Imagine a gigantic tree limb weighing over 7,000 lbs falling onto your home. You dutifully call your insurance company to report the loss. So when the adjuster inspects your home and (verbally) tells you that debris removal is not covered by your policy and that you need to clean up the debris (glass, limbs, branches) all by yourself, you clean it up yourself, right? And when you hurt your hand in the process of doing so and then discover that your policy does, in fact, provide additional coverage for debris removal, you sue the adjuster for negligent misrepresentation, right?
This is what happened in Bock v. Hansen, 225 Cal. App. 4th 215, 170 Cal. Rptr. 3d 293 (2014). As a result of the injury, the insured sued an adjuster for negligent misrepresentation. After the trial court dismissed the action, the insured’s appealed. The appellate court disagreed with the trial court’s decision, i.e., that the insureds’ Complaint failed to state a cause of action against the adjuster as a matter of law, finding that the adjuster could be held personally liable for the tort of negligent misrepresentation, even though he was not a party to the insurance contract.
The court explained that before an action for negligent misrepresentation could be maintained, there must be a “legal duty.” The court stated that a “special relationship” exists between insurers and their insureds; and therefore, the adjuster, as an employee of the insurer, had a legal duty to the insureds. Because an insured was injured as a direct result of relying on the adjuster’s misrepresentation, the adjuster was subject to liability for the false statements.
The court listed the elements of negligent misrepresentation, one of which is “justifiable reliance on the misrepresentation.” The adjuster in the case argued that the insureds could not justifiably rely on his representations because his representations contradicted the express terms of the policy. The appellate court did not agree.
So what’s the bottom line? Adjusters should be careful when making representations to insureds, and consider only discussing coverage in writing—especially in California! As far as the decision, in this case, this case seems to be an outlier, because the majority of jurisdictions have held that an adjuster does not owe a duty to an insured.