- Defense Verdict for Insurance Agency and Owner in Professional Negligence Case
- January 10, 2019 | Authors: Christopher E. Dougherty; Eric A. Fitzgerald; Christopher J. Conrad
- Law Firms: Marshall Dennehey Warner Coleman & Goggin, P.C. - Philadelphia Office; Marshall Dennehey Warner Coleman & Goggin, P.C. - Philadelphia Office
We successfully defended an independent insurance agency and its owner against claims of professional negligence brought by former long-time customers of the agency in a lawsuit filed in the Centre County Court of Common Pleas.
In December 2014, the husband and wife plaintiffs purchased a residential property in Philipsburg, PA, which they planned to renovate on their own and then either flip or keep as a rental. The day after closing on the property, they contacted the agency to advise they had purchased the property and sought insurance coverage. At the time, the plaintiffs already had insurance on their primary residence and another rental property (as well as several automobiles) which they had obtained through the agency.
Based on information that the plaintiffs provided about the property, an agency sales representative prepared a quote for them. When initially discussing the quote with plaintiffs, the sales representative explained that because the property was unoccupied, and since the plaintiffs planned to renovate the property themselves with no definite end date for completing the renovations, only one carrier with which the agency had a relationship would write coverage on the property. Our clients proposed a specific dwelling fire policy through an insurance company with coverage of $21,500, equivalent to the purchase price plus closing costs (i.e., actual case value), and the plaintiffs were told that coverage could increase periodically as renovations were completed.
The plaintiffs agreed to the dwelling fire policy proposed by the agency and completed and signed the application and authorized the agency to bind coverage. Notably, the husband testified at trial that our clients told him the dwelling fire policy was the best coverage the agency could offer them and they were free to seek coverage elsewhere if they did not find the policy suitable. Still, the plaintiffs applied for and obtained the dwelling fire coverage.
In January 2015, the wife plaintiff contacted the agency to advise they had completed some renovations and requested an increase in coverage by $8,500. Our clients honored this request, notified the carrier, and coverage was increased to $30,000. The plaintiffs claimed that they contacted the agency again in June 2015 and asked for an additional $20,000 in coverage after completing more renovations. Our clients adamantly disputed that the wife plaintiff ever made this request. The agency had no record of the request, despite maintaining accurate phone logs and electronic claim notes detailing each and every conversation they had with the couple about the property and their other insurance needs. Our clients admitted at trial there were several documented telephone conversations with the wife plaintiff in June 2015, particularly concerning two automobiles the plaintiffs insured through the agency, but none of these conversations had anything to do with the property. The couple acknowledged at trial they never followed up with the agency or the insurance company directly to confirm whether their supposed request for an increase in coverage had been confirmed, nor did they ever check their mail to see if they had received a new declarations page or a bill for a premium increase from the carrier.
In October 2015, the property was completely destroyed by a fire caused by three volunteer firefighters who later were convicted of arson. These three individuals were not sued by the plaintiffs, however, even though they were directly responsible for the loss. Instead, the plaintiffs only sued our clients for professional negligence, advancing two theories: (1) our clients were negligent for not increasing coverage by $20,000 in June 2015, as the couple allegedly requested; and (2) our clients were negligent in failing to offer the plaintiffs a “builders’ risk” policy, which, they argued, would have insured the property for $158,000, its replacement value.
In support of their “builders’ risk” theory, the plaintiffs called to testify at trial an expert witness who had 40+ years of experience as an insurance and construction surety bond agent in Pennsylvania. Their expert testified that in his opinion, the standard of care applicable to insurance agents in Pennsylvania requires agents to offer their customers the best possible coverage available, and it has always been his practice to do so. During cross-examination, the expert acknowledged he was present for and heard the husband plaintiff's earlier testimony when he stated the agency told him the suggested dwelling fire policy was the best coverage the agency could offer. Most critically, the plaintiffs' expert conceded that in light of the husband's testimony on this point, together with his own opinion concerning the applicable standard of care, our clients in fact met the standard of care under the circumstances by proposing the dwelling fire policy to the plaintiffs, which was the best coverage our clients could offer.
We also were successful in convincing the trial judge to charge the jury on contributory negligence, as this remains a viable affirmative defense in professional negligence actions in Pennsylvania, despite the plaintiffs' attorneys arguing that the Comparative Negligence Act should apply instead. Consequently, we argued to the jury in closing that the plaintiffs were negligent for waiting until after closing to contact the agency for insurance on the property, yet claiming they felt they had no other choice but to accept the dwelling fire policy proposed to them; they were negligent for not seeking coverage elsewhere, even after the dwelling fire coverage policy was in place, despite personally knowing at least two other local insurance agents and they claimed they were dissatisfied with the amount of coverage under the policy; and they were negligent for failing to make any effort (including reading their mail) to verify that coverage had been increased by $20,000 in June 2015 as they supposedly requested.The jury never reached the question of the plaintiffs' contributory negligence, however. Rather, after deliberating for less than an hour, the jury returned a verdict in favor of our clients, finding that neither of our clients was negligent under the circumstances. The plaintiffs did not file any post-trial motions or an appeal from the jury’s verdict.