Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

December 2019 Archives

UNDER ALABAMA LAW, INSURANCE AGENTS AND BROKERS DO NOT OWE A DUTY TO THEIR CUSTOMER TO ADVISE REGARDING THE ADEQUACY OF THE CUSTOMER'S INSURANCE COVERAGE

In Somnus Mattress Corp. v. Hilson, No. 1170250, 2018 WL 6715777 (Ala. Dec. 21, 2018) the Court found that the insurance agent and broker in that case had no duty to advise the insured of the adequacy of its insurance coverage. The allegation that the agent made statements to the insured that the insured did not need business income coverage was nothing more than an opinion that could be accepted or rejected by the insured. Of significance to the Court was the fact that the insured had had a prior loss which involved a loss of business income and the fact that the insured knew its own finances and needs. Under the totality of the circumstances, the Court found that the insured did not justifiably rely upon the agent's opinion regarding the need for business income coverage, even if the Court were to have interpreted Missouri law as imposing a duty on the agent to advise the insured about the adequacy of coverage that it was purchasing.

UNDER ILLINOIS LAW, SUIT AGAINST AGENT FOR NEGLIGENT FAILURE TO PROCURE COVERAGE BEGAN TO RUN WHEN THE INSURED RECEIVED THE INSURANCE POLICY

In a split decision, the Illinois Supreme Court in Am. Family Mut. Ins. Co. v. Krop, 2018 IL 122556, 120 N.E.3d 982, reh'g denied (Nov. 26, 2018) held that in a negligent failure to procure lawsuit against an insurance agent, the applicable statute of limitations began to run under Illinois law when the insureds received the policy rather than when the insurance company denied coverage. In so holding, the Supreme Court held that the suit against the agent sounded in negligence, which was a tort claim arising out of a contractual relationship. The contract was breached when the agent procured a policy that did not provide the requested coverage. The Court found that the discovery rule was inapplicable because the insureds had an obligation to read and understand their own policies. In the decision, the Court emphasized that requiring customers to read their insurance policies was reasonable because customers know the coverage that they want. Such a rule also incentivized customers to act in good faith. On the other hand, the Court noted that a contrary rule would allow customers to maintain defective policies for many years and assert the defect after potential evidence supporting the insurer may have been lost.

SOUTH CAROLINA SUPREME COURT INVALIDATES PIP SETOFFS

In Cothran v. State Farm Mutual Auto Insurance Co., 2019 WL 3683591 (S.C. 8/2/19) the Colorado Supreme Court invalidated a PIP provision in State Farm's policy which attempted to coordinate its benefit with workers compensation benefits. The Court held that South Carolina's PIP statute prohibited set-offs, and therefore the clause was void. The Court found that the language of South Carolina's Section 38-77-144 was intended to prevent insurance companies from avoiding payment of PIP benefits by directing their insureds to other sources of recovery, such as workers compensation insurance.

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