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.
The Thursday November 1, 2012 edition of the Los Angeles Daily Journal featured Robert McKennon and Reid Winthrop’s front-page article entitled: “Insurance Agents Key to Insurer Liability.” In it, Mr. McKennon and Mr. Winthrop discuss how agents can be the key to rendering insurers liable for policy coverage. The article discusses the difference between “brokers” and “agents,” including “dual agents,” and discusses when and how to make the case that a “broker” is really an “agent” for purposes of imputing liability to an insurance company. The article also discusses how to respond to an insurer’s argument that the policy terms control and the insured has a duty to read the policy. The article is posted below with the permission of the Daily Journal.
New California Law Requires That Insurers and Agents Verify that an Annuity is Suitable for the Consumer
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.Continue Reading
Do insurance brokers owe fiduciary duties to their clients? Under California law, until recently, this was an open question. Most attorneys, especially those representing policyholders, included a breach of fiduciary duty cause of action when suing an insurance broker/agent in actions that involve broker/agent malpractice. And, some include these claims when suing a broker/agent and an insurance company for insurance bad faith. California law has now been clarified with the California Court of Appeals for the Second Appellate District’s decision in Workmen’s Auto Insurance Company v. Guy Carpenter & Company, Inc., __ Cal. App. 4th __, Cal. App. LEXIS 533 (May 4, 2011), that held insurance brokers do not owe fiduciary duties to their clients.
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.Continue Reading
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).
James Dobbas (Dobbas) owned a ranch and livestock in Sierra County. Fred Vitas (Vitas), his insurance agent, obtained a $1 million primary liability policy and a $3 million excess liability policy for his ranch operations with Cal Farm Insurance Company (Cal Farm). Dobbas also owned a railroad emergency response company. American Guarantee and Liability Insurance Company (American) insured Dobbas as a sole owner of the company under a $7 million excess liability insurance policy. Vitas allegedly cancelled the Cal Farm $3 million excess policy or failed to renew it.Continue Reading