The law has been clear in California for quite a while that if you suffer property damage not covered under your insurance policy as a direct result of your insurance broker’s neglect you can pursue a claim against your broker for professional negligence. However, until recently what was not so clear was what your options were where you suffer property damage not covered under your insurance policy as a direct result of your insurance broker’s negligence and your property damage caused damage to a neighbor’s property.

While being able to sue your insurance broker for damages might help you recover for the loss you suffered as a direct result of the broker’s negligence, how does that help you defend yourself against the third party claim your neighbor will make against you? And, practically speaking, most people do not want to wait to have a judgment entered against them to first establish and/or recover damages against their insurance broker. So the question becomes: Can you assign your professional liability claim against the insurance broker to your neighbor as part of a settlement to avoid having to defend against your neighbor’s claim and incur substantial economic loss? The answer to this question in California was not entirely clear until recently.

In AMCO Insurance Company v. All Solutions Insurance Agency,1 the California Court of Appeal found that professional liability claims against insurance brokers were indeed assignable. There, the plaintiffs sustained fire damages resulting from the negligence of a property owner. The property owner did not have insurance coverage for the loss because the insurance broker failed to obtain the insurance that the property owner requested. To avoid incurring substantial losses to the neighbor, the property owner assigned its rights against its broker to the neighbor. Subsequently, the neighbor brought a separate action against the broker.

The broker moved for summary judgment, asserting that just like malpractice claims against attorneys, professional liability claims against insurance brokers are not assignable. The trial court granted the motion. The California Court of Appeal reversed, finding that claims against insurance brokers are assignable, unlike legal malpractice claims, because the broker-client relationship is “not protected by a privilege of confidentiality and, given the standardized nature of insurance policies, the product ultimately delivered to the client cannot be regarded as highly or uniquely personal.”

The California Court of Appeal’s clarification on this issue provides policyholders with a new way to protect themselves when and if they face a situation similar to the one described above.


1 AMCO Ins. Co. v. All Solutions Insurance Agency, LLC, (Fifth District Court of Appeal of California, February 9, 2016) 244 Cal.App.4th 883.