Judge: Peter A. Hernandez, Case: 24STCV18469, Date: 2025-01-22 Tentative Ruling
The Court often posts its tentative several days in advance of the hearing. Please re-check the tentative rulings the day before the hearing to be sure that the Court has not revised the ruling since the time it was posted.
Please call the clerk at (213) 633-0154 by 4:00 pm. the court day before the hearing if you wish to submit on the tentative.
Case Number: 24STCV18469 Hearing Date: January 22, 2025 Dept: 34
Defendant USI Insurance Services LLC’s Demurrer to
Plaintiffs’ Fourth Cause of Action for Fraudulent Concealment is OVERRULED.
Background
On July 25, 2024, Plaintiffs Fountain Topco LLC and 4
Over LLC (“Plaintiffs”) filed a complaint against Defendants ACE American
Insurance Company and USI Insurance Services LLC (“Defendants”) arising from Plaintiffs’
insurance coverage with Defendants alleging causes of action for:
1.
Breach of Contract;
2.
Tortious Breach of The Implied Covenant of Good
Faith and Fair Dealing;
3.
Negligence; and
4.
Breach Of Fiduciary Duty.
On September
17, 2024, Plaintiffs filed a First Amended Complaint (“FAC”) against Defendants
alleging causes of action for:
1.
Breach of Contract;
2.
Tortious Breach of The Implied Covenant of Good
Faith and Fair Dealing;
3.
Negligence; and
4.
Fraudulent Concealment.
On October
23, 2024, Defendant ACE American Insurance Company filed an answer to
Plaintiffs’ FAC.
On November
8, 2024, Defendant USI Insurance Services LLC (“USI”) filed this Demurrer to Plaintiffs’
fourth cause of action for fraudulent concealment. On January 8, 2025, Plaintiffs
filed an opposition. A reply was filed on January 14, 2025.
Legal Standard
“The
party against whom a complaint or cross-complaint has been filed may object, by
demurrer or answer as provided in Section 430.30, to the pleading on any one or
more of” various grounds listed in statute. (Code Civ. Proc., § 430.10.)
When considering demurrers, courts
read the allegations liberally and in context. 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. (Ibid.) 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).
Discussion
USI
demurs, pursuant to Code of Civil Procedure section 430.10, subdivisions (e),
to Plaintiffs’ fourth cause of action for fraudulent
inducement, on the basis that
Plaintiffs fail to state facts sufficient to constitute a cause of action.
Timing
The
court notes that USI’s demurrer is untimely. (See Code Civ. Proc., § 430.40,
subd. (a).) Plaintiffs’ FAC was filed on September 17, 2024. USI then demurred
on November 8, 2024, almost two months
later. Nevertheless, the court
exercises its discretion to still consider the demurrer, but admonishes USI to
comply with the requirements of the Code of Civil Procedure going forward. (Jackson
v. Doe (2011) 192 Cal.App.4th 742, 749 [trial court has discretion to
consider a late-filed demurrer].)
Fraudulent Concealment
“[T]he
elements of an action for fraud and deceit based on a concealment are: (1) the
defendant must have concealed or suppressed a material fact; (2) the defendant
must have been under a duty to disclose the fact to the plaintiff; (3) the
defendant must have intentionally concealed or suppressed the fact with the
intent to defraud the plaintiff; (4) the plaintiff must have been unaware of
the fact and would not have acted as he did if he had known of the concealed or
suppressed fact; and (5) as a result of the concealment or suppression of the
fact, the plaintiff must have sustained damage.” (Boschma v. Home Loan
Center, Inc. (2011) 198 Cal.App.4th 230, 248.)
Generally, fraud must be
pled with particularity. (Hills Transportation Co. v. Southwest Forest
Industries, Inc. (1968) 266 Cal.App.2d 702, 707.) Pleadings must allege
facts as to “‘how, when, where, to whom, and
by what means the representations were tendered.’" (Stansfield v.
Starkey (1990) 220 Cal.App.3d 59, 73.)
Plaintiffs allege that on
August 5, 2021, USI, acting as an insurance broker for Plaintiffs, sold a Chubb
cyber enterprise risk management insurance policy to Plaintiffs. (FAC, ¶ 11.) On
July 27, 2022, Alexander Ross (“Ross”), vice president of USI, sent Plaintiffs
a proposal from Chubb for a policy renewal that identified the same terms and
endorsements as the original insurance policy. (Id., ¶ 14.) Without
Plaintiffs’ knowledge, an agent for Chubb sent a separate renewal policy
proposal to Joyce Mackewich (“Mackewich”), a senior account manager for USI. (Id.,
¶ 15.) This second proposal included terms and endorsements that had not been
identified in the initial renewal proposal, including a specimen policy. (Ibid.)
On August 3, 2022, Ross and Mackewich met with Plaintiffs to present the terms
of the policy renewal without revealing the existence of the second proposal. (Id.,
¶ 17.) On August 5, 2022, Plaintiffs purchased and renewed its insurance policy
through USI after Defendants led Plaintiffs to believe that they were securing
the same insurance coverage under the renewed policy as they had under the
original. (Id., ¶¶ 18-19.) Plaintiffs relied on Defendants to inform
them separately and in writing if the renewed policy in any way provided more
restrictive coverage terms or limits from original policy. (Id., ¶ 19.)
On November 19, 2022, Plaintiffs became victim to a ransomware attack that
severely affected Plaintiffs' business operations. (Id., ¶¶ 21, 23–24.)
Plaintiffs reported the incident to Defendants and submitted a claim for
reimbursement of the costs and expenses that Plaintiffs had incurred during the
attack. (Ibid.) Defendants, based on the renewed policy, denied majority
of Plaintiffs’ claim. (Ibid.) It was not until June 8, 2023, that
Plaintiffs learned of the existence of the second renewal proposal. (Id.,
at ¶ 20.)
USI argues that Plaintiffs’
claim fails as a matter of law as it is based on a wholly unsubstantiated
confidential relationship that exceeds the limited legal duties owed by
insurance brokers. (Demurrer, at p. 5.) USI contends that insurance brokers
have a limited duty to procure the requested insurance to a client. (Id.,
at p. 6.) As such, USI argues that the only duty owed by USI to Plaintiffs is
to place the insurance policy requested by the insured without a duty to advise
Plaintiffs on specific insurance matters. (Ibid.) Additionally, USI
argues that Plaintiffs’ FAC does not establish that USI had a duty to disclose
or that a fiduciary relationship existed between USI and Plaintiffs. (Id.,
at p. 7.) Lastly, USI argues that the cause of action does not meet pleading
standards as Plaintiffs fail to allege any facts showing the intent to induce
reliance or how Plaintiffs would have acted differently if the second proposal
of the insurance policy was disclosed. (Id., at pp. 9-10.)
In opposition, Plaintiffs argue that as Plaintiffs
alleged that a confidential relationship developed between USI and Plaintiffs,
USI had a duty to disclose compete and accurate information concerning the
insurance policy renewal proposals. (Opp., at p. 7.) As such, Plaintiffs
contend that USI had a duty to disclose the terms of the second renewal
proposal to Plaintiffs. (Id., at p. 8.) Plaintiffs also argue that they
sufficiently alleged their cause of action for fraudulent concealment with the
requisite particularity.
The court finds that Plaintiffs’ FAC sufficiently alleges
that a confidential relationship existed between Plaintiffs and USI. (FAC, ¶ 51;
GAB Business Services, Inc. v. Lindsey & Newsom Claim Services, Inc.
(2000) 83 Cal.App.4th 409, 417 [A confidential relationship is a fiduciary duty
undertaken by agreement whereby a person voluntarily assumes a position of
trust and confidence.].) As such, Plaintiffs allege USI had a duty to disclose
any material information concerning the material reduction in coverage and
limits under the renewed policy that caused Plaintiffs damages. (FAC ¶¶ 52-53.)
Plaintiffs further allege that USI failed to inform Plaintiffs about the second
proposal, specimen policy, and material reduction in coverage and limits in
order to induce Plaintiffs to renew their policy through USI. (Ibid.)
It is correct that insurance brokers, who act on behalf
of the insurance applicant or policyholder have a limited duty to their clients
to use “reasonable care, diligence, and judgment in procuring the
insurance requested by an insured.” (Pacific Rim Mechanical Contractors,
Inc. v. Aon Risk Ins. Services West, Inc. (2012) 203 Cal.App.4th 1278, 1283
(emphasis in original).) As such, the broker cannot be held liable for
breaching this duty unless (1) the broker misrepresents the nature, extent or
scope of coverage; (2) the insured makes a specific request for or inquiry
about a particular type or extent of coverage; or (3) the broker assumes an
additional duty either by “express agreement or by ‘holding himself out’ as
having expertise in a given field of insurance being sought by the insured.” (Ibid.)
Here, Plaintiffs make clear allegations that USI
misrepresented the scope of the coverage that Plaintiffs purchased by failing
to inform Plaintiffs about the second proposal, specimen policy, and material
reduction in coverage and limits in order to induce Plaintiffs to renew their
policy through USI. Thus, even if there was no confidential relationship,
Plaintiffs allegations do plead the existence of a duty to disclose owed by USI
as an insurance broker. As such, Plaintiffs sufficiently allege that USI had a
duty to disclose, failed to disclose material information with the intent to
induce Plaintiffs to purchase the policy, that Plaintiffs would have acted
differently if they had known the material information, and that such
concealment led to Plaintiffs’ harm. (FAC ¶¶ 49-53.)
Plaintiffs have sufficiently pled a cause of action for
fraudulent inducement. Accordingly, USI’s demurrer is overruled.
Conclusion
Defendant USI Insurance Services LLC’s
Demurrer to Plaintiffs’ Fourth Cause of Action for Fraudulent Concealment is
OVERRULED.