Court Opinion

ID: 9762848
Source: CourtListenerOpinion
Date Created: 2023-08-29 02:32:36.298428+00
Date Added: 2024-06-11T07:29:37.935429
License: Public Domain

Pickering, J.,
concurring:
While I concur in the decision to reverse summary judgment and remand for further proceedings in this case, I do so because I find an issue of fact as to whether Star issued the problematic insurance policy ‘ ‘by reason of [Brown] having performed services for [Star] under this Agreement,” as the indemnity clause in the Producer Agreement requires. This conclusion depends on reading the indemnity clause as applying only when Brown’s acts or omissions caused Star to incur liability it could not avoid and would not have *326incurred otherwise. I read the clause this way not because Star seeks indemnity for negligence — I don’t see that it does — but based on ordinary rules of contract construction.
As noted, I do not see this case as involving a question of indemnity for negligence. The party seeking indemnification, Star, was held contractually liable on a policy of insurance that Brown, acting as Star’s producing agent, originated. Star now seeks contractual indemnity from Brown. There is no claim that Star was negligent toward the insured or toward Brown; hence, there is no question of Star being indemnified by Brown for Star’s negligence. At most, Star seeks indemnity for having issued a policy it wouldn’t have if Brown had provided complete information about the prospective insured’s business on the application Brown forwarded. Brown and Star disagree on whether Star knew what Brown knew (or should have known) about the insured when Star issued the policy.
The Producer Agreement defined the insurance risks Star authorized Brown to solicit and submit. If Brown exceeded the scope of its authority in taking this partly California-based insured’s application and forwarding it to Star as unexceptionable, then Brown may be liable to Star as a matter of agency law, Restatement (Third) of Agency § 8.09 cmt. b, illus. 1 (2006), and/or under the indemnity clause in the Producer Agreement (Star having become “involved” in a “claim, suit, hearing, action or proceeding” giving rise to “liability] ” “by reason of [Brown] having performed services for [Star] under this Agreement”). However, Brown opposed summary judgment with competent proof that Star knew that the insured still had operations in California when it accepted the application and issued the policy — in other words, that Star knew what Brown knew about the applicant and chose to write the policy anyway. This was sufficient to create a genuine issue of material fact as to whether Star incurred contractual liability to the insured on its own and not “by reason of” Brown. See id. cmt. b (an agent’s liability to a principal for unauthorized actions “does not extend to loss that the principal could have avoided”). Star’s different interpretation of the indemnity clause would lead to Brown being a reinsurer, not simply a producer, which is an unreasonable reading of the Producer Agreement as a whole. See 5 Margaret N. Kniffin, Corbin on Contracts § 24.22, at 240 (1998) (noting “preference for an interpretation that will result in contract terms that are reasonable”). Using the fault-based rubric the parties persuade the majority to adopt, if this commercially extraordinary result was what the parties intended, they should have said so much more clearly than they did. Cf. Restatement (Third) of Torts: Apportionment of Liability § 22 cmt. f (2000) (“An in*327demnitee can recover contractual indemnity for his or her own legally culpable conduct only if the contract is clear on that point,” but noting that, “[i]f the contract is otherwise clear, it need not contain specific words, such as ‘negligence’ or ‘fault.’ ”).
I thus concur in my colleagues’ decision to reverse summary judgment and remand but for the reasons and on the limited issues outlined above.