Some errors and omissions claims against insurance agents are little more than attempts by insureds to deflect the blame for their own mistakes. The agent may request information from the insured in order to obtain coverage, and the insured does not respond right away. To the insured, the matter is not urgent, until it is.
A Nebraska insurance agency provided auto, inland marine and commercial general liability insurance for a company that bought hay and alfalfa and resold it to feedlots and dairies. For the first four years of the company’s existence, it was a one-person operation. It owned one truck that the owner drove. Eventually, it bought a second truck and hired a driver. Because there had previously not been any employees, it did not carry workers’ compensation insurance.
On February 2, 2009, the owner’s daughter (who handled insurance purchasing for the company) called the agency and requested workers’ comp coverage. The agency responded with a request for the company’s estimated payroll so that they might obtain quotes.
On March 31, the new truck driver was injured in a work-related auto accident.
On April 1, the insured provided the requested payroll information to the agency.
Three years later, the driver sued his employer for failing to carry workers’ comp insurance and for sending him out during a high wind warning. He sought $309,154.10 in medical expenses plus additional damages. The insured submitted claims for the lawsuit to its insurance company. The insurer’s policies excluded coverage for injuries for which benefits are payable under a workers’ compensation law and for which the insured is liable as an employer. The insurer denied coverage accordingly.
Four years after that, a trial court approved a settlement awarding the injured driver $800,000 in damages. In the settlement, the insured agreed to assign its claims against its insurer and agent to the driver. The driver then sued both, alleging that the agent:
● Failed to obtain workers’ comp coverage upon the insured’s request
● Failed to inform the insured that they were required to carry workers’ comp coverage and that their existing insurance would not cover injuries to employees
The trial court ruled in favor of the agency and insurer based on the law. The driver appealed, but in March 2020 the Nebraska Supreme Court upheld the decision.
“The (trial) court found,” the Supreme Court wrote, “that it was the actions of (the insured) which delayed the insurance quote and that (the agency) had not provided (the insured) with any false information regarding the commercial line policy’s coverage or the need for workers’ compensation coverage.” The driver argued that the agency, acting as a broker, had a legal duty to advise the insured on coverage needs. The court disagreed, saying that acting as a broker did not change the producer’s duty of care to an insured.
The agency appears to have done the right things in this situation. It was able to show the court that it responded to the request for workers’ compensation insurance with a request for necessary information. It had records of when it made the request and when it received the information. Because of this, there was no dispute as to what happened. This permitted the Supreme Court to affirm that “it would be an unreasonable burden to impose upon insurance agents a duty to anticipate what coverage an individual should have, absent the insured’s requesting coverage in at least a general way.”
A desperate insured may point fingers at the agent instead of at himself. This agency was prepared for that, and it won its case as a result.