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Plaintiffs Mark Tanner Construction, Inc. (Tanner), and Mt. Lincoln Construction, Inc. (Mt. Lincoln), are both general contractors located in Truckee. CAP is a self-insured workers compensation program for the construction industry. Compensation Risk Managers of California, LLC (CRM) administered a self-insured workers compensation program for contractors, Contractors Access Program of California (CAP). The Department of Industrial Relations granted CAP a Certificate of Consent to Self-Insure in 2004. CRM administers CAP and contracted with Diversified to market CAP. Diversified Risk Insurance Brokers (Diversified), later acquired by defendant HUB International Insurance Services, Inc. (HUB), marketed and sold CAP to plaintiffs Mark Tanner Construction, Inc., and Mt. Lincoln Construction, Inc.

California contractors were able to fulfill their obligation to obtain workers compensation insurance by joining CAP. Membership in CAP required an agreement to be jointly and severally liable for the workers compensation liability of all other members for that year of membership. Approximately 250 employers became members of CAP. Tanner and Mt. Lincoln became a member of CAP in 2006.

On December 31, 2009, CAP was terminated. The Director of the Department revoked CAP’s certificate to self-insure and CAP was placed into conservatorship. CAP’s estimated exposure for unfunded liabilities was over $20 million. In the spring of 2010, members were sent assessments for the anticipated exposure. Tanner was assessed $150,258 and Mt. Lincoln was assessed $42,784. Later that year, CAP defaulted on payment of benefits for its workers compensation liabilities.

Tanner, Mt. Lincoln, and two other companies sued HUB and others for professional negligence and constructive fraud. The first amended complaint (FAC) alleged that CAP was marketed through insurance brokers, including Diversified, as a less expensive and more effective means of handling workers compensation insurance claims. Diversified did not disclose to Tanner or Mt. Lincoln its exclusive broker relationship with CRM. Diversified allegedly did not inform plaintiffs of the following facts concerning the financial stability of CAP: (1) beginning in 2006, CAP incurred losses of over $28 million and then over $60 million; (2) CRM was involved in a multimillion-dollar lawsuit in New York over similar self-insured insurance programs; (3) CAP’s security bond was not renewed after 2008 and plaintiffs were unprotected if claims exceeded reserves; and (4) at least five other self-insured insurance programs administered by CRM in California had failed. The FAC alleged “[t]his information provided sufficient notice that agent brokers should investigate the proverbial health” of the self-insured workers compensation programs.

While a defense motion for summary judgment was pending, plaintiffs obtained a copy of a Regional Field Consultant Agreement (Agreement) between CRM and Diversified that had not been provided to plaintiffs in discovery. Plaintiffs believed the Agreement “significantly alter[ed] the legal landscape in this action.” They argued the Agreement established that rather than acting as broker for them, Diversified instead was acting as the broker for CAP. Further, Plaintiffs argued that the Agreement revealed Diversified was part of a joint venture with CRM. These relationships had not been disclosed to plaintiffs. Plaintiffs moved for leave to file a second amended complaint to add new allegations and new causes of action arising from legal relationships revealed by the Agreement. They also moved to continue the hearing on the summary judgment motion to permit additional discovery pursuant to Code of Civil Procedure section 437c, subdivision (h). The trial court denied both motions, finding the Agreement was not the “silver bullet” that plaintiffs claimed. The trial court granted HUB’s motion for summary judgment. Plaintiffs appeal from the ensuing judgment. Plaintiffs contend the trial court abused its discretion in denying both the motion to amend the complaint and the motion to continue the summary judgment hearing.

The Court of Appeal sustained the dismissal in the partially published opinion of Mark Tanner Construction v. HUB International Insurance Services.

The trial court found that HUB was entitled to summary judgment on the professional negligence claim because insurance brokers had no duty to investigate the financial condition of the insurer, and “no facts were presented demonstrating that Defendants knew or should have known of the financial condition of CAP.” As to the claim for constructive fraud, the trial court found a duty to disclose arose in an arm’s length business transaction only if there was a fiduciary relationship, and “Plaintiffs have failed to demonstrate a triable issue of material fact demonstrating that Defendants have a fiduciary relationship.” “Apparently distracted by what they perceive to be an egregious discovery violation, plaintiffs fail [on appeal] to adequately challenge either the legal bases or the factual findings of the trial court’s rulings.” The trial court denied plaintiffs’ request for a continuance. It found plaintiffs were dilatory in initiating discovery and that because the Agreement added little to the case, additional discovery based on this agreement was not necessary.