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Wyatt – continued from page 7standards imposed by Wyatt, somethingwe should all be aware of.Consider Googling Wyatt v. Union HomeMortgage. Reading the first eight or soparagraphs will give you a good overviewof the issues.An interesting note, one of the attorneys inthe appellate case was Bruce H. Newman,who was the original General Counsel forCMA (before Phillip M. Adleson and now,Robert Finlay).A special thanks to Attorney Craig Forry,of Forry Law, author of the followingarticle about Murry v. UPS Capital InsuranceAgency, Inc. He was kind enough to allowus to provide his article along with thisintroduction. I’m fortunate to be on Mr.Forry’s e-mail list (www.ForryLaw.com).Murray believed he purchased appropriateinsurance to cover the loss, but the insurancecompany denied his claim.Murray sued his insurance broker, UPS CapitalInsurance Agency (UPS Capital), for breachof contract and negligence. He asserted UPSCapital owed him a special duty to make theinsurance policy language understandable toan ordinary person and to explain the scopeof coverage. The court granted UPS Capitalsummary judgment after concluding therewas no heightened duty of care and dismissedMurray’s lawsuit.On appeal, Murray asked to create a new rulethat brokers/agents, specializing in a specificfield of insurance, who hold themselves outas experts, are subject to a heightened dutyof care towards clients seeking that particularkind of insurance.That same day, Tokio Marine AmericaInsurance Company (Tokio) issued a MarineCertificate of Insurance (Certificate), whichMurray believed fully insured the shipmentin the event of any loss or damage byUPS. The Certificate contained a FreeFrom Particular Average (FPA) provision,providing a limitation on coverage.At some point during the shipment toTexas, UPS damaged the equipment andMurray submitted a 36,666.85 claim.Tokio rejected the claim on the groundsthe coverage Murray purchased did notcover the loss. Specifically, Tokio arguedthe Certificate’s FPA provision did not applyto the shipping damages.The appellate court declined the invitation tocreate a per se rule; however, it reversed thejudgment and remanded the matter, and indoing so confirmed some basic principles ofliability for insurance brokers/agents.Murray later learned the policy coveredonly catastrophic losses such as the entiredestruction of the vehicle in which theshipment was carried by UPS, and notdamage caused by factors other than acatastrophic loss such as mishandling thefreight or other causes.Forry ArticleIntroductionIn the recent decision in Murray v. UPSCapital Insurance Agency, Inc., the Californiaappellate court reversed the trial court’sgranting of summary judgment, andremanded the action for a jury trial, becauseMurray raised triable issues of fact as towhether UPS Capital undertook a specialduty by holding itself out as having expertisein inland marine insurance, and Murrayreasonably relied on its expertise.Murray purchased used computer equipmentworth nearly 40,000, which was damagedby the United Postal Service (UPS) while it wasbeing transported from California to Texas.Page 8In 2018, Murray contacted UPS Capitaland requested insurance coverage for ashipment that same day from Californiato Texas. He completed UPS Capital’s formapplication for a house policy coverage andpaid 350. On the form, Murray describedthe shipment as used computer equipmentvalued at 37,000.Murray sued UPS Capital, and his negligenceclaim was based on the premise UPS Capitalowed a special duty to the public and toMurray to exercise reasonable care in itsdealings including a duty of disclosure toinform Murray of the products availableto cover in-transit cargo loss and damagein the absence of a catastrophic loss andfurther to fully explain technical provisionssuch as the FPA provision.Murray maintained UPS Capital breached itsduty of care by failing to fully explain the FPAcontinued on page 9Spring 2021

Wyatt – continued from page 8provision in the Certificate, by not disclosingother available insurance products toMurray, and by not giving Murray theopportunity to purchase insurance thatwould cover loss or damage caused byfactors other than a catastrophic loss.Murray argued an insurance agent mayassume additional duties by an expressagreement or holding itself out as being aspecialist. Because UPS Capital held itselfout as having expertise, it had a duty toinform Murray of the basic coverage detailsof the insurance policy.The trial court granted UPS Capital’s motionfor summary judgment and dismissed thelawsuit, concluding California law is wellsettled as to the limited duty of insurancebrokers, which is only to use reasonablecare, diligence, and judgment in procuringthe insurance requested by an insured.Murray contended the trial court erredbecause he presented facts establishingUPS Capital owed a heightened duty toadvise Murray that All-Risk insurance wasSpring 2021available and/or explain the limitations ofFPA coverage.limited coverage available to ship his usedgoods with UPS.The appellate court found no publishedcases on the issue of whether insurancebrokers, selling one kind of policy,automatically assume additional dutiessimply because they are specialists,implicitly holding themselves out as havingexpertise in that given field of insurance.Murray proposed it create a per se ruleimposing a heightened duty of care forall specialized agents/brokers.As a general rule, an insurance agentassumes only those duties found in anyagency relationship such as reasonablecare, diligence, and judgment in procuringthe insurance requested by an insured.While the appellate court declinedto institute such a rule, it concludedpublic policy supports the creation of areasonable inference of expertise whenthere is evidence the agent specializes ina particular field of insurance.The undisputed evidence of UPS Capital’sspecialization, in addition to Murray’sother evidence, created a triable issue ofmaterial fact that, if found true in Murray’sfavor, would show UPS Capital assumed aspecial duty to advise Murray about theAn insurance agent has no duty toaffirmatively advise an individual seekinginsurance about different or additionalcoverage. There is no fiduciary duty to (1)make available to them a particular kind ofinsurance, (2) advise them of the availabilityof such coverage elsewhere in the industry,or (3) advise them of inadequacies incoverage of which plaintiffs should, asreasonable persons, have themselvesbeen aware.However, an insurance agent may assumea greater duty to the insured when one ofthe following three exceptions arise: (a) theagent misrepresents the nature, extent orcontinued on page 10Page 9

Wyatt – continued from page 9scope of the coverage being offered or provided, (b) there is arequest or inquiry by the insured for a particular type or extentof coverage, or (c) the agent assumes an additional duty by eitherexpress agreement or by holding himself out as having expertisein a given field of insurance being sought by the insured.Whether a duty of care exists is a question of law for the court.Also, whether, and the extent to which, a new duty is recognizedis ultimately a question of public policy. Any extension of theexisting exceptions or creation of a new duty is ultimately aquestion of public policy.The appellate court found no case law specifically defining thephrase “holding themselves out as having expertise,” but itdiscussed the factors that should be considered when applyingthis exception, as discussed in the 1997 decision in Fitzpatrick.The Fitzpatrick first of three exceptions, when the agentmisrepresents the nature, extent or scope of the coveragebeing offered or provided, was based on the court‘s analysis ofthree cases: Nacsa – agent misrepresented policy provided fullcoverage to replace business personal property in case of totalloss; Desai – agent misrepresented insured getting 100 percentreplacement cost coverage with real property insurance policy;and Free – homeowner specifically inquired if coverage limitsadequate to rebuild home.inquiry), Murray’s evidence raised a triable issue of material factregarding application of the third exception (holding itself outas having expertise).The case was remanded to permit a jury to resolve the triableissue of material fact as to whether UPS Capital was holding itselfout as having expertise in a specialized area of insurance, andtherefore, assumed a heightened duty of care.LESSONS:1. The duty of insurance brokers/agents is limited to those foundin any agency relationship such as reasonable care, diligence,and judgment in procuring the insurance requested by aninsured.2. An insurance agent may assume a greater duty to the insuredwhen one of the following three exceptions arise: (a) the agentmisrepresents the nature, extent or scope of the coveragebeing offered or provided, (b) there is a request or inquiry bythe insured for a particular type or extent of coverage, or (c) theagent assumes an additional duty by either express agreementor by holding himself out as having expertise in a given fieldof insurance being sought by the insured.Craig B. Forry, Esq., FORRY LAW GROUP, (818) 361-1321 ForryLaw@Aol.com.The second exception, when “there is a request or inquiry by theinsured for a particular type or extent of coverage”, was based onWestrick, where an insurance agent failed to disclose facts aboutimmediate coverage for a recently purchased truck in responseto a specific inquiry about coverage. The court determined theagent had a duty to explain a limiting provision to the insuredbecause the insured made prior inquiries regarding coverage of awelding truck under his existing policy and the agent had superiorknowledge of the scope of the policy’s automatic coverage clause.The third exception applied when “the agent assumes an additionalduty by either express agreement or by ‘holding himself out’ ashaving expertise in a given field of insurance being sought bythe insured.The appellate court concluded in Murray that neither caseauthority nor public policy support creation of a per se ruleregarding specialists, but rather courts must utilize a totality ofthe circumstances approach.Evidence of specialization at a minimum creates a presumptionthe agent/broker anticipates their clients will rely on theiracknowledged expertise, and supports courts imposing anextended duty.While UPS Capital’s evidence adequately refuted applicationof the second exception (applicable when there is a request/Page 10Spring 2021

Odell MurryMAI FinancialServices, Inc.Can Private Money Fuelthe Recovery Once Again?As the Pandemic Retrenches, Private Money Steps Upn comparing the 2020 COVID -19Pandemic to the Great Recession of2007, there are some major differences,but some similarities. During the GreatRecession of 2007 institutional lenderswere quick to batten down the hatches, themoney stopped flowing, and the resultinghasty retreat of institutional lenders allowedprivate lenders to get involved to keepthe gears of the real estate sector of theeconomy from locking up completely. Astraditional lenders backed away, privatelenders seized the moment and steppedin to fill the void.Today’s economic indicators and the moodmay feel reminiscent of the lead-up to theGreat Recession of 2007. Like with thateconomic disaster, the stock market hasremained stubbornly strong throughoutthe COVID-19 pandemic, despite concernsof a record number of people out of work.The lock-down has hampered much ofregular economic activity, but at the sametime, it has led to record levels of personalsavings. At the start of 2021, there aresome 10 million Americans behind on theirrent and mortgages, and it appears thatgovernment programs are the only thingpreventing a massive crisis in the housingmarket, but that crisis showed signs ofbubbling up to the surface as indicated byfalling rental prices in pricey coastal metrosSpring 2021during late fall and early winter. Since thenrent prices have already begun to climbagain, but it is still too soon to tell if thatrally will be sustainable without continuedgovernment intervention.It can be said that the federal governmentcertainly has intervened more quicklyin this case than in the Great Recession.The Federal Reserve swiftly dropped theFederal funds rate to near-zero, resumedprograms to purchase massive amountsof securities, backstopped money marketmutual funds, and vastly expandedthe scope of its repurchase agreementoperations. Congress approved a 1.8trillion package on March 27, 2020, whichincluded 500 billion in direct payments toAmericans, 208 billion in loans to majorindustries, and 300 billion in Small BusinessAdministration loans. Nine months later,a 2.3 trillion spending package, whichincluded a second round of stimulus, wassigned into law.The question is, what happens if the marketsperceive that government funding dries up,or that the funding provided simply isn’tenough to stave off calamity? Institutionallenders do not manage upheaval the waythat private lenders can. As a result, theopportunity for private lenders may behere again. It may then be up to privatelenders to once again “Save the Day,” as theprivate lending industry did so admirablyin 2007 and 2008.Collapse of EmploymentThe unemployment figures have been dire,as whole sectors of the service economywere paused or diminished because ofCOVID-19 lock-down policies. In April2020, the U.S. unemployment rate peakedat 14.7%, and it has only scaled down to6.4% in January 2021. As we all know, thosenumbers likely are worse among people ofcolor and women, who economists say arebearing the brunt of this economic disaster.Even a short-term interruption in employment can have disastrous consequenceson credit scores for some potential homebuyers, as bills become past due. If federalrecovery programs fail to keep pace witheconomic need, the credit picture for manyhome-buyers, at least with institutionallenders, may grow even murkier.Reshaping of the Real Estate SectorWe are likely to see a dramatic reshapingof the real estate outlook, and it may havereal ramifications for institutional andprivate lenders. Office, retail, vacation, andhospitality real estate all saw a significantcontinued on page 12Page 11

Recovery – continued from page 11dip in value in 2020, and the bottom forthat dip isn’t predicted to come for sometime, according to a recent BloombergNews Report. Also, people are rethinkingwhere they are living and working, bothbecause of the pandemic and becausecompanies have been forced to realize thattechnology allows a dispersed workforce towork effectively and, in some cases, moreefficiently than they would in an office.This means that investments in urban andoffice real estate, once sure bets, are nowon shakier ground.All this may spook institutional investorsfrom putting money down on large-scaleprojects. However, there may be a needfor more small-scale lending for housing inthe suburbs and rural America, as peopleflee to places with more space and are nolonger tied geographically to their jobs.Filling the VoidPrivate lenders have proven they can stepin when institutional lenders waver. WhilePage 12the Great Recession was devastating for thereal estate market, it was private money –gathered from private individuals, pensionfunds, IRA’s, and other private investors –which proved a source of key capital duringthe recovery. For example, In 2012, privatelyfunded multifamily property loans in theUnited States went up 22% over 2011, andprivately funded loans for retail propertyincreased by 17%.These are indeed turbulent times, and it isimpossible to predict fully what the close of2021 will look like in the economy or the U.S.real estate market. What we can say withsome confidence is that history has shownthat private investors may be the lubricantthat keeps the gears of the real estate sectorfrom locking up in times of crisis, and theylikely will be called on to play a large rolein this latest recovery effort.Private lenders are able to navigate moreturbulent terrain because their definitionsof risk and success are fundamentallydifferent from traditional mortgage lending.Private loans are typically based on theamount of equity in a property, rather thanon the borrower’s individual credit score,for example. And private investors aremore concerned with seeing a solid planfor a good rate of return on investmentthan with credit scores, and that may leadthem to find good investments wheninstitutional investors turn their back oncertain borrowers in the real estate market.Odell Murry is founder and president of MAIFinancial Services Inc., a private-mortgagecompany and institutional commercialmortgage broker. He is also a board memberand past president of the California MortgageAssociation. Murry originates institutionaland private-mortgage loans on apartments,industrial, retail and most other incomeproducing commercial real estate. He alsoserves as chairman of the National AdvisoryBoard of the University of MassachusettsW.E.B. Du Bois Center. You can contact OdellMurry at OMurry@MAIFunding.com or (866)MAI-FUND.Spring 2021

Zachary J. Fiene, Esq.Wright, Finlay & Zak, LLPT. Robert Finlay, Esq.Wright, Finlay & Zak, LLPAm I a “Debt Buyer?”Understanding the New Wave of DebtBuyer Statutes and Their Impact onServicing Non-Performing Mortgage DebtThe financial goal of every debt buyeris uniform – maximize your returnon investment. As the debt buyingmarketplace expands, states are enactinglaws to regulate the industry and protectconsumers. The only thing more damagingto your bottom line than a poorer thanexpected return on a purchased debt isfinding yourself in a lawsuit where yourexposure is in the tens of thousands ofdollars because you unknowingly violateda new state law. California and Texas aretwo states who have recently passed“debt buyer statutes” aimed at companiespurchasing charged-off debt on thesecondary market. This article exploresthe impact of those laws on debt buyers,the potential applicability to residentialmortga

For the entrepreneurial CMA members, it would be a “roller coaster on a flat track.” Sometimes, although we ride a roller coaster ride every day, we want to make it wilder than it already is. Perhaps, it i