April 4, 2011
Today, the Indiana Court of Appeals held that an insurance agent owed an insured a duty to exercise reasonable care when advising about insurance coverage, despite the lack of a long-standing, intimate relationship between the insured and agent in
Meridian Title Corp. v. Ganier Group, LLC, ___ N.E.2d ___ (Ind. Ct. App. 2011), Case No. 46A03-1006-PL-312. However, that agent did not owe the insured a duty of good faith and fair dealing.
less..
Gainer Group is in the business of buying real estate for the purpose of subdividing and re-selling it. It agreed to purchase some property and the seller agreed to provide title insurance. Meridian, the seller's real estate agent, procured the title insurance. After the sale, the seller alleged that it mistakenly sold more land to Gainer Group than it intended. Meridian attempted to facilitate a resolution of the dispute by holding a meeting at its offices. At the meeting, Meridian told Gainer Group that it was his opinion that Gainer Group did not have a claim under its policy of title insurance because the seller closed on the property without a completed survey.
Subsequently, the seller filed suit against Gainer Group, which hired counsel to defend itself. It then submitted the claim to the title insurance company, which provided a defense. Gainer Group then filed suit against Meridian for the litigation expenses and attorney fees it incurred prior to the title insurance company's acceptance of Gainer Group's claim. The trial court denied summary judgment to Meridian.
On appeal, the Court reaffirmed that an insurance agent’s duty does not extend beyond procuring insurance for the insured unless the insured can establish the existence of an intimate, long-term relationship with the agent or some other special circumstance. The facts in this case did not establish an intimate, long-term relationship, but the Court held that they did constitute a special circumstance.
The evidence shows that Meridian advised Gainer Group that the policy contains an exception for survey issues. There is no indication in the designated materials, and Gainer Group does not argue, that this representation is inaccurate. Schedule B of the policy, which is part of the designated evidence in this summary judgment proceeding, lists the general exceptions of the policy, including "[e]ncroachments, overlaps, boundary line disputes, or other matters which would be disclosed by an accurate survey or inspection of the premises." In addition, [Gainer Group] stated that [Meridian] never refused to assist Gainer Group with a claim. Thus, Meridian had an extended duty to advise Gainer Group regarding coverage, and it fulfilled that duty.
Because there was no evidence that Meridian's advice was inaccurate or made in bad faith, Meridian did not breach the duty it owed to Gainer Group. Nevertheless, it did owe that duty.
The Gainer Group tried arguing that the Indiana Supreme Court's decision in
Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515 (Ind. 1993), which imposed a duty of good faith and fair dealing on insurers. The Court refused to extend
Erie to insurance agents.
Our Supreme Court has yet to extend this duty to an agent; rather, an insurance agent's duty does not extend beyond the general duty to exercise reasonable care, skill and good faith diligence in obtaining a policy of insurance unless the evidence, through certain factors as set forth above, establishes a special relationship. Therefore, we decline Gainer Group’s invitation to extend the application of the duty of an insurer as set out by the Supreme Court in Erie.
Lessons:
- An insurance agent who provides advice that there is no coverage does not breach a duty merely because the insurer accepts coverage.
- An insurance agent does not owe a duty of good faith and fair dealing to an insured.
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