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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The Professional Claims Handler
Post 5218
Read the full article at https://www.linkedin.com/pulse/zalma-philosophy-claims-handling-part-8-barry-zalma-esq-cfe-zdwsc, see the full video at https://rumble.com/v70zl4s-the-zalma-philosophy-of-claims-handling-part-8.html and at https://youtu.be/MIYcF71ffRQ, and at https://zalma.com/blog plus more than 5200 posts.
Claims Commandment X – Thou Shall Not Pretend to be a Lawyer
Some experienced and professional claims people know the law in their area of expertise better than most lawyers.
Adjusters should be adjusters and leave lawyering to lawyers. Similarly, lawyers should be lawyers and never try to be adjusters.
Claims Commandment XI – Thou Shall Empathize With the Claimant
Everyone presenting a claim is unhappy, disturbed, shocked, injured and needs help.
Empathy is identification with and understanding of another’s situation, feelings, and motives. It is the ability to understand another person’s circumstances, point of view, thoughts, and feelings....
HOW TO CREATE AN EXCELLENCE IN CLAIMS HANDLING PROGRAM
See the full video at https://rumble.com/v70wb2i-the-zalma-philosophy-of-claims-handling-part-6.html and at https://youtu.be/tL5nDKPEs40 and at https://zalma.com/blog plus more than 5200 posts.
Post 5217
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.
An Excellence in Claims Handling program begins with a statement in the insurer’s claims manual or statement of professionalism that it is dedicated to providing excellence in claims handling to every insured who presents a claim.
The excellence in claims handling program should include, at a minimum:
A series of lectures supported by text materials explaining:
A definition of insurance.
How to read and understand an insurance policy.
How to interview an insured, witness, or claimant.
How to assist an insured in the insured’s obligation to ...
The Professional Claims Handler
Post 5216
Read the full article at https://www.linkedin.com/pulse/zalma-philosophy-claims-handling-part-5-barry-zalma-esq-cfe-jde8c, see the full video at https://rumble.com/v70q4x8-the-zalma-philosophy-of-claims-handling-part-5.html and at https://youtu.be/6b9tZQsEkB4, and at https://zalma.com/blog plus more than 5200 posts.
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.
Standards to be a Professional Claims Adjuster
The Insurance claims professional should be a person who:
1. Can read and understand the insurance policies issued by the insurer.
2. Understands the promises made by the policy.
3. Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
4. Are competent investigators.
5. Have empathy and recognize the difference between empathy and sympathy.
6. ...
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.
How to Create Claims Professionals
To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
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 ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
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 ...
