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Rhode Island Supreme Court Finds That An Insured's Malpractice Claim Against His Former Insurance Agent Was Untimely Because It Was Filed More Than Three Years After The Insured Received A Copy Of The Policy And Therefore Could Have Discovered The Alleged

In Faber v. McVay, 155 A.3d 153 (R.I. March 8, 2017) the Rhode Island Supreme Court held that an insurance agent malpractice claim was untimely because it was not filed within three years after the date upon which the plaintiff knew or should have known of the agent's alleged wrongful acts.

In this case, the plaintiff had used defendant insurance agent for the plaintiff's insurance needs from 1998 until the agent's retirement in 2005. One of the policies purchased was an automobile policy which included $5,000,000 of UIM coverage. In 2002 the plaintiff asked the agent if he could obtain the same coverage for a reduced premium. According to the agent, she advised the plaintiff that plaintiff could purchase $250,000 in UM coverage from one insurer at a substantially reduced premium and then purchase a $5,000,000 umbrella policy from another insurer that included UM coverage. The agent alleged that she informed the plaintiff that the policies were different than the plaintiff's existing coverage. Nevertheless, according to the agent the plaintiff directed her to make the change. Thereafter the plaintiff received notice of the policy changes in the form of summaries beginning in 2002, but did not read the summaries. The plaintiff alleged that he assumed his automobile policies provided maximum coverage for UM.

In 2007 plaintiff was injured in a motor vehicle accident. The plaintiff exhausted the primary layer of $250,000 of UM coverage and then submitted a claim to the umbrella insurer for excess UM coverage. At that point the plaintiff was advised that the umbrella policy did not provide UM coverage, but only excess liability coverage. Upon learning this, the plaintiff then sued the agent.

In the malpractice case, the agent alleged that the malpractice claims were barred by the applicable statute of limitations. In response, plaintiff asserted that the discovery rule had tolled the limitations period because the plaintiff could not reasonably have discovered the alleged insurance malpractice until the accident from which he sought excess UM coverage. Plaintiff argued that reasonable persons do not read their insurance policies and he did not read his. The trial court granted summary judgment in favor of the agent, finding that a reasonable and diligent inquiry would have placed the plaintiff on notice of his malpractice claim in 2002 when he changed the coverage. Because the complaint was filed in 2009 it was untimely.

The Rhode Island Supreme Court affirmed the dismissal of the malpractice claim as being violative of Rhode Island's 3-year statute of limitations. The court found that the plaintiff was obligated to act as a reasonably diligent insured. As a reasonably diligent insured, the plaintiff should have perused the personalized summary of his policy coverages. Because the plaintiff had not read the summaries, the court found that plaintiff failed to exercise the necessary reasonable diligence that was required of him.

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