“Stranger Liability” For Insurance Providers

Our San Francisco insurance attorneys noticed a recent interesting case for California insurance law. The case, Hull & Co. v. Superior Court, involves “stranger liability,” in other words whether a victim can sue the insurance broker who provided insurance to a business establishment, even though that victim has no direct contract with the insurance broker.

The background of the case is as follows: Jason Gonzaga was shot at a Dave & Busters bar in Southern California. Mr. Gonzaga sued the bar and also their security company, claiming that they failed to prevent the shooting incident. He settled that case, but then filed another case against the security company’s insurance provider, Burlington, claiming that they had denied the security company’s claim in bad faith under the assault and battery exclusion. At trial, the judge awarded summary judgment for the insurance company, deciding that the assault and battery exclusion was enforceable. Mr. Gonzaga then sued the wholesale insurance broker, Hull & Co., asserting that Hull had a duty of care to the security company to ensure that the insurance coverage provided for such lawsuits against the company. The trial court allowed this case to move forward.

In March, the Los Angeles Superior Court awarded summary judgment to Burlington and dismissed Mr. Gonzaga’s claim against Hull with prejudice. Mr. Gonzaga appealed to the California Supreme Court, but that appeal was denied.

Wholesale insurance brokers are happy with the ruling, saying in an amicus in the case that if Mr. Gonzaga’s claim went forward, insurance brokers would face unlimited liability from those with whom they have no contract for simply doing their job in California.

Some claim this issue isn’t fully resolved though, and that stranger liability for insurance brokers could come up again before California courts. Ben McKay, executive director of the Surplus Line Association of California, says that this case didn’t officially determine there would be no stranger liability, just that there was none in the case against Hull. He said other cases might succeed, and it depends on the function of the wholesale insurance broker – whether it is giving advice or simply being a conduit for insurance providers. In a case with different facts, an insurance broker could be liable and Mr. McKay hopes the ruling would be specific in defining the liability so that wholesale insurance brokers will understand their duty.

The Hull case brought attention to this issue, even though Mr. Gonzaga lost, and now some state lawmakers are thinking of addressing the issue through legislation. There was a bill, Assembly Bill 1053, but it is unlikely to become law. The idea is being considered though, and we will wait to see what the legislature or future court cases determine on this issue.

San Francisco Insurance Attorneys
This case shows how complicated insurance cases can be, with many layers of potential liability and difficulties with insurance companies if they are not insuring you directly. If an insurance company is giving you the run around, contact an insurance lawyer at the Brod Firm today. Our lawyers are experienced in California insurance law and can help you receive the benefits and compensation you paid for and deserve.