Most insurance agents have heard a prospective client say, “Get me what I had before, only cheaper.” When the client doesn’t know that didn’t happen, even when they should have known, a lawsuit can result.
A Tennessee couple had moved to the state from Georgia. Their previous insurance included a personal umbrella policy that provided $2 million in excess uninsured/underinsured motorist coverage. When they moved to Tennessee, they contacted a local independent agency to purchase renters, auto and umbrella insurance. During a half hour meeting, the husband allegedly gave the agent a copy of the declarations from the previous personal umbrella policy and told him they wanted the same coverage. The agent later denied that this occurred.
The agent provided the couple with quotes, including one for the umbrella policy. The umbrella quote did not show a separate line item for excess UIM coverage, nor did it show a premium for it. The policy the carrier eventually issued did not provide this coverage or charge a premium for it. It actually contained an exclusion of coverage for UIM claims. Nevertheless, the couple bought all the policies as quoted. They received copies of the declarations and policy forms and paid the stated premiums with no objection.
The policy was renewed twice, with the couple receiving copies and paying the premiums. During the third policy term, the wife was injured and her car totalled when a truck owned by a wrecking service struck her. The wrecking service did not have enough auto liability insurance to fully compensate her. The court’s opinion does not state the amount of damages she sought. However, it was enough to exhaust their primary UIM coverage – probably between $1 and $2 million.
This was when they learned that their umbrella policy did not provide excess UIM coverage. The husband asked for it to be added to the policy immediately, though he was told that the coverage would not apply retroactively. The couple reached an out of court settlement with the wrecking service and the driver.
They sued the agency and the agent for $1 million, arguing that both negligently failed to obtain the requested excess UIM coverage. The agency argued that under state law the couple had accepted the policy as it was when they received it and paid the premium. The trial court ruled in the agency’s favor, but the appellate court reversed the ruling. The agency appealed.
The Tennessee Supreme Court reversed again. While the couple argued that the state law in question did not apply to claims against insurance agents, the court rejected that claim. The couple and the appellate court, they said, distorted the meaning of the law. In their opinion, the state legislature had not intended for the law to exonerate only insurance carriers.
If the agent did anything wrong here, it was overlooking one additional coverage in one policy. It is not clear that the excess UIM coverage was all that important to the insureds at the time of the quote, and consequently the agent did not highlight its absence. This was a mistake. The quote did not include the coverage, but neither did it point out its absence. The carrier readily endorsed it on after the accident, so they likely would have done so at inception had the insureds known and cared that it was missing.
The agency won after lengthy litigation (the final decision came five years after the accident.) Better communication might have prevented all of it. When a client asks for the same coverage as before, the agent should make sure they know when that is not so.