No Duty of Care Exists in Arms-Length Negotiations Between Insurer and Insured
Post 5011
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Failure to Read Insurance Quote Carefully Can Cause the Failure of Negotiation and an Expensive Failure of Intent to Insure
The Plaintiff, Association operates a “planned community” in Eden Prairie, Minnesota. Defendant Burns & Wilcox, Ltd. (“B&W”) helps its clients secure specialized insurance, and Defendant Commercial Industrial Building Owner’s Alliance, Inc. (“CIBA”) sells insurance policies. The Association requested a quote for property insurance from Burns & Wilcox, Ltd. (B&W), which obtained a quote from CIBA with a wind/hail deductible of “$50,000 per location per occurrence”. The issued policy contained what the Association claimed was a different deductible, leading to a significant financial impact on the Association when their property suffered damage from wind and hail.
In Lodges at Oakparke Estates Homeowner’s Ass’n, Inc. v. Burns & Wilcox, Ltd., et al., No. 24-cv-1682 (ECT/SGE), United States District Court, D. Minnesota (March 5, 2025) resolved the dispute.
BACKGROUND
The Association requested a quote for property insurance from Burns & Wilcox, Ltd. (B&W), which obtained a quote from CIBA with a wind/hail deductible of a minimum of “$50,000 per location per occurrence”.
The Association sued for negligence and breach of fiduciary duty against B&W and sought reformation of the insurance policy as an equitable remedy. The Association filed a motion to amend its Complaint to add claims of unjust enrichment and negligence against CIBA.
The Association instructed B&W to bind coverage with CIBA consistent with the quote. CIBA then issued a policy containing a wind/hail deductible that included a percentage deductible not in the quote. CIBA’s issued policy stated that the deductible would be “FIVE PER CENT (5%) of the total insurable values, subject to a minimum of $50,000 per location per occurrence.” The Association only relied on the per location per occurrence deductible.
After the policy came into effect the Association’s property suffered damage from wind and hail. CIBA’s claims adjusting group determined the replacement cost value was $1,446,736.43.
Under what the Association contended was the quoted policy the Association’s deductible would have been $600,000.00. According to the issued policy, however, the Association must pay the entire repair cost because the adjusted value did not exceed the purported 5% deductible, or approximately $1,546,766.00.
The Association sought reformation of the insurance policy as an equitable remedy. The court granted the motion for the unjust enrichment claim but denied it for the negligence claim, as the Proposed Amended Complaint failed to allege that CIBA owed a duty of care.
ANALYSIS
Although courts should freely give leave to amend pleadings when justice so requires, changing a deadline in the scheduling order after the deadline has passed requires a good cause showing. Because there are no allegations of bad faith, dilatory motive, undue delay, or resulting prejudice, the Court granted the motion as it relates to the Association’s proposed unjust enrichment claim.
The Association and CIBA were two parties to an arm’s length transaction, and Minnesota law does not recognize a duty of care in such situations. The Proposed Amended Complaint did not allege any facts giving rise to a special relationship that imposes a common law duty on CIBA. Because the Association failed to allege facts giving rise to a duty, allowing amendment of the pleadings to add a negligence claim would be futile.
The Motion was DENIED as to Plaintiff’s claim for negligence.
ZALMA OPINION
Purchasing a major insurance policy protecting valuable and extensive property is a difficult task that takes serious consideration by the insured who must read the quotation for insurance carefully. The insurer, CIBA, issued the quote and a policy with two different deductibles which exceed the actual replacement cost that the insured have considered before it agreed to acquire the policy.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
DOJ Creates National Fraud Enforcement Division
Will the Feds Take on Insurance Fraud? Possibly as Part of a National Anti-Fraud Effort
On April 7, 2026, the Acting Attorney General, Todd Blanche, issued a memorandum establishing the Department of Justice National Fraud Enforcement Division (NFED). The memo describes an ambitious, but perhaps redundant, vision for this ...
When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment
Post number 5345
Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
FACTS
American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
Breach of a Specific Condition Precedent Is a Complete Defense
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In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...
