Opinion
B292484
02-25-2020
AHSL ENTERPRISES, INC., Plaintiff and Appellant, v. GREENWICH INSURANCE COMPANY et al., Defendants and Respondents.
Jankielewicz & Sons and Lenny Janner for Plaintiff and Appellant. Troutman Sanders, Jennifer Mathis and Jenni K. Katzer for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. LC106097) APPEAL from a judgment of the Superior Court of Los Angeles County, Rupert A. Byrdsong, Judge. Affirmed. Jankielewicz & Sons and Lenny Janner for Plaintiff and Appellant. Troutman Sanders, Jennifer Mathis and Jenni K. Katzer for Defendants and Respondents.
INTRODUCTION
We determine in this appeal whether the trial court erred in sustaining the demurrer filed by respondents Greenwich Insurance Company and XL Insurance America, Inc. to the first amended complaint (FAC) filed by appellant AHSL Enterprises, Inc. Finding no error, we affirm the court's judgment dismissing AHSL's FAC.
Because Greenwich and XL are represented by the same counsel and are identically situated, and because none of the issues discussed herein requires us to differentiate between the two, we refer to both entities jointly as "Greenwich."
According to the FAC, AHSL ran a restaurant known as Orange Delite, where non-parties Guzman and Carranza worked. AHSL hired defendant and now-dismissed respondent Safecal Inc. as an insurance broker to procure an insurance policy covering employee disputes. Safecal sold AHSL a policy issued by Greenwich (the Policy). The Policy covered employment claims made from September 24, 2014 to September 24, 2015 (the Policy Period). It provided that notice of any claim covered by the policy "shall be given in writing to" ABA Insurance Services (ABAIS) as soon as practicable, but in no event later than 60 days after the end of the Policy Period. AHSL claims it never received a copy of the Policy despite requesting it from Safecal.
On or about May 29, 2015, AHSL received complaints and right-to-sue letters on behalf of Guzman and Carranza from the Department of Fair Employment and Housing (DFEH). Though AHSL twice sent notice of these letters and complaints to Safecal, Safecal did not notify Greenwich or ABAIS of the claims.
In May 2016, Guzman and Carranza filed a complaint against AHSL. On August 16, 2016, AHSL notified ABAIS of the lawsuit. Greenwich initially accepted tender of the claim with a reservation of rights, but on March 17, 2017, denied coverage because AHSL had not timely reported the claim. AHSL subsequently settled the lawsuit with Guzman and Carranza.
On August 21, 2017, AHSL sued Safecal for breach of contract, and sued Greenwich for breach of contract and bad faith. On May 15, 2018, AHSL filed a FAC alleging the same causes of action. All parties demurred to the FAC, and the court sustained the demurrers without leave to amend, ruling as to Greenwich that AHSL failed to allege a timely tender of the claim. After the court entered judgments in favor of Safecal and Greenwich, AHSL timely appealed. AHSL and Safecal subsequently settled, and AHSL dismissed Safecal from the appeal.
As to Greenwich, AHSL argues the court erred in sustaining the demurrer because: (a) AHSL sufficiently alleged a timely tender of the claim; and (b) even if AHSL had not timely tendered its claim, Greenwich could not deny the claim on that basis without showing the untimely notice prejudiced Greenwich. We affirm.
STATEMENT OF RELEVANT FACTS
On August 21, 2017, AHSL filed a complaint against Greenwich and Safecal. On October 31, 2017, Safecal filed a demurrer, which was set for hearing on June 19, 2018. On May 15, 2018, AHSL filed a FAC, containing the following relevant allegations:
- In June 2013, "AHSL retained the brokerage services of Safecal" and Safecal agreed to be "AHSL's broker of record" and to "represent AHSL" in obtaining an insurance policy covering employment business practices between September 24, 2014 and September 24, 2015. Safecal and AHSL entered into a written contract providing that Safecal would be AHSL's broker to obtain insurance for AHSL, and would service any obtained policy, including forwarding the actual policy purchased to AHSL. The contract also provided that Safecal would be AHSL's attorney-in-fact to procure insurance. The contract stated: "Your insurance broker represents you, the consumer . . . ." and AHSL alleged that "Safecal was to act as AHSL's agent/broker."
- Safecal did not file a notice of appointment with the California Insurance Commissioner under Insurance Code section 1704 stating it was Greenwich's agent.
Indeed, Safecal was alleged to be "AHSL's agent/broker."
- Safecal provided an insurance policy application that "referenced both XL and Greenwich." The first paragraph of the application stated: "The policy for which application is being made provides, subject to its terms and conditions, claims made coverage."
- Safecal promised it would provide the insurance policy after the application was submitted and the premium was paid. AHSL never received a copy of the policy, despite repeated efforts to obtain a copy through Safecal.
- Relevant portions of the Policy stated:
- The "Policy Period" was from September 24, 2014 to September 24, 2015.
- Section II of the policy provides: "Coverage shall apply to any Claim made against the Insured committed prior to the expiration date of this Policy, provided that the Claim is first made during the Policy Period . . . and written notice of said Claim is reported to the Insurer pursuant to Section VII[] of this Policy."
- Section III.B defines "Claim" as "any Employment Claim" and "includes a civil, administrative, alternative dispute resolution, arbitration proceeding, or other legal proceeding, including but not limited to a charge filed with
the Equal Employment Opportunity Commission ('EEOC') or equivalent state or local agency . . . ."
- Section VII.A states: "The Insureds, as a condition precedent to coverage under this Policy, shall give the Insurer written notice as soon as practicable (but in no event later than sixty (60) days after expiration of the Policy Period . . .) of any Claim first made during the Policy Period . . . ."
- Section VII.C states: "Notice to the Insurer shall be given in writing to the Insurer at the address stated in the Declarations."
- At the top of the declarations page, it states: "NOTICES AND CLAIMS TO BE SENT: All notices required to be given to the Insurer under this Policy shall be addressed to ABA Insurance Services Inc." and provides an address and telephone number. The declarations page also states: "THIS POLICY AND ALL OF ITS ENDORSEMENTS PROVIDE CLAIMS MADE COVERAGE."
- On or about May 29, 2015, AHSL received DFEH complaints and right-to-sue letters on behalf of Guzman and Carranza. AHSL tendered the claim to Safecal twice on or before August 26, 2015. Safecal received the August 26, 2015, tender, but never forwarded it to Greenwich.
- On May 24, 2016, Guzman and Carranza sued AHSL, asserting employment claims. On August 16, 2016,
AHSL tendered the claim to ABAIS at the address listed on the declarations page.
- Through an e-mail exchange with AHSL counsel, Greenwich initially accepted the tender, subject to a reservation of rights whose nature was undescribed. However, Greenwich later denied the claim because AHSL had waited more than 60 days from the end of the Policy Period to tender the claim, and AHSL had submitted the claim to the wrong entity.
- Despite Greenwich's claim that AHSL should not have tendered the claim to AHSL's insurance broker Safecal, XL advised its policy holders to do just that. AHSL attached to its FAC a printout of a webpage with a heading of "XL Catlin" and entitled "10 Actions NOT to Take When Facing a Claim." On the list, item 3 states: "DON'T wait to contact your agent/broker or insurer." On the second page of the webpage, it states: "Information accurate as of October 2017." The webpage also states: "The information contained herein is intended for informational purposes only and does not constitute legal advice. . . . Any descriptions of insurance provisions are general overviews only." The FAC contains no allegation that AHSL read or relied on this webpage in deciding to whom or how to tender a claim.
- AHSL spent $85,000 settling the case with Guzman and Carranza, and $15,000 in additional attorneys' fees above the retention limit. In order to pay the $85,000 settlement, AHSL needed to take out a loan, and was thus incurring $2,400 monthly interest.
- AHSL alleged a cause of action for breach of contract against Safecal, and causes of action for breach of contract and bad faith against Greenwich.
- AHSL also alleged that "[a]t all times herein mentioned, each of the Defendants mentioned in the caption of this Complaint, which is incorporated herein by this reference, was and is the agent, servant, representative and/or employee of each of the other Defendants, and all the things alleged to have been done by any Defendant was done in the capacity of agent and/or representative of the other Defendants, individually, collectively, and in all possible combinations."
Insurance Code section 1704, subdivision (a), provides: "Any person acting as a licensee under this chapter shall not act as an agent of an insurer unless the insurer has filed with the commissioner a notice of appointment, executed by the insurer, appointing the licensee as the insurer's agent."
On May 25, 2018, all named defendants demurred to the FAC. AHSL opposed the demurrers, and the named defendants replied. AHSL did not request leave to amend in its oppositions.
On June 19, 2018, the trial court granted the demurrers without leave to amend. As to Greenwich, the court found the FAC did not establish that AHSL timely tendered under the Policy.
On July 19, 2018, the court entered judgment in favor of Greenwich. On August 2, 2018, the court entered judgment in favor of Safecal. On September 4, 2018, AHSL appealed both judgments. On June 10, 2019, AHSL settled with Safecal and dismissed it from the appeal.
DISCUSSION
A. AHSL Failed to Sufficiently Allege It Tendered the Claim as Required by the Policy or Permitted by Law
1. The Policy Required AHSL to Give Notice of the May 29 , 2015 Letters
AHSL admits that "[o]n approximately May 29, 2015, AHSL received notice of a pending employment claim being made by two of its employees." Nevertheless, AHSL argues that "[o]n the issue of notice, it cannot be said that the May 29, 2015 letter constituted sufficient notice to trigger any obligation to report a claim." "Clearly, the better 'trigger' for notice would be the actual filing of the lawsuit, a year later, on May 25, 2016." We disagree.
The Policy is clear: "The Insureds, as a condition precedent to coverage under this Policy, shall give the Insurer written notice as soon as practicable (but in no event later than sixty (60) days after the expiration of the Policy Period . . . ) . . . of any Claim first made during the Policy Period . . . ." "Claim" is defined to include "a civil, administrative, alternative dispute resolution, arbitration proceeding, or other legal proceeding, including but not limited to a charge file with the Equal Employment Opportunity Commission ('EEOC') or equivalent state or local agency." Therefore, the right-to-sue letters and accompanying complaints from the DFEH constituted a Claim that the Policy required AHSL to report.
Moreover, the Policy provides that "Coverage shall apply to any Claim made against the Insured committed prior to the expiration date of this Policy, provided that the Claim is first made during the Policy Period . . . and written notice of said Claim is reported to the Insurer pursuant to Section VII[] of this Policy." By the plain language of the Policy, AHSL must give written notice of the claim as soon as practicable to trigger coverage under the Policy.
2. AHSL Failed to Report the Claim as Required by the Policy
Section VII.C of the Policy provided that "[n]otice to the Insurer shall be given in writing to the Insurer at the address stated in the Declarations." The declarations page provides that notice is to be sent to ABAIS, and lists ABAIS's address.
In the FAC, AHSL alleged three different tenders of the claim:
- On some unknown date before August 26, 2015, AHSL sent notice of the claim to Safecal.
- On August 26, 2015, AHSL sent another notice of the claim to Safecal.
- On August 16, 2016, AHSL sent notice of the claim to ABAIS.
AHSL's first two tenders were made within the Policy Period of September 24, 2014 to September 24, 2015, but were not made to the entity specified on the declarations page. AHSL's third tender was made to the specified entity but was made more than 60 days after the expiration of the Policy Period. Therefore, AHSL failed to report the claim as required by the Policy.
3. AHSL's Tenders to Safecal Were Insufficient
AHSL argues that its first two tenders to Safecal satisfied its requirements under the Policy because the FAC generally alleged Safecal to be Greenwich's agent. We disagree that AHSL's tenders to Safecal satisfied its notice requirements under the Policy.
First, it is undisputed that the Policy provides explicit and reasonable instructions on how an insured party is to give notice of a claim -- it is to provide notice "in writing to the Insurer at the address stated in the Declarations," i.e., to ABAIS. AHSL provides no authority holding that such a requirement can be satisfied by giving notice to the Insurer's agent.
Moreover, AHSL insufficiently alleged Safecal was Greenwich's agent. "Generally, an allegation of agency is an allegation of ultimate fact and is, of itself, sufficient to avoid a demurrer." (Garton v. Title Ins. & Trust Co. (1980) 106 Cal.App.3d 365, 376, citing Skopp v. Weaver (1976) 16 Cal.3d 432, 437.) However, an exception to this general rule exists "where the specific allegations of a complaint overcome the general allegation of agency by showing that no such relationship existed." (Ibid.; see also Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1235-1236 ["Where a pleading includes a general allegation, such as an allegation of an ultimate fact, as well as specific allegations that add details or explanatory facts, it is possible that a conflict or inconsistency will exist between the general allegation and the specific allegations. To handle these contradictions, California courts have adopted the principle that specific allegations in a complaint control over an inconsistent general allegation. (Skopp v. Weaver [supra] 16 Cal.3d [at p.] 437 [128 Cal. Rptr. 19, 546 P.2d 307]; 4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 450, p. 584.)"].)
Here, while AHSL generally alleged that Safecal was Greenwich's agent, AHSL also specifically alleged:
- "AHSL retained the brokerage services of Safecal" and Safecal agreed to be "AHSL's broker of record" and to "represent AHSL" in obtaining the desired insurance.
- "Safecal was to act as AHSL's agent/broker."
- The contract between AHSL and Safecal specified that "Your insurance broker represents you, the consumer . . . ."
- Safecal did not file a notice of appointment with the California Insurance Commissioner under Insurance Code section 1704 stating it was Greenwich's agent.
- Safecal was "AHSL's agent/broker."
The specific allegation that Safecal was retained as AHSL's agent and broker, coupled with the allegation that Safecal had never filed a notice of appointment to act as Greenwich's agent, overcomes AHSL's boilerplate agency allegation. Therefore, the FAC fails to state facts sufficient to allege that Safecal was Greenwich's agent. AHSL's tenders to Safecal did not fulfill its requirement to give notice to Greenwich.
In its reply brief, AHSL argues Safecal is Greenwich's ostensible agent because "Greenwich intentionally or carelessly created the impression that Safecal was their agent." AHSL cites to nothing in the FAC to support this conclusion and we have found no such allegation.
4. AHSL's Futile Request to Safecal for the Policy Is Irrelevant
AHSL argues that "[a]fter paying the premiums, AHSL continually requested a copy of the policy, and Safecal continually promised to provide one. Notwithstanding these requests and promises, the actual Greenwich/XL policy was never provided." AHSL provides neither authority nor argument why Safecal's failure to provide the policy demonstrates error. As discussed above, AHSL did not sufficiently allege -- nor could it have -- that Safecal was Greenwich's agent, so any failure on Safecal's part to provide the Policy is not attributable to Greenwich.
5. The "Internet Advertisements" Are Irrelevant
As an exhibit to its FAC, AHSL attached an undated webpage with a heading of "XL Catlin" and entitled "10 Actions NOT to Take When Facing a Claim." The third "action" is "DON'T wait to contact your agent/broker or insurer." AHSL therefore argues that giving notice of the claim to Safecal is sufficient because "per their own internet advertisements, Greenwich/ XL advises all insureds to do exactly what AHSL did in this case; specifically , tender any and all claims to their insurance agent/broker. . . . Without belaboring the point, this is exactly what AHSL did in this case." (Emphasis in original.) We disagree.
First, AHSL does not allege that it read or relied on this webpage to give notice of its claim. Additionally, given that the webpage states, "Information accurate as of October 2017" and AHSL's tenders to Safecal occurred in 2015, any such allegation would likely be false.
In its reply brief, AHSL argues, "Under this set of [online] instructions, AHSL tendered the claim to Safecal." But such an allegation appears nowhere in the FAC.
Second, the webpage further states: "The information contained herein is intended for informational purposes only and does not constitute legal advice. . . . Any descriptions of insurance provisions are general overviews only." AHSL does not allege that the parties agreed to modify the notice provisions of the Policy with the suggestions from the webpage.
B. Greenwich Is Not Required to Show Prejudice from the Untimely Notice
AHSL argues that even if its notice was untimely, Greenwich cannot deny its claim unless Greenwich can show prejudice from the untimely notice because "California Courts have consistently held that notice provisions, like the one in issue here, cannot form the basis of a claim denial, absent 'significant prejudice' to the insurance company."
"California's 'notice-prejudice' rule operates to bar insurance companies from disavowing coverage on the basis of lack of timely notice unless the insurance company can show actual prejudice from the delay. The rule was developed in the context of 'occurrence' policies." (Pacific Employers Ins. Co. v. Superior Court (1990) 221 Cal.App.3d 1348, 1357 (Pacific Employers).) "The purpose of this rule is to prevent insureds from losing coverage for claims made against them where the insurance company has not been prejudiced in its defense of the claim by the insured's failure to comply with the reporting requirement." (Slater v. Lawyers' Mutual Ins. Co. (1991) 227 Cal.App.3d 1415, 1431 (dis. opn. of Johnson, J.).)
"'"[A]n 'occurrence' policy provides coverage for any acts or omissions that arise during the policy period even though the claim is made after the policy has expired."' (Pacific Employers [supra] 221 Cal.App.3d [at p.] 1356 .) It is distinguished from a claims made policy in which '"the carrier agrees to assume liability for any errors, including those made prior to the inception of the policy as long as a claim is made during the policy period."' (Id. at pp. 1356-1357.) A '"claims made and reported"' policy is further distinguished by a requirement that the claim be reported to the insurer within the reporting period. (Helfand v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 869, 888 .)" (Lat v. Farmers New World Life Ins. Co. (2018) 29 Cal.App.5th 191, 196, fn. 2.) --------
But the Policy is not an "occurrence policy." As AHSL alleges, the first sentence of the application for insurance that it filled out states: "The policy for which application is being made provides, subject to its terms and conditions, claims made coverage." The declarations page of the Policy states: "THIS POLICY AND ALL OF ITS ENDORSEMENTS PROVIDE CLAIMS MADE COVERAGE." And the Policy itself states: "Coverage shall apply to any Claim made against the Insured committed prior to the expiration date of this Policy, provided that the Claim is first made during the Policy Period . . . and written notice of said Claim is reported to the Insurer pursuant to Section VII[] of this Policy." The "notice-prejudice" rule is inapplicable to claims-made policies:
"'Claims-made policies . . . require that notification to the insurer be within a reasonable time. Critically, however, claims-made policies require that notice be given during the policy
period itself. When an insured becomes aware of any event that could result in liability, then it must give notice to the insurer, and that notice must be given 'within a reasonable time' or 'as soon as practicable' -- at all times, however, during the policy period . . . . [¶] Coverage depends on the claim being made and reported to the insurer during the policy period. Claims-made . . . policies are essentially reporting policies . . . . If a court were to allow an extension of reporting time after the end of the policy period, such is tantamount to an extension of coverage to the insured gratis, something for which the insurer has not bargained. This extension of coverage, by the court, so very different from a mere condition of the policy, in effect rewrites the contract between the two parties. This we cannot and will not do.'" (Pacific Employers, supra, 221 Cal.App.3d at pp. 1358-1359, quoting Gulf Ins. Co. v. Dolan, Fertig and Curtis (Fla. 1983) 433 So.2d 512, 515.)(Accord, Helfand v. National Union Fire Ins. Co., supra, 10 Cal.App.4th at p. 888 [refusing to apply the notice-prejudice rule when "notice [is] an element of coverage" because "[s]ubjecting this [insurance] policy to the notice-prejudice rule would materially alter the insurer's risk"]; Slater v. Lawyers' Mutual Ins. Co., supra, 227 Cal.App.3d at pp. 1422-1423 [the notice-prejudice rule is inapplicable to "claims made" policies]; see also Venoco, Inc. v. Gulf Underwriters Ins. Co. (2009) 175 Cal.App.4th 750, 760 [when coverage depends upon the insured reporting the claim, "[i]mposing the prejudice requirement that [plaintiff] seeks would expand the reporting time limit and impermissibly alter its agreement with [Insurer]"].)
AHSL argues Pacific Employers is "readily distinguished" because "[t]he policy at issue in the Pacific Employer[s] case was for claims made and reported only during the policy period" and the Policy in this case "allows for tenders to be made within the policy period, and also allows for tenders to be made after the expiration of the policy." (Emphasis in original.) We fail to see why this distinction makes a difference. The notice provision of the Policy requires AHSL to report a claim "as soon as practicable (but in no event later than sixty (60) days after the expiration of the Policy Period . . .)." While this provision could arguably extend the coverage of the Policy from claims made during the Policy Period to claims made until 60 days after the expiration of the Policy Period, it does not negate the "claims-made" nature of the Policy. Moreover, given that AHSL indisputably failed to report the claim to Greenwich per the instructions provided in the Policy until August 16, 2016 -- 327 days after the expiration of the Policy Period on September 24, 2015 -- excusing AHSL's tardy notice would still be "tantamount to an extension of coverage to the insured, gratis." Like the court in Pacific Employers, we find no authority permitting us to award AHSL greater coverage than it purchased.
DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
MANELLA, P. J. We concur: WILLHITE, J. CURREY, J.