Plaintiff judgment creditor sued defendant surplus lines insurance broker for negligence in procuring an insurance policy for a judgment debtor that did not cover work done by the judgment debtor in India. The broker demurred on the ground that it owed no duty of care to the judgment creditor. The Los Angeles County Superior Court, California, sustained the broker’s demurrer without leave to amend. The judgment creditor appealed.
California Business Lawyer & Corporate Lawyer, Inc. offers counsel for CRC 3.811
Overview
The issue on appeal was whether the broker owed a duty of care to the judgment creditor even though the two parties had no direct contact, were not in privity of contract, and the judgment creditor was not named on the policy the judgment debtor procured from the broker. The court concluded that the complaint’s allegations supported finding a duty of care. The judgment debtor bought the policy, as required under its contract with the judgment creditor, for the purpose of protecting the judgment creditor against the judgment debtor’s possible breach of contract. Therefore, the insurance transaction greatly affected the judgment creditor. The judgment creditor’s injury from the judgment debtor’s breach was foreseeable. The broker voluntarily assumed the responsibility of finding insurance for the judgment debtor. It was obligated to discharge that responsibility competently. The broker failed to meet that responsibility when it obtained a policy that excluded any work done in India by the judgment debtor. The broker was well-positioned to prevent the injury the judgment creditor suffered from the judgment debtor’s inadequate insurance coverage.
Outcome
The judgment was reversed, and the case was remanded for further proceedings.