Appellant insurance company challenged a judgment from the Superior Court of Orange County (California) in favor of respondent executrix of insurance agent’s estate in its action against respondent agents seeking damages for breach of fiduciary duties under Cal. Ins. Code §§ 1733- 1734, an accounting, and imposition of a constructive trust. The complaint arose out of the use of overdue premium funds for other purposes.

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Overview

The court reversed the judgment and found that appellant insurance company was entitled to have its action submitted to the jury because there was substantial evidence that would have supported a jury determination that respondent executrix of insurance agent’s estate owed and breached a fiduciary duty. Appellant could submit to the jury its complaint on the Knoblock theory of liability as a director of a corporate trustee liable to the trust beneficiary and on a theory of fiduciary duty under Cal. Ins. Code §§ 1733- 1734. The action arose when appellant’s audit showed owed and overdue premiums of $ 1.128 million as a result of a business arrangement between respondent agents where premium payment form California and Arizona were pooled into a single general account of the Arizona respondent rather than into trust accounts. The trial court, concluding that the evidence would not support a finding that respondent executrix owed a fiduciary duty, refused to give 50 special jury instructions to that effect and found that respondent executrix was not appellant’s constructive trustee and incurred no liability.

Outcome

The court reversed the judgment because it found substantive evidence that would support a jury determination that respondent executrix of insurance agent’s estate owed and breached a fiduciary duty to appellant insurance company. The court held that appellant was entitled to have its action submitted to the jury on its theories of fiduciary duty under the Insurance Code and as a director of a corporate trustee liable to the trust beneficiary.

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Sunday, Jul 25, 2021