Legal Updates for Insurance Agents & Brokers
Ohio Courts Crack Down on Attempts to Expand Insurance Agent Liability
Edited by Timothy Ventura, Esq.
It’s a scenario that plays out all too often for insurance agents: A client comes to you seeking insurance coverage for, say, a parcel of real property. Coverages and options are discussed, a quote is prepared and the client agrees to buy the policy. So far, so good. But then the worst happens: A casualty event occurs, the client makes a claim to the insurer, and he or she is informed there is no coverage for the loss. With no payment forthcoming from the insurance company, guess who they decide to look to for payment?
When these situations arise, frustrated insureds and their attorneys will bring suit against the insurance agent, arguing the insured did not know that the type of loss at issue was excluded or not covered and that the lack of coverage is the agent’s fault. While this is not a new strategy for litigants, Ohio courts have recently been pushing back.
In LGR Realty, Inc. v. Frank & London Ins. Agency, 2018-Ohio-334, discussed in a prior Update, the Ohio Supreme Court decided that the statute of limitations for a claim for negligence in procuring insurance begins to run on the date the policy goes into effect, not on the date of a later casualty loss, at least where the policy contains a specific exclusion for the coverage later claimed by the plaintiff. This provides closure to insurance agents, so a plaintiff cannot claim 10 or 20 years later they wanted a certain coverage that was not provided and that they did not know there was a problem with coverage until a casualty event occurred.
In Johnson v. Grossi Ins. Agency, 2018 Ohio Misc. LEXIS 593, the Summit County Court of Common Please went even further, holding:
While an insurance agent has a duty to exercise ordinary care and reasonable diligence in his or her good faith effort to provide for an insured the policy terms the insured has requested, an insured has a corollary duty to read the policy that has been given to him or her to verify that it provides the coverage requested. The failure to do so bars the insured from presenting a professional negligence claim against the agent.
Imposing a duty to actually read the policy would, on its own, seriously limit the efficacy of bringing suit against an insurance agent. While Johnson has no precedential effect outside of Summit County, it at least shows a potential roadmap for an agent to argue against liability.
In a case handled in our Cincinnati office, which was affirmed by the Court of Appeals, an insured obtained insurance for one parcel of real property but failed to take all necessary steps to obtain insurance for a second parcel of property. The trial court held that the insurance agent discharged the duty he owed to the plaintiffs by obtaining a quote for them, advising them what they would need to do to finalize coverage and advising them that further communication would be with the insurer itself. The court noted, among other things, the plaintiffs should have realized that something was amiss when they obtained policy documents for one parcel of real property and not the other. This should have clued them in to the fact that they had no coverage on the second parcel.
Taken together, these cases show a trend toward requiring insureds who acquire policies through agents to actually read the documents provided and to pay attention to what they receive. They cannot simply claim they relied on their insurance agent, did not read the documents themselves and place all of the blame on the insurance agent. Of course, it is always advisable for insurance agents to keep careful records of discussions about coverage to protect against potential lawsuits. Still, if the worst happens and a lawsuit arises, Ohio courts are giving insureds less leeway to claim they did not know what was in their insurance policies, increasing the chance of a successful defense.
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