Louisiana Personal Injury Lawyer Blog
A recent Louisiana Court of Appeal decision underscores the importance of insurance agents fulfilling their duties with reasonable diligence and care. In Upscale Fashions, Inc. v. Botsay Insurance Network, Inc., an insurance agent’s failure to properly procure and communicate coverage details led to a significant financial loss for the insured and a hefty judgment against the agency.
Case Summary
Upscale Fashions, Inc., a retail clothing company, purchased a property insurance policy through Botsay Insurance Network, Inc. The policy initially included wind and hail coverage. However, this crucial coverage was excluded when the policy was renewed, allegedly without Upscale’s knowledge.
Subsequently, Upscale’s premises suffered windstorm damage. Believing they were covered, Upscale filed a claim, only to discover that their new policy did not cover wind and hail. They then sued Botsay for failing to procure the requested insurance and for not informing them about the change in coverage.
The trial court ruled in favor of Upscale, finding that Botsay had been negligent. Botsay appealed this decision.
The Court of Appeal’s Ruling
The Court of Appeal upheld the trial court’s decision, affirming that Botsay had indeed been negligent. The court highlighted three key factors that must be established for a plaintiff to recover damages in such a case:
- An agreement by the insurance agent to procure insurance.
- The agent’s failure to use reasonable diligence in obtaining the insurance and notifying the client of any lack of coverage.
- Actions by the agent that led the client to reasonably believe they were insured.
The court found that Botsay failed to exercise reasonable diligence in several ways. They did not adequately inform Upscale about the exclusion of wind and hail coverage in the renewed policy, nor did they promptly notify Upscale of this lack of coverage when the claim was filed. Furthermore, the court determined that Botsay’s actions led Upscale to believe they were adequately insured.
The Importance of Reasonable Diligence
The Upscale Fashions, Inc. decision underscores the legal expectation that insurance agents act with “reasonable diligence” when procuring insurance for their clients. This includes not only obtaining the requested coverage but also clearly communicating any changes or exclusions in the policy. Failure to do so can result in the agent being held liable for the client’s losses.
Implications for Businesses and Insurance Agents
This case serves as a cautionary tale for both businesses and insurance agents. Businesses should carefully review their insurance policies, especially upon renewal, to ensure they have the coverage they need. It’s crucial to seek clarification from the agent if there’s any uncertainty.
For insurance agents, the message is clear: exercise due diligence in procuring and communicating insurance coverage. Clearly explain any policy changes or exclusions, especially to clients who may have language barriers or limited understanding of insurance terminology. Failure to do so can have serious financial consequences.
Additional Sources: UPSCALE FASHIONS, INC. D/B/A UPSCALE MEN’S CLOTHING VERSUS UNDERWRITERS AT LLOYD’S LONDON ET AL
Written By Berniard Law Firm
Other Berniard Law Firm Articles on Insurance Agent Negligence: What Happens When Your Insurance Agent Doesn’t Procure the Coverage You Asked For? and What Your Insurance Agent Owes YOU