MEMORANDUM DECISION DENYING LEE INVESTMENTS LLC’S MOTION FOR JUDGMENT PURSUANT TO RULE 50(b), FEDERAL RULES OF CIVIL PROCEDURE (Doc. 703)

Lee Investments LLC (hereafter Lee) moves pursuant to Rule 50(b), Federal Rules of Civil Procedure, for judgment as a matter of law on the ground that no reasonable jury would have a legally sufficient evidentiary basis to find for United States Fidelity & Guaranty Company (hereafter USF & G) and Aon Risk Services Inc. of Central California Risk Services (hereafter Aon) in that:

A. Governing Standards.

The standards governing a motion for judgment as a matter of law pursuant to Rule 50, Federal Rules of Civil Procedure, are reiterated in Gibson v. City of Cranston, 37 F.3d 731, 735 (1st Cir.1994):

Further, a party cannot raise arguments in a post-trial motion for judgment as a matter of law that it did not raise in its pre-verdict motion. Freund v. Nycomed Am-ersham, 347 F.3d 752 , 761 (9th Cir.2003).

B. Was the Sackett’s August 11, 1998 letter (Exh. 888) A Condition or Exception Limiting Coverage, and Required To Be As a Matter of Law, Clear, Plain and Conspicuous?

Lee asserts that the August 11, 1998 letter “stated what USF & G claims was a condition to coverage that Lee’s employees (a) stay within their designated classification as water park employees and (b) that claims arising from ‘construction’ not be reported under the workers’ compensation policy”, and contends:

Lee asserts that, because USF & G and American Specialty were not clear, plain and conspicuous in their statement of condition or exception to the policy, that condition or exception cannot be enforced. Lee cites Thompson v. Occidental Life Insurance Co., 9 Cal.3d 904, 912 , 109 Cal.Rptr. 473 , 513 P.2d 353 (1973):

Lee also cites E.M.M.I., Inc. v. Zurich American Ins. Co., 32 Cal.4th 465, 471 , 9 Cal.Rptr.3d 701 , 84 P.3d 385 (2004):

Lee’s contention assumes that the August 11, 1998 letter imposed a condition or restriction on coverage. It did neither.

As USF & G responds, Lee’s contention that the August 11, 1998 letter constituted a condition modifying the terms of an integrated policy is “completely unfounded as a matter of law” and fact. The August 11, 1998 letter was not part of the insurance policy, did not address any term or provision of the insurance policy, and did not constitute a condition or exclusion to the policy itself. The cases upon which Lee relies discuss rules for the interpretation of an insurance policy that is in force, and not, as here, written representations made by the applicant before the written and fully integrated policy contract was issued or came into effect. As USF & G contends:

Furthermore, Lee, over the objections of USF & G, requested and obtained Jury Instruction No. 29:

(Doc. 661, p. 30). Therefore, Lee’s issue of policy condition or exclusion was presented to and the jury fully considered Lee’s argument that USF & G was imposing a condition in the workers’ compensation policy, that such condition had to be certain and unambiguous and, if so, should be interpreted in its narrowest sense. The jury unequivocally rejected Lee’s theory of the case and version of conflicting facts.

Lee’s assertion that Jury Instruction No. 29, given at trial, is of “no moment” because the issue of whether the condition was clear, plain and conspicuous is a question of law, is without merit. The case upon which Lee relies, 20th Century Ins. Co. v. Liberty Mut. Ins. Co., 965 F.2d 747, 753 (9th Cir.1992), does not so hold. Further, because Lee requested and obtained Jury Instruction No. 29, the doctrine of invited error precludes Lee’s motion on this ground. See Deland v. Old Republic Life Insurance Company, 758 F.2d 1331, 1336-1337 (9th Cir.1985).

The jury resolved every one of the multitude of disputed facts against Lee, finding Lee had been deceitful and had acted with fraudulent intent in inducing USF & G to issue the worker’s compensation insurance policy. Lee’s motion for judgment on this ground is DENIED.

C. As a Matter of Law, Was USF & G Required to Provide Lee With A Completed, Signed and Returned, Application For the Workers’ Compensation Policy Issued by USF & G?

Lee argues that, as a matter of law, an application for the workers’ compensation policy was required in this case as an element of the claim for rescission. This claim has been fully analyzed and rejected in Lee’s accompanying motion to vacate the Partial Judgment.

Lee relies on the testimony during its cross-examination of Stanley Sheehan:

(Testimony of Sheehan, Feb. 7, 2007, 16:20-17:4).

Lee argues that this testimony establishes that an application for insurance by USF & G is an element of a claim for rescission. Lee cites CACI Instruction 2308, “Rescission for Misrepresentation or Concealment in Insurance Application-— Essential Factual Elements”, as including in the elements of the claim the following:

Lee contends that Lee never submitted an application for insurance with USF & G. Rather, Lee asserts:

Lee contends:

Lee’s position is based on reference to incomplete testimony and is incorrect as a matter of California law. The provisions of California law governing the right to rescission under the California Insurance Code and case law impose no “requirement” of an application. See Mitchell v. United National Ins. Co., 127 Cal.App.4th 457, 467-469 , 25 Cal.Rptr.3d 627 (2005):

None of these Insurance Code provisions require a written or formal “application” before a contract of insurance may be rescinded because of misrepresentation or concealment.

Moreover, Sheehan’s selectively quoted testimony that a signed application is requested by American Specialty during the underwriting process is irrelevant, because Sheehan also testified an unsigned application is often accepted. Hugh Awtrey testified that signed applications are usually not required as part of the underwriting process:

(Testimony of Awtrey, Feb. 8, 2007, 170:7-20). Bennett Bibel also testified that an underwriter can use any form of documentation it chooses in making an underwriting decision:

(Testimony of Bibel, Feb. 17, 2007, 38:4-21).

As USF & G argues, Lee’s contention that it was prejudiced because the “formality” of the application would have placed Lee on notice that the information provided would be used to determine whether to issue the policy is contradicted by the reality of Lee’s relationship with its broker, Aon, and workers’ comp insurance industry practice:

Lee replies that USF & G previously cited Cohen v. Penn Mut. Life Ins. Co., 48 Cal.2d 720, 726 , 312 P.2d 241 (1957), for the proposition that the fact the insurer asked specific questions on the application makes the answers material as a matter of law. Lee asserts that it previously argued that, without a corresponding request for certain information on the application, the information is presumed immaterial, citing Reserve Ins. Co. v. Apps, 85 Cal.App.3d 228, 231 , 149 Cal.Rptr. 223 (1978) and Ashley v. American Mut. Liab. Ins. Co., 167 F.Supp. 125, 132 (N.D.Cal.1958). Lee argues the application itself is such an important and necessary document that it may be used to prove or disprove the element of materiality. Lee claims the issue of an application and the presence of it was key to show the absence of fraud and the lack of a misrepresentation:

Lee contends that the Partial Judgment must be vacated, altered and/or amended for failure to decide an essential issue in the case.

Lee’s position is inaccurate. A contract of insurance was issued to Lee by USF & G at the instance of Aon, as Lee’s insurance broker, through American Specialty. This transaction follows industry practice whereby the insured’s broker seeks workers’ comp coverage for the insured that may or may not be accompanied by a signed, completed application for the policy. Lee’s position would negate any ability of USF & G to rescind that policy merely because an application was not completed and signed by Lee. The course of dealing between Lee and Aon and industry practice explains fully how the USF & G insurance policy came into force after the Industrial Indemnity policy was can-celled. In accordance with industrial practice, Lee’s broker “shopped” the risk and located an insurer willing to issue a workers’ comp policy based on Aon’s presentation of “the case” for Lee. Lee’s arguments concerning the importance of the application pertain to materiality, which were made by Lee to the jury on the issue of liability. There was no failure of proof on an essential issue nor any instructional error regarding a completed application for the policy.

For all the reasons stated above, Lee’s motion for judgment as a matter of law on this ground is DENIED.

D. Whether USF & G and Aon Failed to Show that Lee’s Employees Engaged in Activities Outside of a Water Park Workers’ Compensation Classification Code?

Lee asserts that USF & G reported Ms. Conley’s accident to the Workers’ Compensation Insurance Rating Bureau (WCIRB) as occurring under classification code 9016, as was made clear by Master Stat Report Facsimile (Ex. 675). Lee contends that there was no evidence that Ms. Conley’s injury was ever classified by USF & G or the WCIRB as occurring under any other classification code:

USF & G rejoins that Ms. Conley’s classification in the Master Stat Report Facsimile is not an admission by USF & G.

First, USF & G correctly observes there was no evidence at trial as to who made the report to the WCIRB or whether the source of the information for the report was anything other than the report of injury filed by Lee.

Second, USF & G maintains that the insurer was required to report injuries to the WCIRB using only the classification codes set forth in the policy. USF & G refers to the trial testimony of Lee’s workers’ compensation expert, Dr. Arthur J. Levine:

(Testimony of Levine, Feb. 14, 2007, 56:11-20, 57:24-58:8).

From this, USF & G contends when Ms. Conley was injured, her injury was reported to the WCIRB under the classifications actually contained in the USF & G policy, as an amusement park maintenance worker, classification 9016:

USF & G contends that by the time the classification was reported, USF & G had filed its action for rescission. It was clear that USF & G contended that the work performed by Ms. Conley was a construction activity not covered by the policy. Even if the Master Stat Report Facsimile was an admission, there was contrary evidence that USF & G did not accept or make such an admission, which the jury could and did consider by expressly find ing that there was no waiver or estoppel by USF & G based on all the evidence.

Lee replies that USF & G misleads the Court concerning its admission because “USF & G fads to remind the Court that the only expert testimony concerning the Master Unit Stat Report was that the purpose was to accurately report injuries.” Lee contends that further testimony by Dr. Levine established that although the reporting party must initially report under an existing classification, the reporting party has a continuing duty to revise the classifications and amend the Master Unit Stat Report so that it accurately reported the classification under which the injury occurred:

(Testimony of Levine, Feb. 14, 2007, 35:8-37:10)

Relying on this testimony, Lee asserts that “this” was ultimately USF & G’s responsibility and that the reporting occurred after the rescission action was filed “only makes the admission more egregious [and] does not ... excuse USF & G from its admission.”

Third, USF & G contends, whether Ms. Conley’s work could be covered by a construction code classification is irrelevant:

Lee contends that the testimony of Lee’s workers’ compensation expert, Arthur Levine, confirms that Ms. Conley was performing water park operations when she was injured. Lee asserts that Dr. Levine “is one of the preeminent experts on California Workers’ Compensation Insurance, arguably one of the most knowledgeable outside the actual workers’ compensation administration”, that he has authored a book and taught classes on workers’ compensation and liability insurance, and has served as the attorney for the Public Members of the Governing Committee on the Workers’ Compensation Insurance Rating Bureau. Lee asserts:

Both USF & G and Aon oppose this conclusory opinion and refer to the disputed evidence. Both assert that Lee’s con tention ignores all of the evidence at trial and all of the relevant legal issues. USF & G contends:

Aon argues that Lee’s contention that Ms. Conley was performing work within the scope of water park operations is irrelevant:

Aon refers to the trial testimony of Christy Platt:

(Testimony of Platt, Feb. 14, 2007, 16:3-21). Aon also refers to the trial testimony of Cathy Hacker:

(Testimony of Hacker, Feb. 2, 2007, 55:16-21)

Aon contends that since the jury reasonably could conclude as a matter of fact, that Ms. Conley was performing construction work, the jury’s verdict was not against the clear weight of the evidence.

Lee replies that the August 11 and August 12, 1998, post-policy-insurance letters make clear that USF & G intended to cover any work done by Lee employees if properly classified within water park classification and that Lee clearly informed American Specialty that it intended its workers to perform normal water park operations. Lee refers to the August 11, 1998 letter (Ex. 833):

Lee again contends that neither Kent Le-Masters’ testimony or Dr. Levine’s testimony has been rebutted. Lee refers to Dr. Levine’s trial testimony:

(Testimony of Levine, Feb. 14, 2007, 45:9 — 49:80). Lee contends that because Dr. Levine’s testimony establishes that, in the context of Workers’ Compensation insurance, the terms “construction” and “construction laborer” do not refer to incidental construction work that may be performed by a maintenance employee, Ms. Conley’s work on the red slide in February 1999 was normal park operations and would be covered and expected within water park classifications 9180 or 9016.

All these arguments center on factual disputes over the parties’ intent in contracting, most especially Lee’s credibility, in responding to the underwriter’s questions and requirements. The jury was free to reject Dr. Levine’s testimony which the jury could have found was not coherent, or so biased or arbitrary as to be of no help to the trier of fact. The testimony established that there were no discussions about code classifications when the policy was sought for Lee by Aon, especially not in relation to USF & G’s “no construction” by Lee’s employees requirement. The secret intent of Lee to refer solely to “construction” activities as defined by specialized complex workers’ comp classification codes, which even the experts do not fully understand, nor could Dr. Levine cogently or comprehensibly explain, is not supported by the evidence. There was a total absence of evidence and failure of proof by Lee that before the policy was bound and issued that Lee and Aon ever discussed such classification codes with ASI or USF & G so as to vary the common meaning of construction or to expand coverage to such unintended construction activities. This dispute was factual, not assisted by Levine’s legal conclusions and the jury rejected Lee’s evidence based on credibility findings adverse to Lee.

Lee’s motion for judgment on this ground is DENIED.

E. Whether, As a Matter of law, Lee Made a Misrepresentation to Aon, Lee Intended to Induce Any Reliance by Aon on a Misrepresentation, and Whether A Reliance of Aon Was a Substantial Factor in Causing Harm, to Aon?

Lee maintains there was no legally sufficient evidence for a reasonable jury to find Lee liable for attorneys’ fees to Aon for commission of a “tort of another.” Lee asserts Christy Platt’s August 12, 1998 letter and all of Lisa Ehrlich’s statements to Hugh Awtrey in response to his questions on August 12, 1998 were intended to be transmitted to American Specialty. Lee argues:

Lee relies on Aon’s action on August 12, 1998, when Aon itself drafted for Lee the language regarding Lee’s nonperformance of construction activities to be transmitted for Lee by Aon, to ASI. Lee contends this was on Aon’s sole initiative and that Aon, in Mr. Awtrey’s and Ms. Moore’s August 27, 1998 letter (Ex. 841), for its own bene fit, took it upon itself to advise Lee that the policy had been issued on the premise that no construction laborers would be employed by Lee. Lee asserts that Aon’s own conduct, and not any breach of duty by Lee to Aon, resulted in Aon being sued by USF & G and American Specialty for indemnity and resulted in Aon’s counterclaim against USF & G and American Specialty for indemnity. Lee asserts that Aon cannot recover for the “tort of another” where Lee breached no duty owed to Aon or Aon’s own conduct necessitated its involvement in litigation, citing Burger v. Kuimelis, 325 F.Supp.2d 1026, 1041-1043 (N.D.Cal.2004).

“[A] person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorneys fees and other expenditures thereby suffered.” Prentice v. North American Title Guaranty Corp., 59 Cal.2d 618, 620 , 30 Cal.Rptr. 821 , 381 P.2d 645 (1963).

Aon responds that Lee presents a one-sided view of the evidence that ignores substantial trial testimony to the contrary. Aon asserts that the jury reasonably concluded that Lee intentionally made misrepresentations to Aon during Lee’s effort to obtain a follow-on workers’ comp insurance policy through USF & G, and that those misrepresentations caused Aon to be sued by USF & G for indemnity based on alleged fault of Aon which was attributable to Lee’s tortious conduct. Aon contends there was substantial evidence that American Specialty and USF & G sought confirmation that Lee would perform no further construction work nor employ construction workers at Island Water Park. Lee knew Aon was relying on those representations in drafting the letter to American Specialty and Lee intended Aon, American Specialty, and USF & G, to rely on the truth of the representations. Aon refers to Aon’s cross-examination of Lisa Ehrlich:

(Trial testimony of L. Ehrlich, Feb. 9, 2007, 7:10-18; 7:22-8:4; 8:14-9:1). Aon also refers to Aon’s cross-examination of Christy Platt:

(Trial testimony of Platt, Feb. 14, 2007, 5:17-25; 6:17-23).

Lee’s admissions support the jury’s findings that Lee knew the prospective second insurer, USF & G, required affirmative representations by Lee that Lee would not perform construction activities and would not utilize construction workers, who would be subcontracted and insurance certificates provided. Aon further contends that Aon did not “take it on itself’ to write the letter to American Specialty. Instead, Aon was acting prudently as Lee’s broker in responding to American Specialty’s requirement that Lee provide a letter containing these representations before issuing the policy. Lee was well aware of this requirement, as evidenced by the testimony set forth above, and the trial testimony of Cathy Hacker: (Trial testimony of Hacker, Feb. 2, 2007, 55:16-21, 71:17-21, 108:5-21). The factual circumstances could not be clearer. Aon was endeavoring, as Lee’s broker, to satisfy the underwriter’s concerns about Lee’s employees’ work activities to enable the policy to be issued to Lee. The jury found against Lee on its theories that Aon breached any duty of care or made any misrepresentations.

Aon describes Lee’s reliance on Burger v. Kuimelis, supra, to contend that Lee breached no duty to Aon as misplaced, because Kumeilis held: “[t]he duty not to mislead is a duty that runs from counter-defendants [insureds] to Kumeilis [broker].” Burger, supra, 325 F.Supp.2d at 1044 . Aon responds that Lee’s argument that Aon’s own conduct in drafting the letter necessitated its involvement in this litigation ignores the fact that Aon was acting for Lee and Lee provided misinformation to Aon:

In its reply, Lee alters its position. Lee now argues:

All of this ignores uncontradicted testimony that neither Aon, American Specialty, or Lee at the time of the letters, discussed or considered the technical meaning of workers’ compensation classification codes. No hypertechnical or logic-defying meanings for the term “construction” were considered or used in the parties’ communications about the “no construction activities” representations by Lee. Lee fully advanced and argued to the jury its claim that Aon breached the duty of care as Lee’s workers’ comp insurance broker by not knowing or fully explaining the meaning of construction so as to have Lee’s construction activities covered under the USF & G policy. The jury rejected Lee’s broker malpractice— negligence theory in its entirety, as well as Lee’s claim that Aon misrepresented, intentionally, or negligently, the meaning of the terms “construction” or “construction activities” in connection with the USF &-G policy.

There was substantial evidence to support that as principal in its insurance broker relationship with Aon, Lee owed Aon duties of candor and cooperation. The evidence is that Lee misrepresented its intent and the performance of construction activities at the Island site in July-August 1998 and thereafter, supported the jury’s finding that Lee breached these duties to Aon. But for Lee’s tortious misrepresentations to Aon and American Specialty, USF & G, a third party, would not have issued the policy and would not have sued Aon for indemnity arising from Lee’s misrepresentations to USF & G and Lee’s breach of duty to Aon. This evidence supports the tort of another claim.

Lee’s motion for judgment on the tort of another claim is DENIED, subject to allocation of recoverable fees for tort of another where the direct claims and defense between the Lee parties and Aon do not implicate USF & G’s indemnity case.

CONCLUSION

For the reasons stated above:

1. Lee’s motion for judgment pursuant to Fed. R. Civ. Proc. Rule 50(b) is DENIED.

2. Counsel for USF & G and Aon shall prepare and lodge a form of order that reflects the specific rulings on each issue addressed by this decision within five (5) days following the date of service of this decision by the Court’s Clerk.

IT IS SO ORDERED.