Court Affirms Ruling That Insured Cannot Recover From Captive Reinsurer or Affiliated Insurance Brokerage

The plaintiffs sued Public Storage seeking insurance coverage after Public Storage allegedly disposed of personal belongings the plaintiffs had in a rented storage unit. The belongings were insured under a policy produced by PSCC Inc., an insurance brokerage affiliated with Public Storage. The coverage was also reinsured by a captive reinsurer affiliated with Public Storage - PS Insurance Company-Hawaii Ltd. The cedent-insurer was sued as well but was ultimately dismissed, after which Public Storage moved for summary judgment. The lower court granted Public Storage's motion, finding that it could not be liable to the plaintiffs under the policy as neither it nor its affiliates were parties to the contract. The plaintiffs appealed, but the California appellate court affirmed.

Although PSCC is a Public Storage affiliate, and was identified in the insurance policy, the court agreed that it was only identified as a producer, not a principal, and thus could not be contractually liable to the plaintiffs under the policy. And while PS Insurance Co. is also affiliated with Public Storage, the court held that the reinsurance agreement between the cedent-insurer and PS Insurance had no effect on the contract between the cedent and its insureds - the plaintiffs. The court also rejected the plaintiffs' "alter ego liability" theory, finding no evidence that Public Storage and/or its affiliates were alter egos of the cedent-insurer. Indeed, the court ruled, it is an "essential feature" of reinsurance that it does not alter the terms or conditions of the insurance contract between the cedent and its insured. As such, the lower court order was affirmed.

Cabral v. Public Storage, No. B294798 (Cal. Ct. App. Apr. 10, 2020).