California Court of Appeals, Second District, First Division
AMERICAN WAY CELLULAR, INC., Plaintiff, Cross-defendant and Appellant,
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Defendant, Cross-complainant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles County No. LC084386, Michael A. Latin, Judge.
Allan Law and James G. Allen for Plaintiff, Cross-defendant and Appellant.
Weston & McElvain, Wynn C. Kaneshiro and Edmond Sung for Defendant, Cross-complainant and Respondent.
American Way Cellular, Inc. (American Way), appeals from a judgment entered after the trial court granted summary judgment in favor of Travelers Property Casualty Company of America (Travelers). American Way filed suit against Travelers, alleging that American Way was entitled to policy benefits following a fire loss at its place of business located in Van Nuys, California (the premises). The court determined that Travelers had no obligation to pay benefits to American Way, holding that an “[e]ndorsement” contained in the policy issued by Travelers “requires as a condition of insurance that the insured premises contain automatic sprinklers” and it was undisputed that the premises did not have an automatic sprinkler system. The court found in favor of Travelers on its cross-complaint for declaratory relief and reimbursement of a $250, 000 good faith advance payment against American Way.
American Way contends that the judgment must be reversed because triable issues of material fact exist with respect to its causes of action for negligence and declaratory relief, including whether A & J Financial Insurance Services (A & J), the insurance broker that prepared the insurance application for American Way indicating the premises were equipped with sprinklers, was an actual or ostensible agent of Travelers. American Way also argues that it was entitled to coverage because the “provisions requiring [American Way to] ‘maintain the protective devices or services listed’ cannot require [American Way] to maintain something that does not exist.” We conclude that because the evidence showed as a matter of law that A & J was not an actual or ostensible agent of Travelers and the evidence showed that American Way did not maintain a sprinkler system as required under the policy, American Way failed to meet its burden of showing that triable issues of material fact exist with respect to its claims for declaratory relief and negligence. We affirm the judgment.
A. The broker agreement between A & J and USASIA Insurance Services, Inc.
A & J is a licensed insurance broker for property insurance. USASIA Insurance Services, Inc. (USASIA), is an insurance agent of Travelers. USASIA and A & J entered into a broker agreement on May 21, 2002 (broker agreement). The broker agreement referred to A & J as “‘BROKER’” and stated that “BROKER desires USASIA to place risks of BROKER’S clients (hereafter referred to a [sic] the ‘INSURED’) with and for acceptance by admitted companies and or non-admitted companies, ... and [¶]... USASIA agree [sic] to allow BROKER commission on such business, if and when placed....”
B. The insurance application
Ali Sheibani is the owner of American Way. Sheibani contacted Ali Derakhshanfar, who was an insurance broker and “principal” of A & J, regarding liability and property coverage. Derakhshanfar “placed” American Way “with CNA initially, ” and later, Travelers. With respect to the placement with Travelers, a “Commercial Questionnaire” filled out by A & J contained a blank space next to the words, “Sprinklers/Smoke Detector”; the commercial questionnaire was faxed to Sheibani. On September 25, 2007, A & J submitted a commercial insurance application (application) on behalf of American Way to USASIA with the notation, “Please see the attached [ACORD] app for above insured. This is a new venture. No losses in the history. Please give us a quote as soon as possible. If you have any questions feel free to contact us.” In the box entitled, “FIRE PROTECTION (Sprinklers, Standpipes, CQ/Halon Systems), ” the application indicated that American Way had “SMOKE DETECTORS/FIRE EXTING./SPRINKLERS.”
On September 27, 2007, USASIA provided a quote from Travelers to A & J, which stated, “Please refer carrier quote proposal for detail information. It may reflect reduced and/or restricted coverage and/or limits which are different from your original request.” On October 11, 2007, A & J requested USASIA to “bind the attached quote effective today 10/11/07 immediately & give us a binder/invoice at your earliest convenience.” On the same day, USASIA sent an e-mail correspondence stating, among other things, “BINDER CONFIRMATION [¶] Policy Period: 10/11/2007 – 10/11/2008 [¶] Assigned Policy Number: 680-6857L078 [¶]... [¶] Insurance Company: Travelers Insurance Company [¶]... [¶] The policy will be issued and forwarded to your attention within next 2–3 weeks.”
C. The policies
Travelers issued a commercial property policy to American Way effective October 10, 2007, to October 10, 2008 (2007 policy). The 2007 policy stated that Travelers had the right to make inspections at any time, but was not obligated to make any inspections. The 2007 policy contained a “Protective Safeguards Endorsement For Sprinklered Locations and Restaurants” (Endorsement), which stated, “As a condition of this insurance, you are required to maintain the protective devices or services listed....” The protective devices were listed as “Automatic Sprinkler System, including related supervisory services.” An exclusion section stated, “We will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you: [¶] a. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact; or [¶] b. Failed to maintain any protective safeguard listed in the Schedule above, and over which you had control, in complete working order. [¶] If part of an Automatic Sprinkler System is shut off due to breakage, leakage, freezing conditions or opening of sprinkler heads, notification to us will not be necessary if you can restore full protection within 48 hours.” The 2007 policy provided that Travelers “will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from a Covered Cause of Loss.” The 2007 policy also stated, “Business Income and Extra Expense is provided at the premises described in the Declarations when the Declarations show that you have coverage for Business Income and Extra Expense” and “Control of Property [¶] Any act or neglect of any person other than you beyond your direction or control will not affect this insurance.” A cancellation provision stated that the policy could be canceled by Travelers upon 30 days’ notice.
American Way received a copy of the 2007 policy. Upon expiration of the 2007 policy, Travelers issued a renewal policy with effective dates of October 10, 2008, to May 10, 2009 (2008 policy). The provisions in the 2008 policy were identical to those contained in the 2007 policy and contained an identical Endorsement. On September 3, 2008, USASIA forwarded a copy of the 2008 policy to A & J, requesting that A & J review it and advise USASIA of any errors, omissions, or changes. USASIA did not receive a response from A & J regarding any errors, omissions, or changes.
D. The fire and subsequent investigation
On October 11, 2008, a fire occurred at the premises, which occupied the southwest section of a “warehouse-type building.” Travelers retained Pacific Rim Investigative Services Group, Inc. (Pacific Rim), to investigate the loss and the cause of the fire. In the meantime, Travelers issued a “good faith” advance payment to American Way in the amount of $250, 000. Pacific Rim concluded that the fire originated in the interior of the east side of the building where an area was under construction. Pacific Rim noted that there was no automatic sprinkler system installed in ...