Filed 10/30/14 Fait v. American States Ins. CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.




              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                     (Sacramento)
                                                            ----




DONNA FAIT et al.,                                                                           C074549

                   Plaintiffs and Appellants,                                        (Super. Ct. No.
                                                                                3420100089783CUBCGDS)
         v.

AMERICAN STATES INSURANCE COMPANY,

                   Defendant and Respondent.




         Plaintiffs Donna Fait and the Glenn Fait 2005 Trust (collectively Fait) sued
defendant American States Insurance Company, alleging Fait was entitled to recovery
under an insurance policy after the demolition of a building Fait’s predecessor sold, with
a retained security interest. The trial court granted summary judgment on the ground the




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intentional demolition of the building was not a covered loss under the policy. Fait
timely appealed from the ensuing judgment. We shall affirm.1
                                     BACKGROUND
       The policy terms and historic facts are not disputed. Briefly, “we determine with
respect to each cause of action whether the defendant seeking summary judgment has
conclusively negated a necessary element of the plaintiff’s case, or has demonstrated that
under no hypothesis is there a material issue of fact that requires the process of a trial.”
(Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.)
       As stated in our prior opinion, “The owner of a parcel of real property with a
building on it demolishes the building to make way for new development. Unfortunately,
the owner is unable to complete the development and ends up defaulting on a purchase
money promissory note secured by a deed of trust on the property. The holder of the note
and deed of trust [Fait] exercises the power of sale under the deed of trust and buys the
property back at a foreclosure sale for less than the amount due under the note.” (Fait,
supra, 207 Cal.App.4th at p. 289.) Because the owner (collectively, New Faze) failed to
maintain insurance as required, after “numerous requests,” Fait bought insurance for the
property. After the destruction of the building, when Fait acquired the property through
foreclosure, Fait made a claim against the policy for the deficiency. Defendant denied
the claim, in part alleging no coverage under the policy.
       The named insured under the policy in effect at the time of the 2006 demolition is
“Fait 1990 Trust [¶] Barbara & Glenn Fait, Trustees.” Donna Fait and the Glenn Fait
2005 Trust are successors in interest to the Fait 1990 Trust. Glenn Fait, individually, is



1 A separate case arising out of the demolition of the building was previously before this
court. (Fait v. New Faze Development, Inc. (2012) 207 Cal.App.4th 284 (Fait).) That
case apparently awaits retrial. Safeco Insurance Company of America, originally a
defendant herein, was dismissed by Fait. Certain other defendants in this action are not
parties to this appeal.

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sole trustee of both trusts. A “Lender Loss Payee Clause” lists the owners (New Faze,
etc.) as loss payees.
       Under “Coverage” the policy states: “We will pay for direct physical loss of or
damage to Covered Property at the premises described in the Declarations caused by or
resulting from any Covered Cause of Loss.” Under an applicable “Cause of Loss-Special
Form,” “Covered Causes of Loss means Risks of Direct Physical Loss,” with exceptions
not relevant. Because Fait admitted the building was intentionally destroyed, defendant
argued no covered loss occurred, because intentional destruction of a building is not a
“fortuitous” risk.
       In opposition, Fait argued Fait should have been treated as a “loss payee” under
the policy, not an insured. Fait did not ratify demolishing the building. Fait conceded
that in October 2005, Glenn Fait read a Sacramento Bee article in which New Faze
announced the building was “slated to be torn down,” and received a letter from New
Faze stating it was planning to “demolish” the building and therefore was terminating
extant leases. The building was demolished in October 2006. The trust conveyed the
property to Fait in April 2007, but Fait did not learn about the demolition until July 2007.
       In reply, defendant argued Fait was not a “loss payee” and had not asked to be,
and in any event, stood by with actual knowledge of the planned destruction and took no
steps to ensure it would not be done before the note was paid off, other than relying on
the owners’ good faith, demonstrated by declarations filed by Glenn Fait (beneficially
interested in, but not a party to, this case) in the Fait case (see fn. 1, ante) and tendered in
this case, stating: “It never occurred to me that the owners . . . would consider
demolishing the building prior to paying off the note, as to do so would violate the terms
of the trust deed and the law.” Fait filed a similar declaration in opposition to summary
judgment in this case. In his deposition, Glenn Fait testified nothing in the Sacramento
Bee stated New Faze was not planning to pay off the note first, and that he had no



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discussions with New Faze on that subject. He admitted the demolition of the building
“was intentional.”
       In relevant part, the trial court found as follows:

              “[Fait] ha[s] failed to demonstrate a triable issue of material fact that the
       demolition was not fortuitous and not a covered loss. Glenn admitted that New
       Faze intentionally demolished the [building]. [Fait]’s argument that the
       demolition was wrongful and in violation of the deed of trust is not relevant here
       as such allegations relate to New Faze’s actions, not those of Defendant.
       Additionally, Glenn knew that New Faze intended to demolish the property.
       While he may not have known of the exact timing of the demolition, he was well
       aware of New Faze’s intent.”
                                       DISCUSSION
                                               I
                                       Fortuitous Loss
       “Insurance is a contract whereby one undertakes to indemnify another against loss,
damage, or liability arising from a contingent or unknown event.” (Ins. Code, § 22,
emphasis added.) “ ‘Property insurance . . . is an agreement, a contract, in which the
insurer agrees to indemnify the insured in the event that the insured property suffers a
covered loss. Coverage, in turn, is commonly provided by reference to causation, e.g.,
“loss caused by . . . ” certain enumerated perils. [¶] The term “perils” in traditional
property insurance parlance refers to fortuitous, active, physical forces such as lightning,
wind, and explosion, which bring about the loss.’ ” (Garvey v. State Farm (1989)
48 Cal.3d 395, 406.) “ ‘Risk’ is commonly defined to mean ‘the chance of injury,
damage, or loss; dangerous chance; hazard’ [citation] or ‘exposure to the chance of injury
or loss; a hazard or dangerous condition.’ ” (Doheny West Homeowners’ Assn. v.
American Guarantee & Liability Ins. Co. (1997) 60 Cal.App.4th 400, 405, fn. 4; accord
Jernigan v. Nationwide Mutual Ins. Co. (2006) 2006 U.S. Dist. LEXIS 9571, pp. *23-25
[no coverage, “the demolition of the building was not a ‘covered cause of loss’ ”].)




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       Accordingly, “[t]he concept of ‘fortuity’ is basic to insurance law. Insurance
typically is designed to protect contingent or unknown risks of harm (Ins. Code, §§ 22,
250), not to protect against harm which is certain or expected. [Citation.] Insurance
protects against risks of loss, not certainties of loss.” (Chu v. Canadian Indemnity Co.
(1990) 224 Cal.App.3d 86, 94-95.)
       Fait does not quarrel with this basic rule. Obviously, there was nothing contingent
or unknown about New Faze’s decision to destroy the building, but Fait maintains that
Fait, as a mortgagee, had nothing to do with that act, and therefore as to Fait, the
consequence was a fortuitous loss covered by the policy. At oral argument in this court,
Fait’s counsel conceded there was no claim Fait was misled about the timing of the
demolition, and agreed that Fait had knowledge of the impending demolition, but
contended Fait had no knowledge this would impair Fait’s security interest.
       The principal authority relied on by Fait, Home Savings of America v. Continental
Ins. Co. (2001) 87 Cal.App.4th 835, proves inapposite when read carefully. There, the
purchaser--the named insured under a property policy--defaulted. The property was
transferred without notice to the lender, and then destroyed. The lender, a named loss
payee, sought recovery for the deficiency, claiming the loss was due to theft or
vandalism. (Id. at pp. 839-840.) The trial court upheld summary judgment, finding
intentional demolition is not fortuitous. (Id. at pp. 840-841.) But the Home Savings court
went on to explain that “the demolition of the residence was entirely fortuitous from [the
lender’s] point of view. There is nothing in the record to show that Home Savings was
aware of the plans to tear down the residence.” (Id. at p. 851.) “Given the absence of
any evidence showing that Home Savings approved or ratified the destruction of the
residence, we conclude the loss was fortuitous as to Home Savings.” (Id. at p. 852; see
Wilson v. Farmers Ins. Exchange (2002) 102 Cal.App.4th 1171, 1175 (Wilson) [“the
demolition (in Home Savings) was accomplished . . . by a third party entirely without the
bank’s knowledge,” emphasis added].)

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       In contrast, in this case, well before the demolition, Glenn Fait read about the
demolition proposal in the Sacramento Bee, yet took no steps to protect the Fait interest
in the property. While Fait did not ratify demolition, Fait knew neither Fait nor the trust
had been listed as mortgagees or loss payees, ratified Fait’s status as a named insured,
and stood by without protecting Fait’s interest, without even asking New Faze about its
financial plans, with knowledge of the planned demolition. At oral argument in this
court, Fait’s counsel conceded Glenn Fait “did not care” about the demolition, as he had
no reason to believe it impaired Fait’s security interest, and argued knowledge of the
demolition did not make Fait’s loss unfortuitous. However, it is critical to recall that the
policy protected the building against “direct physical loss of or damage to” the building,
and did not purport to protect Fait’s beneficial interest therein.
       Glenn Fait--a lawyer since 1972, with real estate experience, the general counsel
to McGeorge School of Law, and former mayor of Folsom--wrote to the insurance broker
in early 2006, stating “you can have [the owners] named [as] the owners with me as an
additional insured.” Fait never sought to be included as a mortgagee or loss payee,
despite a prior letter from the broker, dated October 31, 2005, suggesting that “there
should really be a policy written in [the names of the owners] and showing you as a
mortgagee.” (Emphasis added.) Glenn Fait’s declaration shows this exchange began
when he contacted the broker to point out that the prior year’s policy “erroneously listed
the 1990 Trust as named insured.” Yet Glenn Fait did not explain why, if the prior policy
was erroneous, he acquiesced in the trust being a named insured in the next policy, rather
than mortgagee or loss payee.
       The loss as to Fait was not through “fortuity.” Therefore, the trial court properly
granted summary judgment on this ground.2

2 Fait argues Fait is an innocent co-insured and should not be barred by the willful acts
of New Faze. (See Ins. Code, § 533; Century-National Ins. Co. v. Garcia (2011) 51
Cal.4th 564, 568-569.) But this claim is based on an exclusion for willful acts, not

                                              6
                                              II
                                      Leave to Amend
       As we have emphasized before, the pleadings outline the perimeter of materiality
for purposes of assessing a summary judgment motion. (FPI Development, Inc. v.
Nakashima (1991) 231 Cal.App.3d 367, 381-382.) In the complaint, and in opposition to
a demurrer, Fait claimed to be an insured under the policy, as the policy shows, listing in
all caps, “Fait 1990 Trust [¶] Barbara & Glenn Fait, Trustees.” In opposition to
summary judgment Fait claimed to be a loss payee, however, no leave to amend the
complaint was sought. “[T]he term ‘loss payee’ shall include, but not be limited to, any
mortgagee of the insured real property.” (Ins. Code, § 572.) Leave to amend was not
sought until oral argument in the trial court.3
       The trial court acted within its discretion in denying leave to amend because this
theory was not outlined in the complaint, and no request for leave to amend was made
until the hearing on the motion. (See Melican v. Regents of University of California
(2007) 151 Cal.App.4th 168, 175-176 [“[i]t would be patently unfair to allow plaintiffs to
defeat [the] summary judgment motion by allowing them to present a ‘moving target’
unbounded by the pleadings”]; Falcon v. Long Beach Genetics, Inc. (2014) 224
Cal.App.4th 1263, 1280; Van v. Target Corp. (2007) 155 Cal.App.4th 1375, 1387, fn. 2.)
       Accordingly, the trial court properly denied the belated motion to amend.4


whether the loss otherwise falls within policy coverage prior to any exclusions. As we
explained in Fait, there are triable issues of fact in Fait’s suit against New Faze for waste
and impairment of security. (See Fait, supra, 207 Cal.App.4th at pp. 299-303.)

3  We do not have the transcript of the summary judgment hearing, but we presume the
trial court accurately recited what happened in its ruling incorporated into the judgment.
(See, e.g., Sutter Health Uninsured Pricing Cases (2009) 171 Cal.App.4th 495, 498.)

4  Because the granting of summary judgment is supported by the grounds set forth by the
trial court, we need not address the parties briefing of issues regarding grounds on which
the trial court denied summary judgment. (See Live Oak Publishing Co. v. Cohagan

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                                     DISPOSITION
       The judgment is affirmed. Defendant shall recover from Fait reasonable costs
incurred on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)




                                                       DUARTE             , J.



We concur:



      BUTZ                  , Acting P. J.



      MAURO                 , J.




(1991) 234 Cal.App.3d 1277, 1287.) However, the parties were prudent to brief those
issues. (See Wilson, supra, 102 Cal.App.4th at p. 1174, fn. 2.)

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