Broker blunder: Fire but no insurance
A building owner was accused by neighbors of negligently allowing a fire to damage their properties. A neighbor who owned a restaurant that was damaged and AMCO Insurance Company, the insurer for a second neighbor, brought actions against the insurance broker for the building owner, All Solutions Insurance Agency, LLC, alleging negligence and breach of contract based on the broker’s failure to procure fire insurance for the building. The building owner had assigned his claims against All Solutions to the neighbors and AMCO. The court granted summary judgment in favor of the broker, and the neighbors and AMCO appealed.
On appeal, the first question was whether a client’s causes of action against an insurance agent or broker are assignable. The court held that California recognized the assignability of a client’s causes of action in such circumstances.
The second question was whether the rule of superior equities from California’s equitable subrogation doctrine applied to the contractual assignments in the case. The court concluded that the rule applied only if the assignee was an insurance company and the assignor was that company’s policyholder. When the parties do not have a relationship that might give rise to a transfer of rights by equitable subrogation, the court said, there is no reason why their assignment should be subject to the rules that govern equitable subrogation. The court concluded that in this case the contractual assignments were not subject to the rule of superior equities.
The third question concerned whether the broker established that there was no triable issue of fact regarding its alleged negligent failure to obtain insurance. Because the client and the employees of the broker disagreed over who said what to whom and when, the court held that there was an issue of triable fact about whether the client requested the broker to obtain insurance coverage before the fire.
For these reasons the court concluded that the trial court should have denied summary judgment on the three grounds presented in the broker’s motions. The lower court’s judgment was reversed.
AMCO Insurance Company vs. All Solutions Insurance Agency, LLCCalifornia Court of Appeal, Fifth District-February 8, 2016-F070038.
