Case Name: Reed, et al. v. Travelers Casualty Ins. Company of America, et al.

Case No.: 1-14-CV-259501

Defendants Starline Insurance Center, LLC (“Starline”) and Allied Insurance Group, LLC dba Starline Insurance Center, LLC (“Allied”) (collectively, the “Starline Defendants”) demur to the first amended complaint (“FAC”) filed by plaintiffs Idrion Reed and Andrew Doh, dba R.C. Mania (collectively, “Plaintiffs”).

This action arises out of a claim made by Plaintiffs under an insurance policy.  Plaintiffs formerly did business as R.C. Mania, a retail store that sold radio controlled vehicles and indoor tracks for racing R.C. cars.  Plaintiffs hired Starline to procure insurance for their business and the property upon which it was located in San Jose.  (FAC at ¶ 4.)  Starline is alleged to be a dba of Allied, and both are alleged to have not only to have been the agents/brokers of Plaintiffs, but also defendant Travelers Casualty Insurance Company of America (“Travelers”).  (Id.)

R.C. Mania purchased a business insurance policy (the “Policy”) from Travelers effective on or about December 6, 2011.  (FAC at ¶ 11, Exhibit A.)  On February 3, 2012, R.C. Mania suffered damages when a break-in occurred at the store premises.  (Id. at ¶ 14.)  R.C. Mania had paid all premiums due on the Policy up to that point, but their claim for damages was denied, the Policy cancelled, and R.C. Mania sent to collection for premiums purportedly due.  (Id. at ¶ 11.)  The defendants ultimately paid some of the losses suffered by R.C. Mania, but only after it had retained counsel to obtain what was due to it under the terms of the Policy.  (Id. at ¶ 21.)  Plaintiffs allege that the defendants breached the Policy by, among other things, initially refusing to pay for the losses suffered, making delayed payments thereunder and continuing to refuse to pay other covered benefits.  (Id. at ¶¶ 22, 23.)

On June 5, 2014, Plaintiffs filed the FAC asserting the following causes of action: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; (3) wrongful interference with contractual relations; and (4) negligence.

On July 7, 2014, the Starline Defendants filed the instant demurrer to the third and fourth causes of action on the ground of failure to state facts sufficient to constitute a cause of action.  (Code Civ. Proc., § 430.10, subd. (e).)

The Starline Defendants’ request for judicial notice is GRANTED.  (Evid. Code, § 452, subds. (d) and (h).)

Plaintiffs’ third cause of action for wrongful interference is predicated on allegations that that the Starline Defendants interfered with their right to receive the benefits they were entitled to under the Policy by providing information to Travelers (upon being contacted by it in the investigation of Plaintiffs’ claim) which was used and relied upon by Travelers to wrongfully deny Plaintiffs’ claim.  (FAC at ¶ 44.)  Plaintiffs insist that the Starline Defendants’ cooperation with Travelers absent their informed consent was wrongful and that they are not entitled to the “rights they would have had” if they had disclosed their dual agency to Plaintiffs at the outset, as they purportedly had a duty to do.  (FAC at ¶ 44.)  Finally, Plaintiffs allege that the Starline Defendants are estopped from asserting that they were operating as Travelers’ agent when they provided information to it regarding Plaintiffs’ claim because of the foregoing failure to disclose.

Plaintiffs’ third cause of action still suffers from the deficiencies articulated in the Court’s prior on the Starline Defendants’ demurrer to this claim in the original complaint- they have not pleaded facts demonstrating wrongful conduct on the party of the Starline Defendants.  Plaintiffs have not identified any authority which stands for the proposition that once the Starline Defendants, as brokers, obtained a policy of insurance from Travelers from them, they continued to owe a duty of care with regard to how Travelers dispensed with their claim for damages suffered on February 3, 2012 that required them to refrain from cooperating with Traveler’s request for information absent their consent.  As articulated previously, an insurance broker’s primary duty is 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.4^th 1278, 1283 (emphasis added).)  While an agent/broker may “assume additional duties by agreement or by holding himself or herself out as having specific expertise” (Kurtz, Richards, Wilson & Co. v. Insurance Communicators Marketing Corp. (1993) 12 Cal.App.4^th 1249, 1257), there are no facts pleaded which suggest that the Starline Defendants assumed additional duties beyond procuring the policy of insurance, including with regard to obtaining approval and payment on the claims submitted to Travelers.  Notably, there are also no allegations that the Starline Defendants committed any wrongdoing with the procurement of the Policy, e.g., that the Policy was not what Plaintiffs requested or was not appropriately priced.

Additionally, there are no facts pleaded which demonstrate that the Starline Defendants, in responding to Travelers’ request for information, acted in a capacity which ran afoul of Insurance Code section 1732, a statute which operates to prohibit brokers from transacting insurance on behalf of an insurance company where they are not its appointed agent, save for collecting premiums and delivering policies and other documents evidencing insurance.  Thus, Plaintiffs’ contention that it was not possible for the Starline Defendants to have acted with a lawful purpose when they provided requested information to Travelers is without merit.

Further, Plaintiffs have not identified any authority which provides that dual agency in this context must be disclosed.  To the extent that Plaintiffs reply on Lippert v. Bailey (1996) 241 Cal.App.2d 376 for such a proposition, their reliance is misplaced.  Lippert concerned whether an agent’s failure to obtain the insurance promised to an insured could be imputed to the insurer, as the agent’s principal, or whether it rested with the agent alone.  The answer to this question depended on whether the insured was aware of the agency relationship in the first place.  (Lippert, 241 Cal.App.2d at 382-383.)  This case did not impose a specific duty upon insurance broker-agents to disclose dual agency to insured parties.

As currently pleaded, the allegations of the FAC describe lawful conduct.  And as the alleged agents of Travelers, the Starline Defendants cannot be held accountable for inducing a breach of the policy simply by acting in the course and scope of those roles.  (See Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 576.)  Accordingly, no claim for wrongful interference with contractual relations has been stated against the Starline Defendants and their demurrer to the third cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Nor has a claim for negligence, the newly pleaded fourth cause of action in the FAC, been stated against the Starline Defendants.  As articulated above, there are no facts pleaded which suggest that the Starline Defendants assumed additional duties to Plaintiffs beyond procuring the policy of insurance.  Plaintiffs’ contention that they did assume such duties by “participating” in Travelers’ investigation of their claim is unavailing; the case cited by Plaintiffs in support of this proposition, Free Republic Ins. Co. (1992) 8 Cal.App.4^th 1726. 1729-1730), is distinguishable as it involved a situation where an insurance agent responded directly to inquiries made by the insured party.  Here, no such inquiries are alleged to have been made by Plaintiffs to the Starline Defendants, only by Travelers.  Nor are the Starline Defendants alleged to have made any misrepresentations regarding the scope of coverage provided by the Policy.

Accordingly, the Starline Defendants’ demurrer to the fourth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.