No Right to Sue Broker Who Does Not Have Special Relationship With Insured
Post 4899
Posted on September 26, 2024 by Barry Zalma
See the full video at https://rumble.com/v5gatm5-when-insurance-agent-controlled-action-of-broker-no-action-against-broker.html and at https://youtu.be/DfMnGZdF-Ek
Plaintiff Green Technology Lighting Corporation (“Green Tech”) appealed the order of the District Court for the District of Idaho granting summary judgment in favor of Defendant Crouse and Associates Insurance Services of Northern California (“Crouse”).
In Green Technology Lighting Corp. v. Crouse And Associates Insurance Services Of Northern California, Inc., a California Corporation, No. 24-66, United States Court of Appeals, Ninth Circuit (September 20, 2024) resolved the dispute over the existence of a special relationship between an insured and its broker.
FACTUAL BACKGROUND
The district court granted summary judgment to Crouse on Green Tech’s claim of negligence and broker malpractice for two independent reasons: First, the court held that Crouse did not owe Green Tech a duty of care, an essential element of negligence claims under Idaho law; and Second, the court determined that Idaho’s economic loss rule bars recovery for any negligence committed by Crouse.
Idaho prohibits the recovery of purely economic losses in all negligence actions.. A purely economic loss is one that is not connected to an injury to a person or property because the economic loss rule limits the actor’s duty so that there is no cause of action in negligence. Summary judgment is only appropriate in cases where the rule applies. Green Tech alleged only economic losses connected to the recall of its products. Unless some exception applies, Green Tech has no cause of action for negligence under Idaho law.
Idaho generally recognize two exceptions to the economic loss rule:
where a special relationship exists between the parties, or
where unique circumstances require a reallocation of the risk.
The district court concluded that neither applied in Green Tech’s case.
ANALISYS
The special relationship exception is extremely narrow and applies in only limited circumstances. Idaho recognizes two situations in which a special relationship has been held to exist:
where a professional or quasi-professional performs personal services; or
where an entity holds itself out to the public as having expertise regarding a specialized function, and by so doing, knowingly induces reliance on its performance of that function.
The Ninth Circuit concluded that neither situation fits the facts of this case. The district court correctly held that, although Crouse was a professional insurance broker, it lacked the “custody or control” over Green Tech’s insurance coverage that would justify recognizing a special relationship giving rise to liability. Crouse did not have ultimate authority over which insurance policies Green Tech obtained rather, it was Insure Idaho-Green Tech’s insurance agent-that instructed Crouse to bind the policy with less coverage. Crouse did not unilaterally control the level of liability coverage that Green Tech would receive.
The Ninth Circuit concluded there was thus no special relationship between Crouse and Green Tech based on the professional services Crouse offered. Nor did a special relationship exist due to Green Tech’s reliance on Crouse’s expertise. This exception requires that an expert have actively sought to induce reliance on the part of the plaintiff.
Where there is no indication in the record that the plaintiffs relied upon or were even aware of the defendant’s provision of its special services, there is no special relationship.
The district court found that Green Tech had no knowledge of Crouse’s existence as it interfaced only with Insure Idaho in seeking to procure insurance for its business. Green Tech failed to raise a genuine factual dispute as to this finding. The economic loss rule thus prohibited Green Tech from recovering for any alleged negligence on Crouse’s part.
Assuming that Crouse owed some duty of care to Green Tech in how it performed its brokering services, the Ninth Circuit agreed with the district court that the economic loss rule is fatal to Green Tech’s negligence suit.
ZALMA OPINION
The economic loss rule prevented a suit against a broker who had no relationship with the insured and only contact with the insured’s agent. Since the broker acted, basically, as an order taker for the insurance agent and provided no advice or counsel to the insured nor hold itself out as a specialist giving advice to the insured, there was insufficient contact with the plaintiff-insured to allow it to maintain a suit because of the economic loss rule since the plaintiff only lost money.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Post 5250
Read the full article at https://lnkd.in/gBzt2vw9, see the video at https://lnkd.in/gEBBE-e6 and at https://lnkd.in/gk7EcVn9, and at https://zalma.com/blog plus more than 5250 posts.
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Post 5249
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The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Zalma’s Insurance Fraud Letter
Read the full article at https://lnkd.in/dG829BF6; see the video at https://lnkd.in/dyCggZMZ and at https://lnkd.in/d6a9QdDd.
ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Zalma’s Insurance Fraud Letter
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The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
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Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
