Start Inc vs National Fire & Marine Insurance Company et al

Case Number

23CV00965

Case Type

Hearing Date / Time

Fri, 09/15/2023 - 10:00

Nature of Proceedings

Demurrer

Tentative Ruling

TENTATIVE RULING:

 For all reasons discussed herein, the demurrer of defendant Brown & Brown Insurance Services of California, Inc. to plaintiff’s complaint is overruled. Defendant shall file and serve its answer to plaintiff’s complaint on or before September 25, 2023.

 

 

Background:

 This action arises from damages incurred by plaintiff Start, Inc. (Start) resulting from the Thomas Fire and a subsequent rainstorm and ensuing mudslides that occurred on January 9, 2018, the alleged wrongful and bad faith handling and denial of insurance benefits by defendant National Fire & Marine Insurance Company (National Fire), and the alleged professional negligence of defendant Brown & Brown Insurance Services of California, Inc. (Brown & Brown), in allegedly failing to procure adequate insurance coverage for the damages sustained by plaintiff Start.

 

As alleged in the complaint filed by Start in this action (the present action or present complaint) on May 20, 2019, Start filed as case number 19CV02637, an action entitled Start Inc. et al. v. Matt Porter et al. against National Fire for breach of its obligations under an insurance contract and against Brown & Brown for professional negligence (the National Fire action). (Compl., ¶ 3.) The National Fire action was later consolidated with case number 19CV04891 entitled Start, Inc., et al. v. Lonmar Global Risks Limited, et al. (the Lonmar action). (Ibid.) (Note: The Court will refer to the consolidated matter as the consolidated action.)

 

On April 20, 2021, Start, National Fire, Brown & Brown, and the defendants named in the Lonmar action entered into a stipulation and tolling agreement pursuant to which the parties agreed to dismiss the consolidated action without prejudice to allow Start to pursue an action against Southern California Edison Company and Edison International for damages arising from the Thomas Fire and mudslides (the SCE action). (Compl., ¶ 4 & Exh. A.)

 

As further alleged in the present complaint, plaintiff Start was founded in 2017 as a commercial nursery to serve as the core of a “seed to patient” legal medical cannabis enterprise. (Compl., ¶ 10.) Start owned and operated a medical cannabis nursery located at 1628 Cravens Lane in Carpinteria, California (the nursery). (Id. at ¶¶ 1, 8.) The nursery had an inventory of mother plants from which small cuttings were removed as needed to be rooted and then sold as “clones” or “teens”, or used to maintain a productive inventory of mother plants.(Id. at ¶ 10.) Start obtained insurance for its nursery from National Fire under a policy that was in effect from June 9, 2017, to June 9, 2018 (the National Fire policy). (Id. at ¶ 12 & Exh. B.) The National Fire policy provided coverage for Start’s commercial property, business personal property, and business income. (Ibid.)

 

Smoke and ash created by the Thomas Fire coated Start’s greenhouse including its climate-regulating mechanisms which consist of a shade-cloth and air-vents, and penetrated the greenhouse’s elements and surfaces. (Compl., ¶ 13.) The greenhouse housed Start’s inventory of annual mother plants and monthly harvest of cuttings. (Id. at ¶ 2.) On January 9, 2018, a rainstorm caused mudslides, evacuations, and road closures (the storm event) which blocked access to Start’s greenhouse for several days. (Id. at ¶ 14.) The storm event exacerbated the damage to the greenhouse caused by the Thomas Fire and caused greenhouse infrastructure and equipment to malfunction. (Ibid.) The damage made it impossible to maintain the greenhouse within a safe range of atmospheric conditions that are required to sustain Start’s inventory. (Ibid.) The greenhouse was unusable until extensive and expensive repairs could be performed to restore the greenhouse to a safe and contamination-free operating condition. (Ibid.) During the period that the greenhouse was not safe, Start’s business was interrupted. (Ibid.)

 

When Start became aware that ash and soot from the Thomas Fire had damaged the greenhouse, it made a claim under the National Fire policy for damage to its commercial and business property and for the business interruption caused by Start’s inability to use its greenhouse (the National Fire claim). (Compl., ¶ 16.) When Start regained access to the greenhouse after the storm event, Start notified National Fire of the further damage it had suffered. (Ibid.)

 

Throughout the claims process, National Fire ignored crucial contamination reports, undervalued Start’s damaged business property, misidentified building elements, and hired claim adjusters and others who lacked knowledge and experience in the medical cannabis industry in general and of the specific needs of a large-scale medical cannabis nursery. (Compl., ¶¶ 2, 17.) National Fire and its adjuster’s and expert’s lack of knowledge and experience led to inaccurate opinions and evaluations, ineffective partial repairs, a failure to pay out the limit of the National Fire policy even though National Fire knew or should have known that Start’s damages exceeded coverage limits, and caused National Fire to underpay or deny the National Fire claim. (Ibid.) As a result of National Fire’s conduct, Start was denied benefits under the National Fire policy and its principals experienced emotional disturbance and distress. (Id. at ¶ 18.)

 

Brown & Brown, who is Start’s insurance agent or broker, procured the National Fire policy. (Compl., ¶ 19.) Start communicated to Brown & Brown the details of its business including that it operated the nursery in which the mother plants were grown. (Ibid.) Start relied on Brown & Brown to secure an insurance policy that would cover the full value of Start’s business property including its medical cannabis farm, the nursery, and its greenhouse. (Id. at ¶¶ 1, 19.) When Start made the National Fire claim, National Fire claimed that the National Fire policy procured by Brown & Brown was inadequate to cover the full amount of property damage suffered by Start. (Id. at ¶¶ 2, 20.) Brown & Brown failed to secure the proper amount of insurance coverage and obtained a policy that included a marijuana endorsement which limits the coverage that Brown & Brown was hired to procure. (Ibid.) National Fire referenced the marijuana endorsement as part of its denial of benefits under the National Fire policy which caused Start to suffer uninsured losses that exceeded the amount of available coverage. (Ibid.)

 

The complaint asserts three causes of action: (1) breach of contract (against National Fire); (2) breach of the implied covenant of good faith and fair dealing (against National Fire); and (3) professional negligence (against Brown & Brown). On May 10, 2023, National Fire filed an answer to Start’s complaint, generally denying its allegations and asserting twenty affirmative defenses.

 

On June 1, 2023, Brown & Brown filed a demurrer on the grounds that, under the doctrine of res judicata, the Court’s order granting a motion for judgment on the pleadings filed by Brown & Brown in the Lonmar action and a dismissal with prejudice of the cause of action alleged against Brown & Brown in the second amended complaint filed by Start in the Lonmar action operate to bar the third cause of action for professional negligence alleged in the present complaint. Brown & Brown further contends that Start has failed to allege in the present complaint that Brown & Brown breached a duty owed to Start or that Brown & Brown caused the damages alleged by Start. Start opposes the demurrer.

 

Analysis:

 

“The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We not only treat the demurrer as admitting all material facts properly pleaded, but also ‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]’ [Citation.]” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (Quelimane); accord, Zhang v. Superior Court (2013) 57 Cal.4th 364, 370.) “If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.” (Quelimane, supra, 19 Cal.4th at p. 38.)

 

(1) Brown & Brown’s Request for Judicial Notice

 

In support of its demurrer, Brown & Brown requests that the Court take judicial notice of: (1) the second amended complaint filed by Start on November 22, 2019, in the National Fire action (the National Fire SAC) (RFJN at p. 2, ll. 22-24; Moon Decl., ¶ 9 & Exh. H); (2) the second amended complaint filed by Start on March 23, 2020, in the Lonmar action (the Lonmar SAC) (RFJN at p. 2, ll. 7-9; Moon Decl., ¶ 3 & Exh. B); (3) a demurrer to the Lonmar SAC filed by All Risks, Ltd. (All Risks) in the Lonmar action on April 22, 2020, (the All Risks demurrer) (RFJN at p. 2, ll. 10-11; Moon Decl., ¶ 4 & Exh. C); (4) the Court’s Minute Order dated June 26, 2020, sustaining the All Risks demurrer (the June 2020 Minute Order) (RFJN at p. 2, ll. 12-14; Moon Decl., ¶ 5 & Exh. D); (5) a motion for judgment on the pleadings filed by Brown & Brown on August 13, 2020, in the Lonmar action (the Brown & Brown motion) (RFJN at p. 2, ll. 15-16; Moon Decl., ¶ 6 & Exh. E); (6) the Court’s Minute Order dated October 30, 2020, granting the Brown & Brown motion (the October 2020 Minute Order) (RFJN at p. 2, ll. 17-19; Moon Decl., ¶ 7 & Exh. F); (7) the Court’s order signed on October 30, 2020, and filed on November 2, 2020, in the Lonmar action dismissing the Lonmar SAC as to Brown & Brown with prejudice and entering a final judgment of dismissal in favor of Brown & Brown and against Start (the Lonmar judgment of dismissal) (RFJN at p. 2, ll. 20-21; Moon Decl., ¶ 8 & Exh. G); (8) a memorandum in support of a motion to consolidate the Lonmar action with the National Fire action (the motion to consolidate) filed by National Fire on November 6, 2020, in the National Fire action (RFJN at p. 2, ll. 25-27; Moon Decl., ¶ 10 & Exh. I); and (9) the Court’s January 22, 2021, Minute Order granting the motion to consolidate (the consolidation order) (RFJN at p. 3, ll. 1-3; Moon Decl., ¶ 11 & Exh. J).

 

Though a demurrer tests the sufficiency of the complaint and not extrinsic matters, “a complaint may be read as if it included matters judicially noticed. [Citations.] Such matters may show the complaint fails to state a cause of action though its bare allegations do not disclose the defect.” (Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581, 590; see also Serrano v. Priest (1971) 5 Cal.3d 584, 591 [when reviewing the sufficiency of a complaint against a general demurrer, the court may consider “matters which may be judicially noticed”].)

 

As the National Fire SAC, the Lonmar SAC, the All Risks demurrer, the June 2020 Minute Order, the Brown & Brown motion, the October 2020 Minute Order, the Lonmar judgment of dismissal, the motion to consolidate, and the consolidation order described above constitute records of this Court, these documents are proper subjects of judicial notice. (Evid. Code, § 452, subd. (d)(1).) Therefore, the Court will grant judicial notice of the National Fire SAC, the Lonmar SAC, the All Risks demurrer, the June 2020 Minute Order, the Brown & Brown motion, the October 2020 Minute Order, the Lonmar judgment of dismissal, the motion to consolidate, and the consolidation order. However, as further discussed below, judicial notice of these documents does not extend to the truth of any facts or factual findings contained therein. (Kilroy v. State of California (2004) 119 Cal.App.4th 140, 147-148 (Kilroy) [also noting that, for purposes of determining whether a factual finding has res judicata effect in a subsequent action, the finding itself though not its truth may be a proper subject of judicial notice].)

 

(2) Judicially Noticed Matters

 

The Court takes judicial notice of the following matters which are relevant to the issues presented in Brown & Brown’s demurrer. Judicial notice of any allegations asserted by any party in the present action, the Lonmar action, or the National Fire action does not extend to the truth of those allegations. (Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 1056–1057 [allegations of a complaint not offered to prove their truth but to show notice or knowledge of matters at issue are not subject to the prohibition against hearsay]; accord, Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1567 [the court may properly take judicial notice that a civil complaint made certain allegations].) In addition, judicial notice of any findings of fact or conclusions of law contained within the June 2020 Minute Order, the October 2020 Minute Order, the Lonmar judgment of dismissal, or the consolidation order is intended only to show that the Court issued a particular order or ruling and made the findings or conclusions contained therein for purposes of res judicata any does not extend to the truth of any facts or hearsay statements contained within the order or ruling. (Kilroy, supra, 119 Cal.App.4th at pp. 145-148.)

 

With certain exceptions not relevant here, the National Fire SAC filed on November 22, 2019, includes the following allegations which are substantively similar if not identical to the allegations of the present complaint: Start owns and operates the nursery; the National Fire policy was in effect from June 9, 2017, to June 9, 2018, and provides coverage for Start’s commercial property, business personal property, and business income; Start’s greenhouse sustained physical damage as a result of soot and ash from the Thomas Fire; the storm event caused further damage to the greenhouse and key infrastructure and equipment used to maintain atmospheric conditions within the greenhouse; mudslides resulting from the storm event blocked access to the greenhouse for several days; Start made a claim against the National Fire policy after it became aware that the Thomas Fire had damaged the greenhouse; National Fire’s and it’s experts and adjusters’ lack of experience and knowledge in the cannabis industry led to inaccurate opinions and evaluations of the losses claimed by Start and National Fire’s refusal to adequately pay Start for the loss of its business income. (Moon Decl., Exh. H, ¶¶ 1, 8, 12-14, 16-18.)

 

In both the National Fire SAC and the present complaint, Start alleges that Brown & Brown procured the National Fire policy which includes a marijuana endorsement that National Fire contends does not cover Start’s losses. (Moon Decl., Exh. H, ¶ 22.) In the National Fire SAC, Start also alleges that Brown & Brown’s failure to obtain insurance to meet Start’s cannabis-industry needs and obtaining a policy which includes a marijuana endorsement resulted in National Fire partially denying benefits to Start causing Start to cease operations, lay off employees, and to lose its 10-year lease on the greenhouse, its cannabis license, and investment opportunities. (Id. at ¶ 24.)

 

In the Lonmar SAC, Start alleges that a portion of the insurance coverage for Start’s nursery was obtained from Royal & Sun Alliance Insurance PLC (RSA), under a different insurance policy (the RSA policy) that was in effect from June 9, 2017, to June 9, 2018. (Moon Decl., Exh. B, ¶ 12.) The RSA policy insured Start’s mother plants. (Id. at ¶¶ 13, 22.) Brown & Brown and All Risks were the insurance brokers or agents who procured the RSA policy in coordination with Lonmar Global Risks, Ltd (Lonmar). (Id. at ¶ 25.) Start communicated to Brown & Brown and All Risks the details of its business, including that it operated the nursery that grows the mother plants, clones, and teens, and that Start had plans for rapid expansion in the near future. (Ibid.)

 

As further alleged in the Lonmar SAC, as a result of soot and ash from the Thomas Fire infiltrating the greenhouse and falling onto the greenhouse’s shade-cloth and the plants and soil, Start had to destroy 830 mother plants. (Moon Decl., Exh. B., ¶¶ 10, 14.) In December 2017, Start made a claim on the RSA policy. (Id. at ¶ 18.) In December 2017, Matt Porter of Brown & Brown inspected the damage to the greenhouse and plant stock and advised Start to cease all clone sales due to potential downstream liabilities and related contamination. (Id. at ¶ 19.)

 

In the Lonmar SAC, Start also alleges that heavy rain and high winds during the storm event damaged the shade-cloth and greenhouse ridge vents which resulted in dramatically increased heat and humidity inside the greenhouse. (Moon Decl., Exh. B, ¶¶ 15, 16.). The heat and humidity created a toxic and harmful greenhouse environment that impacted mother plants that had survived the Thomas Fire. (Id. at ¶ 16.) Rain during the storm event also caused mudslides which closed access to the greenhouse for several days and exacerbated the situation. (Ibid.) As a result of atmospheric conditions within the greenhouse, Start lost an additional 538 mother plants. (Id. at ¶ 17.) In January 2018, Start made a second claim against the RSA policy based on this loss. (Id. at ¶ 20.) RSA categorized the second claim as resulting from a mudslide, even though the no plants were damaged as a result of mudslides. (Id. at ¶ 20.)

 

Start further alleges in the Lonmar SAC that RSA categorized the two claims as one occurrence—the storm event as damage resulting from a mudslide attributable solely to the Thomas Fire—thereby limiting the policy coverage to $1.5 million. (Moon Decl., Exh. B, ¶ 22.) RSA hired adjusters and “experts”, including cannabis expert Brent Buhrman (Buhrman), who mischaracterized, misrepresented, or intentionally fabricated statements and attributed them to Start’s representatives. (Id. at ¶¶ 23, 24.) Based on RSA and its adjusters and experts attributing fabricated statements to Start’s representatives and based on a valuation opinion provided by Buhrman, RSA accused Start of making misrepresentations during the application and investigation process including fraudulent representations regarding the value of the plants. (Ibid.)

 

In the Lonmar SAC, Start also alleges that RSA based its denial of payment for Start’s losses on accusations of fraud by Start. (Moon Decl., Exh. B, ¶ 24.) Start further alleges that Start was also underinsured because, according to RSA, Brown & Brown and All Risks failed to obtain adequate insurance coverage. (Id. at ¶ 25.) In addition, RSA and other third parties’ mismanagement of Start’s claims against the RSA policy resulted in a denial of benefits to Start and caused Start to cease operations, lay off its employees, and lose the 10-year lease on the greenhouse. (Id. at ¶ 23.)

 

The Lonmar SAC includes a sixth cause of action for professional negligence against Brown & Brown and All Risks. In the June 2020 Minute Order, the Court observed that “Start again alleges that ‘[the] accusations of fraud were . . . relied on as a basis for refusing to pay anything on [its] covered loss’ and that RSA ‘contends [the policy] doesn’t cover the losses because the crop was fraudulently valued.’ [Citation.] While paragraph 72 of the [Lonmar] SAC alleges additional ‘facts,’ these facts still fail to allege a causal connection between All Risks’ alleged conduct in procuring the subject policy and RSA’s independent actions in adjusting Start’s claim and ultimately denying coverage.” (Moon Decl., Exh. D.) For reasons discussed in the June 2020 Minute Order, because Start failed to allege a proximate causal connection between All Risks’ conduct and Start’s alleged harm, the Court sustained the All Risks demurrer. (Ibid.)

 

The Brown & Brown motion was also directed to the sixth cause of action for professional negligence alleged in the Lonmar SAC. As more fully discussed in the October 2020 Minute Order, the Court granted the Brown & Brown motion without leave to amend for the same reasons that the Court sustained the All Risks demurrer. (Moon Decl., Exh. F.) As a result of the Court granting the Brown & Brown motion without leave to amend, the Lonmar judgment of dismissal was entered.

 

In the consolidation order, the Court noted that “the complexities involved in the different issues of liability in the [Lonmar action and the National Fire action] would tend to militate in favor of separate trials.” (Moon Decl., Exh. J, italics added.) The Court noted, however, that “there are common issues regarding damage and causation regarding which the parties would benefit from conducting joint discovery. More importantly, while there are distinct differences in the two cases, and while the claims of liability will be based upon the interpretation of two separate insurance policies and the acts and conduct of two separate sets of persons and entities in adjusting the claims made in each case, there are significant common and overlapping issues of fact and law which make consolidation of the two actions for trial proper” and that “consolidation becomes particularly important with respect to the damages sought by Start in the two actions.” (Ibid., italics added.)

 

The Court also noted that “[s]hould Start be able to prove its case against both insurers, the issue of just where one loss ends and the other begins would appear to be a complex issue.” (Moon Decl., Exh. J.) Accordingly, the Court found that “there is considerable risk of double recovery for some aspects of the loss if the actions are tried separately.” (Ibid., italics added.) Finding that “[w]ithout consolidation of the trial of these two actions, if Start prevails in each case, there is the real possibility of the defendants in both cases being held responsible for vastly more than their share of liability for these injuries and damages, and/or that Start would obtain multiple recoveries for some of the damages incurred,” the Court ordered the National Fire action and the Lonmar action consolidated for pretrial and trial purposes (herein referred to as the consolidated action). (Ibid., italics added.) Importantly, the Court ordered that the pleadings and findings in the two cases would remain separate and jury instructions would distinguish the two cases. (Ibid.)

 

As further discussed above, on April 20, 2021, Brown & Brown agreed to a dismissal of the consolidated action without prejudice and entered into a tolling agreement further discussed herein to permit Start to pursue the SCE action. (Complaint, ¶ 4 & Exh. A.)

 

(3) Claim Preclusion Does Not Bar the Third Cause Of Action Alleged in the Present Complaint

 

Brown & Brown contends that the third cause of action for professional negligence alleged in the present complaint and the sixth cause of action for professional negligence alleged in the Lonmar SAC involve the same parties and the same cause of action. Because the sixth cause of action alleged in the Lonmar SAC terminated in the Lonmar judgment of dismissal, Brown & Brown argues, the third cause of action for professional negligence alleged in the present complaint is barred under the doctrine of res judicata. “If all of the facts necessary to show that an action is barred by res judicata are within the complaint or subject to judicial notice, a trial court may properly sustain a general demurrer.”  (Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d 1292, 1299; Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 792 (Boeken).)

 

The term “[r]es judicata … is an umbrella term encompassing issue preclusion and claim preclusion, both of which describe the preclusive effect of a final judgment.” (Guerrero v. Department of Corrections & Rehabilitation (2018) 28 Cal.App.5th 1091, 1098.) Claim preclusion, the primary aspect of res judicata, prevents a party from relitigating the same cause of action in a second suit between the same parties while issue preclusion prevents the relitigation of issues actually litigated and resolved in the prior proceeding. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896; Boeken, supra, 48 Cal.4th at p. 797.)

 

In the demurrer, Brown & Brown does not appear to contend that issue preclusion applies here. For example, Brown & Brown exclusively utilizes the term res judicata which generally refers to claim preclusion. (See, e.g., Planning & Conservation League v. Castaic Lake Water Agency (2009) 180 Cal.App.4th 210, 226 (Planning) [though “the term ‘res judicata’ is often applied to both doctrines, we follow our Supreme Court in limiting its scope to claim preclusion”].) Brown & Brown also argues that, under the primary rights theory, the professional negligence claim alleged by Start in the present complaint and in the Lonmar SAC constitute the same cause of action. (See Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, 1517 [the primary rights theory “implicates matters of claim preclusion (res judicata), not issue preclusion or collateral estoppel”].) Brown & Brown does not, however, offer any reasoned argument contending that any specific issues were actually litigated and resolved against Start in the Lonmar action. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824 (DKN) [“[u]nder issue preclusion, the prior judgment conclusively resolves an issue actually litigated and determined in the first action”].)

 

As Brown & Brown’s demurrer is limited to whether the causes of action for professional negligence alleged in the Lonmar SAC and in the present complaint involve the same parties and the same primary rights, it is the Court’s understanding that the demurrer is brought on the grounds of claim preclusion and not issue preclusion. (See DKN, supra, 61 Cal.4th at pp. 818, 824-825 [noting that claim preclusion and issue preclusion have distinctly different requirements].) The Court will therefore limit its examination to whether claim preclusion bars the third cause of action alleged in the present complaint. Furthermore, to the extent that the third cause of action does not allege invasion of the same primary right alleged in the sixth cause of action of the Lonmar SAC, issue preclusion would constitute an insufficient ground for demurrer. (Bush v. Superior Court (1992) 10 Cal.App.4th 1374, 1384-1385; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 [“a demurrer cannot rightfully be sustained to part of a cause of action”].)

 

Claim preclusion bars relitigation of the same cause of action in a second suit between the same parties when the “second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit.” (DKN, supra, 61 Cal.4th at p. 824.) Here, there is no dispute that Start and Brown & Brown were parties to the sixth cause of action for professional negligence alleged in the Lonmar SAC. Therefore, the “same parties” requirement of claim preclusion as to Start and Brown & Brown is satisfied.

 

Res judicata applies to a dismissal with prejudice. (Boeken, supra, 48 Cal.4th at p. 793; Roybal v. University Ford (1989) 207 Cal.App.3d 1080, 1087.) However, judgments that are entered on the pleadings such as the Lonmar judgment of dismissal “may be deemed a judgment on the merits, and conclusive in a subsequent suit; and the same is true where the [pleading challenge] sets up the failure of the facts alleged to establish a cause of action, and the same facts are pleaded in the second action.” (Goddard v. Security Title Insurance & Guarantee Co. (1939) 14 Cal.2d 47, 52; see also Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1216, fn. omitted [“[t]he standard for granting a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer”].) Accordingly, a judgment on the pleadings “will have the effect of a bar in a new action in which the complaint states the same facts which were held not to constitute a cause of action on the former [motion] or, notwithstanding differences in the facts alleged, when the ground on which the [motion] in the former action was sustained is equally applicable to the second one.” (McKinney v. County of Santa Clara (1980) 110 Cal.App.3d 787, 794.)

 

The “relevant point” for purposes of determining whether, under claim preclusion, the Lonmar judgment of dismissal bars the third cause of action for professional negligence alleged in the present complaint is what a Start has alleged “because that allegation indicates what primary right was adjudicated as a consequence of the dismissal with prejudice.” (Boeken, supra, 48 Cal.4th at pp. 798-799.) As more fully discussed above, the present complaint relates to the adequacy of insurance coverage for Start’s insurable interests in its commercial property, business personal property, and business income under the National Fire policy and whether Brown & Brown breached its duties to Start in procuring the National Fire policy. Start alleges that the National Fire policy did not adequately insure Start’s commercial property, business personal property, and business income because the marijuana endorsement included in the National Fire policy limited the coverage available under the National Fire policy. As a result, Start’s commercial property, business personal property, and business income were underinsured which caused Start to suffer losses to those interests. 

 

The Lonmar SAC relates to the adequacy of insurance coverage for Start’s mother plants under the RSA policy which was procured by Brown & Brown. The Lonmar SAC includes allegations that RSA denied coverage under the RSA policy because, according to RSA, Start allegedly misrepresented the value of the mother plants. Pursuant to the October 2020 Minute Order, the Court granted the Brown & Brown motion based on a finding that RSA’s coverage determination would not have been any different even if Brown & Brown had secured higher coverage limits for the mother crops because RSA refused to cover the losses to the mother plants due to Start’s alleged fraud. (Moon Decl., Exhs. D & F [noting that the allegations as to Brown & Brown were no different from the allegations found insufficient by the Court as to All Risks].)

 

In the October 2020 Minute Order, the Court did not find that the allegations of the Lonmar SAC raised an issue as to Start’s right to recover under all circumstances upon which a cause of action for professional negligence against Brown & Brown might be based. (See Olwell v. Hopkins (1946) 28 Cal.2d 147, 148-150 [general demurrer in prior action “raised an issue as to plaintiffs’ right to recover under any circumstances upon their alleged cause of action,” therefore judgment was on the merits and properly given preclusive effect in subsequent action between same parties for vindication of same primary right].) Put another way, under Brown & Brown’s interpretation of the preclusive effect of the Court’s findings in the October 2020 Minute Order and entry of the Lonmar judgment of dismissal, Start would never be able to enforce any claims against Brown & Brown in connection with any insurance policy it obtained or was asked to obtain on behalf of Start. As the Brown & Brown motion sought judgment on the pleadings with regard to the specific allegations of the Lonmar SAC and RSA’s reasons for denying coverage under the RSA policy only and not based on the totality of any duties Brown & Brown owed to Start in procuring insurance coverage, the October 2020 Minute Order and the Lonmar judgment of dismissal do not have claim preclusive effect here because the present complaint alleges Start’s right to recover from Brown & Brown with regard to the National Fire policy insuring different interests.

 

In addition, the allegations of the Lonmar SAC regarding the basis on which RSA denied coverage for Start’s losses are not asserted in the present complaint which includes different and independent allegations regarding the reasons for National Fire’s denial of benefits under the National Fire policy. For these additional reasons, the October 2020 Minute Order and the Lonmar judgment of dismissal did not determine the merits of the present third cause of action for professional negligence or whether the present complaint sufficiently alleges a cause of action against Brown & Brown with regard to its procurement of the National Fire policy. (See Keidatz v. Albany (1952) 39 Cal.2d 826, 828 [if … new or additional facts are alleged that cure the defects in the original pleading, it is settled that the former judgment is not a bar to the subsequent action whether or not plaintiff had an opportunity to amend his complaint”].)

 

The holding in Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, disapproved on another ground in Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 948, fn. 12, further demonstrates that Brown & Brown’s contentions are untenable. In Daniels, the court determined the preclusive effect of a dismissal with prejudice that was entered after a general demurrer had been sustained with leave to amend and the parties thereafter failed to amend the pleading at issue. (Id. at p. 1165.) The court noted that the preclusive effect of the judgment of dismissal “ ‘is of limited scope.’ [Citation.] A former judgment entered after a general demurrer is sustained with leave to amend ‘ “is a judgment on the merits to the extent that it adjudicates that the facts alleged do not constitute a cause of action.” ’ [Citations.] Accordingly, such a judgment will bar ‘a subsequent action alleging the same facts,’ as well as one alleging ‘different facts ... if the demurrer was sustained in the first action on a ground equally applicable to the second.’ [Citation.] However, the former judgment will not bar a subsequent action alleging ‘new or additional facts ... that cure the defects in the original pleading.’ [Citation.]” (Ibid.) For reasons discussed above, the present complaint alleges new and additional facts regarding the procurement of the National Fire policy and National Fire’s different reasons for disclaiming coverage for Start’s commercial property, business personal property, and business income (and not its mother plants).

 

Brown & Brown has failed to demonstrate how the allegations on which the Court’s findings in the October 2020 Minute Order were based are the same as the allegations of the present complaint which pertain to the National Fire policy and National Fire’s reasons for denying coverage thereunder. (Cf. Pollock v. University of Southern California (2003) 112 Cal.App.4th 1416, 1428 [grounds for demurrer to complaint which alleged the same facts and sought to vindicate the same primary right were equally applicable to second action].) Brown & Brown also has failed to demonstrate how the grounds on which the Brown & Brown motion were granted are equally applicable to the third cause of action alleged in the present complaint. Furthermore, whether the National Fire policy obtained by Brown & Brown was provided adequate insurance coverage was not a matter that the Court considered in the October 2020 Minute Order. (Craig v. County of Los Angeles (1990) 221 Cal.App.3d 1294, 1302.)

 

Brown & Brown further contends that the third cause of action alleged in the present complaint is based on the same primary rights which Brown & Brown asserts is Start’s right to recover damages based on RSA and National Fire’s denial of insurance benefits. Therefore, Brown & Brown argues, because Start’s professional negligence claim resulted in the Lonmar judgment of dismissal, claim preclusion prevents Start from relitigating the same claim in the present action.

 

Under the primary rights theory, “ ‘[a] cause of action ... arises out of an antecedent primary right and corresponding duty and the delict or breach of such primary right and duty by the person on whom the duty rests. “Of these elements, the primary right and duty and the delict or wrong combined constitute the cause of action in the legal sense of the term....” ’ [Citation.]” (Boeken, supra, 48 Cal.4th at pp. 797-798; see also Crowley v. Katleman (1994) 8 Cal.4th 666, 681 (Crowley) [a cause of action “is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty”] (citation omitted).) “[T]he determinative factor is the harm suffered” and “[t]he cause of action is the right to obtain redress for a harm suffered[.]” (Boeken, supra, 48 Cal.4th at p. 798; Crowley, supra, 8 Cal.4th at p. 681 [“the primary right is simply the plaintiff’s right to be free from the particular injury suffered”].) Accordingly, “[w]hen two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right.” (Boeken, supra, 48 Cal.4th at p. 798.)

 

The same analysis applies. As further discussed above, the primary right at issue in the cause of action for professional negligence alleged in the Lonmar SAC was Start’s right to adequate insurance coverage for its mother plants under the RSA policy. Accordingly, the primary right that Start sought to enforce in the Lonmar SAC was its right to be free from “the particular injury suffered” which is negligence by Brown & Brown in obtaining adequate insurance coverage for its mother plants from RSA under the RSA policy.

 

“A claim in the present proceeding is based on the same primary right if based on the same conditions and facts in existence when the original action was filed. [Citation.] Even if [the] challenge is not based on the same conditions and facts, those different conditions and facts must be ‘material.’ [Citation.]” (Citizens for Open Government v. City of Lodi (2012) 205 Cal.App.4th 296, 325.) In the third cause of action alleged in the present complaint, Start does not allege any primary rights or duties with respect to its insurable interests in its mother plants. Instead, the primary right at issue in the present complaint is Start’s right is right to be free from Brown & Brown’s purported negligence in connection with obtaining adequate insurance coverage from National Fire under the National Fire policy to cover its commercial property, business personal property, and business income. Based on the allegations described above, the primary rights and duties at issue in the present action are not the same as those at issue in the sixth cause of action alleged in the Lonmar SAC.

 

By way of further example, the present complaint and the Lonmar SAC allege separate and distinct contracts of insurance issued by separate insurers. Therefore, the causes of action for professional negligence alleged in each action relate to separate invasions of different primary rights notwithstanding whether Start has alleged a single wrongful act by Brown & Brown (i.e., negligent procurement of insurance coverage). (Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 928; Roam v. Koop (1974) 41 Cal.App.3d 1035, 1041 [though separate contracts may concern the same general subject matter, “each may be viewed as involving a separate primary right and thus giving rise to a separate and independent cause of action”].)

 

The allegations of the present complaint and the Lonmar SAC also describe different obligations and duties that Brown & Brown allegedly breached. (Lippert v. Bailey (1966) 241 Cal.App.2d 376, 381-382 [the failure to provide bargained for insurance coverage constitutes an invasion of a primary right in the insurance contract and a breach of duty pertaining to the primary right in failing to provide the “bargained for coverage” giving rise to a cause of action]; see also Corral v. State Farm Mutual Auto. Ins. Co. (1979) 92 Cal.App.3d 1004, 1010 [the cause of action is the facts from which the primary right and the corresponding primary duty arise].)

 

Furthermore, the harm and damages alleged in each action are distinct. In the Lonmar SAC, Start sought compensation for unpaid losses to its mother plants. In the present action, Start seeks compensation for alleged losses to different interests further discussed above. Even if the Lonmar SAC included the same operative facts as the present third cause of action with regard to Brown & Brown’s role in procuring insurance for Start’s business, this does not conclusively establish that claim preclusion bars the present cause of action. (Agarwal v. Johnson (1979) 25 Cal.3d 932, 954, disapproved on another ground in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574, fn. 4.) Rather, the allegations of the present complaint and the Lonmar SAC describe “factually distinct attempts” to obtain insurance coverage requested by Start from different insurers for the purpose of insuring different and distinct interests. (See, e.g., Planning, supra, 180 Cal.App.4th at p. 228 [though actions involved the same general subject matter, the episodes of purported noncompliance at issue constituted factually distinct attempts to obtain compliance which involved materially different environmental reports].) Therefore, the causes of action alleged here and in the Lonmar SAC against Brown & Brown are not the same.

 

In addition, because Start alleges a different categories of loss resulting from RSA’s denial of benefits under the RSA policy and National Fire’s denial of benefits under the National Fire policy, the present action and the Lonmar SAC do not allege a single injury to a single right giving rise to only one claim. (See, e.g., Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Ins. Co. (1993) 5 Cal.4th 854, 861 [though attorney committed two alleged omissions, claim for payment for construction work constituted single debt for purposes of a claim under attorney’s liability insurance policy].) For these additional reasons, claim preclusion does not apply here to prevent Start from litigating the third cause of action for professional negligence alleged in the present complaint.

 

Brown & Brown also contends that Start has improperly split its cause of action for professional negligence. While the “rule against a plaintiff splitting a single cause of action so as to make it the basis of several suits is, in part, an application of the doctrine of res judicata[,] [citations] [i]n determining whether a cause of action has been split, the relief sought by the injured party should not be confused with the cause of action; ‘[t]he violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief....’ [Citations.]” (Allstate Ins. Co. v. Mel Rapton, Inc. (2000) 77 Cal.App.4th 901, 907-908, original italics (Allstate).) Because Start alleges a violation of a primary right in the present third cause of action that is different from the primary right at issue in the sixth cause of action of the Lonmar SAC as further discussed above, the rule against splitting a cause of action is not applicable here. (Hamilton v Asbestos 22 Cal.4th 1127, 1145 [“splitting” a cause of action occurs when the violation of one primary right is stated in two causes of action].)

 

Brown & Brown also appears to suggest that by consolidating the two actions, the Court has already found that there exist sufficient overlapping and interrelated issues such that claim preclusion applies to bar the third cause of action alleged in the present complaint. Brown & Brown misconstrues the consolidation order. As further discussed above, in the consolidation order, the Court specifically noted that there exist distinct factual differences between the two matters which involve separate insurance policies and conduct by separate persons and entities that normally would require separate trials but for the issues of overlapping liability and the potential for multiple recoveries by Start. Therefore, the Court’s findings in the consolidation order do not, under claim preclusion, bar litigation of the third cause of action. In addition, as the present matter does not involve the same controversy at issue in Lonmar SAC for all reasons discussed above, there exist no concerns regarding multiple litigations, vexation, or expense to the parties or wasted effort or expense in the judicial administration of this matter. (Nakash v. Superior Court (1987) 196 Cal.App.3d 59, 67 [res judicata curtails “multiple litigation causing vexation and expense to the parties and wasted effort and expense in judicial administration”] (italics omitted).)

 

Principles of estoppel also provide sufficient grounds to overrule the present demurrer. As alleged in the present complaint, Brown & Brown’s counsel signed a stipulation (the stipulation) which acknowledges that the National Fire action and the consolidated action were, as of the date the stipulation was signed, still pending. (Compl., Exh. A at p. 2, ll. 6-11.) Brown & Brown also acknowledged in the stipulation that resolution of the SCE action “may result in a more efficient resolution of the National Fire [a]ction[.]” (Id. at p. 2, ll. 12-19.) Brown & Brown also signed a tolling agreement “addressing the claims asserted by [Start] against [Brown & Brown] in [the National Fire action].” (Id. at p. 2, ll. 18-21 & Exh. A [including tolling agreement signed by Brown & Brown].) Brown & Brown agreed that the remaining claims in the National Fire action would be dismissed without prejudice. (Id. at p. 2, ll. 25-26.) On April 19, 2021, the Court reviewed the parties’ stipulation and signed the order dismissing the National Fire action without prejudice, adopting Brown & Brown’s position as true. (Id. at Exh. A [Apr. 19, 2021, order].) There is no evidence to suggest that Brown & Brown objected to the stipulation of dismissal or tolling agreement.

 

Brown & Brown’s present position as reflected by its contentions on demurrer is inconsistent with the position Brown & Brown effectively adopted by signing the stipulation and agreeing to dismiss the National Fire action without prejudice. “[O]ne cannot take inconsistent positions to the injury of an opponent.” (Lunsford v. Kosanke (1956) 140 Cal.App.2d 623, 628.) Further, judicial estoppel may be applied against a party “that has taken positions or made statements that are ‘totally inconsistent.’ [Citation.]” (Bell v. Wells Fargo Bank, N.A. (1998) 62 Cal.App.4th 1382, 1387.) Here, Brown & Brown’s agreement to enter into a tolling agreement addressing Start’s claim in the National Fire action and to dismiss those claims without prejudice cannot be reconciled with Brown & Brown’s present position that the claims alleged by Start in the present complaint which as further discussed above are effectively identical to those asserted in the National Fire action, are barred by claim preclusion. Brown & Brown may also be equitably estopped from asserting in the present action a position that is different and inconsistent from the position it asserted in the consolidated action and which was adopted by the Court as true, absent ignorance, fraud, or mistake. (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183-184.) Under the circumstances present here, the Court may also refuse to apply res judicata when “when to do so would constitute a manifest injustice.” (Slater v. Blackwood (1975) 15 Cal.3d 791, 796.) Accordingly, estoppel and concerns of manifest injustice constitute additional grounds to overrule the demurrer.

 

Furthermore, “[w]here the plaintiff is simultaneously maintaining separate actions based upon parts of the same claim, and in neither action does the defendant make the objection that another action is pending based on the same claim, judgment in one of the actions does not preclude the plaintiff from proceeding and obtaining judgment in the other action. The failure of the defendant to object to the splitting of the plaintiff's claim is effective as an acquiescence in the splitting of the claim.” (Rest.2d Judgments, § 26.) Though the Court does not find that Start has improperly split the cause of action alleged against Brown & Brown, there is no evidence or information to suggest that Brown & Brown objected to any alleged splitting of the cause of action by, for example, filing an appropriate motion in the National Fire action or in the consolidated action. Instead, Brown & Brown, without any apparent objection, entered into the stipulation and tolling agreement described above. Available information suggests that Brown & Brown may have waived any argument that Start has impermissibly split its cause of action. (Allstate, supra, 77 Cal.App.4th at pp. 909-910 [a defendant may the waive the prohibition against or be deemed to have acquiesced to a plaintiff splitting a cause of action by failing to object].)

 

The primary right theory “does not concern itself with theories of liability—such as [professional negligence]—but with the plaintiff's underlying right to be free from the injury itself[.]” (Crowley, supra, 8 Cal.4th at p. 683.) In the present action, Start seeks to vindicate separate and distinct rights with regard to Brown & Brown’s conduct in procuring of adequate insurance to cover Start’s insurable interests in its commercial property, business personal property, and business income which are different from the rights and duties at issue in the Lonmar action. As the cause of action for professional negligence alleged in the present complaint constitutes a separate and distinct claim based on separate and distinct primary rights and breaches of independent duties to procure insurance coverage for independent insurable interests, claim preclusion does not bar the third cause of action alleged in the present complaint. Therefore, and for all reasons discussed above, the Court will overrule Brown & Brown’s demurrer on the grounds of res judicata.

 

(4) Start Has Alleged Facts Sufficient to Constitute A Cause Of Action for Professional Negligence

 

Alternatively, Brown & Brown generally demurs to the third cause of action for professional negligence on the grounds that Start has failed to allege facts sufficient to constitute a cause of action for professional negligence. The elements of a cause of action for professional negligence are (1) the defendant owed a duty of care to the plaintiff to use such skill, prudence, and diligence as members of his or her profession commonly possess and exercise, (2) the defendant breached that duty, and (3) the breach was the proximate cause of the plaintiff’s damages. (Paul v. Patton (2015) 235 Cal.App.4th 1088, 1095.) In California, a negligence cause of action may be alleged in general terms, but the complaint must still indicate the acts or omissions which the plaintiff claims were negligently performed. (Quelimane, supra, 19 Cal.4th at p. 60.)

 

Brown & Brown first contends that Start’s allegations are “incomplete” and “ignore[] that Brown & Brown procured a separate insurance policy covering marijuana for the exact same time period.” (Opp. at p. 18, ll. 24-26.) Whether Brown & Brown procured a separate insurance policy covering marijuana is an extrinsic matter that may not be considered on demurrer. (See Executive Landscape Corp. v. San Vicente Country Villas IV Assn. (1983) 145 Cal.App.3d 496, 499-500 [also noting that the court is precluded from weighing disputed facts on demurrer].) The Court will therefore disregard these arguments.

 

Brown & Brown next contends that Start has failed to allege that Brown & Brown breached what Brown & Brown contends is a “limited duty” to use reasonable care, diligence, and judgment in procuring the National Fire policy. (See Opp. at pp. 18-19.) In the third cause of action, Start alleges Brown & Brown acted as Start’s insurance agent in procuring the National Fire policy, and that Brown & Brown owed Start a duty to use reasonable care, diligence, and judgment in procuring insurance on behalf of Start. (Complaint, ¶¶ 34, 36.)

 

An insurance broker such as Brown & Brown owes a duty “ ‘to use reasonable care, diligence, and judgment in procuring the insurance requested by an insured.’ [Citation.]” (Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Ins. Services West, Inc. (2012) 203 Cal.App.4th 1278, 1283.) Brown & Brown’s duty to exercise reasonable care can be inferred from the allegations of the complaint, and “the breach of duty of care may be alleged by stating the act was negligently done. [Citations.]” (Pultz v. Holgerson (1986) 184 Cal.App.3d 1110, 1117, fns. omitted.)

 

Start alleges that Brown & Brown breached its duty by failing to procure sufficient insurance that provided adequate coverage for Start’s commercial property, business personal property, and business income and by obtaining a policy that included a marijuana endorsement. Under the general pleading standards applicable to a claim of negligence, these allegations are sufficient to state that Brown & Brown acted in a negligent manner. Further, Brown & Brown’s duty is, by these allegations, put at issue by the pleadings and can be inferred from the express allegations of the complaint. (Brooks v. E. J. Willig Truck Transp. Co. (1953) 40 Cal.2d 669, 680 [negligence may be alleged in general terms; plaintiffs are entitled to prove acts constituting negligence].) Though generally there is no requirement that Start detail the specific manner in which Brown & Brown breached its duty, Start has sufficiently pleaded the manner in which Brown & Brown breached the duty of care at the pleading state. (Guilliams v. Hollywood Hospital (1941) 18 Cal.2d 97, 101 [also noting that the exact nature of the wrongful act is a “matter[] of evidence”].)

 

“The standard of pleading in negligence cases rests upon considerations of fairness and convenience in view of the situation of the opposing parties, and the rule permitting the pleading of negligence in general terms finds justification in the fact that the person charged with negligence may ordinarily be assumed to possess at least equal, if not superior, knowledge of the affair to that possessed by the injured party.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 157.) Brown & Brown is in a superior position to know the specific conduct it undertook to procure the National Fire policy on behalf of Start. Any remaining ambiguities can be “clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

 

Brown & Brown further contends that, assuming it was negligent in procuring the policy, because Start alleges that National Fire denied coverage because Start was underinsured and because National Fire conducted a bad faith investigation as to whether coverage applied, National Fire would have, according to the allegations of the complaint, denied coverage without regard to Brown & Brown’s conduct. In California, the courts apply the “substantial factor” test to determine causation. (Mitchell v. Gonzales (1991) 54 Cal.3d 1041, 1052.) “[C]onduct is not a substantial factor in causing harm if the same harm would have occurred without that conduct.” Yanez v. Plummer (2013) 221 Cal.App.4th 180, 187.)

 

Giving the complaint a reasonable interpretation, Start alleges that as a result of Brown & Brown failing to secure adequate coverage, it was underinsured. National Fire allegedly referenced the marijuana endorsement as part of its denial of benefits. Brown & Brown is alleged to have procured the National Fire policy which included the endorsement on which National Fire relied to deny coverage. By these allegations, Start sufficiently alleges that Brown & Brown’s failure to obtain a policy that covered the losses alleged in the complaint and that did not contain a limiting endorsement was a substantial factor in causing Start’s harm notwithstanding any conduct by National Fire. Moreover, Start may plead inconsistent causes of action in separate counts to the extent Start is in doubt as to whether National Fire or Brown & Brown are liable. (Zeppi v. Beach (1964) 229 Cal.App.2d 152, 160.) Therefore, for all reasons discussed above, the Court will overrule Brown & Brown’s demurrer on the grounds that Start has failed to allege facts sufficient to state a cause of action for professional negligence.