Fourth Appellate District Upholds Dismissal Of Fraud, Bad Faith, And Emotional Distress Claims Against Interinsurance Exchange
In the unpublished case of Cohen, et al v. Automobile Club of Southern California, et al, No. D053900 (February 26), Division One of the Fourth Appellate District upheld a trial court’s dismissal of fraud, bad faith, and intentional infliction of emotional distress claims against the Interinsurance Exchange of the Auto Club. The Cohens’ home was destroyed in the 2003 Cedar fire. Thereafter they retained a contractor on the Exchange’s preferred provider list to restore their property. That contractor allegedly performed substandard work and lacked the financial resources to complete the assignment. The Exchange then paid a second contractor to fix the problems and finish the construction. Nonetheless, the Cohens sued, alleging that an Auto Club employee had a financial interest in the first contractor. They sought compensation primarily for the emotional distress allegedly caused by the delay in moving back into their home. The trial court sustained a demurrer to their Second Amended Complaint without leave to amend.
The Court of Appeal affirmed. It found the Exchange had no duty to disclose negative information about the initial contractor or the employee’s alleged relationship with it. See Kaldenbach v. Mutual of Omaha Insurance Company (2009) 178 Cal. App. 4th 830, 850. The Court relied on the fact that an insurer-insured relationship is not a fiduciary or confidential one. See Vu v. Prudential Property & Casualty Insurance Co. (2001) 26 Cal. 4th 1142, 1150-1151. The Cohens, in turn, relied primarily on the exception to the general rule that a non-fiduciary lacks a disclosure duty based on volunteered representations communicating a “half-truth.” One who volunteers information can become liable to another by not disclosing everything relevant with respect to the information conveyed.
The Court found that nothing said by or on behalf of the Exchange fell within this exception: “There is nothing in the alleged statements or the surrounding circumstances showing a reasonable insured would have understood [the Exchange] was purporting to provide a list of advantages and disadvantages of retaining [the initial contractor]…” Even the Cohens conceded it was made clear that “it was each insured’s responsibility to select a building contractor, and the stated ‘enticement’ for using a contractor on the [preferred] list was [only] that the insurer would provide a full warranty…” The Exchange fulfilled that obligation by fulfilling its warranty. See Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal. App. 4th 115 where a similar warranty was held not to require a disclosure of an underlying alleged defect because the warranty constituted only a promise to take remedial steps with respect to the purchaser then before the court, not a misrepresentation of any underlying facts that purchaser was entitled to have.
February 26, 2010
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