Insurer Not Bound by Additional Insured Endorsement Issued by Broker Because Broker Served as Agent of Insured, Not Insurer
Costco Wholesale Corp. v. Tokio Marine & Nichido Fire Ins. Co., 2015 Cal. App. Unpub. LEXIS 7764 (Cal. Ct. App. Oct. 27, 2015)
On appeal in Costco, the Second District Court of Appeal affirmed a trial court’s ruling that the carrier was not obligated to provide coverage to Costco under a blanket additional insured endorsement for vendors issued to Yokohama Tire Corporation by its broker.
The trial court found that the carrier was not bound by the endorsement issued by the broker because the broker was the agent of the insured, not the carrier. In reviewing the ruling, the appellate court rejected the argument that an actual agency relationship existed between the broker and the carrier, finding that there was no meeting of the minds or bilateral agreement as to agency, as required by California law. The court also rejected the argument that the carrier’s inaction upon receipt of broker-issued individual vendor endorsement manifested the acceptance of an actual agency relationship.
The court further found that the trial court’s factual finding that the broker was not the carrier’s ostensible agent was supported by substantial evidence. Specifically, the court found that Costco did not have a reasonable basis to believe that the broker was the carrier’s agent for the purposes of issuing the endorsement.
Finally, the court addressed and rejected Costco’s contention that the carrier’s admission that the broker’s endorsement was “part of” the policy necessarily meant that Costco was covered by the policy. The Court of Appeal found that the trial court had discretion to determine the scope and effect of the admission under Fredericks v. Filbert Co., 189 Cal. App. 3d 272 (1987), and had not abused its discretion in rejecting the admission.
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