Insurance Brokers' Duties to Third Parties Continue to Shrink
The Wednesday May 1, 2013 edition of the Los Angeles Daily Journal featured Robert McKennon and Victor Xu’s article entitled: “Insurance Brokers’ Duties to Third Parties Continue to Shrink.” In it, Mr. McKennon and Mr. Xu discuss how a new appellate decision- Travelers Property Co. of America v. Superior Court 2013 DJDAR 5005 (Cal. App. 2d Dist. 2013)- clarifies and limits the duties owed by insurance brokers to third-party claimants. The article discusses how in Travelers, the court specifically addressed the holding in Nowlon v. Koram Insurance Center, Inc., 1 Cal.App.4th 1437 (1991) and limited the holding in that case to the unique circumstances of negligence per se. The article also discusses how Travelers does not foreclose the possibility of other types of breach of professional duty claims by third-parties against brokers, especially where the harm was reasonably foreseeable. The article is posted below with the permission of the Daily Journal.
California Governor Jerry Brown recently signed a new law that will provide increased protection to seniors and other consumers who are interested in purchasing an annuity. AB 689, which was sponsored by the California Department of Insurance and authored by Assembly Budget Committee Chair Bob Blumenfield (D-San Fernando Valley), requires that insurers verify that an annuity purchase is suitable and appropriate for the consumer based on an evaluation of his or her age, income, financial objectives and ten other factors. The bill was unanimously passed by both the state Senate and the state Assembly.
Guy Carpenter & Co. (“Carpenter”) is a reinsurance intermediary providing insurance companies with reinsurance coverage. Carpenter placed reinsurance for Workmen’s Auto Insurance Co. (“the company”) with PMA Capital Insurance Company of Philadelphia, Pennsylvania (“PMA”). The company sued Carpenter, alleging causes of action for negligence, breach of fiduciary duty and breach of contract. Regarding the breach of fiduciary duty claim, the company asserted that Carpenter breached its duty by failing to secure timely payments from PMA, failing to secure the best available terms of reinsurance, and acting with the intent to injure the company by incurring inflated commissions. 
Delving into the sometimes arcane metes and bounds between insurers’ rights of equitable subrogation and equitable contribution, a California appellate court recently denied an excess insurer’s right to bring an equitable subrogation action against its insured’s agent for failing to renew another excess insurer’s policy that would have covered the same underlying bodily injury risk. The appellate court expanded on the trial court’s reasoning, and concluded that the excess insurer could not establish at least two necessary elements of an action for equitable subrogation, and could not show that it had paid more than its fair share under the doctrine of equitable contribution. James Dobbas, et al. v. Fred Vitas, et al., 2011 Cal. App. LEXIS 15 (January 7, 2011).
