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Torts/Insurance: Agent Liability For Failure to Procure UIM Coverage

Posted by Ted A. Schmidt | Jul 17, 2015 | 0 Comments

Wilks v. Manobianco, 716 Ariz. Adv. Rep. 14 (July 9, 2015) (J. Berch)

COMPLIANCE WITH STATUTORY REQUIREMENT TO OFFER UIM COVERAGE DOES NOT BAR NEGLIGENCE CLAIM AGAINST AGENT FOR FAILURE TO PROCURE SUCH COVERAGE

Plaintiff had automobile insurance with State Farm for two years which was obtained for her by the defendant insurance agent. The agent changed the coverage to another company and then a year later back to State Farm.  In making this last change plaintiff asked the agent to obtain “the exact same coverage that [she]had previously, full coverage.”  The agent failed to look at the prior coverage which included uninsured motorist coverage [UM] and underinsured motorist coverage [UIM]. He did not include UIM in the new coverage.  Nonetheless, plaintiff signed a number of forms to obtain the new policy including a Department of Insurance [DOI] form rejecting UIM coverage. Several years later the plaintiff was rear-ended by an underinsured motorist and when State Farm denied her claim for UIM coverage she sued the agent for negligently failing to secure it.

Defendant agent moved for summary judgment arguing that his compliance with A.R.S. §20-259.01, requiring UIM and UM be offered to the insured, entitled him to judgment. The trial court agreed, the Arizona Court of Appeals reversed and the Arizona Supreme Court affirmed the court of appeals.

Insurance agents have a common law duty to exercise reasonable care in the procurement of insurance.  That duty is founded on an agent's status as one with "special knowledge," who "undertakes to act as an advisor" to a client. A.R.S. §20-259.01 provides that “every insurer .  .  . shall by written notice offer the insured and at the request of the insured shall include within the policy underinsured.”  An insurance agent is not an “insurer”  and the statute says nothing about preempting a common law cause of action against an agent.  The signature on a DOI form only serves to preempt a claim that such coverage was properly offered, it does not preempt a claim that the agent negligently failed to procure it.

The [plaintiffs'] negligence claim is based on a duty distinct from that imposed by A.R.S. §20-259.01. Whether [the agent] breached its common law duty by failing to procure the UIM coverage [plaintiffs] allegedly requested and whether [plaintiffs] should be assigned comparative fault for failing to read the related paperwork are questions for the jury.

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".

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