Judge: Gail Killefer, Case: 21STCV36032, Date: 2023-12-06 Tentative Ruling
Case Number: 21STCV36032 Hearing Date: January 16, 2024 Dept: 37
HEARING DATE: Tuesday, January 16, 2024
CASE NUMBER: 21STCV36032
CASE NAME: Seven Lions, Inc. v. Morris
Kamkar, et al.
MOVING PARTY: Defendant/Cross-Complainant USG Insurance Services, Inc
OPPOSING PARTIES: Plaintiff Seven Lions, Inc., and Defendant/Cross-Complainant Morris Kamkar
dba Kamkar Insurance Agency
TRIAL DATE: 12 March 2024
PROOF OF SERVICE: OK
PROCEEDING: Motion for judgment on the
pleadings as to the Third Cause of Action for Negligence against it in
Plaintiff’s Complaint and on the entire Cross-Complaint brought by Morris
Kamkar dba Kamkar Insurance Agency or, in the alternative, for an Order
bifurcating and staying those claims pending resolution of Plaintiff’s
insurance policy-related claims brought by Seven Lions against Defendant AIX
Specialty Insurance Company
OPPOSITION: 2 January 2024
REPLY: 8
January 2024
TENTATIVE: Defendant/Cross-Complainant
USG’s motion for judgment on the pleadings is denied in its entirety.
Defendant/Cross-Complainant
USG’s motion to bifurcate is also denied.
Defendant/Cross-Complainant
USG to give notice.
Background
On September
30, 2021, Seven Lions, Inc. (“Plaintiff”) filed a Complaint against Morris
Kamkar dba Kamkar Insurance Agency (“Kamkar”); USG Insurance Services, Inc.
(“USG”); AIX Specialty Insurance Company (“AIX”); and Does 1 to 20.
The operative Complaint alleges three causes of action: (1)
breach of contract; (2) breach of the implied covenant of good faith and fair
dealing (insurance bad faith); and (3) negligence.
On November 19, 2021, Defendant/ Cross-Complainant USG
Insurance Services, Inc. (“USG”) filed a Cross-Complaint against Kamkar and Roes
1 to 50 for (1) equitable indemnity; (2) contribution; (3) declaratory relief;
and (4) express indemnity.
On January 19, 2022, Defendant/Cross-Complainant Kamkar
filed a Cross-Complaint against USG and Zoes 1 to 25 for (1) express indemnity;
(2) equitable indemnity; (3) contribution; (4) apportionment of fault; and (5)
declaratory relief.
On
December 8, 2023, the court denied AIX’s motion for summary judgment.
On
December 18, 2023, USG filed a motion for judgment on the pleadings as to
Plaintiff’s Complaint and third cause of action for negligence, and as to Kamkar’s
entire Cross-Complaint. In the
alternative, USG asks the court to bifurcate and stay the Plaintiff’s claims
against USG and Kamkar. Both Plaintiff
and Kamkar oppose the Motion.
I. Legal Standard
“A motion for judgment on the pleadings
performs the same function as a general demurrer, and hence attacks only
defects disclosed on the face of the pleadings or by matters that can be
judicially noticed.” (Burnett v. Chimney Sweep (2004) 123 Cal.App.4th
1057, 1064.) “In deciding or reviewing a judgment on the pleadings, all
properly pleaded material facts are deemed to be true, as well as all facts
that may be implied or inferred from those expressly alleged.” (Fire Ins.
Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452.) When
considering demurrers and judgment on the pleadings, courts read the
allegations liberally and in context. (Wilson v. Transit Authority of City
of Sacramento (1962) 199 Cal.App.2d 716, 720-21.) A motion for judgment on
the pleadings does not lie as to a portion of a cause of action. (Id.)
“In the case of either a demurrer or a motion for judgment on the pleadings,
leave to amend should be granted if there is any reasonable possibility that
the plaintiff can state a good cause of action.” (Gami v. Mullikin Medical
Ctr. (1993) 18 Cal.App.4th 870, 876.) A non-statutory motion for judgment
on the pleadings may be made any time before or during trial. (Stoops v.
Abbassi (2002) 100 Cal.App.4th 644, 650.)
II. Discussion
A. Timeliness
of USG’s MJOP
Plaintiff and Kamkar
argue that USG’s motion is untimely under CCP § 438(e). However, section 438(e)
gives the court discretion to consider the Motion:
No motion may be made pursuant to this
section if a pretrial conference order has been entered pursuant to Section
575, or within 30 days of the date the action is initially set for trial,
whichever is later, unless the court otherwise permits.
(CCP § 438(e) [bold
and italics added].) “‘It is evident that whether to grant
... leave [to file a late motion for judgment on the pleadings] is a matter
residing in the trial court's discretion to control litigation before it.’
[Citation.] There
was no abuse of that discretion. ‘The interests of all parties are advanced by
avoiding a trial and reversal for defect in pleadings.’ [Citation.].” (Burnett
v. Chimney Sweep (2004) 123 Cal.App.4th 1057, 1063.)
Therefore, the court exercises
its discretion and considers USG’s Motion on the merits.
B. MJOP as to Plaintiff’s Third Cause of
Action for Negligence
Defendant USG asserts
that Plaintiff’s third cause of action for negligence against USG should be
dismissed because as a matter of law USG owed no duty to Plaintiff. For
authority, Defendant USG relies upon Evanston Insurance Company v.
Russell Associates (C.D. Cal., July 7, 2008, No. CV0704007AHMSSX)
2008 WL 11339610. There, the
District Court found that Cal. Ins. Code, § 1763 did
not “impose a duty on surplus line brokers to verify the truthfulness of the
information contained in the insurance applications submitted to them.” (Id.
at 4.) “Nowhere in this
statute (or in any other California authority of which the Court is aware) is
there a duty owed by a surplus line broker to an insured to verify the
truthfulness of the information contained in an insurance application submitted
to the surplus lines broker.” (Ibid.)
The District Court also found that
balancing the factors set forth in Biakanja
v. Irving (1958) 49 Cal.2d
647, did not compel the District Court to find that the surplus broker,
Cambridge, owed the insured, Russell, “a duty of care, despite the absence of privity of contract.” (Evanston
Insurance, supra, (C.D. Cal., July 7, 2008, No. CV0704007AHMSSX) at 4.)
One of the distinguishing facts in Evanston Insurance was that the
pleading at issue contained “no allegation
(and no evidence in the record) that Cambridge was aware of Farmers'
cancellation of the policy when Cambridge searched for another insurer for
Russell in September 2005.” (Id.)
Here, however, Plaintiff’s
complaint alleges that USG had knowledge via Plaintiff’s insurance broker,
Kamkar, that Plaintiff required a 30-day umbrella coverage on the Loss Location
(1100 E. 6th St., A-1, Los Angeles, CA
90021).
Despite Kamkar
expressing that he sought a 30-day coverage extension for the Loss Location,
Kamkar requested that the Loss Location be removed:
Here, unlike Evanston Insurance, USG knew or should have known that
neither Kamkar nor Plaintiff intended to delete the location from
coverage. Without the knowledge and
consent of Plaintiff, USG requested AIX process the policy change request according to the terms
stated by Kamkar and delete the Loss Location from Plaintiff’s insurance
policy.
Moreover, the six factors set forth in Biakanja
v. Irving favor imposing a duty on USG for processing an insurance
application according to its terms.
The
determination whether in a specific case the defendant will be held liable to a
third person not in privity is a matter of policy and involves the balancing of
various factors, among which are the extent to which the transaction was
intended to affect the plaintiff, the foreseeability of harm to him, the degree
of certainty that the plaintiff suffered injury, the closeness of the
connection between the defendant's conduct and the injury suffered, the moral
blame attached to the defendant's conduct, and the policy of preventing future
harm.
(Biakanja v. Irving, supra, 49 Cal.2d at 650.)
First, the
insurance policy at issue was intended for the benefit of Plaintiff. Thus, the
first factor weighs in favor of Plaintiff.
Second, any errors in the
insurance application would foreseeably cause harm to Plaintiff. Here, Plaintiff’s Complaint alleges that USG
had reason to challenge the information in the application because Kamkar had
informed USG’s agents that a 30-day coverage extension was required for the
Loss Location. (Compl. ¶¶ 18, 22.) Thus,
the error at issue -- the removal of the Loss
Location from the policy -- was easily foreseeable as the application that
Kamkar submitted specifically requested that the Loss Location be removed from
Plaintiff’s insurance policy “effective 05/10/2021 not 30 days out, i.e.
06/10/2021).” (Compl. ¶ 30.) Therefore, the second factor weighs in favor of Plaintiff.
The third factor concerns the
degree of certainty of harm to the Plaintiff. USG processed the application but
instead of the effective date of removal of the Loss Location being 5/10/21,
USG requested that “Effective 05/12/21, remove
the location indicated on the request form. (1100 E. 6th St., A-1, Los Angeles,
CA 90021).” (Compl. ¶ 32.) The third factor goes favor of Plaintiff because the Loss
Location suffered damage on 5/12/21, the date the removal of the loss location
was effective. (Compl. ¶ 33.)
The fourth factor relates to the closeness of the connection between
the defendant's conduct and the injury suffered. The misunderstanding that
occurred was between Kamkar and USG, not Plaintiff. Plaintiff’s Complaint
alleges the various communications between Kamkar and USG that led to the
miscommunication about when the removal of the Loss Location was to be
effective. (Compl. ¶¶ 18-30.) In Business to Business Markets,
Inc. v. Zurich Specialties London Limited (2005) 135 Cal.App.4th
165, 170, the appellate court found that despite the remoteness between the
surplus lines insurance broker and the insured, the fourth factor weighed in
favor of the insured because they were the intended third-party beneficiary of
the policy.
Here, Plaintiff was the intended
beneficiary of the insurance policy at issue. Moreover, the policy did not just
relate to adding or extending insurance coverage but removing insurance
coverage. Moreover, USG failed to ensure that Plaintiff signed the change to
its insurance policy and instead only relied on Kamkar’s signature. (Compl. ¶
30.) Therefore, the fourth factor favors Plaintiff.
The fifth factor relates to the moral
blame attached to the defendant's conduct. Here, USG was obligated to rely on
the representations made by Kamkar as the broker that sought the removal of the
Loss Location from the insurance policy. (Ins. Code, § 1763.) Therefore, the
fifth factor weighs in favor of USG.
The sixth factor relates to the policy of
preventing future harm. “[I]mposing a duty on surplus lines brokers to verify
the truthfulness of all information submitted in every application for
insurance, without any reason to challenge the information's veracity,
would shift the burden of being truthful from the insured to the broker and
would severely slow down the process of obtaining insurance coverage.” (Evanston Insurance, supra, (C.D. Cal., July 7, 2008, No.
CV0704007AHMSSX) at *5 [italics added.) Plaintiff’s Complaint alleges that USG
had reason to challenge the information in the application because Kamkar had
informed USG’s agents that a 30-day coverage extension was required for the
Loss Location. (Compl. ¶¶ 18, 22.)
Unlike the parties in Evanston Insurance, the error in removing
the Loss Location from the insurance policy was not due Plaintiff’s action; USG
had notice that Kamkar had requested that coverage on the Loss Location be
extended for 30-days. USG
agent, Dave Roy, wrote to Kamkar: “From
what you are saying, it seems like in 30 days or so you would be sending a
change request to remove the 1100 E 16th St location so we would have 3
locations on this policy for about 30 days?” (Compl. ¶ 27.) As the request
related to the removal of insurance coverage, USG should have taken care to
confirm the effective date of the removal of the Loss Location from the
insurance policy because USG had written notice that a 30 day extension of
coverage had been requested. USG had also rejected Kamkar’s prior two
applications, with the 30 day extension, because they were confusing. (Compl.
¶¶ 19, 27.) In seeing the final policy change, Dave Roy of USG responded: “Oh,
nevermind. I just saw a second policy change. This is perfect.” (Compl. ¶ 30.)
Based on these facts, the court finds that the sixth factor weighs in favor of
Plaintiff.
Because the Biakanja v. Irving factors
weigh in favor of Plaintiff, the court finds that grounds exist for imposing a
duty on USG regarding the removal of insurance coverage. Although the Evanston
Insurance court found that surplus line brokers did not owe a duty, “the decisions of federal district and circuit courts,
although entitled to great weight, are not binding on state courts even as to
issues of federal law.” (Alan v. Superior Court (2003) 111 Cal.App.4th 217, 229.)
Therefore, USG’s motion for judgment on
the pleadings as to Plaintiff’s Complaint is denied.
C. MJOP as to Kamkar’s Cross-Complaint
USG asserts that
because it owes no duty to Plaintiff, it cannot commit any actionable “error or
omission” for which it owes Kamkar indemnity. (CC ¶ 7, Ex. A.) Therefore, there
can be no equitable indemnity or implied contractual indemnity. “Thus, no indemnity
may be obtained from an entity that has no pertinent duty to the injured third
party [citation], that is immune from liability [citation], or that has been
found not to be responsible for the injury [citation].” (Jocer Enterprises, Inc. v. Price (2010) 183 Cal.App.4th
559, 573–574.) As stated above, however, because USG had notice that Kamkar was
requesting a 30-day coverage extension before removing the Loss Location from
Plaintiff’s policy, the facts as pled supported a finding that USG owed a duty
of care to Plaintiff under the Biakanja v. Irving factors.
Accordingly, USG motion for judgment on
the pleadings as to Kamkar’s Cross-Complaint is denied.
I. Legal Standard
“The court, in furtherance of convenience or to
avoid prejudice, or when separate trials will be conducive to expedition and
economy, may order a separate trial of any cause of action . . . or of any
separate issue . . . .”¿ (CCP § 1048(b).)¿ Additionally, “[t]he court may, when
the convenience of witnesses, the ends of justice, or the economy and
efficiency of handling the litigation would be promoted thereby, on motion of a
party, after notice and hearing, make an order . . . that the trial of any
issue or any part thereof shall precede the trial of any other issue or any
part thereof in the case . . . .”¿ (CCP § 598.)¿¿
¿¿
“It is within the discretion of the court to
bifurcate issues or order separate trials of actions, such as for breach of
contract and bad faith, and to determine the order in which those issues are to
be decided.”¿ (Royal Surplus Lines Ins. Co., Inc. v. Ranger Ins. Co.¿(2002)
100 Cal.App.4th 193, 205.)¿ “The major objective of bifurcated trials is to
expedite and simplify the presentation of evidence.”¿ (Foreman & Clark
Corp. v. Fallon¿(1971) 3 Cal.3d 875, 888.)¿¿
II. Discussion
If USG’s motion for
judgment on the pleadings is denied, USG requests, in the alternative, that the
court bifurcate/stay Plaintiff’s third cause of action for negligence and
Kamkar’s claims as alleged in his Cross-Complaint.
USG argues that if the
trial results in a favorable judgment for Plaintiff against AIX, then the
broker negligence claim advanced by Plaintiff, as well as Kamkar’s indemnity
claims, will be moot. Defendant Kamkar’s opposition fails to address USG’s
Motion to Bifurcate. Plaintiff opposes the Motion on various bases, including
the fact that it was brought pursuant to a Motion for Judgment on the
Pleadings. USG’s Notice of Motion properly notified both USG and Plaintiff that,
in the alternative, it sought “an
Order bifurcating and staying those claims pending resolution of the insurance
policy-related claims brought by Seven Lions against Defendant AIX Specialty
Insurance Company (“AIX”).”
However, Plaintiff is correct that under
Cal. Rules of Court, rule 3.727(10), bifurcation is to be heard at any case
management conference “a hearing should be set
for a motion to bifurcate under Code of Civil Procedure section 598,” and
combined with a motion for judgment on the pleadings. Plaintiff further asserts
that its claims against Kamkar and USG are not pled in the alternative and instead
Plaintiff seeks to prove that Kamkar, USG, and AIX all bear responsibility for
Plaintiff’s harm. Plaintiff argues if the trial were to be bifurcated, all
evidence and witnesses would need to appear in twin proceedings and AIX would
be prejudiced. The court notes that although AIX was served with notice of this
Motion, AIX has not filed an opposition.
As USG fails to show how
bifurcation will expedite or simplify the trial, the motion to bifurcate is
denied.
Conclusion
Defendant/Cross-Complainant
USG’s motion for judgment on the pleadings is denied.
Defendant/Cross-Complainant
USG’s motion to bifurcate is also denied.
Defendant/Cross-Complainant
USG to give notice.