NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Plaintiffs and appellants Alon Gamliel, Caryn Gamliel, Tamir Dayan, and Stella Pakler appeal from an order sustaining defendant and respondent Scott N. Litman's (Litman) demurrer to plaintiffs' second amended complaint (SAC) without leave to amend. We affirm in part and reverse in part. We agree with plaintiffs that they properly pled a cause of action for negligence relative to policy procurement and servicing against Litman even though he was a fully disclosed agent of the insurer. The SAC adequately alleges that Litman made misrepresentations regarding the insurance coverage. Accordingly, the trial court's order sustaining Litman's demurrer to the tenth cause of action is reversed.
In all other respects, we affirm the trial court's order.
FACTUAL AND PROCEDURAL BACKGROUND
"Because this matter comes to us on demurrer, we take the facts from plaintiff's complaint, the allegations of which are deemed true for the limited purpose of determining whether the plaintiff has stated a viable cause of action. [Citation.]" (Stevenson v. Superior Court (1997) 16 Cal.4th 880, 885.)
Plaintiffs own property located at 8559/8601 Nobel Avenue in North Hills. At some point, they interacted with Litman, who was a "captive"
Prior to the date of loss, plaintiffs informed Litman that they had lost their tenant. Because the property was not formally occupied from a tenant's perspective, plaintiffs would be taking the opportunity to do some repairs to the property. At no time did Litman ever inform plaintiffs that Farmers would contend that there was no coverage because the property was unoccupied. In fact, according to plaintiffs, he did just the opposite—he assured plaintiffs that they were covered.
On or about October 22, 2007, plaintiffs' property was damaged as a result of fire. They promptly gave notice of the claim. Six months later, Farmers denied the claim, contending that the property was vacant and that arson had occurred; thus, there was no coverage.
As a result of Farmers's denial of their claim, plaintiffs were severely damaged, both economically and noneconomically, prompting them to file their original complaint on October 24, 2008, against Farmers, FIE, and Litman. According to the Litman's respondent's brief, Litman demurred, and the trial court sustained his demurrer with leave to amend.
Plaintiffs filed their first amended complaint on April 6, 2009, alleging breach of written contract, fraud, negligent misrepresentation, intentional infliction of emotional distress, negligence, and breach of oral and implied contract against Litman. Again Litman demurred to all causes of action alleged against him, and on June 24, 2009, the trial court sustained his demurrer with leave to amend.
On July 24, 2009, plaintiffs filed their SAC. As against Litman, the SAC contained five causes of action: fraud, negligent misrepresentation, intentional infliction of emotional distress, breach of oral and implied contract relative to policy procurement and servicing, and negligence relative to policy procurement and servicing.
Litman demurred to plaintiffs' SAC, arguing that (1) fraud was not pled with adequate specificity, (2) negligent misrepresentation was improperly pled as an alternative to fraud, (3) the intentional infliction of emotional distress claim did not allege extreme and outrageous conduct or that emotional distress was a foreseeable risk, (4) the breach of contract claim was virtually identical to the cause of action set forth in the first amended complaint and still failed to set forth the terms of the alleged contract, and (5) plaintiffs' negligence cause of action failed because Litman was a disclosed agent acting within the scope of his agency. Plaintiffs opposed Litman's demurrer, asserting that the SAC alleged adequate facts, that Litman could be sued for his tortious conduct, that the fraud and negligent misrepresentation causes of action were pled with adequate specificity, and that each element of the intentional infliction of emotional distress cause of action was supported by adequate factual allegations.
On September 2, 2009, the trial court sustained Litman's demurrer without leave to amend. Regarding the fraud cause of action, the trial court found that the "SAC continues to lack particularity required to plead fraud against . . . Litman." While the SAC added new allegations, plaintiffs "still fail[ed] to specifically allege the following: (1) where each communication took place; (2) when each communication took place (4 to 6 weeks is a broad time frame); (3) how each communication took place (claiming communications were `typically telephonic' sheds no light on each specific communication); and (4) the specific content of each communication. As a result [p]laintiffs cannot meet the stringent pleading requirements for fraud under California law."
"In addition, [p]laintiffs have again pled the reliance element by offering conclusions of fact and general bases for their alleged reliance. . . . In fact, [p]laintiffs have pled virtually the same bases for reliance as their [first amended complaint], yet they now claim the `reliance was reasonable' without stating any specifics as to why or when any alleged reliance took place."
"Plaintiffs contend that . . . Litman conspired with [Farmers and FIE] to defraud [them]. Further, [p]laintiffs contend that . . . Litman aided and abetted any alleged fraud. However, for such a theory, [p]laintiffs must allege [that] Litman knew another defendant's conduct constituted a breach of duty and that he gave substantial assistance to the other defendant. [Citation.] The SAC is devoid of any allegations [that] Litman had any involvement in, or knowledge of, the Farmers claim handling process. Further, the SAC is void of any allegation that . . . Litman had an agreement with any of the other Defendants and that . . . Litman specifically did anything to further an alleged fraud."
Regarding the negligent misrepresentation cause of action, the trial court ruled: "The SAC ignores the Court's ruling on negligent misrepresentation and again improperly tries to plead negligent misrepresentation as an alternative to fraud. Plaintiffs merely incorporate by reference the allegations from fraud and try to plead negligent misrepresentation. Plaintiffs have offered no basis to show [that] Litman made any representation without reasonable ground for the belief."
As for the intentional infliction of emotional distress claim, the trial court determined that "the SAC is devoid of any factual allegations amounting to extreme and outrageous conduct on the part of . . . Litman. Plaintiffs claim they `suffered emotional harm due to the intentional conduct of their insurer'; however, they make no specific reference to . . . Litman."
Moreover, "[w]hile [p]laintiffs appear to utilize an aiding and abetting theory against . . . Litman, [they] offer no factual support for their conclusion that Defendants were acting in concert. No allegations exist that . . . Litman consented to the alleged conduct of [p]laintiffs' insurers, let alone that . . . Litman even knew what the insurers were alleged doing."
Furthermore, "[a]s to causation, [p]laintiffs have once again failed to offer facts to show emotional distress was a foreseeable risk of . . . Litman's alleged conduct."
With respect to plaintiffs' breach of oral and implied contract cause of action, the trial court noted that plaintiffs' opposition to Litman's demurrer failed to address this cause of action. "An unopposed demurrer concedes the validity of the arguments that the cause of action is insufficiently pled, and that concession binds the non-opposing party whose pleading was challenged." Setting that aside, "[a]s to the merits, the only change from the [first amended complaint] is [p]laintiffs now claim they entered into an oral and implied contract with [Farmers and FIE] `acting by and through Litman.'. . . However, . . . Litman still cannot ascertain the purported terms of his alleged oral and implied contract with [p]laintiffs and the alleged terms he breached."
Regarding the negligence cause of action, the trial court relied upon Lippert v. Bailey (1966) 241 Cal.App.2d 376, 378-379 (Lippert) and determined that plaintiffs failed to state sufficient facts "because . . . Litman was a disclosed agent." After all, plaintiffs conceded in the SAC that "Litman was an agent and employee of Farmers" and plaintiffs "knew their policy was coming from [Farmers] and FIE and had no problem identifying to whom they should submit a claim." The trial court found Paper Savers, Inc. v. Nacsa (1996) 51 Cal.App.4th 1090 (Paper Savers), cited by plaintiffs, inapposite.
Litman's motion for reconsideration was denied; a judgment of dismissal was entered; and plaintiffs' timely appeal ensued.
I. Standard of Review
"Our Supreme Court has set forth the standard of review for ruling on a demurrer dismissal as follows: `On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed "if any one of the several grounds of demurrer is well taken. [Citations.]" [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment. [Citation.]' [Citations.]" (Payne v. National Collection Systems, Inc. (2001) 91 Cal.App.4th 1037, 1043-1044.)
II. The Trial Court Properly Sustained Litman's Demurrer Without Leave to Amend to the Fourth, Fifth, Eighth, and Ninth Causes of Action
Fourth Cause of Action for Fraud
The pleading elements of a cause of action for fraud are (1) a misrepresentation made by the defendant (false representation, a concealment, or a nondisclosure); (2) the defendant's knowledge of the falsity or lack of reasonable ground for believing the misrepresentation to be true; (3) defendant's intent to defraud, that is, to induce plaintiff's reliance; (4) justifiable reliance by the plaintiff; and (5) resulting damage to the plaintiff. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974.)
Allegations of fraud involve a serious attack on a person's character and therefore the defendant is entitled to "`the fullest possible details of the charge in order to prepare his defense.'" (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) "`Accordingly the rule is everywhere followed that fraud must be specifically pleaded. The effect of this rule is twofold: (a) General pleading of the legal conclusion of "fraud" is insufficient; the facts constituting the fraud must be alleged.
(b) Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically).'" (Ibid.) Thus, a plaintiff must state his or her cause of action by "pleading facts which `show how, when, where, to whom, and by what means the [false] representations were tendered.' [Citation.]" (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) The plaintiff must state what was said (or concealed); whether it was stated orally or in writing, and if in writing, what the writing is; when and where it was said; and to whom the statement was made.
Plaintiffs do not adequately allege fraud against Litman. While plaintiffs allege that Litman confirmed that insurance coverage was in effect, they neglect to allege adequate detail regarding his purported representations. As the trial court aptly noted, "4 to 6 weeks prior to the loss" is a long time frame and does not satisfy the stringent pleading requirements of a fraud claim. Likewise, although the communications between plaintiffs and Litman "typically were telephonic", such a generalization is insufficient. And, where did Litman make the representations? Absent these details, plaintiffs have not pled a proper fraud claim.
In defending their fraud claim, plaintiffs argue that the strict pleading requirement is relaxed when the facts are more within the defendant's knowledge than the plaintiff's purview. While that may be true, plaintiffs have not demonstrated how Litman's alleged fraudulent misrepresentations are more within his knowledge than plaintiffs' knowledge. At a minimum, they know when he made false statements to them, whether those statements were made telephonically or in writing, and where those statements were made.
Also in their appellate brief, plaintiffs assert that Litman conspired with Farmers to defraud them. Nothing in the fraud cause of action in the SAC indicates that plaintiffs are alleging a conspiracy claim against Litman in connection with their fraud claim against Farmers.
Fifth Cause of Action for Negligent Misrepresentation
A claim for negligent misrepresentation requires proof of each of the elements of fraud except for knowledge of the falsity of the representation; an honest belief in the truth of the statement, without a reasonable ground for that belief, is sufficient. (R&B Auto Center, Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327, 377.) Like a claim for fraud, each element of a cause of action for "negligent misrepresentation must be factually and specifically alleged." (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.)
In the SAC, plaintiffs' negligent misrepresentation cause of action does not contain any factual allegations. Rather, it consists of two paragraphs: the first incorporating numerous prior paragraphs, and the second alleging "that the representations and concealment of material facts set forth above were done negligently, proximately resulting in injuries and damages to" plaintiffs. For the same reasons outlined above, plaintiffs' negligent misrepresentation claim fails as a matter of law.
Eighth Cause of Action for Intentional Infliction of Emotional Distress
The elements of a cause of action for intentional infliction of emotional distress are: (1) extreme or outrageous conduct engaged in with the intent of causing, or reckless disregard of the probability of causing, emotional distress; (2) severe emotional distress; and (3) causation. (Christensen v. Superior Court (1991) 54 Cal.3d 868, 903.) "`Conduct to be outrageous must be so extreme as to exceed all bounds of that usually tolerated in a civilized community.' [Citation.] Generally, conduct will be found to be actionable where the `recitation of the facts to an average member of the community would arouse his resentment against the actor, and lead him to exclaim, "Outrageous!"' [Citation.]" (KOVR-TV, Inc. v. Superior Court (1995) 31 Cal.App.4th 1023, 1028.)
In the SAC, plaintiffs lump together all of the defendants' allegedly wrongful conduct and label it "outrageous." Nothing specific is alleged against Litman. From what we can glean from plaintiffs' appellate brief, they appear to be basing their claim for intentional infliction of emotional distress against Litman upon his alleged aiding and abetting of Farmers's wrongful conduct. Liability may be imposed on one who aids and abets the commission of an intentional tort if the person knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to act. (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144.) Aiding and abetting the commission of a tort focuses on whether a defendant knowingly gave substantial assistance to someone who performed wrongful conduct. (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823.)
Here, there are no facts in the SAC to support plaintiffs' apparent aiding and abetting theory. Plaintiffs do not allege that Litman knew that Farmers was committing an intentional tort and/or that he substantially assisted or encouraged the commission of a tort. Absent these essential allegations, plaintiffs' intentional infliction of emotional distress claim against Litman fails.
Ninth Cause of Action for Breach of Oral and Implied Contract Relative to Policy Procurement and Servicing
Plaintiffs' ninth cause of action against Litman fails for both procedural and substantive reasons. Procedurally, plaintiffs forfeited any argument regarding this cause of action on appeal because they failed to raise any argument below. (Kolani v. Gluska (1998) 64 Cal.App.4th 402, 412 [failure to raise issue or argument in the trial court results in waiver on appeal].) In opposition to Litman's demurrer, plaintiffs failed to respond to Litman's challenges to the breach of contract cause of action. In fact, the trial court so noted in its order sustaining Litman's demurrer without leave to amend. Having ignored this cause of action below, plaintiffs are precluded from defending this cause of action on appeal.
Setting aside this procedural obstacle, substantively, the claim fails. In order to plead a claim for breach of an oral agreement, the plaintiff must allege: (1) the terms of the agreement, (2) the plaintiff's performance of the agreement, (3) the defendant's breach of the agreement, (4) the resulting damage, and (5) consideration. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 515, p. 648.) A cause of action for breach of an implied contract has the same elements as does a cause of action for breach of contract, except that the promise is not expressed in words but is implied from the promisor's conduct. (Chandler v. Roach (1957) 156 Cal.App.2d 435, 440.)
Here, the SAC fails to allege a breach of contract claim against Litman. At best, plaintiffs assert a breach of contract claim against Farmers and FIE. After all, the SAC alleges: "An oral and implied contract was entered into between [p]laintiffs on one hand and [Farmers and FIE] acting by and through [Litman]." In other words, the parties to the contract, be it implied or oral, were plaintiffs and Farmers and/or FIE. Litman was not a party to any agreement.
Moreover, the pleading does not set forth the terms of the contract and what terms Litman allegedly breached.
Under these circumstances, we readily conclude that plaintiffs' breach of contract claim against Litman fails as a matter of law.
Denial of Leave to Amend
We conclude that the trial court did not abuse its discretion in denying plaintiffs leave to amend the fraud, negligent misrepresentation, intentional infliction of emotional distress, and breach of contract causes of action. They have had three opportunities to set forth these claims properly. Moreover, on appeal, plaintiffs defend the allegations of their SAC and argue that the pleading is adequate. They do not contend that they can allege additional facts to support their claims against Litman. Consequently, we find no error in the denial of leave to amend.
III. The Trial Court Erred in Sustaining Litman's Demurrer to the Tenth Cause of Action for Negligence Relative to Policy Procedurement and Servicing)
In the tenth cause of action, plaintiffs allege that "Defendants," a group that includes Farmers, FIE, and Litman, "did not advise [p]laintiffs that there purportedly was no coverage as [a] result of the alleged vacancy and/or alleged lack of occupancy." "Quite to the contrary, Defendants assured [p]laintiffs that there was coverage and that [they] had nothing to worry about." Also, "Defendants never warned [p]laintiffs that there were purported coverage issues." "Had Defendants conducted themselves differently [p]laintiffs could have protected [themselves], but their inaction and/or neglect caused [p]laintiffs to lose this opportunity." Finally, plaintiffs alleged that "prior to the date of loss, [they] were in contact with [Litman], individually and on behalf of [Farmers and FIE], as set forth above, [p]laintiffs informed [Litman] of the status of the subject property. [Litman] represented to [p]laintiffs that there was coverage and certainly at no time advised [p]laintiffs that there was no coverage or that certain purported exclusions would apply."
"An insurance agent acting in the name of an insurance company is generally not personally liable to the insured for negligence committed within the scope of his or her employment; e.g., negligent failure to process an insurance application or to obtain coverages requested by the insured." (1 Croskey et al., Cal. Practice Guide: Insurance Litigation (Rutter Group 2009) ¶ 2:51.1, p. 2-16.1; see also Lippert, supra, 241 Cal.App.2d at p. 382.) The rationale is that "[t]he agent's negligence in performing his or her duties owed to the insurer is attributed to the insurance company: `Where an agent is duly constituted and names his principal and contracts in his name and does not exceed his authority, the principal is responsible and not the agent.' [Citations.]" (Croskey, supra, ¶ 2:51.2, p. 2-16.1.)
"The general rule that an insurance agent is not liable for negligent performance of his or her duties to the insurer does not insulate the agent from liability where, under the circumstances, the agent has breached a duty of care owed to the insured." (Croskey, supra, ¶ 2:53, p. 2-16.2.) "An insurance company's agent may be personally liable to someone who purchases insurance in reasonable reliance on the agent's negligent or intentional misrepresentations regarding coverage or other material policy terms." (Croskey, supra, ¶ 2:54, p. 2-17; see also McNeill v. State Farm Life Ins. Co. (2004) 116 Cal.App.4th 597, 603.) The rationale behind this principle is the following: "The rule shielding agents from personal liability for torts committed in the course and scope of their employment . . . does not apply to fraud." (Croskey, supra, ¶ 2:54, p. 2-17; see also Fitzpatrick v. Hayes (1997) 57 Cal.App.4th 916, 927; McNeill v. State Farm Life Ins. Co., supra, at p. 603 ["Like other agents, an insurance company's may be personally responsible when they commit that tort"].)
Although not artfully pled, plaintiffs' allegations fall squarely within the exception to the general rule outlined above. They allege that prior to the date of loss, they informed Litman that their property was not "formally occupied" and that they would be performing some repairs. Litman never informed plaintiffs that Farmers would deny coverage "due to [a] purported policy exclusion or limitation for vacancy and/or lack of occupancy." However, after the fire and after plaintiffs made their claim with Farmers, Farmers denied coverage on the grounds that the property was vacant.
Plaintiffs' theory of liability against Litman is that he misrepresented the insurance coverage as he did not advise plaintiffs that there was "no coverage as a result of [the] alleged vacancy and/or alleged lack of occupancy." To the contrary, plaintiffs were assured that there was coverage. At this stage of the proceedings, these allegations support a claim for negligence against Litman individually based upon his misrepresentations to plaintiffs regarding the scope of the insurance coverage.
In defending the trial court's order, Litman attempts to refute numerous cases (including Paper Savers, supra, 51 Cal.App.4th 1090) cited by plaintiffs by arguing that they concern the scope of an agent's duty, not whether the agent can be held personally liable for his allegedly wrongful acts. In light of our conclusion above, we need not reach this issue.
Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110 (Desai) does not aid Litman's cause on appeal. In Desai, "[a]n insured sued his real property insurer and insurance agent for breach of contract and negligence. . . . On demurrer, the trial court concluded that the insured could not state a cause of action against his insurer." (Id. at p. 1114.) The insured appealed, and the appellate court reversed the order of dismissal in favor of the insurer. (Id. at pp. 1114, 1121.) In so ruling, the Court of Appeal did not consider whether the agent was personally liable to the insured; in fact, the agent does not appear to have been a party to the appeal. (Id. at pp. 1115, 1121.)
All remaining issues, including whether Litman can amend the SAC to state a claim based upon his alleged expertise in this type of insurance, are moot.
The order sustaining Litman's demurrer to the SAC without leave to amend is reversed as to the tenth cause of action for negligence only. In all other respects, the order is affirmed. The judgment of the trial court is reversed. The parties to bear their own costs on appeal.
BOREN, P. J.