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GGIS Insurance Services, Inc. v. Superior Court of Los Angeles County

December 11, 2008

GGIS INSURANCE SERVICES, INC., ET AL., PETITIONERS,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT;
CAPITOL INDEMNITY CORPORATION, REAL PARTY IN INTEREST.
GGIS INSURANCE SERVICES, INC., ET AL., PETITIONERS,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT;
CAPITOL INDEMNITY CORPORATION, REAL PARTY IN INTEREST.



ORIGINAL PROCEEDINGS in mandate. Maureen Duffy-Lewis, Judge. Petitions denied. (Los Angeles County Super. Ct. No. BC357839).

The opinion of the court was delivered by: Croskey, Acting P. J.

CERTIFIED FOR PUBLICATION

GGIS Insurance Services, Inc. (GGIS), Insuresuite, Inc. (Insuresuite), Survival Insurance, Inc. (Survival), and Richard Joseph Acunto (collectively Petitioners) commenced this action against Capitol Indemnity Corporation (Capitol), alleging that it owed them a defense and indemnity in an action brought against them by the Pennsylvania insurance commissioner. Petitioners sought to stay this action on the ground any adjudication of facts in this proceeding could prejudice them in the underlying Pennsylvania action. They challenge the trial court's denial of their request for a stay. They also challenge the denial of their motion for summary adjudication of Capitol's claimed duty to defend.

We conclude that a policy exclusion precludes coverage for the claims alleged by the commissioner and that a stay is not warranted because the coverage issues can be decided as a matter of law. We therefore deny both petitions.

FACTUAL AND PROCEDURAL BACKGROUND

1. Factual Background

GGIS is a California corporation that acts as a general agent in California for insurers. Acunto is its chief executive officer and a director. Insuresuite and Survival worked together with GGIS in some capacity.

GGIS marketed, underwrote, and serviced automobile insurance policies in California on behalf of Legion Insurance Company (Legion) and Villanova Insurance Company (Villanova), pursuant to a Management Agreement. Acunto also was a party to the Management Agreement. The Management Agreement provided for GGIS to collect premiums paid by policyholders, retain a portion of those funds as commissions for services rendered, and remit the remainder to Legion and Villanova. It provided that all premiums collected by GGIS were the property of Legion and Villanova, and that GGIS held those funds as a fiduciary. It stated further that GGIS was responsible for collecting all "earned premium" and for paying those amounts to Legion and Villanova "whether collected or not." The Management Agreement also provided for GGIS to "refund commissions on policy cancellations, reductions in premiums or any other return premiums at the same rate at which such commissions were originally retained."

The Commonwealth Court of Pennsylvania issued orders of rehabilitation in March 2002, appointing the Pennsylvania insurance commissioner as rehabilitator of Legion and Villanova. The court ordered all persons in possession of those insurers' assets not to dispose of the assets without the prior written consent of the commissioner. It also ordered all persons who had collected premiums on behalf of the insurers to "account for all earned premiums and commissions" and "account for and pay all premiums and commissions unearned due to policies canceled in the normal course of business, directly to the Rehabilitator." After it became aware of the rehabilitation orders, GGIS ceased retaining "commissions" from the premiums collected and instead retained "administrative fees" in the amount of $180,000 per week, beginning in April 2002. GGIS contends it collected those fees pursuant to an oral agreement with the commissioner. GGIS stopped retaining administrative fees in December 2002, when there were no more collected premiums. The Pennsylvania court issued orders of liquidation in July 2003, appointing the commissioner as liquidator of Legion and Villanova.

2. The Insurance Policy

Capitol issued an Insurance Agents and Brokers Professional Liability Policy to GGIS, as the named insured, for a one-year period beginning on December 31, 2004. The policy included Insuring Agreements A and B, providing up to $3 million in coverage for losses and defense expenses arising from claims first made during the policy period. Insuring Agreement C provided limited coverage up to $25,000 for defense expenses only, in certain circumstances.

The policy exclusions stated that the policy "shall not apply to any Claim, Loss, or Defense Expenses based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving," certain matters. The specified matters included, "any actual or alleged commingling of, or inability or failure to pay, collect, safeguard or return any money or failure to perform any actuarial service" (exclusion G).

A "Claim" was defined as: "1. any written notice or demand for monetary relief; or "2. any civil proceeding in a court of law, made against any Insured seeking to hold such Insured responsible for damages for a Wrongful Act or Personal Injury.

"A Claim does not include criminal proceedings of any type, or regulatory investigations or proceedings, or any proceeding that seeks injunctive, declaratory, equitable or nonpecuniary relief or remedies of any type."

A "Wrongful Act" was defined as "any actual or alleged negligent act, error or omission of an Insured arising solely from the Insured's rendering or failing to render Professional Services."

3. The Pennsylvania Action, Tender of Claim, and Payment of Defense Costs

An attorney representing the Pennsylvania insurance commissioner, M. Diane Koken, sent a letter to GGIS and Acunto in March 2005, demanding remittance of over $6 million in premiums collected by them on behalf of Legion and Villanova and purportedly retained improperly as administrative fees. The letter also stated that GGIS had improperly paid to or for the benefit of reinsurers over $3.5 million of premiums collected. The letter stated further that GGIS and Acunto had miscalculated the amounts of "returned premium" due to insureds upon the cancellation of certain policies and that the "insureds received overpayments of returned premium or failed to pay premium owed because Guardian did not perform the required short rate calculation," and demanded an accounting of those amounts. The letter demanded payment of over $9.5 million to the commissioner and an accounting of all premium amounts for the canceled policies.

GGIS filed a proof of claim in June or July 2005 in connection with the liquidation proceedings. GGIS alleged that Legion and Villanova had committed fraud, breach of fiduciary duty, and breach of contract by failing to disclose their ...


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