Supreme Court of California Justia
Citation 26 Cal. 4th 1142, 33 P.3d 487, 113 Cal. Rptr. 2d 70

Vu v. Prudential Property & Casualty Ins. Co.

Vu v. Prudential Property & Casualty Ins. Co. (2001)26 Cal.4th 1142 , 113 Cal.Rptr.2d 70; -- P.3d --

[No. S078271. Nov. 5, 2001.]

PETER VU, Plaintiff and Appellant, v. PRUDENTIAL PROPERTY & CASUALTY INSURANCE COMPANY Defendant and Respondent.

(On certification from the Court of Appeals, Ninth Circuit, No. 98-55540.)

(Opinion by Kennard, J., with George, C.J., Baxter, J., Werdegar, J., Chin, J., Brown, J., and Levy, J. fn. * , concurring.)

COUNSEL

Gruber & Kantor, Glenn R. Kantor, Daniel S. Gruber, Lisa S. Kantor and Sara Smith Ray for Plaintiff and Appellant.

Bill Lockyer, Attorney General, Timothy G. Laddish, Assistant Attorney General, Randall P. Borcherding, Deputy Attorney General for the State Insurance Commissioner as amicus curiae on behalf of Plaintiff and Appellant.

James T. Linford as amicus curiae on behalf of Plaintiff and Appellant. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone, Janice A. Ramsay, James F. Henshall, Jr., William Wraith, Craig S. Simon; Sonnenschein Nath & Rosenthal, Ronald D. Kent and Susan M. Walker for Defendant and Respondent.

Robie & Matthai, Pamela E. Dunn and Daniel J. Koes for the Personal Insurance Federation of California as amicus curiae on behalf of Defendant and Respondent.

Lewis, D'Amato, Brisbois & Bisgaard, Raul L. Martinez, Richard B. Wolf and Elise D. Klein for California FAIR Plan Association as amicus curiae on behalf of Defendant and Respondent. Luce, Forward, Hamilton & Scripps, Peter H. Klee and Marc J. Feldman for the National Association of Independent Insurers as amicus curiae on behalf of Defendant and Respondent.

Sonnenschein Nath & Rosenthal, Ronald D. Kent and Susan M. Walker for the Association of California Insurance Companies as amicus curiae on behalf of Defendant and Respondent.

Horvitz & Levy, Mitchell C. Tilner and Lisa Perrochet for 21st Century Insurance Company and Truck Insurance Exchange as amici curiae. James Osborne & Associates and W. James Osborne as amicus curiae.

Nielsen, Merksamer, Parrinello, Mueller & Naylor and Richard D. Martland for the California Chamber of Commerce and California Manufacturers Association as amici curiae.

Barger & Wolen and Kent R. Keller for Century National Insurance Company, the National Association of Independent Insurers and the Association of California Insurance Companies as amici curiae.

Robinson, Calcagnie & Robinson and Sharon J. Arkin for United Policyholders as amicus curiae.

Fred J. Hiestand for the Civil Justice Association of California as amicus curiae. [26 Cal.4th 1144]

OPINION

KENNARD, J.

In a case involving an insurance claim for damages caused by the 1994 Northridge earthquake, the United States Court of Appeals for the Ninth Circuit certified the following question to this court: "Where an insured presents a timely claim to his insurer for property damage under a policy, and the insurer's agent inspects the property but does not discover the full extent of covered damage, does California Insurance Code § 2071 bar a claim brought by the insured more than one year after the damage was sustained but within one year of his discovery of the additional damage? Or, to put the matter differently, does Neff v. New York Life Ins. Co., 30 Cal.2d 165, [26 Cal.4th 1146] 180 P.2d 900 (1947), remain good law?" (Vu v. Prudential Property & Cas. Ins. Co. (9th Cir. 1999) 172 F.3d 725, 727.) fn. 1

In answering this question, we explain below that Neff's holding that an unconditional denial of coverage commences the running of the one-year statute of limitation of Insurance Code section 2071 remains good law. On the facts of this case, however, Prudential may be estopped to raise the statute of limitations defense if the insured can show that he refrained from bringing a timely action because he reasonably relied on the insurer's factual misrepresentation that his damages were less than his policy's deductible amount. We do not decide whether the federal district court erred in sustaining defendant insurer's motion for summary judgment. That task remains for the United States Court of Appeals, aided, we hope, by the views expressed in this opinion.


I. THE NINTH CIRCUIT'S CERTIFICATION

The Northridge earthquake struck at 4:31 a.m. on January 17, 1994. It had an estimated magnitude of 6.7 or 6.8 on the Richter Scale. Many residences and commercial buildings were damaged. One report estimated that 450,000 insurance claims were paid, totaling $12.5 billion. (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 1899 (1999-2000 Reg. Sess.) p. 2.) Another estimated that some 600,000 claims were paid, and put the damage figure at $15.3 billion. (Sen. Rules Com., Off. of Sen. Floor Analysis, 3d reading analyses of Sen. Bill No. 1899 (1999-2000 Reg. Sess.) p. 4.) Many other claims were rejected, often on the basis of the statute of limitations. (Sen. Com. on Ins., Rep., Department of Insurance: In Rubble After Northridge (Aug. 28, 2000) p. 9.) More than 2,000 complaints were filed with the California Insurance Commissioner. (Assem. Com. on Insurance, Rep. on Dept. of Ins., Northridge Earthquake (2000) p. 26.) The Legislature later undertook an extensive investigation of the California Department of Insurance, its handling of these complaints, and its settlements with various insurers. (See generally Sen. Com. on Ins., Rep., Department of Insurance: In Rubble After Northridge, supra.) The rejected claims have also engendered considerable litigation and generated five published opinions in the [26 Cal.4th 1147] federal district court. (Campanelli v. Allstate Ins. Co. (C.D.Cal. 2000) 85 F.Supp.2d 980; Vashistha v. Allstate Ins. Co. (C.D.Cal. 1997) 989 F.Supp. 1029; Ward v. Allstate Ins. Co. (C.D.Cal. 1997) 964 F.Supp. 307; Sullivan v. Allstate Ins. Co. (C.D.Cal. 1997) 964 F.Supp. 1407; Hill v. Allstate Ins. Co. (C.D.Cal. 1997) 962 F.Supp. 1244.)

The opinion of the Ninth Circuit succinctly summarized the facts and proceedings leading to its order of certification in this case:

"Peter Vu was one of countless insureds who suffered damage to his home as a result of the infamous Northridge earthquake of January 17, 1994. At the time of the earthquake, Vu maintained a homeowner's insurance policy with Prudential Property and Casualty Insurance Company. The policy included an endorsement for earthquake damage, covering $300,000.00 for his dwelling and $30,000.00 for appurtenant structures. A separate 10% deductible applied to each coverage. As required by California Insurance Code § 2071, Vu's policy contained a one-year suit clause providing that '[n]o action can be brought unless . . . the action is started within one year after the date of loss.' Cf. Cal. Ins. Code, § 2071 ('No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity . . . unless commenced within 12 months next after inception of the loss.'). Within a few days of the earthquake, Vu contacted Prudential to report that his home had sustained observable damage, which included cracks in his walls and ceilings. An adjuster sent by Prudential inspected Vu's home on January 26 and informed him that he was entitled to $2,500 for damage to appurtenant structures, but that the damage to his home was only $3,962.50, an amount significantly below the policy deductible. On January 30, Prudential paid Vu for the appurtenant-structure damage.

"Relying on Prudential's inspection and denial of his claim, Vu took no further action until August 1995 when he discovered substantial additional damage that had been caused by the earthquake. In September 1995, some twenty months after Prudential had effectively denied Vu's claim for damage to his home, an appraiser hired by Vu estimated that the earthquake damage to Vu's home far exceeded the $30,000 deductible.[ fn. 2 ] Vu promptly informed Prudential and requested coverage for this newly discovered damage. Prudential declined on the ground that the one-year statute of limitations on actions for recovery of claims had expired.

"Two and a half years after Prudential had resolved Vu's original claim, but less than a year after Vu discovered the additional damage, Vu filed suit [26 Cal.4th 1148] in federal district court. Vu alleged that Prudential was estopped from invoking the one-year statute of limitations because his failure to bring an action within one year was the direct result of his reasonable reliance on Prudential's January 1994 inspection, and on Prudential's representation that the damage to his home fell below the $30,000 deductible. The district court granted Prudential's motion for summary judgment, holding that the one-year statute of limitations acted as a bar to Vu's breach-of-contract claim and to his second claim for breach of the implied covenant of good faith and fair dealing. Vu timely appealed." (Vu v. Prudential Property & Cas. Ins. Co., supra, 172 F.3d at pp. 727-728.)


II. THE STATUTE OF LIMITATIONS ON INSURANCE CLAIMS

The ordinary statute of limitations for breach of a written contract is four years. (Code Civ. Proc., § 337.) Insurance claims for property damage, however, have a one-year limitation period. (Ins. Code, § 2071.) We explained: "The short statutory limitation period is the result of long insistence by insurance companies that they have additional protection against fraudulent proofs, which they could not meet if claims could be sued upon within four years as in the case of actions on other written instruments. (Code Civ. Proc., § 337.) Originally, the shortened limitation periods were inserted into policies by insurers. Some courts declared such provisions void as against public policy while other courts enforced them in order to protect freedom of contract." (Bollinger v. National Fire Ins. Co. (1944) 25 Cal.2d 399, 407.) In 1909, the California Legislature intervened in favor of a shortened period of limitation by enacting the predecessor to Insurance Code section 2071 to impose a 15-month limitation on claims under fire insurance policies. (Stats. 1909, ch. 267, § 1, p. 409.) The statute was fashioned after a New York statute governing lawsuits on fire insurance policies. "Thereafter, as insurance coverage was expanded to cover more than fire (e.g., theft, lightning and other property damage) the New York provision was broadened in 1943 by replacement of the phrase 'after the fire' with . . . 'after inception of the loss.' " (Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674, 683, quoting Proc v. Home Ins. Co. (1996) 17 N.Y.2d 239, 244.) In 1949, California's section 2071 was amended to conform more closely to the New York law, shortening the limitation period to the one-year period of that law. (Prudential-LMI Com. Insurance v. Superior Court, supra, at p. 682.)

For years, California cases debated whether the defense of the statute of limitations was a favored or disfavored defense. In 1999, we resolved the matter: "[T]he affirmative defense based on the statute of limitations should [26 Cal.4th 1149] not be characterized by courts as either 'favored' or 'disfavored.' The two public policies identified above -- the one for repose and the other for disposition on the merits -- are equally strong, the one being no less important or substantial than the other." (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 396.) Thus, we approach the issue of the statute of limitations defense in this case with no policy predisposition favoring either side.


III. ESTOPPEL

The Ninth Circuit has asked us whether our decision in Neff v. New York Life Ins. Co., supra, 30 Cal.2d 165 (Neff), "remain[s] good law." (Vu v. Prudential Property & Cas. Ins. Co., supra, 172 F.3d at p. 727.) Neff involved the doctrine of estoppel. In December 1926, Arthur Neff, the insured, became disabled by tuberculosis. He submitted a claim under his disability policy in April 1927. The insurer denied the claim, asserting that it did not appear Arthur was entitled to disability benefits. Arthur did not pursue the matter further. He died in 1937. In 1943, during his widow's last illness, their son discovered the correspondence between the insurer and his father. The son's lawsuit alleged that the insurer knew that Arthur was disabled within the meaning of the policy but fraudulently represented that Arthur was not entitled to policy benefits.

By 1947, when we decided Neff, it was already well settled that "an unconditional denial of liability by the insurer after the insured has incurred loss and made claim under the policy gives rise to an immediate right of action." (Bollinger v. National Fire Ins. Co., supra, "25 Cal.2d at p. 404.) It was also clear that under some circumstances a misrepresentation or concealment by a defendant might bar it from raising the defense of the statute of limitations. (Neff, supra, 30 Cal.2d 165, 169; see Pashley v. Pacific Elec. Ry. Co. (1944) 25 Cal.2d 226, 229-232; Kimball v. Pacific Gas & Elec. Co. (1934) 220 Cal. 203, 210.) The issue in Neff was how to treat the insurer's allegedly false communication that the insured was " 'not entitled to any benefits under [the] policy.' " (Neff, supra, at p. 168.) Was this an unconditional denial of liability that would start the running of the statute of limitations? Or was this a misrepresentation of fact on which the insured reasonably relied, and thus a misrepresentation that could furnish a basis for estopping the insurer from raising a statute of limitations defense?

This court viewed the insurer's communication as a denial of liability, not a misrepresentation of fact. Affirming the judgment for the insurer, the Neff majority said: "Under the circumstances[,] the conclusion is inescapable that [26 Cal.4th 1150] plaintiff . . . belatedly attempts to assert a cause of action that allegedly accrued to the insured as a result of an alleged representation which was made sixteen years earlier by defendant and which was allowed to stand undisputed for that entire period of time by the aggrieved parties -- the insured and his widow -- though the same facts on which plaintiff here relies for relief were at all times known to them." (Neff, supra, "30 Cal.2d at p. 171.) We rejected the contention that an estoppel could be grounded on the theory that the insurer concealed the "fact" of the insured's right to recovery. We said that such a rule "would mean that no insurer could deny liability without indefinitely suspending the running of the statute of limitations . . . ." (Id. at p. 172.) Referring to the case as one involving a difference of opinion on the meaning of the policy, Neff concluded that "no mere denial of liability, even though it be alleged to have been made through fraud or mistake, should be held sufficient, without more, to deprive the insurer of its privilege of having the disputed liability litigated within the period prescribed by the statute of limitations." (Id. at pp. 172-173.)

Plaintiff argues that developments in the law since Neff call for reconsideration of that decision. He points out that although Neff itself recognized that "an insurer has the duty of exercising good faith in its dealings with the insured" (Neff, supra, 30 Cal.3d at p. 172), later cases have built upon this premise and declared that an insurer and its insured have a "special relationship" (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 685; see Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 401; Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 575; Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 659). Under this special relationship, an insurer's obligations are greater than those of a party to an ordinary commercial contract. (Chase v. Blue Cross of California (1996) 42 Cal.App.4th 1142, 1152.) In particular, an insurer is required to "give at least as much consideration to the welfare of its insured as it gives to its own interests." (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818.) Cases have referred to the relationship between insurer and insured as a limited fiduciary relationship (see Gibson v. Government Employees Ins. Co. (1984) 162 Cal.App.3d 441, 449-450) as "akin to a fiduciary relationship" (State Farm Fire & Casualty Co. v. Superior Court (1989) 216 Cal.App.3d 1222, 1226); or as one involving the "qualities of decency and humanity inherent in the responsibility of a fiduciary" (Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 215).

[1] The insurer-insured relationship, however, is not a true "fiduciary relationship" in the same sense as the relationship between trustee and [26 Cal.4th 1151] beneficiary, or attorney and client. (See Croskey et al., 2 Cal. Practice Guide, Insurance Litigation (The Rutter Group 2000) ¶ 12:1150.) It is, rather, a relationship often characterized by both unequal bargaining power (see Steven v. Fidelity & Casualty Co. (1962) 58 Cal.2d 862, 879-884) in which the insured must depend on the good faith and performance of the insurer (see Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 44; Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d 809, 819). These characteristics have led the courts to impose "special and heightened" duties, but "[w]hile these 'special' duties are akin to, and often resemble, duties which are also owed by fiduciaries, the fiduciary-like duties arise because of the unique nature of the insurance contract, not because the insurer is a fiduciary." (Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1148; see Hassard, Bonnington, Roger & Huber v. Home Ins. Co. (S.D.Cal. 1990) 740 F.Supp. 789; Croskey, supra, ¶ 12:1150.)

Consequently, even as the California cases expanded upon the significance of the special relationship between insurer and insured, they have not viewed those cases as undermining the Neff decision. For example, in Love v. Fire Ins. Exchange, supra, 221 Cal.App.3d 1136, the plaintiffs' house sustained subsidence damage in 1981 caused by third party negligence. They filed a claim, which the insurer denied on the ground that the policy did not cover such damage. In 1988, the plaintiffs discovered the policy did cover subsidence damage when caused by third party negligence. They brought suit, alleging that the insurer should be estopped from asserting a statute of limitations defense because it had fraudulently concealed that the policy provided coverage for their damage.

Citing Neff, the Court of Appeal in Love affirmed a judgment for the insurer. It said: "It is undisputed that the Loves knew the operative facts (i.e., their home was damaged and the causes of damage included third party negligence) . . . . [T]hey admit being told unequivocally in 1981 their claim was denied for lack of coverage. [The insurer] neither 'misrepresented' nor 'concealed' any facts (as opposed to pertinent law or legal theories) . . . ." (Love v. Fire Ins. Exchange, supra, 221 Cal.App.3d at p. 1145.) In a footnote, Love distinguished the estoppel cases cited by the plaintiffs, explaining that in those cases "the defendants' nondisclosures and/or misrepresentations effectively concealed the facts upon which the cause of action rested, not the legal theories supporting the complainants' claims." (Id. at pp. 1145-1146, fn. 5.)

On similar facts, the Ninth Circuit in Matsumoto v. Republic Ins. Co. (1986) 792 F.2d 869, applying California law, also found for the insurer: [26 Cal.4th 1152] "Here, [the insurer's] denial of the Matsumotos' claims was, at most, an incorrect interpretation of the terms of [the] contract. We are therefore bound by Neff v. New York Life Insurance Co. [citation] wherein the California Supreme Court held that an insurer's disclaimer, even if 'made through fraud or mistake' could not toll the statute of limitations." (Id. at p. 872.) In a footnote, the Ninth Circuit observed that the Matsumotos did not argue "factual concealment." (Id. at p. 872, fn. 3.) Many other cases have applied our decision in Neff without suggesting that Neff's reasoning may be outmoded. (See Prieto v. State Farm Fire & Cas. Co. (1990) 225 Cal.App.3d 1188; Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049; State Farm Fire & Casualty Co. v. Superior Court (1989) 210 Cal.App.3d 604; Abari v. State Farm Fire & Casualty Co. (1988) 205 Cal.App.3d 530; Lawrence v. Western Mutual Ins. Co. (1988) 204 Cal.App.3d 565; Cardosa v. Fireman's Fund Ins. Co. (1956) 144 Cal.App.2d 279, 283.)

[2a] We therefore reaffirm our holding in Neff, supra, 30 Cal.2d 165, that a denial of coverage, even if phrased as a "representation" that the policy does not cover the insured's claim, or words to that effect, offers no grounds for estopping the insurer from raising a statute of limitations defense. But as we have seen, Neff and many of the cases applying Neff were careful to distinguish such a representation from a misrepresentation of fact. The latter, they noted, could lead to an estoppel.

Here the undisputed representation is one of fact. William Leggitt, Prudential's inspector, examined Vu's property after the earthquake, and provided Vu with a worksheet showing the specific items of damage and the cost of repairs. Leggitt then explained to Vu that the total cost of repairs, $3,962.50, was less than the policy's deductible amount of $30,000. Leggitt's worksheet and explanation did not merely convey a denial of coverage, or state Prudential's interpretation of the policy. Leggitt communicated specific facts describing the nature and amount of damage, and he advised Vu not to file a claim because the total damage Vu had incurred was less that the policy's deductible.

On these facts, Prudential may be estopped from raising a statute of limitations defense if Vu can show that he reasonably relied on Leggett's representation. [3] As we explained in Benner v. Industrial Acc. Com. (1945) 26 Cal.2d 346: "An estoppel may arise although there was no designed fraud on the part of the person sought to be estopped. [Citation.] To create an equitable estoppel, 'it is enough if the party has been induced to refrain from using such means or taking such action as lay in his [26 Cal.4th 1153] power, by which he might have retrieved his position and saved himself from loss.' . . . 'Where the delay in commencing action is induced by the conduct of the defendant it cannot be availed of by him as a defense.' " (Id. at pp. 349-350; see Ginns v. Savage (1964) 61 Cal.2d 520, 524-525; Valvo v. University of Southern California (1977) 67 Cal.App.3d 887, 896; Elliano v. Assurance Co. of America (1970) 3 Cal.App.3d 446; Industrial Indem. Co. v. Ind. Acc. Com. (1953) 115 Cal.App.2d 684.) Chase v. Blue Cross of California, supra, 42 Cal.App.4th 1142, 1157, confirmed that "[a]n insurer is estopped from asserting a right, even though it did not intend to mislead, as long as the insured reasonably relied to its detriment upon the insurer's action."

On point is the decision of the federal district court in Ward v. Allstate Ins. Co., supra, 964 F.Supp. 307, another Northridge earthquake case. Applying California law, the federal court said: "[A]fter the Plaintiffs had submitted a timely claim to Allstate, they relied on the representations of Mr. Sanchez, a purported expert and agent of Allstate, that their damage was limited to approximately $20,000. For this reason, the Plaintiffs allowed the limitations period to elapse without conducting a further investigation. This is precisely the type of situation contemplated by the estoppel doctrine. Allstate cannot be allowed to lull the Plaintiffs into sleeping on their rights, and then use the limitations period as a sword to cut down their claims." (964 F.Supp. at p. 310.)

[2b] Prudential disputes whether Vu's reliance was reasonable, claiming that Vu did not use due diligence to discover that his damage exceeded the deductible amount under his policy. Whether Vu's reliance was reasonable depends on a myriad of factual questions. These may include: whether Vu himself was qualified to evaluate the damage or had to rely on an expert (see Vu v. Prudential Property & Cas. Ins. Co., supra, 172 F.3d 725, 730-731); what Vu told the inspector about his damage; whether the inspector was qualified and, if not, whether Vu knew of his lack of qualification; whether the inspector examined the entire property and, if not, whether Vu knew the inspection was more limited; what led Vu to suspect his damage was greater than the policy's deductible amount, and whether Vu then acted diligently after he so suspected, etc. Our role here is limited to setting out general principles of California law for the assistance of the Ninth Circuit. The application of these principles of law to the specific facts of plaintiff's case is a matter for the federal judiciary.


IV. CONCLUSION

We answer the Ninth Circuit's certified question as follows: Our decision in Neff, supra, 30 Cal.2d 165, remains good law to the extent it holds that an [26 Cal.4th 1154] insurer's denial of a claim on the ground that the policy does not cover the loss in question offers no basis for estopping the insurer from asserting the one-year period of limitation as a defense. Neff, however, does not necessarily control the result in this case. Prudential, the insurer, inspected the property of Vu, its insured, to determine the nature and extent of the damage caused by the earthquake. After the inspection, Prudential represented incorrectly to Vu that his loss was less than the policy's deductible amount. Under these circumstances, Prudential would be estopped from raising the one-year statute of limitations of California Insurance Code section 2071 as a defense if Vu proves that he reasonably relied on Prudential's representation in not bringing a lawsuit within the statutory period.

GEORGE, C.J., BAXTER, J., WERDEGAR, J., CHIN, J., BROWN, J., and LEVY, J. fn. * , concurred.

­FN *. Associate Justice, Court of Appeal, Fifth Appellate District, assigned by the Chief Justice pursuant to article VI, section 6, of the California Constitution.

­FN 1. While this case was pending, California's Legislature enacted Code of Civil Procedure section 340.9, which extends the statute of limitations for some insurance claims arising from the Northridge earthquake. We asked the parties to brief the applicability of this statute to the case at hand to determine whether this case was moot. Because the briefs showed there is a substantial dispute whether the statute applies to this suit and whether it is constitutional, we conclude that this case is not moot and that the certified question "may be determinative of a cause pending in the certifying court." (Cal. Rules of Court, rule 29.5(a)(2).) Because the effect, if any, of section 340.9 on this case is not within the scope of the question certified to us by the Ninth Circuit, we do not address it in this opinion.

­FN 2. "An architect hired by Vu in 1997 concluded that there was $302,728.40 of damage to Vu's home and $348,024.20 in total damage to his property." (Vu v. Prudential Property & Cas. Ins. Co., supra, 172 F.3d at p. 727, fn. 2.)

­FN *. Associate Justice, Court of Appeal, Fifth Appellate District, assigned by the Chief Justice pursuant to article VI, section 6, of the California Constitution.

Request by the United States Court of Appeals for the Ninth Circuit for the answer to a certified question of state law pursuant to rule 29.5 of the California Rules of Court. The certified question, as posed by the Ninth Circuit and accepted by the California Supreme Court, states: "Where an insured presents a timely claim to his insurer for property damage under a policy, and the insurer's agent inspects the property but does not discover the full extent of covered damage, does California Insurance Code ? 2071 bar a claim brought by the insured more than one year after the damage was sustained but within one year of his discovery of the additional damage? Or, to put the matter differently, does Neff v. New York Life Ins. Co. 30 Cal.2d 165 (1947), remain good law?"

Opinion Information
Date:Citation:Docket Number:Category:Status:
Mon, 11/05/200126 Cal. 4th 1142, 33 P.3d 487, 113 Cal. Rptr. 2d 70S078271Question of Law - Civilcomplete

Parties
1Vu, Peter (Appellant)
Represented by Sara Smith Ray
Gruber And Kantor
15821 Ventura Blvd, #600
Encino, CA

2Prudential Property & Casualty Insurance (Respondent)
Represented by James Francis Henshall
Berger, Kahn,L Shafton, Moss, Etc.
2 Park Plaza, Suite 650
P O Box 19694
Irvine, CA

3Prudential Property & Casualty Insurance (Respondent)
Represented by Ronald D. Kent
Sonnenschein, Nath & Rosenthal
Sonnenschein Nath et al
601 S Figueroa St
Los Angeles, CA

4Personal Insurance Federation Of California (Amicus curiae)
Represented by Pamela E. Dunn
Robie & Matthai
500 South Grand Avenue
15th Floor
Los Angeles, CA

521st Century Insurance (Amicus curiae)
Represented by Mitchell C. Tilner
Horvitz & Levy
15760 Ventura Blvd.
18th Floor
Encino, CA

6National Association Of Independent Insurers (Amicus curiae)
Represented by Peter H. Klee
Luce, Forward, Hamilton & Scripps Llp
600 West Broadway
Suite 2600
San Diego, CA

7Quackenbush, Chuck (Amicus curiae)
Represented by Randall P. Borcherding
Supervising Deputy Attorney General
Ofc Attorney General
455 Golden Gate Ave
San Francisco, CA

8Association Of California Insurance Companies (Amicus curiae)
Represented by Susan M. Walker
Sonnenschein Nath & Rosenthal
601 South Figueroa Street
Suite 1200
Los Angeles, CA

9California Fair Plan Association (Amicus curiae)
Represented by Raul L. Martinez
Lewis D'Amato Brisbois & Bisgaard
221 North Figueroa Street
Suite 1200
Los Angeles, CA

10Linford, James T. (Amicus curiae)
Post Office Box 210598
San Francisco, CA 94121

11Civil Justice Association Of California (Amicus curiae)
Represented by Fred James Hiestand
Attorney At Law
1121 L Street, Suite 404
Sacramento, CA

12United Policyholders (Amicus curiae)
Represented by Sharon J. Arkin
Robinson, Calcagnie & Robinson
Newport Beach Office
620 Newport Center Drive, Seventh Floor
Newport Beach, CA

13Osborne, W. James (Amicus curiae)
14156 Magnolia Blvd., Suite 200
Sherman Oaks, CA 91423


Opinion Authors
OpinionJustice Joyce L. Kennard

Disposition
Nov 5 2001Opinion filed

Dockets
Apr 20 1999Request to answer question of state law filed
United States Court of Appeals for the 9th Circuit (Record: 2 Vols Excerpts from Record, AOB (Vu) Appellees brief, and Question)
Apr 22 1999Order filed:
Any party in this Proceeding May file A letter of brief to this request by 5-11-99. reply Thereto by 5-21-99.
May 11 1999Filed letter from:
Dated 5-11-99 from Gruber & Kantor (letter in support for certification).
May 12 1999Filed letter from:
Berger, Kahn, Et Al dated 5/11/99 (letter brief) in support of request
May 18 1999Received letter from:
Crosby, Heafy, Roach and May urging Court to Accept 9th Circuit's Request.
May 21 1999Filed:
Letter from Calif Commissioner of Insurance Re request
Jul 28 1999Request for certification granted
Request for certification from the U.S. Court of Appeals for the Ninth Circuit is granted. Votes: George,CJ., Kennard, Werdegar, Brown, JJ. Votes: George C.J., Kennard, Werdegar & Brown JJ.
Aug 30 1999Opening brief on the merits filed
Opening brief/merits [Rule 40n] Appellant Peter Vu
Sep 15 1999Application for Extension of Time filed
To file Ans/brief/Appellant Prudential Property and Casualty Insurance asking > Dec 1st Faxed SF (Jennifer)
Sep 17 1999Extension of Time application Granted
To December 1, 1999 for Appellant, Prudential Property & Casualty Insurance Company To file answer brief on the merits
Nov 2 1999Letter sent to:
Manuel M. Medeiros, State Gov'T Section, Ag-Sac Pursuant to Crc 29.5(H) Your Office Is Hereby Notified the case Is Pending before this Court. Enclosed Is A copy of the certification from the Ninth Circuit Court of Appeals and A copy of the Order of this Court Accepting certification. In the Event Your Office Decides to Proceed, an Application and the Proposed brief should be filed with this Court no Later Than 30 Days from the Date the Last brief Is filed by the parties.
Nov 9 1999Application for Extension of Time filed
Appellant Prudential's answer brief/merits to and Including Jan. 1, 2000. [granted to 1/3/00 - Order Prepared]
Nov 16 1999Extension of time granted
Applnt's answer brief/merits to & Including 1/3/00
Jan 3 2000Answer brief on the merits filed
Resp Prudential Property and Casualty Ins Co. [Accepted in L.A with Yellow Cvrs Instead of Blue per John Rossi]
Jan 13 2000Application for Extension of Time filed
By Aplt Vu to file reply brief [asking to 3/27/99] [Tct/Hm/- granted to 3/27 - Order Prepared]
Jan 19 2000Extension of time granted
Appellant Vu's reply brief on the merits to & Including 3/27/00.
Mar 15 2000Application for Extension of Time filed
Appellant requesting 4/26/00 to file reply brief on the merits (grant - Order in Prep)
Mar 21 2000Extension of Time application Granted
To April 26, 2000, To file Appellant's brief on the merits.
Mar 27 2000Order filed:
The Order filed on March 21, 2000, Is Hereby Modified to Reflect that Applt, Peter Vu's reply brief on The merits Is extended to and Including April 26, 2000.
Apr 26 2000Reply brief filed (case fully briefed)
May 22 2000Application for Extension of Time filed
Of Personal Ins. Federation Of Calif in support Of Prudential Property (Appellant) to file an Appln to file an A/C brief to June 26, 2000
May 24 2000Received application to file Amicus Curiae Brief
Of 21st Century Insurance Company and Truck Insurance Exchange . Ok: Order Being Prepared
May 25 2000Received application to file Amicus Curiae Brief
Of National Association Of Independent Insurers in support Of Prudential Property (Application/brief Under one Cover)
May 26 2000Received application to file Amicus Curiae Brief
Association of Calif Insurance Companies in support of Resp Prudential Proerty Et Al (AC Under Separate Cover). [Tct/Hm--Ok/Order Prepared]
May 26 2000Received application to file Amicus Curiae Brief
Chuck Quackenbush, State Insurance Commissioner in support of Appellant (Separate brief) Along with A request for Judicial Notice [Ok/Order Prepared]
May 30 2000Received application to file Amicus Curiae Brief
California Fair Plan Association [Rule 40n] [in support of Applnt Prudential] [Applctn, brief & Reqt/Jud'l Notice]
May 31 2000Extension of Time application Granted
To & Including June 26, 2000 for A/C Personal Insurance Federation of California To file It's Appln for permission To file an A/C brief Supt Rsp
Jun 1 2000Permission to file amicus curiae brief granted
National Association of Independent Insurers in support of Appellant, Prudential Property & Casual Ty Ins. Co. answer Due 20 Days from Today.
Jun 1 2000Amicus Curiae Brief filed by:
National Association of Independent Insurers in support of Appellant, Prudential Property and Casualty Insurance Company
Jun 1 2000Permission to file amicus curiae brief granted
Of 21st Century Insurance Company & Truck Insurance Exchange. answer Due: June 21, 2000
Jun 1 2000Amicus Curiae Brief filed by:
21st Century Insurance Company & Truck Insurance Exchange. answer Due: June 21, 2000
Jun 1 2000Permission to file amicus curiae brief granted
Association of Calif Insurance Companies in support of Resp. answer Due w/I 20 Days.
Jun 1 2000Amicus Curiae Brief filed by:
Association of Calif Insurance Companies in support of Resp.
Jun 1 2000Permission to file amicus curiae brief granted
Chuck Quackenbush, State Insurance Commissioner, in support of Appellant. answer Due w/I 20 Days.
Jun 1 2000Amicus Curiae Brief filed by:
Chuck Quackenbush, State Insurance Commissioner, in support of Appellant.
Jun 1 2000Request for Judicial Notice filed
Amicus Chuck Quackenbush, Insurance Commissioner
Jun 8 2000Permission to file amicus curiae brief granted
California Fair Plan Association in support of Appellant. answer Due w/I 20 Days.
Jun 8 2000Amicus Curiae Brief filed by:
California Fair Plan Association in support of Appellant.
Jun 8 2000Request for Judicial Notice filed
Amicus California Fair Plan Association
Jun 12 2000Application for Extension of Time filed
Response to AC brief of Quackenbush, Ins Commnr. to 7-31-00 **Perm Gtd, Ord Being Prep** Appellant Prudential Property & Casualty (Kw-Sf)
Jun 16 2000Extension of Time application Granted
Time Is extended to 7-31 for Aplt Prudential to file the Ans to the A/C brief of Chuck Quackenbush
Jul 6 2000Received application to file Amicus Curiae Brief
Late application of James T. Linford (separate brief) no party supported. (perm/order prepared)
Jul 11 2000Permission to file amicus curiae brief granted
James T. Linford [no party supported]. Answer by any party due within 20 days.
Jul 11 2000Amicus Curiae Brief filed by:
James T. Linford
Jul 14 2000Permission to file amicus curiae brief granted
Personal Insurance Federation of California. Answer due 20-days from today.
Jul 14 2000Amicus Curiae Brief filed by:
Personal Insurance Federation of California in support of Prudential Property & Casualty Insurance Company.
Jul 19 2000Application for Extension of Time filed
Combined Responses to AC briefs to 8-20-00
Jul 24 2000Extension of Time application Granted
to August 20, 2000, to file answer briefs to amicus curiae briefs by appellant Prudential
Aug 10 2000Application for Extension of Time filed
by Prudential Property etc. to file answer brief to AC Briefs.
Aug 15 2000Extension of Time application Granted
to 8-30-00 for aplt Prudential to file the answers to A/C briefs
Aug 22 2000Mail returned and re-sent
copy of ordered filed 8/15/00 to atty Borcherding
Aug 30 2000Response to Amicus Curiae Brief filed by:
Resp Prudential Property and Casualty Ins Co (Answering brief of James Linford)
Aug 30 2000Response to Amicus Curiae Brief filed by:
Resp Prudential Property and Casualty Ins Co [aswering brief of C. Quackenbush]
Aug 30 2000Filed document entitled:
Respondent's Objection s to amici' C. Quackenbush's Request for Judicial Notice Submitted along with an Amicus Brief on 5-26
Jan 16 2001Letter sent to:
Counsel to submit letter briefs on the effect of newly enacted CCP Section 340.9 on the question certified to this court by the U.S. Court of Appeals and whether that section moots the underlying action. Are there issues concerning the interpretation, applicability, or validity of section 340.9 that this court needs to address, and as to which supplemental briefs should be submitted? The parties should respond to this request by January 29, 2001. Amici may also submit letter briefs on or before that date.
Jan 29 2001Letter brief filed
By Amici Curiae, 21st Century Insurance Company & Truck Insurance Exchange
Jan 29 2001Letter brief filed
By Amici Curiae, Atty James T. Linford
Jan 29 2001Letter brief filed
By the Attorney General for Amici Curiae Insurance Commissioner of the State of California
Jan 29 2001Received document entitled:
Letter Brief from Atty Richard Martland for Amici Curiae Calif. Chamber of Commerce and Calif. Manufactures Association (to court for permission to file)
Jan 29 2001Letter brief filed
Respondent Prudential Property and Casualty
Jan 29 2001Letter brief filed
Amicus Curiae California Fair Plan
Jan 29 2001Received document entitled:
Letter brief from Century National Insurance Company, the National Association of Independent Insurers and the Association of California Insurance Companies [needs perm to file]
Jan 30 2001Received document entitled:
Letter Brief from Amici Civil Justice Association of California (tct for permission to file) *** Rule 40(n) ***
Jan 30 2001Letter brief filed
By Appellant Vu *** Rule 40(n) ***
Jan 30 2001Letter brief filed
By Amici Personal Insurance Federation of California *** Rule 40(n) ***
Feb 8 2001Received document entitled:
Application for relief from default to file amicus curiae letter brief obo United Policyholders
Feb 9 2001Order filed:
The application of the Civil Justice Association of California (CJAC) for permission to file an amicus letter brief is hereby granted.
Feb 9 2001Letter brief filed
Amicus Curiae Civil Justice Association of California (CJAC)
Feb 20 2001Received letter from:
Amicus Letter Brief from Law Offices of James Osborne & Associates (to court for permission)
Feb 20 2001Order filed:
The application of United Policyholders for permission to file an amicus curiae letter brief is granted.
Feb 20 2001Letter brief filed
By amicus curiae United Policyholders
Feb 20 2001Order filed:
The application of Century National Insurance Company, the National Association of Independent Insurers and the Association of California Insurance Companies for permission to file an amicus curiae letter brief is granted.
Feb 20 2001Letter brief filed
By Amicus Curiae Century National Insurance Company, the National Association of Independent Insurers and the Association of California Insurance Companies
Feb 20 2001Order filed:
The application of California Chamber of Commerce and California Manufacturers Associationn for permission to file an amicus curiae letter brief is granted.
Feb 20 2001Letter brief filed
By Amicus Curiae California Chamber of Commerce and California Manufacturers Association
Mar 7 2001Letter brief filed
Amici James Osborne
Mar 7 2001Order filed:
The application of James Osborne for permission to file an amicus curiae letter brief is granted.
Jul 26 2001Case Ordered on Calendar:
9-4-01, 1:30pm, S.F.
Aug 10 2001Received Motion
counsel for resp "Prudentil Property and Casualty Ins Co." requesting court vacate Sept 4th oral argument and return the question certified in this matter, due to a change in law since this Court accepted the certified question. **faxed to Ken W.- SF*
Aug 10 2001Association of attorneys filed for:
Law Firm of Sonnenschein, Nath & Rosenthal as co-counsel for respondent ["PPCIC"]
Aug 16 2001Order filed:
The mot. to return the unanswered cert. question to the 9th Circ. & vacate/continue oral arg., etc is DENIED. Oral arg. before this ct. should be limited to the questions certified by the 9th Circ.
Sep 4 2001Cause Called, Argued and Submitted
Nov 5 2001Opinion filed: Judgment affirmed in full
Majority Opinion by Kennard, J. -- joined by George C.J., Baxter, Werdegar, Chin, Brown & Levy (assigned) JJ.
Nov 9 2001Request for modification of opinion filed
non-party The Law Firm of tSteven W. Murray
Nov 16 2001Request for modification of opinion filed
resp., Prudential Property and Casualty Ins. Company
Nov 21 2001Request for modification of opinion filed
by counsel for Amici Truck Insurance Exchange and 21st Century Insurance Company
Nov 28 2001Request for modification denied
Chin, J., was absent and did not participate.
Nov 29 2001Received letter from:
amici Assn Cal Ins. Co., addressing letter submitted, Nov 21, by amici Truck Ins Exchg and 21st Century Ins Co.

Briefs
Aug 30 1999Opening brief on the merits filed
Opening brief/merits [Rule 40n] Appellant Peter Vu
Jan 3 2000Answer brief on the merits filed
Resp Prudential Property and Casualty Ins Co. [Accepted in L.A with Yellow Cvrs Instead of Blue per John Rossi]
Apr 26 2000Reply brief filed (case fully briefed)
Jun 1 2000Amicus Curiae Brief filed by:
National Association of Independent Insurers in support of Appellant, Prudential Property and Casualty Insurance Company
Jun 1 2000Amicus Curiae Brief filed by:
21st Century Insurance Company & Truck Insurance Exchange. answer Due: June 21, 2000
Jun 1 2000Amicus Curiae Brief filed by:
Association of Calif Insurance Companies in support of Resp.
Jun 1 2000Amicus Curiae Brief filed by:
Chuck Quackenbush, State Insurance Commissioner, in support of Appellant.
Jun 8 2000Amicus Curiae Brief filed by:
California Fair Plan Association in support of Appellant.
Jul 11 2000Amicus Curiae Brief filed by:
James T. Linford
Jul 14 2000Amicus Curiae Brief filed by:
Personal Insurance Federation of California in support of Prudential Property & Casualty Insurance Company.
Aug 30 2000Response to Amicus Curiae Brief filed by:
Resp Prudential Property and Casualty Ins Co (Answering brief of James Linford)
Aug 30 2000Response to Amicus Curiae Brief filed by:
Resp Prudential Property and Casualty Ins Co [aswering brief of C. Quackenbush]
Brief Downloads
application/pdf icon
Vu-Appellant's Opening Brief.pdf (3268356 bytes) - Appellant's Opening Brief
application/pdf icon
Vu-RESPONDENT'S_BRIEF.pdf (4214090 bytes) - Respondent's Brief
application/pdf icon
Vu-Appellant's Reply Brief.pdf (1733230 bytes) - Appellant's Reply Brief
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
May 20, 2011
Annotated by janine wetzel

FACTS

Plaintiff Vu’s house was damaged by the Northridge earthquake on January 17, 1994. Vu had a homeowner’s insurance policy with Prudential that covered $300,000 for his home and $30,000 for appurtenant structures; the deductibles were 10% for each type of coverage. Under the policy, in accordance with California Insurance Code § 2071, the statute of limitations for filing suits or actions for the recovery of any claim was one year from the time of the loss.

Vu contacted Prudential shortly after the earthquake; the company sent an adjuster, who told Vu that he couldn’t get any insurance money for the damage to his home, because the damage was only $3,962.50, less than his deductible. Relying on the information from the adjuster, Vu took no further action at that time.

Later, in August 1995, Vu discovered that the earthquake had caused substantial additional damage. In September 1995, he hired an appraiser who concluded that the damage to his home was much greater than the $30,000 deductible. Vu contacted Prudential to request coverage for the damage, but Prudential declined because of the one-year statute of limitations.

PROCEDURAL HISTORY

Vu brought this action in federal district court arguing that Prudential was estopped from relying on the one-year statute of limitations because Vu’s failure to bring the action within the one-year timeframe was because of his reasonable reliance on Prudential’s 1994 inspection. The district court granted Prudential’s motion for summary judgment, based on the statute of limitations. Vu appealed. The Ninth Circuit certified this question to the California Supreme Court.

ISSUE

Where an insured presents a timely claim to his insurer for property damage under a policy, and the insurer’s agent inspects the property but does not discover the full extent of covered damages, does California Insurance Code § 2071 bar a claim brought by the insured more than one year after the damage was sustained but within one year of his discovery of the additional damage? In other words, does Neff v. New York Life Ins. Co., 30 Cal.2d 165, 180 P.2d 900 (1947), remain good law?

HOLDINGS

(1) Whether California Insurance Code § 2071 bars the claim depends on whether the insured can show that the insurance company misrepresented facts and that the insured reasonably relied on those misrepresentations, causing her to miss the statute of limitations.
(2) Neff remains good law, but does not control in this case.

ANALYSIS

The Court begins by discussing the legislative history of the passage of Insurance Code § 2071 (and its predecessor), codifying a statute of limitations for property damage insurance claims.

The Court next addresses the estoppel argument by discussing Neff, whose holding Vu asks the Court to reconsider. The Court reaffirms Neff, but clarifies that it does not control this case. Neff holds that an insurer’s denial of coverage does not estop the insurer from raising a statute of limitations defense. In that case, the insurance company denied disability benefits to a policyholder; the policyholder’s son later argued that the insurance company fraudulently represented that the policyholder wasn’t entitled to benefits. The Court in Neff affirmed the judgment for the insurer, finding that the communication was a denial of liability (which created a cause of action and started the statute of limitations running) not a misrepresentation of fact.

Case law since Neff has recognized the heightened duties insurers have as parties to insurance contracts; but, the Court found no case law that calls into question the authority of the Neff holding. Rather, subsequent case law has illuminated a distinction between law and fact. Courts have recognized a distinction between insurance companies who communicate incorrect interpretations of the insurance contract (and are not estopped from raising a statute of limitations defense) and insurance companies who misrepresent or conceal facts (and might be estopped from raising a statute of limitations defense). In the former situation, an alternative rule would risk the possibility that any time an insurance company denies a claim, it would lose the benefit of the statute of limitations provision. Here, however, there was a factual representation.

Here, the inspector communicated facts to Vu regarding the nature and value of the damage and instructed Vu not to file a claim. If Vu reasonably relied on the inspector’s representation, Prudential may be estopped from raising the statute of limitations defense. Vu need not show that Prudential was fraudulent. Benner v. Industrial Acc. Comm., 26 Cal.2d 346 (1945).

An insurance company “cannot be allowed to lull the Plaintiffs into sleeping on their rights, and then use the limitations period as a sword to cut down their claims.” Ward v. Allstate Ins. Co., 964 F.Supp. 307, 310 (C.D. Cal. 1997).

Finally, the Court provides a variety of factual questions that might inform the federal court’s analysis regarding whether Vu’s reliance was reasonable.

TAGS

Prudential; Vu; statute of limitations; California Insurance Code section 2071; Northridge earthquake; misrepresentation; insurance; estoppel; policyholder

RELATED CASES
Neff v. New York Life Ins. Co., 30 Cal.2d 165, 180 P.2d 900 (1947)
Love v. Fire Ins. Exchange, 221 Cal.App.3d 1136 (1990)
Matsumoto v. Republic Ins. Co., 792 F.2d 869 (9th Cir. 1986)
Ward v. Allstate Ins. Co., 964 F.Supp. 307 (C.D. Cal. 1997)

Annotation by Janine Wetzel