Filed 1/7/14 Kallman v. State Farm General Insurance CA2/7
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN


ANDREW KALLMAN, et al.,                                              B243272

         Plaintiffs and Appellants,                                  (Los Angeles County
                                                                     Super. Ct. No. SC110220)
         v.

STATE FARM GENERAL INSURANCE
COMPANY,

         Defendant and Respondent.




                   APPEAL from a judgment of the Superior Court of Los Angeles County,
Cesar C. Sarmiento and Jacqueline A. Connor, Judges. Reversed.


                   Hamrick and Evans, George Knopfler and James Pazos for Plaintiffs and
Appellants.


                   LHB Pacific Law Partners, Michael J. McGuire and Matthew F. Batezel for
Defendant and Respondent.


                               ____________________________________
                                     INTRODUCTION
       Appellants Andrew and Frances Kallman appeal from the judgment entered upon
the trial court’s order granting respondent State Farm General Insurance Company’s
motion for summary judgment. Appellants filed a complaint against State Farm, alleging
causes of action for breach of contract and breach of the covenant of good faith and fair
dealing, arising out of State Farm’s settlement of appellants’ homeowners insurance
claim. State Farm moved for summary judgment on the ground that appellants’ action
was barred by the one-year statute of limitations contained in appellants’ insurance
policy. The trial court granted State Farm’s motion, finding that the statute of limitations
began to run more than one year before appellants initiated suit against State Farm.
       On appeal, appellants argue that the trial court erred in granting State Farm’s
motion for summary judgment. Specifically, appellants contend the statute of limitations
remained equitably tolled from the time they filed their insurance claim with State Farm
on August 23, 2007, until the time they initiated the present action on November 3, 2010.
For the reasons set forth below, the trial court’s judgment is reversed.
                  FACTUAL AND PROCEDURAL BACKGROUND
    I. Appellants’ Insurance Policy
       In January of 2007, appellants purchased a homeowners insurance policy (“the
policy”) from State Farm, which insured appellants’ home during the period of January
17, 2007, to January 17, 2008.1 The policy covered payments for the repair of certain
damages to appellants’ home (“Coverage A”) and personal property (“Coverage B”), as
well as additional living expenses – i.e., rent for temporary housing – incurred by
appellants as a result of damages covered by the policy (“Coverage C”). Specifically,
Coverage C provided for payment of additional living expenses to maintain appellants’
standard of living for the shortest of: “(a) the time required to repair or replace



1
       The parties’ briefings on appeal state that the policy covered the period of August
6, 2007, to August 6, 2008. However, the copies of the policy contained in the record
indicate that the policy covered the period from January 17, 2007, to January 17, 2008.
                                              2
[appellants’] premises; (b) the time required for [appellants’] household to settle
elsewhere; or (c) 24 months.” The policy also contained a provision informing appellants
that a one-year statute of limitations for claims brought against State Farm under the
policy would begin to run after the date of a covered loss or damage.
   II. Appellants’ Insurance Claim
       On or about August 23, 2007, appellants discovered that their fourth-floor water
heater had leaked while they were away for a long weekend, causing extensive water
damage to their home. Appellants immediately notified State Farm about the damage and
submitted a claim under the policy.
       On August 24, 2007, State Farm conducted an initial inspection of appellants’
property. That same day, appellants had their own contractor inspect their property.
According to appellants’ contractor, the repairs would take between three and six months
to complete.
       A few days later, State Farm informed appellants that it would pay up to $20,000
per month to cover appellants’ additional living expenses while repairs were being
completed. Soon after, State Farm advanced $40,000 to appellants to cover their security
deposit and first month’s rent for temporary housing.
       On August 31, 2007, State Farm conducted another inspection of appellants’
property with a contractor from Rossmoyne, Inc. (“Rossmoyne”), the firm State Farm
hired to calculate the estimates for appellants’ repairs. Rossmoyne’s contractor
confirmed that the repairs would take approximately six months to complete.
       On that same day, State Farm sent appellants a letter outlining additional payments
that were potentially qualified under Coverage C. The letter stated that the policy would
cover only necessary rental costs during the reasonable expected time of repairs.
       On September 10, 2007, State Farm received Rossmoyne’s estimate, which called
for $247,426.20 worth of repairs to appellants’ property. On September 20, 2007, State
Farm contacted appellants to discuss Rossmoyne’s estimate. Appellants approved the
estimate, with the exception that they believed the home’s floors needed to be replaced as
a result of the water damage.

                                             3
        On September 28, 2007, State Farm sent appellants a number of documents,
including: (1) a $247,426.20 check for the undisputed amount of repairs, pursuant to
Coverage A; (2) a letter confirming that the repairs were expected to be completed in six
months; and (3) a check for $120,000 for additional living expenses, pursuant to
Coverage C, to cover the six month period during which the repairs were supposed to be
completed.
        Per appellants’ request, State Farm and Rossmoyne inspected appellants’ floors on
October 1, 2007, and later approved an additional payment of $30,496.39 to cover their
replacement. During the inspection, State Farm informed appellants that the undisputed
repairs needed to commence in the near future because State Farm had started making
payments.
        On November 13, 2007, appellants informed State Farm that they had retained a
design firm to assist in the planning, designing, and monitoring of the repair work, and
that a separate contractor had completed a $433,419 estimate for the repair work.
Appellants also confirmed that they expected the repairs to be completed by August 1,
2008.
        On December 26, 2007, State Farm approved additional living expenses under
Coverage C through August 1, 2008. State Farm also warned appellants that any time
associated with remodeling, redesigning, or renovating their home (i.e., time associated
with work outside the scope of necessary repairs) would not be covered under the policy.
        On January 21, 2008, after reviewing appellants’ $433,419 estimate, Rossmoyne’s
contractor advised State Farm that the initial $247,426.20 estimate and the $30,496.39
flooring estimate were sufficient to cover appellants’ necessary repairs. On February 19,
2008, State Farm sent a letter informing appellants that additional construction costs
outside of those covered by Rossmoyne’s estimates would not be covered by the policy.
State Farm also warned appellants that the policy would not cover the services of an
architect or designer because the home had suffered no structural damage and would
therefore not require the drafting of additional plans to complete the necessary repairs.


                                             4
The letter also informed appellants of the one-year statute of limitations governing suits
brought under appellants’ policy.
       The following day, State Farm forwarded two more additional payments: one for
$30,496.39, to cover the flooring repairs, and the other for $80,000, to cover the family’s
additional living expenses through August 1, 2008. State Farm also warned appellants
that additional living expenses incurred beyond August 1, 2008, may not be covered
under the policy. Again, State Farm informed appellants of the statute of limitations
provision contained in their insurance policy.
       On March 7, 2008, attorney George Knopfler informed State Farm that he had
been retained by appellants2 to pursue potential litigation against State Farm for breach of
contract and bad faith actions. State Farm responded with two letters, one on March 25,
2008, and another on April 17, 2008, neither of which Mr. Knopfler, nor appellants,
answered. In both letters, State Farm stated its position that it had investigated
appellants’ claim in good faith and reiterated its opinion that appellants’ independent
estimate of $433,419 covered costs outside the scope of necessary repairs, which were
not covered by the policy.
       On May 13, 2008, appellants informed State Farm that they believed the repairs
would not be completed until December 1, 2008, four months after the agreed upon date
of completion. Due to the parties’ prior agreement that repairs would be completed by
August 1, 2008, State Farm asked appellants to provide documentation to justify
extending the completion date, as well as Coverage C payments, by four months.
       On June 3, 2008, Mr. Knopfler responded to State Farm’s request. However, Mr.
Knopfler only provided his own statements regarding the expected delays. According to
Mr. Knopfler, the delays were attributable to inaction by appellants’ architect and
backlogs in the City’s permitting process. State Farm requested that appellants provide


2
       Appellants contend that Mr. Knopfler was retained to represent only Mr. Kallman,
and not the Kallmans collectively. However, as discussed below, this issue does not bear
on this Court’s ruling. Therefore, for the sake of brevity, Mr. Knopfler will be referred to
as “appellants’” attorney throughout this opinion.
                                              5
documents directly from appellants’ architect and the City’s planning department to
verify the delay. Again, State Farm warned appellants that delays associated with
redesigning, remodeling, or renovating their home would not be covered by the policy.
       On June 25, 2008, Mr. Knopfler replied with another explanation. Again, he
provided only his own statements regarding the expected delays, which consisted of a
self-compiled list of dates marking milestones in appellants’ insurance claim process. In
its reply, State Farm again informed Mr. Knopfler that extended coverage under
appellants’ policy would not be approved without documents sent directly from
appellants’ architect and the City’s planning department. State Farm also restated its
belief that the services of an architect were unnecessary, as appellants’ policy only
covered repairs to the original design of the home, and would not cover any new
designs.3
       On September 25, 2008, State Farm sent Mr. Knopfler another letter requesting
documents from appellants’ architect and the City’s planning department. State Farm
warned Mr. Knopfler that it would close appellants’ file if they did not provide the
requested documents because State Farm believed it had made all undisputed payments
on appellants’ claim. On November 12, 2008, after receiving no response from
appellants or Mr. Knopfler, State Farm sent a closing letter to Mr. Knopfler, informing
him that it had closed appellants’ file due to their failure to provide the documents
necessary to extend payments on their claim. Mr. Knopfler and appellants deny receipt
of the closing letter. Appellants did not contact State Farm again for nearly two years.
    III.    The Kallmans’ Suit Against State Farm
       On November 3, 2010, the Kallmans filed suit against State Farm, alleging claims
for breach of contract and bad faith. In their complaint, appellants alleged that State
Farm breached the insurance contract when it failed to “properly adjust the Claim and



3
       The record includes the results of another inspection performed by Rossmoyne’s
contractor on July 24, 2008, in which the contractor indicated that appellants were
making significant additions and improvements to the original design of their home.
                                             6
pay out policy benefits to [appellants] in connection with the loss that occurred to [their
property].” Appellants also alleged that State Farm acted in bad faith in handling
appellants’ claim.
         State Farm filed a motion for summary judgment, arguing that the statute of
limitations for filing a claim under appellants’ policy had expired prior to initiation of the
present action. Appellants opposed State Farm’s motion for summary judgment, arguing
that the statute of limitations had remained tolled from the time they filed their claim with
State Farm on August 23, 2007, claiming they never received State Farm’s closing letter.
   IV.      The Trial Court’s Decision
         The trial court granted State Farm’s motion for summary judgment on the ground
that the one-year statute of limitations for appellants’ claims against State Farm had
expired. The trial court based its ruling on two alternative grounds. First, the court found
that appellants failed to present a triable issue of fact to show that they never received
State Farm’s closing letter. Alternatively, the trial court found that even if appellants
never received State Farm’s closing letter, the undisputed evidence showed as a matter of
law, the statute of limitations began to run prior to November of 2008, following State
Farm’s repeated warnings that it would close appellants’ file if they did not provide the
requested documents. After granting summary judgment on the breach of contract claim,
the trial court declined to rule on appellants’ bad faith cause of action.
         This appeal followed.
                                       DISCUSSION
   I. Standard of Review
         On appeal from a grant of summary judgment, we review the record and the ruling
of the trial court de novo. (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 334.) In
doing so, we consider all the evidence set forth in the moving and opposition papers,
except that evidence to which objections have been made and sustained. (Ibid.) The
reviewing court must view all evidence and consider all reasonable inferences in a light
most favorable to the non-moving party. (Agular v. Atlantic Richfield Co. (2001) 25
Cal.4th 826, 843.) The moving party bears the burden of establishing, through

                                              7
declarations and evidence, a complete defense to the non-moving party’s action or the
absence of a material fact of the non-moving party’s case. (1231 Euclid Homeowners
Ass’n v. State Farm Fire and Cas. Co. (2006) 135 Cal.App.4th 1008, 1017.) A grant of
summary judgment is proper if the evidence set forth shows that there is no triable issue
as to any material fact, and that the moving party is entitled to judgment as a matter of
law. (Code Civ Proc., § 437c, subd. (c); see also Guz v. Bechtel Nat. Inc., supra, 24
Cal.4th at p. 334.)
       When reviewing a grant of summary judgment, we follow the same procedure as
the trial court in determining whether the opposing party has established the existence of
a triable issue of material fact. (Oakland Raiders v. National Football League, (2005)
131 Cal.App.4th 621, 630.) In doing so, we are not bound by the reasons given by the
trial court in granting summary judgment; “we review the ruling of the trial court, not its
rationale.” (Ibid.; see also Davey v. Southern Pac. Co. (1897) 116 Cal. 325, 329 [“No
rule of decision is better or more firmly established by authority . . . than that a ruling or
decision, itself correct in law, will not be disturbed on appeal merely because given for a
wrong reason”].)
   II. Applicable Law
       As required by statute, homeowners insurance policies must advise a policyholder
that he has one year from the date of his loss to file suit against his insurance provider.
(See Singh v. Allstate Ins. Co. (1998) 63 Cal.App.4th 135, 140.) In Prudential-LMI Com.
Insurance v. Superior Court (1990) 51 Cal.3d 674, the California Supreme Court held
that the one-year statute of limitations is equitably tolled throughout the period during
which the insurance provider investigates the insured’s claim. (Id. at p. 693.) This
tolling period ends when the insurance provider either denies the insured’s claim in
writing (ibid.), or settles the insured’s claim. (Marselis v. Allstate Ins. Co. (2004) 121
Cal.App.4th 122, 126.) The insurer is required to send a letter which clearly and
unequivocally denies the claim. (See Prudential-LMI, supra, 51 Cal.3d at p. 678 [tolling
ends upon insured’s receipt of unequivocal denial in writing]; Aliberti v. Allstate Ins. Co.
(1999) 74 Cal.App.4th 138, 146, 148-149.) “The reason for the tolling rule is to avoid

                                               8
penalizing the insured for the time consumed by the insurer investigating the claim, while
preserving ‘the central idea of the limitation provision [that] an insured will only have 12
months to institute suit.’” (Marselis v. Allstate Ins. Co., supra, 121 Cal.App.4th at p.
125, citing Prudential-LMI, supra, 51 Cal.3d at p. 693.)
   III.   The Trial Court Erred in Granting Summary Judgment
       On appeal, appellants argue that the statute of limitations remained tolled from the
time they filed their insurance claim with State Farm on August 23, 2007, until they filed
suit on November 3, 2010. The trial court rejected this argument, concluding that the
tolling period for the statute of limitations expired no later than November of 2008. In
reaching its decision, the trial court acknowledged that even if a triable issue of fact
existed as to whether appellants received State Farm’s closing letter dated November 12,
2008, appellants’ conduct during the two-year period between November of 2008 and
November of 2010 demonstrated their acknowledgment State Farm had closed their
claim file no later than November of 2008. The trial court based its conclusion on the
following undisputed facts: (1) State Farm made all of its payments under the policy prior
to November of 2008; and (2) appellants admitted receipt of every letter from State Farm,
including the final warning letter sent September 25, 2008, with the only exception being
the November 12, 2008, closing letter. As discussed below, the trial court erred in
granting State Farm’s motion for summary judgment.
          a. The Marselis Decision
       Respondent urges this court to rely on Marselis v. Allstate Ins. Co. (2004) 121
Cal.App.4th 122, as authority to affirm the trial court’s judgment. The plaintiff in
Marselis was the policyholder and sued her insurance provider, Allstate Insurance
Company (“Allstate”), after Allstate refused to reopen the plaintiff’s claim more than two
years after the company made a series of payments under the claim. (Id. at p. 125.)
Following the Loma Prieta earthquake, the plaintiff filed a claim for structural damage to
her home. (Ibid.) In February of 1990, after months of investigating the plaintiff’s claim,
Allstate paid the plaintiff approximately $92,000 under her policy. (Ibid.) Soon after, the
plaintiff applied for a loan, informing the lender that she had recently settled an insurance

                                              9
claim with Allstate. (Ibid.) Over two years after the settlement of her claim, the plaintiff
asked Allstate to reopen her claim because she believed she could receive a more
generous settlement. (Ibid.) After Allstate refused to reopen her claim, the plaintiff sued
the insurance company. (Ibid.) Following a court trial on Allstate’s statute of limitations
defense, the court found that the one-year statute of limitations expired no later than
February of 1990, when Allstate informed the plaintiff it would make no further
payments under her claim. (Ibid.)
       The court of appeal affirmed the trial court’s decision, holding that the equitable
tolling period expired in February of 1990, thereby restarting the one-year statute of
limitations. (Marselis v. Allstate Ins. Co., supra, 121 Cal.App.4th at p. 126.) The court
held that the requirement for written denial of an insured’s claim to stop equitable tolling
does not apply to cases in which the insurance provider has made all undisputed
payments under the insured’s policy. (Id. at pp. 125-126.) The court rationalized that
“[n]othing justifies judicial extension of the equitable tolling rule to create a right to
reopen claims that have been paid.” (Id. at p. 126.) Marselis is distinguishable and the
rationale does not apply to this case. In Marselis it was undisputed that the insureds’
claim had been settled and resolved. No issue was raised about unresolved payments as
in this case.
       The core issue in this case is when did the tolling period end, thereby
reactivating the running of the one-year contractual period? The California
Supreme Court has been unambiguously clear when it held that to end the
equitable tolling of a contractual limitations period, the insurer must clearly and
unequivocally deny the claim in writing. (Prudential-LMI Commercial Ins. v.
Superior Court, supra, 51 Cal.3d at p. 678.) California courts have consistently
reinforced this rule, holding that “oral denials of claims are not sufficient to stop
equitable tolling.” (Aliberti v. Allstate Ins. Co., supra, 74 Cal.App.4th at pp. 146,
148-149; Hydro-Mill Co., Inc. v. Hayward, Tilton and Rolapp Ins. Associates, Inc.
(2004) 115 Cal.App.4th 1145, 1163.)

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      The issue presented by State Farm’s motion for summary judgment is
whether State Farm “clearly and unequivocally denied the claim in writing.”
      To satisfy its initial burden, State Farm presented evidence of its November
12, 2008 letter to Attorney Knopfler, which purported to inform the Kallmans that:
(a) State Farm was closing its file and (b) the one-year contractual limitations
period commenced as of the date of the letter. It is apparent that the inference
State Farm sought to draw from this evidence is that the Kallmans received the
subsequent closing letter and, thus, had written a “clear and unequivocal” notice of
State Farm’s closure of the claim.
      The Kallmans rebutted State Farm’s evidence by submitting the declarations
of Attorney Knopfler, Rebecca Luna, Andrew Kallman and Frances Kallman, all
of whom testified that they did not receive State Farm’s November 12, 2008
Closing Letter.
      The Kallmans further asserted that from its evidence of non-receipt of the
closing letter, a trier of fact could reasonably infer, inter alia, that State Farm never
sent the closing letter, thereby creating a triable issue of fact. The court in Jensen
v. Traders & General Ins. Co. (1956) 141 Cal.App.2d 162, 164 held that “If th[e]
plaintiff’s testimony denying the receipt of the letter was believed, the jury would
be warranted in going further and finding that the letter was not posted.” The court
in Lucas v. Hesperia Golf & Country Club (1967) 255 Cal.App.2d 241, 247 held
that plaintiff’s testimony denying receipt of a notice raised an inference that
notices were never mailed to plaintiff and, thus, created a conflict in the evidence
to be resolved by the jury.
      A single declaration is sufficient to create a triable issue of fact, but the
evidence submitted by the Kallmans in support of their position is more extensive.
The testimony of State Farm’s own representative, Amanda Barberiz, provides
further support for the Kallmans’ position because she could not definitely state
                                           11
whether she or someone else sent the closing letter and, thus, does not have actual
knowledge that the letter was ever sent.
      There is no dispute that State Farm did not send the closing letter by certified
mail or by any other method that would confirm that the notice was, in fact, sent
and/or received such as by return, receipt requested. State Farm points out that the
Legislature has not mandated that such notices be sent by certified mail. The
Kallmans respond to this contention by asserting that “State Farm’s commentary
misses the point – common sense dictates that a reasonable insurer who seeks to
make certain that its insured receives the written notice of the denial of the claim
would send the ‘written notice of denial’ by certified mail.” Regardless of whether
this criticism has merit, this court does agree that a triable issue of material fact has
been raised which requires a reversal as hereafter stated.
      The Kallmans’ response to State Farm’s motion for summary judgment
provided sufficient evidence to establish a triable issue of fact as to whether State
Farm provided the Kallmans with clear and unequivocal notice, in writing, of its
denial of the Kallmans’ claim, a legal prerequisite to end the tolling of the
limitations period. As a consequence, the trial court erred in granting State Farm’s
motion.
      In addition to the issue of whether State Farm sent the closing letter,
evidence of the Kallmans is undisputed on the issue of whether they, in fact,
received State Farm’s “clear” and “unequivocal” written notice of the denial of the
claim. With regard to this point, State Farm argues that “Appellants fail to provide
any legal authority holding that actual receipt of a closing letter is required to end
the equitable tolling.” To give credit to State Farm’s position on this point would
be to ignore the rationale for the underlying legal principles applicable to issues
such as in this case as declared by the California Supreme Court in Prudential-LMI


                                           12
Commercial Ins. v. Superior Court, supra, which dictates that a clear denial in
writing is required.
      The September 25, 2008 letter from State Farm also fails to comply with the
requirements of Prudential-LMI, because the closing letter was conditional by
stating, in effect, “We will close unless, etc.” Such language does not comply with
the notification requirements established by our Supreme Court that to stop
equitable tolling the language used must be clear and unequivocal in denying the
claim. We hold that the September 25, 2008 letter did not terminate the tolling
period.
      State Farm has failed to negate the existence of a triable issue of fact
regarding the applicability of its contractual limitations defense.

                                    DISPOSITION


      The judgment is reversed. Each party is to bear its own costs on appeal.




                                                                           WOODS, J.


We concur:




             PERLUSS, P. J.                                                SEGAL, J.*



*
 Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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