Plaintiff insureds appealed a judgment from the Superior Court of Orange County (California), which, after finding an estoppel, was entered in favor of defendants, an insurer and its agents, in the insureds’ action alleging failure to insure their property as contracted.
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On appeal, the insureds claimed the release did not release the agents. The agents argued that the insureds had only one cause of action and, having released the insurer, could not proceed upon any of the pleaded remedies and that the reservation of rights was a nullity as to the agents. The court held that the insureds’ only injury was the failure to insure the property adequately. The court held that the reservation of rights was a nullity because the negligent invasion of the insureds’ contractual rights by the agents was, by virtue of the agents’ agency relationship to the insurer, attributable to the insurer, as the agents’ principal, and a legal remedy could be maintained only against the insurer; therefore, the release extinguished the insureds’ sole primary right. The court held that the insurer was solely liable for the agents’ negligence because the agents were known by the insureds to be the agents of the insurer and the insureds knew the policy would be issued by the insurer. The court rejected the insureds’ dual agency argument because the trial court’s implied finding that there was no dual agency was supported by substantial evidence.
The court affirmed the judgment for the agents.