{"id":887631,"date":"2016-03-15T16:12:04","date_gmt":"2016-03-15T22:12:04","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=887631"},"modified":"2016-03-15T16:13:02","modified_gmt":"2016-03-15T22:13:02","slug":"insurance-coverage-equitable-subrogation-doctrine-of-superior-equities","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/insurance-coverage-equitable-subrogation-doctrine-of-superior-equities\/","title":{"rendered":"Insurance Coverage \u2013 Equitable Subrogation \u2013 Doctrine of Superior Equities"},"content":{"rendered":"

David L. Blinn | Low, Ball & Lynch | February 8, 2016<\/p>\n

Equitable subrogation<\/a> is most commonly employed when an insurer pays its insured for losses and then pursues an action against the wrongdoer whose wrong caused the loss paid by the insurer.\u00a0 This case considered whether an insurer may bring an action for equitable subrogation against the broker of the third party wrongdoer for failing to secure insurance on behalf of that wrongdoer.<\/p>\n

On December 15, 2009, a fire started in a two-story apartment building owned by Amarjit Singh (\u201cSingh\u201d).\u00a0 The fire damaged Singh\u2019s own property, and also caused damage to neighboring properties, including a commercial building owned by David Saari (\u201cSaari\u201d) and a restaurant owned and operated by Hideyo Ogawa and Myong Echols (\u201cRestauranteurs\u201d).\u00a0 Amco Insurance Company (\u201cAmco\u201d) issued a commercial property insurance policy to Saari for his building.<\/p>\n

Singh tendered his first party claims, as well as Saari\u2019s and Restauranteurs\u2019 claims to his insurance company, but the claims were denied because the policy was not in effect at the time of the fire.\u00a0 There was no dispute that Singh had received notice of non-renewal from his insurance company, and no dispute that he had communicated with his brokers at All Solutions Insurance Agency, LLC (\u201cAll Solutions\u201d).\u00a0 Singh and his broker disputed the substance of the conversations, with Singh claiming he had asked the broker to obtain insurance before the fire, and believed that he was covered.\u00a0 On the other hand, All Solutions\u2019 principal claimed that he communicated two different quotes for insurance to Singh and was waiting to hear back from him as to which one to purchase when the fire occurred.<\/p>\n

Restauranteurs sued Singh for their property and business losses, and similarly, after paying for Saari\u2019s losses, Amco likewise sued Singh in subrogation.\u00a0 Singh entered into a stipulated judgment with both, and assigned his rights against All Solutions to them, based on All Solutions\u2019 failure to procure insurance for him.\u00a0 Both Restauranteurs and Amco then filed suit against All Solutions.\u00a0 All Solutions then filed separate motions for summary judgment<\/a>, claiming (1) that its conduct did not fall below the standard of care for an insurance broker; (2) the assignment was precluded by the rule of superior equities; and (3) the assigned negligence cause of action was not assignable.<\/p>\n

The trial court, relying on the prior case of Dobbas v. Vitas (2011) 191 Cal.App.4th 1442, held that Amco\u2019s rights were proscribed by equitable principles rather than the basics of assignment, and that Amco could not prove it was entitled to equitable subrogation <\/a>because its loss was not caused by All Solutions\u2019 failure to maintain the policy, but by the fire, which was the very risk that Amco insured.\u00a0 Amco and Restauranteurs appealed.<\/p>\n

The Court of Appeal reversed.\u00a0 First, the Court noted that California law recognized the general rule that an agent or broker who intentionally or negligently fails to procure insurance as requested by a client will be liable to the client in tort for the resulting damages.\u00a0 Secondly, the general rule in California is that causes of action are assignable, and prior case law in California had concluded that a negligence claim against an insurance broker who failed to procure insurance was assignable.<\/p>\n

The Court then reviewed the Dobbas decision, to determine whether the doctrine of superior equities used there barred Amco\u2019s assigned equitable claims against All Solutions. \u00a0In Dobbas, the insured owned a bull that escaped from a pasture and caused an automobile accident in which two people were killed.\u00a0 The bull owner had a primary policy for $1,000,000 and believed he had an excess policy for an additional $3,000,000 in coverage and a second excess policy from American Guarantee Insurance Company (\u201cAmerican Guarantee\u201d) in the amount of $7,000,000. \u00a0It turned out that the $3,000,000 excess policy was not in effect, because Dobbas\u2019 broker (Vitas) had either cancelled or failed to renew it.\u00a0 In settling the claims against Dobbas, American Guarantee contributed $2.8 million to the settlement, and received an assignment from its insured, Dobbas, of any claims he had against his broker.\u00a0 The Appellate Court held that American Guarantee was not entitled to equitable subrogation, noting that the insurance agent\u2019s failure to procure the excess policy had not caused the accident \u2013 it was caused by the bull escaping and running wild.\u00a0 That incident was one for which the carrier had agreed to provide insurance coverage to Dobbas.\u00a0 As such, because American Guarantee could not show that its equitable position was superior to the insurance agent\u2019s position, justice did not require the loss be shifted entirely from American Guarantee to the insurance agent.<\/p>\n

The Amco Court distinguished Dobbas, which involved an insurer seeking subrogation against its own broker\u2019s insured.\u00a0 In Dobbas, the carrier was thus in a subrogee-subrogor relationship with its own insured, taking an assignment from him against his broker.\u00a0 The doctrine of superior equities applied, and the carrier had to show that its rights were superior to that of the broker, since both of them played a role in securing coverage for the same insured.\u00a0 On the other hand,\u00a0 Amco had taken an assignment not from its own insured<\/u>, but from a third party, with whom it was not in a subrogee-subrogor relationship.\u00a0 The Court concluded that the assignment of Singh\u2019s cause of action against his own broker was not subject to the principles of equitable subrogation, and that the general rule of assignability applied.<\/p>\n

Finally, the Court of Appeal held that even if the doctrine of superior equities did apply…<\/p>\n

To finish reading this article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

David L. Blinn | Low, Ball & Lynch | February 8, 2016 Equitable subrogation is most commonly employed when an insurer pays its insured for losses and then pursues an action against the wrongdoer whose wrong caused the loss paid by the insurer.\u00a0 This case considered whether an insurer may bring an action for equitable… Continue reading Insurance Coverage \u2013 Equitable Subrogation \u2013 Doctrine of Superior Equities<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[3],"tags":[9129,23,8307],"class_list":["post-887631","post","type-post","status-publish","format-standard","hentry","category-insurance-claims","tag-equitable-subrogation","tag-insurance-coverage","tag-summary-judgement","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nInsurance Coverage \u2013 Equitable Subrogation \u2013 Doctrine of Superior Equities - 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