Judge: Douglas W. Stern, Case: 22STCV11454, Date: 2023-03-29 Tentative Ruling
Case Number: 22STCV11454 Hearing Date: March 29, 2023 Dept: 68
Matthew Garza v. Certain Underwriters at Lloyd’s of
London, et al., case no. 22STCV11454
MOVING PARTY: Defendants Gilbert Insurance
Services, Inc., and Paradigm-Gilbert Insurance Group, LLC (Demurrer only)
RESPONDING PARTY: Plaintiff
Matthew Garza
(1) Demurrer to First Amended Complaint and (2) Motion
for Sanctions
I. BACKGROUND
A. Factual
Plaintiff
Matthew S. Garza had a 12 year career in major league baseball. He was a pitcher
for the Tampa Bay Rays, Chicago Cubs, Texas Rangers and Milwaukee Brewers. In
his 12 year career, Mr. Garza pitched in 290 major league games, throwing
nearly 28,000 pitches in over 1,710 endings. He struck out 1,380 batterers
during that time. (Complaint ¶ 16, 17.) Unfortunately,
his career as a major league baseball player came to an end following the 2017
season as a result of a June 3, 2017 collision between himself and Milwaukee
Brewers first baseman Jesus Aguilar. (Complaint
¶ 18.)
Plaintiff
believed that he had successfully procured a total disability insurance policy from
Lloyds of London, which would pay him $10 million. (Complaint ¶ 32, 36.). However, the claim was denied on that basis
that incomplete and incorrect information was provided on the insurance application. This litigation ultimately ensued.
Plaintiff
has sued Lloyds, his professional advisors and the insurance brokers. The moving parties are the insurance brokers. Plaintiff alleges a single cause of action
against Defendants Gilbert and Paradigm for breach of duties as insurance
brokers. (FAC, ¶¶ 95-102.) Plaintiff alleges in his FAC that as his insurance
brokers, Gilbert and Paradigm should have caught the errors in Plaintiff’s
insurance application. (FAC, ¶¶ 97-98.) As a result of their alleged breach of
duty, Plaintiff claims that he was damaged by having his insurance claim denied
by Lloyd’s. (FAC, ¶ 101-102.)
B. Procedural
This action was filed by Plaintiff on July 1,
2021. Defendant Gilbert filed the Demurrer and Motion for Sanctions that are
now before the Court on January 30, 2023, and February 17, 2023, respectively.
Defendant Paradigm filed its joinder in demurrer on January 31, 2023. Plaintiff
filed his oppositions to the two motions on March 16, 2023. Defendant Gilbert
filed replies to the two motions on March 22, 2023.
II. ANALYSIS
A. The Demurrer
As a general matter, in a demurrer
proceeding, the defects must be apparent on the face of the pleading or via
proper judicial notice. (Donabedian
v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer
tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As
such, the court assumes the truth of the complaint’s properly pleaded or
implied factual allegations. (Id.)
The only issue a demurrer is concerned with is whether the complaint, as it
stands, states a cause of action. (Hahn
v. Mirda (2007) 147 Cal.App.4th 740,
747.)
Where a demurrer is sustained, leave to amend
must be allowed where there is a reasonable possibility of successful
amendment. (Goodman v. Kennedy (1976)
18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a
pleading can be amended successfully. (Id.;
Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f
there is any reasonable possibility that the plaintiff can state a good cause
of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist.
(1969) 70 Cal.2d 240, 245).
Third Cause of Action for Breach of Duties of Insurance Broker
Defendant Gilbert,
joined by Defendant Paradigm, have demurred to Plaintiff’s Third Cause of
Action for Breach of Duties of Insurance Broker on the basis that they have no
duty as insurance brokers to independently investigate information in an
application prepared by the insured.
The case that
Gilbert cites in support of the proposition that it did not owe a duty is to
Garza is Century Surety Co. v. Crosby Insurance, Inc. (2004) 124
Cal.App.4th 116, 129. However, as Plaintiff points out in his opposition, this
same case could support the idea that insurance brokers have a duty to the
insured:
“We conclude that policy reasons support imposing a duty on
insurance brokers to exercise reasonable care in preparing insurance
applications under the facts alleged in the cross-complaint. We emphasize that our holding should not be construed as treating an insurance broker as a
guarantor of information in an insurance application or as imposing a duty on a
broker to independently investigate information
provided by the insured. However, when the broker knows of actual
misstatements, the broker may be held liable for transmitting those
misrepresentations in an insurance application knowing the insurer will reasonably rely on them.”
Plaintiff alleges
more than a simple failure of the insurance brokers to “independently investigate
information provided by the insured.” The
allegations, liberally construed, support the claim that the Defendants knew
enough to impose on them a duty to obtain additional information, which they
failed to do. Plaintiff alleges that Gilbert
was advised that the original policy application was incomplete, and required
additional information. (Complaint ¶ 1f.) Gilbert therefore knew that additional
information was necessary, and failed to obtain that additional information. (Complaint ¶ 1f.) Nevertheless, Gilbert submitted incomplete
and inaccurate supplemental information.
(Complaint ¶ 1f.) Further, Dennis
Gilbert of Gilbert signed an Agent Statement certifying certain facts that were
known to not be true by Gilbert at the time that he signed.
“g. In connection
with both the original and the supplemental policy applications for Mr. Garza,
Dennis J. Gilbert, the founder and CEO of Defendant Gilbert, signed an “Agent
Statement,” as the Producing Insurance Agent on the policy, in which he
certified that:
(1) he had communicated with Mr. Garza and that Mr.
Gilbert had “truly and accurately recorded all the information given to [him]
by [Mr. Garza]”;
(2) Mr. Gilbert “kn[e]w of no other medical
information about [Mr. Garza] other than that contained on this application”;
(3) Mr. Garza had “either filled out the application
or ha[d] personally reviewed the completed application” before it was submitted
to Lloyd’s; and
(4) Mr. Gilbert had “explained all policy benefits,
exclusions and limitations” to Mr. Garza.
None of those certifications
were, in fact, true, since Mr. Garza had never met or spoken to Mr. Gilbert
until September 2022.” (Complaint ¶ 1g.)
Thus, this is not a
case where the insurance broker is alleged to have simply failed to conduct an investigation.
This case involved allegations of a much
more active role by demurring defendants involving actual knowledge of the
incompleteness of the information that had been submitted and the need to
obtain additional information.
“[W]hen the broker
knows of actual misstatements, the broker may be held liable for transmitting
those misrepresentations in an insurance application knowing the insurer will
reasonably rely on them.”
Further, “as a
general proposition, an insurance agent will be liable to his client in tort
where his intentional acts or failure to exercise reasonable care with regard
to the obtaining or maintenance of insurance results in damage to the client.” (Saunders
v. Cariss (1990) 224 Cal.App.3d 905, 909 (reversing and remanding a
demurrer in a broker’s favor where the broker allegedly signed coverage
reduction agreements without the insureds’ knowledge or authorization)
(citation omitted).) An insurance broker’s liability may sound in professional
negligence or breach of contract. (See id. at 908.)
The facts alleged
are sufficient to maintain a cause of action for breach of duties and
professional negligence against Gilbert and Paradigm. Accordingly, Defendants’
Demurrer to Plaintiff’s Third Cause of Action is OVERRULED.
III. Sanctions
Defendant Gilbert has requested sanctions
against Plaintiff pursuant to CCP § 128.7 because Gilbert alleges that
Plaintiff’s cause of action against Gilbert is frivolous. The Court denies
Gilbert’s motion for sanctions, as Gilbert’s demurrer to Plaintiff’s cause of
action is overruled. Based on the pleading, Plaintiff’s cause of action is not
frivolous. However, even if the Court had sustained the demurrer, the Court
would still have denied Gilbert’s motion for sanctions, as Plaintiff’s cause of
action does not rise to the level of frivolous.
Under § 128.7, a court may impose sanctions
for filing a pleading if the court concludes that the cause of action is
indisputably without merit, either factually or legally, or was filed for an
improper purpose. (Guillemin v. Stein (2002) 104 Cal. App. 4th 156, 168.)
This action is not indisputably without merit, nor does it appear that it was
filed for an improper purpose.
Accordingly, Defendant Gilbert’s motion for
sanctions is DENIED.
IV. ORDER
1.
Defendants’ demurrer to Plaintiff’s Third
Cause of Action is OVERRULED.
2.
Defendants are granted 20 days to file their
Answers.
3.
Defendant Gilbert’s motion for sanctions is
DENIED.