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Conspicuous Disclosure Under UCC 1-201(10)

On Behalf of | Mar 26, 2009 | Firm News |

Broberg v. Guardian Life Ins. Co. of America (March 2, 2009) 90 Cal. Rptr. 225, 2009 Daily Journal D.A.R. 2983

Broberg is an insurance case. The insured claimed fraud and misrepresentation in connection with the sale of the policy. The insurer said it had disclosed the operative risk on the last page of a sales chart. Under California case law (Haynes v. Farmers Ins. Exchange (2004) 32 Cal. 4th 1198, 1204), the disclaimer had to be “conspicuous, plain and clear” to be effective. p. 233. The disclaimer was contained in the body of a 39-line single-spaced end note, all capitalized, with the same font, color, border, style and spacing. There was nothing about the particular disclaimer language to draw one’s attention to it (at least above other lines). The majority concluded that this could not qualify as conspicuous, guided by the California’s version of UCC Section 1-210(10). The capitalization of the disclosure language did not persuade the majority, apparently because all 39 lines were capitalized, and therefore insufficient attention was directed to these particular disclaimers.

Since the case doesn’t involve sale of goods–and insurance contracts are often more strictly construed–it is not clear how much reliance will be placed on this decision in UCC cases.