Fire Insurance Exchange v. Superior Court

BACKGROUND

A group of homeowners (real parties) whose homes were damaged or destroyed in the 1994 Northridge earthquake brought an action against Fire Insurance Exchange and Farmers Insurance Exchange (petitioners) to recover under their policies and for damages, alleging breach of contract, insurance bad faith, fraud, and negligence.

Real parties’ first amended complaint alleges that at the time of the earthquake, their homes were insured under the “Fourth Edition” “Protector Plus Homeowners Package Policy,” with “Guaranteed Replacement Cost Coverage,” issued by Fire Insurance Exchange. It is alleged that real parties repaired or rebuilt their homes, and in doing so, incurred costs for land stabilization and for construction upgrades made necessary by changes to the building code, and that petitioners denied their claims for such costs.

The matter was assigned to Los Angeles Superior Court Judge Carl West. For case management purposes, prior to setting the matter for trial, Judge West resolved disputed issues raised by the pleadings regarding the interpretation of the policy terms upon which coverage depended.

The court found the policy to be ambiguous and exclusions…