Failure to Procure: A Case Update
The Insured operated a medical center on leased premises in North Miami Beach, Florida. The sprinkler system on the leased premises was undergoing maintenance when a leak occurred, resulting in significant water damage to both the physical improvements and to the contents located therein. The Insured maintained a commercial property insurance policy, which provided $100,000 of coverage for the physical improvements and contents of the subject property, and which contained a $1,000 deductible and a 90 percent coinsurance clause. As a result of the sprinkler leak, the Insured suffered property damage totaling approximately $260,000. The Insured made an insurance claim, purportedly expecting to receive a $100,000.00 payout, but received only $16,562.67 due to the policy’s coinsurance clause.
The Insured filed suit against the Insurance Agent, to assert a claim for negligent procurement of insurance. The Insured alleged that it had met with the Insurance Agent in order to obtain a commercial property coverage policy of insurance in the amount of $100,000.00 that would cover the property, equipment, supplies and improvements of the building. The complaint further alleged that at the meeting the Insurance Agent informed the Insured that it would procure a commercial policy of insurance that would cover and protect all of the property, equipment, furnishings and improvements of the building and fully pay the amount of $100,000.00 as requested by the Insured. The complaint alleged that the parties did not discuss the effect of the co-insurance clause. The Trial Court dismissed the claims against the Insurance Agent and on appeal, the Trial Court’s decision was reversed.
The Third District Court of Appeal reiterated Florida’s well established case law, holding that where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages for negligence. The Third District explained that an agent’s duty to employ reasonable skill and diligence, and liability may result from a negligent failure to obtain coverage which is specifically requested or clearly warranted by the Insured’s expressed needs. This general duty requires the agent to exercise due care in correctly advising the insured of the existence and availability of particular insurance, including the availability and desirability of obtaining higher limits, depending on the scope of the agents undertaking.
The Third District explained that its ruling did not imply that an agent or broker has a general duty of knowing and/or valuing the contents and improvements of the premises either before procuring or thereafter reviewing, a commercial policy. Nor, was it the case that an agent or broker had a general duty to explain a coinsurance clause to any insured issuing such a policy. Rather, the Court explained that when an insured alleges that it specifically communicated its insurance needs to an agent who then undertook to procure a policy addressing such needs, that insured states a cause of action for negligent procurement where it also alleges that, without providing an explanation that different coverage was required, the agent procured a policy not meeting those expressed needs.
Kendall South Medical Ctr, Inc. v. Consolidated Insurance Nation, Inc. d/b/a Insurance Nation, 42 Fla. L. Weekly D1071a (Fla. 3d DCA 2017).