When an insured makes a mistake, it is human nature that he will look for someone to blame. In the case of a serious underinsured auto accident, that someone may be his insurance agent.
A Wisconsin farmer decided to move his homeowners coverage to another insurer after suffering an uninsured loss involving an injury to one of his employees. He contacted a local agent for a regional insurer about a replacement policy. The agent visited the farm twice during a period of two months and obtained a farmowners policy from the insurer.
The farmowners policy contained a farm umbrella liability coverage endorsement that provided $1 million coverage. A separate endorsement stated that the farm umbrella endorsement did not cover injury or property damage arising out of the use “of any automobile while away from premises owned by, rented to, or controlled by” the farmowner. The insurer attached this endorsement because it did not provide the underlying auto insurance, which was still with the original carrier.
At the time he purchased the farmowners policy, he had three months remaining on his existing auto policy. He apparently renewed it.
More than a year after he obtained the farmowners policy and umbrella endorsement, he had an accident while hauling a trailer loaded with cattle between two of his properties on a public road. Three people in the other vehicle were injured. The court opinion did not describe their injuries or the amount of damages they sought. However, the farmer’s auto insurance policy provided $500,000 bodily injury liability coverage per accident, and he asked for coverage under the umbrella endorsement. The injured parties were probably seeking $1 million or more in damages.
The insurer denied his claim for coverage under the farm umbrella endorsement, citing the exclusion for use of an auto off of farm premises. The farmer sued the insurer and his agent, arguing that the exclusion was ambiguous in the context of the entire policy. He also argued that the policy should be reformed to provide the coverage and that, if the court would not reform the policy, his agent was negligent.
The trial court ruled in favor of the insurer and agent on all counts. It found that there was nothing ambiguous about the terms of coverage; that there was no evidence the farmer had asked his agent to obtain coverage for off-premises use of his autos; and that there was no evidence that the agent had failed to act with reasonable care in obtaining the coverage he had discussed with the farmer. The farmer appealed.
The appellate court upheld the trial court’s conclusions. The terms of the exclusion, it said, applied whether he had underlying coverage or not. The court also said that it could not reform the policy because the insured admitted in a deposition that he had never specifically asked his agent to have the umbrella endorsement cover off-farm use of his vehicles.
Because he never requested the coverage or asked to have his auto coverage moved to the new carrier, the court also held that the agent was not negligent. It noted that the agent never contracted to provide advice. It also discounted the opinion of the insured’s expert witness, saying that the question of an agent’s duty to an insured is a matter of law based on fact, not opinion. “(N)o reasonable factfinder could conclude (the agent) had breached the relevant standard of care,” it concluded.
While the record shows that the agent was aware of when the farmer’s auto policy was due to renew, it does not appear that he followed up to quote replacement coverage. While the insured also did not ask, the agent missed an opportunity to sell more coverage. The new carrier might have removed the umbrella exclusion if it obtained the underlying coverage.
The opinion also stated that the agent had little documentation of his discussions with the insured. Letters or emails inviting the insured to contact him about auto insurance might have been sufficient to kill the lawsuit much earlier.
Insureds whose coverage turns out to be less than they expected may blame their agents. Fortunately for this agent, his client had little evidence to support the accusation.