Filed 6/27/16
                        CERTIFIED FOR PARTIAL PUBLICATION




          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                             SECOND APPELLATE DISTRICT

                                      DIVISION FOUR


CLAYTON D. PASLAY et al.,                      B265348
                                               (Los Angeles County
                Plaintiffs and Appellants,     Super. Ct. No. SC119432)

v.

STATE FARM GENERAL
INSURANCE COMPANY,

                Defendant and Respondent.


        APPEAL from a judgment of the Superior Court of Los Angeles County,
Nancy L. Newman, Judge. Reversed in part, affirmed in part, and remanded with
directions.
        Hart, Watters & Carter and Thomas L. Watters for Plaintiffs and Appellants.
        LHB Pacific Law Partners, Clarke B. Holland, Matthew F. Batezel and
Aparajito Sen, for Defendant and Respondent.
________________________________________________________________
*      Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion
is certified for publication with the exception of parts D.1. and D.2.c. of the
Discussion.
      In the underlying action, appellants Clayton and Traute Paslay asserted
claims for breach of insurance contract, bad faith, and elder abuse against
respondent State Farm General Insurance Company (State Farm), and requested an
award of punitive damages. The trial court granted summary adjudication in State
Farm‟s favor on each claim and on the request for punitive damages. We conclude
there are triable issues of fact regarding the claim for breach of insurance contract,
but none regarding the other claims and the request for punitive damages. In the
published portion of the opinion, we conclude that the bad faith claim fails under
the genuine dispute doctrine, and that the evidence supporting the application of
that doctrine precludes the existence of triable issues regarding the elder abuse
claim. We therefore reverse the judgment solely with respect to the Paslays‟ claim
for breach of insurance contract, affirm the trial court‟s remaining rulings, and
remand the matter for further proceedings.


                          RELEVANT FACTUAL AND
                        PROCEDURAL BACKGROUND
      The following facts are not in dispute: In December 2010, the Paslays‟
house in Pacific Palisades was insured under a homeowners policy issued by State
Farm. On December 17, 2010, during a period of heavy rain, a roof drain failed,
causing water to enter the house‟s master bedroom through the ceiling, and
damage other parts of the house. The Paslays reported the incident to State Farm,
which arranged for them to live in a rented residence while their house was being
repaired. At the end of October 2011, the Paslays resumed living in their house.
State Farm made payments under the policy exceeding $248,000, including
$122,770.98 for repairs to the house, but denied coverage for certain items,




                                          2
including work undertaken in the master bathroom, replacement of drywall
ceilings, and installation of a new electrical panel.
      In December 2012, the Paslays initiated the underlying action against State
Farm. Their second amended complaint (SAC), filed January 15, 2014, contained
claims for breach of an insurance contract and bad faith, alleging that State Farm
had violated the policy in numerous ways, including refusing to pay for repairs to
the master bathroom, refusing to pay for replacement of certain drywall ceilings
and the electrical panel, and “[p]rematurely forcing [the Paslays] to move out of
temporary rental housing.” The SAC also contained a claim by Traute for elder
abuse (Welf. & Inst. Code, §§ 15610.07, 15610.30) predicated on allegations that
she was 80 years old when the house suffered water damage. In support of that
claim, the SAC asserted that State Farm engaged in abuse by failing to pay policy
benefits and forcing Traute to move back into the Paslays‟ house while it was still
under construction. The complaint sought compensatory and punitive damages.
      In November 2014, State Farm sought summary judgment or adjudication
regarding the SAC. State Farm requested summary adjudication on the claims for
breach of an insurance contract and bad faith, arguing that there were no triable
issues whether it had provided all policy benefits due the Paslays. State Farm also
argued that the bad faith claim failed under the “„genuine dispute‟” doctrine for
want of triable issues whether it acted unreasonably with respect to the Paslays‟
claim. In view of the purported defects in the claims for breach of an insurance
contract and bad faith, State Farm contended that summary adjudication was
proper with respect to the claim for elder abuse and the Paslays‟ request for
punitive damages.
      In granting summary judgment, the trial court concluded that summary
adjudication was proper with respect to each claim in the SAC and the request for


                                           3
punitive damages because there were no triable issues whether State Farm failed to
pay benefits owed under the policy and forced the Paslays to move prematurely
back to their house. On May 19, 2015, the court entered a judgment in favor of
State Farm dismissing the entire action with prejudice. This appeal followed.


                                   DISCUSSION
      The Paslays contend the trial court erred in granting summary judgment on
the basis of the motions for summary adjudication. For the reasons explained
below, we agree that summary adjudication was improper with respect to the
SAC‟s claim for breach of insurance contract, but not with respect to the other
claims and the request for punitive damages.


        A. Standard of Review
      “A summary adjudication motion is subject to the same rules and procedures
as a summary judgment motion. Both are reviewed de novo. [Citations.]”
(Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819.) “A
defendant is entitled to summary judgment if the record establishes as a matter of
law that none of the plaintiff‟s asserted causes of action can prevail. [Citation.]”
(Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107.) Generally, “the party
moving for summary judgment bears an initial burden of production to make a
prima facie showing of the nonexistence of any triable issue of material fact; if he
carries his burden of production, he causes a shift, and the opposing party is then
subjected to a burden of production of his own to make a prima facie showing of
the existence of a triable issue of material fact.” (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 850.) In moving for summary judgment, “all that the
defendant need do is to show that the plaintiff cannot establish at least one element


                                          4
of the cause of action -- for example, that the plaintiff cannot prove element X.”
(Id. at p. 853, fn. omitted.)
       Although we independently assess the grant of summary judgment, our
inquiry is subject to two constraints. Under the summary judgment statute, we
examine the evidence submitted in connection with the summary judgment
motion, with the exception of evidence to which objections have been
appropriately sustained. (Mamou v. Trendwest Resorts, Inc. (2008) 165
Cal.App.4th 686, 711; Code Civ. Proc., § 437c, subd. (c).) Here, State Farm raised
numerous evidentiary objections to the showing proffered by the Paslays, which
the trial court sustained in part and overruled in part. Because the Paslays do not
challenge these rulings on appeal, our review is limited to the evidence considered
by the trial court.
       Furthermore, our review is governed by a fundamental principle of appellate
procedure, namely, that “„[a] judgment or order of the lower court is presumed
correct,”‟” and thus, “„error must be affirmatively shown.‟” (Denham v. Superior
Court (1970) 2 Cal.3d 557, 664, italics omitted, quoting 3 Witkin, Cal. Procedures
(1954) Appeal, § 79, pp. 2238-2239.) Under this principle, the Paslays bear the
burden of establishing error on appeal, even though State Farm had the burden of
proving its right to summary judgment before the trial court. (Frank and Freedus
v. Allstate Ins. Co. (1996) 45 Cal.App.4th 461, 474.) For this reason, our review is
limited to contentions adequately raised in the Paslays‟ briefs. (Christoff v. Union
Pacific Railroad Co. (2005) 134 Cal.App.4th 118, 125-126.) Underlying all the
claims asserted in the SAC are allegations that State Farm breached the insurance
contract with respect to numerous losses related to the December 2010 rain water
leak in the house. Because the Paslays‟ briefs discuss only a limited number of
alleged losses, we confine our review to those.


                                          5
        B. Policy Provisions
       The Paslays contend there are triable issues whether State Farm paid the
policy benefits relating to the repair of the house, focusing primarily on work
performed in the master bathroom, abatement of asbestos on the house‟s ceilings,
and replacement of the electrical panel. In addition, they maintain there are triable
issues regarding additional living expenses due under the policy. We begin by
describing the policy provisions relevant to those contentions.
       In Section I -- Losses Insured, the policy provides under Coverage A that
State Farm insures “for accidental direct physical loss” to the pertinent dwelling,
except as set forth in Section 1 -- Losses Not Insured. An endorsement concerning
Coverage A further states that State Farm “will pay . . . the reasonable and
necessary cost to repair or replace with similar construction and for the same use
on the premises . . . the damaged part of the [covered] property . . . .”
      The policy sets forth two pertinent limitations under Coverage A regarding
(1) upgrades required by building ordinances or other laws and (2) mold-related
costs. The endorsement described above states: “We will not pay increased costs
resulting from enforcement of any ordinance or law regulating the construction,
repair, or demolition of a building . . . , except as provided under Option OL --
Building Ordinance or Law Coverage [(Option OL)].” The endorsement contains
Option OL, which states that (subject to restrictions not relevant here) when a
dwelling is damaged by a “[l]oss [i]nsured,” State Farm “will pay for the increased
cost to repair or rebuild the physically damaged portion of the dwelling caused by
the enforcement of a building, zoning or land use ordinance or law if the
enforcement is directly caused by the same [l]oss [i]nsured and the requirement is
in effect at the time the [l]oss [i]nsured occurs.” (Italics omitted.) Option OL


                                           6
further provides that under similar circumstances (that is, those described in the
phrases italicized above), State Farm will pay for losses and “legally required”
changes to undamaged portions of the dwelling resulting from the enforcement of
an ordinance or law.1
        Also included in the policy is an endorsement relating to “any type or form
of fungi, including mold . . . .” The endorsement provides, inter alia, that under
Section 1 -- Losses Not Insured, State Farm will not pay more than $5,000 “for all
loss by fungus” to a dwelling subject to Coverage A “caused by or directly
resulting from” a covered “peril,” including “the cost of any testing or monitoring
of . . . property to confirm the type, absence, presence or level of fungus.”2


1       The endorsement provides in pertinent part: “When the dwelling covered
under Coverage A -- Dwelling is damaged by a Loss Insured we will also pay for:
[¶] a. the cost to demolish and clear the site of the undamaged portions of the
dwelling caused by the enforcement of a building, zoning or land use ordinance or
law if the enforcement is directly caused by the same Loss Insured and the
requirement is in effect at the time the Loss Insured occurs; and [¶] b. loss to the
undamaged portion of the dwelling caused by enforcement of any ordinance or
law if: [¶] (1) the enforcement is directly caused by the same Loss Insured; [¶] (2)
the enforcement requires the demolition of portions of the same dwelling not
damaged by the same Loss Insured; [¶] (3) the ordinance or law regulates the
construction or repair of the dwelling, or establishes zoning or land use
requirements at the described premises; and [¶] (4) the ordinance or law is in force
at the time of the occurrence of the same Loss Insured; or [¶] c. the legally
required changes to the undamaged portion of the dwelling caused by the
enforcement of a building, zoning or land use ordinance or law if the enforcement
is directly caused by the same Loss Insured and the requirement is in effect at the
time the Loss Insured occurs.”
2      The mold endorsement states that the $5,000 coverage limitation for “loss
by fungus” applies to “loss to all insured property, including all costs or expenses
for: [¶] a. any loss of use or delay in rebuilding, repairing or replacing covered
property, including any associated cost or expense, due to interference at the
described premises or location of the rebuilding, repair or replacement of that
(Fn. continued on next page.)


                                          7
      In addition to the coverage for damage to the dwelling discussed above, the
policy provides for additional living expenses. Under Coverage C, the policy
states: “When a [l]oss [i]nsured causes the residence premises to become
uninhabitable, we will cover the necessary increase in costs you incur to maintain
your standard of living up to 24 months. Our payment is limited to incurred costs
for the shortest of: (a) the time required to repair or replace the premises; (b) the
time required for your household to settle elsewhere; or (c) 24 months.”


      C. Underlying Proceedings
      We next examine the parties‟ showings, with special attention to the
evidence bearing on the issues raised on appeal.


             1. State Farm’s Evidence
      In seeking summary adjudication on the Paslays‟ claims, State Farm
submitted evidence supporting the following version of the underlying events: On
December 17, 2010, when rain water leaked through the ceiling of the house‟s
master bedroom, Traute contacted Clayton, who was then in Texas. After
reporting the loss to State Farm and arranging for temporary repairs, Clayton told


property, by fungus; [¶] b. any remediation of fungus, including the cost or
expense to: [¶] (1) remove or clean the fungus from covered property or to repair,
restore or replace that property; [¶] (2) tear out and replace any part of the building
or the other property as needed to gain access to the fungus; [¶] (3) contain, treat,
detoxify, neutralize or dispose of or in any way respond to or assess the effects of
fungus; or [¶] (4) remove any property to protect it from the presence of or
exposure to fungus; [¶] c. the cost of any testing or monitoring of air or property to
confirm the type, absence, presence or level of fungus, whether performed prior to,
during or after removal, repair, restoration or replacement of covered property.”
(Emphasis omitted.)


                                           8
State Farm that his general contractor would prepare a damage estimate. State
Farm assigned a field adjuster to the claim and hired Andrew Gillespie, a general
contractor, to assist with its investigation.
      On January 11, 2011, the house was inspected by State Farm representatives
and Clayton, together with Gillespie and the Paslays‟ general contractor, Charlie
MacDonald. State Farm gave the Paslays a $25,000 check as an advance
regarding the loss. Gillespie and MacDonald estimated that the period potentially
required for repairs would be six months, and discussed issues relating to asbestos
abatement.
      After the inspection, State Farm transferred the Paslays‟ claim to a team
managed by Donna Blazewich that processes long-term catastrophic claims.
Blazewich assigned the claim to Radi Stewart, who conferred with Clayton
regarding a six-month lease for a residence Clayton had found. To secure the
lease, Stewart approved an $85,000 advance and engaged Klein & Company
(Klein), a housing vendor. By January 17, 2011, Klein had arranged for a six-
month lease beginning on January 20, at $9,000 per month, plus an $18,000
deposit. Klein issued an invoice for $73,657.50, which State Farm paid.
      On January 21, 2011, while inspecting the house, Stewart saw that some
wallpaper had separated from a master bathroom wall. During the inspection,
Clayton voiced concerns regarding the possibility of mold developing in the
master bathroom; in addition, he stated that MacDonald wished to remove drywall
ceilings throughout the house in order to abate asbestos. Stewart advised Clayton
that the homeowners‟ policy contained a $5,000 coverage limit concerning mold,
including the costs of drywall removal for mold, testing, and remediation. In a
letter to the Paslays dated January 31, 2011, Stewart noted Clayton‟s “feel[ing]
there may be a potential for mold,” and set forth the policy provisions regarding


                                            9
the $5,000 mold coverage limit. Stewart also stated: “[W]e are currently in the
process of awaiting the estimate from your contractor regarding the asbestos
abatement for the ceiling damaged as a result of the water loss.”
         On February 9 and 10, 2011, an asbestos abatement subcontractor hired by
MacDonald removed drywall ceilings throughout the house. Prior to that work,
the Paslays submitted no estimate or proposal regarding asbestos abatement to
State Farm for its review and approval. Upon discovering the removal, Stewart
advised Clayton that State Farm would review the Paslays‟ estimated asbestos
abatement costs with Gillespie to determine whether they were reasonable.
         In early March 2011, Gillespie learned that the only “upgrade” work to the
house then required by the Los Angeles Department of Building and Safety was
the installation of hard-wired smoke detectors. Shortly afterward, he estimated
that the water damage repairs would cost $83,306.76, and that installation of
smoke detectors would involve an additional expenditure of $4,200. Gillespie‟s
estimate included $6,815.40 to repair peeling wallpaper in the master bathroom,
which was the only damage he had seen there.
         In February and March 2011, the Paslays submitted a $262,234.70 repair
estimate. Clayton, who had worked as an insurance adjuster but was not a
licensed general contractor, was responsible for determining the proposed scope of
repairs.3 State Farm paid the Paslays $71,352.89 as an undisputed portion of the
claim.



3      The Paslays did not rely on MacDonald to identify the necessary repairs,
even though the repair estimate identified “Macdonald General Contractor” as the
“[e]stimator.” Macdonald testified that he did not prepare the Paslays‟ written
estimates, although he discussed unit costs with Clayton.


                                          10
         In mid-March 2011, the Paslays applied for -- and later obtained -- a
building permit containing the following work description, “Completely remodel
(E[xisting]) master bath.” Later, in April 2011, Clayton, Blazewich, and Stewart
re-inspected the house, accompanied by MacDonald and Gillespie. The master
bathroom had been reduced to its studs, and the shower entry reframed.
         Following the inspection, Gillespie advised Stewart that demolition of the
master bathroom was not needed to repair water damage, and that the installation
of smoke detectors did not require a new electrical power box, as the Paslays had
proposed. He also told Stewart that removal of the house‟s drywall ceilings had
been unnecessary because scraping the ceilings would have been a less costly
method of abating asbestos.
         On May 9, 2011, State Farm informed the Paslays that it disputed coverage
for the demolition and reconstruction of the master bathroom, the proposed new
electrical panel, and the replacement of undamaged ceiling drywall. State Farm
agreed to pay for certain other repairs. Gillespie increased his estimate by
approximately $10,000 to reflect the approved repairs, and State Farm paid the
Paslays an additional $10,062.90 for those items.
         In late June 2011, the Paslays submitted a $349,589.27 repair estimate and
some invoices. Based on the invoices, State Farm paid the Paslays an additional
$4,414.55 for certain emergency work they had undertaken to protect the house.
Later, State Farm also paid the Paslays‟ claims for damage to personal property
($15,232.52, less $2,848.49 in depreciation), and moving expenses related to their
rental housing ($9,535.51).
         In July 2011, the Paslays‟ initial six-month lease for their rental residence
expired. Thereafter, State Farm authorized payment of their rent on a monthly
basis.


                                            11
      On September 29, 2011, in a letter to the Paslays, State Farm set forth its
coverage positions relating to the disputed scope-of-repair issues. Accompanying
the letter was an additional $14,565.19 payment for other repairs that State Farm
had determined were subject to coverage, and a $5,000 payment under the mold
coverage provisions of the policy.
      Although State Farm authorized payment of the Paslays‟ rent through
November 2011, the landlord rented the residence to a different tenant, effective
October 31, 2011. At the end of October 2011, the Paslays moved back into their
house. Traute testified that when they did so, the kitchen was effectively
functional, a bedroom and bathroom were available for use, and the house had
water, gas, and electricity. When asked whether the house was then livable, she
stated, “„Oh, you can live in it, yeah.‟”
      In November 2011, State Farm paid the Paslays $1,250 for the cleaning of
the house‟s air ducts. Later, in May 2012, State Farm made a final $540 payment
for the installation of an emergency gas shut-off valve, bringing its total payments
under the policy to more than $248,000, including $122,770.98 for repairs to the
house based on Gillespie‟s final estimate.4


             2. The Paslays’ Evidence
      In opposing the motion for summary adjudication or judgment, the Paslays
maintained there were triable issues regarding numerous aspects of State Farm‟s
conduct with respect to their claim. Our focus is on the admissible evidence they
offered in an effort to raise triable issues relevant to their contentions on appeal.

4     State Farm submitted evidence that its total payments were approximately
$267,000, although that sum included an $18,000 refundable security deposit for
the Paslays‟ rented residence.


                                            12
That showing relied primarily on declarations and deposition testimony from
Clayton and MacDonald.
      Regarding the work undertaken in the master bathroom, Clayton stated that
based on his experience as an insurance adjuster, he was concerned that rain water
had infiltrated the master bathroom. On January 21, 2011, during an inspection of
the house, he raised that possibility with Stewart, in view of the peeling wallpaper
in the master bathroom. Clayton‟s declaration stated: “I never made a claim for
mold in any part of the house, I just expressed my concern that if water had
intruded into the walls of the master bathroom, the potential for the development
of mold existed.” When Stewart described the $5,000 limit for mold coverage in
the policy, Clayton repeated his concern, and explained that he was making no
claim for mold.
      According to Clayton and MacDonald, in mid-February 2011, they
examined the master bathroom for hidden water damage, shortly before the
Paslays were to leave for a trip overseas. After removing portions of the
bathroom‟s wall, they discovered substantial water damage. In exploring the
extent of the damage, they removed cabinets, fixtures, and other parts of the
bathroom. Clayton phoned Stewart, discovered that he was unavailable, and left a
message requesting an immediate investigation of the water damage. Two days
later, Stewart arrived at the house. By then, the wet debris had been removed from
the master bathroom and discarded. According to Clayton, at some point, pictures
of the wet debris were sent to Stewart. MacDonald stated that the work he
performed in the bathroom “was done to repair the damage done by the water
intrusion,” and Clayton stated that “[t]he cost of repairing the bathroom was in
excess of $35,000.”




                                         13
      Regarding the removal of the asbestos-covered drywall ceilings,
MacDonald stated during State Farm‟s initial inspection, he and Clayton pointed
out water intrusion throughout the house, including the dining room, living room,
office, and front bedroom, as well as around the fireplace. Clayton and
MacDonald further stated that because there was no attic access to the ceilings in
many parts of the house, the only feasible way to determine the extent of the water
intrusion was to remove portions of the drywall ceilings. Furthermore, it was not
possible to repair the existing ceiling damage or examine for hidden damage by
removing and patching areas of the existing ½ inch drywall ceiling without
producing unsightly results, as the applicable building code required the use of 5/8
inch drywall. In view of these considerations, Clayton and MacDonald concluded
that in order to abate the asbestos on the damaged ceilings, it was necessary to
remove and replace the ceilings in their entirety, rather than scrape off the
asbestos.
      Regarding the replacement of the electrical panel, MacDonald stated:
“During the repair work at the house, it was necessary for me to access the
electrical panel . . . to turn the electricity off and on. When my electrical
contractor and I examined the electrical panel, we were concerned that it was
hazardous. I had calculations made of the electrical load which the box needed to
serve in the house. Those calculations showed that the box was overloaded
beyond its 100 amp[] capacity. Further, the electrical panel appeared to be the
original electrical panel installed when the house was built. Because of the
amount of work being done in the house, the building code required that
hazardous conditions in the house be corrected. [¶] . . . I discussed the issue
. . . with [Clayton] and it was agreed the electrical panel should be replaced with a
200 amp[] box to abate the hazard.”


                                          14
      Regarding the provision of additional living expenses, Clayton stated: “In
October[] 2011, we received a telephone call from the landlord‟s real estate agent
informing us that other agents wanted to show the [rented] house. We could not
understand what was happening as our house was still under construction, the
master bedroom and master bathroom not having been completed. There was no
sink, toilet, shower or bathtub in the master bathroom. There were no carpets or
floorings in the family room, office or guest bedroom either. [¶] . . . When the
landlord‟s real estate agent was showing the house, we were informed that the
house was available for rent as of November 1, 2011. This was the first we heard
that our lease was being terminated. [¶] . . . In mid October[] 2011, we received a
letter from [Klein], State Farm‟s agent, advising us we had to vacate the house by
the end of October. . . . Accordingly, we were forced to move back into our house
before construction was completed.”


        D. Analysis
      We conclude the trial court erred in granting summary adjudication with
respect to the Paslays‟ claim for breach of insurance contract, but not with respect
to their bad faith and elder abuse claims and request for punitive damages. As
explained below (see pt. D.1. of the Discussion, post), the Paslays‟ evidentiary
showing raised triable issues regarding two matters relevant to the breach of
insurance contract claim, namely, the work undertaken in the master bathroom and
the replacement of the drywall ceilings. Nonetheless, those triable issues did not
preclude summary adjudication regarding the bad faith and elder abuse claims and
the request for punitive damages (see pt. D.2. of the Discussion, post).




                                         15
             1. Breach of Insurance Contract
      In order to secure summary adjudication on the breach of insurance contract
claim, State Farm sought to show that the Paslays could not demonstrate a critical
element of that claim, that is, unpaid policy benefits due the Paslays.5 We agree
with the trial court that State Farm‟s evidence sufficed to shift the burden to the
Paslays to raise triable issues regarding that matter. Accordingly, we examine
their showing with respect to the contentions raised on appeal. 6


                   a. Triable Issues Regarding Work in Master Bathroom
      The Paslays‟ evidence is sufficient to raise triable issues regarding the
existence of water damage in the master bathroom for which State Farm failed to
pay the costs of repair. State Farm acknowledges that under the policy, it was

5     Generally, “[a]n insured can pursue a breach of contract theory against its
insurer by alleging the insurance contract, the insured‟s performance or excuse for
nonperformance, the insurer‟s breach, and resulting damages.” (San Diego
Housing Com. v. Industrial Indemnity Co. (1998) 68 Cal.App.4th 526, 536.)
6      To the extent our inquiry requires us to interpret the policy, we apply
established rules of contract interpretation. (E.M.M.I. Inc. v. Zurich American Ins.
Co. (2004) 32 Cal.4th 465, 470.) Under these rules, “„the mutual intention of the
parties at the time the contract is formed governs interpretation. [Citation.] Such
intent is to be inferred, if possible, solely from the written provisions of the
contract. [Citations.] The “clear and explicit” meaning of these provisions,
interpreted in their “ordinary and popular sense,” unless “used by the parties in a
technical sense or a special meaning is given to them by usage” [citation], controls
judicial interpretation. [Citation.]‟ [Citations.] A policy provision will be
considered ambiguous when it is capable of two or more constructions, both of
which are reasonable. [Citation.] But language in a contract must be interpreted
as a whole, and in the circumstances of the case, and cannot be found to be
ambiguous in the abstract. [Citation.] Courts will not strain to create an
ambiguity where none exists. [Citation.]” (Waller v. Truck Ins. Exchange, Inc.
(1995) 11 Cal.4th 1, 18-19.)


                                          16
obliged to pay the reasonable and necessary costs of the water damage repairs,
subject to the policy‟s limitations of liability. According to Clayton and
MacDonald, in mid-February 2011, after removing certain portions of the
bathroom‟s wall to check for water intrusion, they found significant water damage
throughout the bathroom. MacDonald stated that the work done in the bathroom
was performed to repair the water damage, and Clayton further stated that “[t]he
cost of repairing the bathroom was in excess of $35,000 . . . .” That sum exceeds
the total payments State Farm made relating to the master bathroom, namely,
$6,815.40 for the repair of peeling wallpaper, and $5,000 for mold testing and
remediation. The record thus discloses evidence which, if credited by the fact
finder, established unpaid benefits for water damage repairs in the master
bathroom.
      State Farm maintains the record unequivocally shows that a significant
portion of the work undertaken in the master bathroom was a remodeling project,
not the repair of water damage. They note that the Paslays‟ application for a
building permit incorporates the work description, “Completely remodel
(E[xisting]) master bath,” as does the building permit itself. In addition, they
observe that Richard Rohaly, a building inspector for the City of Los Angeles,
testified in his deposition that he “recalled the master bathroom being remodeled
at the house.”
       State Farm‟s contention fails, as the characterization of the work done in
the bathroom is neither undisputed nor dispositive. The Paslays‟ architect, who
prepared the building permit application, testified that although he developed the
work description based on conversations with MacDonald, it was his own
description. Rohaly, the building inspector, had no recollection whether the work
in the master bathroom was independent of water damage. Moreover, the


                                         17
characterization of the project as a “remodel” does not address whether the work
was necessitated by water damage. The amount of the water damage, and the
extent to which it required the teardown and rebuilding of the master bathroom,
remain triable issues of fact.
      State Farm also suggests that the policy‟s $5,000 coverage limit for mold
shields it from liability for any unpaid water damage repairs because the coverage
limit is applicable to all mold-related repairs, remediation, and “exploratory work
. . . .” We disagree. Generally, “an insurer may limit coverage to some, but not
all, manifestations of a given peril, as long as „[a] reasonable insured would
readily understand from the policy language which perils are covered and which
are not.‟” (De Bruyn v. Superior Court (2008) 158 Cal.App.4th 1213, 1223,
quoting Julian v. Hartford Underwriters Inc. Co. (2005) 35 Cal.4th 747, 759.)
      Here, the coverage limit for mold cannot reasonably be understood to
encompass any water damage in the master bathroom discovered in the course of
testing for mold, but directly caused by the leak in the master bedroom. The mold
endorsement provides that State Farm will pay no more than $5,000 “for all loss
by fungus” to a dwelling “caused by or directly resulting from” a covered peril,
including “the cost of any testing or monitoring of . . . property to confirm the
type, absence, presence or level of fungus . . . .” On the Paslays‟ showing, after
concerns regarding the potential for mold motivated Clayton and MacDonald to
remove portions of the bathroom wall, they discovered water damage directly
caused by the covered peril -- namely, the leak in the master bedroom --
throughout the bathroom. Although the coverage limitation applies to the costs of
the initial testing to confirm the “absence” or “presence” of mold, it does not
encompass the additional costs of repairing the water damage that Clayton and
MacDonald claim to have found in the master bathroom, as that damage is not


                                          18
reasonably viewed as a “loss by fungus” (italics added). In sum, there are triable
issues regarding the existence of unpaid policy benefits relating to water damage
in the master bathroom.


                   b. Triable Issues Regarding Drywall Ceilings
      The Paslays‟ evidence also raises triable issues whether State Farm was
obliged to pay for the replacement of the removed drywall ceilings. As explained
above (see pts. B & D.1.b. of the Discussion, ante), the policy obliged State Farm
to pay the reasonable and necessary costs of repairing water-damaged portions of a
dwelling “with similar construction,” subject to Option OL, which provides
coverage for the costs of legally mandated changes to damaged and undamaged
parts of the dwelling when “the enforcement” of the law or ordinance “is directly
caused by the same [l]oss [i]nsured . . . .” In seeking summary judgment, State
Farm acknowledged that as a result of the water damage to ceilings throughout the
house, it had agreed to pay for the removal of asbestos from the house‟s ceilings
by scraping, but denied liability for the replacement of the ceilings, arguing that
the removal of undamaged portions of the ceilings constituted an unreasonable and
unnecessarily costly method of abating asbestos.
      The Paslays submitted evidence that aside from asbestos abatement, there
was another ground for replacing the ceilings potentially subject to policy
coverage. Clayton and MacDonald stated that due to the water damage throughout
the house and the absence of attic access, it was necessary to remove portions of
the ceilings to repair the damage and check for hidden water intrusion. According
to Clayton and MacDonald, it was impossible to make acceptable repairs in a
piecemeal fashion to the removed portions of the existing ½ inch drywall ceiling.
They maintained that piecemeal repairs would have resulted in uneven and


                                         19
unsightly ceilings, as the applicable building code required the use of 5/8 inch
drywall. The Paslays thus argued that only the removal and replacement of the
ceilings in their entirety would yield ceilings “with similar construction.”
      The Paslays also pointed to testimony from Kamran Ravandi, the Los
Angeles Department of Building and Safety plan check engineer who issued the
Paslays‟ building permit. Ravandi stated that due to the scope of the work, the
Paslays‟ project was subject to Los Angeles Building Code section 913405.1.2,
which states: “Alterations, repairs, rehabilitation in excess of 10 percent of the
replacement value of the building or structure may be made provided all the work
conforms to this Code for a new building and no hazardous conditions . . . are
continued or created in the remainder of the building as a result of such work.”
(Italics added.) Ravandi further testified that the Paslays were required to comply
with insulation-related code requirements for ceilings.
      In view of this evidence, there are triable issues regarding coverage for
replacement of the removed drywall ceilings. Clayton‟s and MacDonald‟s
testimony, if credited by the fact finder, establish that only removal and
replacement of the ceilings (including their undamaged portions) would result in
code-compliant ceilings of a “similar construction.” Furthermore, Ravandi‟s
testimony supports the reasonable inference that the code-complaint ceilings were
subject to coverage under Option OL because their installation was required by the
enforcement of the building code. In sum, there are triable issues regarding the
existence of unpaid policy benefits relating to replacement of the drywall ceilings.


                   c. No Other Triable Issues
      For the reasons discussed below, the Paslays raised no other triable issue
regarding unpaid policy benefits due them.


                                         20
                         i. Replacement of Electrical Panel
      The Paslays contend there are triable issues whether State Farm was obliged
to pay the costs of replacing their 100 amp electrical panel with a 200 amp panel,
even though the former was not damaged by the leak in the master bedroom.
Relying on Los Angeles Building Code section 913405.1.2, they argue that Option
OL provided coverage for the replacement. We reject that contention.
      As explained above (see pt. B & D.1.b. of the Discussion, ante), Option OL
affords coverage only for upgrades to a dwelling attributable to “the enforcement”
of a law or ordinance “caused by the same [l]oss [i]nsured” requiring repairs to the
dwelling. In seeking summary adjudication, State Farm presented evidence (1)
that the 100 amp panel was inadequate for the house‟s power usage prior to the
leak in the master bathroom, (2) that city officials did not ask the Paslays to install
the new panel, and (3) that the sole electricity-related change to the house required
by city officials under the building code -- namely, the installation of smoke
detectors -- did not materially increase the load on the 100 amp panel. On that
showing, the panel‟s replacement was not due to repair-related enforcement of the
building code, and thus constituted an independent upgrade to the house.
      In an effort to raise triable issues, the Paslays maintained they were obliged
to eliminate hazardous conditions in the house, arguing that Los Angeles Building
Code section 913405.1.2 required them to rectify existing hazards in the house.
They submitted evidence that during the course of the repairs, Clayton and
MacDonald determined that the 100 amp electrical panel was inadequate for the
house.
      The Paslays raised no triable issues, as nothing in the record suggests that
the hazardous condition presented by the 100 amp panel was “continued or


                                          21
created” in the house “as a result of” the repair work. (Italics added.) In
construing a statute or ordinance, we look first to its language, as commonly
understood, and avoid interpretations that render words or phrases surplusage.
(Chaffee v. San Francisco Public Library Com. (2005) 134 Cal.App.4th 109, 114.)
Los Angeles Building Code section 913405.1.2, states that repairs “may be made
provided . . . no hazardous conditions . . . are continued or created in the remainder
of the building as a result of such work.” (Italics added.) Interpreting the
provision to require the remediation of all “continu[ing]” hazards, regardless of
their relationship to the repairs, would nullify the italicized phrase.
      The Paslays‟ contention thus fails for want of evidence that the repair work
itself created or continued any hazard posed by the panel. That work involved no
repairs or changes to the house‟s electrical system other than the installation of
smoke detectors, which did not increase the load on the panel. Accordingly, there
are no triable issues regarding coverage for the replacement of the electrical
panel.7


                    ii. Additional Living Expenses
      The Paslays contend there are triable issues whether State Farm fully paid
benefits due them for additional living expenses. Under Coverage C, the policy
provides in pertinent part: “When a [l]oss [i]nsured causes the residence premises


7      In view of our conclusion, it is unnecessary to address the Paslays‟ related
contention that under Option OL, the phrase “enforcement of a building, zoning or
land use ordinance or law” encompasses voluntary compliance with a code
provision by a general contractor. For the reasons discussed above, even if
MacDonald‟s replacement of the panel constituted “enforcement” of the building
code, that conduct was not “caused by the same [l]oss [i]nsured” that required
repairs to the dwelling.


                                          22
to become uninhabitable, we will cover the necessary increase in costs you incur
to maintain your standard of living up to 24 months.” (Italics added.) The policy
further states that those benefits are available no longer than “the time required to
repair or replace the premises . . . .”
       In seeking summary adjudication, State Farm submitted evidence that in
January 2011, it paid for a six-month lease for a residence through Klein, its
housing vendor. After July 2011, when the initial six-month lease expired, State
Farm authorized payment of the Paslays‟ rent on a monthly basis. Although State
Farm authorized payment of the rent through the end of November 2011, the
landlord rented the residence to a new tenant, effective October 31, 2011. In early
October 2011, Klein sent the Paslays a formal “move-out” notice that asked
whether they desired further temporary housing. The Paslays requested no
alternative housing, and moved back into their house. According to Traute, the
house was then habitable.
       The Paslays offered no evidence that they “incur[red],” or sought to incur,
additional living expenses when their rented residence was leased to a new tenant.
According to Clayton‟s declaration, after the landlord and Klein notified them that
they needed to vacate the rented residence, they moved back to their house, which
was still under repair. The Paslays otherwise submitted no evidence that State
Farm was responsible for their displacement from the rented house, that they ever
informed Klein or State Farm that they desired alternative rented housing, or that
they incurred any increased costs to maintain their standard of living upon
returning to their house. The record thus discloses no triable issues regarding
unpaid additional living expenses owed the Paslays.




                                          23
                          iii.   Total Unpaid Repair Costs
      The Paslays rely on the fact that they spent $164,093.86 more than State
Farm paid them to establish a triable issue of fact on their breach of contract claim.
As we have concluded there are triable issues regarding unpaid policy benefits
relating to certain repairs (see pt. D.1.a & D.1.b. of the Discussion, ante), we
examine this contention solely to determine whether it identifies an independent
basis for denying summary adjudication. In our view, it does not.

      The Paslays maintain that State Farm improperly relied on Gillespie‟s repair
estimates because the policy required State Farm to pay the actual costs of
repairing the house “with similar construction.” To establish the actual repair
costs subject to policy coverage, they rely on Clayton‟s declaration, which
evaluates those costs as $164,093.86.

      The Paslays‟ contention fails for two reasons. First, under the policy, State
Farm was obliged to pay “the reasonable and necessary cost to repair” subject to
policy coverage, not the actual costs of repair the Paslays incurred. As insurers
may properly rely on independent experts to assist in determining repair benefits
due under an insurance policy (Chateau Chamberay Homeowners Assn. v.
Associated Internat. Ins. Co. (2001) 90 Cal.App.4th 335, 346 (Chateau
Chamberay Homeowners Assn.), disapproved on another ground in Wilson v. 21st
Century Ins. Co. (2007) 42 Cal.4th 713, 724, fn. 7 (Wilson); Fraley v. Allstate Ins.
Co. (2000) 81 Cal.App.4th 1282, 1292-1293 (Fraley); see Lincoln Fountain Villas
Homeowners Assn. v. State Farm Fire & Casualty Ins. Co. (2006) 136




                                          24
Cal.App.4th 999, 1001-1008), State Farm did not breach the contract merely by
relying on Gillespie‟s repair estimates.8
         Second, Clayton‟s declaration cannot be regarded as raising triable issues
regarding unpaid benefits beyond those identified above. To the extent the
declaration states that the $164,093.86 in unpaid repair costs were subject to
policy coverage, the trial court sustained State Farm‟s objections to the relevant
portion of the declaration, and the Paslays have not challenged that ruling on
appeal. The Paslays may not rely on the stricken portion of the declaration to raise
a triable issue of fact. (Everett, supra, 162 Cal.App.4th at pp. 654, 658-659.)
Moreover, Clayton‟s declaration identifies the actual unpaid costs as $164,093.86
without enumerating the items encompassed under that sum, aside from stating
that it includes the costs of repairs purportedly “required to comply with the
building code . . . .” As explained above, one such item -- namely, the
replacement of the electrical panel -- is not subject to policy coverage.
Accordingly, evidence that the Paslays expended more than State Farm paid them
does not itself establish a triable issue of fact on the breach of insurance contract
claim.


8      The Paslays‟ reply brief argues that the “reasonable and necessary” repair
costs due under the policy necessarily presents a factual issue that cannot be
resolved on summary judgment. We disagree. When a breach of insurance
contract claim is predicated on the coverage provisions applicable here, summary
judgment in the insurer‟s favor on the claim is proper when the insured raises no
triable issue whether the insurer paid the “reasonable and necessary cost to repair”
under the policy. (Everett v. State Farm General Ins. Co. (2008) 162 Cal.App.4th
649, 658-659 (Everett); see West v. State Farm Fire and Cas. Co. (9th Cir. 1989)
868 F.2d 348, 351 [“Reasonableness becomes a question of law appropriate for
determination on motion for summary judgment when only one conclusion about
the conduct‟s reasonableness is possible”].)


                                            25
                     d. Summary
       As there are triable issues regarding unpaid policy benefits due the Paslays
related to the work in the master bathroom and the replacement of drywall ceilings
(see pt. D.1.a & D.1.b. of the Discussion, post), summary adjudication was
improperly granted with respect to the claim for breach of insurance contract.
              2. Remaining Claims
       In granting summary judgment in favor of State Farm, the trial court
concluded that the Paslays‟ claims failed for want of a triable issue regarding
unpaid policy benefits, but identified an alternative basis for granting summary
adjudication on the Paslays‟ claims for bad faith, elder abuse, and punitive
damages. The court stated that had it been required to address those claims, it
would granted summary adjudication on each in light of the “genuine dispute”
doctrine. As explained below, we agree with that determination.


                     a. Bad Faith
       To establish bad faith, the Paslays must demonstrate misconduct by State
Farm more egregious than an incorrect denial of policy benefits. “The law implies
in every contract, including insurance policies, a covenant of good faith and fair
dealing.” (Wilson, supra, 42 Cal.4th at p. 720.) The obligation imposed on the
insurer under the covenant “„is not the requirement mandated by the terms of the
policy itself . . . . It is the obligation . . . under which the insurer must act fairly
and in good faith in discharging its contractual responsibilities.‟” (California
Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 54, italics
omitted, quoting Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573-574.) In
the context of a bad faith claim, “an insurer‟s denial of or delay in paying benefits


                                            26
gives rise to tort damages only if the insured shows the denial or delay was
unreasonable.” (Wilson, supra, 42 Cal.4th at p. 723.)
      Under this standard, “an insurer denying or delaying the payment of policy
benefits due to the existence of a genuine dispute with its insured as to the
existence of coverage liability or the amount of the insured‟s coverage claim is not
liable in bad faith[,] even though it might be liable for breach of contract.”
(Chateau Chamberay Homeowners Assn., supra, 90 Cal.App.4th at p. 347.) That
is because “whe[n] there is a genuine issue as to the insurer‟s liability under the
policy for the claim asserted by the insured, there can be no bad faith liability
imposed on the insurer for advancing its side of that dispute.” (Ibid., italics
deleted.) An insurer may thus obtain summary adjudication of a bad faith cause of
action “by establishing that its denial of coverage, even if ultimately erroneous and
a breach of contract, was due to a genuine dispute with its insured.” (Bosetti v.
United States Life Ins. Co. in City of New York (2009) 175 Cal.App.4th 1208,
1237 (Bosetti).)
      The genuine dispute doctrine “does not relieve an insurer of its obligation to
thoroughly and fairly investigate, process and evaluate the insured‟s claim. A
genuine dispute exists only where the insurer‟s position is maintained in good
faith and on reasonable grounds.” (Wilson, supra, 42 Cal.4th at p. 723, italics
omitted.) Those grounds include reasonable reliance on experts hired to estimate
repair benefits owed under the policy. (Chateau Chamberay Homeowners Assn.,
supra, 90 Cal.App.4th at p. 348; Fraley, supra, 81 Cal.App.4th at pp. 1282, 1292-
1293.) The reasonableness of the insurer‟s decision is assessed by reference to an
objective standard (Bosetti, supra, 175 Cal.App.4th at pp. 1238-1240; see Brehm
v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1238-1240.) The
application of the genuine dispute doctrine “becomes a question of law where the


                                          27
evidence is undisputed and only one reasonable inference can be drawn from the
evidence.” (Chateau Chamberay Homeowners Assn., supra, 90 Cal.App.4th at
p. 346.)
        We conclude that the Paslays‟ bad faith claim fails under the genuine
dispute doctrine. The only triable issues relating to unpaid policy benefits concern
the work in the master bathroom and the replacement of drywall ceilings.
Regarding those benefits, the record discloses only a genuine dispute regarding the
extent of the damage and required repairs. “Where the parties rely on expert
opinions, even a substantial disparity in estimates for the scope and cost of repairs
does not, by itself, suggest the insurer acted in bad faith.” (Fraley, supra, 81
Cal.App.4th at p. 1293.) The evidence shows only that Gillespie, State Farm‟s
expert, promptly examined the master bathroom and drywall ceilings, assessed
the extent and type of damage, and estimated the costs of the appropriate repairs.9


9      The Paslays suggest there are triable issues regarding the genuineness of the
disputes concerning the master bathroom and the drywall ceilings. Regarding the
master bathroom, they argue that Stewart‟s invocation of the $5,000 mold
coverage limitation contravened a State Farm operation guide. That guide states:
“„If the mold is the result of a loss rather than the cause of it, coverage must be
analyzed for the event that caused the mold. If the most important proximate
cause of the loss is covered, mold resulting from the covered event is also
covered.‟”
       In our view, the guide cannot reasonably be regarded as raising a triable
issue regarding State Farm‟s claims handling. The guide merely addresses
investigations into the causes of mold -- which was never found in the master
bathroom -- and does not discuss the mold coverage limitation.
       Regarding the drywall ceilings, the Paslays contend State Farm improperly
refused to pay for their replacement because it paid for their removal. That
contention fails in light of the record, which establishes the following undisputed
facts: During the January 2011 inspections, the parties discussed issues relating to
asbestos abatement. In February 2011, without submitting their estimate for
(Fn. continued on next page.)


                                         28
      The Paslays contend there are triable issues whether State Farm adequately
investigated the damage in the master bathroom and to the ceilings. We disagree.
Generally, the reasonableness of an insurer‟s conduct “must be evaluated in light
of the totality of the circumstances surrounding its actions.” (Wilson, supra, 42
Cal.4th at p. 723.) Thus, the adequacy of the insurer‟s claims handling is properly
assessed in light of conduct limiting the insurer‟s investigation by parties with an
interest in policy benefits. In Blake v. Aetna Life Ins. Co. (1979) 99 Cal.App.3d
901, 905-906, the plaintiff‟s husband was insured under a life insurance policy
that provided $10,000 to the plaintiff as beneficiary upon “due proof” of
accidental death. After the husband died from a lethal dose of a prescription drug,
the insurer assigned an investigator, who unsuccessfully attempted to obtain
information from the plaintiff regarding the husband‟s state of mind before his
death and the source of the fatal drugs. (Id. at pp. 911-912.) When the insurer
made no payment of the accidental death benefits after 16 months of investigation,

asbestos abatement to State Farm, the Paslays arranged for an asbestos abatement
subcontractor to remove the pertinent ceilings. State Farm paid the
subcontractor‟s $5,630 fee as an item of the undisputed portion of the Paslays‟
claim, but asked Gillespie to assess the Paslays‟ claim for funds to replace the
ceilings as “an expanded scope of work.” In July 2011, Gillespie informed State
Farm (1) that his original estimate had adequately provided for any necessary
repairs for water intrusion, and (2) that scraping asbestos from the drywall ceilings
would have been a less costly method of abatement than removing the ceilings.
As State Farm paid for repairs in accordance with Gillespie‟s estimates and the
asbestos abatement subcontractor‟s $5,630 fee, the record establishes only a
genuine dispute regarding whether the Paslays were entitled to additional funds to
replace the drywall ceilings.
       In a related contention, the Paslays suggest that State Farm failed to
examine why they removed the ceilings. That contention is unsupported by the
record, which discloses only that Gillespie considered the documents the Paslays
later submitted in connection with the ceilings.


                                         29
the plaintiff asserted claims for breach of insurance contract and bad faith against
the insurer. (Id. at pp. 916-917.) The appellate court reversed judgment on the
bad faith claim, concluding that trial evidence showed the insurer had done all it
reasonably could to determine the cause of death, in view of the plaintiff‟s failure
to supply critical information. (Id. at pp. 920-921.)
         Here, the Paslays curtailed State Farm‟s ability to investigate the damage in
the master bathroom and to the ceilings, notwithstanding the policy provisions
regarding their “[d]uties [a]fter [l]oss,” which included an obligation to “exhibit”
the damage property “as often as [State Farm] . . . require[d].” Viewed in the light
most favorable to the Paslays, the record shows that in January 2011, during
inspections of the house, the parties discussed asbestos abatement to the damaged
ceilings, and Clayton “expressed [his] concern that if water had intruded into the
walls of the master bathroom, the potential for the development of mold existed.”
In a letter dated January 31, 2011, Stewart noted Clayton‟s “feel[ing] there may be
a potential for mold,” set forth the $5,000 mold coverage limit, and stated: “[W]e
are currently in the process of awaiting the estimate from your contractor
regarding the asbestos abatement for the ceiling damaged as a result of the water
loss.”
         In mid-February 2011, before submitting any estimate regarding asbestos
abatement, the Paslays removed the ceilings. At approximately the same time,
Clayton and Macdonald examined the master bathroom for hidden water damage,
and removed cabinets, fixtures, and other parts of the bathroom. Clayton phoned
Stewart, learned that he was unavailable, and requested an immediate investigation
of the newly discovered damage. By the time Stewart arrived at the house two
days later, the debris from the master bathroom had been discarded. At some
point, Stewart was sent photographs displaying piles of debris. Stewart


                                           30
subsequently informed the Paslays that the demolition of the bathroom “down to
the framing” prior to any agreement on the scope of work was prejudicial to State
Farm.10
      On this record, there are no triable issues regarding the adequacy of State
Farm‟s investigation, as the Paslays removed the damaged property before State
Farm had an opportunity to conduct a full assessment of the Paslays‟ proposals
and contentions. The record shows only that State Farm did what it could to
assess the claimed losses before denying them. In our view, even if those denials
were mistaken, nothing suggests that State Farm acted in bad faith. Summary
adjudication was therefore proper on the bad faith claim.11


                   b. Elder Abuse
      We next examine Traute‟s claim for elder abuse. Under the Elder Abuse and
Dependent Adult Civil Protection Act (Welf. & Inst. Code, § 15600 et seq.), an


10    In a letter dated March 17, 2011, Stewart set forth the policy provisions
regarding the Paslays‟ duties after a loss, and stated: “Based on our inspection of
February 18, 2011[,] the master bathroom has been demolished down to the
framing . . . . [¶] Since the property has been removed State Farm has been
prejudiced by the removal of your property prior to any agreement . . . . ”
Although State Farm raised the Paslays‟ failure to provide an opportunity to
inspect the alleged damage or supply estimates of the cost of repairs prior to
dismantling the master bathroom and removing the ceilings, it did not assert as a
separate ground for summary judgment that the Paslays had breached their
obligations under the insurance contract.
11     The Paslays suggest that State Farm engaged in bad faith because in August
2011, after the pertinent dispute arose, State Farm asked them to communicate
with it through its counsel. We disagree, as there is no evidence that the request
reflected any failure to “to thoroughly and fairly investigate, process and evaluate
the [Paslays‟] claim.” (Wilson, supra, 42 Cal.4th at p. 723.)


                                         31
elder is “any person residing in this state, 65 years or older.” (Welf. & Inst. Code,
§ 15610.27.)12 Section 15610.30 broadly defines financial abuse of an elder as
occurring when a person or entity “[t]akes, secretes, appropriates, obtains, or
retains real or personal property of an elder” for “a wrongful use or with intent to
defraud, or both,” as well as “by undue influence . . . .”13 (§ 15610.30, subds.
(a)(1), (a)(3).)
       As there is no dispute that Traute was 80 years old when the rain water leak
damaged the house, the focus of our inquiry is on whether there are triable issues
regarding the existence of financial abuse.14 In view of our discussion regarding
the Paslays‟ breach of insurance contract and bad faith claims (see D.1. and D.2.a.
of the Discussion, ante), we see no evidence that State Farm retained policy
benefits owed to Traute with an intent to defraud or by undue influence. The key
question thus concerns the existence of triable issues regarding “a wrongful use”
of policy benefits. For the reasons discussed below, we conclude the evidence
below raised no such issues.
       Subdivision (b) of 15610.30 provides a person or entity is “deemed to have
taken, secreted, appropriated, obtained, or retained property for a wrongful use if,

12    All further statutory citations are to the Welfare and Institutions Code,
unless otherwise indicated.
13     In this context, “„[u]ndue influence‟ consists: [¶] 1. In the use, by one in
whom a confidence is reposed by another, or who holds a real or apparent
authority over him, of such confidence or authority for the purpose of obtaining an
unfair advantage over him; [¶] 2. In taking an unfair advantage of another's
weakness of mind; or, [¶] 3. In taking a grossly oppressive and unfair advantage
of another‟s necessities or distress.‟” (Bounds v. Superior Court (2014) 229
Cal.App.4th 468, 479, quoting Civ. Code, § 1575.)
14     The evidence otherwise establishes that Clayton was 60 years old at the time
of that incident.


                                         32
among other things, the person or entity takes, secretes, appropriates, obtains, or
retains possession of property and the person or entity knew or should have known
that this conduct is likely to be harmful to the elder . . . adult.” (§ 15610.30, subd.
(b).) The provision further specifies that a person or entity “takes, secretes,
appropriates, obtains, or retains real or personal property when an elder or
dependent adult is deprived of any property right, including by means of an
agreement . . . .” (§ 15610.30, subd. (c).) Thus, a party may engage in elder abuse
by misappropriating funds to which an elder is entitled under a contract. (See
Wood v. Jamison (2008) 167 Cal.App.4th 156, 164-165 [elder‟s attorney engaged
in financial abuse by improperly accepting as fee certain funds to which elder was
entitled through loan]; Bonfigli v. Strachan (2011) 192 Cal.App.4th 1302, 1307,
1315-1316 [plaintiffs stated elder abuse claim based on defendant‟s exercise of
contract-based power of attorney and failure to pay funds admittedly owed under
contract].)
      Traute‟s elder abuse claim presents a question of statutory interpretation
regarding the term “wrongful use.” As explained above, there are triable issues
whether State Farm breached the insurance contract, but none whether State Farm
acted in bad faith, in view of the genuine dispute doctrine. The issue thus
presented is whether a merely incorrect denial of policy funds under the
circumstances shown here may constitute a “wrongful use” of those funds, for
purposes of an elder abuse claim.
      We begin by observing that to establish a “wrongful use” of property to
which an elder has a contract right, the elder must demonstrate a breach of the
contract, or other improper conduct. In Stebley v. Litton Loan Servicing, LLP
(2011) 202 Cal.App.4th 522, the trial court sustained a demurrer without leave to
amend to the plaintiffs‟ complaint, which asserted a claim for wrongful


                                          33
foreclosure and a claim for elder abuse based on the foreclosure. (Id. at pp. 524-
525.) After affirming the ruling with respect to the wrongful foreclosure claim,
the appellate court held that the elder abuse claim also failed, concluding that a
lender does not engage in financial abuse of an elder by properly exercising its
rights under a contract, even though that conduct is financially disadvantageous to
an elder. (Id. at pp. 527-528.)
      Subdivision (b) of 15610.30 imposes an additional requirement beyond the
existence of improper conduct, namely, that “the person or entity knew or should
have known that this conduct is likely to be harmful to the elder . . . adult.” (Italics
added.) In statutes and other legal contexts, the italicized phrase ordinarily
conveys a requirement for actual or constructive knowledge. (E.g., Castillo v. Toll
Bros., Inc. (2011) 197 Cal.App.4th 1172, 1196 [Labor Code section 2810,
subdivision (a), which bars a person from entering into enumerated contracts when
the person “„knows or should know‟” that specified contract condition is absent,
imposes requirement for actual or constructive knowledge].) Generally,
constructive knowledge, “means knowledge „that one using reasonable care or
diligence should have, and therefore is attributed by law to a given person‟, [and]
encompasses a variety of mental states, ranging from one who is deliberately
indifferent in the face of an unjustifiably high risk of harm [citation] to one who
merely should know of a dangerous condition [citation].)” (John B. v. Superior
Court (2006) 38 Cal.4th 1177, 1190-1191, quoting Black‟s Law Dict. (7th
ed.1999) p. 876.) The existence of constructive knowledge is assessed by
reference to an objective “reasonable person” measure, “since there is no other
way to measure it.” (New v. Consolidated Rock Products Co. (1985) 171
Cal.App.3d 681, 690.)




                                          34
        Here, our focus is on the deprivation of property due an elder under a
contract. In that context, the italicized phrase imposes a requirement in addition to
the mere breach of the contract term relating to the property, as the existence of
such a breach ordinarily does not hinge on the state of mind or objective
reasonableness of the breaching party‟s conduct. (See Carma Developers (Cal.),
Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 373.) In
view of the italicized phrase, we conclude that under subdivision (b) of 15610.30,
wrongful conduct occurs only when the party who violates the contract actually
knows that it is engaging in a harmful breach, or reasonably should be aware of
the harmful breach.15
        The evidence before the court did not raise a triable issue whether those
circumstances obtain here. As explained above, notwithstanding the existence of
triable issues regarding policy benefits due the Paslays, there is no evidence that




15     Our conclusion receives additional support from the legislative history of
the current version of section 15610.30, the pertinent provisions of which were
enacted in 2008. (Stats. 2008, ch. 475, § 1, pp. 3364-3365.) The previous version
of the statute stated in pertinent part: “(b) A person or entity shall be deemed to
have . . . retained property for a wrongful use if, among other things, the person or
entity . . . retains possession of property in bad faith. [¶] (1) A person or entity
shall be deemed to have acted in bad faith if the person or entity knew or should
have known that the elder . . . had the right to have the property transferred or
made readily available . . . .” The legislative analyses accompanying the 2008
legislation reflect an intent to shift the proof required for “wrongful conduct” to
“the defendant‟s knowledge or presumed knowledge of the effect of the taking on
the elder, . . . to which a reasonable person standard may be applied.” (Sen. Jud.
Com., Financial Abuse of Elder or Dependent Adults, March 25, 2008, p. 9
[discussing S.B. 1140 (2007-2008 Reg. Sess.)]; Assem. Com. on Judiciary, Elder
and Dependent Adults: Financial Abuse, June 17, 2008, p. 5 [discussing S.B. 1140
(2007-2008 Reg. Sess.)].) In our view, the legislative history does not
(Fn. continued on next page.)


                                          35
State Farm acted in subjective bad faith or unreasonably in denying additional
benefits. Traute‟s elder abuse claim thus fails in light of the evidence supporting
the application of the genuine dispute doctrine to the Paslays‟ bad faith claim.
         Negrete v. Fidelity and Guar. Life Ins. Co. (C.D.Ca1. 2006) 444 F.Supp.2d
998, upon which Traute relies, is distinguishable. There, the plaintiff asserted
several class claims against an insurer, including claims for breach of fiduciary
duty and elder abuse, alleging that the insurer employed deceptive practices in
selling annuities to senior citizens. (Id. at pp. 999-1000.) The federal court
concluded that the fraud allegations were sufficient to state an elder abuse claim.
(Id. at pp. 1001-1003.) In contrast, Traute raised no triable issues regarding the
existence of bad faith or unreasonable conduct by State Farm. Accordingly,
summary adjudication was properly granted with respect to Traute‟s elder abuse
claim.


                     c. Punitive Damages
         We conclude that summary adjudication was proper with respect to the
Paslays‟ request for punitive damages. “In the absence of an independent tort,
punitive damages may not be awarded for breach of contract . . . .” (Cates
Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 61.) Punitive damages
are thus unavailable in connection with the Paslays‟ breach of insurance policy
claim, notwithstanding the existence of triable issues regarding unpaid policy
benefits due the Paslays. Furthermore, as the claims for bad faith and elder abuse
fail for want of a triable issue of fact, the Pasleys have asserted no tort cause of


demonstrate an intent to deem mere breaches of contract actionable instances of
elder abuse.


                                          36
action capable of supporting an award of punitive damages. Accordingly,
summary adjudication was properly granted with respect to the Paslays‟ request
for punitive damages.




                                       37
                                 DISPOSITION
      The judgment is reversed with respect to the claim in the SAC for breach of
insurance contract, and affirmed with respect to the remaining claims and request
for punitive damages. The matter is remanded for further proceedings in
accordance with this opinion. The parties are to bear their own costs on appeal.
      CERTIFIED FOR PARTIAL PUBLICATION




                                             MANELLA, J.


We concur:




EPSTEIN, P. J.




COLLINS, J.




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