A California man blamed his leg amputation on a faulty shoe insert. After the insert manufacturer’s liability insurance company denied coverage for his lawsuit, the company gave its rights to sue its insurance agent to the patient.
The company manufactured “podiatric and orthopedic shoe inserts.” They also ran a store that filled shoe insert prescriptions. They asked an insurance agency to obtain their coverage in 2015. That December the agency obtained a general liability policy. The policy contained a professional liability exclusion that applied to “medical, surgical, dental, X-ray, or nursing services treatment, advice or instruction.”
Around the same time, a doctor prescribed shoes with custom-molded inserts for a patient with diabetes. The patient took the prescription to the manufacturer’s store. He met with the store owner, who recommended inserts that he said were superior to those the man was using. However, the patient found the current ones to be more comfortable and requested those inserts. The store owner agreed to provide the ones he wanted.
However, the shoes that the store delivered to the patient did not have those inserts. He found them to be a bit too snug and not as comfortable as what he was used to but decided to give them a try. Within a week, his feet were swelling and red, and his right large toe had a black spot on it. The store owner told him that the shoes apparently had “a bad insert.”
Shortly afterwards, gangrene set in. Surgeons amputated the toe and part of the foot, but the problem worsened. In May, his right leg was amputated below the knee. He concluded that the bad inserts in his shoe caused his injuries.
He sued the manufacturer in November 2017. The liability insurance carrier initially provided a defense under a reservation of rights. However, a few months later the carrier filed a “declaratory judgment action,” a suit in which one party asks a court to determine the rights and obligations of two parties in a dispute. The carrier sought to have the court declare that it had no duty to defend the manufacturer or pay any damages to the injured man and that it should be reimbursed for the legal expenses they had already paid. In October 2018, the court ruled that the professional services exclusion applied and the carrier owed no coverage.
In an August 2021 agreement, the manufacturer agreed to assign its potential recoveries against the carrier and their agent to the patient. An arbitrator awarded $1.5 million in damages for the injuries resulting from the shoes. The following spring, the man sued the agency and amended his lawsuit in November 2022 and again in April 2023. The trial court ruled that the time period for filing suit under the statute of limitations expired before this suit was filed and ruled in the agency’s favor. The patient appealed.
In October 2025, the appellate court also ruled in the agency’s favor. The judges said that the period for filing an errors and omissions suit began in October 2018 when the court ruled that the insurer did not owe any coverage. Under the state’s two-year statute of limitations, that gave the manufacturer until October 2020 to file suit. However, after the manufacturer assigned its rights to the patient, he did not file suit until April 2022. This was too late, and the judges upheld the trial court’s ruling in favor of the agency.
Recommending healthcare products to a consumer is a professional liability exposure. The court’s opinion did not state whether the agency ever suggested that the manufacturer purchase coverage for it. In most states, an agency’s legal obligation is to obtain the requested coverage but not to recommend additional coverage. Assuming the role of insurance advisor presents numerous liability risks to an insurance agency. Not all are willing to do it.
It’s possible the agency could have avoided this lawsuit by making a documented recommendation to its insured to buy this coverage. However, there is no guarantee that the plaintiffs would not have found some other grounds. This appears to be one of those cases where the agency was unable to avoid the lawsuit. Fortunately for them, the lawsuit came too late.
