further conclude Broker owed no duty to procure prior completed work coverage for
Assemblers. We, therefore, affirm the judgment.
BACKGROUND
Broker procures insurance for businesses. Assemblers was a remodeling
contractor. In 2000, Assemblers contacted Broker seeking a basic liability policy.
Assemblers told Broker the policy limits its clients required, but never described the
types of coverage it wanted. Assemblers repeatedly told Broker to procure the least
expensive policy. Broker procured policies and provided them to Assemblers's president,
who read them. The president never had any questions for Broker after reading the
policies and never asked for a different policy or different coverage. Assemblers never
told Broker it did not want a policy with a manifestation endorsement or with a prior
completed work exclusion. In addition, Broker never misrepresented any coverage
2
contained in Assemblers's policies and never failed to obtain the coverage Assemblers
requested.
In April 2004 Assemblers performed work for a restaurant. In July 2008 an
explosion and resulting fire occurred at the restaurant, causing substantial property
damage. The restaurant's insurer, Golden Eagle Insurance (Golden Eagle), paid for the
damage under an insurance policy for which the restaurant paid premiums. Within a
month of the fire, Golden Eagle began pursuing Assemblers to pay for the damage.
Assemblers tendered Golden Eagle's claim to Lincoln General Insurance Company
(Lincoln General), the insurer who provided liability insurance for Assemblers in 2004,
and Preferred Contractors Insurance Company (Preferred), the insurer providing liability
insurance for Assemblers in 2008.
In an October 14, 2008, telephone conversation, a Preferred claims specialist
informed Assemblers's president that Assemblers's policy included a prior completed
work exclusion. Assemblers's president indicated he was aware of the exclusion and that
Lincoln General had also denied coverage. He told the claims specialist he had informed
Golden Eagle he had no coverage for the loss and Golden Eagle was welcome to sue him.
Preferred denied coverage in writing on October 23, 2008, asserting a prior
completed work exclusion. Lincoln General denied coverage on February 10, 2009,
asserting a manifestation endorsement limiting coverage to injury or damage first
manifested during the policy period.
After learning of the denial of coverage, Assemblers did not ask Broker why
Broker had not obtained a different type of policy for Assemblers and Assemblers had no
3
criticisms of Broker's failure to do so. Assemblers also did not ask Broker to change any
of Assemblers's policies to include the coverages excluded by the Lincoln General and
Preferred policies because the coverages were cost-prohibitive.
The month after Lincoln General denied coverage in writing, Golden Eagle sued
Assemblers and subsequently obtained a default judgment. Assemblers assigned to
Golden Eagle any claims Assemblers had against Broker and then petitioned for
bankruptcy relief.
Golden Eagle brought the instant lawsuit against Broker in Assemblers's name
alleging Broker negligently failed to procure Assemblers insurance coverage adequate to
cover the restaurant fire. Broker moved for summary judgment asserting among its
arguments that it had no legal duty to provide Assemblers with different or additional
coverages, Assemblers's claim was barred by the superior equities doctrine and
Assemblers's claim was barred by the statute of limitations.
Assemblers opposed each of these points. As part of its opposition, it submitted a
declaration from an insurance expert. Broker objected to the declaration on, among other
grounds, the declaration lacked foundation and failed to established expertise in the
standard of care for brokers providing insurance to contractors in Southern California.
The court granted Broker's motion, agreeing Broker owed no legal duty to provide
Assemblers with a different insurance policy that would have covered the subject loss.
The court also sustained Broker's objections to the declaration of Assemblers's expert on
the grounds the declaration failed to establish the expert possessed expertise on the
standard of care for brokers for contractors in Southern California. The court further
4
noted, "the scope of the legal duty of care is established by the courts, not by expert
testimony." The court declined to rule on any of Broker's other asserted grounds for
summary judgment.
DISCUSSION
" 'Because this case comes before us after the trial court's grant of summary
judgment, we apply these well-established rules: " ' "[W]e take the facts from the record
that was before the trial court when it ruled on that motion," ' " and we " ' " ' "review the
trial court's decision de novo, considering all the evidence set forth in the moving and
opposing papers except that to which objections were made and sustained." ' " ' "
[Citation.] We also " ' "liberally construe the evidence in support of the party opposing
summary judgment and resolve doubts concerning the evidence in favor of that
party." ' " ' [Citation.] 'We need not defer to the trial court and are not bound by the
reasons in its summary judgment ruling; we review the ruling of the trial court, not its
rationale.' " (Hartnett v. Crosier (2012) 205 Cal.App.4th 685, 689-690.)
I
Superior Equities Doctrine
Although the trial court declined to address this issue below, Broker contends
Assemblers's claim is barred by the superior equities doctrine. We agree.
The record shows and the parties do not dispute the restaurant's insurer, Golden
Eagle, filed this action against Broker as Assemblers's assignee. "An insurer's right to
subrogation is delimited by the application of equitable principles and not by the law of
assignments. '[O]ne who asserts a right of subrogation, whether by virtue of an
5
assignment or otherwise, must first show a right in equity to be entitled to such
subrogation, or substitution[.]' (Meyers v. Bank of America National Trust & Savings
Association (1938) 11 Cal.2d 92, 96 (Meyers).) Equitable subrogation requires an insurer
to establish that its equitable position is superior to the position of the party to be
charged." (Dobbas v. Vitas (2011) 191 Cal.App.4th 1442, 1446.)
An insurer cannot establish its position is equitably superior to the party to be
charged if the party is not the wrongdoer whose act or omission caused the underlying
loss or is not otherwise legally responsible for the underlying loss. (Dobbas v. Vitas,
supra, 191 Cal.App.4th at p. 1454; State Farm General Ins. Co. v. Wells Fargo Bank,
N.A. (2006) 143 Cal.App.4th 1098, 1112 ["the aim of equitable subrogation is to shift a
loss for which the insurer has compensated its insured to one who caused the loss, or who
is legally responsible for the loss caused by another and whose equitable position is
inferior"].) Here, there is no evidence Broker caused the restaurant fire. There is also no
evidence Broker agree to indemnify Assemblers for causing the restaurant fire. Golden
Eagle, therefore, cannot establish its position is equitably superior to Broker's. (Dobbas
v. Vitas, at p. 1454 [an insurer is not in a equitably superior position to a third party who
agreed to procure insurance for a loss, but did not cause the loss or agree to indemnify for
the loss].)
The fact Golden Eagle is acting as Assemblers's assignee in this case does not alter
our analysis. "[W]here by the application of equitable principles, a surety has been found
not to be entitled to subrogation, an assignment will not confer upon him the right to be
so substituted in an action at law upon the assignment. His rights must be measured by
6
the application of equitable principles in the first instance, his recovery being dependable
upon a right in equity, and not by virtue of an asserted legal right under an assignment."
(Meyers, supra, 11 Cal.2d at p. 97; accord, Dobbas v. Vitas, supra, 191 Cal.App.4th at
p. 1455.)
II
Duty
Even if Assemblers's claim was not barred by the superior equities doctrine,
Broker contends Assemblers cannot establish Broker owed a duty to Assemblers to
procure liability insurance with prior completed work coverage. We agree with this
contention as well.
As we recently explained, under well-settled law, "[i]Insurance brokers owe a
limited duty to their clients, which is only 'to use reasonable care, diligence, and
judgment in procuring the insurance requested by an insured.' [Citations.] Accordingly,
an insurance broker does not breach its duty to clients to procure the requested insurance
policy unless '(a) the [broker] 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 [broker] 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.' " (Pacific Rim Mechanical Contractors,
Inc. v. Aon Risk Ins. Services West, Inc. (2012) 203 Cal.App.4th 1278, 1283 (Pacific
Rim).)
7
Here, Assemblers does not assert and has not produced evidence Broker breached
its limited duty to Assemblers in any of the above respects. Rather, Assemblers seeks to
hold Broker accountable for breaching a previously unrecognized implied contractual
duty to investigate Assemblers's coverage needs and procure the requisite coverage to
meet those needs, even if Assemblers did not request the coverage and, as appears from
the record, probably could not have afforded it.
Assemblers touts many policy reasons for recognizing this implied contractual
duty. These reasons revolve around Assemblers's assertion that recognizing the implied
contractual duty would ensure fairness and equity by holding insurance brokers to the
same standards as other professionals. Whatever the merits of these policy arguments, it
is not difficult to conceive of countervailing policy considerations, including the
likelihood such an implied contractual duty might cause brokers to oversell insurance to
their clients in an effort to avoid the prospect of later professional liability.
We are also mindful that a decision to imply a duty here would effectively
mandate prior completed work coverage in all contractor general liability policies, which
could appreciably increase the cost of the policies without directly benefitting the
insureds. This case presents such an example as it appears the only party who would
have directly benefited from the prior completed work coverage is Golden Eagle. The
restaurant would not have directly benefited from the coverage because its losses were
already covered by the policy it purchased from Golden Eagle. Assemblers also would
not have directly benefited from the coverage because it was essentially insolvent at the
time of the loss and had no assets to protect.
8
As we explained in Pacific Rim, balancing these types of considerations is
properly the function of the Legislature, not the courts. (Pacific Rim, supra, 203
Cal.App.4th at p. 1285.) If imposing a broad duty on brokers to affirmatively determine
and procure insurance to meet an insured's coverage needs, or mandating prior completed
work coverage in all contractor general liability policies, " 'is in the interest of the
public . . . , the people of California, by initiative or through the Legislature, can create
that duty . . . .' [Citation.] 'We may not legislate on the subject in their stead.' " (Id. at
p. 1287.)
Given our conclusions that Assemblers's claim is barred by the superior equities
doctrine and Broker owed no legal duty to Assemblers to procure insurance with prior
completed work coverage, we need not address Broker's contention Assemblers's claim is
barred by the statute of limitations. We also need not address Assemblers's contention
the court erred by sustaining Broker's objections to the declaration of Assemblers's
standard of care expert.
DISPOSITION
The judgment is affirmed. Respondent is awarded its appeal costs.
MCCONNELL, P. J.
WE CONCUR:
HUFFMAN, J.
O'ROURKE, J.
9
AI Brief
AI-generated · verify before citing
Holding. The court held that an insurance broker's claim is barred by the superior equities doctrine when the insurer cannot establish that the broker caused the loss or agreed to indemnify the insured, and further held that a broker has no implied duty to investigate and procure specific coverage not requested by the client.
Issues
Whether an insurer's subrogation claim against an insurance broker is barred by the superior equities doctrine.
Whether an insurance broker has an implied duty to investigate and procure specific insurance coverage not requested by the client.
Disposition. affirmed
Quotations verified verbatim against the opinion
“We conclude Assemblers's claim is barred by the superior equities doctrine.”
“We further conclude Broker owed no duty to procure prior completed work coverage for Assemblers.”
“Equitable subrogation requires an insurer to establish that its equitable position is superior to the position of the party to be charged.”