Isken v. Rick Galster III Ins. Agency, Inc.
| Decision Date | 03 November 2022 |
| Docket Number | C.A. No.: N22C-04-170 FJJ |
| Citation | 285 A.3d 158 |
| Parties | Donald ISKEN, Plaintiff, v. RICK GALSTER III INSURANCE AGENCY, INC., Defendant. |
| Court | Delaware Superior Court |
Sean O'Kelly, Esquire, O'Kelly & O'Rourke, 824 North Market Street, Suite 1001A, Wilmington, Delaware 19801.
Loren Barron, Esquire, Margolis Edelstein, 300 Delaware Avenue, Suite 800, Wilmington, Delaware 19801.
The Plaintiff, Donald Isken ("Mr. Isken"), has filed suit against Rick Galster III Insurance Agency, Inc. ("Galster Insurance") seeking monetary damages for negligence, fraudulent inducement, and fraudulent misrepresentation. Galster Insurance has moved to dismiss the complaint because: (1) Mr. Isken did not allege Galster Insurance owed him a fiduciary duty; (2) Mr. Isken did not plead fraud with particularity; and (3) Mr. Isken relied on representations outside the four corners of the contract.
For the reasons that follow, Galster Insurance's motion to dismiss must be DENIED .
Galster Insurance is a Virginia stock corporation that maintains a place of business in Wilmington, Delaware.1 A third-party broker agency, Galster Insurance sells, solicits, and negotiates insurance on behalf of its clients in exchange for compensation.
Mr. Isken is a Delaware resident who owns property located at 913 Stuart Road in Wilmington, Delaware (the "Insured Premises").2
Nationwide Insurance Company covered the Insured Premises via a homeowner insurance policy ("the Nationwide Policy") until September 2018, when Nationwide elected not to renew the policy.3 In search of a replacement policy, Mr. Isken contacted Galster Insurance and instructed its agent broker, Rick Galster III ("Mr. Galster"), to obtain new coverage for the Insured Premises on equivalent terms as the Nationwide Policy.4 Galster Insurance secured a replacement policy ("the Replacement Policy") through Scottsdale Insurance Company, which became effective on September 19, 2018.5
Nearly two years later, in August 2020, two storms hit the Insured Premises.6 Consequently, the Insured Premises sustained loss of electricity for several days.7 Without electricity, the Insured Premise's sump pump failed and one foot of water flooded into two fully furnished living spaces in the lower-level living area.8 All told, the cost of restoring the damaged areas to their previous condition exceeded $100,000.9
When Mr. Isken informed Galster Insurance of the damage, Mr. Galster advised Mr. Isken to immediately file a claim under the Replacement Policy.10 Mr. Isken did so.11 However, through his conversations with the in-house claims adjuster for Scottsdale Insurance Company, Mr. Isken learned the Replacement Policy only provided $5,000 worth of coverage for water damage, instead of the $50,000 he instructed Galster Insurance to obtain.12
Mr. Isken subsequently requested, and received for the first time, a copy of the Replacement Policy.13 After reviewing it, Mr. Isken filed the instant suit against Galster Insurance.14 Galster Insurance now moves to dismiss the complaint.
On a motion to dismiss, the Court must determine whether the "plaintiff ‘may recover under any reasonably conceivable set of circumstances susceptible of proof.’ "15 If the plaintiff may recover, then the motion must be denied.16 This Court may grant the motion if "it appears to a reasonable certainty that under no state of facts which could be proved to support the claim asserted would plaintiff be entitled to relief."17 When applying this standard, the Court will accept as true all nonconclusory, well-pled allegations18 and must draw all reasonable factual inferences in favor of the non-moving party.19
Further, to state a viable claim for fraud under Superior Court Civil Rule 9(b),20 the plaintiff must well-plead:21
(i) a false representation, usually one of fact, made by a defendant; (ii) defendant knew or believed the representation was false, or made it with reckless indifference to the truth; (iii) an intent to induce the plaintiff to act or refrain from acting; (iv) the plaintiff acted or refrained from acting in justifiable reliance on the representation; and (v) damage resulting from such reliance.22
Galster Insurance first argues that Mr. Isken's professional negligence claim must fail because Mr. Isken did not plead and prove Mr. Galster owed him a fiduciary duty. To support this proposition, Galster Insurance turns to this Court's recent decision in Fansler v. North American Title Insurance Company .23
The Fansler Court granted dismissal in a professional negligence claim after it determined the plaintiff failed to establish a fiduciary duty existed between the parties.24 Fansler , however, does not require insured plaintiffs to well-plead the existence of a fiduciary duty in every negligence claim brought against insurance agents.25
This Court first explored the relationship between insured and agent in Sinex v. Wallis .26 The Sinex plaintiff brought suit against a defendant and the defendant's employer. In response, the defendant filed third-party complaints against its insurance agent and agency, claiming both negligently failed to obtain more than the minimum no-fault insurance coverage. Granting summary judgment for the defendant, Sinex outlined the duties between the two parties:
Ordinarily, an insurance agent assumes only those duties normally found in an agency relationship. This includes the obligation to use reasonable care, diligence, and judgment in procuring the insurance requested by the insured. The agent assumed no duty to advise the insured on the specific insurance matters merely because of the agency relationship. On the other hand, an expanded agency or relationship creating a greater duty of the agent to the insured may arise when an agent holds himself or herself out as an insurance counselor or specialist and is receiving compensation apart from the premium(s) paid.27
The Sinex Court next addressed plaintiff's argument that the defendant agent violated the ordinary duty of reasonable care, diligence, and judgment. In support of its position, the Sinex plaintiff directed the Court's attention to a line of cases from other jurisdictions. Those cases held an insurance agent breached his duty to the insured when the agent failed to follow explicit instructions regarding the type (or amount) of coverage required. The Court, however, declined to address whether Delaware recognizes such a cause of action. Instead, Sinex rejected the plaintiff's argument as a matter of fact, finding the plaintiff never provided the defendant agent with specific instructions in the first place.
Fourteen years after Sinex , this Court again confronted the issue of insurance agent liability in Montgomery v. William Moore Agency .28 Denying summary judgment, the Montgomery Court set out its view of the law:
The court holds that an insurance agent must offer coverage in the way that a reasonably competent agent would under the circumstances. And, generally, an insurance agent has no duty to advise a client. This general rule, however, turns largely on the relationship between the agent and the client and will not apply if: 1) the agent voluntarily assumes the responsibility for selecting the appropriate policy for the insured or 2) the insured makes an ambiguous request for coverage that requires clarification.29
Montgomery , in short, recognized a fiduciary relationship is not a required element in every negligence case between an insured and an agent.
Finally, this Court most recently addressed the duties between insured and agent in Slaubaugh Farm, Inc. v. Farm Family Ins. Co .30 In Slaubaugh , two plaintiff farmers instructed their long-time insurance agent to obtain new homeowner's insurance with coverage for snow and ice. When the policy was issued, however, the issuing insurance company failed to include the snow and ice coverage. The plaintiffs brought this deficiency to the attention of the agent.
The agent, in turn, requested the insurance company to issue a revised policy with all demanded coverage. In response, the insurance company acknowledged the request but failed to take further action. The plaintiffs subsequently filed suit against insurance company and agent after a blizzard caused extensive damage to a chicken house on the property. Concluding a genuine issue of fact existed as to whether the agent breached his duty, the Slaubaugh Court held:
An insurance agent assumes only those duties normally found in an agency relationship. This duty includes the obligation to use reasonable care, diligence, and judgment in procuring the insurance requested by the insured. An insurance agent most offer coverage in the way that a reasonably competent agent would under the circumstances. Generally, an insurance agent does not have a duty to advise a client with respect to appropriate insurance coverage. This general rule, however, does not apply if the agent voluntarily assumes the responsibility for selecting the appropriate coverage or if the insured makes an ambiguous request for coverage that requires clarification.31
Slaubaugh then turned to the alleged failure of the agent to follow up with the request for revised coverage. To that point, the Court found "[i]t is ... well-settled law that an agent has the obligation to use reasonable care, diligence, and judgment in processing the insurance requested by the insured."32
Slaubaugh makes clear that an agent carries the affirmative duty to seek clarification when a request for insurance coverage is ambiguous. If a duty is charged in this context, then surely it must be imposed when an agent fails to follow the explicit instructions of the insured.33 Thus, to the extent there is any doubt in Delaware jurisprudence, this Court will not require a plaintiff to plead the existence of a fiduciary relationship if an agent allegedly...
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