Under California Law, Plaintiffs Are Legally Entitled To Allege Promissory Fraud In Insurance Bad Faith Cases

In No Cost Conf., Inc. v. Windstream Communs., Inc. 940 F. Supp. 2d 1285 (S.D. Cal. 2013) the Court allowed Plaintiff leave to amend a promissory fraud cause of action in a contract case. In Erlich, the California Supreme Court generally discussed the differences between tort and contract claims. However, the California Supreme Court clarified that “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” Id. at 983. …The Court further explained that “[t]ort damages have been permitted in contract cases where a breach of duty directly cause physical injury; for breach of the covenant of good faith and fair dealing in insurance contracts; for wrongful discharge in violation of fundamental public policy; or where the contract was fraudulently induced….…Rather, as the California Supreme Court made clear, a plaintiff may assert a tort claim, in addition to contract claims, if he based the tort claim on conduct, independent of the mere act of breach of contract. See also Lazar v. Sup. Ct., 12 Cal 4th 631, 49 Cal. Rptr. 2d 377, 909 P. 2s 981, 985 (Cal. 1996) (“In [cases of promissory fraud]. The [plaintiff’s claim does not depend upon whether the defendant’s promise is ultimately enforceable as a contract. “if it is enforceable, the [plaintiff] has a cause of action in tort as an alternative at least, and perhaps in some instances in addition to his cause of action on the contract.’” (citation omitted)….No Cost Conf., Inc. v. Windstream Communs., Inc. 940 F. Supp. 2d at 1301-1302.

“The elements of fraud, which give rise to the tort action for deceit, are misrepresentation (false representation, concealment, or non-disclosure);knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “Promissory fraud” is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such an intention, there is an implied misrepresentation of fact that may constitute actionable fraud. (Id.)

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