Insurer’s Only Obligation is to the Person Insured
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It is axiomatic that first party property insurance is a contract of personal indemnity. It does not follow title to the land and only pays those who are named on the policy as an insured and have an insurable interest. Someone who has an insurable interest but is not named has no right to the policy.
Konstantinos Kapnisis (Kapnisis) appealed from the judgment after the trial court granted summary judgment in favor of Colony Insurance Company (Colony). In Konstantinos Kapnisis v. Colony Insurance Company, B308056, California Court of Appeals, Second District, Fourth Division (January 19, 2022) the California Court of Appeals resolved an issue regarding that an insurer only needs to pay he who is insured.
FACTUAL BACKGROUND
Kapnisis wanted to buy a restaurant called Big Oaks. Kapnisis signed a purchase agreement and a month-to-month lease to rent Big Oaks pending the close of escrow. The lease required him to pay Big Oaks’ insurance premium in order to operate the restaurant. Colony subsequently issued a policy naming Big Oaks as the insured. Two weeks later, a fire destroyed Big Oaks. Colony issued checks payable to “Big Oaks” and sent payment to the mailing address listed in the insurance policy.
Big Oaks was a restaurant located on land owned by the United States Forest Service. In 2012, Hitendra Golakiea and his wife, Ila Patel, purchased Big Oaks. Golakiea and Patel decided to sell, and Kapnisis offered to purchase, Big Oaks for $220,000. The parties signed a Commercial Property Purchase Agreement and Joint Escrow Instructions (Purchase Agreement). The Purchase Agreement stated, among other things, that the offer was contingent upon Kapnisis obtaining:
a special use permit from the United States Forest Service; and
a permanent liquor license from the California Department of Alcohol Beverage Control.
The title of Big Oaks would be conveyed through a grant deed “at the close of escrow.” On the same day that he signed the Purchase Agreement, Kapnisis signed a month-to-month Commercial Lease Agreement (Lease) with Golakiea and Patel to lease Big Oaks. Kapnisis signed the Lease in order to begin operating Big Oaks before the sale of the property closed. The lease required Kapnisis, as the tenant, to pay the operating expenses and utilities, insurance premiums, and real property taxes. As of July 2017, Kapnisis managed Big Oaks and lived on the property.
Kapnisis never obtained either the special use permit from the United States Forest Service nor the requisite liquor license. Because of his failure to obtain the required documents, escrow never closed. Therefore, title to Big Oaks did not transfer to Kapnisis.
INSURANCE POLICY
Under the terms of the Lease, Kapnisis was responsible for paying the insurance on Big Oaks. In June 2018, Kapnisis received a call from Big Oaks’ insurance broker, Huntington Pacific Insurance Agency, and learned that the insurance policy on Big Oaks was up for renewal.
On June 17, 2018, the insurance broker, through an intermediary, obtained a quote for Big Oaks from Colony. The quote included $255,000 in building coverage and $100,000 in contents coverage, for a premium of $4,145.54. The application for insurance for Big Oaks, was signed by Kapnisis. The only applicant listed was “Big Oaks Lodge,” with a handwritten address of 33101 Bouquet Canyon Road, Saugus CA 91390, which was the physical address of the restaurant. Colony then issued its Policy, listing “Big Oaks” as the insured. The listed mailing address was 2533 North Lamer Street, Burbank CA 91504 (the North Lamer address). This mailing address was also Patel’s residential address.
Kapnisis paid the insurance broker the premium and received a receipt from the insurance broker with his name handwritten on it.
THE FIRE
On August 11, 2018 a fire broke out at Big Oaks and the entire building burned down. Kapnisis and Patel each made claims with Colony for policy benefits as a result of the fire. Patel told Colony that she was the owner of Big Oak and Kapnisis was the tenant. Kapnisis also claimed he was the owner of Big Oaks; however, he did not provide Colony with any documentation proving he owned Big Oaks at the time of the fire.
In September 2018, Colony issued a series of checks made payable to “Big Oaks” for the fire loss. Colony paid a total of $335,368.76. Colony sent the checks to the North Lamer address.
THE LAWSUIT
Kapnisis initiated this lawsuit against Colony for breach of contract, breach of implied covenant of good faith and fair dealing, unfair competition, negligence, and declaratory relief. He also sought punitive damages against Colony. Colony filed a motion for summary judgment or summary adjudication, arguing that there was no breach of contract because it complied with the express terms of the Policy by writing checks to “Big Oaks” and mailing those checks to the address listed on the Policy. The trial court granted the summary judgment motion as to all causes of action and entered judgment in favor of Colony.
DISCUSSION
The standard elements of a breach of contract claim are:
the existence of a contract,
the plaintiff’s performance or excuse for nonperformance,
the defendant’s breach, and
resulting damage to the plaintiff. (Abdelhamid v. Fire Ins. Exchange (2010) 182 Cal.App.4th 990, 999.)
The interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation.
Since Kapnisis did not dispute that “Big Oaks” was the named insured on the Policy and that the insurance proceeds were mailed to the address listed on the Policy; and that neither Kapnisis nor his address were listed on the Policy; Colony satisfied its contractual obligations to pay policy benefits to “Big Oaks” at the address listed on the Policy.
Colony followed the express terms of the Policy and any dispute beyond that, such as Patel’s authority to cash those checks, is not between Kapnisis and Colony but potentially between Kapnisis and Patel. Colony complied with its contractual obligations to pay the insurance proceeds to the listed insured and corresponding address in the Policy.
Kapnisis failed to submit evidence sufficient to establish a triable issue of material fact as to Colony’s alleged breach of contract. Absent a breach of contract, Colony did not breach the implied covenant of good faith and fair dealing. T
ZALMA OPINION
It is rare, in my experience, for people who purchase insurance to actually read the policy acquired. At the time Colony’s policy was issued Kapnisis had an insurable interest in the property that held the Big Oaks restaurant and lodge but had no ownership interest in an entity called “Big Oaks.” He never asked Colony, or his broker, to name him as an insured on the policy because he did not read it – and probably did not read the application either – he was not an insured of the policy and it only insured the risks faced by the actual owner of “Big Oaks” Ms. Patel. Insurance only pays the person insured as long as that person has an insurable interest in the property. Patel, as the owner of Big Oaks had that interest and was named; Kapnisis had an insurable interest but was not named.
© 2022 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.
Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.
You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, [email protected] and [email protected] . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma’s videos on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/
Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
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Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
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ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
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In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...