The critical focus is not on the principal's and agent's intention to enter into an agency relationship, but on whether a third party relies on the principal's conduct based on a reasonable belief in the existence of such a relationship. The agency relationship between Wengler and Bishop was established by Steven’s testimony that he went to Bishop Insurance's office for his first meeting with Wengler. The receptionist summoned Wengler, who emerged from inside the Bishop Insurance office area, and Steven was directed by the receptionist to a room off to the side to discuss insurance matters with Wengler. Further, Steven testified that he made his check out to Bishop Insurance and that Wengler accepted the check. Bishop Insurance then placed the original policy with Lloyds.

The appellate court concluded that based on the evidence, the jury could reasonably find that Wengler had apparent authority to act on behalf of Bishop Insurance and that Bishop Insurance was liable to the Vreekens for Wengler's acts.

Steven contacted Wengler on March 23, 2005 to “find out what I could do to make sure my policy would continue to be in force.” Steven testified that Wengler told him that “he would take care of it.” Wengler, with the assistance of Bishop Insurance employee Carol Young, attempted to reinstate the policy, but learned that same day that the original policy would not be reinstated. Neither Wengler nor Bishop Insurance ever notified the Vreekens that the original policy had not been reinstated before the house collapsed two months later. Wengler also concealed from the Vreekens that he had submitted the second application with a material misrepresentation that resulted in voiding the second policy.

The Bishop defendants owed Steven a duty to inform him that Wengler's attempt to reinstate the original policy failed and of Wengler's actions in seeking the second policy. Wengler had taken on the responsibility of reinstating the policy, and Steven was not aware that his home would not be covered.

Although, as a general rule, the agency relationship between an insurance broker and the insured terminates upon procurement of the requested insurance policy, inherent in the obligation to seek continuation of an insurance policy is the duty to notify the applicant if the insurer declines to continue to insure the risk so that the applicant may not be lulled into a feeling of security or be put to prejudicial delay in seeking protections elsewhere.

When an agent undertakes to procure insurance and fails to do so, or when he fails to inform the principal of the nonavailability of insurance from a prospective insurer so that the principal can obtain insurance from another insurer, the agent may be liable. The burden of proving the nonavailability of insurance coverage is on the insurer or the broker, because it is an affirmative defense that is within the peculiar knowledge of those familiar with the market. Furthermore, a broker cannot meet its burden of showing a lack of proximate cause between its failure to properly procure insurance and the insured's lack of coverage merely by showing that the insurer which it approached would not supply the insurance in question.

Although Hawaiian law has not yet addressed the specific question to require plaintiffs to establish the availability of alternative insurance coverage in all cases involving negligent failure to procure a policy would require more than the “substantial factor” test. Even if a plaintiff would have been unable to obtain alternative coverage, an insurance agent's failure to notify the plaintiff that the agent was unable to obtain coverage, or that the agent had engaged in conduct resulting in the policy becoming void, could still be a “substantial factor” causing the plaintiff's damage. The Vreekens were not required to demonstrate that alternative insurance was available as part of their prima facie case.

There was evidence adduced from which the jury could conclude that Wengler made the statement “I'll take care of it” without sufficient intent that he would be able to renew the policy, despite Steven's reliance on the renewal. Wengler testified that when Steven telephoned, Wengler did not tell Steven that he would need a new policy, and did not tell Steven to make the insurance renewal payment by credit card or any other instantaneous means.

Punitive damages were assessed against Wengler and Bishop. The appellate court found there was no basis for punitive damages against Bishop since they were not vicariously responsible Wengler’s actions, they reversed the punitive damages against Bishop and affirmed the punitive damages against Wengler.