Johnson-Killion v. Universal North America Insurance Company

Background

A fire destroyed Leslie Johnson-Killion’s home on October 9, 2017. Johnson-Killion alleged that Universal insured the home but paid only $338,000 toward the loss, although she initially claimed she was entitled to $422,000. She also alleged that Universal paid only $16,900 toward an $80,042.41 debris-removal bill, although she claimed the policy provided more coverage.

Johnson-Killion asserted claims for breach of the insurance contract and breach of the implied duty of good faith and fair dealing. She moved for summary judgment, which asks the court to rule without a trial when no important factual dispute requires a trial. Universal filed a cross-motion for summary judgment.

Contractual Time Limit

The policy stated that a lawsuit against Universal had to be started within one year after the loss. Under the California rule discussed by the court, that period is paused from the time the insured notifies the insurer of the damage until the insurer denies coverage.

The court concluded that claims concerning additional payment for the loss of the home were filed more than one year after even the later claim-denial date Johnson-Killion relied on. The same was true for claims concerning additional debris-removal benefits. The court therefore stated that those claims would be barred unless Johnson-Killion showed that the policy’s one-year deadline was not enforceable against her.

Johnson-Killion offered evidence that she did not know about the deadline and that Universal had not disclosed it in the letters she received during the claims process. Universal offered no contrary evidence, arguing instead that the cases Johnson-Killion relied on involved claims denied in full. The court rejected that distinction, reasoning that the disclosure duty applies to the claim presented even when the insurer pays some benefits.

The court nevertheless denied both parties’ motions on this issue. Whether Johnson-Killion reasonably relied on Universal’s failure to disclose the deadline—and whether she reasonably failed to discover it by other means—was a factual question that could not be resolved on summary judgment.

Coverage for the Home

The policy’s basic limit for the residence was $338,000. The limit could increase to $422,000 if the loss exceeded $338,000 because Johnson-Killion had purchased additional coverage. Universal paid $338,000. It later obtained estimates for rebuilding at the insured location ranging from $288,133.73 to $306,646.52. Johnson-Killion told Universal that she had elected to replace the home by purchasing a home in Virginia for $415,000.

Universal argued that a later estimate obtained by Johnson-Killion was inadmissible because she had not claimed more than $338,000 during the claims process. The court rejected that argument because Johnson-Killion had submitted evidence that she disputed the payment and sought benefits above $338,000.

The court also rejected Johnson-Killion’s request for judgment as a matter of law that she was entitled to $415,000. Evidence that Universal’s rebuilding estimates might be flawed—including alleged errors concerning square footage and required code-compliance work—could support a factfinder’s decision in her favor, but it only created a factual dispute. Neither party was therefore entitled to summary judgment on the claim for additional benefits for the home.

Debris-Removal Coverage

The policy provided up to $16,900 for debris removal under its debris-removal provision, representing five percent of the $338,000 limit. A separate “Ordinance or Law” provision potentially provided coverage of up to $84,500, or 25 percent of the $338,000 limit, for increased costs caused by enforcement of an ordinance or law. That provision included certain debris-removal costs connected to required construction, demolition, remodeling, renovation, repair, or replacement.

Johnson-Killion sought summary judgment for $63,142.41, the difference between the $80,042.41 debris-removal invoice and Universal’s $16,900 payment. The court denied her motion because she did not identify an ordinance or law that required the work on her Santa Rosa home, or provide evidence that such required work caused the debris-removal costs.

Universal argued that Johnson-Killion had assigned any claim for additional debris-removal benefits to Sonoma County under a debris-removal permit. The court denied Universal’s motion because the evidence did not conclusively establish the scope of the assignment. The permit required Johnson-Killion to file an insurance claim, and the evidence could support a finding that she assigned only the right to collect benefits that were paid, not the underlying claim for additional benefits.

Disposition

The court denied Johnson-Killion’s motion for summary judgment and denied Universal’s cross-motion for summary judgment. It set a case-management conference for April 15, 2022, and directed the parties to file a joint case-management statement by April 8, 2022.