Opinion
NOT TO BE PUBLISHED
Alameda County Super. Ct. No. RG06301459
Reardon, J.
In this subrogation action, Associated Electric & Gas Insurance Services Limited (AEGIS) appeals from a summary judgment entered in favor of Chapman & Associates, Inc. and Steve Wright (collectively Chapman). AEGIS provided excess insurance for the City of Alameda (City), and paid approximately $25 million to settle a nearly fatal personal injury. AEGIS sued Chapman for failing to secure additional insured coverage for the City under the liability policies Chapman procured for the Alameda Point Collaborative, Inc. (Collaborative). AEGIS sought to recover $3 million-the amount it claimed the City would have been entitled to had it been named an additional insured. Finding no triable issues of material fact supporting AEGIS’s claim of damages, we affirm.
On appeal, AEGIS claims that the failure to procure additional insured coverage actually deprived the City of $6 million in primary insurance. In any event, as we shall discuss, this is a distinction without a difference.
I. BACKGROUND
A. The Parties and the Insurance Policies
The Collaborative is a nonprofit corporation that provides services to the homeless, including low income housing. It subleases its facilities from the Alameda Reuse and Redevelopment Authority (Redevelopment Authority), which functions as a joint powers authority established by the City. In two separate subleases, the Redevelopment Authority sublet portions of the Alameda Naval Air Station to the Collaborative, including 677 West Ranger Avenue and 751 West Ranger Avenue. Pursuant to the subleases, the Collaborative was obligated to maintain at least $3 million in liability insurance and to name the City and the Redevelopment Authority as additional insureds on that insurance.
Chapman & Associates has been the Collaborative’s insurance broker since 1999. Since that time, Chapman & Associates has renewed the Collaborative’s insurance with the understanding that the Collaborative needed at least $3 million in liability insurance and was required to name the City and the Redevelopment Authority as additional insureds.
In January 2003, Chapman presented the Collaborative with a proposal for the period of February 2003 to February 2004, which split the Collaborative’s coverage between two insurance companies; the Collaborative accepted the offer. Pursuant to the proposal, Northfield Insurance Company (Northfield), of the Northland Insurance Companies, would provide $3 million in liability coverage for the parcel located at 751 West Ranger Avenue, and Great American Insurance Company (Great American) would provide $1 million in liability coverage and a $2 million umbrella policy for the rest of the Collaborative’s property on West Ranger and elsewhere.
When renewing the Collaborative’s insurance for February 2003 to February 2004, Chapman failed to procure additional insured coverage for the City and the Redevelopment Authority under either the Northfield or Great American policies. Also, Chapman only obtained a $1 million policy from Northfield, instead of the required $3 million policy.
Nevertheless, in April 2003, Chapman prepared and disseminated insurance certificates and policy endorsements that falsely represented to the City and the Redevelopment Authority that they were named insureds on the Northfield and Great American policies.
B. Underlying Personal Injury Action
In early 2003, the Collaborative hired contractors to install modular classrooms to provide space for a Head Start program to be located at 751 West Ranger Avenue. By June 2003, the Collaborative had asked Chapman to add the modular classrooms to its insurance policies.
In July 2003, electrical subcontractors from Sanford Construction (Sanford) were connecting the modular classrooms to City power. Consequently, Alameda Power & Telecom (APT) had employees on the job site supervising the work. On July 15, 2003, one of Sanford’s employees, Jeptha McGee, was standing in an open trench and drilling into an electrical vault. While drilling, McGee hit live power lines and suffered nearly fatal injuries, including lost limbs and severe brain damage.
It was basically undisputed that Sanford and the City were principally to blame for McGee’s accident. By the summer of 2004, McGee had hired lawyers and sued the City, the Redevelopment Authority, and 100 Doe defendants. During pretrial discovery, the City and the Redevelopment Authority advised McGee’s attorneys that they were insured for $3 million under the Collaborative’s policies; that the City had a $25 million policy with AEGIS; and that both were also self-insured under Government Code section 990.
C. Lack of Anticipated Insurance
In March 2005, the City and the Redevelopment Authority tendered claims to Northfield and Great American, requesting coverage for McGee’s accident. Both companies denied the claims by the City and the Redevelopment Authority. Northfield denied the claims because neither the City nor the Redevelopment Authority were named as additional insureds. Great American denied the claims because it did not insure the property (751 West Ranger Avenue) where the accident occurred.
The City then tendered the case to its excess insurer, AEGIS. Pursuant to that policy, AEGIS was obligated to pay only after exhaustion of the City’s $500,000 self-insured retention.
D. McGee Settlement
In 2005, McGee demanded $25 million to settle his case. The City and the Redevelopment Authority demanded that AEGIS contribute to the settlement. Everyone agreed that the City and the Redevelopment Authority were facing a judgment that could have exceeded $25 million. AEGIS agreed to help fund the settlement. Inasmuch as the City had only spent $280,000 of its $500,000 self-insured retention, the City paid $220,000 of the $25 million settlement; AEGIS paid the remaining $24,780,000.
As McGee was represented in the litigation by a guardian ad litem, his lawyers had to seek court approval of the settlement. Christine Spagnoli, one of McGee’s lawyers, submitted a declaration in support of the settlement, in which she averred that the settlement “truly represents an extraordinary result in light of the contested liability issues.”
E. The Subrogation Litigation
On December 8, 2006, AEGIS filed the instant action against Chapman, alleging negligence, breach of contract, and misrepresentation regarding the failure to procure the requisite primary coverage for the City and the Redevelopment Authority.
Chapman moved for summary judgment on four grounds: (1) the failure to obtain additional insured coverage for the City and the Redevelopment Authority could not have caused any damage to AEGIS; (2) allowing AEGIS to recover in subrogation would result in an “impermissible windfall”; (3) Insurance Code section 11580.04 was a “complete bar” to AEGIS’s claims; and (4) the City did not have a “reasonable expectation” that the additional insured endorsements would cover the McGee accident.
Insurance Code section 11580.04 provides: “Any additional insured endorsement issued by an admitted or nonadmitted insurer for the benefit of a public agency in connection with, collateral to, or affecting any construction contract to which the provisions of subdivision (b) of Section 2782 of the Civil Code apply, shall not provide any duty of indemnity coverage for the active negligence of the additional insured in any case where an agreement to indemnify the additional insured would be invalid under subdivision (b) of Section 2782 of the Civil Code. In any case where a claim or loss encompasses the negligence of the original insured and the active negligence of the additional insured that is not covered because of this section, the insurer’s obligation shall be limited to obligations permitted by this section. [¶] Any contract requirement that requires a promisor to procure insurance that is invalid under this section shall be invalid.”
In support of its motion, Chapman submitted a declaration from Attorney Spagnoli, counsel for McGee, in which she opined that a verdict for noneconomic damages alone could exceed $50 million. She averred that, in her experience, “McGee’s personal injury claim had a verdict value that was far in excess of the $25 million [AEGIS] policy limits.” Spagnoli explained that “the reason for making a policy limits demand is to ‘open up’ the policy and expose [AEGIS] to a judgment in excess of the policy limits if [AEGIS] [acted] unreasonably in refusing the demand.” Spagnoli averred that “[i]f there had been another policy of insurance that would have provided coverage to APT or the City... in addition to the AEGIS policy, then I would have made a policy limits demand on that insurer as well. This is true whether the total demand would have been $25 million or $28.5 million or even $30 million.... Thus, regardless of whether there was additional [insured] coverage or not, AEGIS was going to receive a policy limits demand.”
In opposition, AEGIS submitted evidence purporting to discredit Spagnoli’s declaration, by demonstrating that she knew about the other policies but did not include them in the settlement; that she knew the City was self-insured; and that she thought the settlement was “extraordinary.”
The trial court granted Chapman’s motion, finding that AEGIS could not prove it suffered any damages caused by Chapman’s failure to obtain insurance and that AEGIS could not establish superior equities regarding the “loss” at issue because Chapman “had no role in causing... McGee’s tragic accident....” The trial court did not consider the other two grounds, which it found moot.
The trial court entered judgment in favor of Chapman and the instant appeal followed.
II. DISCUSSION
A. Standard of Review
A party is entitled to summary judgment when there is no triable issue of material fact and the party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) “On appeal from a summary judgment, we make ‘an independent assessment of the correctness of the trial court’s ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law.’ [Citation]. [¶] ‘[F]rom commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.... A defendant [moving for summary judgment] bears the burden of persuasion that “one or more elements of” the “cause of action” in question “cannot be established, ” or that “there is a complete defense” thereto.’ [Citation.] In addition, ‘the party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact.’ [Citation.]” (Roger H. Proulx & Co. v. Crest-Liners, Inc. (2002) 98 Cal.App.4th 182, 194 (Proulx).) Once the defendant meets its burden, the burden shifts to the plaintiff to set forth “specific facts” showing that a triable issue fact exists. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849.)
In reviewing a summary judgment, we strictly construe the moving party’s evidence and liberally construe the opposing party’s evidence. (Proulx, supra, 98 Cal.App.4th at p. 189, fn. 1.) “If, in deciding this appeal, we find there is no issue of material fact, we affirm the summary judgment if it is correct on any legal ground applicable to this case, whether that ground was the legal theory adopted by the trial court or not. [Citation.] If, on the other hand, we find that one or more triable issues of material fact exist, then we must reverse the judgment.” (Id. at p. 195.)
B. The City Has No Claim to Assert Against Chapman; Thus, AEGIS Has No Subrogation Claim Against Chapman
1. Principles of Subrogation
“ ‘Equitable subrogation permits a party who has been required to satisfy a loss created by a third party’s wrongful act to “step into the shoes” of the loser and pursue recovery from the responsible wrongdoer. [Citation.] In the insurance context, the doctrine permits the paying insurer to be placed in the shoes of the insured and to pursue recovery from third parties responsible to the insured for the loss for which the insurer was liable and paid.’ (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1595-1596....) Because subrogation rights are purely derivative, an insurer cannot acquire anything by subrogation to which the insured has no right and can claim no right the insured does not have. [Citation.]” (United Services Automobile Assn. v. Alaska Ins. Co. (2001) 94 Cal.App.4th 638, 645.)
“The essential elements of an insurer’s cause of action for equitable subrogation are as follows: [1] the insured suffered a loss for which the defendant is liable, either as the wrongdoer whose act or omission caused the loss or because the defendant is legally responsible to the insured for the loss caused by the wrongdoer; [2] the claimed loss was one for which the insurer was not primarily liable; [3] the insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; [4] the insurer has paid the claim of its insured to protect its own interest and not as a volunteer; [5] the insured has an existing, assignable cause of action against the defendant which the insured could have asserted for its own benefit had it not been compensated for its loss by the insurer; [6] the insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends; [7] justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and [8] the insurer’s damages are in a liquidated sum, generally the amount paid to the insured.” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1292, italics omitted.)
Chapman asserts that two of the eight elements cannot be satisfied here: that AEGIS suffered damages for which Chapman is liable and that justice requires that the loss should be entirely shifted from AEGIS to Chapman.
2. Analysis
Before addressing the challenged elements, we pause to address a crucial issue that was conflated in the trial court, that being the “loss” for which Chapman is claimed to be responsible. As it asserted below, Chapman argues subrogation is not appropriate because it did not cause McGee’s personal injuries. This argument fails to distinguish between the injuries and liability for those injuries. The gist of AEGIS’s claim is that Chapman’s failure to add the City as an additional insured on the primary policies exposed the City to liability for McGee’s personal injuries. (See Proulx, supra, 98 Cal.App.4th at p. 198 [failure to add additional insured is akin to wrongful denial of coverage].) In other words, “[l]iability for the injury, and not the injury itself, is the loss for which [Chapman] is allegedly responsible; this is also the loss against which [AEGIS] insured the [City]. Accordingly, application of equitable subrogation is appropriate in these circumstances, even though [Chapman] had no hand in [McGee’s] injuries. (See also Troost v. Estate of DeBoer (1984) 155 Cal.App.3d 289, 295-296... [subrogation lies against person who caused insurer’s loss, even if not the direct cause of the insured injury].)” (National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 54.)
However, even assuming, arguendo, that AEGIS had a superior equitable position, in that it was not liable for the City’s “loss, ” AEGIS’s subrogation claim fails. Damages in an equitable subrogation action are measured by the difference between the amount the excess carrier would have contributed had there been primary insurance and the amount ultimately paid by the excess insurer. (Continental Casualty Co. v. Royal Ins. Co. (1990) 219 Cal.App.3d 111, 120.) Because the rights of AEGIS derive from the rights of the City, we must first determine the extent of the City’s claim against Chapman.
An injured party must have sustained an actual injury before it can be compensated for its infliction. (See Valdez v. Taylor Automobile Co. (1954) 129 Cal.App.2d 810, 822 [plaintiff required to have sustained actual detriment].) A broker who wrongfully fails to procure insurance is liable for all the proximate damages up to the amount the insurer would have paid had the policy been properly procured. (Id. at pp. 822-823; see also Mid-Century Ins. Co. v. Hutsel (1970) 10 Cal.App.3d 1065, 1069 [liability for failing to procure insurance “ ‘is to pay damages, and is not that of an insurer’ ”].) Conversely, where the plaintiff has suffered no actual detriment “ ‘by [the] failure... to procure insurance, plaintiff’s damage is damnum absque injuria.’ [Citation.]” (Mid-Century Ins. Co. v. Hutsel (1970) 10 Cal.App.3d 1065, 1070.)
Although the City was arguably damaged by the failure to procure the additional insured coverage, on this record, we are hard pressed to find any actual detriment to the City, and as a consequence, there is nothing for AEGIS to recoup as a subrogee. Rather, it appears that AEGIS is seeking to recover for its own, not its insured’s, loss.
Chapman presented evidence indicating that any additional insurance would not have averted the City’s payment of its self-insured retention or reduced the amount of money AEGIS would have been required to pay to settle the McGee case. It is undisputed that the City was at fault, and that the McGee case had an extremely high settlement value. Indeed, attorneys for the City advised AEGIS that the City’s potential exposure was well in excess of the $25 million policy limits, and a likely jury verdict would have been in the range of $35-$40 million. Counsel for the City further opined that although it was possible for a verdict against the City to come in below the AEGIS policy limits, the verdict could have been as high as $65-$75 million. Similarly, the mediator assigned to the case believed that the litigation could not be settled for less than AEGIS’s policy limits. Accordingly, any failure by AEGIS to accept the policy limits demand in the amount of $25 million had the potential of exposing AEGIS to substantial liability for failing to settle within the policy limits.
Likewise, Spagnoli made clear in her declaration that a policy limits demand was made to open the policy and to expose AEGIS to a judgment in excess of the policy limits if AEGIS acted unreasonably in refusing the demand. Counsel further averred that given the high settlement value of the McGee case, AEGIS “was going to receive a policy limits demand” regardless of “whether there was additional [insured] coverage or not....” Presented with this take-it-or-leave-it offer, AEGIS capitulated and paid the policy limits.
In the face of this evidence, AEGIS failed to present “specific facts” showing a triable issue of material fact as to whether the City “suffered damages caused by” Chapman’s failure to secure additional insured coverage. AEGIS put forth the following evidence in an effort to refute Chapman’s evidence: (1) Spagnoli “knew about other insurance in addition to the AEGIS” policy, in that the City disclosed information about the Northfield and Great American policies during discovery, yet counsel did not include these policies as part of the settlement; (2) Spagnoli knew the City was self-insured; and (3) Spagnoli referred to the $25 million settlement as an “extraordinary result in light of the contested liability issues, ” and she opined that an “extraordinary outcome” had been obtained.
The undisputed evidence, however, established that both Great American and Northfield had denied the City’s claims prior to the settlement demand. AEGIS’s evidence regarding the possibility of other insurance coverage during discovery, which later proved to be unavailable, did nothing to contradict Spagnoli’s testimony that she would have pursued other insurance had it been available.
Similarly, AEGIS’s evidence that the City disclosed its self-insured status during discovery did not give rise to a triable issue of fact regarding its purported damages. According to AEGIS, Spagnoli’s failure to demand the full amount of the City’s self-insured retention ($500,000), in addition to the $25 million policy limit, called into question Spagnoli’s testimony that she would have pursued other insurance if it had been available. We are not persuaded. AEGIS points to no evidence indicating that Spagnoli had any knowledge about whether the City had paid the full amount of the self-insured retention. Moreover, even if AEGIS had introduced evidence that Spagnoli knew she could have demanded an additional $220,000 from the City’s unexhausted self-insured retention, this evidence did nothing to establish that AEGIS would have been faced with anything other than a policy limits demand.
Finally, AEGIS’s evidence that Spagnoli referred to the $25 million settlement as an “extraordinary result in light of the contested liability issues” speaks nothing to whether the City suffered damages due to the unavailability of the $3 million (or $6 million) in liability coverage. Irrespective of whether the $25 million settlement was “extraordinary, ” it was undisputed that the City was aware that a probable jury verdict would be in the range of $35-$40 million, and could be as high as $65-$70 million, and, as a consequence, any attempt to settle the case for less than the policy limits would expose AEGIS to a potential bad faith claim. In other words, AEGIS presented no evidence that it paid out sums that it would not otherwise have been obligated to pay if Chapman had not breached its duty to obtain additional insured coverage. (Continental Casualty Co. v. Royal Ins. Co., supra, 219 Cal.App.3d at p. 120.)
Accordingly, the trial court did not err in granting Chapman’s motion for summary judgment on the ground that AEGIS failed to present a triable issue of fact that it suffered damages as a result of Chapman’s failure to secure the additional insured coverage for the City. Inasmuch as the absence of damages is fatal to AEGIS’s claim of subrogation, we need not determine whether the trial court independently erred in determining that AEGIS was not entitled to subrogation because it did not have a superior equitable position.
In the end, the instant case does not turn on complex issues regarding primary and excess insurance or on the arcane doctrine of superior equities. Rather, it comes down to the simple issue of damages, or more appropriately, the lack thereof.
III. DISPOSITION
The judgment is affirmed. Chapman is entitled to its costs on appeal.
We concur: Ruvolo, P.J., Rivera, J.