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Negligent Insurance Procurement Suits

April 13, 2020

Negligent Insurance Procurement Suits

Case: Talat Parveen Et Al. v. ACG South Insurance Agency, LLC Et Al.

Facts: Plaintiffs contacted an insurance agent to procure a new umbrella insurance policy with the same terms as their existing one, which included excess uninsured motorist coverage. Such coverage was not included, but they payed premiums and renewed the policy for several years. After a car accident, Plaintiffs sued for uninsured motorist coverage, but the trial court granted the insurance company summary judgment because the policy did not include excess coverage. Plaintiffs then sued the agent for failure to procure the requested coverage.

Intermediate Decision: The intermediate court ruled in favor of the Plaintiffs and reversed the grant of summary judgment. TCA § 56-7-135(b) provides that paying premiums on an insurance contract creates a rebuttable presumption that the coverage has been accepted by all insureds. However, the court held this only applies to suits between parties to the insurance contract (the insurance carrier and the insured parties), but not suits brought against an agent who failed to procure requested coverage.

Review Granted: March 26, 2020.

Prediction: Ben thinks the Supreme Court will also rule in favor of the Plaintiff but on different grounds. The analysis need not restrict the statute to actions between parties to the insurance contract, but should instead consider the underlying issue. Here, there is no dispute the policy did not include the excess coverage; the question is whether the agent was negligent in procuring that policy and misled Plaintiff about the terms. Moreover, the statute only creates a “rebuttable presumption” which could be overcome at trial if affirmative misrepresentation is proven.