The Appeals Court has reaffirmed the rule that neither an insurance agency nor an insurance company has legal liability for failing to advise an insured as to the completeness or adequacy of the insured’s insurance coverage absent a “special relationship.”
Insureds based claim on twenty year relationship with insurance carrier
In Kleykamp et al. v. USAA Casualty Insurance Company, a husband and wife, Dr. Helen Kaulbach and Dr. Donald Kleykamp, had been insured with USAA, a direct writer, for over 20 years. During that time period they had never dealt with any independent agent for their personal insurance needs.
They had purchased their homeowner, automobile, personal property, and umbrella policies through USAA. They also had USAA credit cards and a USAA checking account through affiliates of USAA Casualty.
During this twenty year relationship, USAA had sent the doctors numerous letters stating USAA’s goal to make sure that insureds had all of their insurance needs satisfied and that insureds had the best coverages available. At USAA’s suggestion the doctors had increased their automobile liability limits to $500 thousand per person and $1 million per accident. Then also at USAA’s suggestion they had purchased a $1 million umbrella policy. Additionally, every two years, USAA conducted a survey of the doctors’ home value for homeowners’ coverage purposes.
The wife, Dr. Kaulbach, handled the insurance contacts with USAA and testified by affidavit that she would always ask the agents she dealt with a question along the lines of, “Is there anything else we should have to be fully covered?” According to Dr. Kaulbach the agents would give advice on various occasions for additional coverages but never discussed or gave any advice regarding underinsured motorists coverage.
Hit by an auto with only compulsory limits, insureds learned their policies did not include underinsured motorist coverage
On July 1, 2010, Dr. Kleykamp suffered a serious leg fracture in an accident involving a bicycle he was riding and an automobile. As a result of the injury he had to undergo several surgeries and had continued impairments that required significant changes to the lifestyle he enjoyed before the accident.
When Dr. Kleykamp and his wife made a damage claim against the responsible party, they found that the driver only had the compulsory liability limits. They then also apparently learned what underinsured motorist coverage provided and that their automobile insurance from USAA did not include such coverage.
Insureds sue USAA for never discussing underinsured motorist coverage with them
The doctors sued USAA claiming that the company through its representatives had been negligent, and therefore liable, for failing to advise them of the availability of underinsured motorist coverage.
The doctors asserted in their suit that they were unfamiliar with insurance and that they had relied on USAA to advise them of the completeness and adequacy of their coverages based on the representations in company’s policyholder communications and its actions in conducting policy reviews.
USAA acknowledged the consistent contact between the parties during the twenty year relationship but denied that the tenor or terms of its communications or its coverage reviews created any basis for the doctors’ negligence claim.
The Superior Court agreed with USAA and allowed its motion for summary judgment. The Superior Court judge found that there was no general undertaking by USAA to advise the doctors regarding their insurance coverages and therefore the two doctors had no legally cognizable claim under Massachusetts law against USAA. The Doctors appealed the judgment in favor of USAA to the Appeal’s Court.
The Appeals Court reaffirms that absent a “special relationship” neither agent nor company need advise on insurance policy’s adequacy
The Appeals Court’s decision on the doctors appeal cited a long series of prior decisions where insureds have brought suits against insurance brokers, agents and insurance companies claiming that the insurance policies they purchased were inadequate. In most, but not all, such cases, Massachusetts courts have consistently applied the rule that insurance brokers, agents and insurance companies only have liability for the inadequacy of insurance coverages where there are “special circumstances of assertion, representation and reliance.”
Along with the major issue of apparently never having read their policies’ declaration pages or coverages, the good doctors had to contend with the adverse ruling in the 2012 Appeals Court decision in Technical Papers Corporation v. Liberty Mutual Insurance Company. (click link for Agency Checklists article, “Agency Risk Primer: Underinsured Loss Ends A 50 Year Relationship.”
In the Technical Papers case, the insured had not only had a twenty year relationship with their carrier, they had actually had a fifty year relationship with the insurer. However, after a $1.1 million fire loss to their data warehouse, Technical Papers sued their insurer claiming that the insurer should have advised them that their data warehouse was woefully underinsured.
Similar to Doctors Kleykamp and Kaulbach’s arguments against USAA, Technical Papers argued that letters where its carrier stated that it wanted to provide “the best possible coverage at a fair price” – constituted a specific assertion regarding the sufficiency of its coverage. But the Appeals Court ruled that such statements are “… more akin to the sort of bland assertion contained in a generic media advertisement” and since no specific actions undertaken by Liberty Mutual showed that it had assumed a heightened duty of due care, Technical Papers lost.
Like Technical Papers, the Appeals Court found Dr. Kaulbach’s conversations with USAA about their automobile insurance were utterly routine and since none of these conversations involved underinsured motorist coverage, or specific assertions as to the adequacy of the doctors’ automobile insurance, they too lost.
The court then reaffirmed the rule that absent any special circumstances of assertion, representation and reliance an insurance agent assumes only those duties normally found in an agency relationship and those assumed duties do not include the duty to advise the insured as to the adequacy of the insurance coverages sold. The decision cited by the court, Martinonis v. Utica Natl. Ins. Group, 65 Mass. App. Ct. 418, 420 (2006) states unequivocally that to recover, “…the insured must present evidence of specific assertions or representations concerning the adequacy of coverage made to the insured, and reliance on those assertions or representations.”
You can click on the following link to access the Kleykamp v. USAA decision.
A recording of the oral argument of the parties in the Appeals Court before the three judge panel hearing the case is here:
Prior articles in Agency Checklists about what may create a “special relationship” with insureds
Agency Checklists has previously had a series of posts by Attorney Kara Larzelere of ForbesGallagher highlighting cases where Massachusetts appellate courts have found “special circumstances” where both agents and companies were potentially liable to insureds.
- The agent going the extra mile for insured;
- Agent as claim adjuster;
- Promise to to follow-up on application;
- Acting as insurance advisor
