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Filed 4/18/13 University Partners v. Maryland Casualty CA3 

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication 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. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA 

THIRD APPELLATE DISTRICT 

(Sacramento) 

---- 

UNIVERSITY PARTNERS, LLC, et al., 

 Plaintiffs and Appellants, 

 v. 

MARYLAND CASUALTY COMPANY et al., 

 Defendants and Respondents. 

C065521 

(Super. Ct. No. 07AS03379) 

UNIVERSITY PARTNERS, LLC, et al., 

 Plaintiffs and Appellants, 

 v. 

ZURICH AMERICAN INSURANCE COMPANY, 

 Defendant and Respondent. 

C067398 
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 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. 
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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. 

FACTS AND PROCEEDINGS

 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 
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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 Fund policy was not provided. 

University Partners informed Cummins the Building was of frame construction and did 

not tell Cummins the Building contained sprinklers. 

 Cummins submitted to Zurich an application for insurance that erroneously 

described the Building as containing sprinklers and being built with fire resistant 

materials. The application was not signed by plaintiffs. Cummins also provided Zurich 

with the Evidence Form. 

 Zurich prepared a written offer of insurance through its subsidiary, Northern, 

based on the information contained in the application and the Evidence Form. The 

premium price was $1,600 per year, which was well below the renewal price for the 

Fireman’s Fund policy. Cummins forwarded the offer to plaintiffs with a cover letter 

indicating the coverage duplicated that of the Fireman’s Fund policy. In fact, however, 

the offer was for RC coverage rather than GRC coverage. It also contained a coverage 

limit of $2,341,000 rather than the $2,431,000 limit of the Fireman’s Fund policy. 
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Cummins was unaware before the fire that the Fireman’s Fund policy provided GRC 

coverage. 

 University Partners agreed to the offered policy (the Northern policy). However, 

when University Partners contacted Bronson to cancel the Fireman’s Fund policy, 

Bronson indicated it had previously rated the coverage of the Fireman’s Fund policy with 

Zurich and found the Zurich price to be $300 higher than that of the Fireman’s Fund 

policy. Bronson suggested that University Partners might want to verify the accuracy of 

the Northern policy. Westley thereafter contacted Cummins and asked why University 

Partners was receiving such a favorable price. Westley asked if the coverage was the 

same as the Fireman’s Fund policy and Cummins indicated it was. Westley also asked if 

the size of the Building was correct and was told it was. Westley asked if the policy 

contained RC coverage and was told it did. Cummins explained the reason for the price 

difference was an error regarding the nature of the insured Building. 

 Westley informed Cummins that it would not cancel the Fireman’s Fund policy 

until the price issue for the Northern policy was resolved. Westley further informed 

Cummins that the only reason University Partners was agreeing to switch coverage was 

because the Northern policy contained the same coverage for less money. Cummins later 

informed University Partners that they had made arrangements with Zurich to stand by 

the quoted price. Plaintiffs agreed to retain the Northern policy and cancel the Fireman’s 

Fund policy. 

 The Northern policy remained in effect from May 30, 2001 to May 30, 2002, 

when it was replaced by an equivalent policy issued by Maryland (the Maryland policy). 

The Maryland policy remained in effect until the fire. Over the years, the coverage limit 

on the Maryland policy increased such that, by May 30, 2005, it had reached $2,999,000. 

Both the Northern and the Maryland policies provided RC coverage. 

 As noted earlier, the Building was destroyed by fire on July 27, 2005. At the time, 

the cost to replace the Building was $4,864,613, well above the Maryland policy limit. 
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University Partners therefore decided not to rebuild and was paid $3,010,914 under the 

Maryland policy. 

 Plaintiffs made arrangements with International Adjusting Service (International) 

to adjust their insurance claim. International contacted Zurich, claiming $1,478,172 in 

unpaid replacement cost. Zurich referred the matter to legal counsel. 

 Plaintiffs initiated this action against Maryland, Cummins, Bronson, and two 

Cummins employees, Dick Dotters and Debbie Cummins. The first amended complaint 

contained eight causes of action: (1) negligent inducement to enter into the Maryland 

policy, (2) negligent adjustment of the policy limits, (3) breach of oral contract to adjust 

the policy limits, (4) breach of express or implied contract to adjust policy limits, (5) 

negligent misrepresentation of the terms of the Fireman’s Fund policy, (6) declaratory 

relief, (7) fraudulent inducement to enter into the Northern policy, and (8) a separate 

claim for damages on behalf of Westley. Plaintiffs later added Northern as a defendant. 

 Bronson demurred to the first amended complaint, asserting the fifth, sixth and 

eighth causes of action fail to state a claim against them. The trial court sustained the 

demurrers without leave to amend. The court concluded there were no material 

misrepresentations in the Evidence Form and no reasonable insured or insurance agent 

would have relied on it without reading the insurance policy itself. According to the 

court, the Evidence Form does not invite the insured to rely on it but rather refers the 

insured to the insurance policy. Furthermore, according to the trial court, even if the 

Evidence Form invited plaintiffs to rely on it, plaintiffs had ample opportunity over the 

next several years to review the Northern and Maryland policies to discover that it did not 

include GRC coverage like that in the Fireman’s Fund policy. Finally, the court 

concluded the sixth cause of action is moot by virtue of the court’s ruling regarding the 

fifth cause of action, and Westley did not oppose the demurrer to the eighth cause of 

action. The court thereafter entered judgment of dismissal in favor of Bronson. 
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 Plaintiffs appealed, and we affirmed. In an unpublished opinion (University 

Partners v. John O. Bronson (July 29, 2009, C058893) (University Partners I)), we 

concluded plaintiffs had no viable claim against Bronson. On the fifth cause of action for 

negligent misrepresentation of the terms of the Fireman’s Fund policy, we concluded 

plaintiffs’ reliance on the Evidence Form in applying for replacement insurance was not 

reasonable and they had a duty instead to examine the terms of the Fireman’s Fund policy 

themselves. We further concluded there was no evidence to suggest the Evidence Form 

was prepared with intent to influence plaintiffs to switch coverage. Finally, we 

concluded plaintiffs had ample opportunity to obtain GRC coverage before the fire if that 

is what they wanted. Because plaintiffs raised no arguments on appeal as to the sixth and 

eighth causes of action, we affirmed the trial court’s order sustaining demurrers to those 

claims as well. 

 On January 8, 2009, the trial court granted summary adjudication on the fifth 

cause of action for all remaining defendants. Plaintiffs do not challenge that ruling on 

appeal. 

 On January 22, 2009, Northern and Maryland moved for summary adjudication of 

the second, third and fourth causes of action. On May 18, 2009, the trial court granted 

the motion. Again, plaintiffs do not challenge that ruling on appeal. 

 On February 5, 2010, Maryland and Northern moved for summary judgment or, in 

the alternative, summary adjudication on all remaining claims. While this motion was 

pending, plaintiffs added Zurich as a defendant. On June 7, 2010, the trial court issued its 

order granting the motion for summary adjudication of Northern and Maryland. On 

June 23, the trial court entered judgment of dismissal in favor of Northern and Maryland. 

Plaintiff appeals from that order (C065521). 

 On November 10, 2010, plaintiffs filed a second amended complaint, in which 

they added a cause of action for civil conspiracy. Zurich demurred to the second 

amended complaint. On February 1, 2011, the trial court sustained Zurich’s demurrers 
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without leave to amend and entered judgment of dismissal. Plaintiffs appeal from that 

judgment (C067398). 

 We have consolidated these two appeals for all purposes. 

DISCUSSION

 In its ruling granting summary adjudication to Northern and Maryland on the first 

(negligent misrepresentation) and seventh (intentional misrepresentation) causes of 

action, the trial court concluded those insurers provided plaintiffs exactly what they and 

Cummins requested, RC coverage, and the insurers made no representations that they 

would provide the same coverage as the Fireman’s Fund policy. The court further 

concluded plaintiffs failed to present sufficient evidence that the insurers are vicariously 

liable for any representations made by Cummins as their agent. Finally, the court 

concluded plaintiffs are estopped by our prior ruling in University Partners I from 

claiming that any alleged misrepresentation caused them not to have GRC coverage at the 

time of the fire. Having so concluded, the court also granted summary adjudication on 

the sixth cause of action, seeking declaratory relief, and the eighth cause of action, 

seeking relief on behalf of Westley individually. With the elimination of all other claims 

against the insurers, those derivative claims also disappear. 

 Plaintiffs take issue with each of the three bases relied upon by the trial court in 

support of summary adjudication on the misrepresentation claims. They contend the 

misrepresentations they allege are not limited to whether the Northern and Maryland 

policies provided GRC coverage. They also contend they are not collaterally estopped by 

our prior decision from claiming defendants’ actions caused them not to have GRC 

coverage at the time of the accident. Finally, plaintiffs argue there is sufficient evidence 

that Cummins was acting as defendants’ agent in connection with the matters at issue. 

 As we shall explain, because we find plaintiffs have not established any actionable 

misrepresentations on the part of either defendants or Cummins, we need not consider 
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plaintiffs’ estoppel and agency arguments. Even assuming plaintiffs are not estopped to 

claim that misconduct by either defendants or Cummins caused them not to have GRC 

coverage at the time of the fire, and assuming Cummins was acting as defendants’ agent 

for purposes of the claims asserted herein, plaintiffs have not established that either 

Cummins or defendants made any misrepresentations to plaintiffs that caused plaintiffs to 

replace their GRC coverage with RC coverage. 

 Plaintiffs contend there is sufficient evidence in the record to support their 

misrepresentation claims based on both conspiracy and aider and abettor theories. The 

misrepresentation they allege does not concern the nature of the policy being provided by 

Northern and Maryland. Plaintiffs do not argue defendants conspired or aided and 

abetted Cummins in misrepresenting to plaintiffs that the Northern and Maryland policies 

provided GRC coverage. Instead, plaintiffs contend Cummins engaged in “price fraud” 

when Cummins misrepresented the nature of the insured premises as having sprinklers 

and being made of fire resistant materials. According to plaintiffs, Cummins did so in 

order to induce defendants to offer their insurance at a rate below that of the Fireman’s 

Fund policy, thereby in turn inducing plaintiffs to switch insurance. Plaintiffs further 

assert defendants participated in this price fraud when they agreed to sell the Northern 

policy to University Partners at this reduced price after learning that the Building had 

been misrepresented in the application. Plaintiffs contend: “[A] trier of fact could 

reasonably conclude that Cummins was engaged in a deceptive practice known 

commonly in the insurance industry as ‘twisting,’ and that [defendants], with knowledge 

of this fact, joined Cummins in this fraudulent plan and conspired with it to actively 

conceal it.” According to plaintiffs: “Twisting is the deceptive practice of making 

misrepresentations of the terms, including price, of an insurance policy to a customer, or 

allowing the use of these misrepresentations, for the purpose of inducing the customer 

into purchasing it.” 
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 Assuming plaintiffs are correct that there is sufficient evidence of defendants’ 

complicity in Cummins’s actions, either as a co-conspirator or an aider and abettor, the 

hole in plaintiffs’ argument is that there is no evidence of any misrepresentation by 

Cummins directed at plaintiffs. “ ‘The elements of fraud, which give rise to the tort 

action for deceit, are (a) misrepresentation (false representation, concealment, or 

nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to 

induce reliance; (d) justifiable reliance; and (e) resulting damage.’ ” (Lazar v. Superior 

Court (1996) 12 Cal.4th 631, 638.) In order to satisfy these elements, it is not enough 

that there were misrepresentations. Those misrepresentations must have been directed at 

the victim for the purpose of inducing the victim to rely to his or her detriment. 

 In this instance, neither defendants nor Cummins made any misrepresentations to 

plaintiffs regarding the terms of the Northern or Maryland policies. The price quoted, 

although artificially low, was the price charged. Although there is evidence Cummins 

misrepresented to plaintiffs that the policy coverage was the same as that in the Fireman’s 

Fund policy, this was based on a misunderstanding, shared by all the parties, that the 

Fireman’s Fund policy provided RC coverage. Thus, in representing that the Northern 

policy provided the same coverage as the Fireman’s Fund policy, Cummins was 

representing that the Northern policy provided RC coverage, which was true. 

 Plaintiffs’ fraud theory is based on misrepresentations by Cummins regarding the 

nature of the Building being insured. However, these were misrepresentations made by 

Cummins to defendants, not plaintiffs. Plaintiffs knew the nature of the insured property. 

If, as plaintiffs allege, Cummins purposely misrepresented the characteristics of the 

Building, this was for the purpose of inducing defendants to offer insurance at a reduced 

rate. The potential danger to an insured in such misrepresentations is that the insurer 

might later deny coverage upon learning the true facts. However, that did not occur here. 

On the contrary, when defendants learned the true facts, they agreed to sell the insurance 
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to plaintiffs at the reduced price and, after the fire, provided plaintiffs the full benefit of 

the policy. 

 What plaintiffs’ argument boils down to is that they were sold insurance at rates 

lower than normal. In other words, they received a windfall from the deal. If the 

circumstances had been as all the parties understood them to be, i.e., that the Fireman’s 

Fund policy provided RC coverage, plaintiffs received the full benefit of what they 

bought without having had to pay the full price for it. 

 Plaintiffs contend they were in fact harmed by the deal because, but for the change 

in policy, they would have recovered the full replacement value of the Building under the 

Fireman’s Fund policy. Plaintiffs argue it was only because of the unusually low price 

for the Northern policy that they decided to switch. Thus, they argue, the fact they were 

offered an artificially low price due to Cummins’s misrepresentations about the Building 

was a proximate cause of their loss. 

 We are aware of no prohibition against a seller of products or services offering 

them at below-market rates, or even below the seller’s cost. This may not make good 

business sense, but it is certainly not a fraud against the purchaser who is benefited 

thereby. It would be as if a consumer who purchased one automobile over another based 

solely on price and was later injured in an accident was permitted to sue the seller on a 

theory that the higher-priced automobile was in fact safer and he would not have been 

injured if he had been driving it at the time of the accident. This is not fraud but freemarket competition. As long as there were no misrepresentations about the nature of the 

product being purchased, e.g., the safety features of the automobile or the breadth of the 

insurance coverage, there is no actionable fraud in undercutting the price of a competitor. 

 Plaintiffs appear to acknowledge as much when they assert: “Plaintiffs are not 

suggesting that [defendants] normally cannot charge any price [they wish] for [their] 

insurance policies. Even though in the business to [sell] insurance policies, if Northern 

and Maryland want to give up over $3,000 a year, and over $15,000 over the length of the 
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[Northern and Maryland policies], [they] normally [have] the right to do so.” However, 

plaintiffs go on to argue: “It is when [Zurich], with actual knowledge of Cummins’ 

fraudulent plan and its purpose, makes the conscious decision to facilitate the 

commission of the tort by allowing Cummins to continue inducing University into 

purchasing the [Northern] policy, is Zurich subject to liability for aiding and abetting 

Cummins’ fraud.” 

 Once again, plaintiffs are attempting to assert a claim against defendants based on 

their complicity in a plan to mislead themselves into offering insurance at a reduced 

price. The only ones harmed in that regard were defendants. It is only because of the 

fortuity that the Fireman’s Fund policy contained GRC coverage, a fact not known to any 

of the parties herein, that plaintiffs were harmed by the switch in coverage. 

 Plaintiffs nevertheless contend defendants had a duty to disclose all material facts 

relating to the policy of insurance and they failed to satisfy that duty when they neglected 

to inform plaintiffs of the fraud perpetrated by Cummins. We fail to see where plaintiffs 

are going with this argument. Plaintiffs were in fact informed by Cummins that it had 

misstated the nature of the insured premises, at least as to the building materials. 

Plaintiffs therefore knew the price they were quoted was lower than what would have 

been the case if the true facts had been used. Plaintiffs also knew they were being sold 

the Northern policy at this lower price notwithstanding the error. Finally, as explained 

above, the only possible fraud concerned the misrepresentations directed at defendants by 

Cummins, not misrepresentations directed at plaintiffs. 

 We conclude the trial court properly granted summary adjudication to Northern 

and Maryland on plaintiffs’ misrepresentation claims. And those being the only 

remaining claims against Northern and Maryland, the court properly granted summary 

adjudication on the derivative claims. 

 Plaintiffs nevertheless contend defendants are guilty of bad faith in handling 

plaintiffs’ claim. Plaintiffs argue “a reasonable juror could conclude that Maryland, 
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through Zurich . . . , did not attempt to effect a prompt, fair, and equitable settlement of 

University [Partners’] October 2, 2006 claim once liability had become reasonably clear. 

Instead, on November 22, 2006, it referred the investigation to legal counsel, implying 

that this referral was to reasonably investigate the claim, when in fact it was for the 

purpose of forcing University [Partners] into litigation.” 

 Assuming plaintiffs adequately alleged a claim for bad faith, the problem with 

their argument is that it presupposes liability became “reasonably clear” to defendants 

before the matter was referred to legal counsel. However, the liability to which plaintiffs 

refer is the purported obligation of Maryland to provide plaintiffs the benefit of GRC 

coverage. However, the Maryland policy provided only RC coverage. Maryland paid 

plaintiffs the full benefit of RC coverage. As explained, above, Maryland’s liability for 

the additional GRC coverage was certainly not clear. On the contrary, Maryland had no 

such obligation. Thus, Maryland’s refusal to grant plaintiffs the benefit of GRC coverage 

cannot be the basis of a bad faith claim. 

 Because plaintiffs assert no independent basis for liability on the part of Zurich 

alone, but instead rely on a respondeat superior theory, we conclude the trial court also 

properly sustained Zurich’s demurrers to the second amended complaint. 

DISPOSITION

 The judgments of dismissal in favor of Northern, Maryland and Zurich are 

affirmed. Defendants are entitled to their costs on appeal. (Cal. Rules of Court, rule 

8.278(a)(1).) 

 HULL , J. 

We concur: 

 RAYE , P. J. 

 DUARTE , J.