California courts have consistently held that agents and employees of insurance companies, including insurance adjusters, do not owe a legal duty to the insured. Instead, liability for their actions lies with the insurer, so long as the agency was disclosed to the insured and the conduct complained of took place within the course and scope of such agency. Claims of negligence, therefore, fail against adjusters acting within the course and scope of their employment. But, what about the tort of negligent misrepresentation?
A claim of negligence is different from a claim of negligent misrepresentation: they are different torts. As the California Supreme Court observed in Bily v. Arthur Young & Co.: “Negligent misrepresentation is a separate and distinct tort, a species of the tort of deceit. ‘Where the defendant makes false statements, honestly believing that they are true, but without reasonable ground for such belief, he may be liable for negligent misrepresentation, a form of deceit.’”
In addition to breach of contract, various tort theories are available to insured against their insurers. The most prominent is bad faith. There are others: an insurer’s mishandling of a claim may also be actionable under the tort of negligent misrepresentation. And, when an insurer’s agents or employees commit an independent tort in the handling of a claim, they can be held personally liable. Those potential independent claims include: misrepresentation or deceit, invasion of privacy, and intentional infliction of emotional distress.
California courts have recognized a cause of action for negligent misrepresentation, i.e., a duty to communicate accurate information, in two circumstances: 1) where providing false information poses a risk of and results in physical harm to person or property; and 2) where information is conveyed in a commercial setting for a business purpose.
The elements of negligent misrepresentation are: 1) a misrepresentation of a past or existing material fact; 2) made without reasonable ground for believing it to be true; 3) made with the intent to induce another’s reliance on the fact misrepresented; 4) justifiable reliance on the misrepresentation; and 5) resulting damage.
In Bock v. Hansen a cause of action against an insurance adjuster for negligent misrepresentation was alleged. All elements of negligent misrepresentation were present. Hansen falsely advised the Bocks that the cost of clean-up was not covered under their policy; Hansen either knew the representation was false when he made it, or he made it with reckless disregard of its truth; and the Bocks relied on Hansen’s false statements to their detriment, i.e., Mrs. Bock was injured as a result of Hansen’s misrepresentation when she was cleaning-up after a covered claim.
The Court’s specific holding: “In sum, we hold that a cause of action for negligent misrepresentation can lie against an insurance adjuster.”
Mr. Daymude consults with clients and accepts cases involving insurance claims and claims against insurance companies or their agents, including claims of bad faith, misrepresentation or deceit, invasion of privacy, and intentional infliction of emotional distress For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael Daymude at 818-971-9409.