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04/30/2014

Negligent Misrepresentation Claim Can Be Asserted Against Insurance Adjuster

In Bock v. Hansen, the California Court of Appeal for the First Appellate District held that a negligent misrepresentation claim can be asserted against an insurance adjuster.  The lawsuit arose out of property damage caused by a tree limb that fell onto the home of the insureds, Michael and Lorie Bock.  The Bocks filed a claim with their homeowners’ insurer, Travelers Property and Casualty Insurance Co.  Travelers assigned Craig Hansen to adjust the loss. 

The Bocks sued Travelers and Hansen individually.  As to Hansen, the Bocks asserted causes of action for negligent misrepresentation and intentional infliction of emotional distress.  The charging allegations against Hansen included that Hansen altered the scene before taking pictures, made derogatory remarks to the Bocks, and misrepresented that the policy did not cover the cost of cleanup, causing the Bocks to undertake the cleanup themselves and leading to Mrs. Bock cutting her hand on a piece of glass.  Additionally, Hansen is alleged to have revised an estimate to include a false statement by the Bocks and conspired with an unlicensed contractor to create a false report.  Travelers allegedly declined to assign a different adjuster, despite the Bocks’ request. 

Hansen filed a demurrer as to the Bocks’ claims for negligent misrepresentation and intentional infliction of emotional distress, which the trial court sustained without leave to amend.  But on April 2, the Court of Appeal reversed.

Regarding the negligent misrepresentation claim, the court first rejected Hansen’s argument that employees of insurance companies do not owe a duty to insureds, distinguishing the cases Hansen relied upon as not involving claims for negligent misrepresentation.  The court found that an insured may assert a negligent misrepresentation claim against its insurer when such claim is supported by appropriate facts.  The court recognized that the insurer-insured relationship, though not a true fiduciary relationship, is nonetheless a “special relationship” that encompasses fiduciary-like duties.  Because Hansen was an employee of the insurer that had a special relationship with the insured, Hansen owed a duty to the Bocks.

The court held that California law recognizes a cause of action for negligent misrepresentation in two circumstances.  A negligent misrepresentation claim may lie where “providing false information poses a risk of and results in physical harm to person or property” and “where information is conveyed in a commercial setting for a business purpose.”  The court found both scenarios were present.  Mrs. Bock was allegedly injured as a result of Hansen’s alleged misrepresentation regarding coverage and Hansen’s alleged misrepresentation was conveyed for a business purpose (i.e. to reduce exposure under the at-issue policy).

The court rejected Hansen’s attempt to characterize Mrs. Bock’s alleged injury as minor, finding that “the Bocks have alleged that Mrs. Bock sustained a cut on her hand as a result of cleaning up the glass and debris as instructed by Hansen,” which is actionable.

Next, the court rejected Hansen’s claim that he cannot be liable as an employee of Travelers because he was acting in the course and scope of his employment, finding that an employee is independently liable for his own torts, regardless of the employer’s liability and in spite of the fact he acts in accordance with his employer’s direction.

Having found that a negligent misrepresentation claim can lie against an insurance adjuster, the court then turned to an analysis of whether a negligent misrepresentation was properly pleaded.  The court set forth the elements of a negligent misrepresentation claim as (1) a misrepresentation of a past or existing material fact; (2) made without reasonable ground for believing it to be true; (3) made with the intent to induce another’s reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation; and (5) resulting damage.

The court found the Bocks properly pleaded a claim for negligent misrepresentation because they alleged Hansen falsely told them the policy did not cover the cost of cleanup; Hansen knew the representation was false or made the representation with reckless disregard of its truth; and they relied on Hansen’s false statement to their detriment.

The court also rejected two other arguments advanced by Hansen.  First, the court rejected Hansen’s argument that an insured cannot justifiably rely on an adjuster’s representation about coverage when such representation is contradicted by the express terms of the policy.  The court found that, absent notice or warning to the contrary, an insured should be able to rely on an adjuster’s “representation of coverage without independently verifying the accuracy of those representations.”  Finally, the court rejected Hansen’s argument that the Bocks had notice that the policy provided coverage for cleanup because the first estimate provided by Travelers included an amount for cleanup.  The court found that the Bocks alleged they immediately relied upon and were damaged by Hansen’s representation before the estimate was provided and that, in any event, the Bocks alleged the amount Travelers agreed to pay was inadequate.

Regarding the intentional infliction of emotional distress claim, the court found the trial court abused its discretion in denying the Bocks’ request for leave to amend.  The Bocks contended they could cure the defects as to that claim and the trial court did not properly consider that contention.

Click here for the opinion. 

The opinion in Bock v. Hansen, Opinion No. A136567, is not final.  It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court.  These events would render the opinion unavailable for use as legal authority in California state courts.

This and other case bulletins, as well as other publications of Gordon & Rees, may be found at www.gordonrees.com.

Insurance

Michael A. Pursell



Insurance