APPEAL from a judgment of the Superior Court for the County of Los Angeles. William J. Birney, Jr., Judge. Affirmed. (Los Angeles County Super. Ct. No. VC044754).
The opinion of the court was delivered by: Bendix, J.*fn11
CERTIFIED FOR PUBLICATION
This case involves the liability of an insurance agency for negligence in advising on, procuring and maintaining an insurance package for a new business venture that did not include workers compensation insurance. The lack of workers compensation insurance was discovered after an employee was injured in a catastrophic fire during the third year of business operations. After a lawsuit in which the employee obtained a multimillion dollar judgment against the owners of the business, this suit was filed by the owners against the insurance agency. The court, following a bench trial, found the insurance agency liable, and entered judgment in favor of the owners in the amount of the judgment that remained outstanding in the underlying case. The insurance agency appeals, claiming (1) the evidence was insufficient to support a finding of negligence on its part largely because the evidence did not support any duty owed to the insured, (2) the action was barred by the statute of limitations, and (3) the trial court erred in refusing to find comparative negligence on the part of the owners, who failed to read their insurance policies.
We find no error and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
John Daniel Williams and Steven Stuart Simon were boyhood friends in Oklahoma, where Williams still lives and owns his own mortgage brokerage business. Simon moved to California, and was employed by Rhino Linings of San Diego. Rhino Linings USA, Inc. (Rhino USA) is an enterprise with dealerships throughout the country; the dealerships are engaged in the business of installing spray-on linings onto the beds of pickup trucks. Rhino USA sells dealerships, providing new owners with spray equipment, supplies, and the like. Simon proposed to Williams that the two should obtain a dealership from Rhino USA, to be located in Santa Fe Springs; Williams would provide most of the financing and Simon would be responsible for sales and managing the business on-site. Williams agreed, and the two became partners in the venture. Williams remained in Oklahoma, but was responsible for financial and administrative matters, including insurance.
Williams and Simon opened the business -- Rhino Linings of Santa Fe Springs (Rhino SFS) -- some time in 1999. Rhino USA referred Williams to Robyn Thaw, who was then employed by the Robert F. Driver Company, an insurance agency. Williams understood that Thaw knew the Rhino Linings operation very well, that she had a custom-made insurance package specific to the Rhino Linings operation, and that she "was the go-to person to take care of the insurance needs for Rhino Linings dealerships." Williams, who was in California at the time arranging a lease for the site of the business, called Thaw in January 1999 and asked to meet with her to review insurance needs. Thaw told Williams a meeting would not be necessary, because she was very familiar with Rhino Linings dealerships and programs, and "was the expert on the product necessary to satisfy [Rhino SFS‟s] insurance needs." Williams did not request any specific type of insurance (and did not know enough about what kind of insurance was needed to make a specific request), instead asking Thaw for whatever insurance was needed to operate the business.
Thaw sent Williams a blank application form by fax, indicating that the program was "designed specifically for Rhino Liners dealers." Williams filled in basic information, leaving all portions relating to insurance coverages blank. He signed the application, and returned it to Thaw, who selected the insurance coverages. Thaw did not send the application (which had a section for workers compensation insurance) back to Williams after she completed it. Thaw submitted the application to Travelers Insurance Company.
Thaw had considerable experience with insurance for Rhino Linings dealerships. Rhino USA had become a client of Thaw‟s in the early to mid-1990‟s, and by 1999, Thaw was handling the insurance needs of some 50 to 100 Rhino Linings dealerships. Thaw had met with Travelers Insurance personnel and helped design and develop the Rhino Linings dealership insurance package. Thaw participated in risk analysis with the Travelers underwriters, and visited Rhino USA, observing the product that was sprayed on the truck beds and the equipment used by the sprayer, including the breathing apparatus worn during application of the lining. She was aware that sprayers had the most dangerous jobs and that it would be important for a sprayer‟s employer to know if its insurance provided no coverage for a sprayer‟s on-the-job injuries. Thaw knew that workers compensation insurance is mandatory in California.
Thaw attended informational seminars for new dealers given by Rhino USA, and spoke at the seminars about the insurance needs of Rhino Linings dealerships. The package of insurance coverages Thaw participated in designing for Rhino Linings dealerships was not available through all Travelers‟ agents; brochures with Thaw‟s name on them were distributed at the Rhino USA seminars at which she spoke. Thaw represented and marketed the insurance package as having been specifically designed for Rhino Linings dealers.
After Thaw submitted Williams‟ application to Travelers, she sent Williams an insurance proposal for Rhino SFS, which Williams accepted "as is." The proposal included, among other coverages, commercial general liability coverage, including "personal and advertising injury" with a $1 million limit, and the "premium basis" showed one full-time employee (consistent with Rhino SFS‟s intention to employ one sprayer, who was to be paid $2,000 a month). A copy of the policy, issued by Travelers for a one-year period effective January 25, 1999, was mailed to Rhino SFS‟s address in Santa Fe Springs a month or so later, but Williams did not receive a copy until late April 1999. Williams "scanned it briefly," and "it looked like everything was complete and in order"; Williams believed he had "all the appropriate insurance coverages that [he] needed to operate [his] business." In fact, the policy did not include workers compensation coverage, and did not include any coverage for injury to an employee such as the sprayer who dealt with toxic materials used for lining the truck beds.*fn1
By the time the one-year Travelers policy expired in January 2000, Thaw had changed her employment and had begun working for Timothy Stuart Mills Insurance Services, a predecessor company of Hilb, Rogal & Hobbs Insurance Services of California, Inc. (collectively, HRH). Thaw continued to act as insurance agent for Rhino SFS after she began working for HRH. By January 2000, Travelers was no longer offering the Rhino Linings insurance package, so Thaw, while employed by HRH, created a new insurance package, underwritten by Hartford Casualty Insurance Company, by using a Hartford "Spectrum" policy and adding additional coverages necessary for Rhino Linings dealerships, such as garagekeepers coverage. Again, the package she created for Rhino SFS from Hartford did not contain workers compensation insurance. In January 2001, the Hartford policy was renewed, again without workers compensation insurance; this time neither Thaw nor anyone at Hartford spoke to Williams or anyone else at Rhino SFS when the policy was renewed.
In July 2001, a fire at the Rhino SFS premises resulted in severe burn injuries to Kendall Mann, then the sales manager for Rhino SFS. When Williams called Thaw to report the fire, he learned for the first time that Rhino SFS did not have the necessary workers compensation coverage.
Mann brought a civil action against Rhino USA, Rhino SFS, Williams and Simon. Williams and Simon were provided a defense and were represented by Hartford-appointed counsel. The jury brought in a verdict against Rhino USA and Rhino SFS (the latter including Williams and Simon, jointly and severally) for $11,272,238.39, finding Rhino USA and Rhino SFS each 50 percent at fault. Judgment was entered on the jury verdict on March 2, 2004. Hartford paid $1 million in partial satisfaction of Mann‟s judgment against Williams and Simon, leaving approximately $5.8 million outstanding on the judgment.
Williams and Simon (collectively, Williams) then filed this negligence action against HRH and the Robert Driver agency on July 5, 2005, seeking compensatory damages in the amount outstanding on the Mann judgment. The Driver agency obtained summary judgment, and no appeal was taken from that judgment.*fn2 HRH sought summary judgment on the ground that the statute of limitations had run, but its motion was denied, the court (Judge Raul Sahagun) finding the statute did not begin to run until March 2, 2004, when the Mann judgment was entered in an amount in excess of the general liability insurance policy limits.
The case proceeded to trial before Judge William J. Birney, Jr., sitting without a jury. The court heard testimony from a number of witnesses, including Williams, Simon, Thaw, Karen Williams (Williams‟ wife), and experts for each side. In addition to the facts recounted above, the following evidence was adduced in respect of the procurement of Rhino SFS‟s insurance.
1. The Initial Policy (January 1999)
As it happened, Robyn Thaw‟s recollection of her telephone conversations with Williams in January 1999 differed from those of Williams, recounted above. Thaw testified that, prior to sending the insurance proposal to Williams, her staff had calculated premiums of $6,204 for workers compensation insurance, based on an annual payroll of $120,000 for three full-time workers.*fn3 Thaw said she called Williams in order to discuss workers compensation insurance, told him the annual premium would be $6,204, and told him workers compensation insurance was mandatory in California, but that he could buy it from someone other than the Robert Driver agency. Thaw said Williams declined to purchase workers compensation insurance, so the insurance proposal she sent to him did not include it. Thaw said she assumed Williams was going to buy workers compensation insurance from someone else.*fn4
Thaw admitted that she never provided Williams a written quote for workers compensation insurance. She wrote no memorandum to the file (or to Williams) to indicate that workers compensation coverage was offered and declined. She made no record of her telephone call with Williams about workers compensation insurance, despite the fact that the Robert Driver agency used a printed form entitled "telephone discussion record," which stated that the form should be completed for every call. HRH‟s own expert testified that an "insurance agent who is using reasonable care, diligence, and judgment ...