Judge: Malcolm Mackey, Case: 19STCV23612, Date: 2023-01-25 Tentative Ruling

Case Number: 19STCV23612    Hearing Date: January 25, 2023    Dept: 55

LORENZO v. LOS MORALES TRUCKING, INC.                                19STCV23612

Hearing Date:  1/25/23  Dept. 55

#9:   MOTION FOR SUMMARY JUDGMENT

Notice:  Okay

Opposition

MP:  Defendant WESTERN PROVISION CORPORATION DBA SOLUTIONS SPECIALTY INSURANCE BROKERS.

RP:   Plaintiffs.

Summary

On 7/3/19, plaintiffs filed the lead action, Lorenzo v. Los Morales (19STCV23612) against the trucking defendants.

On 1/13/21, this lead case was ordered consolidated for all purposes with 20STCV23961 and 20STCV12415. 

The Complaint in consolidated case number 20STCV23961 alleges that GLOBAL CENTURY, as insurance broker, was used by THANDI as a device to broker insurance policies between California trucking insureds, like LOS MORALES, a small trucking company, and the non-California-admitted, insolvent insurer, Global Hawk, provided a policy for indemnity in the event of catastrophic loss, but now the Lorenzo plaintiffs are unlikely to receive any compensation from GLOBAL HAWK’S liquidation proceedings.

On 2/3/21, plaintiffs filed the Second Amended Complaint regarding separately filed wrongful death lawsuits that arise out of the same double fatal pedestrian accident. Allegedly, plaintiffs are the parents of two sisters who died in April 2019, after being run over by a dump truck, while they were pedestrians in a crosswalk, on route to middle school, due to the failure to provide for previously school-arranged crossing guards for student safety on particularly dangerous streets near the school, at a time a substitute crossing guard was needed.

On 4/2/21, GREEN DOT PUBLIC SCHOOLS CALIFORNIA and GREEN DOT PUBLIC SCHOOLS NATIONAL were added as DOE defendants 1 and 2, to the Second Amended Complaint.

On 7/16/21, Defendant/Cross-Complainant LOS ANGELES UNIFIED SCHOOL DISTRICT (LAUSD) filed an official form Cross-Complaint against GREEN DOT PUBLIC SCHOOLS CALIFORNIA, GREEN DOT PUBLIC SCHOOLS NATIONAL,  ORIVERA TRUCKING, LLC; LOS MORALES TRUCKING INC; GLOBAL HAWK INSURANCE COMPANY RISK RETENTION GROUP; and STANLEY RANDLE.  The causes of action are:  1)  Indemnification, 2) Apportionment of Fault and 3) Declaratory Relief.

On 6/15/21, the Court overruled the Demurrer of LAUSD, and, on 10/6/21, the Court of Appeal summarily denied an unopposed petition for writ of mandate filed 8/16/21, by Defendant LAUSD, which had requested to overturn the demurrer ruling.

On 12/12/22, plaintiffs filed a Third Amended Complaint, in Lorenzo v. LAUSD (20STCV12415), against LAUSD and others, including for Negligence and Dangerous Condition of Public Property (Gov. Code § 835).

MP Position

Moving party requests an order granting summary judgment with respect to the Complaint filed in case number 19STCV23612, on bases including the following:

·         Western Provision is not liable to plaintiffs for the sole cause of action alleged against it in the Complaint-- Negligence.

·         Evidence from Western Provision's principal, and its expert witness, show Plaintiffs cannot establish the breach and causation elements against Western Provision.

·         Discovery responses show that Plaintiffs do not possess and cannot reasonably obtain needed evidence in support of the negligence claim elements.

·         Western Provision cannot be liable to Plaintiffs for Negligence, under a third-party beneficiary, or alter-ego, theory.

·         Plaintiff spends excess time and effort in the Opposition explaining what the duties are for surplus lines brokers with respect to procurement of insurance parties, despite the fact that Western Provision is a retail broker, not a surplus lines broker.

·         Western Provision's due diligence of Global Hawk did not indicate any information showing that the Policy should not be written and issued by Global Hawk for Los Morales. (SSUMF, No. 26). Western Provision's brokerage of the Policy was done within the standard of care for insurance brokers. (SSUMF, No. 30).

·         Plaintiffs argue that Western Provision failed to "submit any Section 1763-related forms and reports . . . in the years 2015, 2019, and 2020," including "the placement of coverage with Global Hawk for [the] subject policy. This is a red-herring because the undisputed material facts show Western Provision was not required to make such reports.  A retail broker, such as Western Provision, never has any disclosure requirements under California Insurance Code Section 132(g), let alone any D-1 and D-2 disclosure requirements. Only surplus lines brokers have such disclosure requirements. (SSUMF, No. 39).

·         Plaintiffs cannot be third party beneficiaries of the agreement between Western Provision and Los Morales with respect to procuring the subject policy. Plaintiffs have alleged no contract, and no privity of contract, between them and Western Provision with respect to its broker agreement with Los Morales.

·         The decision in Nowlon v. Koram Ins. Center, Inc. (1991) 1 Cal.App.4th 1437 is inapposite because it does not reference liability based upon a third-party beneficiary theory. Additionally, the decision in Business to Business Markets Inc. v. Zurich Specialties (2005) 135 Cal.App.4th 165 does not apply because there is no reference in the decision to the plaintiff being a beneficiary of an insurance broker agreement.

·         Moving party’s declarations are actually competent evidence, notwithstanding the opposing evidentiary objections.

RP Positions

Opposing party advocates denying, for reasons including the following:

·         Plaintiffs’ responses are not factually devoid. Plaintiffs’ discovery responses refer to the subpoenaed records of Western Provision, which contained no Section 1763 forms or reports, indicating that Western Provision had placed the coverage illegally and in defiance of the search and reporting requirements of Section 1763.

·         The Court should find triable issues of breach and causation, based on the demonstrated noncompliance with the strict statutory requirements for the placement of coverage with a nonadmitted insurer.

·         Western Provision did not report the placement of coverage with insolvent nonadmitted insurer Global Hawk for subject policy, meaning it was placed by Western Provision, in violation of the search and disclosure requirements of Insurance Code section 1763 applicable to surplus lines brokers.

·         Global Hawk is insolvent, and unlikely to satisfy any claims for indemnity, such as the Lorenzo’s claims against Los Morales Trucking.

·         The fact that Western Provision and its principal, Mr. Funes, submitted Section 1763-related forms and reports pertaining to the placement of coverage for Los Morales with nonadmitted insurers, for other unrelated policies of insurance covering property damage only, unequivocally shows that Western Provision acknowledges a statutory duty to report a “diligent search” and inability to secure California coverage, in accordance with Insurance Code Section 1763. (See Ex. 4, Surplus Lines at 4-5 to 4-7, 4-11 to 4-13, 4-22 to 4-25, 4-29 to 4-31).

·         Western Provision can be liable to Plaintiffs under a third-party beneficiary theory.  The Court has already considered and rejected this argument, it its ruling sustaining Demurrer. (RJN No. 14, Order.).

·         “[T]he duty of the broker or insurer, which is incurred in the procurement or issuance of an insurance policy, runs not only to those who contracted for the insurance policy but also “runs directly to the class of potential victims of the insured. [Citation.] Nowlon falls within that class.” (Nowlon, 1 Cal.App.4th at 1447).

·         Western Provision’s conduct in this case was unreasonably harmful to Los Morales Trucking because it puts their personal assets, if any, at risk to satisfy judgments and settlements, and also harmful to the public at large, since the insurance policies are not covered by CIGA, and are essentially uncollectable. Given the facts showing that Western Provision placed the insurance illegally in defiance of Section 1763, there is sufficient moral blame to warrant a duty. Unless a duty of care is owed, in these circumstances, innocent victims like the Lorenzo plaintiffs go uncompensated because they are deprived the benefits of CIGA. Imposing a duty of care on an insurance broker, a duty that extends to third party claimants, is justly warranted in these circumstances.

·         Evidentiary objections were filed as to moving party’s conclusory and speculative declarations. 

Tentative Ruling

The motion for summary judgment against Complainant is denied.

            Evidence

The Court overrules opposing evidentiary objections, filed 1/11/23, as to number 15, and sustains as to the rest of the numbers.

The declaration of Henry Funes, President of Solutions Specialty Insurance Brokers, filed 11/9/22, is unusually loaded with argument and unsupported conclusions.

"A motion for summary judgment must be decided on admissible evidence in the form of affidavits, declarations, admissions, answers to interrogatories, depositions and matters of which judicial notice may be taken. . . .  'Personal knowledge and competency must be shown in the supporting and opposing affidavits and declarations....  'The affidavits must cite evidentiary facts, not legal conclusions or ‘ultimate’ facts..... 'Matters which would be excluded under the rules of evidence if proffered by a witness in a trial as hearsay, conclusions or impermissible opinions, must be disregarded in supporting affidavits.'" Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1119-20.   Accord  Bozzi v. Nordstrom, Inc.  (2010) 186 Cal.App.4th 755, 761.

Additionally, the Court finds that the expert declaration of the President of Fisher Consulting Group Inc., filed 11/9/22, in opposition, lacks sufficient references to evidence reasonably relied on by experts, and impermissibly argues some conclusions of law.

“A trial court enjoys broad discretion in ruling on foundational matters on which expert testimony is to be based.”  Maatuk v. Guttman (2009) 173 Cal. App. 4th 1191, 1197.  “Although the courts have rejected expert opinions ‘[w]here the basis of the opinion is unreliable hearsay...,’ nevertheless, hearsay information of a type reasonably relied upon by professionals in the field in forming an opinion on the subject may be used to support an expert opinion, even though not admissible in court.”  Korsak v. Atlas Hotels (1992) 2 Cal. App. 4th 1516, 1524.  Experts may not testify as to questions of law, legal interpretation and the application of law to facts.  WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4^th 525, 532.  A doctor's conclusions lacking competent evidentiary foundation require denial of a motion for summary judgment.  Garibay v. Hemmat (2008) 161 Cal.App.4th 735, 742-43 (doctor’s declaration was based upon hospital records that were not properly before the court);  Sesma v.  Cueto (1982) 129 Cal.App.3d 108, 113-14.  When an expert bases a conclusion on assumptions not supported by the record, matters not reasonably relied upon, or factors which are speculative, remote or conjectural, then the conclusion has no evidentiary value for purposes of a summary judgment motion or opposition. Lockheed Litigation Cases (2004) 115 Cal.App.4th 558, 563.  When an expert gives only an ultimate opinion unsupported by reasoned application and factual bases, the declaration has no evidentiary value for purposes of summary judgment.  Kelley v. Trunk (1998) 66 Cal.App.4^th 519, 525;  Bushling v. Fremont Med. Ctr. (2004) 117 Cal.App.4^th 493, 510.  But see Hanson v. Grode (1999) 76 Cal.App.4^th 601, 608 n. 6 (criticizing Kelley).  An expert's opinion involving speculation of the facts and lacking support in foundational facts cannot create a triable issue of fact.  Andrews v. Foster Wheeler LLC (2006) 138 Cal.App.4th 96, 108.  “In light of the rule of liberal construction, a reasoned explanation required in an expert declaration filed in opposition to a summary judgment motion need not be as detailed or extensive as that required in expert testimony presented in support of a summary judgment motion or at trial.”  Garrett v. Howmedica Osteonics Corp. (2013) 214 Cal.App.4th 173, 189.

            Procedure

The Court determines that moving party has not shifted the burden of proof to plaintiffs, due to insufficient proof surviving the ruling on evidentiary objections, and plaintiffs’ sufficient discovery responses. 

“Until parties moving for summary judgment satisfy the initial burden of proof, opposing parties are not required to respond with counteraffidavits.”  Classen v. Weller (1983) 145 Cal. App. 3d 27, 43.  “A moving defendant now has two means by which to shift the burden of proof under subdivision (o)(2) of section 437c to the plaintiff to produce evidence creating a triable issue of fact. The defendant may rely upon factually insufficient discovery responses by the plaintiff to show that the plaintiff cannot establish an essential element of the cause of action sued upon….  Alternatively, the defendant may utilize the tried and true technique of negating (‘disproving’) an essential element of the plaintiff's cause of action.”  Brantley v. Pisaro (1996) 42 Cal. App. 4th 1591, 1598.  See also CCP §437c(p)(2). 

Alternatively plaintiffs supported triable issues of material fact  (e.g., sep. stmnts, fact numbers 10, 18, 19, 20, and proof referenced thereat).

“Summary judgment is proper only where there are no triable issues of material fact and the moving party is entitled to judgment in its favor as a matter of law.”  Assad v. Southern Pacific Transportation Co. (1996) 42 Cal. App. 4th 1609, 1612.

A question of duty may constitute a triable issue of material fact, as to whether the facts in dispute give rise to a theoretical duty that has been determined as a pure issue of law.  Alcaraz v. Vece (1997) 14 Cal.4th 1149, 1162 n.4 (regarding negligence, disputed facts which give rise to a legal duty are determined by the jury); Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 614.   See also  Ray v. Silverado Constructors (2002) 98 Cal.App.4th 1120, 1130-36  (triable issues of fact existed as to duty regarding contractor’s delegated duties).   “To base a duty ruling on the detailed facts of a case risks usurping the jury's proper function of deciding what reasonable prudence dictates under those particular circumstances.”  Cabral v. Ralphs Grocery Co. (2011) 51 Cal.4th 764, 774.

            Substantive Law

The Court’s independent research reveals that there is no governing California case directly on point as to retail brokers, in interpreting Insurance Code Section 1764.1 (effective 1/1/20), which expressly applies to a nonadmitted insurer or surplus line broker, and does not mention a retail broker.  The closest and citable opinion is M&F Fishing, Inc. v. Sea-Pac Ins. Managers, Inc. (2012) 202 Cal. App. 4th 1509, 1529  (“this statute governs the notice requirements when insurance is being sought or placed by a surplus lines broker with a nonadmitted carrier.”).  "A legal proposition asserted without apposite authority necessarily fails."  People v. Taylor (2004) 119 Cal.App.4th 628, 643.  “‘A decision, of course, does not stand for a proposition not considered by the court.’"  Flatley v. Mauro (2006) 39 Cal. 4th 299, 320 (quoting Nolan v. City of Anaheim (2004) 33 Cal.4th 335, 343).   See also  Bosworth v. Whitmore  (2006) 135 Cal.App.4th 536, 550 (“appellate opinions are not authority for unconsidered propositions….”).

However, the nature and scope of duties of a retail broker are not just defined by statute, but instead Biakanja case factors of duties in negligence as to third parties can apply.  That conclusion is inferred by a holding of a duty owed by a surplus lines broker, which is one-step more removed from the client than the retail broker dealing directly.  The case dealt with similar considerations, as shown by the following excerpt:

“Although B2B is, strictly speaking, not quite an intended beneficiary, it comes close enough to being one that imposing duty on PLIS [nonadmitted broker] is within the spirit of Biakanja. Just because other parties, such as retail insurance broker Hoyla, may have closer connections to B2B does not mean PLIS's connection was legally inadequate.3 B2B is more than an incidental beneficiary—it made the initial phone call and contact with Hoyla (who then contacted PLIS) because it considered itself the intended beneficiary of the policy. Moreover, and most importantly, the software contract between B2B and Tricon called for such a policy, a contractual obligation that, upon demurrer, we infer retail broker Hoyla told PLIS about when Hoyla gave PLIS the information….”

Bus. to Bus. Markets, Inc. v. Zurich Specialties London Ltd. (2006) 135 Cal. App. 4th 165, 171.

According to a related treatise citing that opinion:

Liability to insured for failure to obtain coverage requested by retail broker: A surplus lines broker may owe a duty of care to the insured to obtain coverage requested by a retail broker on the insured's behalf. Rationale: Despite the lack of privity between them, the transaction is intended for the insured's benefit and the risk of harm to the insured is clearly foreseeable. [Business to Business Markets, Inc. v. Zurich Specialties (2005) 135 CA4th 165, 171….

….

[2:59] Application—broker held liable to insured: The following cases found an insurance broker liable to the insured for uninsured losses:

….

[2:64] Placing coverage with nonadmitted insurer: Policies issued to California residents by surplus lines brokers (nonadmitted insurers not licensed by the State; see ¶ 2:30.9 ff.) must prominently disclose that the insurer is not subject to California's financial solvency regulation and does not participate in California's insurance guarantee funds. (See form of notice in Ins.C. § 1764.1.)

1) [2:64.1] Liable to both insured and third party claimants for insolvency: Absent such disclosure by the insurer, a broker placing insurance directly with a nonadmitted insurer (rather than through a surplus lines broker) may be personally liable if the insurer becomes insolvent. The broker's liability includes both claims by the insured and claims by third parties injured by the insured. Rationale: But for the insurer's breach of its statutory duty (i.e., acting as agent for a nonadmitted insurer), the claims would have been covered by the California Insurance Guarantee Association (CIGA), which protects both insureds and third party claimants. [Nowlon v. Koram Ins. Ctr., Inc. (1991) 1 CA4th 1437, 1447, 2 CR2d 683, 689; compare Travelers Prop. Cas. Co. of America v. Sup.Ct. (Braum) (2013) 215 CA4th 561, 580-581, 155 CR3d 459, 475-476 (limiting Nowlon holding to claims asserting “negligence per se” theory based on broker's violation of statute intended to protect third party claimants)]

Cal. Prac. Guide:  Civ. Pro. Before Trial Insurance Litig.  (The Rutter Group 2022) ¶¶ 2:30.12, 2:59 – 2:64.1.

Consistent with the above-referenced insurance law:  Factors for determining whether there is a duty owed to a plaintiff include “‘forseeability of harm to the plaintiff, the degree of certainty that plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and the consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.’"   Gu v. BMW of North America, LLC (2005) 132 Cal. App. 4th 195, 208. Accord  Conte v. Wyeth, Inc. (2008) 168 Cal.App.4th 89, 105-06; Delfino v. Agilent Technologies, Inc. (2006) 145 Cal.App.4th 790, 815-16.  Biakanja factors are applicable where litigants bring claims independent of contracts.  Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 942.  “Liability for one's failure to exercise ordinary care, however, is not boundless. Limitations may arise if grounded either in statute or public policy…. Public policy limitations are often expressed by defining the scope of persons to whom the defendant owes a duty….”  Melican v. Regents of Univ. of Cal. (2007) 151 Cal. App. 4th 168, 177.  The element of duty is based upon considerations of policy as to whether a particular plaintiff is entitled to protection.  Coldwell Banker Residential Brokerage Co. v. Sup. Ct. (2004) 117 Cal. App. 4th 158, 164.  "Courts frequently have held that statutory requirements can establish both duty and the applicable standard of care." Yarick v. PacifiCare of Cal. (2009) 179 Cal. App. 4th 1158, 1166.

Finally, moving party evidently undertook at least some duties towards statutory compliance and due diligence in obtaining the subject insurance policy, which could have been negligence in light of publicly available information to learn of the reportedly unknown insolvency of the insurer  (see, e.g.,  sep. stmnts, fact numbers 25 and 26).  “ ‘[A] volunteer who, having no initial duty to do so, undertakes to provide protective services to another, will be found to have a duty to exercise due care in the performance of that undertaking if one of two conditions is met: either (a) the volunteer's failure to exercise such care increases the risk of harm to the other person, or (b) the other person reasonably relies upon the volunteer's undertaking and suffers injury as a result.’ ”  Ericson v. Fed. Express Corp. (2008) 162 Cal. App. 4th 1291, 1307.