When an insurance agent explains the coverage in a policy to the client, the client will remember what was said. Most clients do not read their policies; they will remember what they heard, not what the policy says. If the two are not the same, and the coverage turns out to not be what the client expected, lawsuits can ensue.
A Wisconsin camper dealership began working with a local independent insurance agency in 2004 or 2005. A few years after that, the agent obtained what the court labeled a “garage policy” to insure the inventory of campers. This policy included a deductible of $500 per unit for losses resulting from hail damage. A large percentage of the inventory was stored outdoors.
After four renewals, the insured started to have hail loss problems. In May 2011 a hail storm caused $100,000 in damage to the inventory. The insurer paid the resulting claim and renewed the policy four months later, again with a $500 per unit hail deductible. The following summer, the insured sustained another $100,000 in hail damage. The insurer again paid the claim but then issued a non-renewal notice for the policy expiring in September 2012.
Shortly before expiration, the agent informed the dealership’s owner that he had received a quote for a policy with a $5,000 per unit hail deductible. He also told her that he believed he could do better the following year if the dealership had no hail losses during the policy term. She agreed to accept the quote with the higher deductible, and the policy was issued.
In August 2013, the agent told the owner that her insurer had agreed to renew the policy with more favorable terms. When they met, he gave her a coverage summary sheet stating the deductible for “Dealers Phys Dam” as “Comp & Coll 1000/5000.” The owner later testified that the agent “specifically informed her when reviewing the summary sheet that the policy had a $1,000 per-unit deductible for hail damage claims, which was capped at $5,000 total.” She accepted the quote.
As the 2014 renewal date approached, the agent told her that he had obtained quotes from the incumbent carrier and a competitor, both offering hail deductibles of $1,000 per unit. Before they could meet in person to review the quotes, the dealership suffered yet another hail storm.
The owner testified that she received a copy of her 2013-14 policy only after the storm occurred. The policy showed a hail deductible of $5,000 per unit with no aggregate deductible. The storm damaged 25 campers, resulting in a deductible of $125,000 for the $190,000 loss. The insurer paid the balance, and the following winter the dealership sued the agent for $120,000 – the difference between the deductible it paid and the $5,000 aggregate it expected.
The case went to trial, but before it was submitted to the jury, the judge found that the dealership had no case and ruled in the agency’s favor without the jury having to decide. The dealership appealed, but the higher court agreed with the lower one.
The verdict rested on the appearance of market realities – no policy with the deductible level the dealership wanted was available. “Simply put,” the court wrote, “no credible evidence was introduced at trial to support a finding that, absent Alderman’s alleged negligence, Camper Corral could have obtained a policy with a hail damage deductible of less than $5,000 per unit.”
The appellate court’s opinion leaves some questions unaddressed. Why did the agent tell the insured the deductible was lower than it actually was? Why did the insured not receive a copy of the policy until a few weeks before it was due to expire? Did the agent not know what was in the policy he sold? Did he even look at it? The answers to these questions will probably not reflect well on the agent.
An insurance agent is the conduit of information between the insurer and the insured. He must relay accurate information to both parties. At best, failure to do so hurts the agent’s reputation. At worst, as in this case, it can make the agent the target of a lawsuit.