Hollingsworth v. JAD Ins. Brokers CA2/8 ( 2014 )

Filed 5/9/14 Hollingsworth v. JAD Ins. Brokers CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
GERALD V. HOLLINGSWORTH, JR., et B246708
al.,
(Los Angeles County
Plaintiffs and Appellants, Super. Ct. No. BC442362)
v.
JAD INSURANCE BROKERS, INC.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Ramona G. See, Judge. Affirmed.
Gary Hollingsworth, in pro. per., and for Plaintiffs and Appellants.
Hewitt & Truszkowski, Stephen L. Hewitt and Henry C. Truszkowski for
Defendant and Respondent.
******
Plaintiffs Gerald and Ivy Hollingsworth contracted with Sash & Door Specialty,
doing business as JCC (JCC), to perform substantial remodeling and construction work
on their home in San Marino. JCC never completed the work and the Hollingsworths
suffered damage to their home and loss of personal property. In an underlying action,
they sued JCC for damages. JCC’s commercial general liability (CGL) insurer,
ProBuilders Specialty Insurance Company, RRG (ProBuilders), refused to defend the
suit based on the coverage provisions of the insurance policy. JCC and the
Hollingsworths eventually settled the underlying action. As part of the settlement,
JCC assigned to the Hollingsworths JCC’s claims against ProBuilders and JCC’s
insurance broker, JAD Insurance Brokers, Inc. (JAD).
In the present case, the Hollingsworths allege the assigned claims against
ProBuilders and JAD. At issue is JAD’s motion for summary judgment, which the
trial court granted.1 We affirm.
FACTS AND PROCEDURE
1. Allegations of the Complaint
The allegations of the operative complaint, the fourth amended complaint, are
as follows. On or about August 7, 2007, the Hollingsworths contracted with JCC to
perform remodeling and construction work on their home in San Marino. The
Hollingsworths asked JCC whether it had liability insurance that “would cover any
damages incurred by [the Hollingsworths] or [JCC] by an accident or occurrence
during the course of the construction work.” JCC advised the Hollingsworths it had a
CGL policy from ProBuilders covering a minimum of $1 million per occurrence.
1 ProBuilders’ demurrer, which the trial court sustained without leave to amend,
was the subject a previous nonpublished appeal, Hollingsworth v. ProBuilders
Specialty Insurance Company (Oct. 28, 2013, B239118). We affirmed the judgment
for ProBuilders in that appeal and held ProBuilders had no duty to defend or
indemnify JCC because the damages claimed by the Hollingworths fell within
exclusions in the policy.
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JCC commenced the remodeling project in August 2007 and was supposed to
complete it in six months. Almost immediately after work commenced, problems
developed. Inadequate supervision and incompetent laborers caused extensive damage
to the home. In December 2007, the Hollingsworths terminated JCC, following
numerous requests to adequately staff the job and perform the work. The damage
caused by JCC displaced the Hollingsworths from their home for more than two years.
In January 2008, the Hollingsworths retained an attorney and tried to informally
resolve their claims against JCC. Their attorney also contacted ProBuilders as JCC’s
CGL insurer. ProBuilders refused to participate in informal dispute resolution with
JCC and the Hollingsworths. In July 2008, the Hollingsworths filed the underlying
lawsuit against JCC in Los Angeles Superior Court, Hollingsworth v. Sash & Door
Specialty dba JCC (2010) No. GC041251, alleging negligence and other causes of
action. JCC promptly tendered defense of the action to ProBuilders. ProBuilders
refused to defend the underlying action and denied coverage. It maintained the
damages suffered by the Hollingsworths were not the result of an “occurrence” within
the meaning of the policy, or certain exclusions applied.
In February 2010, the Hollingsworths and JCC settled the underlying action for
$60,000. JCC also agreed to a stipulated judgment against it for $450,000.
Additionally, JCC assigned all of its claims against ProBuilders and JAD to the
Hollingsworths.
The Hollingsworths thus bring the present complaint as assignees of JCC. They
allege causes of action against JAD for breach of contract and negligence as follows.
An oral contract was formed when JCC discussed its insurance needs with JAD, and
JAD agreed to provide JCC with insurance that met those needs in exchange for a fee.
In or before February 2007, JCC “specifically advised JAD that [JCC] sought the
broadest possible liability insurance coverage that would insure and indemnify [JCC]
against any and all liability that [JCC] may incur as a result of negligence during the
operation of [JCC]’s construction business, including insurance coverage that would
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cover claims for . . . property damage occurring during the course of [JCC]’s
construction operations, and/or arising from [JCC]’s negligence.” JAD advised JCC
that it had obtained the insurance JCC wanted and that the ProBuilders policy
“provided the broadest possible liability coverage as allowed under the law, and
covered claims made against [JCC] for . . . property damage arising from [JCC]’s
negligence occurring during the course of [JCC]’s construction operations.” JAD
breached the contract because the ProBuilders policy did not provide the broadest
possible liability coverage as allowed under the law. It contained an exclusion for
property damage to any real property on which JCC was performing operations. JAD
also had a duty to procure the liability insurance requested by JCC, and its breach of
this duty constituted negligence.
2. JAD’s Motion for Summary Judgment
The evidence submitted by JAD with its motion for summary judgment was
undisputed and consisted of the following. During discovery, JAD propounded
interrogatories to the Hollingsworths asking them to describe “the type of insurance
coverage requested by” JCC and identify each person who discussed JCC’s insurance
needs with JAD. In response, the Hollingsworths stated “[q]uestions about the
communications between [JCC] and JAD should be directed to these two parties,” and
they identified only Jean Chu of JCC as a person who discussed JCC’s needs with
JAD.
JAD submitted Chu’s declaration with its motion. Chu was the owner and
manager of JCC. From 2003 to 2008, JCC obtained its CGL insurance through JAD.
She was the only person from JCC who had direct contact with JAD. In or around
February 2007, Chu spoke to JAD about obtaining new insurance. She “did not ask
JAD to obtain coverage for JCC which would cover all claims that could be made as a
result of JCC’s construction operations.” Nor did she tell JAD that JCC wanted a
“policy in which ‘everything would be covered,’” a “policy that provided coverage
during the course of construction,” or a “policy that provided ‘full coverage.’” In
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March 2007, she received a proposal from JAD for the CGL insurance policy from
ProBuilders. She briefly reviewed the proposal and did not request any additional
terms or coverage. No one at JAD told her “that ‘everything would be covered’ under
the policies JAD obtained for JCC . . . [,] or that the policies would provide ‘full
coverage’ for all claims made for damages occurring during JCC’s construction
operations[,] or that the policies provided the broadest possible liability coverage as
allowed under the law.” During the time in 2007 when Chu worked with JAD to
obtain the ProBuilders’ policy, Chu did not know the Hollingsworths. She first met
them months later, in July 2007. She never asked JAD for any special or different
coverage for the Hollingsworths’ project.
JAD also submitted the declaration of Angel Huang, executive vice president of
JAD. She was the person at JAD who maintained contact with JCC from 2003
through 2008. Her declaration was consistent with Chu’s. When JCC first approached
her, it asked her to obtain CGL insurance and replicate the coverage JCC had. When
Chu approached Huang in February 2007 specifically, Chu did not ask her “to obtain
coverage for JCC which would cover all claims that could be made as a result of JCC’s
construction operations.” Nor did Chu ask for a policy that “would provide the
‘broadest possible liability coverage as allowed under the law,’” one “in which
‘everything would be covered,’” or one “that provided coverage during the course of
construction.” Huang sent Chu a proposal for the ProBuilders policy that, “on its face,
did not purport to provide coverage for all claims that could be made as a result of
JCC’s construction operations.” Additionally, “[t]he proposal, on its face, contained
exclusions from coverage.” Chu returned the signed proposal, and in March 2007,
ProBuilders issued the policy to JCC. Huang never told Chu the policy provided the
broadest possible coverage under the law. Chu never requested any special or
different coverage in 2007.
In opposition, the Hollingsworths submitted the declaration of Ivy
Hollingsworth. Mrs. Hollingsworth had no evidence of the communications between
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JCC and JAD but attested to what JCC told her. Mrs. Hollingsworth asked whether
JCC was covered by liability insurance before entering into the contract with it. Chu
assured her JCC was covered by CGL insurance “which would provide coverage for
claims arising out of any work and/or accidents in relation to the construction work” at
the Hollingsworths’ property. The Hollingsworths would not have contracted with
JCC otherwise.
The trial court granted JAD’s motion for summary judgment. It held JAD had
shown JCC did not seek from JAD the broadest possibility liability coverage as
alleged in the complaint, and JAD was thus entitled to judgment on the breach of
contract and negligence causes of action. The Hollingsworths timely appealed from
the judgment for JAD.
STANDARD OF REVIEW
A defendant may move for summary judgment when it contends an action has
no merit. (Code Civ. Proc., § 437c, subd. (a).) The defendant has met its burden of
showing a cause of action is meritless if it demonstrates one or more elements of the
cause of action cannot be established or there is a complete defense to the cause of
action. (§ 437c, subd. (p)(2).) The defendant need not support its motion with
affirmative evidence negating an essential element of the plaintiff’s case. Instead, it
may show the absence of evidence supporting the plaintiff’s case using factually
devoid discovery responses or other means. (Leslie G. v. Perry & Associates (1996)
43 Cal. App. 4th 472, 482; Union Bank v. Superior Court (1995) 31 Cal. App. 4th 573,
590.)
Once the defendant has met its burden, the burden shifts to the plaintiff to set
forth specific facts showing a triable issue of material fact. The plaintiff may not rely
upon the mere allegations or denials of its pleadings to show a triable issue of fact.
(Code Civ. Proc., § 437c, subd. (p)(2).) An issue of fact is created only by a conflict in
the evidence. (Sinai Memorial Chapel v. Dudler (1991) 231 Cal. App. 3d 190, 196.)
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A genuine issue of fact exists if, and only if, the evidence would allow a reasonable
juror to find the underlying fact in favor of the party opposing summary judgment.
(Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850.) The court shall grant
the motion for summary judgment if all the papers submitted show there is no triable
issue as to any material fact and the moving party is entitled to judgment as a matter of
law. (Code Civ. Proc., § 437c, subd. (c).)
We review the grant of summary judgment de novo, applying the same legal
standard as the trial court in determining whether any genuine issues of material fact
exist and whether the moving party is entitled to judgment as a matter of law. (PCO,
Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150
Cal. App. 4th 384, 390.)
DISCUSSION
An insurance broker represents insurance applicants in transactions with
insurers. (Ins. Code, § 33;2 Krumme v. Mercury Ins. Co. (2004) 123 Cal. App. 4th 924,
929.) “Insurance brokers owe a limited duty to their clients, which is only ‘to use
reasonable care, diligence, and judgment in procuring the insurance requested by an
insured.’” (Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Ins. Services West,
Inc. (2012) 203 Cal. App. 4th 1278, 1283.) An insurance broker also has a statutory
duty to not misrepresent the provisions of a policy. (§§ 780, subds. (a)-(b), 781, subd.
(a).) Accordingly, a broker may be liable for breach of duty when (1) the broker
misrepresents the nature, extent, or scope of coverage (Pacific Rim, supra, at p. 1283);
(2) the client made a specific request for or inquiry about particular coverage and the
broker negligently fails to obtain the requested coverage (ibid.; Nowlon v. Koram Ins.
Center, Inc. (1991) 1 Cal. App. 4th 1437, 1447); or (3) the broker assumes an additional
2 Further undesignated statutory references are to the Insurance Code.
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duty by express agreement or by holding itself out as an expert in the field of insurance
being sought by the insured (Pacific Rim, at p. 1283).
Here, JAD carried its burden on summary judgment of showing the
Hollingsworths cannot meet one or more elements of their causes of action for breach
of contract and negligence. The Hollingsworths allege JAD agreed to procure a
certain type of insurance for JCC and told JCC that the ProBuilders’ policy met its
requirements. But when JAD asked the Hollingsworths in discovery what evidence
they had of communications between JCC and JAD, the Hollingsworths’ response
lacked any material facts supporting a request for a specific type of insurance. They
instead directed JAD to itself and JCC for information about the communications.
This evidence, the declarations of Chu (from JCC) and Huang (from JAD), negated the
allegations of the complaint. Chu and Huang were the representatives from their
respective companies who communicated about insurance coverage. Both indicated
Chu never requested the specific insurance coverage alleged in the complaint -- that is,
the broadest possible liability insurance allowed under the law or coverage for all
damages that could arise during the course of JCC’s construction operations.
Furthermore, both indicated Huang never represented to Chu that the ProBuilders’
policy provided such coverage. When JAD first began working with JCC in 2003,
JCC simply asked JAD for CGL insurance consistent with what JCC already had. In
2007, when JCC bought the ProBuilders’ policy, it did not make any special requests
for the “broadest possible” coverage. In selecting the policy, JCC could not possibly
have had the Hollingsworths’ requests in mind because it bought the policy months
before the Hollingsworths first contacted JCC. JAD’s evidence demonstrated (1) there
was no request to procure or agreement to provide the insurance coverage described in
the complaint, and (2) JAD did not misrepresent that the ProBuilders’ policy provided
this coverage. Thus, there was no breach of contract or breach of the broker’s limited
duties to its client.
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Once JAD marshaled this evidence, it was up to the Hollingsworths to produce
specific facts showing a triable issue of material fact. The Hollingsworths failed to
show a genuine conflict in the evidence. They “dispute” the Chu and Huang
declarations by pointing to statements in Mrs. Hollingsworth’s declaration --
specifically, that Chu told Mrs. Hollingsworth JCC’s insurance would cover any claim
arising out of work or accidents during JCC’s construction operations. But there is no
true dispute here. Regardless of what JCC said to Mrs. Hollingsworth, Mrs.
Hollingsworth had no direct knowledge of the communications between JCC and JAD.
Her statements do not contradict any of the evidence from Chu and Huang about their
communications. Their communications are what is material when we consider the
claim that JAD breached its duties to or an agreement with JCC. A triable issue of fact
does not exist.
The Hollingsworths argue it was insufficient to show what Chu did not request;
rather, JAD had to show what type of insurance Chu affirmatively requested. We are
not persuaded by this argument. The complaint sets the boundaries of the issues the
defendant must raise and those the court must resolve. (Conroy v. Regents of
University of California (2009) 45 Cal. 4th 1244, 1250.) “[T]he burden of a defendant
moving for summary judgment only requires that he or she negate plaintiff’s theories
of liability as alleged in the complaint . . . .” (Hutton v. Fidelity National Title Co.
(2013) 213 Cal. App. 4th 486, 493.) The complaint alleges the type of policy JCC
requested and claims JAD did not provide this policy and misrepresented the
ProBuilders’ policy as complying with JCC’s requests. JAD was required to negate
only these allegations, and it did so.
The Hollingsworths also assert Chu’s credibility is in doubt given her previous
assignment of JCC’s claims to the Hollingsworths and her now “hostile position”
towards them. A desire to test the credibility of a declarant is not a proper basis on
which to deny summary judgment. With some exceptions not pertinent here, “[i]f a
party is otherwise entitled to a summary judgment . . . , [it] may not be denied on
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grounds of credibility or for want of cross-examination of witnesses furnishing
affidavits or declarations . . . .” (Code Civ. Proc., § 437c, subd. (e).) Even if a
declarant’s statements are self-serving, unless they are controverted, the court
generally must accept them as true and cannot send the case to trial simply to allow the
opposing party to cross-examine the declarant or otherwise test his or her credibility.
(Trujillo v. First American Registry, Inc. (2007) 157 Cal. App. 4th 628, 636.)
The Hollingsworths additionally argue JAD had a duty “to explain the limited
coverage” provided by the ProBuilders’ policy, and in view of this duty, they should
have a chance to cross-examine the witnesses regarding the extent to which JAD
explained exclusions in the policy. Relying on Valentine v. Membrila Ins. Services,
Inc. (2004) 118 Cal. App. 4th 462, 466-467 (Valentine), they state: “Where a broker
had a long term relationship with the insured and knew the risks involved in the
insured’s business and the insured’s concerns regarding adequate coverage, the broker
owes a duty to procure a policy with coverage for those risks or at least to explain that
the insurance obtained excluded those risks.” First, Valentine dealt with the damages
available after a broker’s negligence had been established at trial. The portion of the
case the Hollingsworths cite was merely a description of the lower court’s reasoning in
finding the broker negligent. The Valentine court accepted the lower court’s reasoning
for purposes of determining the appropriate damages, but the broker’s breach of duty
was not truly the issue in the case. (Id. at p. 476.) As such, the case is not authority
for the proposition cited by the Hollingsworths.
Second, even if Valentine held as the Hollingsworths suggest, this case is
distinguishable. In Valentine, the broker apparently had “knowledge of . . . his clients
concerns” regarding adequate coverage. (Valentine, supra, 118 Cal.App.4th at p. 467.)
In other words, the clients somehow informed the broker they wanted coverage for
risks that ended up falling within policy exclusions. The broker knew the type of
coverage the clients wanted, failed to procure that coverage, and failed to explain the
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policy excluded such coverage. As we have discussed, there was no evidence here that
JAD knew JCC wanted the type of coverage alleged in the complaint.
The Hollingsworths rely on Westrick v. State Farm Insurance (1982) 137
Cal. App. 3d 685, 691, to argue similarly that an insurance broker can be liable for mere
silence or inaction. In Westrick, the client expressly requested insurance coverage for
two specific vehicles. (Id. at p. 690.) The broker did not inquire further of the client
and did not warn him that his current insurance policy would not cover the vehicles.
The client’s request for specific insurance, in combination with his long relationship
with the broker’s agency, the foreseeability of harm, and the broker’s inaction, gave
rise to the broker’s liability for negligence. (Id. at pp. 690, 692.) Again, the client’s
request and the broker’s resulting knowledge of the client’s needs were material. The
evidence does not show similar circumstances here. The trial court did not err in
granting JAD’s motion for summary judgment.
DISPOSITION
The judgment is affirmed. Respondent shall recover costs on appeal.
FLIER, J.
WE CONCUR:
RUBIN, Acting P. J.
KUSSMAN, J.
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