A cupcake business sued its broker for failing to obtain insurance coverage to protect the company against all claims, which included a sexual harassment lawsuit in Big Man Bakes v. Stephen Hoskins.
William Brown and his business partner, Claudine Grier, founded Big Man Bakes in Los Angeles. In June 2009, Grier contacted USI of Southern California Insurance Services and was referred to broker Steven Hoskins. Grier asked for basic 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 said she wanted to keep insurance costs low while still satisfying the landlord's and statutory insurance requirements.
Hoskins emailed Grier a proposal and she responded by modifying the annual sales projection in order to receive a lower premium. In her emails to Hoskins, Grier referred to the proffered insurance as "business insurance." Hoskins placed the business property and liability insurance with the chosen insurer.
The following month, Grier contacted Hoskins for workers' comp insurance because the bakery had hired an employee. Hoskins sent two proposals, both including 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 placed the comp policy and sent Grier a copy, advising that higher limits and additional coverages might be available. Thereafter, Hoskins had no further communication with 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 Steven Hoskins and USI for negligence, breach of fiduciary duty and breach of implied contract for failing to recommend and obtain coverage against all claims arising from its operations. Big Man Bakes alleged that Hoskins and USI breached their duty of care by failing to recommend and assist the bakery to obtain EPLI, which would have covered the claims.
Respondents moved for summary judgment, arguing there was no duty to procure all potentially applicable coverages. Hoskins said Grier requested only the policies he procured and corroborated this with files containing notes and emails with Grier.
At the hearing, the trial court noted that because Grier was now deceased, Brown had no admissible evidence of what she said to Hoskins about Big Man Bakes' insurance needs. Big Man Bakes argued Hoskins' declaration and files showed Grier requested all possible insurance and created a triable issue of material fact as to Hoskins' duty to advise Grier to purchase EPLI. Respondents countered that corroborating notes and emails established that Grier requested the bare minimum required and specific types of insurance, which Hoskins dutifully procured.
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.
A broker has no duty to advise the client on specific insurance matters or procure a policy affording the client complete liability protection. Big Man Bakes failed to meet its burden, and respondents were entitled to summary judgment.
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