Insurance Coverage – Liability of Adjuster for Negligent Misrepresentation

by Low, Ball & Lynch

Bock v. Hansen

Court of Appeal, First Appellate District (April 2, 2014)

40 years ago in Gruenberg v. Aetna Ins. Co. (1973), the California Supreme Court held that in general, an insurance company’s agents and employees cannot be sued for conspiring with the insurer to violate duties owed solely by the insurer under the express or implied terms of the policy.  This case considered whether an adjuster in the employ of an insurance carrier could be found individually liable for negligent misrepresentations in the handling of a claim.

In September of 2009, a 41-foot-long tree limb, weighing 7300 pounds, broke off from an oak tree in the front yard of Michael and Lorie Brock, crashing into their living room window, and according to them, damaging the chimney as well.  The Brocks reported the incident to their homeowners’ insurer, Travelers Property and Casualty Insurance Company (Travelers).  Travelers assigned Craig Hansen to adjust the loss.  According to the Bocks, when Mr. Hansen arrived, he said he had only a few minutes to inspect the damage, and in fact was there no more than 10 to 15 minutes.  During that time, he pushed several branches out of the way of the window and off the chimney before taking pictures of the window and chimney.  He also told Mrs. Bock to “clean up the mess,” and made derogatory comments about her husband’s employer, PG&E.

Before leaving, he wrote a check for $675.69.  When Mrs. Bock said this would not cover the clean-up, let alone the damage, Hansen told her clean-up was not covered under the policy.  Relying on these and other statements by Hansen, Mrs. Bock attempted to clean up the glass, sustaining a cut on her hand.

After Hansen left, Mr. Bock discovered the tree limbs had caused significant damage to the chimney.  The next day, Mrs. Bock sent an e-mail to Travelers’ Field Manager Frank Blaha, reporting the chimney damage, and requesting another adjuster, because Mr. Hansen was “rude, disinterested and rushed during his initial visit.”  Travelers ignored the request, and two days later, Hansen prepared an estimate totaling $3,479.54, reflecting minimal amounts in each category of repair, as the Bocks had obtained an estimate the same day for $2,065 for cut up and removal of the tree limbs alone.  Two days later, Hansen and Blaha both came to the house.  The Bocks were present, along with a licensed general contractor they asked to come out.  Hansen and Blaha were shown significant cracks in the chimney, as well as gouges where the tree limb hit it.  Again, Hansen allegedly falsely told the Bocks their policy did not cover the cost of clean-up.  The Bocks claimed that Hansen brought out an unlicensed contractor to inspect the damage, and prepared a report upon which Travelers concluded that the cracks in the chimney were minor and not caused by the fallen branch, and they denied coverage for anything other than repair of the broken window and frame.

The Bocks filed a complaint against Travelers and Hansen.  This included causes of action for intentional misrepresentation and intentional infliction of emotional distress.  The Bocks alleged that Hansen falsely told them that their policy did not cover the cost of clean-up and that they relied upon those statements and performed the clean-up on their own, to their detriment.  The fifth cause of action alleged that the actions of both Travelers and Hansen were extreme and outrageous.  Travelers demurred.  The trial court sustained Travelers’ demurrer without leave to amend, holding that the complaint was “strictly contract based,” and that nothing pled supported a fraud based claim.  Travelers answered the remaining contract causes of action pled against it.  Subsequently, Hansen demurred, arguing that he owed them no legal duty, and that the Bocks also had constructive knowledge of their policy and could not reasonably rely on his statements, and that the documents attached to the complaint showed that Travelers actually did pay for debris removal.  The trial court sustained the demurrer without leave to amend and entered judgment in Hansen’s favor.  The Bocks appealed.

The Court of Appeal reversed.  It disagreed with the trial court that a negligent misrepresentation claim could not lie against an insurance adjuster as a matter of law.  Hansen had cited Sanchez v. Lindsey Morden Claims Services, Inc. (1999) 72 Cal.App.4th 249, which had held that agents and employees of insurance companies do not owe a duty to the insured, as long as their agency relationship was disclosed and the conduct took place within the course and scope of such agency.  The Court of Appeal noted that the cases cited involved claims of negligence against the insurer and its agent, and that negligence was a completely different tort from negligent misrepresentation, which was a form of the tort of deceit.  The elements of the causes of action were different, and the policies behind each tort “sometimes call for different results even when applied to the same conduct.”

The Court of Appeal also cited some of the leading treatises on insurance coverage litigation (Croskey, et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2013) ¶11:9, pg. 11-3) and (2 Witkin, Summary of Cal. Law (10th ed. 2005) Insurance, §251, pg. 351) for the proposition that the insurer’s agents and employees may have committed some independent tort in the course of handling claims, such as misrepresentation or deceit, for which they can be held personally liable, even though they themselves are not parties to the insurance contract.

The Court also noted that while the insurer-insured relationship was not a true fiduciary relationship, it was a “special relationship,” with “heightened duties,” such that an employee of the party in the special relationship had a duty to the Bocks.  Here, Mrs. Bock was injured as a result of Mr. Hansen’s misrepresentation, and Hansen said what he said for a business purpose.  Consequently, the Court held that the Bocks could proceed with a negligent misrepresentation cause of action against Hansen.

The Court also noted that although it had not been sufficiently pled, a cause of action for intentional infliction of emotional distress could potentially lie against Hansen.  The trial court had refused to let them amend, but in light of the Bocks’ claims that they could state facts to show that Hansen abused a relationship of power over them and that he knew they were susceptible to injuries through mental distress, the Court of Appeal held that the Bocks should be allowed to attempt to amend that claim.

The judgment for Hansen was reversed, and the matter was remanded to allow the claim against Hansen for negligent misrepresentation to proceed as pled, and for the Bocks to attempt to re-state their claim for intentional infliction of emotional distress.


This case is somewhat troubling.  A couple of past cases had held that agents or employees of insurers could be liable for tortious acts undertaken for their own benefit, economic or otherwise, but the Court’s ruling here ignored that aspect and seems to leave open the door for many more claims to be brought against adjusters, whether based on facts or not.  This case will probably be appealed, and we will keep a close eye on it and report any further developments.

For a copy of the complete decision, see:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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