IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
DONALD ISKEN, )
)
Plaintiff, )
) C.A. No.: N22C-04-170 FJJ
v. )
)
RICK GALSTER III INSURANCE )
AGENCY, INC., )
)
Defendant. )
Date Submitted: October 4, 2022
Date Decided: November 3, 2022
OPINION AND ORDER UPON CONSIDERATION OF
RICK GALSTER III INSURANCE AGENCY, INC.’S MOTION TO DISMISS
DENIED.
Sean O’Kelly, Esquire, O’Kelly & O’Rourke, 824 North Market Street, Suite
1001A, Wilmington, Delaware 19801
Loren Barron, Esquire, Margolis Edelstein, 300 Delaware Avenue, Suite 800,
Wilmington, Delaware 19801
JONES, J.
1
OPINION AND ORDER
The Plaintiff, Donald Isken (“Mr. Isken”), has filed suit against Rick Galster
III Insurance Agency, Inc. (“Galster Insurance”) seeking monetary damages for
negligence, fraudulent inducement, and fraudulent misrepresentation. Galster
Insurance has moved to dismiss the complaint because: (1) Mr. Isken did not allege
Galster Insurance owed him a fiduciary duty; (2) Mr. Isken did not plead fraud with
particularity; and (3) Mr. Isken relied on representations outside the four corners of
the contract.
For the reasons that follow, Galster Insurance’s motion to dismiss must be
DENIED.
FACTUAL BACKGROUND
Galster Insurance is a Virginia stock corporation that maintains a place of
business in Wilmington, Delaware.1 A third-party broker agency, Galster Insurance
sells, solicits, and negotiates insurance on behalf of its clients in exchange for
compensation. Mr. Isken is a Delaware resident who owns property located at 913
Stuart Road in Wilmington, Delaware (the “Insured Premises”).2
Nationwide Insurance Company covered the Insured Premises via a
homeowner insurance policy (“the Nationwide Policy”) until September 2018, when
Nationwide elected not to renew the policy.3 In search of a replacement policy, Mr.
1
See Plaintiff’s Complaint at 1. The Court takes the factual record from the complaint, as is required under Superior
Court Civil Rule 12(b)(6).
2
See id. at 2
3
See id.
2
Isken contacted Galster Insurance and instructed its agent broker, Rick Galster III
(“Mr. Galster”), to obtain new coverage for the Insured Premises on equivalent terms
as the Nationwide Policy.4 Galster Insurance secured a replacement policy (“the
Replacement Policy”) through Scottsdale Insurance Company, which became
effective on September 19, 2018.5
Nearly two years later, in August 2020, two storms hit the Insured Premises.6
Consequently, the Insured Premises sustained loss of electricity for several days. 7
Without electricity, the Insured Premise’s sump pump failed and one foot of water
flooded into two fully furnished living spaces in the lower-level living area.8 All
told, the cost of restoring the damaged areas to their previous condition exceeded
$100,000.9
When Mr. Isken informed Galster Insurance of the damage, Mr. Galster
advised Mr. Isken to immediately file a claim under the Replacement Policy.10 Mr.
Isken did so.11 However, through his conversations with the in-house claims adjuster
for Scottsdale Insurance Company, Mr. Isken learned the Replacement Policy only
provided $5,000 worth of coverage for water damage, instead of the $50,000 he
instructed Galster Insurance to obtain.12
4
See id. Through their conversations, Mr. Iskin alleges he made Mr. Galster aware of previous claims for water
damage to the Insured Premises in 2015 and 2017.
5
See id. at 3.
6
See id.
7
See id.
8
See id.
9
See id.
10
See id.
11
See id.
12
See id. at 4.
3
Mr. Isken subsequently requested, and received for the first time, a copy of
the Replacement Policy.13 After reviewing it, Mr. Isken filed the instant suit against
Galster Insurance.14 Galster Insurance now moves to dismiss the complaint.
STANDARD OF REVIEW
On a motion to dismiss, the Court must determine whether the “plaintiff ‘may
recover under any reasonably conceivable set of circumstances susceptible of
proof.’”15 If the plaintiff may recover, then the motion must be denied.16 This Court
may grant the motion if “it appears to a reasonable certainty that under no state of
facts which could be proved to support the claim asserted would plaintiff be entitled
to relief.”17 When applying this standard, the Court will accept as true all non-
conclusory, well-pled allegations18 and must draw all reasonable factual inferences
in favor of the non-moving party.19
Further, to state a viable claim for fraud under Superior Court Civil Rule
9(b),20 the plaintiff must well-plead:21
(i) a false representation, usually one of fact, made
by a defendant; (ii) defendant knew or believed the
representation was false, or made it with reckless
indifference to the truth; (iii) an intent to induce the
plaintiff to act or refrain from acting; (iv) the
plaintiff acted or refrained from acting in justifiable
13
See id.
14
See id.
15
Holmes v. D’Elia, 2015 WL 8480150, at *2 (Del. 2015).
16
See Deuley v. DynCorp Int’l, Inc., 2010 WL 704895, at *3 (Del. Super. 2010) (internal citations omitted).
17
Fish Eng’g Corp. v. Hutchinson, 162 A.2d 722, 724 (Del. 1960).
18
See Pfeffer v. Redstone, 965 A.2d 676, 683 (Del. 2009).
19
See Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005) (internal citations omitted).
20
Super. Ct. Civ. R. 9(b).
21
Trentwick American Litigation Trust v. Ernest & Young, LLC., 906 A.2d 168, 207 (Del. Ch. 2006), aff’d 931 A.2d
438 (Del. 2007).
4
reliance on the representation; and (v) damage
resulting from such reliance.22
ANALYSIS
A. Galster Insurance’s Duty to Mr. Isken
Galster Insurance first argues that Mr. Isken’s professional negligence claim
must fail because Mr. Isken did not plead and prove Mr. Galster owed him a
fiduciary duty. To support this proposition, Galster Insurance turns to this Court’s
recent decision in Fansler v. North American Title Insurance Company.23
The Fansler Court granted dismissal in a professional negligence claim after
it determined the plaintiff failed to establish a fiduciary duty existed between the
parties.24 Fansler, however, does not require insured plaintiffs to well-plead the
existence of a fiduciary duty in every negligence claim brought against insurance
agents.25
This Court first explored the relationship between insured and agent in Sinex
v. Wallis. 26 The Sinex plaintiff brought suit against a defendant and the defendant’s
employer. In response, the defendant filed third-party complaints against its
insurance agent and agency, claiming both negligently failed to obtain more than the
minimum no-fault insurance coverage. Granting summary judgment for the
defendant, Sinex outlined the duties between the two parties:
22
See Infomedia Cp., Inc. v. Orange Health Sols., Inc., 2020 WL 4384087, at *3 (Del. Super. 2020) (citing Stephenson
v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983)).
23
2019 WL 1281432 (Del. Super. 2019).
24
See id. at *5.
25
See generally id.
26
611 A.2d 31 (Del. Super. Ct. 1991).
5
Ordinarily, an insurance agent assumes only those duties
normally found in an agency relationship. This includes
the obligation to use reasonable care, diligence, and
judgment in procuring the insurance requested by the
insured. The agent assumed no duty to advise the insured
on the specific insurance matters merely because of the
agency relationship. On the other hand, an expanded
agency or relationship creating a greater duty of the agent
to the insured may arise when an agent holds himself or
herself out as an insurance counselor or specialist and is
receiving compensation apart from the premium(s) paid.27
The Sinex Court next addressed plaintiff’s argument that the defendant agent
violated the ordinary duty of reasonable care, diligence, and judgment. In support
of its position, the Sinex plaintiff directed the Court’s attention to a line of cases from
other jurisdictions. Those cases held an insurance agent breached his duty to the
insured when the agent failed to follow explicit instructions regarding the type (or
amount) of coverage required. The Court, however, declined to address whether
Delaware recognizes such a cause of action. Instead, Sinex rejected the plaintiff’s
argument as a matter of fact, finding the plaintiff never provided the defendant agent
with specific instructions in the first place.
Fourteen years after Sinex, this Court again confronted the issue of insurance
agent liability in Montgomery v. William Moore Agency.28 Denying summary
judgment, the Montgomery Court set out its view of the law:
The court holds that an insurance agent must offer
coverage in the way that a reasonably competent agent
would under the circumstances. And, generally, an
insurance agent has no duty to advise a client. This general
27
See id. at 33 (internal citations omitted).
28
2015 WL 1056326 (Del. Super. 2015).
6
rule, however, turns largely on the relationship between
the agent and the client and will not apply if: 1) the agent
voluntarily assumes the responsibility for selecting the
appropriate policy for the insured or 2) the insured makes
an ambiguous request for coverage that requires
clarification.29
Montgomery, in short, recognized a fiduciary relationship is not a required element
in every negligence case between an insured and an agent.
Finally, this Court most recently addressed the duties between insured and
agent in Slaubaugh Farm, Inc. v. Farm Family Ins. Co.30 In Slaubaugh, two plaintiff
farmers instructed their long-time insurance agent to obtain new homeowner’s
insurance with coverage for snow and ice. When the policy was issued, however,
the issuing insurance company failed to include the snow and ice coverage. The
plaintiffs brought this deficiency to the attention of the agent.
The agent, in turn, requested the insurance company to issue a revised policy
with all demanded coverage. In response, the insurance company acknowledged the
request but failed to take further action. The plaintiffs subsequently filed suit against
insurance company and agent after a blizzard caused extensive damage to a chicken
house on the property. Concluding a genuine issue of fact existed as to whether the
agent breached his duty, the Slaubaugh Court held:
An insurance agent assumes only those duties normally
found in an agency relationship. This duty includes the
obligation to use reasonable care, diligence, and judgment
in procuring the insurance requested by the insured. An
insurance agent most offer coverage in the way that a
29
See id. at *2.
30
2018 WL 5473033 (Del. Super. 2018).
7
reasonably competent agent would under the
circumstances. Generally, an insurance agent does not
have a duty to advise a client with respect to appropriate
insurance coverage. This general rule, however, does not
apply if the agent voluntarily assumes the responsibility
for selecting the appropriate coverage or if the insured
makes an ambiguous request for coverage that requires
clarification.31
Slaubaugh then turned to the alleged failure of the agent to follow up with the request
for revised coverage. To that point, the Court found “[i]t is … well-settled law that
an agent has the obligation to use reasonable care, diligence, and judgment in
processing the insurance requested by the insured.”32
Slaubaugh makes clear that an agent carries the affirmative duty to seek
clarification when a request for insurance coverage is ambiguous. If a duty is
charged in this context, then surely it must be imposed when an agent fails to follow
the explicit instructions of the insured.33 Thus, to the extent there is any doubt in
Delaware jurisprudence, this Court will not require a plaintiff to plead the existence
of a fiduciary relationship if an agent allegedly fails to follow the specific
instructions of the insured.
31
See id. at *3 (internal citations omitted).
32
See id. at *4.
33
As noted in Sinex, a line of cases from other jurisdictions impose liability on the agent when the agent fails to
follow the explicit instructions of the insured. See, e.g. Consolidated Sun Ray, Inc. v. Lea, 401 F.2d (3d Cir. 1968),
cert. denied 393 U.S. 1050, 89 S. Ct. 688, 21 L.Ed.2d 692 (1969) (duty to exercise care owed by reasonable and
prudent broker breached when agent failed to follow explicit instructions of insured); Port Clyde Foods, Inc. v.
Holiday Syrups, Inc., S.D.N.Y., 563 F.Supp. 893 (1982) (broker breached duty to provide skill, care, and diligence
when insurance agent failed to discover that specifically requested coverage had not been provided by insurer);
Roberson v. Knapp Ins. Agency, 125 Ill.App.2d 373, 260 N.E.2d 849 (1970) (agent found in breach when policy did
not provide coverage specifically requested); Karam v. St. Paul Fire and Marine Ins. Co., La.Supr., 281 So.2d 728
(1973) (breach found when insured requested $100,000 in coverage but agent erroneously obtained $10,000).
8
Mr. Iskin has well-pled that he explicitly instructed Mr. Galster to replace the
Nationwide Policy with equivalent coverage. Because Mr. Galster owed Mr. Iskin
a duty to follow these instructions (even absent a fiduciary relationship between the
two), the Court will not dismiss this count of the complaint.
B. The Negligent Misrepresentation Pleading Requirements
Galster Insurance also argues Mr. Isken has not adequately pled the prima
facie elements of fraud under Delaware law. The Court disagrees.
In TEK Stainless Piping Products, Inc. v. Smith,34 this Court outlined the three
minimum pleading requirements a fraud claim must meet under Superior Court Civil
Rule 9(b) to survive dismissal. Specifically, the TEK Court found the alleged
misrepresentations must: (1) be enumerated; (2) identify the parties to the
conversation; and (3) set out the content of the discussions with sufficient
particularity to place the party on notice of the precise misconduct with which it is
charged.35
The Court is satisfied Mr. Isken’s complaint meets these requirements. Mr.
Isken alleges he specifically instructed Mr. Galster to acquire a policy identical to
the Nationwide Policy. According to Mr. Isken, this conversation took place after
Nationwide noticed the parties it was declining to renew the Nationwide Policy and
before Mr. Galster obtained the Replacement Policy.36 Although Mr. Isken does not
34
2013 WL 7577468 (Del. Super. 2013).
35
See id. at *3.
36
According to Mr. Isken, Nationwide notified him of the refusal to renew the policy on September 18, 2018, and Mr.
Isken relayed this information to Mr. Galster shortly thereafter.
9
specify the time and place of the dialogue, the Court finds the substance of the
discussion lays out the elements of fraud with sufficient particularity. Therefore, the
Court cannot dismiss Mr. Isken’s negligent misrepresentation and fraudulent
inducement claims.
C. Flowshare and the Four Corners of the Contract
Finally, Galster Insurance contends Mr. Isken’s fraudulent inducement claim
must fail because the claim relies on representations made by Mr. Galster outside
the four corners of their contract. Mr. Isken’s reliance on extra-contractual
representations, so claims Galster Insurance, runs afoul of this Court’s “bootstrap
doctrine” as articulated in Flowshare, LLC v. GeoResults, Inc.37 The Court finds the
bootstrap doctrine has no applicability to this case.
Flowshare was a breach of contract action concerning an integration clause.
As the Flowshare Court instructed:
A fraud claim can be based on representations found in a
contract, however, “where an action is based entirely on a
breach of the terms of a contract between the parties, and not
on a violation of an independent duty imposed by law, a
plaintiff must sue in contract and not in tort.” A plaintiff
“cannot bootstrap” a claim for a breach of contract into a claim
of fraud merely by alleging that a contracting party never
intended to perform its obligations or “simply by adding the
term fraudulently induced to a complaint.” Essentially, a fraud
claim alleged contemporaneously with a breach of contract
claim may survive, so long as the claim is based on conduct
that is separate and distinct from the conduct constituting
37
2018 WL 3599810 (Del. Super. 2018).
10
breach. Allegations that are focused on inducement to contract
are “separate and distinct” conduct.”38
In other words, Flowshare assumes a breach of contract action with a corresponding
fraud claim. Mr. Isken has not alleged Galster Insurance breached their contract;
rather, as noted above, his claim is rooted in Mr. Galster’s breach of duty owed to
him in tort alone and independent of their contract. Therefore, a Flowshare analysis
is inappropriate and the Court will not dismiss the fraudulent inducement claim
under this theory.
CONCLUSION
Based on the foregoing, Galster Insurance’s Motion to Dismiss is DENIED.
IT IS SO ORDERED.
/s/ Francis J. Jones, Jr.
Francis J. Jones, Jr., Judge
cc: File&ServeXpress
38
See id. at *5 (internal citations omitted).
11
Isken v. Rick Galster III Insurance Agency, Inc.
Combined Opinion