Defense Digest, Vol. 31, No. 1, March 2025

Adequate Notice Requires More Than the Delivery of a Policy

By
M. Claire McCudden

Key Points:

  • Supreme Court of Idaho on December 31, 2024, reversed and remanded district court’s grant of summary judgment in favor of builder who asserted negligence claims against its insurance company and sought damages for the insurance agent’s failure to include the real property at issue in renewal of insurance policy. 
  • In BrunoBuilt, Inc. v. Auto-Owners Insurance Co., 2024 WL 5250025 (Idaho 2024), court held, once coverage is procured, an agent can be deemed to be acting as an agent of the insurer when the agent promises to renew a policy, and that something more than the delivery of an insurance policy is required to satisfy notice of policy change. 

A recent decision from the Supreme Court of Idaho on December 31, 2024, reversed and remanded the district court’s grant of summary judgment in favor of a builder who asserted negligence claims against its insurance company and sought damages for the insurance agent’s failure to include the real property at issue in the renewal of the insurance policy. 

In BrunoBuilt, Inc. v. Auto-Owners Insurance Co., 2024 WL 5250025 (Idaho 2024), BrunoBuilt asserted claims against various parties following the reactivation of a landslide that damaged the Dempsey home. The Dempseys had entered into a construction contract with BrunoBuilt in 2014 for the construction of a residence on property located on a pre-existing landslide. In February of 2016, BrunoBuilt’s civil and geotechnical engineering expert observed the landslide had reactivated. BrunoBuilt continued working on the construction of the home that was mostly complete. The landslide eventually indicated earth movement and became visible on the Dempsey property. No certificate of occupancy was issued for the residence. BrunoBuilt then initiated the underlying lawsuit. 

Prior to the litigation, BrunoBuilt contracted with Randy Richardson of Richardson Insurance Services to advise on available insurance coverage and obtained a “Tailored Protection Policy” that included builders’ risk coverage, which covered “direct physical loss or damage caused by a covered peril to ‘buildings or structures’ or while in the course of construction, erection or fabrication.” The Dempsey project was added to the policy in August of 2015. At that time, the policy contained a coverage exclusion for loss resulting from landslide. The exclusion did not specify the type of landslide that was excluded. Prior to the renewal date in 2016, the agent sent an email to BrunoBuilt inquiring into whether the Dempsey home would be completed and was informed the job would likely be done by the end of March. The agent did not include the Dempsey property in the 2016 renewal, which revised the exclusion for damage resulting from landslides and provided that damage from both naturally-occurring landslides and landslides caused by human activity were excluded from coverage.

Damage to the Dempsey property from the landslide became noticeable between April and June of 2016. BrunoBuilt and Richardson filed a claim with Auto-Owners. Auto-Owners then informed BrunoBuilt that Randy Richardson deleted the Dempsey property from the renewal. BrunoBuilt claimed that was the first time they were informed that the property was not included in the 2016 renewal, and they requested that coverage be reinstated. Auto-Owners declined and closed BrunoBuilt’s claim. 

BrunoBuilt sued Richardson and Auto-Owners, asserting Randy Richardson was negligent and Auto-Owners was liable for Richardson’s negligence based on the doctrine of respondeat superior. BrunoBuilt alleged Richardson was negligent in that he failed to properly advise BrunoBuilt regarding the existence, cost, and need for landslide coverage and that he failed to include the Dempsey property in the 2016 renewal. 

The Idaho Supreme Court considered the district court’s granting of Auto-Owners’ motion for summary judgment that dismissed the claims because Richardson was not acting as Auto-Owners’ agent and Auto-Owners did not provide coverage for landslides. BrunoBuilt argued on appeal that the district court’s decision dismissing the failure-to-renew claim was erroneous because the motion only sought summary judgment on the claim related to the alleged failure to procure landslide coverage. In deciding and reviewing the district court’s decisions, the Idaho Supreme Court considered whether Richardson could have been acting as an agent of Auto-Owners for purposes of the failure-to-renew claim. In doing so, the court reviewed the holding in Bales v. General Insurance Company of America, 53 Idaho 327, 24 P.2d 57 (1933), which stated that an insurance company was an agent at the time the insurance broker failed to renew the policy. Therefore, the Idado Supreme Court held that the Bales cases suggests that once coverage is procured, an agent can be deemed to be acting as an agent of the insurer when the agent promises to renew a policy.

The court then identified “the generally accepted legal principle that, if insurers fail to provide notice of a reduction in coverage upon renewal, then coverage under the preexisting policy continues.” BrunoBuilt, Inc., 2024 WL 5250025, *8 citing, Thomas v. Nw. Nat’l Ins. Co., 973 P.2d 804, 807 (Mont. 1998) (“[W]hen an insurer renews a previously issued policy, it has an affirmative duty to provide adequate notice to the insured of changes in coverage.”); D. C. Barrett, Annotation, Insurance company as bound by greater coverage in earlier policy where renewal policy is issued without calling to insured’s attention a reduction the policy coverage, 91 A.L.R.2d 546 § 3 (2024 update) (“The general rule is that an insurance company is bound by the greater coverage in an earlier policy where the renewal policy is issued without calling to the insured’s attention a reduction in the policy coverage.”). In their consideration, the court relied on Idaho Code Section 41-1842(5), which requires an insurer to notify a named insured of, among other things, reductions in limits or reductions in coverages. In doing so, they found that statute applied to the policy at issue here. 

The court then turned to the policies to determine whether there was a change in policy and, in doing so, applied the well-established rules of interpreting insurance contracts. The court found the policies were ambiguous as to the interpretation of landslide and looked to other courts that interpreted similar policy language to only exclude coverage for naturally occurring landslides. It, therefore, concluded that the 2016 policy reduced the coverage available for landslides by excluding human-caused landslides. 

In determining whether notice was provided, the Idaho Supreme Court found there was a requirement for something more than the delivery of an insurance policy and held, “it is a broadly accepted rule that insurers must provide adequate notice of changes in coverage to insureds in the context of a renewal because the law does not impose a duty on the insured to scour a renewal policy for changes absent notice from the insurer… .” As Auto-Owners only mailed a copy of the policy, the court held it did not fulfill the written requirement notice and the coverage provided in the 2015 policy remained in effect until 30 days after notice was given or BrunoBuilt obtained replacement coverage. 

This case demonstrates that insurance agents in Idaho can be deemed to be acting as an agent of the insurer when the agent promises to renew a policy. Further, this case sets forth the written notice requirement that can come into play that requires insurers to take additional steps above and beyond mailing a copy of the policy when there is a change in coverage in the context of a renewal. 

*Claire is a member of our Professional Liability Department and works in our Wilmington, Delaware, office. 

 

Defense Digest, Vol. 31, No. 1, March 2025, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2025 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.