Asked and Answered: Retail Insurance Agent Meets Standard of Care by Requesting Coverage Sought, Even If Insurer Declines to Underwrite Risk

Weaver Warehouse sought $3 million in builder’s risk insurance and $2.6 million in existing structure coverage for property renovations; however, an error occurred in the application process, resulting in less existing structure coverage offered by the insurer, Great American. At Weaver’s request, the retail insurance agent and agency, Jeff Gottschalk and Dietz & Bluett, LLC (D&B), sought an increase to the existing structure coverage offered from $280,000 to $480,000, which Great American would not do because it was under the (incorrect) impression that the property had been purchased within the last twelve months. 

Weaver purchased the coverage offered by Great American, which included $3 million in builder’s risk insurance and $280,000 in existing structure coverage and suffered a subsequent fire loss that Great American covered. However, Weaver contended it was underinsured and filed a lawsuit against Gottschalk and D&B, which was dismissed by summary judgment motion. 

On appeal, the Pennsylvania Superior Court found that Gottschalk and D&B did owe a duty to the insured, Weaver, but did not breach the duty owed in accord with existing Pennsylvania precedent interpreting the standard of care. See e.g. Laventhol & Horwath v. Dependable Ins. Assocs., 579 A.2d 388 (Pa. Super. 1990); Al’s Café, Inc. v. Sanders Ins. Agency, et al., 820 A.2d 745 (Pa. Super. 2003).

The Superior Court found that Gottschalk and D&B had a duty to procure the insurance requested by Weaver, which they met by requesting insurance and an increase in existing structures coverage, despite Great American ultimately declining to increase the existing structures coverage. Weaver accepted the coverage offered, albeit lower than Weaver desired. There was no breach where Gottschalk and D&B followed Weaver’s instructions and procured an insurance policy that was neither void nor materially defective. 
    
Moreover, the court rejected Weaver’s “reasonable expectations” argument, finding that Weaver “may not complain that its reasonable expectations were frustrated by policy limitations which [were] clear and unambiguous.” 

This decision bolsters the existing case law supporting retail insurance agents when requested coverage is not available or the prospective insured is not eligible for such coverage. While insurance agents should request the coverage sought by their customer, they are not underwriters and must defer to the insurer with respect to insurance underwriting and coverage decisions. Insurance agents should document requests made by customers and efforts to procure the coverage requested, as well as any response from the insurance company regarding the coverage request, in the event similar litigation ensues. 

_{Case Law Alerts, 3rd Quarter, July 2024 is prepared by Marshall Dennehey to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2024 Marshall Dennehey, all rights reserved. This article may not be reprinted without the express written permission of our firm.}