PROPERTY INSURER VICTORY IN FIGHT TO REDUCE INFLATED PROPERTY CLAIMS

As the owners of significant commercial and residential property are aware, the procurement of property insurance, including earthquake insurance, is an expensive endeavor. Recently, a California property insurer achieved an important victory in its efforts to contain expenses related to improper construction claims.

In the matter of People v. Building Permit Consultants, Inc., 20th Century Insurance Company brought suit against Building Permit Consultants, Inc. alleging it was part of a scheme to increase the amount of money that that insurer had to pay homeowners who had suffered earthquake damage. In its Complaint, 20th Century alleged that the consulting firm had prepared damage and estimate reports and other documents to support false and fraudulent claims. 20th Century further alleged that the consulting firm had made improper cold calls and direct mail solicitation and had prepared damage estimates that were inflated and in many cases were without any basis whatsoever.

Building Permit Consultants, in responding to the Complaint, moved to dismiss the case pursuant to the state’s "anti-slapp" statute (which permits a defendant in a civil action to move to dismiss on the basis that the action had been brought to chill the defendant’s First Amendment rights). In bringing its motion, Building Permit Consultants contended that its cold calling and direct mail solicitation practices, together with the damage reports it had submitted to 20th Century, were in furtherance of its First Amendment rights.

The trial court denied the anti-slapp motion on the basis that the statute did not apply because the reports prepared by Building Permit Consultants were not made before, or in conjunction with, any issue under consideration or review by any judicial body or other official proceeding.
On appeal, a state appellate level court affirmed, concurring with the trial court’s reasoning.

While property insurers should certainly pay reasonable amounts to settle property claims, the extent and cost of claims arising from significant events, such as the 1994 Northridge earthquake, has inflicted substantial burdens on property carriers which, in turn, have often attempted to pass on those costs by way of premiums to all of the property carriers’ policyholders. The decision in People vs. Building Permit Consultants, Inc. should assist property carriers, and responsible property owners, in holding down the cost of premiums for property insurance.

LANDLORDS WIN IMPORTANT CASE UNDER ELLIS ACT

As many are aware, the Ellis Act permits landlords a means of terminating rental properties (i.e., terminating existing tenancies) by removing the units from the rental market altogether. In an important appellate level decision, a state appellate court has ruled that a landlord which brings Ellis Act proceedings, files appropriate notices and properly serves a termination notice may then file an unlawful detainer action against a tenant who refuses to vacate and cannot be liable for retaliatory eviction.

In the case of Drouet v. Superior Court, Joel Drouet owned a two unit rental property. A tenant, Jim Broustis, had lived at the property for twelve years when Drouet decided to bring Ellis Act proceedings. After Drouet complied with all procedures, Broustis was served with a termination notice. Broustis refused to vacate and Drouet brought an unlawful detainer action. Broustis filed an answer alleging, among other defenses, retaliatory eviction. Broustis cited the fact that he and Drouet had periodic disputes over repairs and payment of rent. Drouet moved to have all defenses dismissed. The trial court granted the motion, except with respect to retaliatory eviction.

Drouet then filed a Writ of Mandate with the appellate court with regard to the trial court’s ruling on the retaliatory eviction defense, and won relief. The appellate court ruled that, while a tenant could seek statutory damages stemming from retaliatory actions during the tenancy, the tenant cannot seek any remedy for retaliatory eviction when a landlord is properly exercising Ellis Act rights.

The decision in the Drouet case is an important victory for landlords who may wish to remove properties, especially small ones, from the rental market.