For how long can a mistake haunt an insurance agency? A Kansas agency found itself in court over an error that was alleged to have happened years before a lawsuit.
Donald Woofter, driving a 2011 Buick in Phoenix, Arizona, got into an accident in January 2013 with Edward Dupass. The accident was severe; nearly four years later, an Arizona court awarded $504,518.20 in damages to Dupass.
Woofter had obtained insurance on his personal vehicles and farm operations from the same Kansas insurance agency for more than 40 years. He was under the impression that a $1,000,000 umbrella policy applied to all of his vehicles and farm operations. However, after submitting claims to his insurers, he learned that only his primary auto policy insured the Buick. That policy had an auto liability limit of only $100,000.
The record does not state why the umbrella did not cover the Buick, nor how long this had been the case.
Dupass and Woofter subsequently negotiated a settlement under which Woofter would pay Dupass $120,000. As part of the settlement, Woofter assigned his rights to any claims he had against his insurance companies and agent to Dupass. In late 2018, Dupass sued the agency and individual producers, claiming that they breached their unwritten contract with Woofter by failing to:
- Procure the coverage Woofter desired
- Advise Woofter of the adequacy of the coverage provided by the policies he bought.
He also claimed that the agency and producers were negligent in failing to procure the proper coverage, causing him to suffer financial injuries.
One of the producers moved the next month to have the case against him dismissed, arguing that he was asked only to obtain “adequate” insurance, not a specific limit, and that in any case Dupass filed the suit after the statute of limitations period had expired. Dupass argued that the period started when the Arizona court awarded the damages in late 2016. The trial court agreed with the producer that the three-year statute of limitations period started when Woofter and the producer conducted their annual coverage review, more than five years before Dupass filed suit.
The court reached a similar conclusion with regard to the case against the agency and its principal. Dupass appealed all of the decisions.
The appellate court upheld the rulings, finding that the three year period started when the agency allegedly breached its contract, which was when it failed to obtain coverage for the Buick under the umbrella. That may have been seven years before Dupass filed the suit. Therefore, the breach of contract claim failed.
The court also did not buy the argument that the injury did not occur until the Arizona court awarded damages. Under Dupass’s interpretation of the law, they said, “a person whose insurance agent has failed to provide the bargained-for motor vehicle insurance would first need to be involved in a collision and have a judgment entered against him or her, in excess of any policy limits, before that person could bring a breach of contract suit against the agent. Such an interpretation is unreasonable.”
The court said that the umbrella policy clearly excluded coverage for the Buick. We don’t know why that was, but a review of the umbrella by the agency should have revealed that coverage gap. It appears that the agency was unaware of the gap, resulting in its client of 40 years being uninsured by more than $400,000. The only reason the agency did not owe that money was the statute of limitations.
There is no substitute for careful review of insurance policies to verify that they provide the requested coverage. When that does not happen, lawsuits like this are the result.