By: AgencyEquity.com
A Michigan independent insurance agency’s failure to submit an Employment Practices Liability Insurance (EPLI) claim on time earned it a lawsuit from its insured.
The insured was a steel processing company. According to the judge’s January 29, 2025 opinion, the insured had purchased insurance through the agency for many years. The agency also served as the insured’s loss reporting contact. The insured’s human resources (HR) manager testified that, whenever they received notice of a covered event, they would call the agency. The agency would then notify the carrier. She described this as the “custom and practice” throughout their “long-term relationship.
The insured purchased an EPLI policy through the agency effective from April 22, 2019 to February 1, 2020. The policy covered the insured’s liability for “employment claims,” which included an “administrative, regulatory or tribunal proceeding.” These could be commenced either by
- The issuance of a document containing a notice of charge or formal investigation, or
- Another notice where the document had not yet been issued.
The policy required the insured to give the insurer written notice of such a claim.
In May 2019, the state Division of Human Rights (DHR) called the HR manager to inform her that they would soon receive formal notice of a discrimination claim made by one of their employees. She promptly sent an email to the insurance agency to report the call.
According to her, she later called an agency employee and verbally provided details of the claim. The employee did not remember any such call and testified that no one at the agency received these details. However, in June she emailed him to request a list of law firms that might represent the insured in the matter. He responded with a list of firms the insurer approved. He also asked for a copy of the written notice of the complaint from the DHR.
Later that month, she wrote to him with her choice of law firm, and he again asked for a copy of the written notice. She replied that she had not yet received it. The insured finally received the written notice in mid-July. Believing that the verbal notice she had provided in May was sufficient (based on past practice,) she did not forward a copy to the agency. Instead, she sent it to the defense attorney.
The policy renewed for a full year term in February 2020. Under its terms, the deadline for submitting the written notice of the employment claim was February 1, 2021. The deadline passed with no written notice. In January 2022, after the employee had filed a formal action, the HR manager forwarded the complaint to the agency with a request that the insurer rush it through. Instead, the insurer denied coverage a few weeks later based on the late report of the loss. The agency appealed unsuccessfully. The insured sued the insurer and the agency for reimbursement of their cost to settle the suit, estimated at between $150,000 and $275,000.
The agency moved for a judgment in its favor based on the law because it felt the facts were undisputed. However, the judge found that some facts were in dispute. Whether the agency and the insured had an implied contract for the agency to report claims was an open question. The agency tried to argue that reports had to be in writing, but that was not their previous practice. In addition, the policy did not even require the insured to have a written complaint before submitting a claim. Finally, the agency argued that it was the insurer’s agent and not the insured’s agent for claim reporting purposes. The judge said they could have been both. He remanded the breach of contract claim for a jury to consider.
As the judge rendered his decision in late January 2025, there is no further public record for this dispute. The parties may be negotiating an out of court settlement. Agencies do not ordinarily have a duty to an insured for anything other than obtaining coverage. However, where they have established a history of voluntarily going beyond that, a court may find, as this one did, that they have additional duties. The agency appears to have mishandled this claim. It may well end up costing them and their errors and omissions liability insurer.
