Judge Mitchell L. Beckloff, Case 22STCV21546 2022-08-31 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 22STCV21546, Date: 2022-08-31 Tentative Ruling

Plaintiff, Topa Insurance Group, Inc., filed its complaint against Defendant, Go Maps, Inc., on July 1, 2022. The complaint alleges seven causes of action: (1) injunctive relief; (2) specific performance; (3) breach of contract (post-termination obligations); (4) breach of contract (indemnification); (5) declaratory relief; (6) breach of fiduciary duty; and (7) conversion.

Plaintiff alleges an Amended and Restated General Agency Agreement (the Agreement) defines the rights and obligations running between the parties. The parties’ relationship centered on a private passenger automobile insurance program (the Program). Plaintiff contends Defendant breached a number of provisions in the Agreement.

Through the Agreement, Defendant acted as Plaintiff’s general agent (GA) to market the Program to potential policyholders, underwrite the risks, maintain all proper policy documentation, collect policyholders’ premiums, and hold premium monies as a fiduciary in a trust account for Plaintiff’s benefit (the Trust Account). In exchange for Defendant’s performance, Plaintiff agreed to act as Defendant’s insurer bearing the full risk of covered losses under the Program, even where such losses are in excess of premiums paid by Program policyholders.

Initially, on July 11, 2022, Plaintiff filed a request for a hearing on its request for a preliminary injunction against Defendant.[1] At that time, Plaintiff sought a preliminary injunction requiring Defendant to:

Later, on July 14, 2022, Plaintiff supplemented its request to include requiring Defendant to:[3]

In response to Plaintiff’s claims, Defendant contends Plaintiff is seeking to rewrite the Agreement, not enforce it. Defendant also claims any harm suffered by Plaintiff is insufficient to justify the relief sought. Defendant asserts the dispute here is merely about money and does not warrant a preliminary injunction.

Plaintiff’s reply contains significant additional new evidence not previously provided. On August 9, 2022, Defendant filed an ex parte application to allow Defendant to file a surreply to address the new evidence and arguments made by Plaintiff. The court granted the application and continued the hearing on Plaintiff’s request for a preliminary injunction to this date.

Plaintiff’s request for a preliminary injunction is GRANTED as follows: Defendant is enjoined from removing from the Trust Account anything other than its 14 percent provisional commission for premiums paid as of this date, any fees due to Defendant as defined in Schedule 4 of the Agreement, all amounts of premium taxes actually owed and attributable to the fees and any fees or assessments as required by any governmental body or agency. The scope of the preliminary injunction maintains the status quo and provides each party with the benefit of their bargain pending an accounting and further resolution of the parties’ claims.

“[A] court will deny a preliminary injunction unless there is a reasonable probability that the plaintiff will be successful on the merits, but the granting of a preliminary injunction does not amount to an adjudication of the merits.” (Beehan v. Lido Isle Community Assn. (1977) 70 Cal.App.3d 858, 866.) “The function of a preliminary injunction is the preservation of the status quo until a final determination of the merits.” (Ibid.)

“Trial courts traditionally consider and weigh two factors in determining whether to issue a preliminary injunction. They are (1) how likely it is that the moving party will prevail on the merits, and (2) the relative harm the parties will suffer in the interim due to the issuance or nonissuance of the injunction.” (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) “[T]he greater the . . . showing on one, the less must be shown on the other to support an injunction.” (Ibid. [quoting Butt v. State of California, (1992) 4 Cal.4th 668, 678].) The burden of proof is on the plaintiff as the moving party “to show all elements necessary to support issuance of a preliminary injunction.” (O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.)

Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. (See, e.g., Ancora-Citronelle Corp. v. Green (1974) 41 Cal.App.3d 146, 150.) A plaintiff seeking injunctive relief must also show the absence of an adequate damages remedy at law. (Code Civ. Proc., § 526, subd. (a)(4).)

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. (See Code Civ. Proc., § 529, subd. (a); City of South San Francisco v. Cypress Lawn Cemetery Ass’n. (1992) 11 Cal. App. 4th 916, 920.)

The parties’ dispute focuses on the Agreement’s provisions and the parties’ conduct after Plaintiff terminated the Agreement on December 2, 2021. (Pavlov Decl. ¶ 13, Ex. 2.)

Plaintiff, through its operating subsidiary Topa Insurance Company, is a specialty insurance company based in Calabasas, California. (Pavlov Supp. Decl. ¶ 2.) Defendant is an insurance agency that allows customers to obtain quotes for car insurance, manage policies, and file claims through a technology-based mobile direct-to-consumer app.[5] (Pomplun Decl. ¶ 2 [filed July 14, 2022][Pomplun 1 Decl.].)

In November 2019, the parties entered into the Agreement. (Pavlov Decl. Ex. 1 [Agreement]; Pomplun 1 Decl., Ex. A.)[6] The Agreement sets forth the rights and obligations of Plaintiff as insurer and Defendant as Plaintiff’s GA with respect to the Program. As of July 2022, approximately 10,500 California residents are insured under the Program. (Pavlov Decl. ¶ 12.)

Section 25 of the Agreement permitted Plaintiff to terminate the Agreement with or without cause. (Agreement § 25, ¶ B.) On December 2, 2021, Plaintiff exercised its rights to terminate the Agreement. Plaintiff explained to Defendant:

“The Company is exercising its right to terminate the Agreement for and amongst the following reasons: (i) reinstatement support heretofore deemed acceptable to the Company covering the Program is to be cancelled with effect the end of the day December 3, 2021 [Section 25.B.10], and (ii) the Company has been made aware of actions taken by the GA that could materially harm the Company’s reputation or reflect unfavorably on the Company based on accusations that are currently under investigation by the California Department of Insurance [Section 25.B.3].” (Pavlov Decl., Ex. 2.)

The Agreement contains provisions governing the parties’ post-termination conduct, including Defendant’s orderly run-off administration of the Program.

Plaintiff contends Defendant failed to perform its post-termination obligations under the Agreement. Defendant argues otherwise. The provision of the Agreement most relevant to the parties’ dispute—Section 25—provides in pertinent part:[7]

“C. If this Agreement is terminated, effective upon receipt of the notice of termination or at the end of the earliest time period permitted by law (the “Termination Date”), the GA’s authority to solicit, accept, issue, or bind Policies or to increase the Company’s liability, exposure, or risk and, except as otherwise provided pursuant to any post-termination plan adopted pursuant to Section 25.E below or this Section 25, all powers and authority granted to the GA pursuant to this Agreement shall cease, unless otherwise required by law to continue (which in such event, the Company shall continue to pay GA for the continued effort). No outstanding quotes on Policy applications shall be honored by the Company after 11:59 p.m. (Pacific Time) on the Termination Date or, in the case of nonrenewal of this Agreement, on the anniversary date of the Policies. Unexpired Policies may remain in force until expiration or non-renewal. However, the Company reserves the right to terminate any Policy at any time for underwriting reasons or for nonpayment of premium, subject to requirements imposed by law and Policy provisions. Notwithstanding the forgoing, the GA shall not be relieved of or released from any obligation created by or under this Agreement in relation to payment, expenses, reports, accounting or claims handling, which relate to the outstanding insurance business under this Agreement existing on the date of such termination. The Company and the GA will cooperate in handling all such business until the business has expired either by cancellation or by the terms of the policies and all outstanding losses and loss adjustment expenses have been settled. To the extent that Company determines, in its sole discretion, to handle claims or have a third party handle the claims, post Termination Date, GA shall provide the Company with all necessary records and information at GA’s sole expense, and cooperate in good faith, to facilitate the transfer and implementation of same to the appropriate party.

D. The GA’s right to receive Commission shall cease and terminate upon the nonrenewal or cancellation of any Policy or Policies. Nothing in this Agreement shall prohibit GA from moving customers insured under this Agreement to another insurer subsequent to receipt by GA of notice of termination from Company of this Agreement.

E. Within twenty (20) business days of the Termination Date, the GA shall pay by wire transfer, or such other means to which the parties agree, to the Company all of the Company Funds as referenced in Section 10 along with an accounting related to same. It is agreed that the Company does not own the Expirations as described in Section 28. If this Agreement is terminated or expires, all insureds for whom the GA placed and/or issued Company Policies are deemed to the property of the GA and the Company and its Affiliates shall not directly or indirectly contact (other than for purposes of servicing the existing policy or handling any claims under the issued policy) or solicit such insureds. Notwithstanding the forgoing, in the event of termination of this Agreement, if there exists a financial obligation due Company by GA, at the election of the Company, the Expirations, to the extent of the financial obligation only, shall be deemed to have automatically transferred to and assigned for the benefit of the Company. This Section 25.E shall survive the termination or expiration of this Agreement.

F. The GA agrees, in the event of the termination or expiration of this Agreement, to take any and all actions reasonably requested by the Company within the timelines specified by the Company and, if requested by the Company, will assist the Company in developing a termination assistance plan setting forth the methodology, approach, deliverables and timelines, to ensure the orderly transition of the services provided by the GA pursuant to this Agreement. This Section 25.F shall survive the termination or expiration of this Agreement for a period of 12 months.

G. Immediately upon the Termination Date, if the Company commits in writing to assume responsibility for performing all of the duties performed by the GA under this Agreement or otherwise in connection with any Policy (hereinafter, the “Service Functions”), the GA covenants and agrees that it shall cooperate with, in good faith, and assist the Company in its performance of the Service Functions in accordance with any post- termination plan adopted pursuant to Section 25.F.

H. The GA, upon and following the Termination Date, shall be responsible for the renewal of all Policies until each such Policy expires or is cancelled according to any post-termination plan adopted pursuant to Section 25.F. The GA shall be entitled to Commission in the amount set forth in Schedule 5 for premiums earned on all renewals bound, if any, following the Termination Date.

I. Within ten (10) business days of the Termination Date the GA shall return to the Company all Company Materials.

J. Where the Company does not commit to handle Service Functions pursuant to Section 25, the GA, upon and following the Termination Date, shall act in good faith to fulfill all obligations set forth in this Agreement, including but not limited to the Service Functions, with respect to any and all in-force business and/or renewal business, if any, placed under this Agreement. Except for new and/or renewals of Policies mandated by law or regulation, the GA shall not, without prior written approval of the Company, increase or extend the Company’s liability or extend the term or change any conditions of any such Policies under this Agreement. The GA shall maintain all required licenses and service the existing business it produced prior to the Termination, including renewals of same, if any, post termination, but GA shall not have binding authority or the authority to produce new business. The GA shall exercise the utmost endeavor placing the Policies written under this Agreement with another insurance carrier and relieve the Company from any type of liability.”

On June 24, 2022, the California Department of Insurance (CDI) served Plaintiff with an order to show cause alleging 21 violations of various statutes and regulations related to the Program. (Pavlov Decl., Ex. 8.) Among other things, CDI sought an order suspending Plaintiff’s certificate of authority to transact business in California for up to a year thereby disrupting the coverage for Plaintiff’s policyholders and allegedly putting Plaintiff out of business. (Pavlov Decl., ¶¶ 35-36.)

Plaintiff seeks a preliminary injunction claiming a likelihood of success on the breach of contract, breach of fiduciary duty and conversion claims it has asserted against Defendant.[8] (Motion 1:2-3.)

To establish a claim for breach of contract, a plaintiff must prove: (1) existence of a contract;

(2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach of the contract; and (4) damages incurred by plaintiff resulting from the breach. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1367.)

The parties do not dispute their contractual relationship and the existence of their Agreement.

While Defendant disputes the severity of any harm allegedly suffered by Plaintiff based on Defendant’s acts, each parties’ performance is central to resolution of this motion.

Plaintiff argues it performed its obligations under the Agreement by providing Defendant with authority for the Program resulting in earned commissions exceeding approximately $3.2 million based upon premiums paid by policyholders and a 14 percent commission rate.[9] (Pavlov Decl., ¶ 12.)

Plaintiff contends Defendant breached the Agreement by failing to perform it post-termination obligations after December 2, 2021 when Plaintiff terminated the Agreement. Those breached obligations include Defendant’s failure to:

As to Defendant’s alleged failure to remit funds to Plaintiff, Plaintiff provides evidence Defendant removed over $2.5 million from the Trust Account on July 6, 2022 which left a balance in the fiduciary account of about $35,000. (Cox Decl., ¶ 6.) On July 14, 2022, after additional deposits had increased the balance of the account, according to Plaintiff’s evidence, Defendant removed an additional $250,000 from the Trust Account. (Cox Decl., ¶ 7.)

Defendant contends Plaintiff failed to perform under the Agreement because it failed to pay Defendant its earned commissions. While Defendant received $3.2 million from the Trust Account toward its earned commissions, according to Defendant, it is still owed nearly $1.5 million for earned commissions. (Pomplun 1 Decl., ¶ 12, Ex. F.) Thus, Defendant’s Trust Account withdrawals have not resulted in payment to Defendant of all owed to it by Plaintiff, and therefore, Plaintiff has not performed its obligations under the Agreement.

Despite Plaintiff’s Senior Vice President and Chief Operating Officer initially attesting Defendant had “earned a 14% commission” for policies it had written (“or approximately $3.2 million”) through December 2021, Plaintiff changes course and argues Defendant is entitled to only a six percent commission. (Pavlov Decl., ¶ 12; Reply 4:7-10.)[12] Plaintiff relies on Schedule 5 of the Agreement for support. Schedule 5 provides Defendant is entitled to a “provisional commission of 14.0%” on all written premiums. (Agreement p. 28.) The provisional commission, however, is subject to adjustment:

“If the ratio of Losses Incurred to Premiums Earned is 80.0% or greater, the adjusted commission rate for the Underwriting Year under consideration shall be 6.0%.” (Agreement p. 28.)

According to monthly reporting concerning premiums earned and losses incurred provided by Defendant to Plaintiff, the loss ratio for the Program from its inception through July 31, 2022 is 151.41 percent. (Genalo Decl., ¶ 38.) Given that the loss ratio exceeds 80 percent, Defendant’s commission under Schedule 5 of the Agreement is six percent of premiums earned through July 31, 2022. Thus, according to the evidence, the maximum commission earned to which Defendant may be entitled from the inception of the Program is $1,641,043. (Genalo Decl., ¶ 39.)[13]

Defendant argues its allegedly adjusted commission rate is not relevant because the Agreement authorizes Defendant to withhold its 14 percent provisional commission. (Agreement § 10.C [“GA has no right to the Company Funds . . . other than to remit to Company, refund premium legitimately owed to insureds, as applicable, and pay itself the provisional commission as described in this Agreement.”]) The Agreement requires a reconciliation to “true up” the commissions due to Defendant.

Defendant also asserts Plaintiff has incorrectly adjusted its commissions under the Agreement to bolster its claims in this litigation. Defendant argues Plaintiff’s calculations (through Genalo) adjust its commissions based across the entire multi-year duration of the Program, not for each “underwriting year” as the term is defined in the Agreement. (Compare Schedule 5 § 1.A, B with Genalo Decl., ¶¶ 34-39.) Plaintiff’s calculations, according to Defendant, are inconsistent with the Agreement and deprive it of commissions it has earned. (Pomplum Surreply Decl., ¶¶ 13-14.)

Plaintiff concedes it has calculated the commissions due to Defendant in a manner inconsistent with the Agreement as of the date the parties entered into the Agreement. Plaintiff argues, however, it did so properly; Defendant is subject to an amendment to the Agreement that redefined “underwriting year.” To support its claim Defendant is subject to an amended definition of “underwriting year,” Plaintiff submits a reinsurance contract between Plaintiff and “Dorchester Insurance Company . . . and any and all companies which are now or hereafter come under the same ownership or management of” Plaintiff. (Genalo Decl., Ex. 8.) The document amends “paragraph H of Article 6 – Definitions” and redefines “underwriting year” as running from December 24, 2019 to December 4, 2021. (Ibid.) The amendment is signed by Genalo for both parties, Petitioner and Dorchester Insurance Company. (Ibid.)

While the reinsurance contract is “incorporated” into the Agreement, a November 7, 2019 reinsurance contract (attached as Exhibit A to the Agreement) cannot possibly include the December 3, 2021 amendment to the reinsurance contract. Moreover, Genalo signed the reinsurance contract amendment one day after Plaintiff gave notice to Defendant it was terminating the Agreement. (Pavlov Dec., Ex. 2.) That Defendant had no knowledge of the amendment until Plaintiff produced it in reply along with the other issues (date, signature, Pavlov’s attestation) raises significant questions concerning Plaintiff’s credibility and calculation of the amount of commissions due to Defendant. (Pomplun Surreply Decl., ¶ 17.)

Accordingly, Plaintiff fails to show a likelihood of success on its proposed calculations on the adjusted commission rate.

The court acknowledges Defendant is entitled to pay itself provisional commissions at 14 percent from Plaintiff’s funds. Nonetheless, the Agreement requires Defendant to reconcile the advanced provisional commissions with the ratio of losses “[w]ithin 30 days after three months following the end of each Underwriting Year . . . .” (Agreement, Schedule 5, para. C, p. 28.) Given the November 7, 2019 effective date of the Agreement and the December 2, 2021 termination, Defendant had the obligation to reconcile its advanced provisional commissions at some point with its earned commissions based on the ratio of losses. (Agreement, Schedule 5, para. I, p. 29 [defining Underwriting Year].) It appears Defendant, now unlike Plaintiff, has made no adjustment to its claim of commissions owed based on the ratio of losses.

The parties also argue about fees or broker’s commissions[14] to which Defendant claims it is entitled. (See Pomplun Decl., ¶ 5 [filed 7-29-22][Pomplun 2 Decl.].) Defendant is entitled to Schedule 4 “fees that are filed by or on behalf of the Company and approved by the applicable Department of Insurance [].” (Agreement p. 27.) Such fees under the Agreement belong solely to Defendant. (Agreement p. 27.) Defendant produces evidence the fees to which it is entitled over the years “now total approximately $1.6 million.” (Pomplun Surreply Decl., ¶ 24.) Plaintiff has not provided evidence otherwise even though it has access to records through the Pace database. Thus, on this evidentiary record, the court cannot determine what fees (in addition to commissions), if any, to which Defendant is entitled. In fact, it appears Defendant is entitled to $1.6 million for fees it collected while acting as Plaintiff’s GA.

Finally, Defendant’s waiver of its rights under the Agreement to withdraw provisional commissions from the Trust Account as they were earned does not demonstrate Plaintiff’s failure to perform. Defendant elected not to raise the issue prior to the parties’ dispute and this litigation. Defendant never provided Plaintiff with the opportunity to breach its payment obligations to Defendant to the extent it deferred its payment.

Based on the evidence before the court, the court finds Plaintiff has demonstrated some ability to succeed on the merits of its claim it fully performed under the Agreement—an element of its breach of contract claim.

In response to Plaintiff’s claim Defendant materially breached the Agreement in multiple ways, Defendant asserts many arguments.

First, Defendant argues it was entitled to a 14 percent provisional commission and additional fees; the Agreement authorized it to remove the commission and fees from the Trust Account. (Agreement § 10, para. C, p. 8.) The commission and fees argument discussed above relates to whether Defendant breached the Agreement. Whether there was a breach and by whom turns on the reconciled commission rate after considering the ratio of losses and the fees, if any, owed by Plaintiff to Defendant. Also included in that inquiry would be the validity of Genalo’s purported amendment to the reinsurance contract and whether, if at all, the amendment is binding on Defendant.

Second, Defendant argues, at best, the disputed funds should remain in the Trust Account pending resolution of the parties’ dispute. (Agreement § 19, paragraph A, p. 12.) That is, nothing in the Agreement allows the disputed funds to be held or accessed by Plaintiff. While the Agreement supports Defendant’s argument, a reasonable interpretation of the Agreement also suggests the funds should have been returned to the Trust Account with Defendant’s authority to withdraw funds from the account suspended when the dispute arose. While Defendant suggests the parties do not have a dispute “regarding payment of premium” such that the provision restricting its right to remove funds from the Trust Account was suspended, it is reasonable that the parties’ disputes about commission would fall within the scope of a dispute about payment of premium. (Agreement § 19, para. A, p. 12. See Schedule 5, I., paras. A, F [linking commissions and premiums paid].) Defendant’s sweep of the Trust Account (twice) in the face of this litigation and a motion for a preliminary injunction raises significant issues such as breach of fiduciary duty.

Defendant also contends it did not breach the Agreement by any alleged failure to account. Defendant argues it met its accounting obligation by providing Plaintiff with monthly account statements during the Program. (Pomplun 2 Decl., ¶ 11.) The account statements provided the amount of premium collected, Defendant’s earned commission, losses and allocated loss adjustment expenses paid, roadside assistance payments with a final balance due to Plaintiff or an amount owed to Defendant. (Pomplun 2 Decl., ¶ 11.)

While Defendant may have provided monthly accountings, termination of the Agreement required Defendant to provide a full accounting and pay Plaintiff its funds based on the accounting within 20 days:

“E. Within twenty (20) business days of the Termination Date, the GA shall pay by wire transfer, or such other means to which the parties agree, to the Company all of the Company Funds as referenced in Section 10 along with an accounting related to same. . . .” (Agreement § 25, para. E, p. 17 [emphasis added].)

There is no evidence (and an apparent concession) Defendant complied with its obligation to provide Plaintiff’s with its funds (assuming there were funds due Plaintiff) or the accounting within 20 days of termination. Defendant’s assertion Plaintiff’s demands are ever shifting, does not account for the failure to comply with the clear obligation on Defendant upon termination of the Agreement.

Defendant argues the obligation to prepare a post-termination assistance plan falls upon Plaintiff. The Agreement specifies:

“F. The GA agrees, in the event of the termination or expiration of this Agreement, to take any and all actions reasonably requested by the Company within the timelines specified by the Company and, if requested by the Company, will assist the Company in developing a termination assistance plan setting forth the methodology, approach, deliverables and timelines, to ensure the orderly transition of the services provided by the GA pursuant to this Agreement. This Section 25.F shall survive the termination or expiration of this Agreement for a period of 12 months.” (Agreement § 25, para. F, p. 17 [emphasis added].)

The parties quibble over what “assist” means and who had the obligation to prepare the initial draft of such a plan. Plaintiff argues, “[a]s part of a collaborative process, [Plaintiff] expects [Defendant] – as the party responsible for running the Program day-to-day – to provide a first draft of the termination plan in light of [Defendant’s] knowledge of how the Program is running.” (Pavlov Reply Decl., ¶ 61.) While Plaintiff’s expectation is reasonable, its communications were hardly collaborative. (Pavlov Decl., Exs. 2 [non-collaborative demand], 4 [plan for “review and approval”]; Pavlov Reply Decl., ¶ 60 [provide the plan].) Similarly, while Defendant’s obligation to “assist” under the Agreement may not have required it to provide a draft plan, ignoring Plaintiff’s request is hardly the assistance envisioned by the parties under the Agreement. (Pavlov Reply Decl., ¶ 62.)

Further, the Agreement requires Defendant to return to Plaintiff all “Company Materials” within 10 days of the termination date. (Agreement § 25, para. I.) “Company Materials” are “[a]ll policies, forms, manuals, materials, equipment and supplies furnished by [Plaintiff] to [Defendant], including the Policy Documents.” (Agreement § 11, para. D, p. 9.) Defendant provides no evidence it returned Company Materials to Plaintiff. Plaintiff provides evidence it has not. (Pavlov Decl., ¶¶ 20 [“post-termination deliverables”], 36 [“Company Materials”].)

Plaintiff’s evidence on the issue is thin—a bare declaration without detailing those Company Materials held by Defendant. Defendant declares Plaintiff cannot provide any detail about the Company Materials because such withheld materials do not exist. (Pomplun Surreply Decl.,

The Agreement does not require Defendant to “return” “Company Records” to Plaintiff. “Company Records” are “true and complete records of all transactions of [Defendant] in connection with any Policy or the Agreement . . . separate and apart from all other records.” (Agreement § 11, para. C, p. 9.) To the extent Plaintiff attempts to establish a breach of the Agreement based on Defendant’s alleged failure to “return” Company Records to it, the claim is unavailing. (See Pavlov Decl., ¶¶ 25, 36.) Defendant provides evidence Plaintiff has remote access to all Company Records through its Pace claims system. (Pomplun Decl., ¶ 7.) Plaintiff provides no evidence to the contrary. (Reply 6:9-18.) In fact, Plaintiff’s evidence demonstrates Defendant transferred sufficient data to the adjuster and gave the adjuster access to Defendant’s Pace claims system. (Pangallo Decl., ¶ 5.)

“G. Immediately upon the Termination Date, if the Company commits in writing to assume responsibility for performing all of the duties performed by the GA under this Agreement or otherwise in connection with any Policy (hereinafter, the “Service Functions”), the GA covenants and agrees that it shall cooperate with, in good faith, and assist the Company in its performance of the Service Functions in accordance with any post-termination plan adopted pursuant to Section 25.F.” (Agreement § 25, para. G, p. 17 [emphasis added].)

Defendant argues that it did not breach its obligations in the Agreement related to Service Functions. Absent Plaintiff committing in writing to assume the duties performed by Defendant under the Agreement, Defendant remains responsible for outstanding insurance business and renewals until that business has expired by cancellation or by the terms of the policies. (See Agreement § 25, paras. C, H.) As Plaintiff has not committed to assume Defendant’s duties, Defendant argues it must continue its obligations related to outstanding policies. (Pomplun Decl., ¶ 17. [“To date, Go Maps has not received any such writing from Topa.”]) Plaintiff’s evidence of breach by Defendant related to Service Functions is unpersuasive. (Pavlov Decl., ¶¶ 33-35 [statement of charges].)[15]

Whether Defendant breached the Agreement as it relates to the Expirations turns on whether Defendant owes Plaintiff money. It is undisputed Defendant owns the Expirations. Plaintiff is entitled to the Expirations only if Defendant has some financial obligation to it. (Agreement

§ 28.) In reply, Plaintiff proffered questionable evidence Defendant owes it approximately $5 million for overpaid commissions, unauthorized broker fees, uncollected premiums and unpaid adjuster fees.[16] (Genalo Reply Decl. ¶ 60.) The parties further dispute the value of the Expirations. (Pomplun Decl., ¶ 16 [$28 million]; Genalo Decl. ¶¶ 63-67 [$300,000]; see also Surreply 10:2-13 [criticizing Plaintiff’s evaluation].)

Nonetheless, Defendant argues persuasively, as explained in part above (1) Plaintiff erred in its calculations of the adjusted commission rate; (2) Defendant is entitled to CDI-approved fees collected under the Agreement; (3) Plaintiff accepted remittances based on collected premiums for two years not written premiums as now claimed in this litigation; and (4) a separate contract governed the payments to Crawford and required Plaintiff and Defendant both make payments to Crawford. (Surreply 5:7-7:10 [adjusted commission rate], 7:18-26 [broker fees], 7:27-8:11 [overdrawn commissions], 8:12-20 [uncollected premiums], 8:21-9:9 [adjuster fees].)

Finally, Plaintiff contends Defendant also breached a provision in the Agreement requiring an adjuster (with whom Defendant has a written agreement) to pursue “salvage, and other recoveries allowed under the law.” (Agreement § 4, para. A (9).) Plaintiff provides evidence Defendant attempted to remove salvage cars from the yard holding the cars in July 2022. (Pavlov Supp. Decl., ¶ 5.)

Defendant argues prior to February 2022, it handled all salvage operations. (Pomplun Decl., ¶ 14.) While that may be the case, the Program’s adjuster assumed its duties as of February 2022. Nothing in the evidence suggests Defendant had any obligation or right as to salvage after February 2022. Thus, there was no reason for Defendant to attempt to obtain salvage cars in July 2022.

Defendant contends, however, it had authority to make this effort and did so only seeking to recover cars for which it bore responsibility. (Surreply 9:10-20.) Defendant identifies an email exchange showing Plaintiff requested Defendant to identify how it would continue to handle salvage efforts, and Defendant did so. (Pomplun Surreply Decl., ¶ 34, Ex. 9.) This evidence undermines Plaintiff’s claim of wrongdoing by Defendant concerning salvage.

Based on the foregoing, the court finds Plaintiff has demonstrated some ability to prevail on the merits of its claim Defendant breached the Agreement—an element of its breach of contract claim. The evidence presented supports Plaintiff’s claim Defendant breached by failing to provide an accounting (which would reconcile the commissions and fees issue and funds due Plaintiff, if any). To some extent Plaintiff’s evidence also supports its claim of breach based upon Defendant’s failure to “assist” with a post-termination assistance plan.

Plaintiff also argues Defendant’s conduct breached the fiduciary duty Defendant owes to it. There can be no question Defendant is Plaintiff’s fiduciary. (Agreement § 10, para. A. [“GA will hold Company funds in trust and act as a fiduciary in the interest of Company.”])

“To establish a cause of action for breach of fiduciary duty, a plaintiff must demonstrate the existence of a fiduciary relationship, breach of that duty and damages.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 182.)

To the extent, if at all, Defendant breached its obligations to Plaintiff under the Agreement through its withdrawals from the Trust Account and failure to pay funds to Plaintiff, the same acts would constitute a breach of fiduciary duty. (Middlesex Ins. Co. v. Mann (1981) 124 Cal.App.3d 558, 571.)

The likelihood of success of either parties’ claim concerning the amount of commissions and fees Defendant earned, as with the breach of contract claim, is difficult to discern on the evidence provided. The analysis of the breach of fiduciary duty claim is similar to the breach of contract claim. In addition, however, the court may consider Defendant’s sweep of the Trust Account in the face of litigation.

“The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.)

Plaintiff’s conversion claim is similar to its breach of contract and breach of fiduciary duty claim. The likelihood of success of either parties’ claim concerning the amount of commissions and fees Defendant earned, as with the breach of contract claim and breach of fiduciary duty claim, is difficult to discern on the evidence provided.

The second part of the preliminary injunction analysis requires the court to evaluate the harm the plaintiff is likely to sustain if the preliminary injunction is denied compared to the harm the defendant is likely to suffer if the injunction is issued. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70.)

Plaintiff contends CDI is threatening to suspend Plaintiff’s certificate of authority to transaction business in California. (Pavlov Decl., Ex. 8.) If CDI did suspend Plaintiff’s certificate, CDI would likely cause Plaintiff to go out of business because it primarily relies on the California marketplace in its business. (Pavlov Decl., ¶¶ 35, 39.) Plaintiff asserts it must have access to the Company Materials and the security of all premium money in the Trust Account to comply with CDI’s demands. As Defendant is not entitled to keep Plaintiff’s Company Materials or its Company Funds, Defendant could not suffer any harm because it has no ownership interest in them. Moreover, Defendant cannot use the Company Materials since it is no longer authorized to conduct new business on behalf of Plaintiff. Of course, in large part, Plaintiff’s argument turns on its claim Defendant is holding its Company Materials, a claim lacking real merit given Plaintiff’s failure to identify the Company Materials, and Defendant’s evidence it is holding none.

Defendant argues Plaintiff’s issue is about monetary relief. It asserts the CDI accusation has nothing to do with the breaches Plaintiff has alleged. According to Defendant, Plaintiff has all the documentation it needs (Company Records) going forward. That Plaintiff delayed in seeking Company Materials undermines its assertion of irreparable harm. Finally, Defendant argues Plaintiff should not receive the Expirations because it is a valuable asset belonging to Defendant.

Based on the evidence, the court agrees this dispute is about money—Plaintiff’s harm is largely monetary. Premiums will continue to be deposited into the Trust Account protecting policyholders who hold any outstanding checks drawn against that account. Plaintiff has access to information to defend against CDI’s action. Plaintiff has remote access to Company Records to allow it to service those accounts (assuming it provides its written election to do so). The accounting issue is related to the monetary dispute between the parties. Despite its belief it cannot do so, Plaintiff could prepare a draft of a post-termination assistance plan to obtain Defendant’s assistance as required by the Agreement. Requiring Defendant to provide Plaintiff with the Expirations—regardless of the valuation dispute—would have a substantial effect on Defendant’s business.

The CDI accusation relates to servicing issues. To the extent the parties have not prepared a post-termination assistance plan and Plaintiff cannot agree to service outstanding policies, Plaintiff is subject to Defendant providing certain services, and Defendant remains in place for run-off administration whatever its wishes. Given that the contract requires Defendant to assist Plaintiff with a post-termination assistance plan and the parties are required to work in good faith, both parties are the remedy to the post-termination assistance plan standoff—one party or the other must initiate the process.

The harm to be suffered by Plaintiff if the injunction is not granted is largely monetary. Given that CDI is investigating Defendant’s servicing—at least to some extent—the balance of harm (to the extent there is harm related to the servicing) tips slightly in favor of Plaintiff.

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court ultimately determines the plaintiff was not entitled to the injunction. (See Code Civ. Proc., § 529, subd. (a); City of South San Francisco v. Cypress Lawn Cemetery Ass’n (1992) 11 Cal.App.4th 916, 920.)

Given the limited scope of the preliminary injunction, the court finds a $10,000 undertaking sufficiently protects Defendant.

[1] Plaintiff merely sought a hearing date for its motion for a preliminary injunction. It did not seek any restraining orders on July 11, 2022.

[2] Such documentation allegedly “includes, but is not limited to, copies of issued policies, policy numbers, names and contact information for insureds, claims information, loss runs, claims bordereau, and any other information [Defendant] possess about the Program.” (Motion 2:6-8.)

[3] On July 14, 2022, after learning Defendant had removed funds from the Trust Account, Plaintiff sought a temporary restraining order (TRO) requiring Defendant to return the funds and to cease removing any further funds. After a hearing, the court granted a TRO enjoining Defendant from further removing any funds from the Trust Account pending the hearing on Plaintiff’s preliminary injunction request.

[4] To the extent Plaintiff has relied on its complaint for evidentiary support, the court notes the complaint is unverified and has no evidentiary value. (See Motion 7:19 [as “detailed in the Complaint”].)

[5] An app is “an application designed for a mobile device (such as a smartphone).” (www.merriam-webster.com/dictionary/app as of August 8, 2022.)

[6] For the sake of brevity and the convenience, the court generally refers to the Agreement without further identifying its location in the Pavlov and Pomplun declarations.

[7] In the Agreement, the parties refer to Plaintiff as the Company and Defendant as the GA.

[8] Specific performance and injunction are remedies.

[9] Plaintiff has since retreated from this sworn admission.

[10] Plaintiff’s funds are defined under the Agreement at Section 10, paragraph B:

“B. For purposes of this Agreement, the term “Company Funds” shall mean: (i) all Policy premium for the classes of business written hereunder and other amounts owed to Company, excluding only the Fees that are retained by the GA (as defined in Schedule 4), and (ii) all amounts of the premium taxes actually owed and attributable to the Fees, (iii) any and all fees and/or assessments as required by the DOI or any other governmental body.”

[11] Ownership of Expirations is explained in the Agreement as not belonging to Plaintiff except where there is a financial obligation owing by Defendant to Plaintiff at the time of termination and then only to the extent of the financial obligation. (Agreement § 28.)

“ ‘Expirations' in the insurance field has a definite and well recognized meaning; it embodies the records of an insurance agency by which the agent has available a copy of the policy issued to the insured or records containing the date of the insurance policy, the name of the insured, the date of its expiration, the amount of insurance, premiums, property covered and terms of insurance. This information enables the agent to contact the insured before the existing contract expires and arms him with the information essential to secure another policy and to present to the insured a solution for his insurance requirements. It has been determined that this information is of vital assistance to the agency in carrying on the insurance business and it has become, in the insurance field, recognized as a valuable asset in the nature of good will.” (V.L. Phillips & Co. v. Pennsylvania Threshermen & Farmers’ Mut. Cas. Ins. Co., 199 F.2d 244, 246 (4^th Cir. 1952).)

[12] Defendant notes (and the court agrees) Plaintiff does not provide evidence Defendant “was paid approximately $3.2 million in commissions” as argued in its motion. Pavlov does not attest to that fact; instead, she notes Defendant earned approximately $3.2 million. (See Opposition 7:17-23.)

[13] The court acknowledges the weak nature of the evidence originally submitted by Plaintiff to support its claim it is owned money. (Pavlov Decl., ¶ 20 [“at least $1 million”].) Nonetheless, “at least $1 million” supports a claim some money is due from Defendant to Plaintiff.

[14] Defendant’s Chief Executive Officer, Kevin Pomplun, attests Defendant does not “charge any broker fees in California.” (Pomplun Surreply Decl., ¶ 22.) Pomplun “colloquially” refers to fees Defendant may charge (as authorized by CDI) as broker’s fees. (Id. at ¶ 23.) CDI has approved Defendant charging installment fees, EFT installment fees, late fees, filing fees and fraud fees. (Id. at Ex. 6.)

[15] The court recognizes Plaintiff’s ability to commit to perform Service Functions necessarily requires a post-termination service plan. (Reply 7 n. 5.) Plaintiff’s argument therefore concedes it has not committed to provide ongoing Service Functions.

[16] Plaintiff retreated from its original claim Defendant earned over $3.2 million in commission with new calculations based on a claim Defendant was subject to an amendment to a reinsurance contract signed by Genalo for both parties the day after Plaintiff terminated the Agreement.