California Supreme Court Vacates Court of Appeal Decision in Williams v. National Western Life

October 7, 2021

On September 22, 2021, the California Supreme Court granted review of the anti-consumer decision in Williams v. National Western Life Insurance Company, which held that an agent who sold for multiple life insurers was the agent of the consumer, not the insurer, and that the insurer owed no duty of care to supervise the agent.  See July 28, 2021 blog post below.  In the same order, the Supreme Court vacated the Court of Appeal opinion and transferred the case back to the Court of Appeal with instructions.   While the instructions include citations to authorities that should require a ruling in favor of the policyholder, the Supreme Court did not direct a ruling one way or the other, and it is by no means clear what the Third Appellate District will do with the case on remand.

Because the same precedents that led the Third District astray in Williams remain on the books, California law continues to be unclear abut the scope of insurer responsibilities for agents that sell the insurer’s policies.  California law should be clarified to state that 1) an agent selling life insurance on commission is considered the agent of the insurer, not the insured, and 2) the insurer has a duty of ordinary care to supervise its agent.  Put another way: 1) whether the insurance company is liable for the misconduct of its commissioned agent under the doctrine of respondeat superior should be analyzed based on the recognition that the agent is not the agent of the consumer, but of the insurer; and 2) the insurer should be liable in negligence if it fails to exercise ordinary care in supervising its agent.

The Supreme Court Order reads:

The petition for review is granted. The matter is transferred to the Court of Appeal, Third Appellate District, with directions to vacate its decision and reconsider its finding that Pantaleoni did not have an agency relationship with National Western Life Insurance Company in light of Insurance Code sections 32, 101, 1662, 1704 and 1704.5 and O’Riordan v. Federal Kemper Life Assurance Company (2005) 36 Cal.4th 281, 288. (See also Ins. Code, §§ 31 [” ‘Insurance agent’ means a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life, disability, or health insurance, on behalf of an admitted insurance company” (emphasis added)], 33 [” ‘Insurance broker’ means a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health with, but not on behalf of, an insurer” (emphasis added)].) (Cal. Rules of Court, rule 8.528(d).) The Reporter of Decisions is directed not to publish in the Official Appellate Reports the opinion in the above-entitled appeal filed June 11, 2021, which appears at 65 Cal.App.5th 436. (Cal. Const., art. VI, § 14; Cal. Rules of Court, rule 8.1125(c)(2).) (See Standing Order Exercising Authority Under California Rules of Court, Rule 8.1115(e)(3), Upon Grant of Review or Transfer of a Matter with an Underlying Published Court of Appeal Opinion, Administrative Order 2021-04-21; California Rules of Court, rule 8.1115(e)(3) and corresponding Comment, par. 3.)

Votes: Cantil-Sakauye, C.J., Corrigan, Cuellar, Kruger and Jenkins, JJ.


LICAC is pleased to note that some of the authorities cited by the Supreme Court were supplied by LICAC in its amicus curiae letter submitted in support of the policyholder.  See  Filed LICAC_Amicus Letter

Those authorities include Insurance Code Section 1704.5.  To our way of thinking, Section 1704.5, when read together with Section 1704, establishes that “the insurer is responsible for all actions of the agent that relate to the application and policy” regardless of whether the agent sells for a single insurer or for multiple insurers.  California law should be clarified to make the insurer’s responsibility clear to everyone.

The LICAC Team