Judge and Jury Find in Favor of Reinsurance Intermediary in Dispute Over Procurement of Reinsurance

WORKMEN’S AUTO INSURANCE COMPANY V. GUY CARPENTER & CO., INC., (No. B211660 (c/w B213853), March 1, 2012)

Workmen’s Auto Ins. Co. (Workmen’s) hired Guy Carpenter & Co. as an insurance intermediary to negotiate to provide Workmen’s with reinsurance through a finite quota share reinsurance agreement. Workmen’s subsequently sued Guy Carpenter, alleging in multiple amended complaints that Guy Carpenter was negligent, breached a contract, breached a fiduciary duty, and failed to secure the best terms of coverage available in the reinsurance marketplace.

The trial court granted summary judgment to Guy Carpenter on the claim for failing to procure at the best terms. Workmen’s appealed and the appellate court upheld the grant of summary adjudication because Workmen’s interrogatory response was factually devoid and could not establish an element of its cause of action. Workmen’s argued that even if it could not prove that Guy Carpenter failed to secure the best terms of coverage, Guy Carpenter may not have secured reinsurance in the first place. The court stated that the trial court did not rule on this theory of Workmen’s and thus the appellate court would not hear it. The court noted that while the trial court may have interpreted its prior order to find that the product was reinsurance, this court was not bound by that determination.

Workmen’s again alleged certain fiduciary duty and negligence allegations in a third amended complaint, and Guy Carpenter filed a demurrer on the fiduciary duty cause of action, which the trial court sustained. This court reviewed the demurrer in Workmen’s third amended complaint and again sustained the trial court’s decision. Workmen’s asked the court to consider trial evidence when reviewing the demurrer, but the court noted that there is no case law requiring a court to consider trial evidence when determining to overrule or sustain a demurrer. The court noted that when a demurrer is sustained, the court is to determine whether the complaint states facts sufficient to constitute a cause of action, and not what occurred in the trial on the merits. The court then held that there was not enough in the complaint to establish that the trial court committed error when ruling on the demurrer. The jury’s judgment in favor of Guy Carpenter on the remaining claims for negligence and breach of contract was not disturbed on appeal.

IMPACT – REINSURANCE: This suit represents an unsuccessful attempt by a cedent to hold a reinsurance intermediary liable for allegedly failing to procure reinsurance under the best terms possible in the market.