Arizona Supreme Court Holds That Insureds May Assign Claims For Professional Negligence Against Their Insurance Agent To Third Parties.

After purchasing a liquor store, the insureds obtained a business and umbrella policy from their insurance agent. The agent allegedly failed to advise them that they could also purchase liquor liability coverage. The store sold beer to a minor who gave it to a second minor who crashed his vehicle, killing his passenger. The father of the deceased sued the store and the insureds for wrongful death. The insurer refused to defend the suit because not liquor liability coverage was in place. To settle the case, the insureds stipulated to a judgment, which Plaintiff agreed not to execute in exchange for an assignment of the insureds’ right to sue their insurer and insurance agent. Plaintiff sued both for negligence and breach of fiduciary duty. The trial court dismissed the claims, citing Premium Cigars International Ltd. v. Farmer-Butler-Leavitt Insurance Agency for the proposition that professional negligence claims against an insurance agent were non-assignable. The Court of Appeals affirmed. This appeal followed.

The Supreme Court reversed and remanded, holding that claims for professional negligence against insurance agents are assignable. The Court rejected the reasoning used in Premium Cigars, where the court of appeals held a claim for professional negligence against an insurance agent un-assignable because it resembles a legal malpractice claim, which cannot be assigned. Discussing the numerous differences between the attorney-client relationship and the insurance agent-insured relationship (as well as general principles governing the assignability of claims), the Court found the comparison made in Premium Cigars unjustified. The Court went on to reject the insurance agent’s public policy arguments for holding such claims un-assignable.

Justice Bales wrote the opinion for the unanimous Court.