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San Diego Assemblers, Inc. v. Work Comp For Less Insurance Services, Inc.

(Broker Was Not Liable For Failing To Procure Insurance Beyond That Requested By Insured)

In San Diego Assemblers, Inc. v. Work Comp For Less Ins. Services, Inc. (2013) 220 Cal.App.4th 1363, the California Fourth District Court of Appeal held that broker, Work Comp for Less Insurance Services, Inc. (“Broker”), was not liable for failing to procure insurance beyond that requested by the insured, San Diego Assemblers, Inc. (“Assemblers”), to cover it for liability arising out of prior completed work performed by Assemblers. The parties’ dispute arose out of the Broker’s alleged failure to provide Assemblers with a policy affording completed operations coverage in connection with the claim involving an explosion and resulting fire at a restaurant. The restaurant’s insurer, Golden Eagle Insurance (“Golden Eagle”), paid for the damage sustained by the restaurant and filed a subrogation action against Assemblers contending that it negligently performed work for the restaurant which caused the subsequent explosion and fire in July 2008. Assemblers tendered the Golden Eagle subrogation claim to its insurer, Preferred Contractors Insurance Company (“Preferred”). However, Preferred denied coverage of the claim on October 23, 2008 asserting a “prior completed work” exclusion. After learning of the coverage denial, Assemblers did not ask Broker why Broker had not obtained a different type of policy for Assemblers and Assemblers had no criticisms of Broker’s failure to do so. Assemblers also did not ask Broker to change any Assemblers policies to include the coverages excluded by the Preferred policy as such changes would be cost-prohibitive.

Subsequently, Golden Eagle obtained a default judgment against Assemblers and Assemblers assigned its rights to Golden Eagle to pursue claims against Broker and its insurers. Thereafter, Golden Eagle filed a lawsuit against Broker alleging that it negligently failed to procure insurance on behalf of Assemblers affording completed operations coverage for property damage claims. The trial court entered summary judgment in favor of Broker.

In affirming the trial court’s entry of summary judgment, the Court of Appeal reasoned as follows:

. . . 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, "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.' 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).)

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.

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