Camping Unlimited For The Developmentally Disabled v. Brown & Brown of Garden…

Background

Camping Unlimited For The Developmentally Disabled operates programs for children and adults with learning disabilities at Camp Krem. In seeking replacement insurance, Camping Unlimited worked with Brown & Brown broker Michael Labadorf. The complaint alleged that Brown & Brown promoted itself as highly experienced in camp insurance, prepared an initial property-value statement, sought competing quotes, and recommended a Markel policy.

The policy included property coverage of approximately $3 million and business-income coverage of $750,000. It also contained a 90 percent coinsurance provision because an independent replacement-cost appraisal had not been provided. The CZU Lightning Complex fires completely destroyed Camping Unlimited’s facilities in 2020. Markel paid the policy limit, leaving Camping Unlimited with at least $6 million in uninsured losses, according to the complaint.

Camping Unlimited filed a single negligence claim. Brown & Brown and Markel removed the action from state court and each moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether the complaint adequately states a legally sufficient claim.

Brown & Brown’s motion

Brown & Brown argued that it generally had no duty to ensure that Camping Unlimited obtained adequate insurance or to recommend additional coverage. It also argued that the complaint did not adequately allege that Brown & Brown assumed a special duty.

The court held that Camping Unlimited adequately alleged a special duty based on Brown & Brown’s alleged representations that it had unusual expertise in camp insurance. Under California law, an insurance broker may assume duties beyond those ordinarily owed to an insured when, among other circumstances, the broker holds itself out as having expertise in the type of insurance sought.

The court also held that Brown & Brown’s arguments raised factual issues that could not be resolved on a motion to dismiss. The court declined to consider purported complete email chains attached to Brown & Brown’s motion because doing so would require going beyond the complaint and making credibility-related inferences. The court therefore denied Brown & Brown’s motion to dismiss.

Markel’s motion

Markel argued that an insurer generally could not be liable for the alleged negligence and that it could not be liable as Brown & Brown’s principal because Brown & Brown acted as Camping Unlimited’s agent when obtaining insurance.

The court agreed with Markel. Camping Unlimited alleged that Brown & Brown sought quotes from multiple insurance companies and recommended Markel’s policy. Applying California law, the court concluded that Brown & Brown acted as Camping Unlimited’s agent when it compared insurance options and sought the best deal for Camping Unlimited, rather than acting as Markel’s agent for those activities. Markel therefore could not be held responsible as Brown & Brown’s principal for those alleged actions.

The court found that allowing amendment would be futile. Camping Unlimited had already alleged facts showing that Brown & Brown sought quotes from multiple companies and that a Markel underwriter, rather than Brown & Brown, bound coverage and issued the policy. The court also noted that any direct claim against Markel based on failure to ensure adequate coverage would be barred under the rule that insurers generally have no such duty without a special duty.

Disposition

The court denied Brown & Brown’s motion to dismiss. It granted Markel’s motion to dismiss without leave to amend and dismissed Markel from the case. Brown & Brown was ordered to answer the complaint within 21 days, and the existing case schedule remained in effect.