An insurance broker has no legal duty to procure insurance coverage for an insured beyond what the insured requests. ( San Diego Assemblers, Inc. v. Work Comp for Less Insurance Services, Inc. (2013) 220 Cal.App.4th 1363)
Facts
San Diego Assemblers, Inc. (Assemblers) was a remodeling contractor. Work Comp for Less Insurance Services, Inc. (Broker) is an insurance broker. In 2000, Assemblers contacted Broker seeking a “basic” liability policy. Assemblers told Broker the policy limits it required, but never described the types of coverage it wanted, and only stated that it wanted the “least expensive” coverage. Broker procured liability policies and provided them to Assemblers’ personnel, who read them. Assemblers’ personnel never had any questions for Broker after reading the policies and Assemblers never asked Broker for different coverage.
In April 2004 Assemblers performed work for a restaurant. In July 2008 an explosion and resulting fire occurred at the restaurant, causing substantial property damage. The restaurant’s property insurer, Golden Eagle Insurance (Golden Eagle) paid for the damage under the restaurant’s insurance policy and subsequently pursued a subrogation claim against Assemblers. Assemblers tendered Golden Eagle’s subrogation claim to Preferred Contractors Insurance Company (Preferred), which provided liability insurance to Assemblers at the time of the explosion in 2008. Preferred refused to indemnify or defend Assemblers on the ground that the Preferred policy contained a “prior completed work” exclusion which barred coverage for property damage arising from an insured’s work competed before the policy period.
Golden Eagle sued Assemblers and obtained a default judgment. Assemblers assigned to Golden Eagle any claims Assemblers had against Broker. Assemblers then filed a petition for bankruptcy.
Subsequently, Golden Eagle brought an action against Broker in Assemblers’ name alleging that Broker had negligently failed to procure for Assemblers a liability policy with full “completed operations” coverage. Broker moved for summary judgment, arguing it had no legal duty to provide Assemblers with different or additional coverage than Assemblers had requested. The trial court granted summary judgment in favor of Broker. Assemblers appealed.
Holding
The appellate court affirmed, finding that Broker did not owe a duty to Assemblers to procure liability insurance with full completed operations coverage. The appellate court reasoned that an insurance broker generally owes an insured a limited duty, which is only to use reasonable care, diligence and judgment in procuring the insurance requested by the insured. An insurance broker does not breach its duty to an insured to procure the requested insurance policy unless: (a) the broker misrepresents the nature, extent or scope of the coverage being offered or provided; (b) there is a request or inquiry by the insured for a particular type or extent of coverage; or (c) the broker assumes an additional duty by either express agreement or by “holding itself out” as having expertise in a given field of insurance being sought by the insured. Here, Golden Eagle standing in the shoes of Assemblers did not assert, and did not produce any evidence, that Broker had breached its limited duty to Assemblers in any of these respects. Thus, Golden Eagle as assignee of Assemblers did not have a legally cognizable claim against Broker.
Comment
This case reaffirms that a broker generally has a limited duty to use reasonable care, diligence and judgment in procuring the insurance requested by an insured. While there may be some situations where the broker’s duty can be expanded, the facts of this case did not warrant any such expansion. As such, neither the insured nor anyone claiming through the insured could prevail on a negligence claim against the broker.