Wilson v. All Service Insurance Corp.

Rona Wilson, the minor child of Willie and Yvonne Wilson (plaintiffs), suffered bodily injuries from a car accident, which was caused by an uninsured motorist. At the time, the Wilsons had an automobile-insurance policy that was issued through Transnational. The family had been placed in the insurance by their broker, All Service Insurance Corporation (defendant). Transnational was a duly authorized insurer in accordance with California law. California law required insurers to provide certified copies of their financial statements to verify that they had enough capital and that their financial conditions were such that they would be able to pay their insureds’ claims on demand. Once insurers proved that they met initial financial requirements, the insurance commissioner could issue certificates of authority for insurers to conduct business in the state. Insurers had to file annual financial statements with the commissioner and publish annual synopses reflecting their true financial conditions. The financial statements had to detail the insurers’ owned assets, liabilities, income, expenditures, and the amounts of premiums they collected from subject matter insured within the state. The commissioner had the duty to investigate insurers and to continuously oversee their financial conditions. To fulfill his duties, the commissioner was granted unfettered access to insurers’ financial records. When the Wilsons filed their claim with Transnational, they claimed $15,000 on behalf of Rona for her physical injuries and $15,000 for their own emotional distress and physical injuries. Shortly after the Wilsons filed their claim, the commissioner declared Transnational insolvent and placed it into liquidation. Up until then, Transnational had operated under a valid certificate of authority. When the Wilsons learned of Transnational’s insolvency and the liquidation proceedings, they agreed to settle their claims for a fraction of their actual damages. At the same time, the Wilsons notified Transnational that it had acted in bad faith and as a result the family was owed punitive damages. The Wilsons sought recovery of their damages from their insurance broker in a state trial court, alleging that the broker had a duty to investigate Transnational’s financial condition. Summary judgment was granted in favor of the broker, and the Wilsons appealed.