Green Technology Lighting Corp. v. Crouse and Associates Insurance Services of Northern California

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 20, 2024
• Docket: 24-66
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS SEP 20 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

GREEN TECHNOLOGY LIGHTING No. 24-66 CORP., a Georgia corporation, D.C. No. 1:17-cv-00432-DCN Plaintiff - Appellant,

v. MEMORANDUM*

CROUSE AND ASSOCIATES INSURANCE SERVICES OF NORTHERN CALIFORNIA, INC., a California corporation,

Defendant - Appellee.

Appeal from the United States District Court for the District of Idaho David C. Nye, District Judge, Presiding

Submitted September 13, 2024** San Francisco, California

Before: BYBEE, BEA, and MENDOZA, Circuit Judges.

Plaintiff Green Technology Lighting Corporation (“Green Tech”) appeals the

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). order of the District Court for the District of Idaho granting summary judgment in

favor of Defendant Crouse and Associates Insurance Services of Northern California

(“Crouse”). We have jurisdiction pursuant to 28 U.S.C. § 1291. We review the

district court’s grant of summary judgment de novo. Soc. Techs. LLC v. Apple Inc.,

4 F.4th 811, 816 (9th Cir. 2021). Summary judgment is appropriate when there is

“no genuine dispute as to any material fact and the movant is entitled to judgment as

a matter of law.” Fed. R. Civ. P. 56(a). We affirm.

Sitting in diversity jurisdiction, the district court granted summary judgment

to Crouse on Green Tech’s claim of negligence and broker malpractice for two

independent reasons. First, the court held that Crouse did not owe Green Tech a

duty of care, an essential element of negligence claims under Idaho law. See First

Bank of Lincoln v. Land Title of Nez Perce County, Inc., 452 P.3d 835, 844 (Idaho

2019). Second, the court determined that Idaho’s economic loss rule bars recovery

for any negligence committed by Crouse. See id. at 844–45. Assuming that Crouse

owed some duty of care to Green Tech in how it performed its brokering services,

we agree with the district court that the economic loss rule is fatal to Green Tech’s

negligence suit.

Idaho “adhere[s] to a general rule prohibiting the recovery of purely economic

losses in all negligence actions.” Id. A purely economic loss is one that is “not

connected to an injury to a person or property.” Id. at 845. Because “the economic

2 loss rule limits the actor’s duty so that there is no cause of action in negligence,”

Brian & Christie, Inc. v. Leishman Elec., Inc., 244 P.3d 166, 172 (Idaho 2010),

summary judgment is appropriate in cases where the rule applies. See, e.g., First

Bank of Lincoln, 452 P.3d at 844–45. Green Tech alleges only economic losses

connected to the recall of its products. Therefore, unless some exception applies,

Green Tech has no cause of action for negligence under Idaho law.

The Idaho courts generally recognize two exceptions to the economic loss

rule: “(1) where a special relationship exists between the parties, or (2) where unique

circumstances require a reallocation of the risk.” Aardema v. U.S. Dairy Sys., Inc.,

215 P.3d 505, 512 (Idaho 2009) (citation omitted). The district court concluded that

neither applied in Green Tech’s case. On appeal, Green Tech disputes only the

district court’s holding that there was no special relationship between Green Tech

and Crouse.

The Idaho Supreme Court has repeatedly characterized the special

relationship exception as “extremely narrow,” applying “in only limited

circumstances.” Id. The caselaw recognizes “two situations” in which a special

relationship has been held to exist: “(1) where a professional or quasi-professional

performs personal services; [or] (2) where an entity holds itself out to the public as

having expertise regarding a specialized function, and by so doing, knowingly

3 induces reliance on its performance of that function.” Wallace v. Heath, 479 P.3d

155, 164 n.1 (Idaho 2021) (alteration in original) (citing Aardema, 215 P.3d at 512).

Neither situation fits the facts of this case. The district court correctly held

that, although Crouse was a professional insurance broker, it lacked the “custody or

control” over Green Tech’s insurance coverage that would justify recognizing a

special relationship giving rise to liability. GSN Cap., LLC v. Shoshone City & Rural

Fire Dist., 541 P.3d 703, 712 (Idaho 2024). Unlike the leading case on the liability

of insurance agents for their insured’s losses, McAlvain v. Gen. Ins. Co. of Am., 554

P.2d 955 (Idaho 1976), Crouse did not have ultimate authority over which insurance

policies Green Tech obtained. Even if Crouse should have known that Green Tech

was applying for insurance above and beyond the policy it ultimately received, it

was Insure Idaho—Green Tech’s insurance agent—that instructed Crouse to bind the

policy with less coverage. Green Tech was not at Crouse’s mercy as the insured was

in McAlvain because Crouse did not unilaterally control the level of liability

coverage that Green Tech would receive. There was thus no special relationship

between Crouse and Green Tech based on the professional services Crouse offered.

Nor did a special relationship exist due to Green Tech’s reliance on Crouse’s

expertise. As the Idaho Supreme Court’s decisions in Duffin v. Idaho Crop

Improvement Ass’n, 895 P.3d 1195 (Idaho 1995), abrogated on other grounds by

Davis v. Blast Props., Inc., No. 50491, 2024 WL 3188837 (Idaho June 27, 2024),

4 and Blahd v. Richard B. Smith, Inc., 108 P.3d 996 (Idaho 2005), confirm, this

exception requires that an expert have “actively sought to induce reliance on the part

of” the plaintiff. Duffin, 895 P.3d at 1201. And where “[t]here is no indication in

the record that the [plaintiffs] relied upon or were even aware of” the defendant’s

provision of its special services, there is no special relationship. Blahd, 108 P.3d at

1002. The district court found that “Green Tech had no knowledge of Crouse’s

existence” as it interfaced only with Insure Idaho in seeking to procure insurance for

its business. Green Tech has failed to raise a genuine factual dispute as to this

finding. We therefore conclude that Green Tech could not have relied on Crouse’s

representations of its own expertise, and consequently, there was no special

relationship between the two. The economic loss rule thus prohibits Green Tech

from recovering for any alleged negligence on Crouse’s part.

Because the foregoing analysis is a sufficient basis on which to affirm the

order of the district court, we do not evaluate the district court’s holding as to the

duties that Crouse may or may not have owed to Green Tech in performing its

brokering activities. Furthermore, it is unnecessary to decide whether the district

court erred in limiting any damages to be awarded to the amount “Green Tech would

have been entitled to had it held” the liability coverage it sought and believed it had.

AFFIRMED.