A property insurer was not liable where the insured’s contractor cashed a jointly-payable check pursuant to a power of attorney granted in a construction contract. (Jozefowicz v. Allstate Ins. Co. (2019) 35 Cal.App.5th 829)
Facts
Stanley Jozefowicz owned a mobilehome for which he obtained a homeowners policy through Allstate Insurance Company. In May 2014, the mobilehome was damaged in a fire. Jozefowicz submitted a claim to Allstate, and Jozefowicz hired Sunny Hills Restoration to perform repairs to the mobilehome. The contract between Jozefowicz and Sunny Hills stated that Jozefowicz was appointing Sunny Hills as his representative to endorse and deposit any insurance checks, and directed Allstate to include Sunny Hills on any checks relating to the work. A copy of the contract was sent to Allstate.
In January 2015, Allstate issued a check for $20,943.97 made payable to both Jozefowicz and Sunny Hills to pay for repairs to Jozefowicz’s mobile home. Allstate sent the check directly to Jozefowicz, but he never cashed it. Around the same time, a dispute arose between Jozefowicz and Sunny Hills over the scope and quality of the work. Sometime later, Sunny Hills contacted Allstate and requested that the check be reissued and sent directly to Sunny Hills. In March 2015, Allstate issued a second check in the same amount, made payable to Jozefowicz and Sunny Hills, and sent it directly to Sunny Hills. Sunny Hills endorsed the check and deposited it into its own bank account.
Jozefowicz sued Allstate under California Uniform Commercial Code section 3309, which provides a cause of action for recovery of a lost, stolen or destroyed check. Allstate moved for summary judgment, contending that Jozefowicz was unable to satisfy the elements of a statutory claim under section 3309. The trial court agreed and granted Allstate’s motion. Jozefowicz appealed.
Holding
The California Court of Appeal affirmed. California Uniform Commercial Code section 3309 provides that “a person not in possession of an instrument is entitled to enforce the instrument if (1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (2) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.”
Here, Jozefowicz expressly instructed Allstate to include Sunny Hills on all checks and notified Allstate that Sunny Hills was permitted to deposit all checks. Accordingly, the loss of possession was the result of a transfer and/or a lawful seizure, thus negating the second element of section 3309. Accordingly, Jozefowicz could not recover from Allstate.
Jozefowicz argued that his contract with Sunny Hills failed to comply with certain Probate Code provisions governing powers of attorney, and thus Sunny Hills was not actually his representative when it negotiated the check. The appellate court rejected that argument, because the Probate Code provisions do not apply to a power of attorney coupled with an interest, which is what Sunny Hills had obtained here.
Comment
Note that Jozefowicz did not bring an action to enforce the insurance contract. Rather, he brought an action to enforce the check. However, under the facts of this case, he could not satisfy the requirements necessary to enforce the check. As such, he could not recover against Allstate.