A client making a new vehicle purchase is naturally excited and wants to get the vehicle in the driveway as soon as possible. That tendency can collide with standard procedures meant to ensure an insurance agency’s smooth and error-free operations. This was the case for a Michigan agency and a new pickup truck.
A man named Hamilton had purchased an auto insurance policy from a regional insurer through an independent agency. In mid-July 2019, he traded in his old pickup truck for a new one. He purchased a Ford F-350 from a local dealership for $65,301.54. Before driving his new purchase away, Mr. Hamilton asked dealership employees if it was okay if he did so. The employees reportedly told him that “everything’s fine and you’re ready to go.”
Everything wasn’t fine. When the employees made that statement, Mr. Hamilton heard, “You have insurance on the truck.” That was not the case.
According to the appellate court’s opinion, this was the sequence of events:
- A salesperson from the Ford dealership called the agency and spoke with a customer service representative. He reported that he was working with Hamilton on trading in the old truck, which was covered under the auto insurance policy, for the new F-350.
- The CSR told the salesperson that she could not add the F-350 to the policy until she had spoken with Hamilton, saying that “it is not legal to update a policy without talking to the actual policy holder …”
- The CSR then attempted to call Hamilton but got his voicemail. She left a message asking him to call her back, as she could not add the new truck to his policy until she spoke with him.
- Hamilton did not return the call. The CSR assumed the purchase had fallen through and therefore did not add coverage for the F-350 to the policy.
- Hamilton, apparently unaware that his phone had voicemail capabilities, did not become aware of the CSR’s message until late August 2019, when his son saw that he had messages on the phone.
- On August 3, 2019, Hamilton’s home suffered fire damage. Because he had also purchased a homeowners insurance policy from the agency, he called them and reported the fire to a different employee.
- On August 28, the unfortunate Mr. Hamilton totaled the new truck in an accident. He reported it to the same employee at the agency. The employee saw that the F-350 was not listed on the policy.
- Hamilton filed a claim, the insurer denied coverage, he wrote a response, and the insurer wrote again. His policy provided automatic collision coverage for a new vehicle, but only for 14 days after purchase. Because the vehicle was reported to the insurer more than 14 days after purchase, they denied coverage.
Hamilton sued the insurer, the agency and the dealership. In its response, the agency produced an affidavit from an expert witness. The expert testified that the agency had followed standard industry practice by not adding coverage for the truck until the insured had confirmed the request. Based partly on this testimony, the judge ruled in the agency’s favor, and Hamilton appealed.
The state Court of Appeals also ruled for the agency. They noted that Hamilton did not present any expert testimony, a layperson would not know standard industry practice, and he never returned the agency’s phone call. They also found that the agency had no duty to obtain insurance on the truck because Hamilton never asked for it.
This agency had an established procedure for handling policy changes, and they followed it in this situation. Because they had that procedure and they had an expert to back it up, they defeated this claim. This case shows that standard procedures that everyone in an agency follows can defend the agency from E&O claims.