Judge: William D. Claster, Case: 20-01161160, Date: 2022-10-07 Tentative Ruling
Cross-Defendant Travelers Casualty Insurance Company of America's Notice of Demurrer and Demurrer to LABARRE/OKSNEE INSURANCE Agency, LLC's Second Amended Cross-Complaint ROA 209
Cross-Defendant Travelers Indemnity Company’s demurrer to the Second Amended Cross-Complaint (2AXC) of Cross-Complainant LaBarre/Oksnee Insurance Agency, LLC is OVERRULED as to the third cause of action (declaratory relief) and SUSTAINED WITHOUT LEAVE TO AMEND as to the fourth cause of action (negligence).
I. Background
The underlying First Amended Complaint of Plaintiff Sirco/Irvine Business Park II Association concerns insurance coverage. The Association is the community association for a three-building commercial condominium park in Santa Ana. In 2008, the Association took out an insurance policy on the condominium park. The policy (as renewed) was in effect on September 25, 2019, when a fire damaged one of the three buildings. The policy was issued by Travelers. The Association purchased the policy through LaBarre/Oksnee, a broker (and alleged agent of Travelers) that held itself out as an expert in condominium insurance.
Travelers denied the Association’s claim because the building at issue wasn’t covered by the policy. The Association alleges that unbeknownst to it, and contrary to its instructions, LaBarre/Oksnee procured an insurance policy that covered only one of the buildings. The Association now brings claims for breach of contract, reformation, and declaratory relief against Travelers. It also brings a negligence claim against both LaBarre/Oksnee and Travelers.
LaBarre/Oksnee cross-complained against Travelers. The operative 2AXC contains four causes of action: equitable indemnity, apportionment/contribution, declaratory relief, and negligence.
II. Standard of Review
In reviewing the sufficiency of a complaint against a demurrer for failure to state facts sufficient to state a cause of action, the Court is guided by long-settled rules. The Court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) “The complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “Further, [the Court] gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)
III. Discussion
A. Declaratory Relief
Travelers offers two reasons the declaratory relief claim should fail. First, Travelers argues LaBarre/Oksnee must allege the existence of a contract to plead a declaratory relief claim. LaBarre/Oksnee correctly points out in opposition that CCP § 1060 contains no such requirement. The statute mentions contracts, but as one of several proper subjects for declaratory relief. The statute also covers “[a]ny person . . . who desires a declaration of his or her rights or duties with respect to another,” which is broad enough to cover a declaration that Travelers owes a duty to indemnify LaBarre/Oksnee.
In reply, Travelers quotes a California Supreme Court case that explains: “A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties under a written instrument and requests that these rights and duties be adjudged by the court.” (Maguire v. Hibernia Savings & Loan Soc. (1944) 23 Cal.2d 719, 728.) In Maguire, the plaintiffs sought a declaration of the rights and duties of the parties under written instruments. (Id., at p. 727 [plaintiffs alleged “an actual controversy exists relating to the legal rights and duties of the respective parties under the written instruments and contracts”].) While it is true that a party seeking a declaration of rights and duties under a contract must plead the existence of the contract, here LaBarre/Oksnee seeks a declaration of rights and duties under principles of equitable indemnity.
Second, Travelers argues the declaratory relief claim is duplicative of the indemnity and apportionment claims, and may be dismissed on that basis. (See DeLaura v. Beckett (2006) 137 Cal.App.4th 542, 545 [court may sustain demurrer without leave if declaration sought is not necessary].) The Court disagrees at this stage of the case. The declaratory relief claim seeks only to adjudicate the existence of a duty to indemnify. The indemnity and apportionment claims seek entry of a money judgment for indemnity, so the Association’s underlying claims must be resolved before these claims can be fully addressed. In contrast, it appears the abstract question of whether Travelers owes a duty of indemnity at all can be resolved independently of the Association’s claims.
B. Negligence
Travelers argues LaBarre/Oksnee again fails to allege the existence of a duty running from Travelers to LaBarre/Oksnee. The Court agrees.
The only direct allegation of a duty running from Travelers to LaBarre/Oksnee in the 2AXC is at ¶ 33:
Cross-complainant alleges that cross-defendants owed cross-complainant a duty to exercise due care in underwriting the policy including but not limited to, a duty to ensure the information provided by cross-complainant was complete and accurate, a duty to adhere to industry standard practices of actually reviewing information submitted through cross-defendants’ platform to provide coverage based thereon, and a duty to review the Conditions, Covenants & Restrictions of the HOA to verify the information provided by cross-complainant regarding the number of buildings and square footage of insured property to provide the insurance requested.
(The 2AXC also incorporates the negligence allegations of the underlying complaint by reference, but those allegations allege a duty running from Travelers to the Association.)
The Court has the same concerns it expressed in the prior demurrer ruling. Assuming Travelers owes a duty to exercise due care in underwriting the policy, wouldn’t that duty run to the insured, not to the broker? LaBarre/Oksnee identifies no case law holding such a duty runs to the broker.
Furthermore, Travelers points out in its papers that an insurer has no duty to the insured to verify the accuracy of statements made by the insured in an insurance application. (See American Way Cellular, Inc. v. Travelers Property Casualty Co. of America (2013) 216 Cal.App.4th 1040, 1051.) The insurer owes fiduciary duties to the insured, not just duties under a negligence theory. (See ibid.) If the insurer has no duty to the insured to verify the insured’s statements in an application despite owing fiduciary duties to the insured, why would it have a duty to do the same for a broker to whom it doesn’t owe fiduciary duties?
Absent case law holding such a duty exists, the Court sustains the demurrer to the fourth cause of action. Because this is the second time this particular defect has been identified, and because it appears to the Court that the defect cannot be cured by amendment, leave to amend is denied.