Opinion
H036119 (Santa Clara County Super. Ct. No. CV107557)
10-31-2011
DOUGLAS ROSS CONSTRUCTION, INC., Cross-Complainant and Appellant, v. NARVER INSURANCE AGENCY, Cross-Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Douglas Ross Construction, Inc. (Ross) sued Narver Insurance Agency (Narver) for negligence on the theory that Narver failed to obtain liability insurance for Ross's subcontractor that covered Ross for construction-job injuries suffered by an employee of the subcontractor's subcontractor. The trial court granted Narver's motion for summary judgment. On appeal, Ross reiterates his arguments from below and contends that it raised triable issues of fact. We disagree and affirm the judgment.
SCOPE OF REVIEW
A defendant moving for summary judgment has the initial burden of showing that a cause of action lacks merit because one or more elements of the cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar)) If the defendant fails to make this initial showing, it is unnecessary to examine the plaintiffs opposing evidence and the motion must be denied. However, if the moving papers make a prima facie showing that justifies a judgment in the defendant's favor, the burden shifts to the plaintiff to make a prima facie showing of the existence of a triable issue of material fact. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, at p. 849; Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1002-1003.)
In determining whether the parties have met their respective burdens, the trial court must "consider all of the evidence" and "all of the inferences reasonably drawn therefrom," and "must view such evidence [citations] and such inferences [citations], in the light most favorable to the opposing party." (Aguilar, supra, 25 Cal.4th at p. 844.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Id. at p. 850.)
We review an order granting a motion for summary judgment de novo. (Aguilar, supra, 25 Cal.4th at p. 860.)
To prevail on a claim for negligence under California law, a plaintiff must show "that the defendant owed a duty to [him or her], that the defendant breached that duty, and that the breach proximately caused the plaintiff's injuries." (John B. v. Superior Court (2006) 38 Cal.4th 1177, 1188.)
NARVER'S SHOWING
Ross was the general contractor for a construction project known as The Sycamores. It hired Northstate Plastering, Inc. (Northstate) as a plastering subcontractor. The written subcontract required Northstate to carry comprehensive general or commercial general liability insurance to "cover all operations by or on behalf of [Northstate]." This provision was part of section 16 of the written subcontract, which contained all of Ross's insurance requirements for The Sycamores.
Narver was Northstate's insurance broker. Northstate applied to Narver for a liability insurance policy to cover its obligation under the Ross subcontract. As part of the application, it answered in writing a series of questions about its business on a contractor's questionnaire form. One question asked Northstate to "Indicate the percentage of construction work performed by you or on your behalf by subcontractors during the past five years." The space for answers allowed for a breakdown between residential and commercial construction and between new construction, remodeling, inside work, and outside work. Northstate crossed out the entire space. Another question asked, "Do you execute written contracts including indemnification clauses in your favor with all independent contractors performing work for you?" Northstate answered, "No work subcontracted." A third question asked, "Do your written contracts with your independent contractors require the independent contractor to maintain Commercial General Liability insurance including you as an Additional Insured?" Northstate answered, "N/A."
Narver obtained from Admiral Insurance Company (Admiral) a commercial general liability insurance policy for Northstate that named Ross as an additional insured. The policy included an "INJURY TO INDEPENDENT CONTRACTORS EXCLUSION," which provided that the policy did not cover injuries to subcontractors or employees of subcontractors.
Northstate hired subcontractor Safway Scaffolding for certain work on The Sycamores. During the work, Safway's employee fell from a scaffold and suffered injuries.
Safway's employee sued Ross and Northstate to recover compensation for his injuries. Ross tendered its defense to Northstate. Northstate tendered both defenses to Admiral. Admiral denied coverage based on the independent contractors exclusion. Ross then sued Northstate for indemnity. And it sued Narver "for professional negligence, alleging [that] Narver owed [Ross] a tort duty to procure an insurance policy for Northstate that provided [Ross] the coverage it had required Northstate to obtain and which Northstate had requested."
NARVER'S PRIMA FACIE CASE
" 'Insurance broker' means a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health with, but not on behalf of, an insurer." (Ins. Code, §§ 33, 1623.) In obtaining a policy for a client, an insurance broker acts as agent only for the insured. (Carlton v. St. Paul Mercury Ins. Co. (1994) 30 Cal.App.4th 1450, 1457.) The duty of an insurance broker is to "use reasonable care, diligence, and judgment in procuring the insurance requested by its client." (Kotlar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th 1116, 1123.) Thus, the general rule is that a broker will be liable in tort to his or her client for intentional or negligent failure to obtain insurance as promised. (Hydro-Mill Co., Inc. v. Hayward, Tilton & RolappIns. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1153.)
The general rule, set forth in Civil Code section 2343, is that "[o]ne who assumes to act as an agent is responsible to third persons as a principal for his acts in the course of his agency . . . . [¶] . . . [¶] 3. When his acts are wrongful in their nature." However, "the statute only makes an agent liable for affirmative misfeasance; it does not render an agent liable to third parties for the failure to perform duties owed to his principal." (Ruiz v. Herman Weissker, Inc. (2005) 130 Cal.App.4th 52, 65.)
Since Narver was Northstate's agent, Narver would arguably be liable in tort to Northstate for failure to procure an insurance policy requested by Northstate. But, since Ross was a third party, Narver is not liable in tort to Ross for the failure to procure an insurance policy requested by Northstate.
Narver therefore made a prima facie showing that negated the duty element of Ross's cause of action.
Even supposing that Narver owed a duty to Ross to procure an insurance policy requested by Northstate, Narver's showing also negated the breach and causation elements of Ross's cause of action.
Northstate's application to Narver attested that Northstate did not hire subcontractors. The effect of this attestation is to request an insurance policy with a premium that does not need to account for the risk of litigation with subcontractors. The policy Narver obtained for Northstate is consistent with Northstate's request. Since Narver procured the policy requested by Northstate, Narver did not breach a duty to Ross to procure an insurance policy requested by Northstate; nor did Narver cause Ross to be without coverage for litigation against Northstate's subcontractors—Northstate caused the without-coverage situation.
In short, Narver did what Northstate asked of it and therefore could not have breached a duty to procure a requested policy; and Northstate, not Narver, caused Ross's loss of coverage by requesting a policy without coverage for litigation against its subcontractors.
ROSS'S SHOWING
Ross did not dispute the facts behind Narver's prima facie showing. And it did not present evidence that its section 16 insurance requirements required coverage against Northstate's subcontractors or precluded an independent contractor's exclusion. Nor did it present evidence that it had communicated in any way with Narver.
Ross first urged that it raised a triable issue of fact regarding the duty element on a theory that it was a third party beneficiary of "the agreement between Narver and Northstate." In its statement of material facts in support of its opposition to Narver's motion, Ross relied on certain evidence to claim that Northstate "made a request that NARVER provide insurance that satisfied [Ross's] requirements."
But this vague evidence adds nothing to the case and is therefore immaterial. One cannot infer from it that Northstate asked Narver to provide insurance with coverage for litigation against its subcontractors. And, if it can be inferred that Ross's requirements included coverage against Northstate's subcontractors, one cannot infer from the vague evidence that Northstate told Narver that Ross's requirements included coverage against Northstate's subcontractors. It is true that one might infer that Northstate gave Narver the subcontract to show Narver what were Ross's requirements. But, again, section 16 of the subcontract does not require coverage against Northstate's subcontractors or preclude an independent contractor's exclusion. Thus, even supposing that Northstate told Narver that Ross was to be a third party beneficiary of the insurance policy, Narver complied with Northstate's request. In short, Ross was simply a third party beneficiary of what Northstate requested of Narver.
In a more generalized argument that a triable issue of fact as to the duty element exists in this case, Ross relied on Business to Business Markets, Inc. v. Zurich Specialties London Limited (2005) 135 Cal.App.4th 165 (B2B). This reliance is erroneous.
In B2B, the plaintiff hired Tricon, an Indian software company, to write a custom-made computer program for the plaintiff's business. One term of their contract obligated Tricon to carry an errors and omissions insurance policy to compensate the plaintiff if Tricon failed to deliver the promised software. The plaintiff thereafter contacted Hoyla, a retail insurance broker. The plaintiff informed Hoyla of Tricon's insurance needs and told Hoyla that Tricon was based in India. Hoyla contacted Professional Liability Insurance Services (PLIS), a surplus lines insurance broker, to place the insurance policy and gave PLIS the information it had received from the plaintiff. PLIS contacted Zurich Specialties London Limited, which issued a policy to Tricon. Although Tricon was an Indian company doing business in India, the policy excluded coverage for any claims arising from or related to work performed in India. Tricon subsequently failed to deliver the software to the plaintiff, and the plaintiff sued for breach of contract. Relying on the policy exclusion, Zurich refused to pay for Tricon's defense or to indemnify it. A default judgment was entered against Tricon, but the plaintiff could not collect on the judgment. The plaintiff then sued PLIS for negligence in procuring a policy that did not cover work done in India. The trial court sustained PLIS's demurrer without leave to amend the ground that PLIS owed no duty of care to the plaintiff.
On appeal, the court accepted as true the plaintiff's allegation that the plaintiff had told Hoyla who, in turn, had told PLIS that the policy must cover work in India. (B2B, supra, 135 Cal.App.4th at pp. 167, 170-171.) Citing Biakanja v. Irving (1958) 49 Cal.2d 647, it then identified six factors that should be considered in determining whether a defendant had a duty to exercise due care to protect the plaintiff although they were not in privity of contract: (1) the extent to which the transaction was intended to affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the degree of certainty that the plaintiff suffered injury; (4) the closeness of the connection between the defendant's conduct and the injury suffered; (5) the moral blame attached to the defendant's conduct; and (6) the policy of preventing future harm. (B2B, supra, at p. 168.) After analysis, and particular reliance on PLIS's alleged knowledge of the plaintiff's need for India coverage, the court concluded that the complaint stated a negligence cause of action against PLIS and reversed the judgment. It also observed that the plaintiff had "made the initial phone call and contact with Hoyla (who then contacted PLIS)." (Id. at p. 171.)
B2B hinged on the key points that the third party (the plaintiff) made the initial contact with the insured's insurance broker and the insurance broker knew that the policy must cover work in India.
Here, however, Ross had no contact with Northstate's insurance broker, Narver, and Narver did not know that the policy must have coverage against Northstate's subcontractors. B2B therefore does not support Ross's argument that a triable issue of fact exists as to the duty element in this case.
Ross next presented evidence to negate the general rule that "an insurance agent does not have a duty to volunteer to an insured that the latter should procure additional or different insurance coverage." (Fitzpatrick v. Hayes (1997) 57 Cal.App.4th 916, 927.)
"The rule changes, however, when--but only when--one of the following three things happens: (a) the agent misrepresents the nature, extent or scope of the coverage being offered or provided [citations], (b) there is a request or inquiry by the insured for a particular type or extent of coverage [citation], or (c) the agent assumes an additional duty by either express agreement or by 'holding himself out' as having expertise in a given field of insurance being sought by the insured [citation]." (Fitzpatrick v. Hayes, supra, 57 Cal.App.4th at p. 927.)
Ross urged that it raised a triable issue of fact whether Narver "misrepresented the nature, extent or scope of coverage being offered or provided." Supporting this point is the following from Ross's statement of material facts: (1) "[Narver's employee] considered the inclusion of the exclusion for injury to independent contractors as a condition of coverage to be 'unusual,' 'not normal,' 'fishy' and 'sneaky,' " and (2) "[Narver's employee] testified that if he was doing his job as good as he could do it, having recognized the policy contained the 'sneaky' provision, he'd like to think he would have said something about it to [Northstate], but he doesn't know if he did."
But the independent contractor's exclusion was a term imposed by Admiral, not Narver, based on Northstate's implicit representation that it did not require coverage against subcontractors. The employee's after-the-fact opinion of Admiral's choice of insurance policy terms is not Narver's misrepresentation of the nature, extent, or scope of the coverage being offered. Nor is the employee's after-the-fact lament that he did not see the exclusion once the policy had issued.
Ross next claimed that it raised a triable issue of fact "whether there was a request for a specific type or extent of insurance coverage" because there was evidence that Northstate "made a request . . . that Narver procure insurance that satisfied [Ross's] requirements." This point fails for the same reasons it failed under Ross's third party beneficiary theory.
Ross finally urged that it raised a triable issue of fact whether Narver's employee "held himself out as an expert in the field of construction insurance." According to Ross, "[Narver's employee] knew that [Northstate's principal] relied on him to procure the kind of insurance [Northstate] needed. [The employee] admitted he had had experience that [Northstate] did not have. [The employee] testified at deposition that he thought [Northstate] would rely on [him] to tell [Northstate] what insurance [it] needed."
This evidence is immaterial because the root of the dispute here is not the employee's assumption of a duty by virtue of special expertise in an insurance field. The root of the dispute is the nature of Northstate's business, namely whether Northstate used subcontractors. Since Ross presented no evidence that Narver's employee knew that Northstate used subcontractors in contradiction to Northstate's representation, the employee was justified in taking Northstate at its word that it did not use subcontractors and communicating to Admiral what Northstate had represented.
DISPOSITION
The judgment is affirmed.
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Premo, J.
WE CONCUR:
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Rushing, P.J.
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Elia, J.