Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court of San Bernardino County No. SCV119733, John P. Wade, Judge.
Shernoff Bidart Darras & Echeverria, Michael J. Bidart, Ricardo Echeverria and Steven M. Schuetze for Plaintiffs and Appellants.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Jeffrey J. Christovich, Allison Ann Arabian and Michael S. Robinson for Defendant and Respondent.
OPINION
MILLER J.
Plaintiffs and appellants Theresa and Julian Plowy appeal after the trial court granted summary judgment in favor of defendant and respondent R.W. O’Neal Insurance Agency, Inc., on plaintiffs’ complaint for alleged negligence in failing to procure requested homeowners’ insurance coverage. Upon review, we conclude that the trial court properly granted the motion for summary judgment; consequently, we affirm the judgment.
FACTUAL AND PROCEDURAL HISTORY
In 2002, plaintiffs went to R.W. O’Neal Insurance Agency, Inc. (the agency) to purchase homeowners insurance for their residence. Plaintiffs wanted guaranteed replacement cost coverage that would provide the full amount needed to repair or replace the home, if it was damaged in a covered event, with like or equivalent construction, regardless of the policy limits.
The agency submitted plaintiffs’ application to Pacific Specialty Insurance Company (the insurer), including a request for guaranteed replacement cost coverage. The insurer issued a policy to plaintiffs for the period from June 23, 2002, to June 23, 2003, including the guaranteed replacement cost coverage.
The insurer sent the annual renewal notice directly to plaintiffs. The insurer’s renewal notice informed plaintiffs that the guaranteed replacement cost coverage would be replaced by “Extended Replacement Cost” coverage. Extended replacement cost coverage would pay replacement costs up to a specified amount over the policy limit. The policy declarations for the renewal policy were mailed directly to plaintiffs; the declarations expressly provided that plaintiffs had extended replacement cost coverage, and made no mention of guaranteed replacement cost coverage. The agency had no part in the insurer’s decision to change the coverage when plaintiffs’ policy was renewed in 2003.
On October 23, 2003, the plaintiffs’ home was destroyed by wildfire. When plaintiffs discovered that their insurance did not provide full guaranteed replacement coverage, they sued the insurer and the agency. Plaintiffs alleged that they had always intended to have guaranteed replacement coverage so they could replace their home if anything happened to it. They instructed the agency to procure guaranteed replacement coverage for them. Plaintiffs believed that they had 100 percent guaranteed cost coverage from the insurer. Plaintiffs at all times believed that the agency was an agent of the insurer and that they were one and the same. Plaintiffs relied on the agency’s expertise to provide them the insurance they requested.
Plaintiffs did not remember receiving, seeing or reading any document advising them of a change in the replacement cost coverage. The agency never communicated to plaintiffs that their coverage had changed. The insurer allegedly told plaintiffs that the agency was responsible for underinsuring their home.
The value of the home at the time the agency procured the 2003 policy was $240,000. The 2003 renewal increased the stated value of the home to $248,000 as an adjustment for inflation. The insurer paid plaintiffs $248,000, plus a 20 percent increase of $49,600 for the extended replacement cost coverage. The actual cost to rebuild plaintiffs’ home was estimated at $458,227.72 for the main building, plus $178,170.09 for other structures, for a total replacement cost of $636,397.81.
Plaintiffs’ third amended complaint alleged causes of action for breach of contract (against the insurer), breach of the implied covenant of good faith and fair dealing (against the insurer), promissory fraud (against the insurer), fraudulent misrepresentation (against the insurer and the agency), negligent misrepresentation (against the insurer and the agency), reformation (against the insurer), and professional negligence (against the agency).
The agency moved for summary judgment on the grounds that plaintiffs could not establish that the agency had made any fraudulent misrepresentation, negligent misrepresentation, or professional malpractice. In addition, the agency asserted there was no ground for plaintiffs to assert a claim for punitive damages. The agency averred that, as plaintiffs had requested, it had in fact procured guaranteed replacement cost insurance for plaintiffs’ home, when the policy was issued in 2002. Thereafter, the insurer changed the coverage, but the agency had no part in that decision. The insurer informed plaintiffs of the change by mailing the notice directly to them; the agency did not participate in that communication. Plaintiffs could not demonstrate that the agency had a duty to provide any further notices to plaintiffs.
The trial court granted the agency’s motion for summary judgment.
Plaintiffs now appeal.
DISCUSSION
A. Standard of Review
We review the trial court’s decision on the motion for summary judgment de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) “In undertaking our independent review of the evidence submitted, we apply ‘“the same three-step process required of the trial court: First, we identify the issues raised by the pleadings, since it is these allegations to which the motion must respond; secondly, we determine whether the moving party’s showing has established facts which negate the opponent’s claims and justify a judgment in movant’s favor; when a summary judgment motion prima facie justifies a judgment, the third and final step is to determine whether the opposition demonstrates the existence of a triable, material factual issue. [Citations.]”’ [Citation.]” (Dawson v. Toledano (2003) 109 Cal.App.4th 387, 392.)
B. Step One—Issues Tendered by the Pleadings
Plaintiffs’ third amended complaint named the agency in three of the six causes of action: fraudulent misrepresentation, negligent misrepresentation, and professional negligence. In their opposition to the motion for summary judgment, plaintiffs abandoned their claim for fraudulent misrepresentation.
As to the cause of action for negligent misrepresentation, plaintiffs are required to show: (1) defendant made a misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce the plaintiffs’ reliance on the fact misrepresented, (4) the plaintiffs’ justifiable reliance on the misrepresentation, and (5) resulting damage. (Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th 967, 983.) The crux of the matter here is whether the agency made a misrepresentation of any past or present material fact.
Similarly, with respect to the cause of action for professional negligence, plaintiffs were required to show that the agency failed to exercise reasonable care in the obtaining or maintenance of insurance, which resulted in damage to plaintiffs. (See Saunders v. Cariss (1990) 224 Cal.App.3d 905, 909.)
Plaintiffs’ theory was that the agency had a duty to provide their requested level of coverage. There are two related duties owed by an insurance agent or broker, each relating to a separate contract: the contract between the broker and the insureds to procure requested insurance, and the insurance contract itself. (See Fraser-Yamor Insurance Agency, Inc. v. County of Del Norte (1977) 68 Cal.App.3d 201, 212.) Plaintiffs urged that the agency failed, first, in an ongoing duty to ensure that plaintiffs had insurance with the coverages that they desired, including guaranteed replacement cost coverage; and second, that it failed separately in procuring an insurance policy with a policy limit of $240,000, which was assertedly an inaccurate and inadequate valuation.
C. Step Two—The Agency’s Moving Papers Justified a Judgment in Its Favor
The agency’s moving papers asserted as undisputed material facts that it was an independent insurance agent, and not an agent of the insurer. Plaintiffs’ application for homeowners insurance, submitted by the agency, included a specific request for guaranteed replacement coverage, just as plaintiffs had requested. The policy issued by the insurer for 2002-2003 actually included the requested guaranteed replacement cost coverage. The annual renewal notice was sent by the insurer directly to plaintiffs. The insurer’s renewal notice included a statement that the guaranteed replacement cost coverage would be changed to extended replacement cost coverage. The declarations for the renewal policy were sent by the insurer directly to plaintiffs. The agency had no part in the insurer’s decision to change the coverage.
As to the valuation of the residence provided in the policy, the agency had derived the $240,000 value by using the specifications of plaintiffs’ home with the insurer’s replacement cost estimator; the value obtained was the minimum value required by the insurer for guaranteed replacement cost coverage to be in effect. In the renewal policy, the dwelling structure valuation amount was increased from $240,000 to $248,000, by applying the insurer’s annual inflation increase.
On the basis of these facts, the agency demonstrated that it had made no misrepresentation of any material past or present facts. It undertook to provide the guaranteed replacement cost coverage in 2002, and it did, in fact, do so. The guaranteed replacement cost coverage in the 2002-2003 policy would have paid for actual reconstruction, regardless of the $240,000 policy limit. The only “fact” which conflicted with plaintiffs’ desire for guaranteed replacement cost coverage was a future fact—the insurer’s unilateral decision to alter the coverage offered in plaintiffs’ renewal policy—which was unknown to the agency and with which the agency had no connection.
There was neither a misrepresentation, nor professional negligence: the agency had provided the coverage that plaintiffs requested, and the contract of insurance itself included the requested coverage amount. On this basis, the agency was entitled to judgment in its favor on the negligent misrepresentation and professional negligence causes of action.
D. Step Three—Plaintiffs Failed to Raise a Triable Issue of Material Fact
In opposition to the motion for summary judgment, plaintiffs argued that triable issues of fact existed as to the agency’s breach of duty both to procure a policy limit of insurance representing the full value of their dwelling, and breach of an ongoing duty to ensure that plaintiffs continued to have full guaranteed replacement cost coverage.
Plaintiffs state that they relied on the agency’s expertise in accurately valuing their home in the first instance, and in providing sufficient policy limits to cover replacement. Plaintiffs averred that they were later told by the insurer that the agency was responsible for underinsuring their property.
Plaintiffs instructed the agency that they wanted 100 percent guaranteed coverage, so they could replace their home if anything ever happened to it. Plaintiffs never gave the agency any different instructions. Plaintiffs believed their home was insured for full value. They also believed that the agency was an agent of the insurer, and that the agency and the insurer were one and the same.
Plaintiffs’ opposition did admit, however, that the agency had set the policy limits value of their home based on the insurer’s cost estimator, and that it had in fact procured full replacement cost coverage for them in the 2002 policy. Plaintiffs purported to dispute that the insurer had mailed them notice of the change in replacement cost coverage, from guaranteed replacement cost to extended replacement cost, or that the insurer had mailed them new declarations in the renewal policy, showing extended replacement cost coverage in place of guaranteed replacement cost coverage. At best, however, plaintiffs were able to assert only that they did not remember receiving, seeing, or reading any such documents. Plaintiffs also admitted that the agency had no part in the insurer’s decision to change their coverage, and they further asserted as an undisputed fact that they received no communication from the agency concerning the changed coverage.
None of the purported undisputed facts asserted by plaintiffs demonstrate that the agency breached any duty owed to them. To the contrary, the undisputed facts, admitted by plaintiffs, show that the agency properly fulfilled its duty. The agency procured an insurance policy and complied with the insurer’s own protocols for estimating the proper valuation of the home, both in terms of setting policy limits and in terms of qualifying for guaranteed replacement cost coverage. The agency in fact obtained the requested guaranteed replacement cost coverage, and plaintiffs’ home was admittedly fully insured in the 2002-2003 policy. Plaintiffs admit that the agency had nothing to do with the insurer’s later unilateral decision to alter coverage. They made no specific inquiry of the agency at the time of renewal and received their communications directly from the insurer. Although plaintiffs aver that they did not remember receiving notices of the change from the insurer, they do not and apparently cannot show that they did not receive such notices and changed policy declarations.
In support of their claims of negligence liability, plaintiffs rely on several cases.
Plaintiffs cite Greenfield v. Insurance, Inc. (1971) 19 Cal.App.3d 803, for the proposition that insurance brokers are liable to an insured when the broker fails to procure the coverage requested, or by misrepresenting the coverage actually procured. (Id. at pp. 810-811.) There, the insured specifically requested the broker to procure insurance to cover mechanical breakdown of a vital piece of machinery in the insured’s business. The broker represented that the insured’s machine was fully covered. Neither the broker nor the insured read the policy that was issued; it actually excluded mechanical breakdown from coverage. Here, by contrast, plaintiffs requested the agency to procure guaranteed replacement cost coverage for their home, and the agency actually did procure precisely that coverage in the 2002 policy.
Plaintiffs cite Kotlar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th 1116 for the notion that the duty of a broker is to use reasonable care, diligence and judgment in procuring requested insurance. (Id. at p. 1123.) Plaintiffs have failed to show that the agency here breached that duty: the agency did use reasonable diligence and actually procured the insurance that plaintiffs had requested. Indeed, Kotlar is instructive on plaintiffs’ claim that, in essence, the agency here should be liable for failure to give them notice of the change in the renewed policy. In Kotlar, the insurance company cancelled the policy without giving notice to all the insureds. The insured urged the court to impose a duty on the broker to provide the named insured with notice of the insurer’s intent to cancel the policy for nonpayment of premiums. The court declined to create such a duty: The insurer had a statutory duty to provide such notice; there was no purpose in judicially imposing a separate nonstatutory duty on a broker. Moreover, the relationship of a broker to a client was not analogous to the highest fiduciary duty owed by an attorney; the broker’s duty was simply to use reasonable care in procuring the requested insurance. (Ibid.)
Here, of course, plaintiffs essentially admit that the agency fulfilled a broker’s duty of reasonable care in procuring the policy. Plaintiffs have not demonstrated that there should be any additional judicially created ongoing duty imposed to warn insureds of changes in renewal policies, in the absence of any communication or inquiry from the insureds.
In Free v. Republic Ins. Co. (1992) 8 Cal.App.4th 1726, a homeowner inquired of his insurance agents each year whether his coverage was sufficient to replace his home, and each time was assured that the coverage was adequate. In fact, property values had risen significantly, and, when a fire destroyed the home, the coverage was insufficient to replace the home. The Court of Appeal held that insurance agents “were not required under the general duty of care they owed plaintiff to advise him regarding the sufficiency of his liability limits or the replacement value of his residence,” but, “once they elected to respond to his inquiries, a special duty arose requiring them to use reasonable care.” (Id. at p. 1729.) Here, in contrast, plaintiffs had no ongoing relationship with the agency, and certainly made no specific inquiry to the agency about the adequacy of their coverage after 2002.
Desai v. Farmers Ins. Co. (1996) 47 Cal.App.4th 1110 also involved a homeowner’s request for 100 percent replacement cost coverage. The agent told the homeowner that the insurer had such coverage available, and assured the homeowner that the policy procured did provide 100 percent of the costs of any repairs, including increase in costs to rebuild. Unbeknownst to the homeowner, the policy issued contained a limit which purported to restrict coverage to the lesser of replacement cost or $150,000. Under those circumstances, the coverage provided by the agent was not what the homeowner had specifically requested. (Id. at pp. 1114-1115.) Again, by contrast, here plaintiffs were provided the exact coverage they asked for.
In Butcher v. Truck Ins. Exchange (2002) 77 Cal.App.4th 1442, the insureds were facing a suit for malicious prosecution. Years before, they had asked the insurer’s agent to provide a policy which included such coverage, which was replacement coverage for a policy that was not being renewed. The insureds asked for the replacement coverage in 1986, but did not bring suit until 1993, which was the first time they made a claim for malicious prosecution coverage and tendered the matter to their insurer, but were denied coverage. (Id. at pp. 1469-1470) As in the other cases cited, there was evidence that the agent failed to procure the requested coverage at the outset. (Id. at p. 1463.) Here, the agency did procure the requested coverage.
In R & B Auto Center v. Farmers Group (2006) 140 Cal.App.4th 327, an auto dealership solicited insurance including lemon law coverage. An agent for Farmers Group told the auto dealer that lemon law coverage was provided. It turned out that lemon law coverage applied only to new car sales, whereas the auto dealer was engaged exclusively in the sale of used cars. (Id. at p. 332.) As before, the agent and the insurer failed to provide the coverage requested ab initio. That is not the case here.
In Clement v. Smith (1993) 16 Cal.App.4th 39, the insured sold a piece of property and a dispute arose with the buyer. The insured told his insurance agent about the dispute and made clear he wanted a contractual liability policy that would cover that dispute. The agent assured the insured that the policy would cover the dispute. In fact, the policy procured covered only personal injury and property damage, not contractual disputes. (Id. at p. 44.) The agent failed to procure the requested insurance. Plaintiffs rely on the court’s pronouncement in Clement that “Absent some notice or warning, an insured should be able to rely on an agent’s representations of coverage without independently verifying the accuracy of those representations by examining the relevant policy provisions.” (Id. at p. 45.) However, as to any representations made by the agency in this case, they were true when made. They only became “untrue” in light of future events—the insurer’s decision to alter the coverage—as to which the agency had no knowledge or control.
In Westrick v. State Farm Insurance (1982) 137 Cal.App.3d 685, the plaintiff had been a long-time customer of the State Farm agent. The plaintiff once inquired about a truck he considered buying for use in his agricultural real estate business. The agent told the plaintiff that, if he purchased the truck, it would be automatically covered for 30 days. The plaintiff did not buy that truck. The plaintiff later bought a welding business for his son; included in the assets of the business were two vehicles. The plaintiff telephoned the agent to ask about coverage; the agent was not in, but the agent’s father, who worked in the same office, told him that the agent would be back the next day. The evidence was disputed whether any representations had actually been made about covering the welding trucks. The plaintiff gave his son permission to drive one of the trucks, on the understanding that he had automatic coverage. The plaintiff’s son was immediately involved in an accident. In fact, the trucks were not covered. The court held that, “a jury could have found that in May of 1977, Doug Crawford [the agent] told Westrick a jeep pickup truck to be used for commercial purposes would be automatically insured under his policy. When Westrick called the agency in July of 1977 to obtain insurance for his new commercial vehicles, Jim Crawford [the agent’s father] understood the purpose of the call, but simply ignored the situation, told Westrick that specific identification of the vehicles ‘wouldn’t be necessary,’ and referred him to his son. Westrick was unaware of the specific policy provision excluding six-wheel vehicles from coverage and relied on Jim Crawford’s expertise. Since he had not been told anything to the contrary, he reasonably believed that his new trucks, just as the pickup truck, were automatically insured for 30 days, and gave his son permission to drive the welding truck on the job. Had he known the truck was not covered, he would not have allowed Vincent [the plaintiff’s son] to use it until insurance had been obtained. We hold that this evidence, if believed by a jury, would have sustained a finding of Doug Crawford’s negligence....” (Id. at p. 690, fn. omitted.)
As in all the other cases, the asserted negligence of the insurance agent was in the failure to respond to a specific inquiry or request for coverage. Each case differs from the circumstances here, in which the agency actually did respond to plaintiffs’ inquiry when they made it, and in fact procured the requested coverage in response to the request. In no case was an agent or broker held liable for procuring a policy which was exactly as represented, but which the insurer later unilaterally changed.
Plaintiffs’ arguments are insufficient to demonstrate the existence of any triable issue of material fact to show that the agency here acted unreasonably or misrepresented anything. Accordingly, the trial court properly granted the agency’s motion for summary judgment.
DISPOSITION
For the reasons stated, the judgment is affirmed. Costs on appeal are awarded to defendant and respondent R.W. O’Neal Insurance Agency, Inc.
We concur: HOLLENHORST Acting P. J., McKINSTER J.