A non-admitted insurer was not bound by a retail insurance broker’s issuance of an endorsement which purported to list a developer as an “additional insured” on the insurer’s policy. ( Certain Underwriters at Lloyd’s of London v. American Safety Ins. Services, Inc. (C.D. Cal. 2010) 702 F.Supp.2d 1169)
Facts
Ashby USA, LLC, a developer, hired Ralph D. Mitzel, Inc., an equipment rental company, to provide grading equipment at an Ashby real estate development site. Sometime later, Mitzel needed a general liability policy. Mitzel’s retail insurance broker, The Wooditch Company Insurance Services, Inc., contacted a licensed surplus line broker, International E&S Brokers, Inc., who procured the requested policy from a non-admitted insurer, American Safety Insurance Company. Mitzel’s retail broker, Wooditch, then issued a certificate of insurance and additional insured endorsement which purported to list Ashby as an “additional insured” on Mitzel’s policy through American Safety. Wooditch issued the certificate and endorsement without the knowledge or consent of either the surplus line broker, International E&S, or the actual insurer, American Safety.
Later, Alexandra Negri was injured in an accident at Ashby’s real estate development site. Negri thus filed a personal injury action against Ashby. Ashby’s own liability insurer, Certain Underwriters at Lloyd’s of London, defended and indemnified Ashby in the personal injury action.
Certain Underwriters then filed a federal court contribution action against American Safety. In the contribution action, Certain Underwriters alleged that Ashby was an “additional insured” on Mitzel’s policy through American Safety, and that American Safety was thus responsible for a share of the costs of defending and indemnifying Ashby in the underlying personal injury action. American Safety defended against the contribution action by asserting that Mitzel’s retail broker, Wooditch, did not have authority to issue the certificate and endorsement which purported to list Ashby as an additional insured on the American Safety policy.
Holding
The federal district court, applying California law, ruled in favor of American Safety. The district court concluded that Mitzel’s retail broker, Wooditch, did not have either “actual” or “ostensible” authority to issue the certificate and endorsement which purported to list Ashby as an additional insured on the American Safety policy. The court emphasized that under California Insurance Code sections 1761 and 703, a retail broker such as Wooditch could not lawfully act as the “agent” of a non-admitted insurer such as American Safety. Rather, only a licensed surplus line broker such as International E&S could act as an agent for American Safety. Because Wooditch was not an “agent” of American Safety, Wooditch’s act of issuing the certificate and endorsement was not binding on American Safety. Thus, Certain Underwriters was not entitled to contribution from American Safety.
Comment
This case presents a somewhat common fact pattern, i.e., a retail broker who issues a certificate of insurance and / or actual endorsement purporting to list someone as an “additional insured” on a policy issued by a non-admitted insurer. In that situation, the non-admitted insurer will invariably be able to establish that the retail broker was not the “actual” agent of the non-admitted insurer. If the non-admitted insurer can also show that the retail broker was not the “ostensible” agent of the non-admitted insurer, the non-admitted insurer should have no coverage obligations to the putative additional insured.