Castrejon v. United States Liability Ins. Co. CA4/1 (2015) · DecisionDepot
Castrejon v. United States Liability Ins. Co. CA4/1
California Court of Appeal Mar 27, 2015 No. D064679Unpublished
Filed 3/27/15 Castrejon v. United States Liability Ins. Co. CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
ANGEL CASTREJON et al., D064679
Plaintiffs and Appellants,
v. (Super. Ct. No. 37-2010-00104436- CU-BC-CTL) UNITED STATES LIABILITY INSURANCE COMPANY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of San Diego County, Richard
E.L. Strauss, Judge. Affirmed.
Winters & Associates, Jack B. Winters, Jr. and Georg M. Capielo for Plaintiffs
and Appellants.
Murchison & Cumming, Bryan M. Weiss and Nancy N. Potter for Defendant and
Respondent.
A liability insurance policy that expressly excludes coverage of both real estate
sales transactions and fraudulent transactions does not cover either 1) the listing for sale
of real property or 2) a loan transaction that the plaintiff homeowners were unaware of
and that, at all times, they have asserted was fraudulent. Hence, we affirm a judgment
entered in favor of respondent insurer with respect to claims that it improperly declined to
defend the perpetrators of the mortgage loan fraud.
where, as here, it appears from the record on appeal the appellant did not request any
additional findings, we are required to imply any reasonable findings that support the
judgment. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133-1134.)
II
In their principal argument on appeal, the Castrejons contend that, in determining
that the USLIC policy did not provide coverage for real estate sales services, the trial
court erred. We find no error.
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A. Coverage Provisions of the USLIC Policy
Century initially obtained liability insurance from USLIC in 2006. With respect to
the 2006 policy the trial court made the following findings:
"a. . . . Century[] originally submitted an application to United States Liability
Insurance Company ('USLIC') seeking insurance for a mortgage brokerage company,
stating that the only business of the company was mortgage brokerage and that Arsalan
Saadatirad was the President of Century Mortgage.
"b. USLIC issued a Professional Liability policy effective April 19, 2006 to April
19, 2007, which, on the Declarations page, in Section VIII, provided that the policy was
issued to provide coverage 'Solely in the performance of Professional Services as a(n)
Mortgage Broker for others for a fee.'
"c. The 2006-2007 policy also included a 'Mortgage Brokers Endorsement' and a
Professional Services Endorsement which provided in pertinent part that USLIC was not
obligated to defend or indemnify claims arising out of services as a Real Estate Agent or
Broker."
In 2007, Century renewed its USLIC policy. With respect to the renewed policy,
which was in place at the time the Castrejons were the victims of Labio's and Saadatirad's
fraud, the trial court found:
"d. Prior to April 19, 2007 Saadatirad/Century requested renewal of the USLIC
policy, and in connection with the renewal, completed a Specified Professions
Professional Liability Renewal Application. That Renewal Application asked if there had
been any change to the nature of the business and Saadatirad answered 'No' and signed
the application.
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"e. USLIC issued a Policy Renewal Certificate which stated: 'Please attach this
Renewal Certificate to your expiring policy.['] The lower portion of the Renewal
Certificate contained the Declarations for the renewal of the policy for the period April
19, 2007-2008. The Declarations did not include a Section VIII. [See Trial Exhibit No.
3]
"f. USLIC also provided Century Mortgage with an updated Mortgage Brokers
Endorsement which was made part of the 2007-08 policy. The 2007-08 policy included
the same Professional Services Endorsement as the 2006-07 policy, excluding coverage
for services as a Real Estate Agent or Broker."
Based on these findings the trial court concluded that the second USLIC policy
unambiguously excluded coverage for real estate sales or brokerage services. The trial
court stated:
"a. The 2007-08 policy was not ambiguous because the declarations page did not
include item VIII. The determination of ambiguity of a policy is based upon the
reasonable expectations of the insured. While there was no actual testimony from the
insured as to his expectations, and such testimony would, in any event[,] be suspect in
view of subsequent events, the reasonable expectations can be determined from the
context of the transaction: the insured asked for mortgage brokerage coverage. He
received an original policy which was limited to mortgage brokerage services, which
contained a mortgage brokers endorsement, and which excluded real estate sales or
brokerage activities. When the insured asked for a renewal of the policy, he represented
that the business of Century Mortgage had not changed. He received a policy which
included a new mortgage brokers endorsement form and which still excluded services as
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a real estate agent or broker. USLIC asked that it be attached to the previous year's
policy. The declarations page was missing Item VIII, but in view of what
Century/Saadatirad had asked for, what they had received in the past, the Mortgage
Brokers form on both policies and the exclusion for Real Estate Sales or Broker services
on both policies, the 2007-08 policy was not ambiguous as to whether it would provide
coverage for real estate sales or brokerage."
B. Analysis
The 2007-2008 policy contained the following Professional Services Exclusion
Endorsement: "In consideration of the premium paid, it is agreed that the Company shall
not be liable to make any payment for Loss or Defense Costs in connection with any
Claim made against any Insured based upon, arising out of, directly or indirectly
resulting from, in consequence of, or in any way involving the rendering or failure to
render Professional Services by any Accountant, Insurance Agent or Broker, Lawyer,
Medical Professional, Real Estate Agent or Broker, Title Insurance Agent/Abstractor and
Escrow Agent."
It is well established that "insurers have the right to limit policy coverage in plain
and understandable language and can limit the character and extent of the risk assumed."
(Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 749.) When it is
asserted, as here, that a limitation on coverage set forth in a policy is ambiguous and that
the ambiguity should be interpreted in favor of the insured, we must apply the rules of
construction, which govern all contracts: "While insurance contracts have special
features, they are still contracts to which the ordinary rules of contractual interpretation
apply. [Citation.] The fundamental goal of contractual interpretation is to give effect to
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the mutual intention of the parties. [Citation.] If contractual language is clear and
explicit, it governs. [Citation.] On the other hand, '[i]f the terms of a promise are in any
respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor
believed, at the time of making it, that the promisee understood it.' [Citations.] This rule,
as applied to a promise of coverage in an insurance policy, protects not the subjective
beliefs of the insurer but, rather, 'the objectively reasonable expectations of the insured.'
[Citation.] Only if this rule does not resolve the ambiguity do we then resolve it against
the insurer. [Citation.]
"In summary, a court that is faced with an argument for coverage based on
assertedly ambiguous policy language must first attempt to determine whether coverage
is consistent with the insured's objectively reasonable expectations. In so doing, the court
must interpret the language in context, with regard to its intended function in the policy.
[Citation.] This is because 'language in a contract must be construed in the context of
that instrument as a whole, and in the circumstances of that case, and cannot be found to
be ambiguous in the abstract.' [Citations.]" (Bank of the West v. Superior Court (1992) 2
Cal.4th 1254, 1264-1265, italics omitted.)
In the context of an initial policy application that stated Century was a mortgage
broker, an application for a renewal that stated Century's business had not changed and
successive policies that expressly excluded real estate services, like the trial court, we
interpret the USLIC policy as unambiguously excluding coverage for real estate sales
transactions. The absence of a declarations clause in the second policy that would have
more fully defined mortgage services covered by the policy did not in any manner
eliminate or reduce the scope of the real estate services exclusion.
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III
The Castrejons also argue that, in any event, the USLIC policy covered their
negligent supervision claim against Century, as opposed to their separate claims against
Labio and Saadatirad. We disagree. The trial court's implied finding that no claims
arising out of the fraud practiced by Labio and Saadatirad were covered is fully supported
by the record.
Both the 2006-2007 policy and the 2007-2008 policy provided: "This Policy does
not apply to, and the Company will not defend or pay Loss for, any Claim arising out of,
directly or indirectly resulting from, based upon or in any way involving any actual or
alleged: [¶] A. criminal, fraudulent, dishonest or discriminatory act or omission . . . ."
Provisions such as this, which apply to a particular class of acts rather than to particular
actors or insureds, exclude coverage not only for claims against the actual perpetrators of
a fraud but derivative claims against their supervisors or employers based on a theory of
negligent supervision. (See Medill v. Westport Ins. Corp. (2006) 143 Cal.App.4th 819,
832 [exclusion for violation of securities laws applies to all insureds even if only
committed by one].)1 Thus, this case is plainly distinguishable from the holding in Smith
Kandal Real Estate v. Continental Casualty Co. (1998) 67 Cal.App.4th 406, 415, upon
which the Castrejons rely. In that case, the court considered an exclusion that applied
only to certain insureds, not a class of acts.
1 The express exclusion in USLIC's policy, which applies to fraudulent acts as opposed to actors or insureds, is broader than the provisions of Insurance Code section 533 which states: "An insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured's agents or others." 10
Moreover, where, as here, the record shows Saadatirad, the principal of Century,
was engaged in the fraudulent scheme, there is no reasonable possibility the corporate
entity he controlled would have ever had the power to discipline him, and, hence, there
was no possibility it would be held liable on a theory of negligent supervision of him or
Labio, his coconspirator. (See Coit Drapery Cleaners, Inc. v. Sequoia Ins. Co. (1993) 14
Cal.App.4th 1595, 1605.)
IV
The Castrejons also suggest that because in declining Saadatirad's and Century's
tenders of defense USLIC relied on the real estate services exclusion, it could not later
rely on the intentional fraud exclusion as relieving it of its duty to defend. We disagree.
USLIC's letters declining to provide a defense to Saadatirad and Century did not waive
its right to later assert other grounds for declining coverage, and there is no other
evidence suggesting that it intended to forego any other defense, including the intentional
fraud that gave rise to the Castrejons' underlying claims. As the court in Waller v. Truck
Ins. Exchange, Inc., supra, 11 Cal.4th at pages 31-32 stated in rejecting such a waiver
argument: "California courts have applied the general rule that waiver requires the
insurer to intentionally relinquish its right to deny coverage and that a denial of coverage
on one ground does not, absent clear and convincing evidence to suggest otherwise,
impliedly waive grounds not stated in the denial. (State Farm Fire & Casualty Co. v.
Jioras (1994) 24 Cal.App.4th 1619, 1628, fn. 7 ['Waiver depends solely on the intent of
the waiving party, and is not established merely by evidence the insurer failed to specify
the exclusion in a letter reserving rights.']; cf. Titan Corp. v. Aetna Casualty & Surety Co.
provision to deny coverage does not preclude insurer from later claiming rights under
other provisions]; contra, Alta Cal. Regional Center v. Fremont Indemnity Co. (1994) 25
Cal.App.4th 455, 466 [dictum stating that where insurance contract does not provide
coverage but insurer fails to assert correct ground for denying coverage, automatic waiver
doctrine permits insured to receive coverage where none exists].)"
Although not asserted in USLIC's letter declining coverage, in light of the entirely
fraudulent nature of the Castrejon transaction, at the time coverage was denied there was
in fact no potential for coverage. (See Waller v. Truck Ins. Exchange, Inc., supra, 11
Cal.4th at p. 37 [no duty to defend where no potential coverage even though defense to
coverage not asserted at time tender of defense declined].)
V
The Castrejons contend the trial court erred in admitting evidence of Labio's and
Saadatirad's criminal convictions. They contend that because the convictions occurred
after USLIC declined to provide a defense, they were irrelevant and inadmissible. Again,
we find no error. Although not dispositive, the convictions were plainly relevant in
considering the nature of the acts that gave rise to the Castrejons' claims.
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DISPOSITION
The judgment in favor of USLIC is affirmed. USLIC to recover its costs of
appeal.
BENKE, Acting P. J.
WE CONCUR:
O'ROURKE, J.
IRION, J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that a liability insurance policy excluding coverage for real estate brokerage services and fraudulent acts did not cover claims arising from a fraudulent loan scheme, as the policy unambiguously excluded both the real estate transaction and the underlying fraud.
Issues
Whether the insurance policy's exclusion of real estate brokerage services applied to the underlying transaction.
Whether the policy's exclusion for fraudulent acts barred coverage for derivative claims of negligent supervision.
Whether the insurer waived the right to rely on the fraud exclusion by failing to cite it in initial denial letters.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“A liability insurance policy that expressly excludes coverage of both real estate sales transactions and fraudulent transactions does not cover either 1) the listing for sale of real property or 2) a loan transaction that the plaintiff homeowners were unaware of and that, at all times, they have asserted was fraudulent.”
“The 2007-08 policy was not ambiguous as to whether it would provide coverage for real estate sales or brokerage.”