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Agency Sued For Underinsuring a Classic Car by 70K

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If you were the owner of a 1960s-vintage classic car and you read these words on an insurance agency’s website, what would you think? “... (N)o one knows classic cars and their owners better than (agency.)” “You tell us the value of your classic and we’ll affirm that it’s a fair, accurate number.” (emphasis added.) To at least one classic car owner in California, this sounded like a promise to insure his car for whatever it was worth.

He owned a 1966 Ford Fairlane and visited the agency’s website in 2016 to get a quote. During an interaction with a chatbot on the site, he disclosed the car’s year, make, model and estimated value. He did not state in his lawsuit what amount he gave as the estimated value. A policy was subsequently issued showing the Fairlane in the schedule of covered autos with a guaranteed value of $30,000. He renewed the policy twice.

During this time, the insured said, he:

  • “... (C)ommunicated his perceived value of the Fairlane on every pertinent communication with every [d]efendant ... agent …”
  • Expressed “his willingness to pay the premiums required for full coverage of the value of the Fairlane."

According to him, various individuals at the agency told him that he was adequately insured and “in good shape insurance-wise.” However, his complaint did not say when he had these conversations, who he had them with, or the values that may have been discussed. Regardless, he took this to mean that the car was insured for its full fair market value. In truth, it wasn’t.

During the third policy term, the car’s brakes failed while he was driving, resulting in a collision that rendered it a total loss. The insured claimed the car had a full fair market value of more than $100,000. However, the insurer paid him only the $30,000 policy limit.

He accused the agency of not assessing the car’s value accurately, thus leaving him without adequate insurance limits. He sued the agency and the insurer for breach of contract, negligence, failure to use reasonable care, failure to act fairly and in good faith, and several other grounds.

The judge, however, did not agree with his conclusions. She described his claim that the agency violated an oral contract as vague, and she rejected his argument that the website advertisements created a contract. “... (A)dvertisements,” she wrote, “generally do not constitute legally-binding offers unless they invite the public to perform an action without further negotiation.” The insured did not argue that the agency’s website did so.

Further, she noted he did not maintain that he asked for anything other than the provided coverage, nor did anyone at the agency tell him that the car was insured for more than $30,000. She found his claim that the agency did not use reasonable care not specific enough as to what would have been reasonable care. That lack of specificity also caused her to reject his claims of fraud and unfair competition. Accordingly, she dismissed the suits against both insurer and agency.

While the agency won, it is clear that the statements on its website created the conditions for the lawsuit. They promised to affirm that the value suggested by the potential client was a “fair, accurate number.” While the judge’s opinion does not mention how the insured concluded that the car had a $100,000 value, it is clear the insured and agency interpreted the statements on the website differently.

Balancing effective advertising with errors and omissions loss prevention can be tricky, but all agencies must find ways to do it.

 

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