Ninth Circuit Affirms Dismissal of Negligent Misrepresentation Claim

by Traub Lieberman Straus & Shrewsberry LLP

In its recent decision in MultiCare Health System v. Lexington Ins. Co., 2013 U.S. App. LEXIS 17981 (9th Cir. Aug. 28, 2013), the United States Court of Appeals for the Ninth Circuit, applying Washington law, had occasion to consider whether a party with whom the insured contracted has standing to bring a misrepresentation claim against an insurer and broker for failing to disclose a policy’s self-insured retention in a certificate of liability insurance.
Lexington Insurance Company insured the Medical Staffing Network (“MSN”), a staffing company providing temporary nursing staff to hospitals, under a professional liability policy with limits of liability of $5 million.  MSN entered into a contract with Good Samaritan Hospital (the “GSH”) whereby MSN provided nursing personnel to GSH. As part of this contract, MSN was required to provide GSH with a Certificate of Liability Insurance. USI Insurance Services, on behalf of Lexington, subsequently provided MSN with an Acord form certificate describing the Lexington policy, and MSN in turn provided the form to GSH. While the Acord form accurately described the policy’s limits of liability and the identity of the insurer, it did not identify the fact that the policy was subject to a $1 million self-insured retention. Notably, the form is a standard pre-printed form that does not contain a space in which to enter information concerning deductibles or retentions.
GSH and MSN were named as defendants in a wrongful death suit alleging that a nurse provided by MSN injured the decedent while at GSH. GSH’s counsel shared a copy of the Acord form with plaintiff’s counsel, who subsequently agreed to voluntarily dismiss GSH from the suit based on the belief that MSN had sufficient insurance to satisfy any judgment. The matter proceeded to arbitration resulting in a judgment against MSN in the amount of $785,000 – an amount within the Lexington policy’s retention. MSN subsequently filed for bankruptcy to avoid paying this amount. Plaintiff thereafter successfully vacated its dismissal of GSH based on its argument that it would not have dismissed GSH in the first place had the Acord form identified the $1 million self-insured retention. GSH subsequently sought a defense and indemnification from Lexington and USI based on theories of negligent misrepresentation and bad faith. While GSH acknowledged that it did not qualify as an insured under the policy, it contended that the defendants had a duty to not misrepresent the terms of an insurance policy and that this duty was breached by failing to disclose the retention on the Acord form. GHS argued, therefore, that as a result of this misrepresentation, Lexington and USI should be required to defend GSH in the underlying suit and pay for any resulting judgment.
The United States District Court for the Western District of Washington granted defendants’ motion to dismiss on the basis that GSH failed to properly state a cause of action for negligent misrepresentation On appeal, the Ninth Circuit affirmed, finding that the Acord form did not contain any false information that would support a misrepresentation claim. The court rejected GSH’s assertion that defendants had an affirmative duty to disclose this information to GSH since no fiduciary relationship existed among the parties. Notable for the court was that the Acord form contained no column for identifying retentions or deductibles, but that it is common knowledge that insurance policies typically impose such requirements on insureds. As such, the Ninth Circuit concluded that:
We do not believe that the Washington Supreme Court would find a duty to disclose a self-insured retention amount on a certificate that summarizes insurance policies and does not contain a column for retention or deductible amounts. This is especially true in light of the fact that the hospital could have asked Medical Staffing for a copy of its insurance policy.
The Ninth Circuit also held that the lower court properly rejected GSH’s request for leave to amend its complaint to claim that third parties frequently rely on certificates of insurance in transacting business with insureds. The court concluded that such an assertion would not establish a duty under Washington law for insurers or brokers to disclose a self-insured retention on a form that has no column in which to include such an amount.

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.

© Traub Lieberman Straus & Shrewsberry LLP | Attorney Advertising

Written by:

Traub Lieberman Straus & Shrewsberry LLP

Traub Lieberman Straus & Shrewsberry LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.