Insurance Law Hawaii

Motion to Strike Insureds' Experts Denied, Unfair Claim Settlement Claims Survive Summary Judgment

    The court denied the insurer's motion to strike the insureds' expert witnesses, and denied the insurer's motion to dismiss all claims raised under the state's unfair claims settlement act. Gerstman v. Crestbrook Ins. Co., 2025 U.S. Dist. LEXIS 108705 (N.D. Tex. June 9, 2025).

    The insureds' property suffered damage when, during a hail and wind storm, a tree branch fell onto the property. The insureds made a claim with their insurer, Crestbrook Insurance Company. Crestbrook inspected the property and estimated damages totalling $6,061.68. Because the sum was less than the $25,000 deductible, Crestbrook did not make a payment.

    The insureds hired a public adjuster who estimated repair costs totalling $137,545.19, including a full replacement of the roof. Crestbrook then reinspected and increased the damage estimate to $10,093.45, which was still below the deductible. 

    The insureds sued asserting breach of contract, violations of the Texas unfair claims settlement act, and bad faith. The insureds alleged that the actual amount of damage to the property was misrepresented in order to keep the amount of covered damage below the policy deductible. Crestbrook moved to strike the insureds' two experts, Dr. Neil Hall and Kevin Funsch, and for summary judgment.

    Crestbrook moved to strike Dr. Hall's opinions because they were irrelevant. Dr. Hall's opinion regarding the full replacement of the roof should be excluded because it was unreliable and lacked a clear or verifiable methodology. The court disagreed. Because the insureds had to prove that there was covered damage to the property, Dr. Hall's opinions regarding the cause of the damage were relevant. His opinions would assist the jury to understand the evidence or to determine a fact in issue. The court was also satisfied that the insureds had shown that the opinions at issue were reliable. Crestbrook's motion to strike the opinions and testimony of Dr. Hall was denied.     

    Crestbrook contended that the insureds' second expert had opinions related to the full replacement of the roof which were irrelevant because they would not assist the jury in determining whether Crestbrook underpaid the claim. Crestbrook maintained that Funsch's opinions were unreliable insofar as they relied on Dr. Hall's opinion that the roof may need to be completely replaced if there were not sufficient matching tiles with which to replace the damaged tiles. The court disagreed. Because there remained a genuine issue of fact as to whether Crestbrook was required to pay the cost of replacing the entire roof in the absence of availability of matching tiles, Funsch's estimate regarding the cost of replacing the roof was relevant. Funsch's opinions were also reliable because he included in his damages calculation the cost of replacing the roof based on Dr. Hall's opinion that the entire roof may need to be replaced. 

    Crestbrook next argued it was entitled to summary judgment on the insureds' breach of contract claim because the evidence was insufficient to establish that Crestbrook breached the policy by declining to pay the insureds' claim. Crestbrook contended that the insureds could not prove that their damage exceeded the policy deductible. The policy provided that, in the event of a covered loss to the insured dwelling, Crestbrook would "pay the cost of repair or replacement." The policy also stated that the insureds agreed to "repair or replace the Dwelling with materials of like kind and quality on the Residence Premises." The parties disputed whether replacement tiles that did not match the other tiles on the roof were materials of "like kind and quality." Whether this phrase required that the roof tiles be uniform in colour was a genuine dispute and prevented Crestbrook's motion for summary judgment dismissing the insureds' breach of contract claim. 

    Crestbrook was granted summary judgment on the bad faith claim because there was a bona fide coverage dispute. Nevertheless, two claims under the Texas unfair claims settlement act survived summary judgment. First, the claim that Crestbrook failed to provide a prompt and reasonable explanation of the basis in the policy for underpayment and denial of the claim survived. Second, the claim that Crestbrook failed within a reasonable time to affirm or deny coverage of a claim was not dismissed on summary judgment.

 

Appraisal Award That Exceeds Insureds' Proof of Loss Upheld

    The insurer's challenge to an appraisal award that was more than the insureds' proof of loss was rejected by the court. Larson, et al. v. Auto-Owners Ins. Co., Iowa Dist. Ct. No. LACV053659 (Iowa Dist. Ct. June 4, 2025). 

    The insureds' home was damaged by hail. The insureds and Auto-Owners disagreed over the loss amount, primarily related to replacement of undamaged siding and the requirement of reasonably uniform appearance. The insureds invoked the policy's appraisal provision. 

    The umpire determined the final appraisal award was $208,194.47. The award was $80,000 higher than the insureds' proof of loss.

    Auto-Owners sought to set aside the umpire's award on the basis of mistake, bias or misfeasance. Auto-Owners alleged the process was unfair and partial, largely due to the umpire's lack of communication and deliberation with either party's appraiser. The umpire merely adopted the insureds' appraisal. 

    Under Iowa law, an appraisal award could not be set aside unless the complaining party showed fraud, mistake or misfeasance on the part of an appraiser or umpire. Here, the umpire received appraisals from each party, scheduled his own appraisal outside the presence of both parties' appraisers, and then agreed with the insureds' appraisal. This was consistent with the policy terms,

    The fact that the umpire's appraisal exceeded the original proof of loss did to invalidate the award. Nor was the lack of communication with the parties' respective appraisers. The allegations by Auto-Owners did not meet the high burden of invalidating the award based on fraud, mistake or misfeasance 

Resulting Loss Claims Denied

    After vandals caused extensive water damage to the insured's building, the claim for resulting loss was rejected by the federal district court. Epperson v. Lexington Ins. Co., 2025 U.S. Dist. LEXIS 102028 (S.D. Ohio May 29, 2025). 

    The insured's borrower defaulted on a loan for purchase of a 78,000 square foot building. The insured obtained a deed to the insured property through foreclosure proceedings. Upon inspection, water was seen pouring out of the building in many places, including through windows. Mold was observed on all three levels of the building.

    The insured held an all-risk policy with Lexington. The policy included a Vandalism Exclusion, barring recovery for losses caused by vandalism unless the vandalism "results in a Covered Cause of Loss," at which point the policy would pay for damage caused by the Covered Cause of Loss.

    Lexington hired an inspector who determined that vandals broke into the insured property and vandalized the property by striking sprinkler heads in the building's fire suppression system. This damage caused the sprinkler heads to activate, ultimately releasing over one million gallons of water from the building's sprinkler system. Lexington denied coverage based upon the Vandalism Exclusion. 

    The insured filed suit alleging breach of contract and bad faith. Both the insured and Lexington filed motions for summary judgment. Neither party disputed that the property had been vandalized, damaging the sprinkler system. The insured relied on the resulting loss exception of the Vandalism Exclusion. The insured maintained he sought coverage of the resulting loss from the vandalism, the water damage caused by the sprinkler leakage, rather than damage caused by the vandalism itself. Lexington argued that the vandalism exception precluded coverage of a loss caused by vandalism, such as the sprinkler leakage and related water damage. An ensuing loss clause did not cover loss caused by an excluded peril but only covered loss caused by a separate and independent covered peril. 

    Lexington pointed to two provisions in the policy that made the sprinkler leakage an uncovered cause of loss: continuous water leakage and mold exclusions. If the sprinkler leakage was not a Covered Cause of Loss, then the resulting-from exception to the Vandalism Exclusion did not apply.

    The insured argued the continuous water leakage exclusion applied to gradual seepage or leakage, which was not the case here. The court, however, was unconvinced that the exclusion only implicated a slow drip caused by an accident. By including the term "leakage," the provision encompassed the escape of water, irrespective of flow rate or total volume. Given the provision's unambiguous language excluding "loss or damage arising out of the continuous or repeated seepage or leakage of water," paired with the body of case law interpreting the exclusion, the court found that the water leakage exception applied to the sprinkler leakage here. 

    The mold exclusion precluded damage caused by "Fungus, Wet Rot, Dry Rot, and Bacteria," which included mold and mildew, unless the loss resulted in a "specified cause of loss," in which case the policy would cover up to $15,000. A specified clause of loss included leakage from fire-extinguishing equipment. But the policy did not include vandalism from the list of Specified Causes of Loss. Therefore, Lexington contended the loss caused by mold, which itself was not caused by a specified cause of loss, was not a Covered Cause of Loss. Just as with the water leakage exclusion, the mold exclusion also barred coverage. No covered cause of loss caused the damage that resulted from the vandalism and the denial of the claim was rooted in the Vandalism Exception. 

    The court also found that Lexington was entitled to summary judgment in the insured's claim for bad faith.

 

Insurer's Attempt to Challenge Appraisal Award Rejected

    The insurer's challenge to an appraisal award was rejected by the federal district court. Bogaerts v. State Farm Fire and Cas. Co., 2025 U.S. Dist. LEXIS 102170 (E.D. Mich. May 29, 2025). 

    The plaintiffs' home was destroyed by fire. State Farm was notified of the loss and after an inspection, made a payment in excess of $650,000 to plaintiffs. Plaintiffs hired a public adjuster who estimated the claim for damages in excess of $1,100,000. The claim included covered line items for backfill/grading, a front paver walkway, and architectural fees. An appraisal was demanded by plaintiffs. State Farm agreed to appraise losses under the Dwelling, Other Structures, and Trees, Shrubs, and Landscaping provisions. Both sides selected appraisers. 

    The appraisers agreed on the scope and amount of the loss and issued a lumps award for the replacement cost value and the actual cash value of the appraised damages. After both appraisers signed the award, State Farm sent a letter notifying plaintiffs that it was refusing to pay the award in its entirety. State Farm claimed, first, that the award for damages for removal and replacement of backfill/grading was not covered under the Dwelling provision of the policy although State Farm agreed to pay to excavate the dirt/land and for backfill so that the new foundation could be installed. Second, State Farm claimed that plaintiffs must prove why architectural fees were necessary since blueprints for the home already existed. 

    Plaintiff sued to compel payment of the remaining amount owed under the appraisal award - $136,321.21. 

    The court agreed the appraisal award was valid and plaintiffs were entitled to payment,. State Farm admitted coverage both for the event generally and for the Dwelling, Other Structures, Debris Removal, Trees, Shrubs, and Landscaping. Once an insurer admitted that a loss was covered under its policy, the court was statutorily mandated under Michigan law to order the parties to participate in the appraisal process, as the parties did not dispute liability and only disagreed about the amount of the loss. 

    State Farm attempted to obfuscate the issue and avoid payment of the award by reframing the disagreement as a coverage dispute. But State Farm had already admitted that the damages at issue were generally covered by the policy, so this was not a coverage dispute. The parties only disagreed on the amount of loss. The appraisal award set the amount of loss. State Farm could not now challenge the loss amount by requiring plaintiffs to prove that the appraised value did not include non-covered damages. While State Farm argued plaintiffs must prove that the appraisers did not make a mistake in their computation of damages, State Farm had the burden of demonstrating a manifest mistake. 

    The appraisal award was affirmed and State Farm was ordered to pay the outstanding balance. 

No Duty to Defend or Indemnify Parties Not Named as Insured or Additional Insured

    The appellate court reversed the lower court's denial of the insurer's motion to dismiss a claim pursued by non-insured parties. Nino & Nino Corp. v. Utica First Insurance Co., 2025 N.Y. App. Div. LEXIS 3226 (N.Y. App. Div. May 28, 2025). 

    Granville Wiltshire (decedent) was an employee of Door Restaurant Corporation who died after sustaining injuries in an accident while working at the restaurant. Door Restaurant rented the premises from Daniel Nino. The administrator of the decedent's estate sued Nino and Nino Corporation to recover damages for personal injuries and wrongful death.

    Five months after the accident, Nino transferred ownership of the premises to Nino Corporation. Nino died thereafter. 

    Door Restaurant had a business owners' policy with Utica First Insurance Company. The policy had an endorsement designating "Daniel Nino, c/o Community Realty Corp." and "Firtsultus Ins. c/o Daniel Nino" as additional insureds. 

    Nino Corporation and its insurer, Seneca Insurance Company, sued Utica, seeking a judgment declaring that the corporation was an additional insured under the Utica policy and that Utica had a duty to defend and indemnify the corporation in the underlying action. Utica moved to dismiss the complaint and for a judgment declaring that it had no obligation to defend or indemnify the corporation in the underlying action. The plaintiffs cross-moved for summary judgment seeking a declaration that Utica had a duty to defend and indemnify the corporation in the underling action. The lower court denied the motion to dismiss and the cross-motion. 

    The appellate court noted that a party was not entitled to coverage if it was not named as an insured or additional insured on the face of the policy. Through its submission of the Utica policy, Utica conclusively established that the corporation was not a named insured or an additional insured under the policy. Therefore, Utica had no duty to defend or indemnify the corporation in the underlying action. 

    

Broker's Liability for Inadequate Coverage Raises Issues of Fact

    The lower court's denial of cross-motions for summary judgment concerning the broker's liability for allegedly procuring inadequate coverage was affirmed. Marcellus Energy Servs. LLC v. Tompkins Ins. Agencies, Inc, 2025 N.Y. App. Div. LEXIS 3032 (N.Y. App. Div. May 15, 2025).

    Plaintiff Marcellus Energy Services LLC supplied truck drivers to operate vehicles owned or leased by Schlumberger Technology Corporation, a multistate oil and gas drilling business. In 2014, plaintiff procured a policy from defendant Tompkins Insurance Agencies, Inc. for their business.

    In 2019, one of plaintiff's employees caused serious physical damage to a Schlumberger vehicle. Coverage was denied and plaintiff paid for the damages out of pocket. Plaintiff then sued , alleging that defendant was negligent in advising plaintiff with respect to the availability of insurance coverage for Schlumberger's vehicles that were operated by plaintiff's employees. Cross motions for summary judgment were both denied by the Supreme Court. Cross-appeals were filed.

    The appellate court noted that an insurance agent had a common-law duty to provide requested coverage within a reasonable time. The agent could be held liable for negligence or breach of contract when a client established that a specific request was made for coverage that was not provided in the policy. Even in the absence of a specific request, an insurance broker could be liable for failing to advise or direct the client to obtain additional coverage where a special relationship had developed between the broker and the client. 

    Gloria Tubbs, plaintiff's owner, testified at her deposition that she explained the nature of her business to defendant's agent, Eric Toftegaard, and that she was seeking coverage that would extend to Schlumberger's vehicles when operated by plaintiff's employees. Tubbs testified that Toftegaard did not advise her that she did not have coverage for hired drivers until 2015, when one of plaintiff's drivers caused physical damage to a Schlumberger vehicle. Plaintiff ended up paying for the damage out of pocket 

    In 2019, another accident occurred in a Schlumberger vehicle operated by one of plaintiff's employees caused significant damage. A Schlumberger representative subsequently informed Tubbs that plaintiff needed to get physical damage coverage for Schlumberger's vehicles or risk losing the business. Even though Toftegard said no insurer provided coverage for driving another company's vehicles, other companies that provided the same services for Schlumberger as plaintiff were able to procure the necessary coverage. 

    At his deposition, Toftegaard said he advised Tubbs that hired driver coverage for the Schlumberger business arrangement was possible, but that defendant could not procure it for plaintiff. 

    The question of whether negligence of an insurance agent or broker proximately caused a client's losses was generally resolved by the fact-finder. Here, the court found there were issues of material fact precluding summary judgment. The Supreme Court properly determined that the resolution of liability with respect to the existence of a special relationship was dependent on credibility determinations and, accordingly, denied the parties' respective motion for summary judgment. 

Motion to Strike Insureds' Experts Denied, Claims under Fair Claims Settlement Act Survives Summary Judgment

    The court denied the insurer's motion to strike the insureds' expert witnesses, and denied the insurer's motion to dismiss claims under the Texas fair claims settlement act. Gerstman v. Crestbrook Ins. Co., 2025 U.S. Dist. LEXIS 108705 (N.D. Tex. Jun 9, 2025). 

    The insureds' property suffered damage when, during a hail and wind storm, a tree branch fell onto the property. The insureds made a claim with their insurer, Crestbrook Insurance Company. Crestbrook inspected the property and estimated damages totalling $6,061.68. Because the sum was less that the $25,000 deductible, Crestbrook did not make a payment. 

    The insureds hired a public adjuster who estimated repair costs totalling $137,545.19, including a full replacement of the roof. Crestbrook then reinspected and increased the damage estimate of $10,093.45, which was still below the deductible. 

    The insureds sued, asserting breach of contract, violations of the Texas claims settlement act, and bad faith. The insureds alleged that the actual amount of damage to the property was misrepresented in order to keep the amount of covered damage below the policy deductible. Crestbrook moved to strike the insureds' two experts, Dr. Neil Hall and Kevin Funsch, and for summary judgment.  

    Crestbrook moved to strike Dr. Hall's opinions because they were irrelevant, and his opinion regarding the full replacement of the roof should be excluded because it was unreliable and lacked a clear or verifiable methodology. Because the insureds had to prove that there was covered damage to the property, Dr. Hall's opinions regarding the cause of the damage were relevant and his opinions would assist the jury to understand the evidence or to determine a fact in issue. The court was also satisfied that the insureds had shown that the opinions at issue were reliable. Crestbrook's motion to strike the opinions and testimony of Dr. Hall was denied.

    Crestbrook contended that the insureds' second expert had opinions related to the full replacement of the roof which were irrelevant because they would not assist the jury in determining whether Crestbrook underpaid the claim. Crestbrook maintained that Funsch's opinions were unreliable insofar as they relied on Dr. Hall's opinion that the roof may need to be completely replaced if there were not sufficient matching tiles with which to replace the damaged tiles. The court disagreed. Because there remained a genuine issue of fact as to whether Crestbrook was required to pay the cost of replacing the entire roof in the absence of availabiity of matching tiles, Funsch's estimate regarding the cost of replacing the roof was relevant. Funsch's opinions were also reliable because he included in his damages calculation the cost of replacing the roof based on Dr. Halls' opinion that the entire roof may need to be replaced.

    Crestbrook argued it was entitled to summary judgment on the insureds' breach of contract claim because their evidence was insufficient to establish that Crestbrook beached the policy by declining to pay the insureds' claim. Crestbrook contended that the insureds could not prove that their damage exceeded the policy deductible. The policy provided that, in the event of a covered loss to the insured dwelling, Crestbrook would "pay the cost of repair or replacement." The policy also stated that the insureds agreed to "repair or replace the Dwelling with materials of like kind and quality on the Residence Premises." The parties disputed whether replacement tiles that did not match the other tiles on the roof were materials of "like kind and quality." Whether this phrased required that the roof tiles be uniform in color was a genuine dispute and prevented Crestbrook's motion for summary judgment dismissing the insureds' breach of contract claim. 

    The court granted Crestbrook's motion for summary judgment on the insureds' bad faith claim, but denied summary judgment on two of the claims under the Texas fair claims settlement act. Crestbrook was not entitled to summary judgment on that claim that it failed to provide a prompt and reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for underpayment and denial of the claim. Further, Crestbrook was not entitled to summary judgment on the claim that it failed to affirm or deny coverage of the claim within a reasonable time.

Illinois Appellate Court Holds Causation Can be Addressed in Appraisal Process

    The Illinois Appellate Court held that issues of causation can be part of an appraisal process. Xaing Zhoa v. State Farm Fire & Cas., Co., 2025 Ill App. LEXIS 903 (Ill. App. Ct. May 12, 2025).

    The insured had a homeowners policy with State Farm. A hailstorm damaged the insured's home. State Farm investigated and paid $12,677.94 as an actual value payment. The payment included replacement of gutters, downspouts, and aluminum wraps on certain window frames and trim.

    The insured felt more was owed and received a second estimate from Encompass Builders who determined that the hail damage was extensive enough to require the replacement of all of the windows in the dwelling, at an estimated cost of $133,817.82. The second estimate also claimed that the scope of the work was extensive enough to require a general contractor and to trigger the inclusion of both overhead and profit in the estimate.

    The insured invoked her right to an appraisal pursuant to the policy. She identified the dispute as "the scope of the damages and the damage repairs" needed to restore the windows of the dwelling. She listed her appraiser and asked State Farm to have its appraiser contact the insured's appraiser to select an umpire and schedule the appraisal.

    State Farm refused to appoint an appraiser, stating that it viewed the differences in estimates to be based on a dispute over policy coverage, not the amount of loss. 

    The insured filed suit seeking a declaratory judgment that would compel the parties to proceed with appraisal under the terms of the policy. State Farm's answer claimed that any damage to the windows was caused by conditions not covered by the policy, such as natural wear and tear, improper installation, and age-related mechanical breakdown. As such, there was no accidental direct physical loss to the windows that would warrant full replacement under the terms of the policy. 

    The trail court granted judgment on the pleadings to the insured. The court held that State Farm had acknowledged the existence of a covered loss when it prepared an estimate and paid the insured. This meant that the dispute was one involving the "amount of loss," not the scope of coverage. 

    The appellate court affirmed. Coverage issues included the determination of who was insured, the type of risk insured against, and whether the policy existed. There was little doubt that the windows of the home were "covered" under the policy. There was a dispute as to whether or not the windows were damaged by the storm but that was not the same as a dispute as to whether the windows were covered by the policy at all. It was an issue of loss and appraisal was ideally suited to resolve disputes over loss.

    The trial court could compel compliance with the appraisal clause of the policy to resolve disputes relating to the "amount of loss." While questions of law and coverage were decided by the court, resolving some questions of causation were necessarily included in the appraisal process. The trail court correctly granted the insured's motion for judgment on the pleadings and correctly compelled appraisal. 

 

Virginia Court of Appeals Finds Appraisal Award Not Reviewable under Arbitration Statute

    The Virginia Court of Appeals affirmed the trial court's conclusion that an appraisal award was not an arbitration award reviewable under the arbitration statute. Church Mutual Ins. Co., S.K. v. Ephesus Richmond Seventh-Day Adventist Church, 2025  Va. App. LEXIS 214 (Va. Ct. App. April 8, 2025).

    Ephesus held a property insurance policy with Church Mutual. In 2021, Ephesus filed a claim alleging that wind and hail had damaged the church building, Church Mutual's inspector concluded that damage to the flat portion of the roof and the church interior resulted from ordinary "weathering" and "footfalls" and that only the sloped portion of the roof and the gutters sustained storm damage. Church Mutual denied most of the claim and issued a check for $59,084.05.

    Ephesus challenged the amount paid and demanded an appraisal. The appraiser selected by Church Mutual estimated the net replacement cost value, less depreciation and other deductions, at $68,148.78. The appraiser selected by Ephesus provided a much greater estimated net replacement cost value, less depreciation, of $1,692,642.89. The umpire concurred with the higher valuation of almost $1.7 million. He and the appraiser for Ephesus endorsed an appraisal award reflecting that valuation.

    Church Mutual asked the trial court to "modify or correct the appraisal award." Ephesus filed a demurrer arguing that the appraisal award was not an arbitration award subject to review under the arbitration statute. It argued the trial court did not have subject matter jurisdiction under the statute, The trial court ruled that the policy, drafted by Church Mutual, provided for an appraisal, not arbitration. The statute permitted modification of arbitration awards exclusively, with no reference to appraisals. The court found that it lacked jurisdiction, denied Church Mutual's application to modify or correct the appraisal award, and dismissed the matter with prejudice. 

    On appeal, the court noted that the language of the contract generally determined whether a particular dispute is arbitrable, In the event of a dispute over the application of arbitration language in a contract, the court had to construe it to determine whether a particular question was one that the parties agreed to submit to arbitration. Without an agreement to arbitrate a particular point, a party could not be subject to the arbitration process.'The burden of proving an agreement to arbitrate rested on the party seeking to us e this method to resolve the dispute, here the insurer, Church Mutual.

    The policy failed to reflect an intention to classify the appraisal process followed in this case as a form of arbitration. The policy included express references to the arbitration of disputes between the insurer and the insured in a provision other than the one setting out the appraisal process. For example, the policy expressly provided for arbitration when the insurer and the insured could not reach agreement on payment of defense costs. The word "arbitration," by contrast, did not appear in the contract provision covering appraisal awards, the specific provision that formed the basis of this suit,

    Church Mutual, therefore, did not met its burden of proving that the appraisal award qualified as an arbitration award under the statute. The trial court correctly ruled it lacked jurisdiction to review the award under the statute pleaded.

Negligence Claims against Insurance Agent Fail

    The insureds' suit against their agent for procuring an inadequate policy was dismissed with leave to amend. Pennington v. United States Assure Ins. Servs. of Fla, Inc., et al., 2025 U.S. Dist. LEXIS 82529 (N.D. Calif. April 30, 2025).

    Plaintiffs Thomas and Kelli Pennington sued defendants US Assure Insurance Services of Florida, Inc, (US Assure) and John M. Brown Insurance Agency, Inc. (Brown) for procuring an incorrect policy. US Assure and Brown were insurance brokers.

    Plaintiffs alleged they sought to remodel their home. They requested a quote for a "Builder's Risk Policy" from Brown by filling out a form on Brown's website. The form included an option to select "Remodel" as the project type, which plaintiffs selected. Plaintiffs then received a proposal from Brown for a "Builders Risk and Installation" policy, presented by US Assure and delivered to plaintiffs by Brown. Plaintiffs believed that the proposed policy was the policy that they had requested on Brown's website. Plaintiffs signed the proposal and the policy was issued by Zurich American Insurance Company. 

    After plaintiffs began their remodeling project, fire damaged the property's garage. Plaintiffs filed a claim with Zurich, but learned that the policy was for covering new construction, not a remodeling project. As a result, Zurich denied the claim and cancelled the policy. Brown then sent a policy cancellation notice to plaintiffs which explained the cancellation was due to plaintiffs having a remodeling project and the policy was issued incorrectly as new construction. Plaintiffs were left uninsured.

    Plaintiffs sued US Assure and Brown for negligent failure to obtain insurance coverage and negligent misrepresentation. US Assure moved to dismiss. 

    California recognized the general rule that an agent or broker who intentionally or negligently fails to procure insurance as requested by a client is liable to the client in tort for the resulting damages. An insurance agent had an obligation to use reasonable care, diligence, and judgment in procuring insurance requested by the insured. Here, plaintiffs' pleadings did not support a reasonable inference that US Assure had a duty to plaintiffs to procure remodeling insurance as opposed to new construction insurance. The complaint only alleged that US Assure was licensed to do business in California and that US Assure "presented" the policy that was ultimately delivered to plaintiffs by Brown. Such bare allegations were not enough to meet the pleading standards under Fed. R. Civ  Proc. 12 (b) (6). US Assure's motion to dismiss the negligence claim was granted with leave to amend.

    Plaintiffs also failed to state a claim against US Assure for negligent misrepresentation. Again, the only factual allegations against US Assure were that US Assure was licensed to do business in California, and that US Assure "presented" the policy. It was not clear what false representation US Assure made or why US Assure would lack reasonable grounds for believing those representations to be true. There were no allegations that US Assure made any false representation as to what the policy would cover. Therefore, US Assure's motion to dismiss this claim was granted with leave to amend,