(Super. Ct. No. 07AS03379)
The opinion of the court was delivered by: Hull , J.
University Partners v. Maryland Casualty
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Plaintiffs University Partners, LLC (University Partners), and its managing member, Thomas Westley, appeal from a judgment of dismissal following orders granting summary adjudication and sustaining demurrers of plaintiffs' property insurers, Maryland Casualty Company (Maryland), Northern Insurance Company of New York (Northern), and Zurich American Insurance Company (Zurich) (hereafter collectively defendants). Plaintiffs contend issues of fact remain on their claims against defendants stemming from the latter's refusal to pay the full replacement cost of plaintiffs' building after it was destroyed by fire. According to plaintiffs, the record contains evidence that, several years before the fire, defendants participated in various misrepresentations made by their agent, defendant Cummins Insurance Agency (Cummins), that induced plaintiff to switch from an insurance policy with guaranteed replacement cost (GRC) coverage (the Fireman's Fund policy), that would have provided full replacement cost of their building, to policies with only replacement cost (RC) coverage, that provided only partial replacement cost.
Plaintiffs do not contend defendants misled them into believing they were receiving GRC coverage, inasmuch as there is no evidence in the record to support such a claim. Instead, plaintiffs contend Cummins made certain misrepresentations as to the nature of the insured premises in the application for insurance. In particular, the application falsely stated that the building had a sprinkler system and that it was built of fire resistant materials. Plaintiffs assert these misrepresentations were made in order to reduce the price of the policy offered by defendants to below that of the Fireman's Fund policy, thereby inducing plaintiffs to switch coverage. Plaintiffs further assert defendants became aware of these misrepresentations but failed to adjust the price of the policy accordingly, thereby acquiescing in Cummins's "price fraud."
We reject plaintiffs' novel "price fraud" theory. The misrepresentations they allege were not directed at plaintiffs but at defendants in order to induce defendants to provide coverage to plaintiffs at a price below what it would otherwise have been. Neither defendants nor Cummins misrepresented to plaintiffs the nature of the policy being provided or the price to be paid for it. Plaintiffs received exactly what they bargained for.
Plaintiffs' claim boils down to this: They were given too good a deal. If the price charged for RC coverage had been based on the true characteristics of their building, i.e., built of wood with no sprinklers, the price of the insurance would have been higher. Instead, they were given the policy at a reduced rate, which induced them to switch coverage. And, but for that switch, plaintiffs would have retained GRC coverage under the Fireman's Fund policy and would have recovered the full replacement cost of the building.
However, this is not a claim for negligent or intentional misrepresentation but the natural result of free-market competition. In the absence of antitrust considerations, the supplier of a product is not prohibited from selling that product at cut-rate prices. Absent misrepresentations to the customer about the nature of the product, one who buys a lower-priced product based on price alone may not later claim he was duped out of buying the higher-priced product which, as it later turns out, might have proven a better fit.
Because this is the essence of plaintiffs' claim, we affirm the judgment of dismissal.
Prior to July 27, 2005, Westley was the managing member of University Partners, LLC, the successor in interest of 300 University Avenue, Ltd. (University Partners). University Partners owned a building located at 300 University Avenue in Sacramento (Building). On that date, the Building was destroyed by fire.
Prior to May 30, 2001, the Building was insured under a policy issued by Fireman's Fund Insurance Company and obtained from defendants John O. Bronson, a California corporation, and one of its employees, Paul F. Bystrowski (hereafter collectively Bronson). Although the Fireman's Fund policy contained a coverage limit of $2,431,000, it included a policy amendment for GRC coverage, which provided that, in the event of a covered loss of the Building, the insurer would pay the full amount required to rebuild the structure without regard to the coverage limit.
Prior to the renewal date of the Fireman's Fund policy, University Partners approached Cummins to determine if it could obtain equivalent coverage at a lower price. Bronson had previously prepared a one-page document titled "Evidence of Property Insurance" (the Evidence Form) that briefly listed the coverage provided in the Fireman's Fund policy. However, the Evidence Form misstated the coverage limit as $2,341,000, rather than $2,431,000, and indicated the policy provided RC coverage rather than GRC coverage. University Partners was unaware of any misstatements in the Evidence Form and provided it to Cummins. The actual Fireman's ...