A Louisiana homeowner sued his independent insurance agent after his home was left uninsured during a hurricane.
The insured’s homeowners carrier canceled his policy effective July 7, 2021 because of unrepaired roof damage. The agency apparently attempted to convince the carrier to rescind the cancellation, as the court opinion stated that they informed the insured on July 21 that the carrier would not reinstate.
Five days later, the agency gave him a quote for replacement coverage. It took him nine days to respond; on August 4 he complained that the quoted premium was too high. He asked them to look for lower-priced options. They got him one on August 5, but there was another long delay in his response. He accepted the new quote on August 20.
The following events ensued:
- August 23: The agency informed the insured that he would have to pay the premium before they could obtain the policy for him.
- August 26, 3:51 pm: The insured informed the agency that his mortgage company would pay the premium.
- August 26: In response, the agency sent the insured documents for him to sign via DocuSign.
- August 26, 4:30 pm (approximately): The agency closed for the day.
- August 26, 4:52 pm: The insured electronically signed the documents and returned them to the agency.
- August 27, 8:00 am. The agency opened for the day.
- August 27, 8:39 am: The agency received a notice from the regional wholesale broker from whom it had obtained the quote. The notice stated that, due to the impending arrival of Hurricane Ida, the broker would not bind or issue any new policies.
- August 29: Hurricane Ida made landfall in Louisiana and damaged the insured’s home.
The insured contacted the agency to get his new policy number so that he could submit a claim. The agency did not tell him that he did not have a policy. He submitted a complaint to the state insurance department. Finally, on September 15 he was told that he had not had homeowners insurance at the time of the storm because of the cease-binding order from the broker.
In late summer 2022, he sued the agency for failing to use “reasonable diligence” in obtaining coverage for him before the storm and failing to communicate deadlines he was expected to meet. The court opinion did not mention the amount of damages he sought. However, Hurricane Ida made landfall in Louisiana with sustained winds of 150 mph. The damage to the home likely was immense.
In April 2024, the agency asked the court for summary judgment, a ruling in its favor based on the law where the facts are undisputed. After a hearing over the summer, the trial court denied summary judgment in November, finding that the facts were unclear as to what happened between 8:00 and 8:39 am on August 27, the day the agency learned of the cease-binding order. The agency asked an appellate court to review the decision.
On January 15, 2025, the appellate court agreed with the lower court. The question of whether the agency exercised reasonable diligence in the 39 minutes between the time it opened and the time it learned of the cease-binding order had to be resolved by a jury.
As the appellate court made this ruling only 10 weeks ago, there is no further record. The two sides are either preparing for trial or negotiating a settlement.
If this agency made a mistake, it was in continuing to do business with this client. The insured left his roof unrepaired, waited more than a week to reject the first replacement quote, waited another two weeks to accept the second one, waited three days to reply to the email about the premium, then sought to get a policy in a hurry as a hurricane approached. This is not the kind of client most agencies want. Clients like this generate a lot of work for relatively little commission and run to a lawyer when they have uninsured losses.
At a certain point, an agency must decide whether the revenue a client brings in is worth the work, stress, and E&O risk. Sometimes, the wisest thing an agency can do is tell the client goodbye.
