By: AgencyEquity.com
When a third party who is not the insured works with an insurance agency on the insured’s behalf, does the agency have obligations to the third party? A man in Virginia thought so and sued the agency over a policy cancellation.
The man purchased a car in September 2018 for his adult daughter. For insurance, he turned to his long-time agency. The agency obtained a policy that listed the daughter as the sole named insured and her father as a lienholder.
Over the course of the family’s dealings with the agency, the father had assumed the task of making premium payments, and that was true for his daughter’s policy. He stated that she was a single mom with “some issues.” She also had an erratic history of making insurance premium payments, so her father paid the agency on her behalf. The insurer, aware of her payment history, required consistent payments on the new policy as a condition of offering a renewal.
Three years before she purchased the policy in question, she had “officially authorized” her father to act on her behalf regarding any insurance policies obtained through the agency. She never revoked that authorization.
Her father asked the agency to change the payment schedule to an annual basis. However, the agency’s account manager declined to do so without authorization from his daughter because she was the sole named insured. Instead, she offered him alternatives:
- Add him to the policy as an additional insured.
- Notify him by mail of any matters related to his daughter’s policy.
- Set up automatic payments for the policy or keep his credit card number on file for payments.
He rejected each of these, saying he wanted his daughter to be the only insured and for her to eventually transition to having sole financial responsibility for the policy. He told the account manager he wanted only to be protected in his capacity as lienholder and to be informed if a cancellation for non-payment of premium was forthcoming.
In November 2019, he asked the account manager to find a replacement policy with a carrier that would permit annual payments, and she told him she would try. Later that month and before a replacement policy was obtained, the carrier sent the daughter a notice that the policy was due to expire. They then cancelled the policy for non-payment of premium effective December 7 before either father or daughter could renew it. The account manager sent her a letter on December 23 telling her of the cancellation but did not send a similar letter to her father. No one obtained a replacement policy.
On December 31, the daughter hit a telephone pole, totaling her car and damaging the pole. The court’s opinion did not state the amount of damages, but she was driving a seven year-old Volkswagen and probably caused structural damage to the pole. The collision coverage loss and the third-party damages likely totaled in the tens of thousands of dollars.
On January 6, the account manager informed the father that no insurance applied to the accident because the policy had been canceled. Believing that he had had a contract with the agency to notify him of any issues with the policy, he sued the agency for breach of contract.
The state general and district courts ruled that no contract existed, and he took his case to the state court of appeals. In April 2025, the appellate court agreed with the lower courts, finding that a “meeting of the minds” had not occurred, that the account manager’s promise to “try” to find a new policy was not binding, and that the father had rejected the offer of insured status under the policy. The agency’s duties, the judges wrote, ran to the daughter alone and not to her father.
This was a problem client. The account manager appears to have made a sincere attempt to work with the father to satisfy his concerns, and he rebuffed those attempts. There appears to be little more the agency could have done. Ultimately, it was the daughter’s insurance policy and her legal obligation to pay for it. The agency did what it could for her, but it did not owe her father anything.
