Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_13-cv-03499/USCOURTS-cand-3_13-cv-03499-10/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Contract Dispute

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United 

States District 

Court

For the Northern District of California 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

NAVIGATORS SPECIALTY INSURANCE 

COMPANY,

 Plaintiff, 

 v. 

ST. PAUL SURPLUS LINES INSURANCE 

COMPANY; LIBERTY SURPLUS 

INSURANCE CORPORATION; et al.,

 Defendants. 

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Case No. 13-cv-03499-SC

ORDER REQUIRING SUPPLEMENTAL 

BRIEFING ON ST. PAUL'S MOTION 

FOR SUMMARY JUDGMENT 

Now before the Court is Defendant St. Paul Surplus Lines 

Insurance Company's ("St. Paul") motion for summary judgment.1 ECF 

No. 69 ("Mot."). The Motion turns, in part, on whether insurance 

broker California Financial Insurance Services ("California 

Financial") had the authority to issue an Additional Insured 

Endorsement on St. Paul's behalf. Plaintiff Navigators Specialty 

Insurance Company ("Navigators") claims that California Financial 

had the authority to issue the Additional Insured Endorsement 

 

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 The original motion for summary judgment was filed jointly by 

Defendants St. Paul and Travelers Property Casualty Company of 

America ("Travelers"). By virtue of Navigators' dismissal of 

Travelers (ECF No. 89), the Court no longer has to rule on that 

portion of the motion pertaining to Travelers. 

Case 3:13-cv-03499-SC Document 109 Filed 06/26/15 Page 1 of 4
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United 

States District 

Court

For the Northern District of California 

because St. Paul's underwriter and agent, Crouse and Associates 

("Crouse"), delegated its power to issue such endorsements to 

California Financial. Navigators fails to address, however, 

whether Crouse had the authority to delegate its agency powers. In 

addition, Navigators did not have the opportunity to respond to St. 

Paul's brief which raised, for the first time, a section of St. 

Paul's letter of authority to Crouse expressly prohibiting any 

delegation of agency powers. ECF No. 105-1, Ex. A. As a result, 

additional briefing is necessary. 

This is an insurance dispute arising from two underlying 

construction defect lawsuits (known as the "3820 Cypress Action" 

and the "PRBO Action"). Both lawsuits allege that a building in 

Petaluma, California contains construction defects, and both 

lawsuits have been consolidated in state court (collectively "the 

Underlying Actions"). McDevitt & McDevitt ("McDevitt"), the 

general contractor for the building, was insured by Navigators. 

St. Paul insured Sunrise Windows ("Sunrise"), a subcontractor 

responsible for windows. This case relates to two policies St. 

Paul issued to Sunrise (the "Sunrise Policies"). 

Navigators alleges that it is entitled to declaratory relief, 

equitable contribution, and equitable subrogation arising out of 

St. Paul's alleged breach of its duty to defend and indemnify 

Navigators' named insured, McDevitt, against the Underlying 

Actions. Navigators claims that McDevitt is listed as an 

additional insured on the Additional Insured Endorsement to the 

Sunrise Policies. Importantly, California Financial, Sunrise's 

insurance broker, issued the Additional Insured Endorsement. 

Central to this case is whether, under the law of agency in 

Case 3:13-cv-03499-SC Document 109 Filed 06/26/15 Page 2 of 4
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United 

States District 

Court

For the Northern District of California 

California, California Financial had the authority to issue the 

Additional Insured Endorsement on St. Paul's behalf. The Court 

ordered additional discovery and supplemental briefing on this 

issue (ECF Nos. 86, 95, 100), and the parties recently filed 

supplemental briefs (ECF Nos. 102 ("Navigators Suppl. Br."); 105 

("St. Paul Suppl. Br.")). 

The parties' supplemental briefs focus on whether California 

Financial was authorized by St. Paul's agent, Crouse, to issue the 

additional insured endorsement -- in other words, whether 

California Financial operated as an authorized sub-agent of St. 

Paul. Navigators' supplemental brief focuses almost exclusively on 

a conversation between representatives of Crouse and California 

Financial during which Crouse allegedly authorized California 

Financial to issue additional insured endorsements on St. Paul's 

behalf. Navigators completely fails to address, however, whether 

Crouse had the authority to delegate its agency powers to 

California Financial in the first place. 

Section 2349 of the California Civil Code governs an agent's 

ability to delegate its powers to a sub-agent: 

An agent, unless specially forbidden by his principal to 

do so, can delegate his powers to another person in any 

of the following cases, and in no others: 

1. When the act to be done is purely mechanical; 

2. When it is such as the agent cannot himself, and the 

sub-agent can lawfully perform; 

3. When it is the usage of the place to delegate such 

powers; or, 

4. When such delegation is specially authorized by the 

principal. 

Cal. Civ. Code § 2349 (emphasis added). Navigators has not 

Case 3:13-cv-03499-SC Document 109 Filed 06/26/15 Page 3 of 4
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United 

States District 

Court

For the Northern District of California 

presented any evidence that the alleged delegation of authority 

from Crouse to California Financial falls within one of these 

categories. Further, Navigators has not had the opportunity to 

respond to St. Paul's brief citing a section of St. Paul's letter 

of authority to Crouse specifically forbidding Crouse from 

delegating its agency powers. ECF No. 105-1, Ex. A at 2 ("Without 

the prior express written approval of [St. Paul], [Crouse] shall 

not: . . . Delegate or assign any of the rights or powers conferred 

under this Letter of Authority to any other individual or 

entity."). 

For the forgoing reasons, the Court hereby ORDERS Navigators 

to show cause why summary judgment should not be granted in favor 

of St. Paul pursuant to section 2349 of the California Civil Code. 

Navigators should file a supplemental brief on this issue of no 

more than three (3) pages within seven (7) days of this Order. St. 

Paul may file a supplemental brief of no more than three (3) pages 

in reply within seven (7) days of the filing of Navigators' 

supplemental brief. 

 IT IS SO ORDERED. 

 Dated: June 26, 2015 

UNITED STATES DISTRICT JUDGE 

Case 3:13-cv-03499-SC Document 109 Filed 06/26/15 Page 4 of 4