Filed 11/15/13 Keilholtz v. Hertel CA4/1
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


                    COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                  DIVISION ONE

                                           STATE OF CALIFORNIA


ROBERT KEILHOLTZ et al.,                                            D061198

         Plaintiffs and Appellants,

         v.                                                         (Super. Ct. No.
                                                                     37-2009-00051748-CU-NP-NC)
ROGER EDWIN HERTEL,
                                                                    ORDER MODIFYING OPINION
         Defendant and Respondent.
                                                                    [No Change in Judgment]



THE COURT:

         It is ordered that the opinion filed herein on October 31, 2013, be modified as

follows:

         1. On page 4, the first full sentence is modified to read:

              The homeowners whose unit had been damaged, Richard and
              Ronnie Abrams, sued the Association, individual members of the
              Board, and the property management company for causes of action
              related to the failure to maintain "all risk" coverage, including
              breach of fiduciary duty, fraud, negligent misrepresentation,
              suppression of fact, constructive fraud, conspiracy, and violation of
              Civil Code section 1365, which imposes certain duties on common
              interest associations with respect to notifying members regarding
              insurance policies maintained by the association.
      2. On page 8, in the second paragraph, the first sentence is modified to read:

          On July 25, 2003, the Abramses suffered a substantial water leak in
          their unit that caused damage to their condominium unit, as well as
          to common areas.

      There is no change in the judgment.




                                                                HUFFMAN, Acting P. J.

Copies to: All parties




                                            2
Filed 10/31/13 Keilholtz v. Hertel CA4/1 (unmodified version)
                      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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


                    COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                  DIVISION ONE

                                           STATE OF CALIFORNIA


ROBERT KEILHOLTZ et al.,                                            D061198

         Plaintiffs and Appellants,

         v.                                                         (Super. Ct. No.
                                                                     37-2009-00051748-CU-NP-NC)
ROGER EDWIN HERTEL,

         Defendant and Respondent.



         APPEAL from a judgment of the Superior Court of San Diego County, Robert P.

Dalquist, Judge. Affirmed.

         George McGill for Plaintiffs and Appellants.

         Tharpe & Howell, Christopher Sherrill Maile and Eric B. Kunkel for Defendant

and Respondent.
                                            I.

                                   INTRODUCTION

      Plaintiffs Robert Keilholtz et al. (plaintiffs)1 appeal a judgment entered in favor of

defendant Roger Edwin Hertel after the trial court granted Hertel's motion for summary

judgment. Plaintiffs, all of whom are homeowners of individual condominium units in

the Las Brisas condominium complex, a mutual benefit condominium development, filed

suit against Hertel seeking damages for breach of professional negligence, fraud, and/or

negligent misrepresentation.

      Hertel was the insurance agent for the nonprofit mutual benefit corporation,

comprised of the homeowners (the Association), for a period of time. The Association

maintained an insurance policy through Truck Insurance Exchange (Truck) that protected

against risks to both the common areas of the development as well as risks to the

individual condominium units. This type of policy is known as an "all risk" policy.

      In May 2003, some members of the Association's Board asked Hertel how the

Association could decrease its insurance costs. Hertel suggested that the Association



1      According to the operative complaint, the named plaintiffs in this action include
Keilholtz, Art Amberg, Lani Amberg, Joanne Oberlander, John Bernheisel, Carl Cannata,
Olivia Cannata, Paula Capestro, Richard E. Cornwell, Frank Dilberto, Scott Dlugos, Jane
Leigh Eden, George Duckworth, Maureen Duckworth, Harvey Finkelstein, Maureen
Finkelstein, Joseph Galante, Phran Galante, Jack Harris, Janet R. Harris, Shirley Hough,
Sheila Johnson, Julius S. Kerekes, Grace J. Kerekes, Joseph Largen, George McGill,
Robert L. Mendenhall, Fred Nasseri, Mitra Nasseri, Orville "Tex" Newton, Shawna
Aymont-Newton, Barbara E. Stangl-Phelps, Seymour Phillips, Barbara Phillips, Russell
Russo, Carolyn S. Russo, Norman Schwartz, Fay Schwartz, Gordon Sarret, John
Schnurer, Caroline Schnurer, Jayne W. Spencer, Erich Spillmann, Tiffany Spillman, and
Jess Willson.
                                            2
could change its policy from an "all risk" policy to one that covered only the common

areas of the development, and not the individual units. This type of policy is known as a

"bare walls" policy.

       After this discussion, Hertel initiated a request with Truck to change the

Association's insurance coverage from "all risk" to "bare walls." The parties dispute the

circumstances under which this change request was initiated. There is no dispute,

however, that Hertel sent the change request form to an employee of the Association's

property management company for signature, and that it was that employee, and not any

member of the Association's Board, who signed the form authorizing the change in

coverage. After receiving the form, the insurance company implemented the change in

coverage. Plaintiffs maintain that they did not know that the change had been made.

Within weeks of the policy change from "all risk" to "bare walls," one of the units in the

complex suffered water damage.

       Just over a month after the property damage occurred, the Association held a

meeting at which the membership discussed the benefits and drawbacks of amending the

Association's governing documents to change a provision of the Association's Covenants,

Conditions & Restrictions (CC&Rs) which, according to various statements made by

some of those who were deposed in this case, required the Association to maintain an "all

risk" policy. Hertel attended that meeting and did not mention that a change in the

Association's policy from "all risk" to "bare walls" had already been effectuated.

       In the meantime, the Association filed a claim with Truck for the water damage to

the unit in the complex. The claim was eventually denied on the ground that the policy in

                                             3
effect at the time of the property damage did not cover losses to the homeowners'

individual units. The homeowners whose unit had been damaged sued the Association,

individual members of the Board, and the property management company for causes of

action related to the failure to maintain "all risk" coverage, including breach of fiduciary

duty, fraud, negligent misrepresentation, suppression of fact, constructive fraud,

conspiracy, and violation of Civil Code section 1365, which imposes certain duties on

common interest associations with respect to notifying members regarding insurance

policies maintained by the association. The action eventually settled, and, as part of the

settlement, the Association agreed to pay the homeowners' attorney fees related to the

action in an amount to be determined by the court. In order to cover the attorney fees that

the court ultimately awarded, the Association imposed a special assessment on the

remaining individual homeowners in the amount of $8,500 per unit.2 In their action

against Hertel, the individual homeowners sought to recover this special assessment from

Hertel under theories of professional negligence, fraud, and/or negligent

misrepresentation.

       Hertel moved for summary judgment, or, in the alternative, summary adjudication,

arguing, among other things, that he could not be liable to plaintiffs for professional

negligence because he owed no duty to the individual plaintiffs. Specifically, Hertel



2       Although the operative complaint asserts that each plaintiff was "required to, and
subsequently did, pay $8,500 each as assessed damages" and requests damages in the
amount of $8,500 per plaintiff, it appears from another document in the record that the
special assessment was imposed on a per-unit basis. This would mean that plaintiffs who
jointly own a single condominium unit would have suffered a single $8,500 loss.
                                              4
maintained that his client was the Association, not the individual plaintiffs, and that he

was not in privity with the individual plaintiffs and therefore, owed no duty to them.

Hertel further argued that the lack of any duty to the individual homeowners eliminated

the possibility that they could recover against him on their negligent misrepresentation

claim. Finally, Hertel maintained that the evidence demonstrated that some of the

plaintiffs had learned of the coverage change around the time of the full Association

meeting in August and took no action as a result, so they could not have justifiably relied

on anything he said to them at that meeting. According to Hertel, the fact that plaintiffs

did nothing after learning of the change in insurance coverage made it impossible for

them to prevail on their claims for fraud and/or negligent misrepresentation.

       The trial court agreed with Hertel that he owed no duty to plaintiffs, and

concluded that this eliminated the possibility that plaintiffs could prevail on their

professional negligence and negligent misrepresentation claims. The court also

determined that plaintiffs' fraud claim failed because plaintiffs had not relied on

statements that Hertel made at the August meeting, and thus, as a matter of law, they had

suffered no damages as a result of his statements. The trial court granted summary

judgment in Hertel's favor.

       We conclude that although Hertel may have owed a duty to the individual

homeowners to prevent the kind of damage suffered by the Abramses, i.e., an uninsured

property loss due to the elimination, without notice, of insurance coverage for their

individual units, this duty does not extend so far as to require him to use due care to

prevent the kind of damage that the plaintiffs in this case allege they have suffered.

                                              5
Because we conclude that the duty that Hertel owes to the individual homeowners is

limited to a duty to use due care with respect to protecting their insurable interests, and

that the harm alleged in this action is not harm to plaintiffs' insurable interests, we affirm

the judgment in favor of Hertel as to the professional negligence cause of action.

       We also affirm the judgment in favor of Hertel with respect to the claims for fraud

and negligent misrepresentation. Because these claims are based on Hertel's conduct at a

meeting that occurred after the individual condominium unit had already suffered a loss,

and the only damages that plaintiffs claim result from the loss sustained by that unit and

the subsequent litigation arising out of that loss, plaintiffs cannot establish that they were

damaged by Hertel's failure to inform the homeowners at that meeting about the change

in the Association's insurance coverage. We therefore affirm the judgment in Hertel's

favor with respect to the fraud and negligent misrepresentation claims.

                                              II.

                   FACTUAL AND PROCEDURAL BACKGROUND

A.     Factual background

       Hertel is an insurance agent appointed by Truck to sell and offer insurance

services related to policies issued by Truck. Hertel serviced policies that the Association

purchased from Truck between 1993 and May 2008, with the exception of a period of

time in 1996 and 1997.3




3    Hertel apparently also serviced some individual insurance policies for various
homeowners in the Las Brisas development.
                                              6
       Under the Association's CC&Rs, the board of directors (the Board) was authorized

to hire a property manager to assist the Board in managing the Association and the La

Brisas property. Between 2000 and 2004, William Brooks, an employee of the Eugene

Burger Management Corporation (EBMC), served as the property manager for the

Association. One aspect of Brooks's duties as the property manager "was to deal with

matters pertaining to the Association's insurance coverage." Brooks "was the person who

dealt with H[ertel] regarding the Association's insurance coverage."

       In March 2003, Truck issued an insurance policy to the Association. That policy

was a "CONDOMINIUM PREMIER" policy, which provided for "all risk" coverage,

including "condominium unit coverage." A specific endorsement for "UNIT

COVERAGE" explained that the policy covered the individual units in the Las Brisas

condominium development.

       Hertel attended a meeting of the Association's Board on May 19, 2003. According

to Hertel, members of the Board expressed concern about the rising costs of the

Association's insurance premiums. Hertel suggested modifying the Association's policy

to cover only "bare walls" as opposed to "all risk." He explained that such a change

would reduce the premium. Hertel indicated that the CC&Rs might have to be amended

to allow for such a change.

       What happened next is the subject of much dispute. Hertel contends that in June

2003, Board member Seymour Phillips called Hertel and asked him to prepare a request

to change the Association's policy from "all risk" to "bare walls." Phillips denied that this

phone call occurred. Brooks, the property manager, stated in a declaration that the Board

                                             7
president called Brooks and directed him to implement the change in the policy to "bare

walls" coverage.

       What is not in dispute is that at some point after May 19, Hertel sent a policy

change request form to Brooks indicating a change in the Association's coverage from

"all risk" to the reduced coverage for "bare walls." Brooks signed the form and returned

it to Hertel, who submitted it to Truck. The change altered the March 2003 policy to the

reduced "bare walls" coverage, retroactive to the date on which the policy went into

effect. Plaintiffs maintain that they were not informed that this change had been made.

       On July 25, 2003, condominium owners Richard and Ronnie Abrams suffered a

substantial water leak in their unit that caused damage to their condominium unit, as well

as to common areas. The Association submitted a claim for damages under its policy

with Truck. Truck paid the portion of the claim for damage to the common areas, but

denied the portion of the claim relating the interior of the Abramses' unit, on the ground

that the policy provided only "bare walls" coverage.

       On August 23, 2003, the Association held its annual meeting. The homeowners

were still unaware that the Association's insurance coverage had been changed from "all

risk" to "bare walls." Hertel was at the meeting and gave a presentation regarding the

Association's insurance coverage, including a discussion of the benefits to the

Association of reducing their coverage from "all risk" to "bare walls." Hertel did not

mention that the Association's insurance coverage had already been reduced from "all

risk" to "bare walls," even when he was specifically asked whether any change to the

Association's coverage had been made. Apparently, just prior to the meeting, Brooks had

                                             8
informed Hertel that the Association's CC&Rs had not been amended to allow for "bare

walls" insurance coverage.4 No one else at the meeting disclosed the reduction in

insurance coverage to the general membership that night.

       Two days later, Hertel spoke with Brooks and told him how much it would cost to

change the Association's insurance coverage back to "all risk." On September 10, Hertel

sent Brooks a written bid for changing the Association's policy back to "all risk"

coverage. Brooks met with the Board on September 15. At that meeting, Brooks

informed the Board members that a change from "all risk" coverage to "bare walls"

coverage had been implemented in June 2003.

       Because the change request initiated and implemented by Hertel and Brooks from

an "all risk" policy to a "bare walls" policy had been implemented in contravention of the

requirements of the Association's CC&Rs, on May 14, 2004, the Board voted to procure

an "all risk" policy so that the Association's insurance would be in compliance with the

CC&Rs. Hertel prepared a policy change request form to procure "all risk" coverage for

the Association, which was effective as of May 13, 2004. The Board also sent a letter to

the Association membership soliciting a vote to amend the CC&Rs to allow for the

Association to maintain only a "bare walls" policy. In the meantime, the Abramses

retained counsel to represent them with respect to the water damage to their unit. In



4       Although a full copy of the La Brisas CC&Rs was never introduced in evidence in
the trial court, and, as a result, a full copy is not in the record on appeal, from statements
made by various witnesses, it appears that the CC&Rs required the Association to insure
not only the common areas of the Las Brisas development, but also individual
homeowners' units.
                                              9
November 2003, the Abramses' attorneys sent a demand letter to the Association asking

for damages in the amount of approximately $135,000 for remediation and construction

costs. In July 2004, the Abramses' attorneys sent a second demand letter asking for

approximately $170,000, including attorney fees. The Board apparently did not agree to

pay the Abramses the amount of money that they were seeking. The Abramses

proceeded to file a lawsuit against EBMC, the Association and some individual Board

members in March 2005.

       The Abrams litigation settled in May 2007. Pursuant to one term of the

settlement, which was approved by the Board, the Association agreed to pay any amount

in excess of $70,000 that the court might award on a motion for attorney fees and costs.5

The trial court ultimately awarded the Abramses approximately $365,000 in attorney fees

and costs, and entered judgment for that amount in their favor and against the

Association.

       In order to pay the judgment, the Association imposed a special assessment of

$8,500 per unit.




5       Under this term of the settlement agreement, Truck, which was involved in the
litigation as the Association's insurer, agreed to pay $70,000 in attorney fees, and the
Association agreed to pay any additional amount of attorney fees and costs awarded to
the Abramses in excess of $70,000.
                                            10
B.     Procedural background

       Plaintiffs filed their original complaint in 2009. After various demurrers and

motions to strike, plaintiffs ultimately filed the operative complaint, a third amended

complaint (TAC), in November 2010.

       Hertel moved for summary judgment, or, in the alternative, summary adjudication.

Plaintiffs opposed the motion.

       The trial court concluded that Hertel did not owe plaintiffs a duty of care, and that,

as a matter of law, plaintiffs had not relied on Hertel's statements at the meeting and had

suffered no damages as a result of his statements. The court determined that plaintiffs

thus could not prevail on their claims for professional negligence, negligent

misrepresentation, or fraud. The trial court granted Hertel's motion for summary

judgment, and entered judgment in favor of Hertel. Plaintiffs moved for a new trial, but

the court denied the motion. Plaintiffs thereafter filed a timely notice of appeal.

                                              III.

                                        DISCUSSION

       Plaintiffs contend that the trial court erred in granting summary judgment in favor

of Hertel because, they maintain, the trial court was incorrect in concluding that Hertel

did not owe them a duty of care, as a matter of law, and there remained triable issues of

fact with respect to all three of their claims against Hertel.




                                              11
A.     Summary judgment standards

       A moving party is entitled to summary judgment when the party establishes that it

is entitled to the entry of judgment as a matter of law. (Code Civ. Proc., § 437c, subd.

(c).) A defendant may make this showing by demonstrating that the plaintiff cannot

establish one or more elements of all of his causes of action, or that the defendant has a

complete defense to each cause of action. (Towns v. Davidson (2007) 147 Cal.App.4th

461, 466.)

       "An issue of fact can only be created by a conflict of evidence. It is not created by

'speculation, conjecture, imagination or guess work.' [Citation.] Further, an issue of fact

is not raised by 'cryptic, broadly phrased, and conclusory assertions' [citation], or mere

possibilities [citation]. 'Thus, while the court in determining a motion for summary

judgment does not "try" the case, the court is bound to consider the competency of the

evidence presented.' [Citation.]" (Sinai Memorial Chapel v. Dudler (1991) 231

Cal.App.3d 190, 196–197.)

       In reviewing a trial court's ruling on a motion for summary judgment, an appellate

court makes " 'an independent assessment of the correctness of the trial court's ruling,

applying the same legal standard as the trial court in determining whether there are any

genuine issues of material fact or whether the moving party is entitled to judgment as a

matter of law. [Citations.]' [Citation.]" (Trop v. Sony Pictures Entertainment, Inc.

(2005) 129 Cal.App.4th 1133, 1143.)




                                             12
B.     The professional negligence cause of action

       Plaintiffs contend that the trial court erred in determining that that Hertel owed

them no duty of care, as a matter of law.

       "The elements of a cause of action for professional negligence are (1) the

existence of the duty of the professional to use such skill, prudence, and diligence as

other members of the profession commonly possess and exercise; (2) breach of that duty;

(3) a causal connection between the negligent conduct and the resulting injury; and (4)

actual loss or damage resulting from the professional negligence. [Citation.]" (Oasis

West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

       1.     Whether Hertel owed plaintiffs a duty of care that extends to the protection
              of their noninsurable economic interests

       Hertel contends that the trial court correctly concluded that he owed plaintiffs no

duty, as a matter of law. Hertel further contends that the trial court's decision to grant

summary adjudication of this claim was correct because even if he owed plaintiffs a duty

of due care, the evidence demonstrates, as a matter of law, that he did not breach that

duty and/or that his actions were not the proximate cause of plaintiffs' damages.

       There is no dispute that Hertel's client was the Association and not plaintiffs—the

individual members who make up the Association. The parties disagree as to whether

Hertel owed the individual members of the Association a duty of due care, such that he

may be found liable to them with respect to the economic loss that they are claiming.

       "The threshold element of a cause of action for negligence is the existence of a

duty to use due care toward an interest of another that enjoys legal protection against


                                             13
unintentional invasion. [Citations.] Whether this essential prerequisite to a negligence

cause of action has been satisfied in a particular case is a question of law to be resolved

by the court. [Citation.] [¶] A judicial conclusion that a duty is present or absent is

merely ' "a shorthand statement . . . rather than an aid to analysis . . . . '[D]uty,' is not

sacrosanct in itself, but only an expression of the sum total of those considerations of

policy which lead the law to say that the particular plaintiff is entitled to protection." '

[Citation.] 'Courts, however, have invoked the concept of duty to limit generally "the

otherwise potentially infinite liability which would follow from every negligent

act . . . ." ' [Citation.]" (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397 (Bily).)

       A duty of care may arise through statute, contract, the general character of the

activity, or the relationship between the parties. (J'Aire Corp. v. Gregory (1979) 24

Cal.3d 799, 803 (J'Aire Corp.).) "The determination whether in a specific case the

defendant will be held liable to a third person not in privity is a matter of policy and

involves the balancing of various factors, among which are the extent to which the

transaction was intended to affect the plaintiff, the foreseeability of harm to him, the

degree of certainty that the plaintiff suffered injury, the closeness of the connection

between the defendant's conduct and the injury suffered, the moral blame attached to the

defendant's conduct, and the policy of preventing future harm. [Citations.]" (Biakanja v.

Irving (1958) 49 Cal.2d 647, 650 (Biakanja), italics added.)

       In Biakanja, supra, 49 Cal.2d at pages 650-651, the Supreme Court permitted

recovery by a third party beneficiary, i.e., the intended beneficiary of a will prepared for

the decedent by the defendant notary public. The notary public failed to have the will

                                               14
properly attested, rendering the will unenforceable. The Supreme Court concluded that

the notary owed a duty to an intended beneficiary, and not only to the notary's client, to

properly handle the will's drafting and solemnization. (Ibid.)

       Later, in J'Aire Corp., supra, 24 Cal.3d 799, the Supreme Court applied the

Biakanja factors to conclude that the tenant of a building used as a restaurant could state

a cause of action for negligence against a renovation contractor hired by the building's

owner for business income lost when the contractor "fail[ed] to complete the project with

due diligence." (J'Aire Corp., supra, at p. 802.) The Supreme Court held that a "special

relationship" (id. at p. 804) that permitted the recovery of economic losses (i.e., the

relationship defined by the Biakanja test) existed between the contractor and the tenant.

The court dismissed concerns that such a theory of recovery would allow for the

imposition of liability out of proportion to fault, for potentially remote consequences and

speculative damages. (J'Aire Corp., supra, at pp. 807-808.) In the court's view, the

Biakanja factors, in combination with "ordinary principles of tort law such as proximate

cause," were "fully adequate to limit recovery" of purely economic damages "without the

drastic consequence of an absolute rule which bars recovery in all such cases." (J'Aire

Corp., supra, at p. 808.)

       In both Biakanja and J'Aire Corp., the question that the courts addressed was

whether the defendant's duty of care could be extended to a third party who was not in

privity with the defendant—i.e., the intended beneficiary of a will (Biakanja, supra, 49

Cal.2d at pp. 648–649) and the lessee of premises that the defendant was renovating



                                             15
(J'Aire Corp., supra, 24 Cal.3d at p. 802)—for injuries alleged to have been suffered by

those third parties.

       To determine whether Hertel owed plaintiffs a legally recognized duty to use due

care to protect their interests in avoiding a"special assessment" to pay for the attorney

fees award in the Abrams litigation, we will apply the six factors identified in these cases.

These six factors, however, do not end our inquiry as to whether Hertel owed a duty to

use due care to protect the interest at stake in this case. In Bily, supra, 3 Cal.4th 370, the

Supreme Court concluded that three additional factors should be considered in

determining, in that case, whether accountants owed a general duty of care to investors

who, in making their investments, foreseeably relied on an audit opinion that the

investors alleged had been negligently prepared: 1) whether there existed the risk of

imposition of liability out of proportion to fault; 2) the possibility that the plaintiff might

take protective measures to guard against the risk (private ordering); and 3) whether it

would be most efficient to place the loss on the class of defendants involved rather than

the plaintiffs. (Id. at pp. 398-407.) Other courts have considered these additional Bily

factors in determining whether a professional negligence claim may be brought by a third

party not in privity with the defendant for an injury alleged to have arisen as a result of

the professional's lack of due care. (See Giacometti v. Aulla, LLC (2010) 187

Cal.App.4th 1133, 1137-1138 [concluding that an accounting firm does not have a duty

of care to its client's employees when hired to prepare W-2 wage and tax statements for

the client]; Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co. (2004) 125



                                              16
Cal.App.4th 152, 165-166, 170-172 [concluding that design engineers did not owe the

property owner or the general contractor a duty of care].)

       The application of the combined nine Biakanja/Bily factors to determine whether a

duty of care is owed to a particular third party who has suffered economic damages is a

legal question that is decided on a case-by-case basis. (See Aas v. Superior Court (2000)

24 Cal.4th 627, 644; Mintz v. Blue Cross of California (2009) 172 Cal.App.4th 1594,

1610.) We consider these factors in turn.

              a.     The Biakanja factors

                     i.      The extent to which the transaction was intended to affect the
                             plaintiffs

       Citing Desert Healthcare District v. PacifiCare FHP, Inc. (2001) 94 Cal.App.4th

781, Hertel notes that in considering this first factor, "[t]he conduct alleged to have been

negligent must have been intended to affect that particular plaintiff, rather than just a

class of persons to whom the plaintiff happens to belong." (Id. at p. 792.) Hertel asserts

that because the "transaction in question was the processing of a request by the

Association to reduce the coverage offered by the Association's policy from 'all risk' to

'bare walls,' " the transaction was "not intended to affect the homeowners as individuals,

but instead their association." However, the record demonstrates that the conduct that

plaintiffs allege was negligent was intended to affect plaintiffs in this case.

       Hertel was the Association's insurance agent and, in that capacity, assisted the

Association in procuring insurance policies to meet the Association's needs. In

particular, Hertel assisted the Association in procuring and maintaining an insurance


                                              17
policy that specifically and directly affected each individual homeowner member of the

Association. Prior to the change request at issue in this case, the Association's policy was

an "all risk" policy. As such, the policy provided coverage for each homeowner's

individual unit, not only for the common areas owned by the homeowners collectively.

Thus, the transaction at issue—Hertel's effectuation of a change intended to eliminate the

coverage for the individual units— clearly was intended to affect these plaintiffs, since it

effectively eliminated the insurance coverage that they had prior to the change. Because

of the nature of the "all risk" policy, Hertel and everyone else involved in making a

change from "all risk" to "bare walls" coverage, had to know that this transaction would

specifically affect the individual homeowners of the Las Brisas development by

eliminating the insurance coverage for their units.

        Hertel acknowledges that where "a transaction is in fact intended to specifically

affect the plaintiff" there is "cause to consider a departure from the general rule that there

is no duty to guard against economic loss." However, Hertel maintains that the

transaction was intended to affect the Association and not the individual homeowners.

Although there is a legal distinction between the Association and its membership, it is

disingenuous to suggest that the effect on the homeowners from the insurance change

requested in this case was "merely collateral," as Hertel asserts. The change did not

affect only the insurance coverage for the development's common areas, but rather,

specifically eliminated each individual homeowner's insurance coverage for his or her

unit.



                                              18
       Hertel cites Adelman v. Associated Internat. Ins. Co (2001) 90 Cal.App.4th 352,

366 (Adelman), as supporting his position with respect to this factor, however, our

reading of the Adelman court's analysis suggests that it actually supports our conclusion

with respect to this factor. Adelman addressed whether an insurer may "be subject to

liability to a noninsured third party for the negligent performance of its indemnity

obligations to the named insured based upon allegations that there is a 'special

relationship' between the insurer and the third party, as that term has been defined and

applied in [Biakanja], supra, 49 Cal. 2d 647 and its progeny." (Adelman, supra, at p.

359.) In Adelman, a homeowners' association (HOA) had procured an insurance policy

that "provided coverage for losses from various perils, including earthquake damage,"

and that "covered the common areas of the project but did not extend coverage to the

individual units owned by the plaintiffs." (Id. at p. 356.) After the buildings in the

complex suffered earthquake damage, the HOA made a timely and proper claim under

the policy seeking the funds necessary to pay to repair damage caused to the common

areas of the project. However, the insurance company failed to make the requested

repairs or to provide the funds necessary to complete the repairs. (Id. at p. 357.) Because

these structural repairs had to be made before the individual homeowners could

commence repairs to their individual units, the homeowners "were forced to incur the

expense of finding other living quarters, or to live amidst disrepair, and suffered

significant diminution in the value of their units." (Ibid.)

       The individual homeowners sued the insurance company, seeking compensation

for the expenses that they incurred as a result of the insurance company's failure to timely

                                              19
and fully perform its obligations under the policy. (Adelman, supra, 90 Cal.App.4th at

pp. 357-358.) In assessing the Biakanja factors and applying them to the situation before

it, the Adelman court concluded that issuance of the insurance policy in that case was not

intended to affect the homeowners individually: "By its express terms, the policy,

although purchased with plaintiffs' homeowner assessment funds, covered only the

common areas of the project; in short, the policy was intended to protect the collective or

group interests of the plaintiffs, not their individual interests. Plaintiffs do not credibly

claim otherwise. The policy was purchased in the name of the HOA, which is the

statutorily designated entity formed to protect and enforce the plaintiffs' collective or

group interests. . . . Given this circumstance, it can hardly be said that the 'end and aim'

of the policy's purchase was the protection of plaintiffs' individual interests." (Adelman,

supra, at p. 366.)

       In contrast to the policy at issue in Adelman, the "all risk" policy that Hertel is

alleged to have changed to a "bare walls" policy without proper authorization covered not

only the common areas of the development but also each of the individual homeowners'

units. The "all risk" policy in this case clearly was intended to protect not only the

collective interests of the plaintiffs, but also their individual interests. Given the specific

nature of the policy at issue, and the intended effect of the change request, which was to

eliminate entirely the protection for the homeowners' individual units, we conclude that

the first factor weighs in favor of finding the existence of a duty.




                                              20
                      ii.    Foreseeability of harm to the plaintiffs

       The next factor we consider is whether the harm that these plaintiffs suffered was

foreseeable. It was clearly foreseeable that a change in the policy coverage from "all

risk" to "bare walls" could cause harm to individual homeowners, particularly if the

homeowners were not informed of the change. Plaintiffs would have had no reason to

procure replacement insurance to protect their individual interests if they reasonably

believed that the Association maintained an insurance policy that provided coverage for

their units. Those persons who were involved in eliminating the coverage for plaintiffs'

individual units could have foreseen that the individual homeowners might incur a loss

that would not be covered by the Association's new "bare walls" policy.

       However, the harm for which plaintiffs seek to recover in this case is not damage

to any of their individual units. Rather, plaintiffs seek compensation for the costs of

litigation and a resulting settlement that was triggered by foreseeable damage to the

Abramses' unit. The damage for which plaintiffs seek compensation is far less

foreseeable than direct, uninsured property damage to a homeowner's individual unit.

Multiple intervening events had to occur in order for these plaintiffs to have suffered the

damages that they are seeking to recover here. Unlike the property damage suffered by

the Abramses—damage to their unit that was uninsured due to the change in the

Association's policy from "all risk" to "bare walls,"—the monetary damage suffered by

plaintiffs was far less foreseeable.

       We conclude that, on the whole, this factor weighs against imposing a duty on

Hertel with respect to the damages that plaintiffs seek in this case.

                                             21
                      iii.   Degree of certainty that plaintiffs suffered injury

       Plaintiffs clearly suffered injury. While the CC&Rs required that the Association

maintain an insurance policy that covered both common areas and the homeowners'

individual units, the policy was changed without proper amendment of the CC&Rs, and

without plaintiffs' knowledge or consent. After the change occurred, one unit suffered

physical damage. Because the Association's policy had been changed, the Abramses,

who owned the unit that sustained the damage, had no insurance to cover the costs to

repair their unit. The Abramses sued the Association, members of the Board, and the

property management company. As a result of that lawsuit, plaintiffs, all individual

homeowners and members of the Association were required to pay a special assessment

to cover a portion of the settlement reached in the Abrams litigation. This factor thus

weighs in favor of finding a duty owed by Hertel to plaintiffs to protect their interests

under these circumstances.

                      iv.    Closeness of connection between defendant's conduct and the
                             injury suffered

       With respect to the closeness of the connection between Hertel's acts and

plaintiffs' injuries, Hertel's alleged initiation of the change request that eliminated the

insurance coverage for the individual units in the Las Brisas community was clearly a

causal factor of the Abramses' loss. However, the causal connection between Hertel's

alleged conduct and the subsequent special assessment imposed on the Association's

membership to pay for the Association's settlement of the Abrams litigation is far more

attenuated.


                                              22
       As Hertel argues, there is not a close connection between his actions and plaintiffs'

injuries. The loss that plaintiffs incurred was a share of the cost of an open-ended

settlement with the Abramses that the Board authorized after failing to settle on more

favorable terms at an earlier point in the litigation. If the Association had handled the

Abrams matter differently, there may have been no need to impose an assessment on

plaintiffs. Because Hertel's actions were not closely connected with the circumstances

that led to the imposition of the special assessment, this factor weighs against a

determination that Hertel owes plaintiffs a duty with respect to their injury.

                      v.     The moral blame attached to defendant's conduct

       Hertel's alleged deviation from the standard of care in his industry is not

particularly blameworthy. His conduct did not present a risk to health or safety, and,

unlike the defendant's conduct in Biakanja, was not unlawful. The harm that Hertel's

actions may have caused was solely economic. Hertel's conduct therefore does not stand

out as morally blameworthy. This factor thus weighs against finding that Hertel owed a

duty to plaintiffs with respect to their injury.

                      vi.    The policy of preventing future harm

       The final Biakanja factor is the policy of preventing future harm. Where CC&Rs

require that an HOA provide insurance coverage that protects not only common areas but

also the individual units of its members, one who assisted that HOA in procuring and

maintaining such coverage knows that changing that coverage to "bare walls" coverage




                                               23
will impact those individual homeowners and may have a potentially drastic affect on

them.

        Plaintiffs allege that Hertel initiated the change request without proper

authorization, either at the suggestion of someone who did not have the authority to make

such a request, or out of a mistaken belief that he had been asked to do so. Plaintiffs

further allege that Hertel initiated the change knowing that the CC&Rs may have

required the Association to maintain "all risk" coverage yet failing to determine whether

the CC&Rs had been amended to allow for the elimination of individual unit coverage. If

a fact finder determines that these allegations are true, imposing liability could act as an

incentive to others to ensure that such significant changes to HOA insurance policies are

not effectuated unless such changes are requested by the appropriate individuals and there

has been some minimal offer of proof that the requested changes have been authorized by

the governing documents and/or governing body of that association. We therefore

conclude that the policy of preventing future harm weighs slightly in favor of recognizing

a duty on Hertel's part that extends beyond protecting only the plaintiffs' insurable

interests, and that would impose liability on him for failing to prevent the type of harm

plaintiffs have alleged they suffered.

               b.     The Bily factors

                      i.     The possibility that liability might be imposed out of all
                             proportion to fault

        The Bily court determined that imposing a duty under the scenario presented in

that case could have vastly expanded the number of possible plaintiffs and the types of


                                              24
claims against the auditor, thereby "rais[ing] the spectre of multibillion-dollar

professional liability that [wa]s distinctly out of proportion to" the auditor's fault and the

connection between the auditor's conduct and the investors' injury (Bily, supra, 3 Cal.4th

at p. 402). In this case, imposing a duty would not raise similar concerns. The nature of

the duty that the plaintiffs in Bily sought to impose would have created potentially

limitless exposure for the auditor, despite the fact that the auditor's role in the financial

reporting process was secondary, in that most of the information on which an auditor

relies necessarily comes from the client, and involves complex professional judgment.

(Id. at p. 400.) In contrast, the number of potential plaintiffs to whom an insurance agent

such as Hertel would owe a duty is limited. Specifically, only where an HOA's insurance

policy protects the individual interests of the homeowners in addition to their common or

collective interests, would an insurance agent have a duty to meet the standards of his

profession with respect to those homeowners.

       Further, the Bily court was concerned that auditors could be left as the sole parties

from whom investors could recover if the court were to impose a duty on them, noting

that by the time investors have determined that they have been damaged, "[t]he client, its

promoters, and its managers have generally left the scene, headed in most cases for

government-supervised liquidation or the bankruptcy court," such that the "auditor has

. . . assumed center stage as the remaining solvent defendant and is faced with a claim

for all sums of money ever loaned to or invested in the client." (Bily, supra, 3 Cal.4th at

p. 400.) Here, there are multiple parties who could be found to bear responsibility for the

losses that plaintiffs suffered. In fact, it is possible that a fact finder would conclude that

                                              25
Hertel is not solely liable, and that he should be held responsible for only a portion of the

damages that plaintiffs seek. Including Hertel as one of multiple parties owing a duty to

plaintiffs and allowing for liability for failing to protect would not be out of all proportion

to any fault that he may be found to bear.

                      ii.    The level of sophistication of the plaintiff in the context of the
                             transaction, including the potential for "private ordering" to
                             contractually protect against the risk

       The Bily court distinguished the class of third party investors, creditors, and others

who read and rely on audit reports and financial statements, from ordinary consumers.

(Bily, supra, 3 Cal.4th at p. 403.) The court noted that, unlike the " 'presumptively

powerless consumer' " in product liability cases, more sophisticated investor/creditor

plaintiffs have the ability to " 'privately order' the risk of inaccurate financial reporting,"

either through their own investigation or audit, or by contractual arrangements with the

client. (Ibid.) The Bily court observed, "As a matter of economic and social policy, third

parties should be encouraged to rely on their own prudence, diligence, and contracting

power, as well as other informational tools. This kind of self-reliance promotes sound

investment and credit practices and discourages the careless use of monetary resources.

If, instead, third parties are simply permitted to recover from the auditor for mistakes in

the client's financial statements, the auditor becomes, in effect, an insurer of not only the

financial statements, but of bad loans and investments in general." (Ibid.) Thus, in a

financial transaction that presents a risk of loss, a party contemplating the transaction

should be encouraged to take appropriate steps to protect his or her own interests through

prudence, diligence and contracting power.

                                               26
       The individual homeowners who are suing Hertel in the present case are not like

the sophisticated investors who brought suit against an auditor in Bily. The individual

homeowners have a special relationship with both the Association representing them, as

well as with the insurance agent who obtained the "all risk" insurance policy for the

Association—a policy that specifically provided protection for the homeowners' risk of

loss to their individual units—and who acted to change that policy in a way that

eliminated this protection. The homeowners were in a uniquely vulnerable position with

respect to the transactions at issue in this case in that under the terms of the Association's

CC&Rs, the homeowners justifiably relied on the Association and the insurance agent to

protect their individual interests. Although the homeowners could have purchased

additional insurance to provide back-up coverage for the risk of damage to their

individual units, this would have been economically inefficient since such risks were

covered by the Association's "all risk" policy. Procuring additional insurance in this

circumstance would have been redundant. Under these circumstances, the Bily

consideration of "private ordering" does not counsel against imposing a duty on Hertel

toward the individual homeowners.

                     iii.    The potential adverse impact on the class of defendants on
                             whom the plaintiffs seek to impose a duty

       The Bily court was particularly concerned that imposing liability on auditors

would not only fail to create "a significant and desirable improvement in audit care," but

would also likely cause "deleterious economic effects." (Bily, supra, 3 Cal.4th at p. 404.)

The Bily court explained, "In view of the inherent dependence of the auditor on the client


                                              27
and the labor-intensive nature of auditing, we doubt whether audits can be done in ways

that would yield significantly greater accuracy without disadvantages." (Ibid.) It is

unclear whether such a concern makes sense in this case. Rather, it would appear that

there could be fairly simple things that an insurance agent could do differently in a

situation like the one in this case to ensure greater "accuracy" in changing HOA

insurance coverage, with little downside. Specifically, an insurance agent could request

verification of a change request to an "all risk" policy from an HOA's board, or could

request to see the minutes of the board actions authorizing such a change. Such efforts

would be minimal, would be unlikely to decrease the availability of agents willing to

assist HOAs in procuring coverage, and would help prevent the kind of unintended lapse

in insurance coverage that occurred here. For these reasons, we conclude that this factor

minimally weighs in favor of imposing a legal duty on Hertel for which the homeowners

had to pay a special assessment as a result of the litigation over the uninsured loss to the

Abramses' unit.

              c.     Consideration of all the factors leads to the conclusion that Hertel
                     did not owe the individual homeowners a duty with respect to the
                     injury that they are claiming

       While some of the Biakanja/Bily factors weigh in favor of imposing a duty on

Hertel, the most significant of the factors—specifically, the foreseeability of the

particular harm for which recovery is sought and the closeness of connection between the

defendant's conduct and the injury alleged—counsel against imposing a duty on Hertel in

this case. In our view, having concluded that it was not reasonably foreseeable that

Hertel's alleged conduct would result in the kind of injury suffered by plaintiffs here, and

                                             28
that his alleged conduct is not closely connected to the injury alleged, it would be

unreasonable to impose liability on Hertel for such damages.6

       Hertel's duty to use due care as an insurance agent does not extend to protecting

the individual homeowners from harm beyond harm to their insured interests. The

damages for which plaintiffs seek compensation in this case—damages from a special

assessment imposed on them as a result of the settlement of the Abrams litigation—are

not within the scope of this duty. Although we disagree with the trial court's conclusion

that Hertel would never owe any duty at all to the individual homeowners, we

nevertheless conclude that under the circumstances alleged in this case, the trial court did

not err in granting summary adjudication in favor of Hertel on plaintiffs' professional

negligence claim.

C.     The fraud and negligent misrepresentation causes of action

       Plaintiffs contend that the trial court erred in granting summary adjudication in

favor of Hertel on their second and third causes of action for fraud and negligent

misrepresentation.7 We reject this contention.




6       Although Biakanja and Bily do not suggest that any of the factors are more
important than others, in our view, the foreseeability of the harm at issue and the
closeness of the connection between the defendant's conduct and the harm suffered
should be the first factors to be addressed in determining whether a defendant has a duty
to use due care toward an interest of another who is not in privity with the defendant. If a
court were to conclude that the harm suffered by the plaintiffs was not a reasonably
foreseeable consequence of the defendant's conduct and that the defendant's conduct was
not closely connected to the harm suffered, then it would not be reasonable to impose
liability on the defendant, regardless of whether some or all of the other factors might
counsel in favor of imposing liability.
                                             29
       Both the second and third causes of action are based on Hertel's conduct at the

August 23, 2003 annual meeting, and not on his June 2003 conduct in initiating the

change request. Plaintiffs allege that property manager Brooks invited Hertel to speak to

the Association's membership at the August 2003 meeting. At that meeting, Hertel gave

a presentation in which he expounded on the merits of changing the association's

insurance policy from "all risk" to "bare walls" coverage. Plaintiffs allege, and Hertel

does not dispute, that he did not inform anyone at the meeting that the Association's

policy had already been changed to a "bare walls" policy prior to the meeting, and

thereby implied, at a minimum, that the policy that was in effect at the time of the

meeting was an "all risk" policy. One member asked Hertel "if any change in insurance

coverage had as yet been effected, and" in reply, Hertel represented that no change in the

policy had been effectuated.8 The Association membership voted not to change the

policy to a "bare walls" policy at that meeting.




7       Neither party took great pains to address the propriety of the trial court's granting
of summary adjudication in favor of Hertel on these two causes of action. In fact,
plaintiffs originally contended in briefing that a reversal as to their first cause of action
would necessarily extend to the second and third causes of action. As will become clear,
we disagree with this assessment, and are dismayed that the parties devoted so little
attention or analysis to the question whether Hertel was entitled to judgment on these
causes of action.

8      The parties dispute what Hertel's and Brooks's motives were in not telling the
members of the Association at this meeting that the insurance policy had already been
changed. Hertel states that "[b]ecause of what Brooks told me [i.e., that there had been
water loss in a unit, the CC&Rs had not been amended to allow for bare walls coverage,
and the Association membership was in the process of collecting ballots to amend the
CC&Rs to allow for a reduction in coverage], and my confusion as to the import of what
                                             30
       The elements of fraud, which give rise to the tort action for deceit, are (1) a

misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another's

reliance on the misrepresentation, (4) justifiable reliance, and (5) resulting damage.

(Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173 (Small).) The tort of

negligent misrepresentation, another species of the tort of deceit (Bily, supra, 3 Cal.4th at

p. 407), does not require the intent to defraud but only " '[t]he assertion, as a fact, of that

which is not true, by one who has no reasonable ground for believing it to be true.' "

(Small, supra, at p. 174.) The elements of negligent misrepresentation are "(1) the

misrepresentation of a past or existing material fact, (2) without reasonable grounds for

believing it to be true, (3) with intent to induce another's reliance on the fact

misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting

damages." (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158

Cal.App.4th 226, 243.)

       In order to establish fraud or negligent misrepresentation, plaintiffs must

demonstrate that they were damaged as a result of Hertel's misrepresentations. Even

assuming that everything that the plaintiffs' assert is true—i.e., that Hertel misrepresented

in August 2003 that no change had been effectuated, and that plaintiffs and members of

the Board remained unaware of the change until months later, in or around approximately

November 2003—plaintiffs have not identified any harm that they suffered as a result of




he told me, I did not tell the unit owners present" about the change request that he had
submitted to Truck.
                                               31
having been kept in the dark about the change in coverage between August and

November.

       The Abramses' property loss occurred in June 2003, after the insurance coverage

change had been effectuated but prior to Hertel's misrepresentation at the August 2003

meeting. All of the damages that plaintiffs seek arise out of their having to pay for the

settlement of the Abramses' claims against the Association resulting from their property

loss. Although the evidence demonstrates that Hertel's statements at the August meeting

were false, that he knew they were false, and that he intended that plaintiffs rely on the

statements and vote to amend the CC&Rs to permit a change in coverage from "all risk"

to "bare walls," there is no evidence that plaintiffs' reliance on these statements caused

any additional damage to them.9 In other words, the damage that the plaintiffs ultimately

suffered arose as a result of the property loss suffered by the Abramses during a time

period when the Association's insurance coverage had been reduced from "all risk" to

"bare walls." The conduct that caused the property loss to be uninsured and that caused

the Abramses to initiate litigation against the Association was the implementation of a

change in the Association's insurance policy from "all risk" to "bare walls," which

occurred in June 2003. Hertel's misrepresentations in August 2003 that plaintiffs allege

prevented the Board and other members of the Association from learning that the



9      It seems clear from the facts in evidence on summary judgment that Hertel did, in
fact, misrepresent the nature of the Association's policy at the August 23, 2003 meeting.
We do not intend to suggest that such conduct was reasonable or condonable. Rather, we
simply conclude that there remain no material issues in dispute with respect to whether
Hertel's misrepresentation at that meeting caused plaintiffs' identified damages.
                                             32
insurance policy had been changed did not lead to plaintiffs' having to pay $8,500 each to

cover the settlement with the Abramses.

       Further, there is no evidence in the record that suggests that plaintiffs suffered any

additional, separate injuries as a result of Hertel's misrepresentations at the August 2003

meeting. Rather, in the operative complaint, plaintiffs assert that if Hertel had not

misrepresented at that meeting that no change in coverage from "all risk" to "bare walls"

had already occurred, (1) they could have "take[n] prophylactic steps [on] their own

behalf (such as the obtaining of additional condominium interior and contents coverage to

protect against the 'gap' created by the reduction to only 'bare walls' coverage)," and (2)

they "would also have been able to intervene informally with [the insurance company10],

or if necessary, later file a complaint in intervention in the Abrams litigation, all in an

effort to secure reversion to 'All-Risk' coverage from the unauthorized 'bare walls'

coverage." Plaintiffs contended that if they had been able to do either of these things,

they could have avoided the $8,500 special assessment. As evidence supporting their

contention that Hertel's misrepresentations at the August 2003 meeting caused damage to

them, plaintiffs refer to the declaration of Russell Russo, a Las Brisas homeowner and

one of the plaintiffs. Russo, who was present at the August 2003 meeting, states, "Had I

not been of this belief that the full, 'all risk' coverage remained in effect—a belief based


10      In their pleadings and other documents, plaintiffs refer to the insurance company
as "Farmers." From the record it appears that Farmers and Truck are related entities, but
the parties do not discuss the relationship between the two, and no one has raised this as
an issue. In their briefing in response to Hertel's motion for summary judgment,
plaintiffs do not dispute the fact that at the relevant time period, the Association was
insured under a Truck insurance policy.
                                              33
primarily upon Hertel's representation, which I now know to have been false—I would

certainly have insisted that the Las Brisas HOA Board commence litigation against [the

insurer] at once, by an action for declaratory or other relief, to judicially compel [the

insurer] to immediately effect reinstatement of the 'all risk' coverage. I knew that such a

court action would be successful, probably by summary judgment, because the alleged

change to 'bare walls' had been utterly and completely lacking in any proper

authorization, either by 'Board action' or by the required CC&R amendment . . . ."

       We find these assertions of injury meritless. First, no injury can be traced to the

homeowners' inability to obtain individual insurance for their condominium units after

the August 2003 meeting at which Hertel misrepresented the Association's coverage. As

noted, the only property damage to which plaintiffs have pointed that resulted in the

Association members having to pay a special assessment is the uninsured property

damage suffered by the Abramses. The change in the policy from "all risk" to "bare

walls," and the Abramses' subsequent property loss, both occurred prior to the August

2003 meeting. The plaintiffs thus have not demonstrated, and cannot demonstrate, that

their damages resulted from not having had the opportunity to obtain property insurance

to cover their individual risk due to misrepresentations made by Hertel in August 2003.

       Second, although the plaintiffs assert that they would have intervened in the

Abrams litigation or would have filed suit against Truck directly, there is no evidence

that they did either of these things even after members of the Board and/or Association

became aware in November 2003 that the Association's policy had been changed to "bare

walls." In a letter dated November 10, 2003, an attorney for the Abramses advised the

                                              34
Association that its policy had been changed from "all risk" to "bare walls," effective

April 3, 2003, and that the Abramses planned to seek compensation from the Association.

Plaintiffs do not dispute the contents of this letter, or that it was received by members of

the Association, including one of the named plaintiffs, Robert Keilholtz, who in his

deposition admitted to knowing about the change in coverage when he learned of the

Abramses' plan to seek compensation from the Association. Keilholtz also admitted that

"the first time we were made aware, me personally and most of the board members and

most of the HOA members, was at the time that [the Abramses] had a loss and that we

found out that we probably wouldn't have coverage," which occurred during Keilholtz's

2003-2004 service as a Board member. Despite learning of the change in the policy from

"all risk" to "bare walls" in or around November 2003, at no point in time did any of the

plaintiffs file a lawsuit against Truck or attempt to intervene in the Abrams litigation.

There is nothing to suggest that plaintiffs were prevented from doing these things as a

result of being unaware of the true nature of the Association's insurance coverage

between August 2003 and November 2003. They have not asserted that any cause of

action that they may have possessed became time-barred as a result of the delay in their

learning about the coverage change, that any defense they may have had to the Abramses'

claims was lost during the few months' time when they remained unaware that their

insurance coverage had been reduced, or that their ability to properly litigate or defend

such claims was hindered as a result of any loss of evidence caused by the delay in their

knowing about the change in coverage.



                                             35
       Finally, with respect to plaintiffs' allegation that they suffered damages in the

amount of $8,500 per unit for attorney fees paid in settlement of the Abramses' claims

because Hertel's misrepresentations at the August 2003 meeting prevented them from

intervening "informally" with Truck before Truck assumed its defensive position with

respect to the Abramses' loss, this contention is entirely speculative. Even if plaintiffs

could prove that they would have attempted to intervene "informally" with the insurance

company to attempt to get it to agree to cover a loss suffered at a time when the effective

policy did not provide coverage, they could not establish that anything they might have

done would in fact have resulted in Truck agreeing to cover the Abramses' individual

property damage, thereby eliminating the need for the Abramses to file suit against the

Association and the Association's subsequent need to settle the Abramses' claims.

       There is simply no allegation of any injury suffered by plaintiffs as a result of

Hertel's misrepresentations as to the nature of the Association's insurance coverage at the

August 2003 meeting, and plaintiffs cannot demonstrate that Hertel's conduct at that

meeting caused the damages they have alleged they suffered. We therefore conclude that

summary adjudication in favor of Hertel on plaintiffs' second and third causes of action

was proper. Hertel is entitled to judgment as a matter of law on these causes of action

because the plaintiffs cannot establish that his misrepresentations at the August 2003

meeting caused them damage.




                                             36
                                         IV.

                                   DISPOSITION

    The judgment of the trial court is affirmed. Hertel is entitled to costs on appeal.




                                                                              AARON, J.

WE CONCUR:



      HUFFMAN, Acting P. J.



                   HALLER, J.




                                          37
