Case Number: BC543840
PROTECH SVCS INC ET AL VS CAPITAL PROVIDERS INS SVCS INC

3/15/2018
Motion for Summary Adjudication

TENTATIVE RULING

Plaintiff’s Objections to Evidence are SUSTAINED as to Nos. 20, 22, and 24, and otherwise OVERRULED. Defendant Hull’s motion is GRANTED as to Issue Nos. 1-4, as follows:

Issue No. 1: Hull Did Not Owe Protech a Duty to Procure Crime Coverage Because Protech and its Broker Asked Hull to Procure the Scottsdale D&O Policy Without Crime Coverage.

Issue No. 2: Protech’s Scottsdale Claim Fails Because Hull Met the Standard of Care by Promptly Binding the Scottsdale D&O Policy As Requested.

Issue No. 3: Protech’s Scottsdale Claim Fails Because Hull Did Not Cause Protech’s Lack of Crime Coverage, Because the Cancellation of the Scottsdale D&O Policy for Nonpayment Caused the Lack of Coverage.

Issue No. 4: Hull Did Not Owe Protech a Duty to Provide Protech with a Lloyd’s Renewal Indication Because Protech Did Not Request a Quote or Indication.

Issues 1 through 3 are conceded by Plaintiff. As to issue No. 4, the court finds that Hull did not owe Protech a duty to provide Protech with a Lloyd’s renewal indication. The court does not reach issues 5 and 6.

Motion for Summary Adjudication is GRANTED.

The court is informed that the case has settled as to the remaining defendants. This motion results in dismissal of Hull as only the first cause of action is asserted against Hull and the ruling negates the cause of action.

Trial of 3/21/2018 is advanced and vacated.

Based upon this ruling, no motion for good faith determination shall be necessary.

OSC Regarding dismissal after settlement is set for hearing on 5/22/2018 at 8:30 a.m. in Dept. 46.

DISCUSSION

Hull now moves this court per CCP § 437c for summary adjudication as to the following issues:

Issue No. 1: Hull Did Not Owe Protech a Duty to Procure Crime Coverage Because Protech and its Broker Asked Hull to Procure the Scottsdale D&O Policy Without Crime Coverage.

Issue No. 2: Protech’s Scottsdale Claim Fails Because Hull Met the Standard of Care by Promptly Binding the Scottsdale D&O Policy As Requested.

Issue No. 3: Protech’s Scottsdale Claim Fails Because Hull Did Not Cause Protech’s Lack of Crime Coverage, Because the Cancellation of the Scottsdale D&O Policy for Nonpayment Caused the Lack of Coverage.

Issue No. 4: Hull Did Not Owe Protech a Duty to Provide Protech with a Lloyd’s Renewal Indication Because Protech Did Not Request a Quote or Indication.

Issue No. 5: Protech’s Lloyd’s Claim Fails Because Hull Did Not Breach Any Duty by Transmitting the Lloyd’s Renewal Indication to CPIS Because Its Transmission Of The Lloyd’s Renewal Indication To CPIS Met The Standard Of Care.

Issue No. 6: Protech’s Lloyd’s Claim Fails Because Hull’s Actions Did Not Cause Protech’s Failure to Obtain CGL Coverage Because Protech’s Failure to Seek GCL Coverage Caused Its Failure to Obtain GCL Coverage.

“In Budd v. Nixen (1971) 6 Cal.3d 195, 200, 98 Cal.Rptr. 849, 491 P.2d 433, our court summarized the basic elements of a professional malpractice action: “The elements of a cause of action in tort for professional negligence are: (1) the duty of the professional to use such skill, prudence and diligence as other members of his profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional’s negligence.”” Turpin v. Sortini (1982) 31 C.3d 220, 229-230.

Issue Nos. 1-3: The Scottsdale Policy

Plaintiff concedes that Hull is not responsible for the failure to obtain proper coverage under this policy. (Opposition p. 1 fn.1). Therefore, the motion is GRANTED as to these issues.

Issue Nos. 4-6: The Lloyd’s Policy

The structure of the insurance purchase and the timeline of events are critical to understanding this case. Hull helpfully provides a chart on page 9 of its Motion which displays the mechanics of the insurance deals at issue here. What happens is that Plaintiff soughtinsurance coverage from its retail broker. CPIS. The retail broker then contacted a wholesale broker with the request; the wholesale broker is the one who actually looks for an insurer. Hull is a wholesale broker. Just as the insured is represented by a retail broker, the insurer is represented by a managing general agent (“MGA”), who underwrites the policy. Thus, Hull is the exact middleman in this transaction, mostly dealing directly with the agents rather than the principals.

From the papers, the court determines the timeline in the case. In March of 2011, Plaintiff contracted CPIS to act as Plaintiff’s retail broker. (Plaintiff’s Opposition to Defendants Statement of Undisputed Material Facts [hereinafter “POSS”] No. 20; P’s Separate Statement of Additional Facts [hereinafter “PAF”] No. 2). CPIS in turn contracted Hull to act as wholesale broker. (POSS Nos. 23-24). Pursuant to this contract and without directly communicating with Plaintiff, Hull obtained a General Commercial Liability policy from Lloyd’s of London, effective from 4/1/11 to 4/1/12 (hereinafter “Lloyd’s Policy”). (Id. Nos. 58-61). In September of 2011, Plaintiff decided to switch to a new retail broker, Salsbury & Associates (“Salsbury”). (Id. No. 62; PAF No. 5). On 9/19/11, Salsbury informed Hull that it would be bringing in its own wholesale broker, and that Hull’s services would no longer be necessary. (POSS Nos. 64-66).

At some time between 9/19/11 and 2/17/12, Defendant Hull advised Plaintiff directly that a notice of non-renewal on the Lloyd’s Policy had been received, which led Plaintiff to believe that the policy would not be renewed; Plaintiff also believed that obtaining a new policy from a different carrier would be prohibitively expensive. (POSS Nos. 67-70). Then on 3/7/12 (a little less than a month before the expiration of the Lloyd’s Policy), it asked Lloyd’s of London for a renewal quote on the Lloyd’s Policy, using the old application from the previous term. (Id. at 70-71). Hull did this on its own responsibility; neither Plaintiff nor Salsbury (presumably relying on the notice of non-renewal) had instructed it to do so. (Id. No. 72-73). Once it obtained the renewal quote, Hull sent the quote to CPIS rather than to Plaintiff or Salsbury. (Id. No. 74; PAF Nos. 11-12).

First, it appears to the court that Hull’s direct client is Defendant CPIS, not Plaintiff; so Defendant Hull has no obligation to help Plaintiff except on receipt of instructions transmitted by Defendant CPIS or pursuant to some other agreement with Plaintiff, which does not appear to exist. Hull’s stated reason for obtaining the quote was its “anticipation” that a request for the quote would be made. (Motion p. 13:17).

As noted in this court’s prior ruling on demurrer, the decision issued in Business to Business Markets, Inc. v. Zurich Specialties (2005) 135 C.A.4th 165 provides the standard of evaluation for situations like this. In that case, the plaintiff had a contract requiring one of its business partners to carry insurance coverage. Id. at 167. The plaintiff then contacted an insurance broker, who in turn contacted the defendant insurance broker, who contacted an insurance company which issued deficient insurance to the business partner. Id. The Court of Appeal applied the factors set forth in Biakanja v. Irving (1958) 49 C.2d 647 for the application of contractual duties of care to third-party beneficiaries, finding that the secondary insurance broker did have a duty of care to the plaintiff. Business to Business, supra, 135 C.A.4th at 168-172. Those factors are “[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [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.”

Factor One: Extent to Which Transaction was Intended to Affect Plaintiff

On the one hand, obtaining an insurance quote is obviously intended to affect the insured. However, where the quote is obtained in anticipation of a request rather than in response to a request, the transaction is intended to affect the broker at least as much. At that point, obtaining the quote is a business service decision; if the insured asks, the broker can present him with a ready-made quote, and/or represent to the insured that he can beat other offers or do something other brokers cannot. Thus, obtaining quotes in advance of requests is primarily intended to affect the broker; this is particularly true given that a quote is just a number and is binding on no one.

Plaintiff raises the policy concern that insureds might be harmed if insurers receive competing applications for the same party from different brokers; the insurer might become confused and decline coverage altogether. (PAF No. 28). But Plaintiff has introduced no evidence showing that that happened in this case.

Factor Two: Foreseeability of Harm

This is difficult to analyze here, where the breach is an omission to inform rather than an affirmative act. The foreseeability of harm in the abstract is clear: if Plaintiff doesn’t have insurance, its business will suffer. On the other hand, there is no generalized duty to supply the information deficiencies of other persons, even if the consequences are obvious. Plaintiff contends that Hull created the information deficiency in the first place by reporting the notice of non-renewal, which led it to conclude that Lloyd’s of London would probably not consider extending coverage.

However, it is not disputed that Hull had a duty to convey that information. And neither party has produced either the notice of non-renewal, or the language in which Hull informed Plaintiff of the notice of non-renewal. It is Plaintiff’s burden to produce that evidence if it supports Plaintiff’s claim. It should also be noted that Plaintiff has not attempted to state a claim for fraud and deceit based on these facts. As the evidence stands, it appears that Plaintiff is attempting to blame Hull for its own business judgment. Plaintiff received word of a notice of non-renewal (from a broker whom it had fired), concluded that renewal was unlikely, and decided to forego the attempt. Now Plaintiff is upset that D Hull was actually able to do what Plaintiff (and its new broker) had thought too difficult to try. The fact that Plaintiff’s judgment was wrong is not a basis for a tort claim. More than that, as noted above, Hull’s success was based on old information contained in a past application. So Plaintiff’s judgment may not have been wrong in the final analysis, when the most recent information was provided to Lloyd’s of London. The foreseeability of the harm is murky at best.

Factor Three: Degree of Certainty that P Suffered Injury

It is certain that Plaintiff suffered harm by the loss of its insurance. But it is by no means certain that Hull’s actions were the cause of that harm. As noted above, the fact that Hull used old information on the quote application calls into question the veracity of the quote. Plaintiff simply assumes that the quote was accurate and would have been honored had updated information been provided. But that is not necessarily so. Therefore, it is not at all certain that Plaintiff’s injury was caused by Hull’s actions; the harm may have been inevitable.

Factor Four: Closeness of Connection

Plaintiff does not seem to produce much evidence on the causation issue, apparently preferring to rely on the assumption that this quote obtained by Hull would have become a renewed policy and saved Plaintiff from harm. But this is only an assumption.

When Hull obtained the quote, it no longer worked for Plaintiff. When Hull sent the quote to CPIS, CPIS no longer worked for Plaintiff. Hull obtained the quote based on old information as a sound business practice, in case an old client came back and asked them for a figure on renewal. Plaintiff never came back, and the effort was wasted. The connection between Hull’s anticipatory business service and Plaintiff’s collapse is not close.

Factors Five and Six: Moral Blame and Future Harm

No moral blame attaches to a company for its attempt to anticipate the needs of its customers. Nor would a rule requiring wholesale brokers to send all quotes obtained to the insured prevent future harms of this sort. The likely result is that wholesale insurers will simply not obtain anticipatory quotes at all. And that fact illustrates a fundamental flaw in Plaintiff’s arguments. If Hull had never obtained the renewal quote, they would not be in this case. Thus, the very thing that Plaintiff contends would have saved its damages is the thing Plaintiff discourages by this suit. Plaintiff is arguing that Hull has actively caused harm by merely preparing to offer additional service.

Balancing

Not one of the Biakanja factors weighs in favor of the imposition of a tort duty here. Hull had been fired for six months when it sought the quote, in anticipation of a potential future renewal of business. Its anticipation was disappointed. There is significant doubt as to whether the quote would even have been viable, given that it was based on old information. The argument that a business, by merely preparing to provide a service, has actively caused harm to a potential customer, is far too tenuous to be adopted.

Plaintiff points out that the Court of Appeal reached the opposite result in Business to Business, supra, 135 C.A.4th at 168-172. But in that case, the service was actually provided; the wholesale broker had actually procured insurance, the contingency insured against came to pass, and it was discovered that the insurance procured was defective. Id. at 167. That is not the facts which apply to the Lloyd’s Policy.

Conclusion

Hull was no longer Plaintiff’s wholesale insurance broker as of 9/19/11. Hull had no duty to provide Plaintiff with a renewal quote on the Lloyd’s Policy, in the absence of a request to do so from either Plaintiff or Salsbury.

Therefore, Defendant Hull’s MSA is GRANTED as to Issue No. 4. Since that is sufficient to negate the only cause of action asserted against Hull, the court does not rule on Issue Nos. 5-6.