Many errors and omissions lawsuits against insurance agencies boil down to an insured saying “you never told me I needed that coverage and I would have bought it if you had.” That was the case for one Ohio agency.
In February 2019, a man stole a black Ford Mustang and led the police on a chase. The chase ended when the car collided with another vehicle in which two women were passengers. One of the women owned the car.
The woman had purchased auto insurance from a particular agency in 2006 and 2007. She went back to them in November 2017 and bought another policy. She later testified that she “went into [the agency’s] office, and [she] got full coverage insurance.” She verified electronically that she had reviewed the policy, paid the monthly premium, and renewed it in 2018.
The court’s opinion did not reveal the amount of damages she and her passenger sought for their injuries from the 2019 accident. However, she submitted a claim to her insurer for uninsured motorists coverage. The fact that they pursued the claim through trial court proceedings and an appeal indicates that the amount of damages was substantial. An agency representative allegedly told the insured she had purchased “full coverage insurance.” She interpreted this to mean insurance that covers “everything.”
It turned out that her policy did not include uninsured motorists coverage, though the policy that she bought in 2006 did include that. Consequently, the insurer denied her claim for UM benefits.
Two years after the accident, the women sued the town where the accident occurred, the town’s police department, the officer who pursued the stolen car, and the owner of the stolen car. They also sued the insurer and agency, alleging negligent misrepresentation and negligent procurement of insurance.
The insurer and agency argued that the facts were not in dispute and the court should rule in their favor based on the law. The two claimants argued that, while it was true the policy did not provide UM coverage, they did not know that until after the accident. They believed that the policy provided “full coverage insurance,” including UM coverage.
The trial court ruled that the policy did not provide the coverage and the insured had never asked for it. Accordingly, it ruled in favor of the agency and insurer, and the claimants appealed the decision with regard to the claim of negligent procurement of insurance.
The Ohio Court of Appeals ruled in January 2023 that the agency was not negligent. The judges found that state law neither required the agency to offer UM coverage nor to obtain an insured’s written rejection of the coverage. They also noted that she had previously purchased that coverage from the agency, finding that “she cannot now argue ignorance as to its availability or of its importance in her current policy.”
Lastly, they found that she never asked about UM coverage or what “full coverage” meant. She allegedly was told she had “full coverage” only after the accident, not at the time she bought the original policy.
The record does not indicate who told the insured she had “full coverage insurance.” That is a phrase an agency should never use. As every insurance professional should know, a policy that covers “everything” does not exist. There is a reason phrases like “full coverage” and “all risks” fell out of general use – courts ruled that “full” and “all” meant what they said.
Some state insurance laws require insurers and producers to obtain an insured’s written rejection of UM coverage. Even if your state does not require it, getting that written rejection is a good loss control practice. If this agency had obtained it, the claimants’ case would have been significantly weakened. They might not have pursued it at all.
The lesson for agencies is: Offer as much coverage as is available and document any rejections of those offers.
