Judge Randolph M. Hammock, Case 22STCV38225 2023-04-17 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCV38225, Date: 2023-04-17 Tentative Ruling

Plaintiffs Al Hanissim, LLC, and Equimax Mortgage & Loan (dba Equimax Management) bring this action for (1) professional negligence and (2) fraud. Plaintiffs allege Defendant HUB International Insurance Services, Inc., and its agents Defendants Kris Hamburger, Deborah Kerr, and MNM Lilac Real Estate Partners, Inc., failed to obtain the requested property insurance for Plaintiff’s properties, despite having retained Plaintiffs’ premium payments. Defendants also allegedly made misrepresentations to Plaintiff to make it appear as though coverage had been obtained. On February 16, 2022, a fire destroyed the properties. The insurers denied Plaintiffs’ insurance claim due to lack of coverage.

Pursuant to Defendants’ request and without objection, the court takes judicial notice of Defendants’ Exhibits 1 and 2. The court takes judicial notice of the exhibits without assuming the truth of the assertions contained therein. (See Seelig v. Infinity Broad. Corp. (2002) 97 Cal. App. 4th 798, 808.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (CCP § 430.30(a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Id.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, 147 Cal.App.4th at 747.)

Defendants MNM and Hamburger demur to the First Cause of Action for Professional Negligence. Defendants contend the cause of action fails because they were agents of HUB acting within the scope of that agency, and therefore liability for their alleged negligence rests solely with HUB, the disclosed principal.

Generally speaking, California courts have adopted the rule that an insurance agent is not individually liable to an insured where the agent acts within the scope of that agency and on behalf of a disclosed principal. (See Lippert v. Bailey (1966) 241 Cal. App. 2d 376, 382.) Plaintiffs do not dispute this point, but argue the instant case falls into a recognized exception to that rule. In particular, Plaintiffs contend MNM and Hamburger assumed a “special duty” owed to Plaintiffs. (Opp. 9: 20-21.)

Courts have recognized liability against an insurance agent in three scenarios: “(a) the agent misrepresents the nature, extent or scope of the coverage being offered or provided…(b) there is a request or inquiry by the insured for a particular type or extent of coverage…, or (c) the agent assumes an additional duty by either express agreement or by ‘holding himself out’ as having expertise in a given field of insurance being sought by the insured.” (Fitzpatrick v. Hayes (1997) 57 Cal. App. 4th 916, 927.) Plaintiffs contend all three exceptions apply here. This court only needs to address the first.

Plaintiffs allege that Defendant Hamburger is a licensed insurance broker and was “an employee, authorized agent, and/or representative of HUB at all relevant times.” (Id. ¶ 4.) Defendant Hamburger “advised, guided, and instructed Plaintiffs in connection with their insurance needs.” (Id. ¶ 33.) Accordingly, Plaintiff alleges that Defendant Hamburger was the one who was to insure the properties through the “Middleneck Program” and “was the person responsible at HUB for reporting to Risk Placement Services (“RPS”) every quarter.” (Id. ¶¶ 14, 15.)

Plaintiffs further allege that Defendant MNM was “a broker of the Policy” and “an employee, authorized agent, and/or representative of Hamburger and HUB.” (Id. ¶¶ 6, 8.) MNM, along with HUB and Hamburger, allegedly falsely “represented to Plaintiffs by way of the June 9, 2021 Statement of Values that the Subject Properties were insured for property insurance through the Middleneck Program.” (Id. ¶ 56.)

Plaintiffs allege these Defendants had a “duty not to misrepresent whether coverage was obtained for the Subject Properties.” (FAC ¶ 34.) Plaintiffs were “under the assumption and erroneously informed by HUB” that the Subject Properties were insured through the “Middleneck Program.” (Id. 36.) Indeed, Plaintiff made premium payments in the amount of $499,564.03 based on the mistaken belief the properties were insured. (Id. ¶ 38.) However, Defendant HUB allegedly never obtained the requested insurance. (Id. ¶ 43.) Plaintiffs did not learn this until after a fire destroyed the properties. (Id. ¶ 42.) Plaintiffs therefore allege that Defendants “negligently and carelessly breached their duties of care to Plaintiffs, by failing to obtain insurance for the Subject Properties despite receiving premiums.” (Id. ¶ 49.)

Thus, at minimum, Plaintiffs have alleged that moving Defendants “misrepresent[ed] the nature, extent or scope of the coverage being offered or provided.” (Fitzpatrick, supra, 57 Cal. App. 4th at 927.) On these allegations, Defendants can be held liable for the alleged negligence, along with the principal, Defendant HUB.

Defendants also contend the fraud cause of action fails because it lacks the requisite specificity, and that Plaintiffs have failed to plead the element of reasonable reliance.

Fraud-based claims are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) To advance a cognizable fraud claim, “every element of the cause of action . . . must be alleged in full, factually and specifically, and the policy of liberal construction of pleading will not usually be invoked to sustain a fraud claim deficient in any material respect.” (Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1331). To plead fraud, a Plaintiff must allege “(1) a representation, (2) that is false, (3) made with knowledge of its falsity, and (4) with an intent to deceive, coupled with (5) actual detrimental reliance and (6) resulting damage.” (Lim v. The.TV Corp. Internat. (2002) 99 Cal. App. 4th 684, 694.)

The allegations underlying the fraud cause of action are the same or similar to those underlying the negligence cause of action. Plaintiffs allege that Defendants “represented to Plaintiffs by way of the June 9, 2021 Statement of Values that the Subject Properties were insured for property insurance through the Middleneck Program.” (FAC ¶ 56.) However, those representations “were false and were made with knowledge of such falsity.” (Id. ¶ 56.) Plaintiffs also allege that Defendants falsely represented by email that the properties had coverage through May 1, 2022, when in fact, no coverage had been obtained. (Id. 57.) Defendants then made further misrepresentations when they attempted to create a pretext suggesting that the (nonexistent) coverage would be removed. (Id. ¶ 58.)

In reliance on the representations that the properties had coverage, Plaintiffs “paid HUB premiums for the Subject Properties and justifiably believed that the Subject Properties were insured.” (Id. ¶ 60.) They also “refrained from purchasing insurance elsewhere.” (Id. ¶ 62.) As a result, Plaintiffs did not have insurance coverage when the fire destroyed the properties. This caused Defendants “loss of the benefit of the bargain, as well as loss of their possessions, loss of use of the business, aggravation and extreme and severe financial distress.” (Id. ¶ 63.)

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.