Court Opinion

ID: 9720391
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:29:00.470275+00
Date Added: 2024-06-11T13:03:25.669707
License: Public Domain

*958LUI, Acting P. J.—
I respectfully dissent.
The majority is correct when it states that the general duty of reasonable care owed by insurance agents to their clients does not include the obligation to procure a policy affording complete liability protection.1I also agree with the majority that the existence of a duty of care is a question of law that is based on considerations of public policy. (Raymond v. Paradise Unified School Dist. (1963) 218 Cal.App.2d 1, 8-9 [31 Cal.Rptr. 847].) “An affirmative declaration of duty simply amounts to a statement that two parties stand in such relationship that the law will impose on one a responsibility for the exercise of care toward the other.” {Ibid.)
I differ with the majority, however, as I conclude that the particular allegations of this cross-complaint state facts from which a special or greater duty could reasonably be inferred.
The third amended cross-complaint alleged that appellants and respondents had a 10-year relationship wherein respondents encouraged appellants to depend and rely upon their advice, service and expertise regarding the holding of their insurance needs and protection, and appellants did so rely. Respondents, who represented themselves to appellants as “financial planners, insurance professionals and as specialists in the area of evaluating their clients’ insurance needs and protection and procuring appropriate liability insurance,” knew of appellants’ assets and wealth and throughout the period of their relationship expressly and impliedly represented to appellants that *959their insurance protection was adequate and that their insurance needs were taken care of. It was further alleged that respondents “indicated and represented to [appellants] that the amount of insurance provided was sufficient to cover [any] claim which might be [brought] against [appellants]” although respondents either knew or should have known that such a limited amount of liability coverage as the $300,000 involved herein “could not adequately protect [appellants] against [reasonable] and foreseeable loss in light of nature of the property insured, the risks involved and the extent of [appellants’] wealth, income and financial worth.”
Respondents represented themselves to be experts at procuring appropriate liability insurance and encouraged appellants to depend and rely on their advice, service, and expertise; they also expressly and impliedly represented that the insurance protection obtained by them was “adequate.”
The court in Sandbulte v. Farm Bureau Mut. Ins. Co. (Iowa 1984) 343 N.W.2d 457, 465, relied upon by the majority, decided that summary judgment was appropriate where the facts most favorable to the insured showed he had purchased insurance from defendants “for several years” and asked for and was assured he had “sufficient coverage.” The court declined to find this was an expanded agency agreement but noted situations where a special duty might arise, for example, when “there is a long-established relationship of entrustment between insurance counselor or agent and client from which it clearly appears that the counselor appreciated that there was a duty to take the initiative in giving comprehensive advice to [the] client on insurance matters----” (Id. at p. 464.) The Sandbulte court, supra, 343 N.W.2d at pages 464-465, further quoted 16A Appleman, Insurance Law and Practice (1981) section 8836, at pages 64-66 as follows: “Ordinarily, of course, an insurance agent assumes only duties normally found in an agency relationship ... and he assumes no duty to advise the insured merely by such relationship. However, where an agent holds himself out as a consultant and counselor, he does have a duty to advise the insured as to his insurance needs, particularly where such needs have been brought to the agent’s attention. And in so doing, he may be held to a higher standard of care than that required of the ordinary agent since he is acting as a specialist. Accordingly, the agent may be liable to an insured for the damage suffered by his failing to inform him as to a potential source of loss and by his failing to recommend insurance therefor.”
In essence, the cross-complaint herein alleges that appellants reposed trust and confidence in respondents to obtain their announced goal of adequate and sufficient insurance protection and that respondents (who held themselves out as specialists in the area) in turn represented to appellants, following a 10-year relationship between the parties, that the insurance *960protection was adequate and that appellants’ insurance needs were taken care of. If appellants can prove what they have alleged,2 they can establish a duty and a cause of action.
Insurance brokers do not need to represent that coverage will be adequate in all circumstances; they can be candid with their clients about the uncertainty of how much insurance is sufficient coverage. They can inform clients as to judgments that have been rendered imposing liability and indicate that future judgments may require even greater coverage. They can tell the clients that each person must decide, given their own circumstances, what amount of coverage is “adequate” and how much they can afford to purchase. They do not need to hold themselves out as experts in the area of evaluating insurance needs and in procuring adequate liability insurance. None of those routes was taken by respondents, at least according to the allegations of the cross-complaint. Rather, respondents “expressly and impliedly represented ... that their insurance protection was adequate and that the [appellants’] insurance needs were taken care of.” Appellants, as clients relying on the expertise of respondents, a reliance encouraged by respondents, should be able to assume respondents were exercising due care for their clients’ benefits in making their representations.
I find that, liberally construing the pleadings and drawing all reasonable inferences that can be drawn therefrom, the third amended cross-complaint does state a cause of action. Therefore, I would reverse the order of dismissal and remand the matter to the trial court for further proceedings.
A petition for a rehearing was denied March 17,1987, and appellants’ petition for review by the Supreme Court was denied May 14, 1987. Mosk, J., and Arguelles, J., were of the opinion that the petition should be granted.

I agree with the majority that neither Westrick v. State Farm Ins. (1982) 137 Cal.App.3d 685 [187 Cal.Rptr. 214], nor Greenfield v. Insurance Inc. (1971) 19 Cal.App.3d 803 [97 Cal.Rptr. 164], imposes a duty to obtain coverage that will protect an insured’s personal assets. However, they are both instructive as to duty.
The court in Westrick, supra, in an appeal from a directed verdict, emphasized the disparity of knowledge between insureds and insurance agents. The court found that an agent who previously told the insured a commercial jeep pick-up truck would be covered for 30 days under his current policy could be liable though he had not expressly promised to assume responsibility to procure the insurance for a new commercial vehicle when his co-agent and father, when asked about general coverage, did not inform the insured that a new six-wheel vehicle was excluded from the policy’s automatic 30-day coverage.
In Greenfield, supra, 19 Cal.App.3d 803, the insurance agent obtained a policy for business interruption that excluded loss caused by mechanical breakdown, the specific type of coverage requested by the insured, and represented that the requested coverage had been obtained. {Id., at p. 810.) Judgments of negligence and fraud were affirmed. The court found a duty “to exercise reasonable care in seeking coverage as requested----” {Ibid.)
Our Supreme Court in Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d. 800 [180 Cal.Rptr. 628, 640 P.2d 764], upheld the liability of a broker who obtained a replacement policy with a $100,000 policy limit, thereby leaving a $200,000 gap in coverage and not complying with the excess policy’s requirement that the insured maintain underlying coverage of $300,000. The situation in Reserve is close to the case at bench since primary insurance was actually obtained by the broker, but in an inadequate amount.

“In reviewing a judgment of dismissal entered upon the sustaining of a demurrer without leave to amend, we must treat the demurrer as admitting all material facts properly pleaded and all reasonable inferences which can be drawn therefrom. [Citations.] We must liberally construe the allegations of the complaint with a view to attaining substantial justice among the parties____It is error to sustain a demurrer where a plaintiff [or cross-complainant] has stated a cause of action under any possible legal theory. [Citations.]" (Service Employees International Union v. Hollywood Park, Inc. (1983) 149 Cal.App.3d 745, 757 [197 Cal.Rptr. 316].) As our Supreme Court stated in Buckaloo v. Johnson (1975) 14 Cal. 3d 815, 828 [ 122 Cal.Rptr. 745, 537 P.2d 865], “even if we were to entertain doubts that plaintiff could factually support his allegations at trial we are nevertheless obliged to give them deference for purposes of this review.”