California agent is liable to insured for negligent policy procurement
Williams v. Hilb, Rogal & Hobbs Insurance Services of California, Inc., No. B203691 (Cal. Ct. App. 09/09/09).
The California Court of Appeal affirmed a finding that an insurance agency was negligent in failing to advise business owners of the need to carry workers' compensation coverage when an insurance agent developed an insurance policy for them.
What it means:
Where an insurance agent holds herself out as having expertise in a particular type of insurance and the insured relies on her representations, she may be liable for losses that resulted from her failure to advise the insured to carry workers' compensation insurance.
Two owners bought a dealership installing spray-on linings onto the beds of pickup trucks. They were referred to an insurance agent who was the "go-to" person for their business because she knew the company and the business well. The owners said they did not request any specific type of insurance but instead relied on the agent's expertise to obtain the insurance she thought was necessary. A fire broke out at the dealership in which a worker was severely burned. When the owner reported the fire, he learned the dealership did not have workers' compensation coverage. The worker sued and obtained an $11 million judgment, $5.8 million of which was allocated to the dealership.
The dealership sued the insurance agency. The Court of Appeals affirmed the finding that the insurance company was negligent. The court held that the agent breached her duty to the owners by failing to advise them of the necessity of carrying workers' compensation coverage along with her failure to include the coverage in the policy. The court noted that because the agent held herself out as having expertise in the insurance being sought. Therefore, she assumed a special duty, which meant she could be liable for losses that resulted from her breach of that special duty.
The agent admitted she was aware that workers' compensation coverage was mandatory in California. She alleged that she offered workers' compensation coverage but the owners declined. However, the file contained no documentation that this conversation took place. In addition, the insurance company had a form entitled "telephone discussion record" that was to be completed for phone conversations, but was not used in the conversations with the owners.
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November 30, 2009
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