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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See the full video at https://lnkd.in/gWQQEySW and at https://lnkd.in/gyhdK6wv
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Post 5396
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Post 5421
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Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.
DISCUSSION/ANALYSIS:
As a result, the...
