Brokerage

Lawsuit Challenges Policy Procurement

An insured discovered after a fire that his broker failed to act on his request to procure fire insurance, according to allegations in the lawsuit.
By: | April 4, 2016

A California insurance brokerage may be forced to pay more than $560,000 in fire losses, based on allegations it ignored a client’s request for coverage.

All Solutions Insurance Agency was a broker for Amarjit Singh, owner of a two-story building that housed the Bombay Restaurant and an apartment in Sonora, Calif., when a fire started in the electrical panel box on Dec. 15, 2009.

The fire damaged Singh’s building as well as the Koto Japanese Restaurant, which was in an adjoining commercial property owned by David Saari.

Singh’s fire damage claims were denied when his carrier said there was no policy in effect at the time of the fire.

The court noted the adjoining property owner and restauranteur were innocent of any fault and had not agreed to assume the risk of fire that began in Singh’s building.

In 2010, Singh agreed to a $194,200 judgment with Koto Japanese Restaurant, and assigned his claims against All Solutions to Koto.

In addition, Saari’s insurer, Amco Insurance Co., paid Saari $371,326 for the damages to his property. The insurance company filed a subrogation action against Singh, who again assigned his rights against All Solutions.

In December 2011, Amco and Koto separately filed suit against the broker (suits which were later consolidated) alleging negligence and breach of contract.

In July 2014, All Solutions won a summary judgment, with a lower court ruling that Singh’s rights could not be assigned.

The court also ruled that the broker’s failure to maintain the policy would not have affected the fire claim paid by Amco to Saari.

On Feb. 8, California’s 5th Appellate District Court of Appeal disagreed. It ruled Singh could assign his rights to any claims against the brokerage.

The court noted the adjoining property owner and restauranteur were innocent of any fault and had not agreed to assume the risk of fire that began in Singh’s building.

In addition, it ruled there were questions about how Singh’s insurance coverage would have worked with Saari’s to cover the fire losses.

It also noted that there was a dispute between Singh and the broker as to whether an order was given to renew the policy.

Because additional issues of fact needed to be determined, the 5th Appellate District Court of Appeal returned the case to the lower court for further proceedings. &

The late Anne Freedman is former managing editor of Risk & Insurance. Comments or questions about this article can be addressed to [email protected]

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