Insurance Agent Has No Obligation to Investigate an Insured’s Coverage Needs
Post 4987
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Plaintiff Liza Sims’ mother owned a house in Magalia, California, that was insured under a policy issued to her by Farmers Insurance. Before the Camp Fire, Sims lived alone in her mother’s house and operated a cosmetic tattoo business there. After the house was destroyed by a wildfire called the Camp Fire in 2018. The insurance company paid Sims’ mother the limits available under her policy but denied Sims’ claim for the loss of her personal and business property. Sims sued Farmers Group, Inc. (Farmers) and insurance agent Dawn Foster (Foster or agent) (collectively, defendants) for negligent misrepresentation and professional negligence.
In Liza Sims v. Farmers Group, Inc., et al., C097755, California Court of Appeals (January 24, 2025) Plaintiff attempted to get coverage for the destruction of business property from a homeowners policy the excluded such coverage.
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not establish causation because Foster’s alleged misrepresentations pertained to a different insurance policy that was no longer in effect at the time of the Camp Fire.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.
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Concurrent Cause Doctrine Does Not Apply When all Causes are Excluded
Post 5119
Death by Drug Overdose is Excluded
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Southern Insurance Company Of Virginia v. Justin D. Mitchell, et al., No. 3:24-cv-00198, United States District Court, M.D. Tennessee, Nashville Division (October 10, 2024) Southern Insurance Company of Virginia sought a declaratory judgment regarding its duty to defend William Mitchell in a wrongful death case pending in California state court.
KEY POINTS
1. Motion for Judgment on the Pleadings: The Plaintiff moved for judgment on the pleadings, which was granted in part and denied in part.
2. Duty to Defend: The court found that the Plaintiff has no duty to defend William Mitchell in the California case due to a specific exclusion in the insurance policy.
3. Duty to Indemnify: The court could not determine at this stage whether the Plaintiff had a duty to ...
GEICO Sued Fraudulent Health Care Providers Under RICO and Settled with the Defendants Who Failed to Pay Settlement
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Post 5119
Default of Settlement Agreement Reduced to Judgment
In Government Employees Insurance Company, Geico Indemnity Company, Geico General Insurance Company, and Geico Casualty Company v. Dominic Emeka Onyema, M.D., DEO Medical Services, P.C., and Healthwise Medical Associates, P.C., No. 24-CV-5287 (PKC) (JAM), United States District Court, E.D. New York (July 9, 2025)
Plaintiffs Government Employees Insurance Company and other GEICO companies (“GEICO”) sued Defendants Dominic Emeka Onyema, M.D. (“Onyema”), et al (collectively, “Defendants”) alleging breach of a settlement agreement entered into by the parties to resolve a previous, fraud-related lawsuit (the “Settlement Agreement”). GEICO moved the court for default judgment against ...
ZIFL – Volume 29, Issue 14
Post 5118
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You can read the full 20 page issue of the July 15, 2025 issue at https://lnkd.in/giaSdH29
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
This issue contains the following articles about insurance fraud:
The Historical Basis of Punitive Damages
It is axiomatic that when a claim is denied for fraud that the fraudster will sue for breach of contract and the tort of bad faith and seek punitive damages.
The award of punitive-type damages was common in early legal systems and was mentioned in religious law as early as the Book of Exodus. Punitive-type damages were provided for in Babylonian law nearly 4000 years ago in the Code of Hammurabi.
You can read this article and the full 20 page issue of the July 15, 2025 issue at https://zalma.com/blog/wp-content/uploads/2025/07/ZIFL-07-15-2025.pdf
Insurer Refuses to Submit to No Fault Insurance Fraud
...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
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/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
