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It is not Bad Faith Only to Deny a Claim\n\nPost 4734\n\nThe California Court of Appeals dealt with a claim by Wynzell Lynn, Jr. \nin a breach of insurance contract case against defendants are AAA Life \nInsurance Company and its agent, Craigory Webb. Plaintiff appealed from a\n final judgment of dismissal that was entered after the trial court \nstruck certain causes of action in plaintiff's operative complaint and \nsustained the defendants' demurrer as to other causes of action, without\n leave to amend.\n\nIn Wynzell Lynn, Jr. v. AAA Life Insurance Company et al., F085402, \nCalifornia Court of Appeals, Fifth District (February 9, 2024) explained\n in a lengthy opinion why the trial court erred.\n\nFACTUAL BACKGROUND\n\nPlaintiff purchased from defendant AAA Life Insurance Company (AAA) a \nlife insurance policy for himself, along with a child term rider (rider)\n providing up to $10,000 in coverage per insured child. According to the\n First Amended Complaint (FAC) plaintiff understood from his prepurchase\n conversations with Webb that the rider would cover all of the children \nin plaintiff's household.\n\nWhen plaintiff first contacted Webb within their household were four \nchildren under the age of 19.\n\nWebb, as the agent for the insurer, stated, "'the rider covers all your \nchildren for $7.00."\n\nThe three-page rider contained the following relevant provisions. The \nrider "provides term life insurance coverage for each Insured Child." An\n Eligible Child must be dependent upon the Insured for support and \nliving within the Insured's household or attending an educational \ninstitution as a full-time or part-time student.\n\nIn November 2020, about seven months after plaintiff's policy became \neffective, tragically, Bowen was fatally shot. On the date of his death,\n Bowen was 17 years old, unmarried, financially dependent on plaintiff, \nand living in plaintiff's household. \n\nDISCUSSION\nBreach of Contract (Express Contract Theory)\n\nTo the extent the rider can reasonably be interpreted to provide \ncoverage for a child with a relationship to the insured akin to Bowen's \nrelationship with plaintiff, the FAC properly pleads the element of \nbreach-the only element the trial court found missing.\n\nIn addition, in Shade Foods, Inc. v. Innovative Products Sales \n&Marketing, Inc. (2000) 78 Cal.App.4th 847 (Shade Foods) the Court \nof Appeals held that an insurance carrier is "bound by its agent's \ninterpretation of coverage under the policy," and an agent's authority \nto bind the principal "unquestionably extends to giving ambiguous \ncontract provisions an interpretation that the insurer itself might \nreasonably adopt." As a result, the court concluded, the insurer was \n"bound by its agent's interpretation of the contract."\n\nBreach of the Covenant of Good Faith and Fair Dealing\n\nNegligence\n\n Accordingly, it concluded the FAC alleges adequate facts to show a \nspecial duty of care, breach of that duty, causation, and damages.\n\n\nZALMA OPINION\n\nThis case, over a $10,000 dispute, went through a claim denial, a \ndemurrer dismissing the entire action, an appeal, a reversal of the \nbreach of contract claim, and a return to the trial court to allow \namendment of a statutory breach claim, if possible, and trial on the \nbreach of contract case. No bad faith because it took the court to find a\n statute making a person "held out as a son" to be a son even if there \nis no physical, natural relationship nor a relationship by adoption. \nThis is a case where the concept of "millions for defense and not a dime\n for tribute" requires reconsideration, mediation and settlement.\n\n(c) 2024 Barry Zalma & ClaimSchool, Inc.\n\nPlease tell your friends and colleagues about this blog and the videos \nand let them subscribe to the blog and the videos.\n\nSubscribe to my substack at \nhttps://barryzalma.substack.com/publish/post/107007808\n\n\ngO to the Insurance Claims Library \u2013 \nhttp://zalma.com/blog/insurance-claims-library.