Unpublished Disposition, 912 F.2d 468 (9th Cir. 1990)

No. 89-15507.

United States Court of Appeals, Ninth Circuit.

Before ALARCON, POOLE, Circuit Judges and HATTER,^*  District Judge

MEMORANDUM^** 

Robert and Barbara Harless (the Insureds) appeal from the district court's order granting summary judgment in favor of State Farm Fire and Casualty Co. (State Farm). The district court concluded that the Insured's action for tortious breach of the implied covenant of good faith and fair dealing was a transparent attempt to recover benefits due under the policy and, therefore, was barred by the policy's one-year limitations period. We affirm.

* We review a grant of summary judgment de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 58 U.S.L.W. 3801 (U.S. June 19, 1990). We must determine whether, viewing the evidence in the light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989). California's substantive insurance law governs in this diversity case. James B. Lansing Sound, Inc. v. National Union Fire Ins. Co., 801 F.2d 1560, 1561 (9th Cir. 1986).

The Insured's "Complaint for Violation of the Insurance Code and for Damages" alleges inter alia that " [p]laintiffs have demanded of the defendant State Farm Fire and Casualty Company benefits due plaintiffs under the policy, but the defendant has refused to pay any benefits on or do those things required of it under the terms and conditions of the policy and accordingly breached its covenant of good faith and fair dealing." Complaint, paragraph 12 (emphasis added). The complaint then recites a number of allegations to support the charged bad faith conduct. Complaint, paragraph 12(a)-(e). All of these alleged actions relate to State Farm's denial of the Insureds' claim for benefits due under the policy. The district court, relying on Abari v. State Farm Fire & Casualty Co., 205 Cal. App. 3d 530, 252 Cal. Rptr. 565, and Lawrence v. Western Mutual Insurance Co., 204 Cal. App. 3d 565, 251 Cal. Rptr. 319 (1988), concluded that the action was fundamentally a claim for policy benefits. We agree.

Under California law, when the bad faith complained of is the denial of benefits under an insurance policy, a trial court may examine the pleadings to determine whether the tort action to recover damages for a breach of the implied covenant of good faith and fair dealing is a "transparent attempt" to recover on that policy. See Abari, 205 Cal. App. 3d at 536, 252 Cal. Rptr. at 568 ("Abari's pleading thus reveals his bad faith and unfair practices claims are a transparent attempt to recover on the policy, notwithstanding his failure to commence suit within one year of accrual." (emphasis in original)); Lawrence, 204 Cal. App. 3d at 574-75, 251 Cal. Rptr. at 324 ("Lawrence's allegation of tortious bad faith relates to the complete denial of the claim on the underlying policy."). Our reading of the complaint reveals that the Insureds' action is a "transparent attempt" to recover policy benefits.

Before the district court, the Insureds relied on Murphy v. Allstate Insurance Co., 83 Cal. App. 3d 38, 147 Cal. Rptr. 565 (1978), to support their argument that "when a bad faith claim is made it is not considered an action on the policy but rather a common remedy arising out of the covenent [sic] of good faith and fair dealing...." Response to State Farm's Motion for Summary Judgment, at 14. Murphy, as the district court pointed out, is inapplicable to this case. As the Abari court observed, in Murphy, "the bad faith 'damages claimed were not caused by any risk insured against under the policy and were not recoverable under the policy.' " Abari, 205 Cal. App. 3d at 536, 252 Cal. Rptr. at 568 (quoting Murphy, 83 Cal. App. 3d at 49, 147 Cal.Rptr. at 574). The Insureds did not allege that State Farm breached an agreement separate from the insurance policy, as was the case in Murphy, 83 Cal. App. 3d at 49, 147 Cal. Rptr. at 574.

Because the Insureds' action was fundamentally a claim on the insurance policy, the district court concluded that the policy's one-year limitations period applied. In determining when the Insureds' cause of action accrued, the district court viewed the evidence in the light most favorable to them and assumed that the Insureds became aware of the damage when they notified State Farm of the property damage to their residence in February 1986. The Insureds did not file this action until May 23, 1988. As a result, the district court concluded, and we agree, that the action was barred by the policy's one-year limitations period.

II

The Insureds attempt to raise a new factual theory in this appeal. For the first time before this court, they raise the argument that their contractual relationship with State Farm involved an agreement separate from the insurance policy. Appellant's Opening Brief at 6. Ordinarily, we will decline to consider a legal or factual theory raised for the first time on appeal. Guillory v. County of Orange, 731 F.2d 1379, 1383 (9th Cir. 1984) ("As a general rule, one may not urge as a ground for reversal a theory not presented to the trial court."); see also Moran v. Aetna Life Ins. Co., 872 F.2d 296, 300 (9th Cir. 1989) ("Because Moran did not present this theory [of a breach of fiduciary duty] to the district court, we decline to address it in his appeal."); cf. Partington v. Gedan, 880 F.2d 116, 130 (9th Cir. 1988) (the court of appeals "will decline to review an issue not clearly raised in the district court unless necessary to prevent manifest injustice, unless a new issue arises while the appeal is pending because of a change in the law, or unless the issue is purely one of law that is both central to the case and important to the public and the necessary facts are fully developed.").

Considering the Insureds' new factual theory for the first time on appeal in this matter would be unfair. State Farm did not have a chance to present any evidence to disprove the existence of a separate agreement. The district court did not have an opportunity to rule on the legal and factual issues that are raised by a claim that there was a separate "agreement to pay." Thus, we do not reach the Insureds' new factual theory in this appeal.

The district court's order granting summary judgment to State Farm is AFFIRMED.