The “Totality of the Circumstances” Determine Whether the Defendant Broker Owed a Heightened Duty of Care to Plaintiff Copy

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In Murray v. UPS Capital Ins. Agency (Sept. 11, 2020) 2020 WL 5508039, the Fourth District Court of Appeal reversed and remanded  the granting of a summary judgment motion in favor of insurance broker UPS Capital Insurance Agency, a wholly owned subsidiary of United Parcel Service (UPS).  The reviewing court found the insured, David Murray, presented sufficient evidence in opposition to the motion to raise a triable issue of fact concerning the nature of the duty owed by UPS Capital when selling Murray “transit” insurance.

Murray purchased used computer equipment valued at nearly $40,000, and arranged with UPS to ship the equipment from California to Texas.  When he inquired about insurance coverage for the equipment, he was directed to UPS Capital for transit insurance.  Murray was offered the “house policy coverage” which for used items limited coverage to loss or damage resulting from certain catastrophic events.  When the equipment was damaged due to mishandling of the equipment while en route, Murray’s insurance claim was denied as the damage was not caused by a covered catastrophic event.  Murray sued UPS Capital for breach of contract and negligence, but appealed only on the issue of negligence.  He argued that, under established California law defining duties owed by insurance brokers, UPS Capital owed a heightened duty of care to him because, among other reasons, it held itself out as an expert in the field of inland marine insurance.  He then contended specifically that UPS Capital “had an affirmative duty to advise him about the relevant FPA [limiting] provision written in ‘archaic language’” and to direct him to an available alternative “all risk” policy which would have covered the loss.

The Court noted the general rule that an insurance agent or broker owes only a duty of “reasonable care, diligence and judgment in procuring the insurance requested by the insured,” but acknowledged that an agent may assume a greater duty to the insured under three exceptions, including when the agent “holds himself out” as having expertise in a given field of insurance being sought by the insured. (* at p. 6, citing, Fitzpatrick v. Hayes (1997) 57 Cal.App.4th 916, 927.)  The Court nevertheless declined to institute a per se rule requiring a heightened duty of care for all specialized agents/broker but did conclude “public policy supports the creation of a reasonable inference of expertise when there is evidence the agent specializes in a particular filed of insurance.”  (* at p. 6, emphasis added.)  It was, therefore, UPS Capital’s specialization, combined with several other factors, which created a triable issue of fact.  (* at p. 6)  The Court found Murray satisfied his burden by presenting evidence that (1) UPS Capital only offered one type of policy to one-time shippers, (2) the policy specifically covered domestic inland shipments by truck, (3) UPS Capital was a subsidiary of UPS, which shipped Murray’s goods, (4) UPS Capital acted as agent for only one company (Tokio Marine America Insurance Company) and offered only Tokio’s version of inland marine coverage, and (5) the one “house” policy it offered “was anything but understandable, especially to a one-time customer unfamiliar with marine transport insurance.”  The collective strength of Murray’s evidence, combined with the inference UPS Capital was an acknowledged “go to” broker for inland marine shipping needs, was sufficient to overcome the motion and require a trier of fact to determine the nature of the duty owed to Mr. Murray.