The insured's suit against his broker for securing a policy with insufficient policy limits was dismissed when filed more than two years after the alleged professional negligence occurred. Pritchard v. Andy Houghton Ins. Agency, 2018 Cal. App. Unpub. LEXIS 1160 (Cal. Ct. App. Feb. 20, 2018).
Pritchard requested coverage for replacement of his property in the event of a total loss by fire. He obtained a policy from Houghton.
A wildfire damaged the property and Pritchard received a contractor's bid of $206,521.79 to rebuild the structures that were damaged by the fire. The same day, Pritchard discovered that the policy limits were only $172,800.
Three years after the wildfire, Pritchard filed his original complaint. After Pritchard filed his first amended complaint, a demurrer with leave to amend was granted to Houghton. A demurrer to the second amended complaint was then filed, alleging breach of fiduciary duty and financial elder abuse. Nevertheless, the trial court again granted the demurrer, without leave to amend, agreeing with Houghton that the action was time barred because it had not been filed within two years of the fire. The trial court found that the gravamen of both the breach of fiduciary duty claim and the financial elder abuse claim was professional negligence. Such a claim had to be filed within a two year time frame.
The Court of Appeals affirmed. Pritchard's allegations for breach of fiduciary duty and financial elder abuse amounted to professional negligence, subject to the two-year statute of limitations.
The court noted that the duty of a broker was to use reasonable care, diligence and judgment in procuring the insurance requested by a client. Pritchard's claim was predicated on Houghton's' failure to procure the specific type of coverage he requested, leaving Pritchard to pay the difference upon discovering that his loss arising from the fire destruction would not be fully covered. The claim sounded in negligence and the two year statute of limitations applied. The court also rejected Pritchard's argument that California recognized a fiduciary duty between an insurance broker and the insured.
Regarding financial elder abuse, Pritchard alleged Houghton knew that wrongfully taking Pritchard's money would cause him to suffer harm because he would not have sufficient insurance proceeds to completely rebuild his property. The allegations, however, lacked particularity as to how Houghton defrauded Pritchard of premiums.
That Pritchard did not have adequate coverage may have been a type of damage. But the damage arose from a breach of the limited duty that insurance brokers owed in providing the specified amount of coverage. Such a claim was based upon professional negligence, which required suit to be filed within two years of the incident.
