By: AgencyEquity.com
Is an insurance agent obligated to inform a client that a carrier intends to non-renew their policy? One couple in Connecticut thought so after their house burned down.
The couple purchased a homeowners insurance policy on their home from an agency in June 2019. They had purchased coverage from that agency for most of the previous 16 years. The agency had been an exclusive agent of one carrier during that time. However, the carrier withdrew from the Connecticut homeowners market and permitted its agents to obtain coverage from other insurers that they approved.
The policy in question was placed with one of those insurers. It had a term of one year and provided a limit of $361,442 on the dwelling. Shortly after issuing the policy, the insurer had the home inspected and found that siding was missing from one part of its exterior. The inspector emailed the agency’s office manager in July to report the missing siding. She wrote, “Please discuss the situation with your insured, as repairs are required as a condition of continued coverage …” The insurer gave the insureds until the following March to complete repairs.
On the deadline for repairs to be made, she emailed the agency again to state that they had not received a report of the repairs having been made. “Due to not receiving a response,” she wrote, “the policy has been set to nonrenew. Please submit proof of repairs … by the policy expiration date.”
The homeowners later claimed that no one from the agency ever contacted them about the inspection, the repairs the insurer wanted, or the risk of non-renewal. Nevertheless, in April 2020 the insurer sent a non-renewal notice by certified mail to the insureds and the agency. The notice cited the uncompleted repairs as the reason, stated that the insureds had not responded to their requests for proof of the repairs, and gave them until the policy expiration date to present the proof and have the non-renewal rescinded.
U.S. Postal Service records later showed that three unsuccessful attempts were made to deliver the notice to the insureds with reminders for them to contact the USPS. In early May, the USPS declared the notice “unclaimed” and returned it to the insurer. The insureds later disputed that they were ever notified of the notice.
The policy expired on June 27, 2020. Two and a half weeks later, the house burned down. The subsequent insurance claim was denied because no policy was in force.
In August, the insureds sued the insurer and the agency. They accused the agency of negligence for not telling them their policy would be non-renewed. They also charged them with violating a state law pertaining to policy non-renewals and for breaching a fiduciary duty. The agency moved to have the negligence claim dismissed, the trial judge agreed, and the insureds filed a new complaint against the agency, alleging violations of other state laws.
In May 2022, the trial judge sided with the insurer and the agency. The insureds appealed.
In May 2024, the appellate court again sided with the insurer and agency. There was no obligation for the agency to report the inspection results to the insured or to inform them of the impending non-renewal. Lastly, they rejected the insureds’ charge that the agency “misled” them by allowing them to think their insurer was still the original carrier. The change in insurers, the judges said, did not cause the insureds’ economic loss; the uninsured fire did.
The opinion does not mention why the agency did not communicate with the insureds about the inspection. It is possible that communications were made by phone and not documented. If so, documentation would have saved the agency a lot of trouble. Any conditions that place a client’s coverage in jeopardy should be promptly communicated to the client in writing. It does not appear that these clients were diligent about checking their mail, but written communications would have provided a strong defense.
