accumulation or run off or surface waters from any source."
                  17

                                                       III. PLAINTIFFS' INSURED LOSSES
                  18
                                   13.     On March 24, 2011, at approximately 2:00 pm, it started raining in Capitola.
                  19

                         Approximately 3:30 pm, the rain stopped. There is no evidence that at any time on March 24,
                  20
                         any rain water that fell on the ground resulted in any "unusual or rapid accumulation of run off or
                  21
                         surface waters" prior to the water entering drains and catch basins that were designed to drain
                         water when it rains in Capitola. On March 24, 2011, the water from the hour and a half rainfall
                  2.'.
                         flowed, as usual, into drains and catch basins in the streets of Capitola which fed into the Noble
                  24
                         Creek channel.
                  25
                                   14.     The Noble Creek channel is and was a natural drainage channel that runs through
                  26
                         the City of Capitola, and carries rainwater generally south to the Pacific Ocean. Some portions of
                  2"


                  28       COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                   DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                          DEALING AGAINST DEFENDANT INSURER
                        the Noble Creek Channel exist in its natural state as an open channel creek. Some portions of the
                        Noble Creek Channel have been replaced with closed pipes. Where the creek channel intersects
                        with streets and roads in Capitola, culverts constructed below them carry water from the upstream
                        side of the road or street to the downstream side.
                                15.    At approximately 4:15 pm on March 24, 2011, within an hour of the end of the
                        rains on that day, the corrugated metal pipe (CMP) attached to the concrete culvert running
                        beneath Bay Avenue, broke and became separated from the culvert.
                                16.    Just after 4:15 pm on March 24, 2011, water from the culvert, unable to enter the
                        broken CMP, flowed up through ground and flowed through the mobile home park damaging
                  in
                        three mobile homes and restrooms owned by the Plaintiff, City. At approximately 4:30 pm, water
                  H
                        flowed out of the mobile home park and onto the adjacent City property and entered Plaintiffs
                  12
                        Police Building damaging it as alleged above. In the next rain, water flowing out of the Bay
                  i ;   Avenue culvert again flowed through the City's mobile home park and onto the adjacent City
                  i-i   property causing additional damage to City owned coaches and structures and additional damage
                  L5    to the City Hall building, all of which damage has been repaired by the City at its own expense.
                  16            17.    The total cost to repair the damage to Plaintiffs insured Property from the March,
                  17    2011 occurrence exceeded $2 million and has been paid entirely by Plaintiff.
                  IS
                                                  IV. THE SUBJECT INSURANCE CLAIM
                  I"
                                18.    Shortly after the damage that occurred on March 24, 2011, Plaintiff reported the
                  20
                        losses to Defendants, Plaintiffs insurers. Defendants appointed McLarens Young International
                  21
                        in San Francisco (McLarens) as its agent for purposes of managing Plaintiffs claim. McLarens
                  22
                        made a cursory investigation of the claim and initially helped the City in its move and in helping
                  23
                        to arrange for repairs. However, in July, 2011 McLarens wrote to Plaintiff and cited numerous
                  21
                        Policy exclusions that would preclude Lexington from paying the claim.
                  25

                  26

                  27

                          COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                  DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                         DEALING AGAINST DEFENDANT INSURER
                                 19.      On September 24, 2011, Daniel Baines, Manager - Property Claims for
                          Lexington, with copy to Paul Hine, Senior Vice President -Property Claims for Lexington,
                          denied Plaintiff Capitola's claims citing the following reasons:
                                          a)      with respect to the City's water damaged City Hall / Police Building, Mr.
                                       Baines called the loss a "flood" as it is defined in the "flood exclusion":
                  6
                                                   i.     "The storm water that escaped from the failed storm drain culvert
                  7
                                                          flooded the first floor of the City Hall building which houses the
                  8
                                                          Police Department and the Council Chamber             All of these
                                                          areas sustained flood damage" (emphasis added)
                  9
                                                   11.    "The City of Capitola issued a press release concerning the flood
                  in
                                                               ....storm drain failed.. .flooding the Pacific Cove Mobile
                      I
                                                               Home Park and portions of Capitola Village....Flooding
                  12
                                                               continued through the Park and to Capitola Avenue causing
                                                               flooding of the Police Department (emphasis added)
                  13
                                                   in.    "URS determined that the failure (of the pipe) was likely caused
                  I I                                     by 'hydrostatic pressure generated from the high flow at the
                                                          culvert junction' which was estimated to be 500 cubic feet per
                  15
                                                          second. URS noted that Santa Cruz County calculated that this
                  16
                                                          flow would have resulted from an approximate '25 year storm.'
                                                          URS also concluded that 'debris in the water flow may have
                  17                                      caught the edge of the CMP at the junction, causing the CMP to
                                                          fold, thereby significantly impeding the flow of stormwater
                  18                                      through the storm drain system."
                  19                               IV.    "The circumstances of this loss fall squarely within the flood
                                                          definition because the insured's own expert, URS, concluded
                  211
                                                          that the storm drain culvert failed a as a result of an increase in
                  21                                      hydrostatic pressure, which resulted from a severe rainstorm, i.e.
                                                          flood. Thus, coverage would not apply to any damage resulting
                  22                                      from flood, including the portion of the insured's claim for
                                                          damage to the City Hall/Police Department Building..."
                  23                                      (emphasis added)
                  24
                                          b)      With respect to the City's CMP that broke on March 24, 2011 Lexington
                  25
                                       excluded coverage for that citing exclusion for declared disasters (which was not
                  26

                  27

                  28       COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER
                           DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP>
                                         DEALING AGAINST DEFENDANT INSURER
                                     factually applicable) and by calling the CMP a "culvert" in order to apply a deductible
                                     larger than the claimed amount:

                                                i.         "It is our understanding that the City has replaced the damaged
                                                           portion of the CMP with a stronger concrete pipe.. .in the amount
                                                           of $484,319.29. ...Even if this expense would otherwise be
                                                           covered under the policy (though the exclusion for F.E.M.A. or
                                                           O.E.S. declared disasters would appear to be applicable), no
                                                           payment is owed by Lexington because the repair costs does not
                                                           exceed the $500,000 deductible for Unscheduled Culverts.

                               20.       On November 3, 2011, Robert Frey of Alliant, Plaintiffs insurance broker, wrote
                        to Lexington to explain why the denial of Plaintiff s claim was inappropriate:
                  in
                                        a)          With respect to Capitola's water damaged City Hall / Police Building, Mr.
                  11
                                        Frey explained to Lexington that:
                  12

                                               i.          the water entering the building was not "flood" as defined in the
                  I 1
                                                           Policy exclusion for "flood"
                  14
                                              ii.          Excluded "Flood" under Policy is the "inundation of a normally
                  r>                                       dry land area" from "surface waters" which term has been
                                                           specifically defined by the California Supreme court:
                  16
                                                              "California Supreme Court found that surface waters were
                  I,
                                                              "those falling upon, arising from and naturally spreading
                  18
                                                              over the land produced by rainfall, melting snow or springs
                                                              and naturally spreading over the lands. Further they are
                  19                                          surface waters until they percolate through the ground or
                                                              flow vagrantly over the surface of the land into well defined
                  20                                          watercourses or streams"
                  21
                                        b)          With respect to the pipe that broke on March 24, Mr. Frey again made
                  22
                                     clear that plaintiffs expert URS did not maintain that that pipe was a "culvert." The
                  23
                                     broken CMP was not a "culvert" even under the definition of the term as cited by
                  24
                                     defendants.
                  25

                  26

                  27

                  28      COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                  DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                         DEALING AGAINST DEFENDANT INSURER
                  I
                               21.     On December 8, 2011, Mr. Baines of Lexington, responding to Mr. Prey's letter,
                  2
                        maintained that the "flood exclusion" precluded coverage for the City's damaged building
                  3
                        because a "flood" broke the pipe and that the CMP attached to the concrete Bay Avenue culvert
                  1
                        was itself a "culvert" subject the $500,000 deductible:
                  5
                                       a)     With respect to City's water damaged building, Mr. Baines altered
                  6
                               Lexington's position away from the water entering the City Building as being a "flood"
                  7
                               and reiterated that the loss was excluded because "heavy rainfall" alone comes within the
                  8
                               definition of "flood" under the Policy:
                  M
                                       i.     "Thus, it appears that the immense amount of pressure from the flow of
                  in                          water caused the CMP to disconnect from the concrete culvert at its
                                              junction. Again, this conclusion points to heavy rainfall as the
                  11
                                              proximate cause of the loss" (emphasis added)
                  12
                                       ii.    cited to the California Supreme Court cases discussing insurance
                  13                          coverage when there are multiple "concurrent causes" of a single loss, at
                                              least one of which is covered and one of which is excluded under a first
                  1 I                         party property policy. He cited California Supreme Court cases of
                                              Garvev v. State Farm (1989) 48 Cal.3d 395 and Sabella v National
                  15
                                              Union Fire Ins. Co. (1963) 27 Cal. 689, that there must be a
                  16
                                              determination as to which of concurrent causes of a loss is the
                                              "predominant cause" and if covered, then the loss is covered. Mr.
                  17                          Baines concluded that analysis: "Here, the predominant, most important
                                              cause of the loss was the flooding caused by excessive rainfall, not the
                  IN                          culvert failure." (emphasis added)
                  19
                                       iii.   "Here the storm drain would not have failed if not for the heavy
                  20
                                              rainfall, which set in motion the chain of events that ultimately led to
                                              the insured's property damage. Therefore, the rainfall, and not the
                  21                          failed culvert, was the efficient proximate cause of the loss." (emphasis
                                              added)
                  22
                                       iv.    With respect to the California definition of "surface waters", Mr. Baines
                  2!
                                              pointed out: "It appears that California courts have never addressed the
                  24
                                              issue of whether water flowing from a storm drain that failed as a result
                                              of heavy rainfall would be included in the definition of surface water"
                  25                          (emphasis added).

                  26

                  27
                                                                         8
                  28      COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                  DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-
                                        DEALING AGAINST DEFENDANT INSURER
                  i
                                          b)          With respect to Capitola's damaged CMP, Mr. Baines insisted that the
                  2
                                   CMP was a "culvert" alleging that Plaintiffs consultant, URS, called it a "culvert" (which
                  3
                                   was not correct):
                  -1
                                                             The Policy contains a sub-limit of liability in the amount of
                  5
                                                             $500,000, in excess of a $500,000 deductible, for "unscheduled
                  6
                                                             Tunnels, Bridges, Dams....Culverts....," such as the storm drain
                                                             culvert (that broke on March 24 in Capitola).
                  7
                                                11.          That plaintiffs expert URS refers to the broken CMP as a
                  8                                          "culvert". Mr. Baines gave examples:
                  9
                                                             1. "the probable cause of the .. .Noble Creek Storm System
                      ID
                                                                malfunction was the failure of the Corrugated Metal Pipe
                                                                (CMP) / Concrete Arch Culvert junction
                      i [
                                                             2. "following the initial failure of the pipe at the culvert
                      12                                        junction"
                      13                                     3. ".. .only after the CMP had become disconnected from the
                                                                concrete arch culvert."
                      I I
                                   22.    On March 19, 2012, Counsel for Plaintiff Capitola wrote to Lexington's Mr.
                      15
                            Baines and explained that
                  16


                      17
                                          a. Rainfall is not a "flood" as defined in the Policy exclusion ("inundation of
                                             normally dry land...") if it was the predominating cause of the pipe break and
                      18                     of the insured's loss.

                      19                  b. Hydrostatic pressure of the water running through the concrete culvert under
                                             Bay Avenue is not "flood" as defined in the Policy exclusion ("inundation of
                  20
                                             normally dry land...") if it was the predominating cause of the pipe break and
                  21
                                             of the insured's loss.

                  22                      c. Debris running through the concrete culvert under Bay is not a "flood" as
                                             defined in the Policy exclusion ("inundation of normally dry land...") if it was
                  2;                         the predominating cause of the pipe break and of the insured's loss.
                  24
                                          d. That in response to Lexington's Garvey and Sabella analysis of the claim, if
                                             the water entering the insured's Capitola's building and damaging it could
                  25
                                             somehow be characterized as "flood" under the Policy exclusion (which it
                  2d                         cannot because these were not "surface waters"), such "flood" would not be
                                             the "predominating cause" because, as acknowledged by Lexington's
                  27

                             COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
COMBINER                     DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                            DEALING AGAINST DEFENDANT INSURER
                                             December 8, 2011 letter, the pipe break and/or whatever caused it is the
                                             "predominant cause" of the loss.

                   3                    e. That the enclosed CMP that ran underground for approximately 100 yards or
                                           more beneath private property mobile home park is not a "culvert" even under
                   4                       the agreed definition of that term as a device that carries water from one side
                                           of a road to other, open on both ends. It is a pipe placed into the former Noble
                   5                       Creek Channel.
                   (,
                                        f. That Lexington had completely misinterpreted the statements of plaintiff s
                   7                       expert, URS, and that the expert had not called the corrugated metal pipe a
                                           "culvert" but merely referred to a "juncture" of the CMP that broke and a
                   8                       "concrete culvert."

                   9            23.     Finally, on April 13, 2012, Mr. Baines of Lexington wrote back to affirm

                   10    Lexington's denial of plaintiff s claim.

                   II                   a)           With respect to the water damaged buildings he reiterated that the "flood

                   12
                                exclusion" in the policy applies:

                   13                           i.          "... .your reliance on Sabella and Garvey which discuss losses
                                                            caused by two concurrent perils, is misplaced. The applicable
                   14                                       cases here are those involving a single causation." (though it
                                                            was Lexington's original denial letter of 12/8/11 that first made
                   lr^
                                                            the Garvev/Sabella analysis)
                   16
                                               ii.          "Here, two perils did not cause the insured's loss. The cause was
                   17                                       a single uninterrupted sequence of events, i.e. flood, which led in
                                                            an unbroken succession, without the operation of any intervening
                   18                                       peril, to the culvert failure."
                   L9
                                              iii.          "The insured's own engineers, URS, already have answered the
                   20
                                                            question of what caused the pipe to break: 'hydrostatic pressure
                                                            generated by the high flow at the culvert junction,' which was
                   21                                       estimated to be 500 cubic feet per second, a flow rate that would
                                                            have resulted from an approximate 25 year storm. Thus, even
                   22                                       the insured's own engineers have acknowledged that the culvert
                                                            failed as a result of flood."
                   23


                   24
                                        b)           With respect to whether the broken "pipe" was a "culvert" subject to the

                   25           $500,000 deductible in the policy, Mr. Baines cited the proper definition of a "culvert"

                   26

                   27
                                                         10
                   2S     COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                  DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE IJ,P<                        DEALING AGAINST DEFENDANT INSURER
                  1                but then twisted that definition in order to argue the 1000 foot underground CMP drain
                  2
                                   was a "culvert":
                  3
                                                  i.       "a culvert is a pipe that carries water from one side of a road,
                  4                                        driveway, railway or other obstruction to the other."

                  5                              ii.       "The description applies to the CMP in Capitola."
                  6
                                                iii.       "what distinguishes a culvert from a pipe is its purpose or
                  7
                                                           function, i.e., to carry water underground from one side of a road
                                                           to another or, in this case, under the mobile home park."
                  8


                  9
                                   24.     Lexington also continued to deny coverage for Plaintiffs damaged property in its

                  Id
                           mobile home park even though such property, damaged in the March, 2011 occurrence, fell

                  II
                           within the "miscellaneous" coverage for unnamed City property.

                  12
                                   25.     Defendants have taken shifting and inconsistent positions during the course of

                  1 '.
                           Plaintiffs claim in order to support what was, on information and belief, a pre-determined
                           decision to deny the claim. As referenced above, Defendants manipulated both the facts of the
                  I I

                           claim and the language in the Policy in order to argue that the claim falls within Policy exclusions
                  15

                           and/or limitations that are clearly not applicable to this loss.
                  16
                                   26.     Despite Plaintiffs good faith attempts to point out the errors and inconsistencies
                  17
                           in Defendants' coverage positions, the misinterpretation of the "flood exclusion," and that the
                  18
                           mischaracterization of the broken "pipe" that caused the loss as a "culvert", Defendants have
                  I"
                           failed and refused, and continue to fail and refuse, to pay the amounts owing to Plaintiff under
                  20
                           the Policy. The claim remains denied and, to date, Plaintiff has been paid nothing under the
                  21
                           Policy despite clear coverage for the claimed losses.
                      >2


                  23                                      V.       FIRST CAUSE OF ACTION
                                                               (Breach of Insurance Contract)
                  24
                                   27.     As and for a separate and distinct FIRST CAUSE OF ACTION, Plaintiff
                  25
                           complains against Defendants, and each of them, and allege:
                  26


                  27
                                                            11
                  28         COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                     DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                            DEALING AGAINST DEFENDANT INSURER
                                28.     Plaintiff re-alleges and incorporates by reference each and every allegation of
                        Paragraphs 1 through 26, inclusive, herein.
                                29.     Notwithstanding their obligations to do so, Defendants failed to properly
                        investigate Plaintiffs claims, and refused to pay Plaintiff the insurance benefits owed to it under
                        the Policy despite demand therefore. Said failures and refusals constitute material breaches of
                        express and implied provisions of the Policy.
                                30.     Defendants' breaches of contract as alleged herein proximately and legally caused
                        Plaintiffs damages as alleged herein.
                                31.     As a proximate and legal result of said breaches of contract by Defendants,
                  10
                        Plaintiff has suffered damages in the amount of the claim as alleged herein, and consequential
                  II
                        damages according to proof including, but not limited to, prejudgment interest pursuant the
                  12
                        California Civil Code.
                  13            WHEREFORE, Plaintiff prays judgment against Defendants, and each of them, as
                  I t   hereinafter set forth.
                  15

                  16                               VI.    SECOND CAUSE OF ACTION
                                        (Tortious Breach of Covenant of Good Faith and Fair Dealing)
                  17
                                32.     As and for a separate and distinct SECOND CAUSE OF ACTION, Plaintiff
                  IS
                        complains against Defendants, and each of them, and allege:
                  I"
                                33.     Plaintiff re-alleges and incorporates by reference each and every allegation of
                  20
                        Paragraphs 1 through 31 herein.
                  21
                                34.     At all relevant times, Defendants had an obligation under the law, and under the
                  22
                        implied covenant in Policy, to act in good faith and deal fairly with Plaintiff. Said Defendants
                  23
                        thereby assumed fiduciary-like obligations to Plaintiff, and agreed to abide by such duties.
                  24
                        Nevertheless, said Defendants refused and failed to act in good faith and deal fairly with Plaintiff
                  25    and breached their fiduciary and fiduciary-like obligations, as is set forth more particularly herein.
                  26

                  27
                                                                        12
                  28      COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                  DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                         DEALING AGAINST DEFENDANT INSURER
                   1
                               35.     Defendants, and each of them, engaged and continue to engage in a course of
                   2
                        conduct to further their own economic interests and in violation of their contractual and fiduciary-
                   3
                        like obligations to Plaintiff, including, but not limited to, the wrongful denial of benefits under
                   4
                        Policy and the following conduct:
                   5
                                       a)      Misrepresentation of pertinent Policy provisions and coverage at issue to
                   6
                                               avoid payment of the claim;
                   7
                                       b)      Unreasonable interpretations of the insurance policies and provisions at
                   8                           issue;

                   9                   c)      Unreasonable delays in acting upon Plaintiffs claim;
                   10
                                       d)      Unreasonable and improper investigation and handling of Plaintiffs claim;
                   11
                                       e)      Wrongful interpretation of evidence and facts to avoid payment of the
                   12                          claim as alleged herein;

                   13                  f)      Wrongful and erroneous interpretation of policy language under applicable
                                               law to avoid payment of the claim;
                   14
                                       g)      Attempting to negate the existence of portions of the policies and to
                   15
                                               unilaterally modify the terms of the policies after the subject loss;
                   16
                                        h)     Violation of various provisions of the California Insurance Code,
                   17                          California Insurance Regulations and the Business and Professions Code
                                               by virtue of the conduct alleged herein; and,
                   18
                                        i)     On information and belief, other wrongful, illegal conduct including
                   19
                                               violation of law and regulations by which defendants are bound.
                   20           Said course of conduct is continuing in nature.
                   21
                                36.     On information and belief, Defendants unreasonably delayed in the review and
                   22
                        payment of the claim submitted by Plaintiff, and improperly handled Plaintiffs claims and/or
                   23
                        informed Plaintiff of decisions. This wrongful conduct by Defendants proximately and legally
                   24
                        caused Plaintiff to incur losses including the loss of insurance benefits under Policy to which
                   25
                        Plaintiff is entitled and damages in addition to the loss of benefits owing including, but not
                   26
                        limited to, lost interest on monies spent for repairs, and additional expenses Plaintiff was forced
                   27
                                                                         13
                   28     COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                   DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE i LP-                                  DEALING AGAINST DEFENDANT INSURER
                        to incur that Plaintiff would not have had to incur had Defendants promptly investigated and paid
                        Plaintiffs claim.
                               37.     Additionally, even after Plaintiff substantiated and documented its claim and
                        Defendants' agents led Plaintiff to believe the claim would be paid, and despite the repair
                        expenses being actually incurred by the City and covered under Policy, Defendants arbitrarily
                        denied payment of these covered losses. In denying payment for these covered losses,
                        Defendants breached the covenant of good faith and fair dealing in Policy, proximately and
                        legally causing Plaintiffs damages as alleged herein.
                                38.     More specifically, as a direct and proximate result of Defendants' breach of the
                  in
                        covenant of good faith and fair dealing, Defendants did substantial damage to a public agency
                  !I
                        charged with delivering vital governmental public health and safety services to its residents.
                  12
                        Because Defendants refused to honor their obligations to the City as alleged herein, the City had
                  13
                        to use its own limited tax payer general fund dollars to make the necessary repairs to its facilities
                  14
                        forcing it to exhaust almost all of its reserve accounts, pushing it to the brink of insolvency, and
                  lr^   sharply limiting and/or reducing its ability to deliver the vital services its residents pay taxes to
                  16    receive.
                  17            39.     On information and belief, all of the wrongful conduct alleged against Defendants
                  IS    described herein is part of a pattern and practice of delay tactics and unwarranted failure and
                  L9    refusal to pay benefits owing to insureds (such as Plaintiff) under policies of insurance similar to
                  20    Policy, and otherwise failing to comply with Defendants' obligations to their insured's under the
                  21    insurance contracts and under applicable law, such as those that have proximately and legally
                  22    caused Plaintiffs damages as alleged herein.
                  23           40.      As a direct, proximate and legal result of defendants' conduct as alleged herein,

                  24    including the wrongful withholding of insurance benefits as alleged above, Plaintiff is incurring

                  25    and will continue to incur costs, expenses and attorneys' fees in pursuing the claim and this

                  26
                        litigation, and other consequential damages according to proof. Plaintiff seeks to recover such

                  27
                                                         14
                  28      COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
GUMBINER                  DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                         DEALING AGAINST DEFENDANT INSURER
                  I
                           damages, including reasonable attorneys' fees (as determined by the Court) incurred in pursuing
                  2
                           both the subject claims and this litigation.
                  3
                                   41.    Defendants pursued said course of despicable conduct intentionally, maliciously,
                  4
                           in conscious disregard of the rights of Plaintiff and its citizens, fraudulently, and/or with reckless
                  5
                           disregard of the likelihood of causing Plaintiff extreme detriment to the orderly conduct of its
                  6
                           business and discharge of its obligations to the public. In so doing, Defendants acted in
                  7
                           furtherance of Defendants' own economic self interests at the expense of the economic interests
                  s
                           and well-being of Plaintiff and its citizens.
                  9
                                   42.     To deter such conduct by Defendants in the future, and prevent the repetition
                  U)
                           thereof as a practice, by way of punishment and as an example, Plaintiff prays exemplary
                  11
                           damages be awarded against Defendants according to proof.
                  12


                      13
                                   WHEREFORE, Plaintiff prays judgment against Defendants, and each of them, as

                      14
                           follows.

                      15           1. For contractual, special, general and consequential damages, as applicable, against
                                      Defendants, and each of them, in amounts according to proof;
                      16
                                   2. For exemplary damages against Defendants according to proof;
                      17


                      IS
                                   3. For reasonable attorneys' fees and costs and expenses as might be awarded by the
                                      court;
                      L9
                                   4. For prejudgment interest; and,
                  20
                                   5. For such other and further relief as the Court deems just and proper.
                  2!


                  22
                           DATED: May 21, 2012.

                  23                                                        UMBJNER & ESKRIDGE LLP

                  24
                                                                  By:
                                                                            >el P. (jurnbiner,
                                                                           Attorney for Plaintiff, City of Capitola

                  27
                                                            15
                  2S         COMPLAINT FOR DAMAGES: 1. BREACH OF INSURANCE CONTRACT AGAINST
COMBINER                     DEFENDANT INSURER; 2. BREACH OF COVENANT OF GOOD FAITH AND FAIR
& ESKRIDGE LLP-                            DEALING AGAINST DEFENDANT INSURER

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:424
posted:12/22/2012
language:Latin
pages:15