Fink v. Brown & Brown Program Insurance Services Incorporated

Filing 20

ORDER denying 9 Motion to Dismiss (see Order for details). Signed by Judge Douglas L Rayes on 4/11/2018. (MMO)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Edward Fink, No. CV-17-03869-PHX-DLR Plaintiff, 10 11 v. 12 ORDER Brown & Brown Program Insurance Services Incorporated, 13 Defendant. 14 15 16 At issue is Defendant Brown & Brown Program Insurance Services, Inc.’s motion 17 to dismiss, which is fully briefed. (Docs. 9, 11, 12.) For the following reasons, the 18 motion is denied.1 19 I. Background 20 On August 21, 2013, Plaintiff Edward Fink was injured in an accident caused by 21 non-party Cole Cantreel’s negligence. (Doc. 1-1 at 8.) Cantreel was underinsured to pay 22 Plaintiff’s damages, and Plaintiff’s own underinsured motorist policy also was 23 insufficient. (Id.) 24 Before the accident, Plaintiff obtained insurance coverage from non-party James 25 LaVerdi, an insurance salesman for non-party All Insurance, LLC, which was owned and 26 operated by non-party Charles Fritsinger. (Id. at 6-8.) Plaintiff claims he requested 27 1 28 Defendant’s request for oral argument is denied because the issues are adequately briefed and oral argument will not aid the Court’s resolution of the motion. See Fed. R. Civ. P. 78(b); LRCiv. 7.2(f). 1 uninsured and underinsured motorist coverage equal to his liability coverage of two 2 million dollars, but LaVerdi did not procure such coverage. (Id. at 7.) 3 On August 10, 2015, Plaintiff sued Fritsinger and other defendants for negligence. 4 (Id. at 9.) He sought damages in the amount of the underinsured motorist coverage he 5 would have had but for Fritsinger’s negligence in adequately training, supervising, or 6 instructing LaVerdi. (Id. at 8-9.) 7 Fritsinger had purchased an error and omissions (“E&O”) policy from Defendant, 8 effective December 2012 through December 2013, and renewed the policy through 9 December 2014. (Id. at 9.) Defendant, however, did not recommend or address the need 10 for retroactive coverage when Fritsinger purchased the policy, nor did Defendant 11 recommend or address the need for tail coverage when Fritsinger cancelled his E&O 12 policy in October 2014. (Id. at 10.) Fritsinger consequently did not have E&O coverage 13 to defend against Plaintiff’s claim because his policy was effective after the date Plaintiff 14 procured his policy, and Fritsinger cancelled his E&O policy prior to the date Plaintiff 15 filed the initial lawsuit. (Id. at 9.) Fritsinger therefore agreed to assign his right to pursue 16 a professional negligence claim against Defendant to Plaintiff. (Id. at 10.) 17 Plaintiff, standing in Fritsinger’s shoes, filed this professional negligence action 18 against Defendant in Arizona state court on September 15, 2017. The complaint alleges 19 that Defendant negligently failed to “explain the need for or recommend” retroactive or 20 tail coverage when Fritsinger purchased and cancelled his E&O policy. (Id. at 10-11.) 21 Defendant removed the action pursuant to this Court’s diversity jurisdiction, and now 22 moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docs. 1, 9.) 23 II. Legal Standard 24 A successful Rule 12(b)(6) motion must show that the complaint lacks a 25 cognizable legal theory or fails to allege facts sufficient to support such a theory. See 26 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that 27 sets forth a cognizable legal theory will survive a motion to dismiss only where it 28 contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is -2- 1 plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 2 Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the 3 plaintiff pleads factual content that allows the court to draw the reasonable inference that 4 the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 5 556). Although the court must take “the well-pled factual allegations in the complaint as 6 true, [it is] ‘not bound to accept as true a legal conclusion couched as a factual 7 allegation.’” Id. (quoting Twombly, 550 U.S. at 555). 8 III. Discussion 9 Defendant asserts that insurance brokers do not have a duty “to advise insureds 10 about the adequacy or appropriateness of the insurance coverage they purchase, or to 11 inform them about optional coverage that might be available.” (Doc. 9 at 4 (quoting 12 BNCCORP, Inc. v. HUB Int’l Ltd., 400 P.3d 157, 166 (Ariz. Ct. App. 2017)). Instead, 13 Defendant contends that, as a matter of law, insurance brokers need only provide the 14 insurance coverage that the client requests. (Id.) Because Plaintiff’s complaint at most 15 alleges that Defendant failed to recommend additional coverage, Defendant argues that 16 Plaintiff has not pled facts that establish Defendant breached its duty of care under 17 Arizona law. 18 Defendant’s argument rests entirely on the Arizona Court of Appeals’ description 19 of the applicable duty in BNCCORP. Plaintiff asserts that, in relying on BNCCORP, 20 Defendant improperly conflates duty and breach. (Doc. 11 at 1, 5.) Specifically, in 21 Arizona a licensed insurance agent owes his or her client a duty “to exercise reasonable 22 care, skill and diligence in carrying out the agent’s duties in procuring insurance.” 23 Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 682 P.2d 388, 402 (Ariz. 24 1984). Plaintiff asserts that whether an insurance agent must explain the need for or 25 recommend retroactive or tail coverage in order to satisfy this duty is a question of fact 26 that cannot be resolved on a motion to dismiss. The Court agrees. 27 To establish negligence, Plaintiff must prove: (1) Defendant had a duty to conform 28 to a certain standard of care; (2) Defendant breached that standard of care; (3) a causal -3- 1 connection between Defendant’s conduct and the resulting injury; and (4) actual 2 damages. Gipson v. Kasey, 150 P.3d 228, 230 (Ariz. 2007). “The first element, whether 3 a duty exists, is a matter of law for the court to decide,” but the other elements, including 4 breach, are factual issues typically decided by the jury. Id. 5 “[T]he existence of a duty is not to be confused with details of the standard of 6 conduct.” Markowitz v. Ariz. Parks Bd., 706 P.2d 364, 367 (Ariz. 1985). Arizona courts 7 have acknowledged the difficulty in distinguishing these two concepts. Coburn v. City of 8 Tucson, 691 P.2d 1078, 1080 (Ariz. 1984); Sw Auto Painting & Body Repair, Inc. v. 9 Binsfeld, 904 P.2d 1268, 1270 (Ariz. Ct. App. 1995). 10 A duty exists when the relationship between the parties is “such that the defendant 11 was under an obligation to use some care to avoid or prevent injury to the plaintiff.” 12 Markowitz, 706 P.2d at 368. Plaintiff has alleged the existence of such a relationship, 13 and Defendant does not argue otherwise. (Doc. 9 at 4; Doc. 11 at 4.); see Darner, 682 14 P.2d at 402. The precise conduct required to comply with the applicable duty “ha[s] to 15 do with whether the defendant breached the applicable standard of care, not whether a 16 duty and attendant standard of care exist.” Sw Auto, 904 P.2d at 1271. For example, in 17 Coburn, the court distinguished the city’s duty to keep the streets reasonably safe from 18 the specific conduct—posting warning signs, installing traffic control devices, fixing 19 potholes—required to comply with that duty. Coburn, 691 P.2d at 1080. The court 20 reasoned that “[a]ttempting to define or evaluate conduct in terms of duty tends to 21 rigidify the concept of negligence—a concept which, by definition, must vary from case 22 to case, depending upon the relationship of the parties and the facts of each case.” Id. 23 In BNCCORP, the appeals court credited the trial court’s factual finding— 24 following a bench trial—that the applicable standard of care did not require the insurance 25 agent to “inform [insureds] about optional coverage that might be available.” 26 BNCCORP, 400 P.3d at 166. Contrary to Defendant’s argument, the court did not hold 27 as a matter of law that such conduct could never breach the duty applicable to the insurer- 28 insured relationship. Instead, the court recognized “the general rule is that ‘brokers have -4- 1 no [obligation] to advise insureds about the adequacy or appropriateness of the insurance 2 coverage they purchase, or to inform them about optional coverage that might be 3 available.’” 4 2.05(5)(a)) (emphasis added). The court reiterated, however, that “[q]uestions as to the 5 applicable standard of care are for the trier of fact” and should be “determined on a case- 6 by-case basis.” Id. at 165; see Coburn, 691 P.2d at 1080 (“[T]he duty remains constant, 7 while the conduct necessary to fulfill it varies with the circumstances.”). Id. (quoting 1-2 New Appleman on Insurance Law Library Edition § 8 It therefore is inappropriate for the Court to rule as a matter of law that the 9 omissions Plaintiff has alleged constitute breaches of the general duty of care. Breach of 10 duty is a quintessential fact question not appropriate for disposition on a motion to 11 dismiss. Accordingly, 12 IT IS ORDERED that Defendant’s Motion to Dismiss (Doc. 9) is DENIED. 13 Dated this 11th day of April, 2018. 14 15 16 17 18 Douglas L. Rayes United States District Judge 19 20 21 22 23 24 25 26 27 28 -5-

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