REINSURANCE BROKER CANNOT BE SUED FOR BREACH OF FIDUCIARY DUTY
Insurance brokers are not subject to breach of fiduciary duty claims under California law, a court held. Workmen’s Auto Insurance Co. sued its reinsurance intermediary-broker, Guy Carpenter & Co., for negligence, breach of fiduciary duty, and breach of contract in connection with Carpenter’s placement of a finite quota share reinsurance agreement on Workmen’s behalf. The trial court granted Carpenter’s motion for summary adjudication with respect to Workmen’s allegation that Carpenter failed to secure the best terms for reinsurance, and sustained Carpenter’s demurrer on Workmen’s breach of fiduciary claim. A jury found for Carpenter on the negligence and breach of contract claims. Workmen’s appealed, but the court of appeal affirmed, holding that an insurance broker cannot be sued for breach of fiduciary duty. An insurance broker’s duties are defined by California insurance law, which ascribes to brokers a duty of care, not a fiduciary duty. The appellate court declined to address as untimely raised Workmen’s argument that the standard should be different for reinsurance brokers because the nature of the relationship with the client is more complex and comprehensive. Workmen’s Auto Insurance Co. v. Guy Carpenter & Co., No. B211660 (Cal. Ct. App. May 4, 2011).
This post written by Ben Seessel.
