William Brown and his business partner, Claudine Grier, started a cupcake business called Big Man Bakes in 2009. Both had business experience and Grier had a master's degree in business administration from Columbia University.
In June 2009, Grier contacted insurance brokerage USI to obtain insurance for Big Man Bakes. She was referred to Hoskins, a broker in USI's small accounts department in charge of accounts generating less than $5,000 in revenue per year. Hoskins learned Grier sought basic insurance coverage for the business, which rented a small retail space and commercial kitchen and had no employees. Grier requested a quote for business property and liability coverage and informed Hoskins she wanted to keep the business's insurance costs low while still satisfying the landlord's and statutory insurance requirements.
Hoskins emailed Grier an insurance proposal based on their discussion. Grier responded with some corrections, including modifying the annual sales projection on which the insurance premium was based to get a lower premium. In her emails to Hoskins, Grier referred to the proffered insurance as "business insurance."
Hoskins obtained a quote based on Grier's information and sent her a proposal, in which the insurer referred to the policy as "business insurance." Grier accepted the proposal, and Hoskins placed the business property and liability insurance with the chosen insurer.
The following month, Grier contacted Hoskins to request workers' compensation insurance, informing him Big Man Bakes had hired an employee. Hoskins sent Grier two workers' compensation insurance proposals, both of which included the phrase "employer's liability insurance." Grier responded, "It looks like Hartford is the cheapest. It offers us the statutory coverage needed. We'd like to lock into the workers' comp at [the annual salaries provided] with Hartford insurance."
Hoskins then placed the workers' compensation policy and sent Grier a copy of the policy. Hoskins advised Grier that higher limits and additional coverages might be available and she could contact him to discuss those options. Thereafter, Hoskins had no further communication with Grier or anyone from Big Man Bakes.
In March 2011, a former employee sued Big Man Bakes and Brown for sexual harassment and constructive discharge.
On July 19, 2011, Big Man Bakes sued respondents for negligence, breach of fiduciary duty, and breach of implied contract for failing to recommend and obtain insurance coverage to protect Big Man Bakes against all claims arising from its operations. Big Man Bakes alleged respondents breached their duty of care by failing to recommend and assist Big Man Bakes to obtain employment practices liability insurance (EPLI), which would have covered the claims brought against it for sexual harassment and constructive discharge.
Respondents moved for summary judgment, arguing they were under no duty to procure all potentially applicable insurance coverages for Big Man Bakes. In support of their motion, Hoskins declared Grier requested only the policies he procured and corroborated his declaration with insurance files containing his notes and emails with Grier.
At the hearing, the trial court noted that because Grier, who was the only one to communicate with Hoskins, was now deceased, Brown had no admissible evidence of what she said to Hoskins about Big Man Bakes' insurance needs. In response, Big Man Bakes argued Hoskins's declaration and insurance files showed Grier requested all possible insurance and created a triable issue of material fact as to Hoskins's duty to advise Grier to purchase EPLI. Respondents countered that Hoskins's declaration that Grier specifically requested three forms of insurance, along with the corroborating notes and emails, established Grier was interested in obtaining only the bare minimum required, and requested specific types of insurance, which Hoskins dutifully procured.
On March 13, 2013, the trial court granted respondents' motion for summary judgment and dismissed the action, finding the undisputed facts established respondents breached no duty to recommend and obtain insurance to cover all possible claims for Big Man Bakes.
In an appeal, Big Man Bakes alleged causes of action for negligence, breach of fiduciary duty, and breach of an implied contract stemming from the brokers' failure to advise Big Man Bakes to obtain EPLI coverage. To establish a cause of action for breach of fiduciary duty, a plaintiff must prove one of the parties was duty bound to act with the utmost good faith for the benefit of the other party. A cause of action for breach of an implied contract must allege the existence of a contract implied in fact, consisting of obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words.
Whether a duty of care exists is a question of law for the court.
Insurance brokers owe a limited duty to their clients to use reasonable care, diligence, and judgment in procuring the insurance the insured requested. A broker breaches this duty only if she misrepresents the nature, extent or scope of the coverage being offered; or if there is a request or inquiry by the insured for a particular type or extent of coverage; or if the broker assumes an additional duty by either express agreement or by holding himself out as an expert in a given field of insurance being sought by the insured.
California law is well settled as to this limited duty of insurance brokers. Under this general duty of reasonable care, a broker has no duty to advise the client on specific insurance matters or procure a policy affording the client complete liability protection. To require insurance brokers, who operate solely as middlemen, to advise and recommend to clients all available insurance would fundamentally alter the duties of insurance brokers and greatly increase the cost of procuring insurance.
Sexual harassment is neither bodily injury by accident nor by disease. Thus, when considered in context, "employer's liability insurance" could not reasonably be understood to provide coverage for an employee's claims for sexual harassment and constructive discharge.
Respondents established they upheld their limited duty of care to Big Man Bakes, and the burden then shifted to Big Man Bakes to raise a triable issue of material fact.
A party opposing a summary judgment motion may use an expert's declaration to raise a triable issue of fact provided the expert's opinion relates to a subject that is beyond common experience and will assist the trier of fact. An expert may not, however, testify about issues of law or draw legal conclusions, and a party cannot rely upon an expert's opinion to establish duty, which is a question of law for the court.
Big Man Bakes failed to meet its burden, and respondents were entitled to summary judgment.
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