Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-00594/USCOURTS-caed-2_06-cv-00594-5/pdf.json

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

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

GLOBAL AEROSPACE, INC.,

NO. CIV. S-06-594 LKK/KJM

Plaintiff,

v. O R D E R

ARTHUR J. GALLAGHER & CO.

INSURANCE BROKERS OF

CALIFORNIA, INC.,

Defendant.

 /

 This case concerns an insurance coverage dispute. Pending

before the court are defendant’s motion to file an amended

counterclaim and motion for judgment on the pleadings. Defendant

alleges that the written insurance policy does not reflect the

parties’ intent and, accordingly, seeks reformation. Defendant

also argues that the written policy was not delivered to the

insured prior to the event giving rise to the claim and, on this

basis, seeks judgment on the pleadings. As defendant has

demonstrated good cause, the motion to file an amended counterclaim

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 The facts are drawn from plaintiff’s pleading unless 1

otherwise specified.

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is granted. The motion for judgment on the pleadings is denied,

however, because defendant has failed to demonstrate that there are

no set of facts under which relief could be granted.

I. Facts1

This case arises out of a crash of an insured aircraft while

attempting to land at Reno, Nevada in snow and freezing fog on

March 13, 2002. Plaintiff and counter-defendant Global Aerospace,

Inc. (“Global”) was the insurer for Regent Air (“Regent”), the

company that chartered the plane. As explained further below,

while Global has paid for the claims resulting from the crash, it

has done so conditionally and denies that it is the responsible

party. It now seeks to recover the money paid on the grounds that

the 2002-2003 policy did not provide coverage for the loss. Regent

assigned its rights to seek reformation of the policy to the

defendant and counter-claimant in the present suit, Arthur J.

Gallagher & Co. Insurance Brokers of California, Inc. (“Gallagher

Aviation”).

A. Regent’s First Policy (2001-2002)

Regent is an aircraft charter company located in Truckee,

California. Compl. ¶ 3. Over a nine-year period, Regent regularly

submitted requests for insurance quotations to AAU (now, Global).

Id. These requests were denied through 2000. In January 2001,

Geoff Logan, a broker employed by Gallagher Aviation, submitted an

informal request for quotation to Dan Haldeman, an underwriter of

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AAU/Global. Id. ¶ 5. Based on his observations of Regent’s

operation, Haldeman agreed to extend an offer of insurance. Id.

¶ 6. On February 13, 2001, Haldeman provided Gallagher Aviation

with a written quotation for the Regent account, which contained

a pilots declaration limiting covered Pilots in Command (PICs) to

those who met ongoing training requirements. Id.

Logan executed and transmitted to Regent a Confirmation of

Insurance, dated March 2, 2001, for coverage effective March 3,

2001 to March 3, 2002. Id. ¶ 10. The confirmation stated that

PICs covered by the policy were those approved by Gerald Canavan,

Regent’s owner and one of its pilots. Id. According to Global,

this was incorrect. Instead, Global contends that the coverage for

PICs, in the written policy, was limited to (1) Gerald Canavan, and

(2) other pilots who were properly certified, had completed certain

training, and had a specified amount of logged flight time. Id.

¶ 11. Jesse Gallagher, who was the captain of the aircraft

involved in the accident, did not satisfy these latter

requirements. Global alleges that based on the misrepresentations

contained in the Confirmation of Insurance, Regent permitted Jesse

Gallagher to operate its aircraft.

B. Regent’s Second Policy (2002-2003)

Although AAU/Global issued Regent’s policy effective March 3,

2001 (based on Regent’s informal application through Logan),

AAU/Global did not receive Regent’s formal application until

December 6, 2001. Id. ¶ 13. This application was in the form of

a “renewal” for 2002-2003. On February 25, 2002, Haldeman faxed

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Logan a quotation for the renewal, in which he stated that “all

Coverages, Terms and Conditions shall remain as per the expiring

policy.” Id. ¶ 14. The policy issued by AAU/Global for March 3,

2002 to March 3, 2003 contained a pilots declaration identical to

the one in the written 2001-2002 policy. Id. ¶ 16.

On March 13, 2002, one of Regent’s aircraft crashed into an

unoccupied commercial building in Reno, Nevada on its approach to

the Reno/Tahoe International Airport. Id. ¶ 17. The crash injured

the pilot and five passengers on board and also damaged the

aircraft and building. Id. Jesse Gallagher was operating the

aircraft as PIC at the time. Id. Pursuant to a Dispute Resolution

Agreement, which provided that ultimate responsibility for the loss

would be resolved either informally or through litigation, Global

undertook to pay the claims. Id. ¶ 19. To date, Global has paid

over $3.2 million to settle the various claims arising out of the

crash. Id. ¶ 34.

C. Pleadings

On March 21, 2006, Global filed its complaint against

Gallagher Aviation. Subsequently, on May 1, 2006, Gallagher

Aviation filed its answer and counterclaim. The original

counterclaim stated, inter alia, a cause of action for reformation,

alleging that (1) Regent’s renewal application disclosed Jesse

Gallagher as a captain who operated Regent’s aircraft; (2)

AAU/Global’s Haldeman confirmed to Gallagher Aviation’s Logan that

the new policy for 2002-2003 would contain coverage for pilots

approved by Canavan; (3) Global intended to provide Regent with

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 This was after two prior unsuccessful attempts at amending 2

its pleadings. First, on June 6, 2006, Global filed a motion to

dismiss the counterclaim for failure to state a claim upon which

relief could be granted. On June 25, 2006, Gallagher Aviation

filed a statement of non-opposition conditioned upon the court

granting its concurrent request to amend its answer and

counterclaim (which was not briefed). As a scheduling order had

been issued on June 9, 2006, the court directed Gallagher Aviation

to file a motion for leave to amend its pleadings and deferred

ruling on the motion to dismiss. Second, on July 25, 2006,

Gallagher Aviation filed a motion for leave to amend its answer and

counterclaim under Fed. R. Civ. P. 15. The court denied the motion

without prejudice, noting that the motion to amend was governed by

Fed. R. Civ. P. 16(b).

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coverage for PICs as approved by Canavan; and (4) the renewal

policy was not issued until after the accident and, when it was

issued, mistakenly did not include the agreed-upon coverage. 

On October 31, 2006, Gallagher Aviation filed the present

motion for leave to file an amended counterclaim and motion for

judgment on the pleadings. The proposed amended counterclaim 2

clarifies and expands upon the factual allegations supporting the

cause of action for reformation. It alleges that on December 6,

2001, Regent submitted an application for insurance to Global that

expressly disclosed Jesse Gallagher as a captain. In light of the

application, Gallagher Aviation contends that Global had a duty to

either furnish the insurance requested or to decline to do so

within a reasonable amount of time. 

As Global allegedly violated this duty, Gallagher Aviation now

seeks to reform the contract. The counterclaim states that on

February 25, 2002, AAU/Global’s Haldeman first faxed Gallagher

Aviation’s Logan a quotation for renewal, which indicated that “all

Coverages, Terms and Conditions shall remain as per the expiring

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policy,” but that later that same day, Haldeman told Logan that the

new policy (for 2002-2003) would also provide coverage for pilots

who were approved by Canavan. Furthermore, Gallagher Aviation

alleges that when Logan later requested that the insurance be bound

pursuant to the “quotation,” the quotation included both the fax

and the oral representation. Accordingly, Gallagher Aviation

alleges that the absence of coverage in the written 2002-2003

policy for any pilot approved by Canavan was the result of a

mistake by Global.

II. Standards

A. Motion for Leave to Amend

A motion for leave to amend a complaint filed after a pretrial scheduling order has issued is governed by the “good cause”

standard of Fed. R. Civ P. 16(b). Johnson v. Mammoth Recreations,

Inc., 975 F.2d 604, 609 (9th Cir. 1992). “Unlike Rule 15(a)'s

liberal amendment policy which focuses on the bad faith of the

party seeking to interpose an amendment and the prejudice to the

opposing party, Rule 16(b)'s ‘good cause’ standard primarily

considers the diligence of the party seeking the amendment.” Id.,

975 F.2d at 609. If the party seeking amendment was not diligent,

the inquiry should end. Id.; Zivkovic v. S. California Edison Co.,

302 F.3d 1080, 1087 (9th Cir.).

 In ascertaining whether justice requires granting leave to

amend, the court may consider factors such as “the presence of

absence of undue delay, bad faith, dilatory motive, repeated

failure to cure deficiencies by previous amendments, undue

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prejudice to the opposing party and futility of the proposed

amendment.” Moore v. Kayport Package Express, Inc., 885 F.2d 531,

538 (9th Cir. 1989). A motion for leave to amend a pleading may

also be denied if the amendment would be futile. See Albrecht v.

Lund, 845 F.2d 193 (9th Cir. 1988).

B. Motion for Judgment on the Pleadings

A motion for judgment on the pleadings may be brought "[a]fter

the pleadings are closed but within such time as to not delay the

trial." Fed. R. Civ. P. 12(c). All allegations of fact by the

party opposing a motion for judgment on the pleadings are accepted

as true. Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482

(9th Cir. 1984). A "dismissal on the pleadings for failure to

state a claim is proper only if 'the movant clearly establishes

that no material issue of fact remains to be resolved and that he

is entitled to judgment as a matter of law.'" Id. (quoting 5 C.

Wright & A. Miller, Federal Practice and Procedure: Civil § 1368,

at 690 (1969)); see also McGlinchy v. Shell Chemical Co., 845 F.2d

802, 810 (9th Cir. 1988).

When a Rule 12(c) motion is used to raise the defense of

failure to state a claim, the motion is subject to the same test

as a motion under Rule 12(b)(6). McGlinchy, 845 F.2d at 810; see

also Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9th Cir. 1989);

Balistreri v. Pacific Police Dep’t, 901 F.2d 696, 699 (9th Cir.

1990). Thus, the motion will be granted only if the movant

establishes that "no relief could be granted under any set of facts

that could be proven consistent with the allegations." Hishon v.

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King & Spalding, 467 U.S. 69, 73 (1984); see also Conley v. Gibson,

355 U.S. 41, 45-46 (1957); Newman v. Universal Pictures, 813 F.2d

1519, 1521-22 (9th Cir. 1987). The court must accept all material

allegations of the complaint as true and all doubts must be

resolved in the light most favorable to the plaintiff. N.L. Indus.

Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).

III. Analysis

Defendant and counter-claimant Gallagher Aviation has filed

a motion for leave to file an amended counterclaim and a motion

for judgment on the pleadings. With respect to the first

motion, Gallagher Aviation argues that its amended counterclaim

should be permitted because it merely corrects the defects

pointed out by Global’s June 6, 2006 motion to dismiss. Global

responds that the proposed amended counterclaim would be futile

because it could not survive a motion to dismiss. With respect

to the second motion, Gallagher Aviation maintains that Global

has not alleged, and cannot in good faith allege, that its

written 2002-2003 policy was in effect at the time of the crash,

because it was not issued or delivered until after the crash. 

Furthermore, Gallagher Aviation argues that there is no basis

for a duty of care running from Gallagher Aviation (as Regent’s

broker) to Global. For the reasons set forth below, the motion

for leave to file an amended counterclaim is granted and the

motion for judgment on the pleadings is denied.

A. Motion for Leave to Amend

First, Gallagher Aviation moves for leave to amend its

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counterclaim. As a scheduling order has been issued in this

case, any amendment to the pleadings is permitted only with

leave of court upon a showing of good cause. See Johnson, 975

F.2d at 609; Fed. R. Civ. P. 16(b). Global contends that

Gallagher Aviation has failed to demonstrate good cause and

that, in any event, the proposed amended counterclaim would be

futile because it fails to cure other critical defects in the

counterclaim.

1. Good Cause 

Gallagher Aviation has demonstrated good cause for leave to

amend. The good cause standard primarily considers the

diligence of the party seeking the amendment. Johnson, 975 F.2d

at 609. Here, Gallagher Aviation’s motion to file an amended

counterclaim does not arise from a failure to exercise due

diligence. Rather, it is clear that the amended counterclaim is

in response to Global’s June 6, 2006 motion to dismiss, which

argued that the original counterclaim failed to sufficiently

allege the intent of the parties and the details of the

purported mistakes leading to a contract that the parties did

not intend. In short, Gallagher Aviation is attempting to

perfect its counterclaim, rather than to introduce new legal

theories.

While it is true that Gallagher Aviation’s previous

attempts to amend its pleadings were submitted in an

inappropriate fashion, Global would not suffer undue prejudice

if the instant motion were granted. See Moore, 885 F.2d at 538

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 Global also notes, correctly, that the request for 3

attorney’s fees is barred by the Dispute Resolution Agreement.

Compl. Ex. A at 2; Cal. Code Civ. P. § 1021 (“Except as attorney’s

fees are specifically provided for by statute, the measure and mode

of compensation of attorneys . . . is left to the agreement,

express or implied, of the parties”). 

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(noting that both undue prejudice and the repeated failure to

cure deficiencies by previous amendment are relevant factors in

determining whether leave to amend should be granted). 

Specifically, Global has been aware of Gallagher Aviation’s

desire to seek reformation, both based upon Gallagher Aviation’s

previous pleadings, as well as the Dispute Resolution Agreement,

which provided Gallagher Aviation with the right to seek

reformation on behalf of Regent. Furthermore, discovery is open

until January 26, 2007, and, more importantly, the issue of

reformation is central to a just resolution of this case. In

light of these circumstances, the court finds that there is good

cause for leave to amend.

2. Futility of Proposed Amendment

Global also contends that, even if Gallagher Aviation is

able to demonstrate good cause, leave to amend need not be

granted if the amended pleading would be subject to dismissal. 

See Moore, 885 F.2d at 538. Specifically, Global argues that

the amended counterclaim is futile because (1) parol evidence is

inadmissible, (2) neither Gallagher Aviation nor Regent Air is a

“party aggrieved,” and (3) mistake has not been alleged with

particularity. The court disagrees. 3

First, the parol evidence rule is no bar to the amended

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counterclaim. Under California law, extrinsic evidence is

admissible where it is relevant to prove a meaning to which the

language of an instrument is reasonably susceptible. See Morey

v. Vannucci, 64 Cal. App. 4th 904, 912 (1st Dist. 1998). Here,

however, if the written 2002-2003 policy was not even in effect

at the time of the crash, any evidence extrinsic to that policy

would obviously not be barred. Whether or nor that policy was

in effect turns on issues of fact, see Section IV.B.1, infra,

and in the present posture of a motion to amend, it cannot be

said that the counterclaim would be “futile.”

Second, Global presses that neither Gallagher Aviation nor

Regent Air is a “party aggrieved” under California law because

they have not suffered damages. Cal. Civ. Code § 3399 (“When .

. . a contract does not truly express the intention of the

parties, it may be revised on the application of a party

aggrieved . . .”). While it is true that Global has paid the

claims arising from the crash, it would make little sense to

require Gallagher Aviation to first pay several million dollars

before it could make its case for why the terms of the written

2002-2003 policy do not apply. The bottom line is that the

resolution of this case requires a determination of which policy

terms were in effect at the time of the crash, and if Gallagher

Aviation were to succeed with its position, reformation would be

appropriate. In this regard, it is worth bearing in mind that

“the remedy of reformation is equitable in nature and not

restricted to the exact situations stated in section 3399" of

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the California Code. Schs. Excess Liab. Fund v. Westchester

Fire Ins. Co., 117 Cal. App. 4th 1275, 1284 (2004).

Finally, Global maintains that the alleged mistake in the

written policy has not been pleaded with the particularity

dictated by California law, which requires a party to specify

“how the mistake was made, whose mistake it was and what brought

it about.” Lane v. Davis, 172 Cal. App. 2d 302, 309 (2d Dist.

1959); Fed. R. Civ. P. 9(b). Here, the Complaint states that

“The terms of the written 2002-2003 policy, which . . . did not

include coverage to Regent Air for Jesse L. Gallagher . . . ,

was the result of a mistake by Global.” Compl. ¶ 16. 

Furthermore, in its papers, Gallagher Aviation states that it

has “alleged mistake with as much specificity as possible under

the facts of this case.” Def.’s Mot. at 8. The court agrees. 

It also bears keeping in mind that “mistake is an ingredient of

formation but not its essence. The essential purpose of

reformation is to reflect the intent of the parties.” Jones v.

First Am. Title Ins. Co., 107 Cal. App. 4th 381, 389 (2d 2003).

In sum, the court finds that Gallagher Aviation has

demonstrated good cause for leave to amend, and that its

proposed amended counterclaim would not be futile. Accordingly,

the motion for leave to file the amended counterclaim is hereby

granted.

B. Judgment on the Pleadings

Second, Gallagher Aviation moves for judgment on the

pleadings. With respect to Counts 1-5 of the complaint,

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Gallagher Aviation argues that the written 2002-2003 policy

could not be in effect until it had been received and accepted

without objection, and that this did not take place prior to the

crash. With respect to Counts 1-3, Gallagher Aviation maintains

that it did not owe Global a legal duty of care. The court

addresses each argument in turn.

1. Failure to Allege an Applicable Contract

As an initial matter, Gallagher Aviation asserts that “a

careful reading of the Complaint reveals that Plaintiff never

actually alleges that its written 2002-2003 policy was in effect

at the time of the crash.” Def.’s Mot. at 10. The court

disagrees. The Complaint states, for instance, that “Jesse L.

Gallagher was not an approved pilot according to the terms of

the 2002-2003 Policy. Therefore, there was no insurance

coverage for the incident under that policy.” Compl. ¶ 18. A

reasonable inference, which the court is obligated to draw on a

motion for judgment on the pleadings, is that this statement

alleges that such a policy was in effect at the time of the

crash; otherwise, the allegation would serve no role in the

Complaint whatsoever. Furthermore, the complaint incorporates

by reference the parties’ Dispute Resolution Agreement, which

also states that the policy covered the period from March 3,

2002 to March 3, 2003. Compl. Ex. A at 1. Again, drawing all

reasonable inferences, Global has sufficiently alleged that the

policy was in effect during that period.

The gravamen of Gallagher Aviation’s motion, however, is

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 Gallagher notes that, in its answers to written 4

interrogatories, plaintiff conceded that the written policy was not

delivered to Gallagher Aviation’s Logan until April 23, 2002, more

than one month after the crash.

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that any allegation that the policy was in effect at the time of

the crash is untenable as a matter of law. Specifically, it

maintains that an insurance policy does not go into effect until

receipt and acceptance, and that Global cannot allege that this

occurred prior to the crash in good faith. The only case 4

Gallagher Aviation cites in support of this proposition, Chase

v. Blue Cross of Cal., 42 Cal. App. 4th 1142, 1155 (1996),

states that “[i]t is a general rule that the receipt of a policy

and its acceptance by the insured without objection binds the

insured as well as the insurer . . .” (internal quotation marks

omitted). However, Chase merely states that receipt and

acceptance are sufficient to make the policy binding; it does

not stand for the stronger proposition that receipt and

acceptance are necessary to make a policy binding.

Rather, it is clear that a policy may become binding even

before an insurer delivers the policy. In Golden Eagle, the

court stated that “[i]t is not necessary . . . for an insurance

policy to be physically delivered to the insured in order for

the policy to be effective.” Golden Eagle v. Foremost Ins. Co.,

20 Cal. App. 4th 1372 (2d Dist. 1993) (internal quotation marks

omitted). Similarly, in Ahern, the court observed that whether

an insurance policy is binding “does not depend on its manual

delivery to, or possession by, insured, but rather on the

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 In addition, the equitable principle cited by Golden Eagle, 5

that “[h]e who takes the benefit must bear the burden,” applies

equally with respect to the insured. 20 Cal. App. 4th 1372

(quoting Cal. Civ. Code § 3521). For instance, an insured could

not refuse to pay its premium after receiving the benefit of

insurance. 

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intention of the parties as manifested by their acts or words.” 

Ahern v. Dillenback, 1 Cal. App. 4th 36, 46 (4th Dist. 1991)

(internal quotation marks omitted).

To be sure, the facts of the present case are not identical

to those in Golden Eagle or Ahern. In Golden Eagle, the court

found that where the insurer intended to send a copy of the

policy to the insured, but was unsuccessful in doing so, it

could not then rely on this mishap to argue that the policy was

not in effect. 20 Cal. App. 4th at 1388. The court noted that

“[w]here the insurer issues a policy and collects a premium,

whether from its agent or directly from the insured, fundamental

fairness requires the insurer be bound.” Id. Here, Gallagher

Aviation points out that the insurer is not attempting to evade

the policy, but, rather, to argue for its applicability. 

Nevertheless, if an insurance company evinces sufficient intent

for a policy to be binding, it is binding for both the insurer

and the insured, not only the former. A contrary rule would

lead to the paradoxical conclusion that, wherever physical

delivery was deficient, the policy could only be enforced by the

insured.5

Gallagher Aviation also attempts to distinguish Ahern

because, there, the court addressed the issue of when a policy

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 The Complaint could also be reasonably construed as alleging 6

that the written 2002-2003 policy was issued on March 3, 2002.

Compl. ¶ 16 (“The policy issued by AAU for the policy period March

3, 2002 . . .”). Cf. Compl. ¶ 13 (“[T]he 2001-2002 Policy had

issued effective March 3, 2001 . . .”).

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has binding effect after it has been issued, whereas here, there

is no allegation that plaintiff issued the written 2002-2003

policy prior to the crash. 1 Cal. App. 4th at 46. While it is

true that Global has not clearly alleged when, precisely, the

written 2002-2003 policy was issued, it has alleged that such a

policy was in effect at the time of the crash. This is 6

sufficient to survive a motion for judgment on the pleadings,

which “may only be granted when the pleadings show that it is

beyond doubt that the plaintiff can prove no set of facts in

support of his claim which would entitle him to relief.” Enron

Oil Trading & Transp. Co. v. Walbrook Ins. Co., Ltd., 132 F.3d

526, 529 (9th Cir. 1997).

In short, Gallagher Aviation has not met its burden of

proving that the written 2002-2003 policy could not be in

effect, as a matter of law, when the crash occurred. At the

very least, there appear to be circumstances in which an

insurance policy is effective even without delivery, e.g., where

the insurer intends for the policy to be effective and there is

some overt act evincing that intent. Whether this case fits

into those circumstances ultimately turns on issues of fact,

but, in the present posture, the court must accept plaintiff’s

allegations as true. As Global has sufficiently alleged that

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To be clear, the court’s ruling is not that the written 7

2002-2003 policy was, in fact, the contract in effect when the

crash took place, as opposed to an insurance binder, for example.

Rather, the court merely holds that Global has sufficiently pled

this allegation.

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the written 2002-2003 policy was in effect, and there appear to

be at least some circumstances in which a policy may be

effective without delivery, the motion must be denied.7

2. Gallagher Aviation’s Duty to Global

Gallagher Aviation separately contends that judgment on the

pleadings is proper with respect to Global’s first, second, and

third causes of action (for broker negligence, equitable

indemnity, and equitable subrogation) because Gallagher

Aviation, as a broker, owed no duty to Global. Even though a

broker is not an agent for the insured, it does not follow that

the broker owes no duty to anyone else. Whether a broker owes a

duty to a third party is a matter of policy and involves the

balancing of various factors. See Century Surety Co. v. Crosby

Ins., Inc., 124 Cal. App. 4th 116, 125 (2004) (relevant factors

include “the extent to which the transaction was intended to

affect plaintiff, the foreseeability of harm to him, the degree

of certainty that the plaintiff suffered injury, the closeness

of the connection between defendant’s conduct and the injury

suffered, the moral blame attached to the defendant’s conduct,

and the policy of preventing future harm”). 

Here, taking plaintiff’s facts as true, the court finds

that Gallagher Aviation owed a limited duty to Global in the

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 This duty is secondary to the broker’s primary duty to his 8

principal, the insured, but an obligation to convey accurate

information regarding the terms of a policy is fully consistent

with both duties.

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no duty to Global, this would, at most, warrant judgment on the

pleadings with respect to the first cause of action (negligence)

but not the second and third causes of action (equitable indemnity

and equitable subrogation). The latter causes of action require

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form of communicating accurate information to its insured.8

First, the transaction between Gallagher Aviation and Regent Air

was intended to affect Global by binding it to an insurance

policy. Second, the harm to Global was foreseeable, because a

misrepresentation regarding coverage subjects an insurer to

either financial liability (in the form of payment for claims

that it did not intend to insure) or potential bad faith

liability (if it were to deny the claims), at least in the

short-term, even if the insurer’s coverage position were

ultimately vindicated. Third, it is certain that Global

suffered injury, as it has paid over three million dollars in

claims. Fourth, there is a direct connection between

defendant’s conduct (an alleged misrepresentation regarding

coverage) and the injury sustained (payment of claims). 

Finally, imposing a duty here also reduces the likelihood of

future misrepresentations on the part of brokers to their

clients.

Accordingly, the court denies the motion for judgment on

the pleadings and finds that Gallagher Aviation owed a duty to

Global.9

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no particular duty other than the general duty to indemnify and

subrogate. See Fireman’s Fund Ins. Co. v. Haslam, 29 Cal. App. 4th

1347, 1353-54 (1st Dist. 1994) (“The duty to indemnify may arise

and indemnity may be allowed when in equity and good conscience the

burden of a judgment should be lifted from a person seeking

indemnity to one from whom indemnity is sought.”); Maryland Cas.

Co. v. Nationwide Mut. Ins. Co., 81 Cal. App. 4th 1082, 1088-89

(4th Dist. 2000) (“Equitable subrogation allows an insurer that

paid coverage or defense costs to be placed in the insured's

position to pursue a full recovery from another insurer who was

primarily responsible for the loss.”).

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V. Conclusion

Based on the foregoing, the court orders as follows:

1. The motion for leave to file an amended counterclaim is

hereby GRANTED.

2. The motion for judgment on the pleadings is hereby

DENIED.

IT IS SO ORDERED.

DATED: December 4, 2006.

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