Opinion
H029813
5-18-2007
RAMIRO VAZQUEZ, et al. Plaintiffs and Appellants, v. SUPERIOR ACCESS INSURANCE SERVICES, INC., Defendant and Respondent.
NOT TO BE PUBLISHED
I. INTRODUCTION
This appeal concerns the liability of an insurance companys managing general agent, respondent Superior Access Insurance Services, Inc. (Superior), for its involvement in the failure of an insurance broker, Yield Insurance Services (Yield) to procure workers compensation insurance for a client, appellant Alfredo G. Chavez dba Chavez Greenhouses (Chavez). The trial court granted summary judgment in Superiors favor, determining as a matter of law that Superior had no liability for the $8.5 million default judgment obtained by Chavezs seriously injured employee, appellant Ramiro Vazquez, against Chavez. The trial court also determined that Superior had no liability for Chavezs and Vazquezs additional claims for compensatory and punitive damages.
On appeal, Vazquez and Chavez contend that the trial court erred because Yield was the ostensible agent of its principal, Superior, and therefore Superior is vicariously liable for Yields failure to procure workers compensation insurance and is bound by the oral contract of workers compensation insurance between Yield and Chavez. Appellants also contend that Superior is directly liable for its negligent failure to act promptly on Chavezs workers compensation insurance application. For reasons that we will explain, we find no merit in appellants contentions and therefore we will affirm the judgment
II. FACTUAL AND PROCEDURAL BACKGROUND
A. The Underlying Action
The material facts regarding Superiors involvement in Yields failure to procure workers compensation insurance for Chavez are essentially undisputed. Superior was the managing general agent authorized to bind coverage for HIH American Compensation Insurance Company (HIH). Yield had entered into a brokers agreement with Superior, which stated that Yield was "acting as Agent or Broker for the applicant and in the applicants behalf, not as agent of [Superior] and that no binding authority is granted or delegated by this agreement."
Chavez sought workers compensation insurance for his business, Chavez Greenhouses, through his insurance broker, Yield. On Chavezs behalf, Yield submitted an application for workers compensation insurance to Superior. The application, dated September 28, 2000, stated that the insurance carrier would be "HIH American Compensation and Liability Insurance Company" and a payment of 15 percent of the total estimated premium, or $962, was required to bind coverage. The application also stated, in small print directly above the signatures of Yields representative and Chavez: "This is NOT an offer of insurance. Quotes are valid for 30 days! No coverage will be in force until all required documents are received, reviewed and approved in writing by [Superior]. NO coverage will take effect until, and if [Superior] issues a binder and a policy number. No agent has binding authority for this proposal."
With the application, Yield submitted to Superior a faxed copy of a Yield draft check in the amount of $962. Yield also gave Chavez a certificate of insurance, dated September 28, 2000, which indicated that Chavez Greenhouses was insured by American Compensation Insurance Company although Superior had not yet approved Chavezs application for workers compensation insurance.
On October 2, 2000 and October 12, 2000, Superior requested additional information before acting on Chavezs application. It appears that Superior faxed at least one inquiry to the wrong fax number. However, it is undisputed that Yield ultimately failed to respond to Superiors final request for information on November 2, 2000. Consequently, Superior did not issue a workers compensation policy to Chavez and did not negotiate the premium payment check.
Thereafter, on February 19, 2001, appellant Ramiro Vazquez was seriously injured while working for Chavez. On February 22, 2001, Superior confirmed that no workers compensation policy had been issued to Chavez. Vazquez and his wife, Maria Vazquez (collectively, Vazquez), subsequently filed a personal injury action against Chavez and obtained an $8.5 million default judgment.
Labor Code section 3706 provides, "If any employer fails to secure the payment of compensation, any injured employee or his dependents may bring an action at law against such employer for damages, as if this division did not apply."
B. The Assignment
On February 27, 2004, Vazquez and Chavez executed a document entitled "Assignment of Claims in Exchange for Covenant Not to Execute." In exchange for Vazquezs agreement not to execute the $8.5 million judgment on Chavezs assets, Chavez assigned to Vazquez all of his rights and claims against American Compensation Insurance Company, Yield and Superior in connection with obtaining or providing Chavez with workers compensation insurance coverage for the period covering Vazquezs lawsuit.
The assignment further provided that Chavez retained "his personal and/or non-assignable causes of action . . . other than those necessary to recover and/or prosecute all or any part of the $8,500,000 judgment obtained by Vazquez . . . ." Chavez also retained his claims for recovery of compensatory and punitive damages for loss of business and emotional distress.
After executing the assignment, Vazquez and Chavez filed a complaint on March 2, 2004 against several defendants, including Yield, Superior, and American Compensation Insurance Company. The currently operative pleading is the second amended complaint.
C. The Second Amended Complaint
In the second amended complaint, Vazquez states five causes of action and Chavez states six causes of action.
Vazquezs causes of action include a first cause of action for breach of contract (breach of promise to procure workers compensation insurance), a second cause of action for fraud (false representation that workers compensation had been procured), a third cause of action for negligence (breach of duty to procure a valid workers compensation insurance policy), a fourth cause of action for common count (money had and received), and a fifth cause of action for negligent misrepresentation (false representation that a valid workers compensation policy would be procured). Based on these claims, Vazquez seeks payment of the $8.5 million judgment and compensatory damages.
Chavezs causes of action nearly duplicate Vazquezs causes of action. Chavez states a sixth cause of action for breach of contract (breach of promise to procure workers compensation insurance), a seventh cause of action for fraud (false representation that workers compensation had been procured), an eighth cause of action for negligence (breach of duty to procure a valid workers compensation insurance policy), a ninth cause of action for common count (money had and received), a tenth cause of action for breach of fiduciary duty, and an eleventh cause of action for negligent misrepresentation (false representation that a valid workers compensation policy would be procured). Chavez seeks compensatory damages for failure to provide workers compensation insurance coverage, emotional distress, and loss of business, as well as punitive damages.
Superior notes in its respondents brief that the second amended complaint "is confusing because, although appellant Chavez assigned any claims he had against the defendants to the Vazquez appellants, separate causes of action are alleged for the Vazquez appellants and for Chavez." However, Superior has not challenged appellants right to bring these causes of action and therefore we need not address the issue.
D. Superiors Motion for Summary Judgment
Superior moved for summary judgment on the ground that all causes of action lacked merit, for two reasons. First, Superior contended that the action was time-barred under Code of Civil Procedure section 339, subdivision (1), the two-year statute of limitations for professional negligence. Second, Superior asserted that plaintiffs could not establish one or more essential elements of each cause of action.
As to the first and sixth causes of action for breach of contract, Superior asserted that as a matter of law there was no written or oral contract created by the insurance application that Chavez submitted to Superior. Regarding the fraud claims (second and seventh causes of action), Superior asserted that it was undisputed that Superior made no representations to Chavez and did not ratify Yields misrepresentation to Chavez that he had workers compensation coverage. Similarly, Superior contended that the fifth and eleventh causes of action for negligent misrepresentation could not be established because it was undisputed that Superior never communicated directly with Chavez. Superior also asserted that it could not be vicariously liable for Yields misrepresentations because Yield was the agent of Chavez, not Superior.
The negligence claims (third and eighth causes of action) also lacked merit, according to Superior, because there was no evidence that Superior exceeded its authority as HIHs managing general agent, and therefore only its principal, HIH, could be liable for Superiors alleged negligence in processing Chavezs application. Likewise, the tenth cause of action for breach of fiduciary duty lacked merit because Superior, as HIHs agent, owed no duty to Chavez.
As to the fourth and ninth causes of action for common count (money had and received), Superior argued that it had never held any of Chavezs money or other property because it had never negotiated the premium payment check submitted by Yield.
E. Opposition to the Motion for Summary Judgment
Responding to each of Superiors arguments, plaintiffs first argued that their action was not time-barred under Code of Civil Procedure section 339, subdivision (1) because they filed their action within two years of actual injury.
Next, plaintiffs asserted that their claims for breach of contract had merit because Superior gave Yield ostensible authority to procure workers compensation insurance for Chavez, based on Superiors act of providing an application form that referenced Superior and failure to advise Chavez that Yield did not have authority to bind coverage.
As to the fraud and negligent misrepresentation causes of action, plaintiffs argued that Superior was vicariously liable for Yields misrepresentations about the existence of workers compensation coverage because Yield was Superiors ostensible agent and also because Superior subsequently ratified the misrepresentations.
Regarding the negligence claims, plaintiffs contended that Superior was directly liable for its own negligence in processing Chavezs application, pursuant to Civil Code section 2343. Plaintiffs also reiterated their argument that Superior was vicariously liable for Yields negligence because Yield was Superiors agent.
Civil Code section 2343 provides in pertinent part, "Agents Responsibility To Third Persons. One who assumes to act as an agent is responsible to third persons as a principal for his acts in the course of his agency, in any of the following cases, and in no others: [¶] . . . [¶] 3. When his acts are wrongful in their nature."
Finally, as to the counts for money had and received, plaintiffs stated that the claim had merit because Yield held the money collected from Chavez for the first premium payment in trust for Superior.
F. The Statement of Decision
Prior to issuing its written order on the motion for summary judgment, the trial court issued a statement of decision on September 30, 2005. The trial court rejected plaintiffs contention that Yield was the ostensible agent of Superior, finding that Superior had done nothing to mislead potential applicants into believing that Yield had authority to bind insurance coverage. The court noted that the insurance application submitted by Chavez expressly stated that the application did not constitute an offer of insurance and the broker, Yield, did not have authority to bind coverage.
The trial court also made the following findings: No contract existed between Chavez and Superior; Superior made no representations to Chavez; Yield did not act as Superiors agent in making its representations; the insurance application imposed no duty of care on Superior; the cause of action for money had and received had no merit because Superior did not hold Chavezs money; and Superior owed no fiduciary duty to Chavez.
During the hearing on the motion for summary judgment, the trial court also ruled that triable questions of fact existed as to whether the action was time-barred under Code of Civil Procedure section 339, subdivision (1).
G. The Order Granting the Motion for Summary Judgment
On December 21, 2005, the trial court filed its order granting Superiors motion for summary judgment. The order states that each cause of action is barred by the statute of limitations. Additionally, the trial court ruled that summary judgment should be granted because plaintiffs could not establish an essential element of each cause of action.
While the order states that each cause of action is barred by the statute of limitations, that statement conflicts with the trial courts ruling from the bench during the hearing on the motion that triable questions of fact existed as to whether the action is time-barred. The parties do not discuss the statute of limitations defense in their briefs on appeal and therefore we need not address it.
In accordance with the statement of decision, the trial court determined that (1) the causes of action for breach of contract lacked merit because there was no valid contract between Chavez and Superior; (2) the causes of action for fraud and negligent misrepresentation lacked merit because Superior made no representations of any kind to Chavez; (3) the causes of action for negligence and breach of fiduciary duty failed because Superior owed no duty to Chavez; and (4) the cause of action for money had and received lacked merit because Superior at no time had in its possession any money or property belonging to Chavez.
Plaintiffs filed a timely notice of appeal from the judgment entered in Superiors favor on January 10, 2006.
III. DISCUSSION
A. The Standard of Review
The standard of review for an order granting or denying summary adjudication is de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 (Aguilar.) The trial courts stated reasons for granting summary adjudication are not binding on the reviewing court, which reviews the trial courts ruling, not its rationale. (Kids Universe v. In2Labs (2002) 95 Cal.App.4th 870, 878.)
In performing our independent review, we follow the instruction of the California Supreme Court regarding summary judgment. 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, 25 Cal.4th at p. 850.) 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 defendants favor, the burden shifts to the plaintiff to make a prima facie showing of the existence of a triable issue of material fact. (§ 437c, subd. (p)(2); Aguilar, 25 Cal.4th 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 court must "consider all of the evidence" and "all of the inferences reasonably drawn therefrom," and "must view such evidence [citation] and such inferences [citations] in the light most favorable to the opposing party." (Aguilar, 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." (Aguilar, 25 Cal.4th at p. 850, fn. omitted.)
Therefore, in the present case we will independently determine whether Superior has met its initial burden, and, if so, whether triable questions of material fact exist. Since the summary judgment motion concerns the liability of Superior, a managing general agent for an insurance company, we will begin our analysis with an overview of the role of a managing general agent and the distinctive roles of insurance brokers and insurance agents.
B. The Managing General Agent
In the present case, Superior is a managing general agent and Yield is an insurance broker. According to statute, a managing general agent has a different role than an insurance broker. Insurance Code section 769.81, subdivision (c), provides in pertinent part: " `Managing General Agent (MGA) means any person, firm, association, partnership, or corporation who . . . manages all or part of the insurance business of an insurer . . . and acts as an agent for that insurer whether known as an MGA, manager, or other similar term." The acts of the managing general agent "are considered to be the acts of the insurer on whose behalf it is acting." (Ins. Code, § 769.85.)
In contrast, " `[i]nsurance broker means a person who, for compensation and on behalf of another person, transacts insurance other than life with, but not on behalf of, an insurer." (Ins. Code, §§ 33, 1623.) In obtaining a policy for a client, an insurance broker acts only as agent for the insured. (Carlton v. St. Paul Mercury Ins. Co. (1994) 30 Cal.App.4th 1450, 1457.) The insurance broker therefore has no authority to bind the insurer. (Marsh & McLennan v. City of Los Angeles (1976) 62 Cal.App.3d 108, 118.)
The duty of an insurance broker is to "use reasonable care, diligence and judgment in procuring the insurance requested by the 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 and Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1153.)
However, "a broker may become the agent for the insurer but only for the purpose of delivering policies and collecting premiums thereon; the agency relationship between broker and insurer terminates upon transmittal of the premium to the insurer." (Marsh & McLennan v. City of Los Angeles, supra, 62 Cal.App.3d at p. 117.)
An insurance agent is distinguishable from an insurance broker. " `Insurance agent means a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life insurance." (Ins. Code, § 31.) An insurance agent has the authority to bind the insurer because the insurer is the agents principal. (Marsh & McLennan v. City of Los Angeles, supra, 62 Cal.App.3d at p. 117.) Thus, "[a]n insurer, as a principal, may be vicariously liable for the torts of its agent if the insurer directed the agent to perform the tortious acts, or if it ratifies acts it did not originally authorize." (Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1118-1119.)
Keeping these distinctions in mind, we turn to the merits of Superiors motion for summary judgment. However, we will address only the causes of action for breach of contract, fraud, negligent misrepresentation, and negligence. We need not discuss the cause of action for breach of fiduciary duty and the causes of action for money had and received because appellants have waived those claims by failing to argue them on appeal. "Although our review of a summary judgment is de novo, it is limited to issues which have been adequately raised and supported in plaintiffs brief. [Citations.] Issues not raised in an appellants brief are deemed waived or abandoned. [Citation.]" (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6.)
C. Breach of Contract
Vazquez and Chavez contend that the trial court erred in summarily adjudicating the causes of action for breach of contract because their contract claims have merit. They assert that Superior is liable for breach of the "oral contract" for workers compensation insurance that was formed as a result of, among other things, Chavezs application and Yields act of giving Chavez a certificate of insurance.
The general rule is that an application for insurance is a proposal. (Linnastruth v. Mut. Etc. Assn. (1943) 22 Cal.2d 216, 219.) To form the insurance contract, "[a] meeting of the minds is essential. And the proposal is not a completed contract until it is accepted by the insurer in the same terms in which the offer was made." (Ibid.; Rios v. Scottsdale Ins. Co. (2004) 119 Cal.App.4th 1020, 1029.) However, insurance coverage by estoppel may be available where the insured relied upon an insurance agents misrepresentations regarding coverage. (Hartford Fire Ins. Co. v. Spartan Realty International, Inc. (1987) 196 Cal.App.3d 1320, 1325.)
In the present case, appellants implicitly concede that no written contract for workers compensation insurance was formed as a result of Chavezs submission of an insurance application to Superior. However, appellants state in their opening brief that "there is a valid contract for insurance between Chavez and Superior based on Chavezs completion of the Superior application, payment of the premium, [Yields] statement as Superiors agent that the insurance has been issued, and providing [sic] Chavez with a certificate of insurance." Appellants further assert that "Superior, as the disclosed principal, is liable for the breach of that contract."
Appellants argument is based on their contention that triable questions exist as to whether Yield was the ostensible agent of Superior and therefore had the authority to bind coverage for its principal, Superior, who is consequently liable for breach of the contract. Superior disagrees, arguing that Yield as a matter of law was the agent of Chavez, not Superior. Alternatively, Superior contends that even if Yield was an ostensible agent, it was the agent of HIH, the insurance company, not Superior.
The existence of ostensible agency is a question of fact. (Kaplan v. Coldwell Banker Residential Affiliates, Inc. (1997) 59 Cal.App.4th 741, 748.) Civil Code section 2300 provides, "An agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him." Under Civil Code section 2334, "A principal is bound by the acts of his agent, under a merely ostensible authority, to those persons only who have in good faith, and without want of ordinary care, incurred a liability or parted with value, upon the faith therof." Additionally, "where the principal knows that the agent holds himself out as clothed with certain authority, and remains silent, such conduct on the part of the principal may give rise to liability." (Gulf Ins. Co. v. TIG Ins. Co. (2001) 86 Cal.App.4th 422, 439.)
The doctrine of ostensible agency also applies to subagents. (Gulf Ins. Co. v. TIG Ins. Co., supra, 86 Cal.App.4th at p. 439.) Therefore, "the principal is similarly liable to third persons for the representations made by subagents." (Ibid.) In St. Julian v. Financial Indemnity Co. (1969) 273 Cal.App.2d 185, 188-189, the appellate court stated in dicta that an insurance broker was the ostensible subagent of the insurer, with authority to bind the insurer. In that case, as in the present case, the insurers general agent had supplied the broker (the ostensible subagent) with the insurance application, and the brokers employee had informed the insured that coverage was effective immediately. (Ibid.)
We determine as a matter of law that even assuming that Yield had ostensible authority to bind Chavezs workers compensation policy, Yield was the ostensible subagent of HIH, the insurer, not Superior, the managing agent. Appellants offer no authority for the proposition that an insurance broker, such as Yield, can have an agent/principal relationship with a managing general agent, which by statute (Ins. Code, § 796.85) is an agent of the insurer. Accordingly, appellants claim that Superior is liable for breach of contract must fail and summary adjudication was properly granted.
D. Fraud and Negligent Misrepresentation
Appellants contend that Superior is vicariously liable for the false representations of Yield, its ostensible agent, that Yield would procure workers compensation insurance for Chavez. Both the causes of action for fraud and the causes of action for negligent misrepresentation are based on this claim of failure to perform a promise. The elements of a cause of action for fraud are well established.
"[A] claim of fraud cannot be permitted to serve simply as an alternative cause of action whenever an enforceable contract is not formed. Accordingly, in order to support a claim of fraud based upon the alleged failure to perform a promise, it must be shown that the promisor did not intend to perform at the time the promise was made." (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 156-157, overruled on another point in Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 95, 92-94.)
The elements of a cause of action for negligent misrepresentation are also well established. "To prevail on a cause of action for negligent misrepresentation, the insured must show that the insurer misrepresented to the insured a past or existing material fact without reasonable grounds for believing it to be true. And the insurer must have intended to induce the insureds reliance on the misrepresentation, with the insured ignorant of the truth and damaged by justifiable but erroneous reliance on the misrepresentation." (Rios v. Scottsdale Ins. Co., supra, 119 Cal.App.4th at p. 1028.)
An insurance companys agent may be personally liable for intentional misrepresentation or fraud. (McNeill v. State Farm Life Ins. (2004) 116 Cal.App.4th 597, 603.) However, it is undisputed in the present case that Superior, the agent of HIH, had no direct communication with Chavez and made no promises or any other representations to Chavez. Superior therefore can have no direct liability for negligent misrepresentation or fraud. Moreover, as we have discussed, as a matter of law Yield was not the ostensible agent of Superior and therefore Superior can have no vicarious liability for Yields alleged misrepresentations.
Appellants reliance on the decision in Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2003) 107 Cal.App.4th 54 is misplaced. In Shafer, the appellate court determined that an attorney retained by an insurance company to give coverage advice in a lawsuit against its insured could be held personally liable for making a fraudulent statement about coverage. (Id.. at p. 59.) The court explained, " `[i]f an attorney commits actual fraud in his dealings with a third party, the fact he did so in the capacity of attorney for a client does not relieve him of liability. " (Id. at p. 69.) The decision in Shafer is distinguishable from the case at bar, where there is no evidence to show that Superior made any fraudulent statements about coverage.
For these reasons, the causes of action for negligent misrepresentation and fraud lack merit as a matter of law and the trial court did not err in granting summary adjudication.
E. Negligence
In their reply brief, appellants elaborate on their argument that Superior is directly liable for its negligent failure to "act promptly and properly on Chavezs application."
Appellants rely on the general rule, set forth in Civil Code section 2343, that "[o]ne who assumes to act as agent is responsible to third persons as a principal for his acts in the course of his agency [¶] . . . [¶] when his acts are wrongful in his 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 the principal. [Citation.]" (Ruiz v. Herman Weissker (2005) 130 Cal.App.4th 52, 65.) Accordingly, it has been held that an independent insurance adjuster retained by an insurer to investigate and adjust a loss is not directly liable in tort for negligent claims handling. (Sanchez v. Lindsay Morden Claims Services, Inc. (1999) 72 Cal.App.4th 249, 255; see also Mottola v. R. L. Kautz & Co. (1988) 199 Cal.App.3d 98, 109.)
Superior therefore can have no direct liability for its allegedly negligent failure to act "properly and promptly" on Chavezs application for workers compensation insurance in the course of performing its duties for HIH, its principal. Appellants reliance on the decisions in Barrera v. State Farm Mutual Automobile Ins. Co. (1969) 71 Cal.2d 659 (Barrera), and Business to Business Markets, Inc. v. Zurich Specialties London Limited (2005) 135 Cal.App.4th 165 (Business Markets), for a contrary result is misplaced.
In Barrera, supra, 71 Cal.2d at p. 674, the California Supreme Court ruled that "an automobile liability insurer incurs the duty to conduct a reasonable investigation of insurability within a reasonable period of time after issuance of the policy, paralleling the line of decisions that hold that an insurer has a duty to act promptly on applications, . . ." Where the insurer fails to conduct a reasonable investigation, the insurer may not assert a right to rescind the policy. (Id. at p. 678.) The decision in Barrera does not aid appellants, however, because it is concerned with the liability of the insurer, not the insurers agent.
In Business Markets, supra, 135 Cal.App.4th 165, the appellate court ruled that a surplus lines insurance broker could be held liable in negligence to the intended beneficiary of an errors and omissions policy that the broker negligently failed to procure. (Id. at p. 167.) A company called Business to Business Markets, Inc. or "B2B," hired an Indian software company, Tricon, to write a computer program. B2B required Tricon to obtain an errors and omissions policy to cover B2B if Tricon failed to deliver the software. (Ibid.)
B2B assisted Tricon by requesting a retail broker to obtain the necessary insurance for Tricon. The retail broker in turn contacted PLIS, a surplus lines insurance broker, which then obtained an insurance policy for Tricon from Zurich Specialties. Tricon failed to deliver the software as promised and B2B sued Tricon for breach of promise. (Business Markets, supra, 135 Cal.App.4th 167.)
Zurich Specialties refused to defend or indemnify Tricon on the ground that the insurance policy excluded coverage for work done in India. After obtaining a default judgment against Tricon, B2B sued PLIS for negligent failure to obtain the necessary insurance. (Business Markets, supra, 135 Cal.App.4th at p. 167.) The appellate court determined B2B could state a claim against PLIS, even though the parties were not in privity and B2B was not named in the policy, because B2B was an intended third party beneficiary of the insurance contract. (Id. at p. 170.) The court also noted the rule that an intended beneficiary of insurance "does not need to be specifically named, as long as he is in the class of members that the insurance is intended to benefit." (Id. at p. 171.)
Appellants contend that Superior is similarly liable to Chavez for its negligent failure to procure workers compensation insurance, because Chavez was the intended beneficiary of the contract of insurance. We disagree. The decision in Business Markets, supra, 135 Cal.App.4th 165, is distinguishable because it concerns the liability of a surplus lines broker, not a managing general agent.
"A `surplus lines broker is licensed to place business with nonadmitted insurers (i.e., those that have not submitted to California regulation and supervision.)" (Croskey, et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2006) [¶] 2:30.9, p. 2-10.) By statute, a surplus lines broker has a duty to "to ensure that a diligent search is made among insurers that are admitted to transact and are actually writing the particular type of insurance in this state before procuring the insurance from a nonadmitted insurer." (Ins. Code, § 1763; Crusader Ins. Co. v. Scottsdale Ins. Co. (1997) 54 Cal.App.4th 121, 124.) A managing general agent, in contrast, has no such statutory duty. We reiterate that pursuant to Insurance Code section 769.85 the managing general agent is the agent of the insurer.
Moreover, the court in Business Markets, supra, 135 Cal.App.4th 165, expressly noted the limitations on its decision: "We confine our analysis to the somewhat particularized facts of this case. Nothing in this opinion suggests that in a more typical case (e.g., an automobile accident) an injured third person has a cause of action against the at-fault partys insurance broker for failing to secure coverage that might compensate the injured party for his damages." (Business Markets, supra, 135 Cal.App.4th at p. 172, fn. 4.)
Thus, the decision in Business Markets, supra, 135 Cal.App.4th 165 does not address the liability of a managing general agent and its ruling is confined to its particular facts. We therefore do not consider the Business Markets decision as authority for any proposition concerning the liability of managing general agents.
For these reasons, we conclude that the cause of action for negligence lacks merit as a matter of law, and the trial court did not err in granting summary adjudication.
IV. DISPOSITION
The judgment is affirmed.
WE CONCUR:
MCADAMS, J.
DUFFY, J.