Filed 6/12/13 Flowers v. Camico Mut. Ins.
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION ONE


SYLESTER FLOWERS et al.,
          Plaintiffs and Appellants,
v.
CAMICO MUTUAL INSURANCE                                              A134890
COMPANY,
                                                                     (Alameda County
          Defendant and Respondent.                                  Super. Ct. No. RG09-450678)

          In this insurance coverage dispute, plaintiffs Sylester Flowers, Helen Chiongson-
Flowers, Alta Tierra Properties, LLC, The Apothecary Eastmont Town Center, Inc., and
Ramsell Holding Corporation appeal from the order of the trial court finding that the
underlying action at issue here alleged a single claim under the applicable policy, thus
triggering the per-claim limit of liability only, and not the aggregate policy limit. We
affirm.
               FACTUAL BACKGROUND AND PROCEDURAL HISTORY
I. The Parties
          The facts are undisputed.1 Defendant CAMICO Mutual Insurance Company is an
insurance company that issued the professional liability policy at the heart of this case.
All the corporate plaintiffs in this action are entities owned by Sylester Flowers and his
wife, Helen Chiognson-Flowers. Flowers is the Chairman and CEO of Ramsell Holding

1
 The parties agreed to and submitted stipulated facts relative to characterizing and describing the
underlying action.
Corporation (Ramsell). The Apothecary Eastmont Town Center, Inc. (AETC) is a wholly
owned subsidiary of Ramsell. Additionally, at all times relevant to this action, the
Flowers owned 99 percent of Alta Tierra Properties, LLC (Alta Tierra).
II. The CAMICO Policy
       Defendant issued Accountants Professional Liability Insurance Policy No.
CAL04227 to the Bertorelli Firm (the Firm), which was in effect from January 1, 2005, to
January 1, 2006 (the Policy). The Policy’s insuring agreement provides that defendant
will pay “those sums that an Insured becomes legally obligated to pay as Damages
because of a Claim arising out of an Insured’s negligent act, error or omission in
rendering or failing to render Professional Services performed after the Retroactive Date
and before the end of the Policy Period.”2
       The Policy defines a “claim” (which by definition includes a “multiple claim”) as
follows: “A Claim means a demand received by any Insured for money or services, and
includes the service of suit(s), or a demand for arbitration. A Claim also includes a
Multiple Claim, which is formed by two or more Claims arising out of or resulting from a
single act, error or omission in the rendering of Professional Services, or from related or
identical acts, errors or omissions in the rendering of Professional Services, whether
such demands are made: (1) against one or more Insureds, (2) by one or more Persons, or
(3) during one or more Policy Periods.”3 (Emphasis added.)
       The Firm purchased limits of liability of $2 million per claim, with $4 million as
the policy aggregate. The Policy explains the per-claim limit of liability as follows: “The
maximum amount payable by the Company for Damages and Claim Expenses for each
covered Claim is the Per Claim Limit of Liability as stated in the Declarations. A single
Per Claim limit of liability applies to a Multiple Claim, regardless of the number of
claimants, lawsuits, or Insureds involved.” The aggregate limit is defined as “[t]he

2
  Certain words and phrases are specially defined in the Policy, and are italicized.
3
  The Policy also defines “professional services” as “any professional services performed by an
Insured as long as the fees or commissions, if any, or other benefits from such services inure to
the benefit of the Named Insured.” Additionally, a “person” is defined as “any natural person or
legal entity.”

                                                2
maximum amount payable by the Company for Damages and Claim Expenses for all
covered Claims made and reported during the Policy Period . . . .”
III. The Underlying Action
       Beginning in early 2000, Ranni Hillyer was retained to provide accounting,
financial planning, and investment services for plaintiffs. In 2001, Hillyer introduced
Flowers to Rajiv Behti, a member of the Firm. Thereafter, plaintiffs retained Behti and
the Firm to serve as their accountants.
       In August 2001, Hillyer commenced her role as chief financial officer (CFO) of
Ramsell, AETC, Alta Tierra, and the personal equivalent thereof for Flowers and his
wife. The underlying action asserts that Hillyer used her role as CFO, and her limited
authority over Flowers’ bank accounts, to embezzle millions of dollars from plaintiffs.
Plaintiffs discovered her embezzlements shortly after her employment terminated in
February 2005.
       In March 2005, plaintiffs filled a lawsuit against Hillyer, seeking to recover the
stolen funds.
       On February 5, 2007, plaintiffs filed suit against Behti and the Firm in the
underlying action. Plaintiffs sought to recover damages arising from Hillyer’s
embezzlements pursuant to legal theories of accounting malpractice, breach of fiduciary
duty, breach of contract, and negligent misrepresentation. The complaint alleged that the
Firm negligently, carelessly, and recklessly rendered professional services by repeatedly
failing to discover Hillyer’s fraudulent scheme of embezzlement, due to Behti’s
friendship with Hillyer and/or because the Firm benefited financially from her actions.
Plaintiffs claim the Firm’s multiple acts, errors and omissions resulted in approximately
72 unauthorized transactions resulting in almost $5 million in combined damages. Behti
and the Firm tendered their defense to defendant.
IV. The Action For Declaratory Relief
       On March 20, 2009, the parties entered into a settlement agreement and mutual
release relating to the February 2007 complaint. Defendant consented to submit itself to
a declaratory relief action, in which the parties agreed to allow the trial court to determine

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whether the alleged acts, errors, or omissions giving rise to the underlying lawsuit
constituted one claim so as to invoke the per-claim limit of $2 million, or constituted
more than one claim so as to implicate the aggregate limit of $4 million.
       On May 5, 2009, plaintiffs filed this declaratory relief action.
       On February 14, 2012, the trial court issued an order in favor of defendant. The
court concluded that the term “related” in the Policy’s definition of a “claim,” was not an
ambiguous term, and meant having a “logical or causal connection.” Based upon this
definition, the court determined that all the wrongful acts stipulated to by the parties were
“related.” Specifically, the court concluded that “although the errors and omissions
involved several different accountants, several different clients, several different losses,
and different engagements or other transactions, they all involved a failure and a breach
of duty to detect or guard against embezzlement or other diversions of funds or property
by Hillyer, which diversions constitute the sole harm allegedly suffered by the various
Plaintiffs.”
       On March 1, 2012, the trial court entered judgment against plaintiffs. This appeal
followed.
                                       DISCUSSION
I. Standard of Review
       Where the decisive facts underlying a declaratory judgment are undisputed, the
reviewing court is confronted with a question of law which is reviewed de novo. (Dolan-
King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974.)
II. Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th
854 (Bay Cities)
       The parties agree the dispositive case here is Bay Cities. In Bay Cities, a general
contractor retained an attorney to represent it in connection with construction work it was
performing. (Bay Cities, supra, 5 Cal.4th 854, 858.) The contractor had completed work
on a project, but was unable to collect a substantial portion of the amount it was owed.
The attorney filed a mechanic’s lien on behalf of the contractor. (Ibid.) However, he did
not serve a stop notice on the construction lenders and did not timely seek to foreclose the

                                              4
mechanic’s lien, thereby committing two separate acts of negligence. In the ensuing
legal malpractice action, the contractor contended it was asserting two separate claims
under the attorney’s professional liability insurance policy. The trial court agreed,
finding that there were two separate acts of legal malpractice and, therefore, the limits of
liability under the policy were doubled. (Ibid.) The insurance company appealed,
contending there was but one claim being asserted. (Id. at p. 859.) Our Supreme Court
held that the two errors were related and arose out of a specific transaction, the collection
of a single debt. Therefore, there was only one claim for purposes of the applicable
policy provision, which limited coverage for claims arising out of a series of related acts,
errors, or omissions. (Id. at p. 873.) In the instant case, the parties agree that Bay Cities
controls, as it involved the argued relatedness of claims under a “claims made and
reported” policy that is similar to the policy at issue here.
A. Primary Rights Theory
       A primary right is an individual’s right to be free of the particular injury alleged.
(Mycogen Corp. v. Monsanto Corp. (2002) 28 Cal.4th 888, 904.) Plaintiffs note that in
Bay Cities, the Supreme Court discussed primary rights because the contractor in that
case had sought relief for a single injury under two different legal theories. The court
highlighted the fact that, had the plaintiff prevailed in a lawsuit, it would have been
limited to recovering only what it lost (payment for its work) due to multiple negligent
acts and omissions. (Bay Cities, supra, 5 Cal.4th 854, 860.) The court stated, “[the
plaintiff] had one primary right—the right to be free of negligence by its attorney in
connection with the particular debt collection for which he was retained.” (Ibid.) The
court further explained, “[the plaintiff] had a single right—the right to payment for its
construction. The loss of that right as a result of the attorney’s two omissions resulted in
a single injury.” (Id. at p. 861.)
       Here, plaintiffs focus our attention on four separate instances of malpractice
alleged in the underlying action. For purposes of this appeal it is not necessary to
describe them in great detail. In brief, plaintiffs allege that (1) accountants at the Firm
failed to detect and guard against Hillyer’s embezzlements when they audited Ramsell’s

                                               5
2002 and 2003 financial statements, (2) Behti failed to protect against Hillyer’s
embezzlements when he was retained by Flowers to review the procedures governing
Hillyer’s investment authority, (3) the Firm’s accountants failed to discover Hillyer’s
embezzlements when retained by Alta Tierra to provide accounting and tax services, and
(4) the accountants failed to detect Hillyer’s embezzlement of Flowers’ funds when
retained to set up accounting records for a real estate investment. Plaintiffs assert that
each individual plaintiff in this case possesses his, her, or its own primary rights to be
free of injuries. They also claim that when their primary rights are analyzed, it is evident
that different members of the Firm committed separate acts, errors, and omissions that
caused different injuries to the different plaintiffs, and were therefore not related.
       As defendant correctly observes, the Supreme Court in Bay Cities never intended
that the primary rights theory be used in such a manner, at least not in the context of the
kind of insurance policy that is at issue here. The court’s primary rights discussion was
in the context of determining whether there was more than one claim at issue, and had no
bearing on whether the claims were related: “Under [the policy language], if an attorney’s
single error harmed two clients and gave each of them a separate claim, those two claims
would be treated as a single claim under the policy’s limitation of liability. It would be
anomalous to limit liability in that circumstance but to disregard the limitation when, as
in this case, a single client suffers a single injury as a result of multiple errors.” (Bay
Cities, supra, 5 Cal.4th 854, 861.) The trial court here recognized and correctly found
that: “[T]he Bay Cities Court did not hold that any time there is more than one ‘primary
right’ involved, this means the alleged errors and omissions cannot be ‘related’ as used in
the applicable policy language. To the contrary, the Court addressed and applied the
policy term ‘related acts, errors or omissions’ as an independent basis of its ruling that the
claims against the attorney should be treated as a single ‘claim’ as defined under the
policy.” We agree with the trial court’s analysis. Plaintiffs’ argument thus fails.
B. The Bay Cities “Factors”
       Plaintiffs also misread another aspect of Bay Cities. The Bay Cities court held that
the term “related” as it is commonly understood and used “encompasses both logical and

                                               6
causal connections.” (Bay Cities, supra, 5 Cal.4th 854, 873.) The court found that, as
used in the policy at issue and the circumstances of that case, “ ‘related’ is not ambiguous
and is not limited only to causally related acts.” (Ibid.) The court also recognized,
however, that “At some point, a relationship between two claims, though perhaps
‘logical,’ might be so attenuated or unusual that an objectively reasonable insured could
not have expected they would be treated as a single claim under the policy.” (Ibid.) The
court rationalized that the allegations in that case were not attenuated, as “They arose out
of the same specific transaction, the collection of a single debt. They arose as to the same
client. They were committed by the same attorney. They resulted in the same injury,
loss of the debt.” (Ibid.) Plaintiffs repeatedly assert in their brief on appeal that, in this
passage, the court intended to create a “four-factor test.” They are wrong. The court was
merely emphasizing why, on the facts of that case, the two acts of legal malpractice were
“related” within the meaning of the applicable insurance policy.
       In the present case, despite the Firm’s various engagements for plaintiffs, in every
instance, the allegations against the Firm remain the same, that is, the Firm repeatedly
failed to detect and guard against Hillyer’s embezzlement scheme, which resulted in the
same injury to the plaintiffs, namely, the loss of their funds.4 We also agree with
defendant that even if the underlying action alleges more than one claim, those claims
nonetheless form a multiple claim, and trigger only a single per-claim limit of liability
under the Policy. Further, it is critical to note that while there were multiple plaintiffs, as
to the Firm there was essentially one client only, namely, the Flowers. As noted above,
all the corporate entity plaintiffs were owned by the Flowers, and the Flowers themselves
were the only individual plaintiffs. We thus agree with the trial court’s conclusion that


4
  Plaintiffs assert their claims are not “related” because they suffered at least two separate and
distinct types of injuries and because each appellant’s loss of funds was unique and different.
They note that in three instances, the Flowers suffered harm when the titles to three of their
properties were clouded. Our review of the stipulated facts indicates that in each case the
clouding of title was precipitated by an act of financial misconduct committed by Hillyer. Thus,
harm caused by the clouding of title was not unduly attenuated from Hillyer’s embezzlement
activities. Additionally, plaintiffs do not suggest that the various losses of funds was caused by
anything other than Hillyer’s undetected misconduct.

                                                7
the alleged acts, errors, and omissions are “related” within the meaning of the Policy’s
provisions regarding “claims,” including “multiple claims.”
C. Alleged Ambiguity in Policy Language
       Finally, plaintiffs complain that the Policy’s provision regarding “related” claims
is ambiguous and should have been construed against defendant and in favor of coverage.
Again, this issue was fully addressed in Bay Cities. (Bay Cities, supra, 5 Cal.4th 854,
873.) Plaintiffs’ attempt to distinguish the instant Policy from the one addressed by the
Supreme Court in Bay Cities is not persuasive.5 The court in Bay Cities clearly and
specifically held that the term “related,” as used in a context substantially similar to the
present case, was unambiguous. (Ibid.)
       The Bay Cities opinion gives broad reading to the notion of “related.” Multiple
errors arising from an ongoing relationship between a professional (the insured, the Firm
and its accountants) and retained clients (Flowers and his entities) are within the scope of
the decision. The separateness of the particular omissions does not change the insurance
policy consequences since the retained client was the party who suffered from the several
instances of misconduct. The notion of “claim” incorporates malpractice logically as
well as causally connected. Multiple instances of misconduct serving the same client,
and based on a retained services agreement is enough for one claim under a policy even if
arising from advice covering various features of the professional relationship. According
to Bay Cities, “related” is a “broad word . . . and is not limited only to causally related
acts.” (Bay Cities, supra, 5 Cal.4th 854, 873.)




5
 We note plaintiffs place much reliance on Justice Kennard’s concurring opinion in Bay Cities
(Bay Cities, supra, 5 Cal.4th 854, 873 (conc. opn. of Kennard, J.)). It is well established that
“concurring opinions are not binding precedent . . . .” (In re Marriage of Dade (1991) 230
Cal.App.3d 621, 629).

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                                 DISPOSITION
     The judgment is affirmed.



                                          __________________________________
                                          Dondero, J.


We concur:


__________________________________
Margulies, Acting P. J.

__________________________________
Banke, J.




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