Claimed Misrepresentation About a Different Policy Irrelevant

Insurance Agent Has No Obligation to Investigate an Insured’s Coverage Needs

Barry Zalma

Feb 04, 2025

Transcript

Trial Court Ruling

The trial court ruled in favor of the defendants, stating that Sims’ claims were legally insufficient because she could not show harm from the agent’s alleged misrepresentations and could not prove the defendants owed or breached any duty of care.

Appeal

Sims appealed, arguing that the court erred. The appellate court affirmed the trial court’s decision.

Issues & Conclusions

Sims’ claims were based on alleged representations by Foster about the insurance coverage on the property.
The trial court concluded that Sims could not establish causation because Foster’s alleged misrepresentations pertained to a different insurance policy that was no longer in effect at the time of the Camp Fire.

Sims’ evidence was insufficient to create a triable issue of material fact.

The trial court also ruled that Sims could not establish Foster owed or breached a duty of care to Sims because the duties of an insurance agent run only to the client, and Sims was not Foster’s client.

The appellate court agreed with the trial court’s findings and affirmed the judgment.

Analysis

Negligent misrepresentation is a species of the tort of deceit. To prove negligent misrepresentation, a plaintiff must show (1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation by the party to whom it was directed, and (5) resulting damage.

Sims alleged that she had two in-person conversations with Foster, the agent, in 2013 and 2014 where she was led to believe her business property was covered. The trial court concluded that Sims could not establish the elements of causation (justifiable reliance and resulting damage) because Foster’s alleged misrepresentations pertain to coverage under an earlier homeowners’ insurance policy, which was replaced by the landlord policy in effect at the time of the fire, more than a year before the Camp Fire that damaged the house.

Disposition:

The judgment was affirmed, and the defendants were awarded their costs on appeal.

The trial court ruled in favor of the defendants because Sims’ claims were legally insufficient because Sims could not show harm from the agent’s alleged misrepresentations and could not prove the defendants owed or breached any duty of care.

In her deposition testimony and discovery responses, Sims admitted facts that directly contradicted the statements in her declaration in opposition to the motion for summary judgment.

Ordinarily, an insurance agent assumes only those duties normally found in any agency relationship. This includes the obligation to use reasonable care, diligence, and judgment in procuring the insurance requested by an insured. However, an insurance agent generally does not have a duty to investigate a customer’s coverage needs, to procure coverage to meet those needs, or to point out the advantages of additional or different insurance coverage.

The trial court properly ruled that because the underlying claims against Foster failed as a matter of law there could be no case against Farmers.

The judgment was affirmed and the defendants were allowed to recover their costs on appeal.

ZALMA OPINION

Insurance agents who do not take on the position of a fiduciary are basically order takers and are only obligated to obtain the insurance ordered. The fact that the agent may have told the plaintiff that her business property was covered by one policy – whether true or not – was not a misrepresentation about a subsequent policy totally different from the one in effect at the time of the fire. People really must read the policy before buying it and before making a claim or filing suit. The court did and the Plaintiff lost.