Wilson v. All Service Ins. Corp.
| Decision Date | 11 April 1979 |
| Citation | 153 Cal.Rptr. 121,91 Cal.App.3d 793 |
| Court | California Court of Appeals Court of Appeals |
Goodman, Hirschberg & King, King & Seligsohn and David Kamin for Plaintiffs and Appellants. Bolton, Hemer & Dunn and Donald H. Moore for Defendant and Respondent.
Plaintiffs commenced this action for damages allegedly sustained by them as a result of defendant insurance broker's having obtained for them a policy of automobile insurance issued by an insurance carrier which subsequently became insolvent after the occurrence of an accident covered by the policy. Plaintiffs appeal from summary judgment entered in defendant's favor.
The complaint contains five causes of action. The first (negligent placement of insurance) alleges: defendant, All Service Insurance Corporation, is a licensed insurance broker, on July 23, 1974, defendant agreed to obtain a policy of automobile insurance for plaintiffs Willie and Yvonne Wilson; through defendant's efforts Transnational Insurance Company, on August 18, 1974, issued to plaintiffs a policy of automobile insurance which included uninsured motorist coverage ( Ins. Code, § 11580.2); defendant owed plaintiffs the duty to use reasonable care in obtaining insurance from a responsible insurance carrier, which duty included the obligation to investigate the financial stability of the issuing insurance carrier; in selecting Transnational as plaintiffs' insurance carrier, defendant breached its duty to plaintiffs by failing adequately to investigate Transnational's ability to pay claims arising under the policy; had defendant made such an investigation, it would have learned that Transnational “was of questionable financial stability, and had questionable ability to meet any claims which might be made pursuant to the policies of insurance” issued by it.
It further alleged that on September 3, 1974, while the Transnational policy issued to plaintiffs was in effect, Rona, minor child of plaintiffs Willie and Yvonne Wilson, sustained bodily injuries through the negligence of an uninsured motorist; as a result of such accident plaintiffs Willie and Yvonne Wilson suffered severe emotional distress and physical injuries; following the accident plaintiffs presented to Transnational, pursuant to the uninsured motorist coverage afforded by the policy, a claim of $15,000 on behalf of Rona and a claim of $15,000 on behalf of Willie and Yvonne; on September 4, 1975, while the claims were pending, Transnational was declared insolvent and placed in liquidation by the Insurance Commissioner; in a reasonable, good faith effort to mitigate damages, plaintiffs settled their claims against Transnational for a total of $10,000; this sum was less than the actual value of the claims; but was fair and reasonable in view of Transnational's insolvency and the pending of liquidation proceedings against it; prior to the commencement of such proceedings, plaintiffs placed Transnational on notice that it was acting in bad faith in connection with their claims under the policy; as a result of Transnational's bad faith, each plaintiff was entitled to punitive damages in excess of $50,000.
The first cause of action concluded that as a “direct and proximate” result of defendant's negligence in failing to select a solvent insurance carrier for plaintiffs, they were denied (1) a major portion of the benefits to which they were entitled under the policy's uninsured motorist coverage, namely: $15,000 for Rona and $15,000 for Willie and Yvonne jointly, less the $10,000 received from Transnational, or a net total of $20,000; and (2) damages in the sum of at least $50,000 for each plaintiff arising out of the bad faith conduct of Transnational.
The four remaining causes of action incorporate all of the foregoing and seek recovery upon the following theories, respectively: breach of implied agreement to use reasonable skill in selecting an insurance carrier; breach of express agreement to procure a policy of automobile insurance from a carrier which would promptly pay claims arising under the policy's uninsured motorist coverage; breach of fiduciary duty to use care, skill and loyalty in obtaining automobile insurance; and breach of implied warranty that the policy issued was fit for plaintiffs' purposes.
After filing an answer, defendant moved for summary judgment ( Code Civ. Proc., § 437c); the motion was granted. Summary judgment was entered in favor of defendant and against plaintiffs.
The complaint discloses the defendant's liability is predicated on a breach of its alleged duty to plaintiffs to investigate Transnational's financial condition before having placed automobile insurance for plaintiffs with that carrier. If no such duty exists, plaintiffs are not entitled to recover the damages sought herein.
(1)Whether a defendant owes a duty of care in a given situation is a question of law for the court. (Peter W. v. San Francisco Unified Sch. Dist. (1976) 60 Cal.App.3d 814, 822 ; Rainer v. Grossman (1973) 31 Cal.App.3d 539, 542 ; Nevarez v. Thriftimart, Inc. (1970) 7 Cal.App.3d 799, 803 .) In order to determine whether defendant owed plaintiffs a duty to investigate Transnational's financial condition, it is necessary to consider provisions of the Insurance Code governing the financial qualifications of an insurer to conduct business in this state.
Insurance Code section 700 provides in pertinent part:
Prior to admission, each insurer must file with the Insurance Commissioner a certified copy of its last annual statement or a verified financial statement disclosing its condition and affairs. ( Ins. Code, § 706.) Before an incorporated insurer may lawfully transact business in this state, it must meet specified requirements as to paid-in capital. ( Id., § 700.01.) In addition to the paid-in capital requirements certain requirements as to surplus must be met before an insurer will be issued a certificate of authority. ( Id., § 700.02.) The Insurance Commissioner is required to examine the business and affairs of a domestic insurer before issuing to it an original certificate of authority. ( I...
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