Stockton Mariposa, LLC v. West American Insurance Company ( 2023 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUN 14 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
STOCKTON MARIPOSA, LLC, No. 22-55343
Plaintiff-Appellant, D.C. No.
2:20-cv-06936-DMG-SK
v.
WEST AMERICAN INSURANCE MEMORANDUM*
COMPANY,
Defendant-Appellee,
and
DOES, 1 to 100,
Defendant.
Appeal from the United States District Court
for the Central District of California
Dolly M. Gee, District Judge, Presiding
Submitted June 7, 2023**
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
1
Before: GRABER and OWENS, Circuit Judges, and TUNHEIM,*** District Judge.
Plaintiff Stockton Mariposa, LLC (“Stockton”), was an insured of Defendant
West American Insurance Company (“West American”). Stockton brought this
action asserting claims for breach of contract and breach of the implied covenant of
good faith and fair dealing after West American denied Stockton’s insurance claim
for theft and vandalism of a covered property following a tenant vacancy.
Stockton alleges that it suffered a loss compensable under the insurance contract
when the property was vandalized and that West American breached the contract
when it refused to reimburse Stockton for the loss. The district court granted West
American’s motion for partial summary judgment. Stockton timely appeals.
We review de novo the district court’s grant of summary judgment. United
States v. City of Tacoma, 332 F.3d 574, 578 (9th Cir. 2003). We must view the
evidence in the light most favorable to the nonmoving party, id., and we must
make an independent determination of the meaning of the relevant language of the
insurance policy, Conestoga Servs. Corp. v. Exec. Risk Indem., Inc., 312 F.3d 976,
981 (9th Cir. 2002). We affirm because (1) the Control Clause does not limit the
Vacancy Exclusion, (2) West American did not waive its objection to Stockton’s
notice delay, and (3) West American carried its burden to show that it suffered
***
The Honorable John R. Tunheim, United States District Judge for the
District of Minnesota, sitting by designation.
2
actual prejudice.
1. When considering matters of California law, we follow the rulings of the
California Supreme Court and, in the absence of such a ruling, attempt to
determine how the California Supreme Court would rule if presented with the issue
at hand. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.
1992). When interpreting insurance policies, California courts “look first to the
language of the contract in order to ascertain its plain meaning or the meaning a
layperson would ordinarily attach to it.” Waller v. Truck Ins. Exch., Inc., 900 P.2d
619, 627 (Cal. 1995), as modified on denial of reh’g (Oct. 26, 1995). Exclusionary
clauses should be interpreted narrowly in favor of coverage. See Medill v.
Westport Ins. Corp., 49 Cal. Rptr. 3d 570, 578 (Ct. App. 2006).
We hold that the Control Clause does not limit the enforcement of the
Vacancy Exclusion. Under California law, vacancy provisions like the one at issue
are valid when the limitation is “conspicuous, plain, and clear.” Travelers Prop.
Cas. Co. of Am. v. Superior Ct., 155 Cal. Rptr. 3d 459, 470–71 (Ct. App. 2013)
(internal citation omitted). The plain text of the Vacancy Exclusion
unambiguously states that a consecutive vacancy for the prior 60 days prevents
coverage for certain losses. See id. at 473 (finding a similar vacancy exclusion to
be unambiguous, conspicuous, plain, and clear). It contains no limitations that
depend on who caused the vacancy. Thus, when a triggering event occurs—a
3
vacancy counting backwards more than 60 days before the loss—the exclusion
applies without regard to who owns the property or who acted to cause the
vacancy.
The Control Clause here does not function to prevent the enforcement of the
Vacancy Exclusion. Stockton relies on a footnote in St. Mary & St. John Coptic
Orthodox Church v. SBC Ins. Servs., Inc., in which the court suggested that a
“control of property” condition could have impacted the vacancy provision. 271
Cal. Rptr. 3d 773, 782 n.5 (Ct. App. 2020). But, in the same footnote, the court
clearly stated that it declined to consider the issue. Id.
2. If an insurer fails to object promptly and specifically to a delay in the
presentation of notice, any objections based on delay are waived. Cal. Ins. Code
§ 554. The purpose of section 554 is to prevent an insurer from “lulling the
insured into believing that notice and proof of loss are unnecessary.” Insua v.
Scottsdale Ins. Co., 129 Cal. Rptr. 2d 138, 142 (Ct. App. 2002). If untimely notice
is raised concurrently with other grounds for denial, it is preserved as a
defense. See Select Ins. Co. v. Superior Ct., 276 Cal. Rptr. 598, 601–03 (Ct. App.
1990).
We are satisfied that West American specifically objected to Stockton’s
delayed notice. The Reservation of Rights letter stated that West American was
investigating the loss under a reservation of rights and alerted Stockton to the
4
relevant provisions related to the investigation, including the Vacancy Clause and
Stockton’s duty to provide prompt notice of the loss. The denial letter also made
clear that late notice was the reason for denial. In short, the harm that section 554
is intended to avoid—the insurer’s misleading the insured into inaction—is not
present here.
3. Finally, under California’s notice prejudice rule, an insurance company
may not deny an insured’s claim under an occurrence policy based on lack of
timely notice or proof of claim unless it can show actual prejudice from the
delay. Cisneros v. UNUM Life Ins. Co. of Am., 134 F.3d 939, 944 (9th Cir. 1998)
(citing Shell Oil Co. v. Winterthur Swiss Ins. Co., 15 Cal. Rptr. 2d 815, 845 (Ct.
App. 1993)). The burden of establishing prejudice is on the insurance company,
Campbell v. Allstate Ins. Co., 384 P.2d 155, 156–57 (Cal. 1963), and prejudice is
not presumed by delay alone, Shell Oil Co., 15 Cal. Rptr. 2d at 845. Although the
issue of prejudice with respect to delay is one of fact, under some circumstances,
prejudice can exist as a matter of law. Nw. Title Sec. Co. v. Flack, 85 Cal. Rptr.
693, 697 (Ct. App. 1970).
Here, West American has shown that it suffered actual prejudice because of
Stockton’s delay. West American’s ability to investigate was not only impaired
but rendered impossible. Given the delay, an investigation would not be able to
determine whether an appreciable loss was covered under the policy. See 1231
5
Euclid Homeowners Ass’n v. State Farm Fire & Cas. Co., 37 Cal. Rptr. 3d 795,
804 (Ct. App. 2006) (holding that the insured’s failure to provide timely notice
prejudiced the insurer because it “effectively denied [the insurer] any opportunity
to fully investigate the loss”). In other words, because of the delayed notice and
the circumstances of loss in this case in connection with the Vacancy Clause, “it
virtually becomes impossible to learn what facts, favorable to defendant, could
have been ascertained through prompt inquiry.” Purefoy v. Pac. Auto. Indem.
Exch., 53 P.2d 155, 159 (Cal. 1935). Stockton’s late notice of its claim actually
prejudiced West American as a matter of law.
AFFIRMED.
6