APPEAL from a judgment and orders of the Superior Court of Los Angeles County, Helen I. Bendix, Judge. (Los Angeles County Super. Ct. No. BC373612)
The opinion of the court was delivered by: Suzukawa, J.
CERTIFIED FOR PUBLICATION
Plaintiffs/appellants appeal the denial of their motions for summary judgment and the grant of defendants/respondents' motions for summary judgment. We conclude that defendants were entitled to summary judgment, and thus we affirm.
FACTUAL AND PROCEDURAL HISTORY
Plaintiffs Barry Wallman, Stan Wallman, and Nancy Wallman (the Wallmans) are general partners of plaintiff Sea Val Enterprises, a general partnership that owns interests in real property. Former plaintiff RTG Investments, Inc. (RTG) is a California corporation, of which Barry Wallman is a principal. Dan Wallman, not a party to this action, is Barry Wallman's brother and Stan Wallman's son.
Defendant American Guarantee & Liability Insurance Company (American Guarantee) is an insurance company that insured apartment buildings owned by some of the plaintiffs. Defendant Benjamin Suddock, doing business as Suddock Insurance Agency (Suddock), is an insurance agent who procured the American Guarantee policies.
In 1994, the Wallmans owned an apartment building at 1325 Ingraham Street in Los Angeles (the Ingraham property). From December 4, 1993, to December 4, 1994, the Ingraham property was insured by Crusader Insurance Company (Crusader). The Crusader policy provided bodily injury liability coverage of $500,000 per occurrence "arising out of the ownership, maintenance or use of the insured premises."
In February 1994, a child named Anthony Rodriguez fell from a third story window of the Ingraham property and suffered a serious head injury.
The Wallmans sold the Ingraham property in August 2001.
In 2004, some of the Wallmans formed RTG. RTG became the owner of at least 23 separate limited liability corporations (LLC's), each of which owned a piece of real property. None of the LLC's owned the Ingraham property.
C. RTG's Acquisition of Business Owner's Liability Insurance Through Capital Insurance Group
In 2004, RTG retained Suddock to obtain primary insurance coverage for the 23 LLC's and the real property they owned. Suddock obtained business owner's liability coverage for the LLC's and properties through the Capital Insurance Group (Capital).
Capital issued separate policies to each LLC and its property for the policy period July 15, 2005, to July 15, 2006 (the Capital policies). The Capital policies provided coverage for, among other things, "those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' [or] property damage . . . to which this insurance applies. . . . [¶] This insurance applies . . . [t]o 'bodily injury' and 'property damage' only if: [¶] (a) The 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory'; and [¶] (b) The 'bodily injury' or 'property damage' occurs during the policy period." The limits of liability of the Capital policies were $1,000,000 liability coverage per occurrence and $2,000,000 "general aggregate."
D. RTG's Acquisition of Excess and Umbrella Coverage Through American Guarantee
In 2004, RTG asked Suddock to obtain excess and umbrella coverage for its properties. Effective July 15, 2005, Suddock procured a commercial excess/umbrella liability policy from American Guarantee for named insured RTG Investments, Inc., for the policy period "07/15/05 to 07/15/06."
"Coverage A" ("Excess Follow Form Liability Insurance") of the American Guarantee policy provided:
"Under Coverage A, we will pay on behalf of the insured, those damages covered by this insurance in excess of the total applicable limits of underlying insurance. With respect to Coverage A, the terms and conditions of underlying insurance are made a part of this policy, except with respect to:
"1. Any contrary provision contained in this policy; or
"2. Any provision in this policy for which a similar provision is not contained in underlying insurance.
"With respect to the exceptions stated above, the provisions of this policy will apply.
"Notwithstanding anything to the contrary contained above, if underlying insurance does not apply to damages, for reasons other than exhaustion of applicable limits of insurance by payment of claims, then Coverage A does not apply to such damages."
Section II of the policy, "Limits of Insurance," provided in paragraph C: "Coverage A applies only in excess of the greater of the actual limits of insurance of underlying insurance or the limits of insurance shown on the Schedule of Underlying Insurance forming a part of this policy."
Section VI, paragraph (A)(9), "Maintenance of Underlying Insurance," provided: "During the period of this policy, you agree:
"a. To keep the policies listed in the Schedule of Underlying Insurance in full force and effect;
"b. That the Limits of Insurance of the policies listed in the Schedule of Underlying Insurance will be maintained except for any reduction or exhaustion of limits by payment of claims or suits for damages covered by underlying insurance;
"c. The policies listed in the Schedule of Underlying Insurance may not be canceled or not renewed by you without notifying us, and you agree to notify us in the event an insurance company cancels or declines to renew any policy listed in the Schedule of Underlying Insurance;
"d. Renewals or replacements of the policies listed in the Schedule of Underlying Insurance will not be materially changed without our agreement.
"If you fail to comply with these requirements, we will only be liable to the same extent that we would have been had you fully complied with these requirements."
The "Schedule of Underlying Insurance" identified the underlying primary insurance as follows:
"Company: Capital Insurance Group
"Term: 07/15/05 to 07/15/06
"Coverage: Commercial General Liability
"Applicable Limits: $2,000,000 Each Occurrence"
Endorsement No. 2 identified 25 properties covered by the American Guarantee policy. The Ingraham property was not included on that endorsement.
On December 1, 2005, American Guarantee issued a further endorsement to the policy, effective July 15, 2005. The endorsement corrected the zip code of one of the properties and amended the Schedule of Underlying Insurance to reflect applicable limits of $1,000,000 per occurrence.
E. The Rodriguez Litigation
On April 4, 2006, Anthony Rodriguez, through his mother as guardian ad litem, sued Barry Wallman for the injuries he suffered when he fell from the window of the Ingraham property in February 1994. The Wallmans tendered the Rodriguez action to Crusader, which had provided primary insurance for the Ingraham property for the 1993-1994 policy year. Crusader accepted the tender and appointed counsel to defend the Wallmans.
When the Wallmans learned that the damages sought in the Rodriguez action might exceed the Crusader policy limits, they tendered the action to American Guarantee. American Guarantee denied coverage.
The Wallmans settled the Rodriguez litigation in May 2007 for $1 million. Crusader contributed its policy limits of $500,000, and Barry Wallman contributed the remaining $500,000.
RTG and Barry Wallman filed the present action for negligence, breach of insurance contract, bad faith, and declaratory relief against defendants Benjamin Suddock, Suddock Insurance Agency (erroneously sued as Ben R. Suddock Insurance Services), and American Guarantee on June 29, 2007. Plaintiffs filed a first amended complaint on December 12, 2007, and a second amended complaint on April 1, 2008. Subsequently, plaintiffs dismissed RTG without prejudice and added Nancy Wallman, Stan Wallman, and Sea Val Enterprises as plaintiffs.
The second amended complaint, which is the operative complaint as to Suddock, and the third amended complaint, filed March 11, 2009, which is the operative complaint as to American Guarantee, allege that American Guarantee breached its insurance contract and acted in bad faith by denying coverage as to the Rodriguez action. They further allege that Suddock was negligent in failing to procure excess coverage that would have protected plaintiffs against claims connected with previously-owned properties, including the ...