In March 2022, an independent insurance agency forgot to tell its carrier about a new truck driver. The result was a lawsuit involving seven parties and the agency and carrier suing each other.
The insured was an Ohio trucking company that was contracted with a company that performs delivery services for a big box retailer. To satisfy that company’s insurance requirements, they worked with the insurance agency to purchase a commercial auto liability policy in November 2021. That policy provided a liability limit of $1,000,000.
The policy contained a condition that required the insured to inform the carrier’s “underwriters” (probably a managing general agent) of all drivers who would be operating insured vehicles. Before any driver could be added to the policy (and therefore insured,) the underwriters had to approve them.
It contained another condition defining “permissive users” as users of covered autos whom the carrier had not approved in writing. The condition automatically reduced the liability limit for these users from the $1,000,000 shown in the declarations to the state mandatory minimum limits (in Ohio, $25,000 for bodily injury to one person, $50,000 for injuries to multiple people in one accident.)
A separate state law set the minimum amount of bodily injury liability insurance for trucks transporting goods for hire at $750,000 where the vehicle weighed more than 10,000 pounds.
In March 2022, the insured hired a new driver. As was their routine practice, the owner texted his contact at the agency, requesting approval for the new driver and an updated list of approved drivers on agency letterhead for him to give the company he was contracted with. The agency obtained the driver’s record and found nothing troublesome. The insured called and texted later that morning, as he had a meeting with the company and was anxious for the updated list. The agency emailed him the current list, including the new driver, before lunch.
The contact at the agency never forwarded the new driver’s information to the MGA, so the MGA never approved him.
In mid-May, the driver, while behind the wheel of a truck weighing more than 10,000 pounds in central Ohio, collided with a couple on a motorcycle. After the trucking company submitted the claim, the carrier responded that they would provide the state minimum limits, not the $1,000,000 limit, because the driver had been unapproved.
The litigation cycle commenced:
- The carrier filed a “declaratory judgment” action in court (a judgment to clarify their legal rights and obligations in the matter.) They asked the court to declare that they owed only the state minimum limits.
- The injured couple, the insured, and the contracting company sued the carrier for the full limits.
- The insured sued the agency.
- The agency sued the carrier for the $750,000 minimum for truckers hauling goods.
- The carrier counter-sued the agency for alleging breaching its authority.
After an April 2024 hearing, the trial court ruled that the carrier owed $750,000 and the agency was liable to the insured for the $250,000 difference. Everyone appealed.
On February 10, 2025, the appellate court upheld all of the trial court’s rulings. Regarding the agency, they found that it had no authority from either the carrier or its MGA to approve drivers. “Accordingly,” they wrote, “(the agent’s) representation to (the insured) that (the driver) had been approved, or added to the policy, was made without any authority to do so.”
The three judges were unanimous in their decision. Given that there was no difference in opinion, it seems unlikely that the parties will appeal again to the state’s highest court.
The agency made a mistake in failing to inform the MGA of the new driver, then compounded it by violating its authority and telling the insured that he was approved. However, the carrier must also pay hundreds of thousands of dollars more than it wanted to because of the agent’s error. The relationship between the agency, MGA and carrier is likely over.
This case shows that even the smallest of oversights can land an agency in court and rupture a valued business partnership.
