December 22, 2011
P. K. SCHRIEFFER LLP
Dear Clients and Colleagues,
On November 17, 2011, the California Court of Appeal, Second Appellate District, in Wallman v. Suddock (2011) 200 Cal.App.4th 1288 affirmed the lower Court on summary judgment in favor of the insurer and insurance agent for negligence, breach of insurance contract, bad faith, and declaratory relief that arose from the insurer’s denial of coverage as to an underlying personal injury action against the insureds.
The Wallman Appellate Court determined that there were no triable issues of fact relating to:
- The agent’s alleged failure to procure the insurance that the insureds requested and that the agent “agreed to provide” because the kind of coverage requested were extremely general in nature;
- That the agent did not “hold himself out” as an insurance expert based on the mere assertion that the insureds purchased insurance from the agent for several years and followed his advice on insurance matters and which the Appellate Court found was insufficient to create a heightened duty; and
- That the agent did not engage in any misrepresentations when the agent told the insured that the insurance protection purchased was adequate because the agent’s statements were not specific responses to the insured’s specific questions about the adequacy of coverage.
In this recent ruling the Appellate Court held the agent’s supposedly general assurance that the policy should provide coverage did not rise to an actionable level for liability for misrepresentation or negligence.
The Appellate Court held that when an agent affirmatively suggests a replacement cost endorsement and negligently explains that the endorsement was sufficient to replace all lost or damaged personal property regardless of policy limits, then the agent may be found to have a heightened duty of care. Also, an agent may be found liable where the agent fails to deliver a policy that the agent specifically agreed to provide. Again, a general statement from an insured to be “fully covered” is not sufficient to state a cause of action against the insurance agent. Paper Savers, supra, 51 Cal.App.4th at 1101; Wallman at p. 1313.
The Appellate Court also affirmed that an insurance agent may assume a greater duty to the insured by “holding himself out” to be more than an ‘ordinary agent’ or by misrepresenting the policy’s terms or extent coverage. Paper Savers, Inc. v. Nacsa (1996) 51 Cal.App.4th1090, 1096. The Appellate Court affirmed, consistent with prior law, that even if the agent has been serving his customer for the past 10 years, this will not be enough to imply the existence of a greater duty on the agent. Jones v. Jacobson (2011) 195 Cal.App.4th 1, 1; Wallman at p.1312. In this regard, the Appellate Court found that the key factor in determining whether the agent holds himself out as an expert in an insurance area will depend on what the agent actually said or did that causes the insured customer to conclude the agent indeed possessed superior knowledge which makes the insured rely upon the statement and purchase one particular policy over the other.
Finally, with regard to the insurance company, American Guarantee, the Appellate Court found that although the insurance policy contained some ambiguities, these potential ambiguities were of no consequence because the policy applied only to the scheduled properties, and the property where the alleged personal injury occurred was not identified in the policy.