Good insurance agents are constantly trying to fill their prospect pipelines through referrals and networking. Sometimes, networking will include making presentations at public events attended by prospective clients. A prospect might hear something in that presentation that he takes as a promise of future coverage, and that could lead to problems down the road.
A Vermont independent agent spoke at a continuing legal education event for attorneys. His subject was cybersecurity risks, specifically the risk of fraudulent wire transfer scams. After the presentation ended, one of the attorneys in attendance approached him. The two had a conversation in which the attorney expressed concern about whether his firm had adequate coverage for these types of scams. The agent told him that “he was going to have to review (their) current policy, but he felt confident that he could provide better coverage.”
More than a month later, the law firm completed a questionnaire on the insurance agency’s website, requesting a quote for professional liability insurance. The request mentioned neither cybersecurity insurance nor the conversation at the CLE event. In response, the agency sent the firm a blank application for group lawyers’ professional liability insurance from a specific insurer. The firm completed and signed the application and returned it to the agency, saying that they were trying to track down a complete copy of their current policy.
Two days later, the agent sent the firm an insurance proposal and premium indication and requested a copy of the declarations from their current policy “to make sure there was no gap in coverage.” The firm responded, not with a copy of the declarations, but with a copy of a certificate of liability insurance. The insurer issued the new policy, and the agency emailed it to the firm with instructions to review it and contact the agency with any questions or requested changes. The policy included $10,000 coverage for network or information security breach losses. The firm acknowledged receiving the policy but did not communicate with the agency further.
The policy renewed twice. The agency enclosed a copy of a bulletin with the second renewal, warning law firms that they may be targets for wire fraud scams. The firm did not respond to this bulletin.
The next month, the firm received what they thought were instructions from the attorney representing a home seller. The email asked the firm to stop payment on a $100,744 check for the proceeds of the sale and to wire the funds to a bank instead. Only when the attorney contacted them nine days after the closing did they realize that the instructions did not come from him.
The firm submitted an insurance claim that the insurer initially denied but for which it eventually paid $50,000. They sued the agency for the balance, charging them with breach of contract, misrepresentation and violating Vermont law. The trial court ruled in the agency’s favor without holding a trial, and the firm appealed. The Vermont Supreme Court upheld the ruling, finding that the firm could not have reasonably relied on statements at a seminar as a promise by the agency to obtain specific coverage.
This agency did the right things to protect itself. It had documentation of the request for a quote, their request for a copy of the expiring policy, an invitation for the firm to contact them with concerns, and even a warning that the loss that occurred was possible. In the face of this evidence, the court correctly ruled that a public speech does not create a contract. Agencies should follow this one’s example and document all client communications.
