Maine Supreme Court Sets Reasonable Evidentiary Standard In Failure to Procure Insurance Case

Insurance agents and brokers are often sued by clients for allegedly failing to procure for the client coverage that met the client’s needs. In determining the agent’s culpability, an essential question is whether the type of insurance requested by the client is available at a price point the client was willing to pay. Proof of availability and pricing is essential to any failure to procure matter.

In Yankee Pride Transportation and Logistics, Inc. v. UIG, Inc., 264 A.3d 1248 (Me. 2021), the Supreme Judicial Court of Maine found that clients who alleged failure to procure cases against their agent/broker were required to present, as part of their proof, some evidence of the identity of an insurance company that would have provided the coverage at issue at a cost the client would have accepted.

In this case, Yankee Pride Transportation and Logistics Inc. was the client. UIG Inc. was an independent insurance agency acting as an intermediary between its clients and the insurance carriers it represented. Yankee Pride and the agency had a course of dealing over the span of years, which included UIG renewing Yankee Pride’s insurance on an annual basis.

Beginning in 2014, the agency secured a policy for Yankee Pride with Great West Casualty Co. The policy was renewed annually through 2017. However, on Feb. 20, 2018, Great West sent a non-renewal notice on the policy, which was going to expire on Dec. 27, 2018. The insure cited the poor safety record of Yankee Pride.

Carrie Michaud was an employee of UIG that managed Yankee Pride’s account. When Yankee Pride received the non-renewal notice, Michaud contacted Great West’s underwriter, Craig Harmon, asking if Great West would reconsider its non-renewal decision. Harmon advised Michaud to contact him closer to the time of the policy renewal date, at which point Harmon would reassess whether Yankee Pride’s safety problems had persisted.

The evidence indicated that Michaud tried contacting Harmon for “quite some time” to revisit the renewal issue before finally being able to speak with Harmon by phone on Dec. 21, 2018. At that point it was less than one week before Yankee Pride’s policy was due to lapse. Harmon asked Michaud to send Great West the details Michaud wanted to present on the account. Michaud sent the email with details supporting the renewal on the same day. On the same day, Michaud also called Yankee Pride, advising Yankee Pride of the difficulties in receiving a policy renewal. During the call, Yankee Pride’s owner, Larry Sidelinger, asked Michaud if Yankee Pride should shop around for insurance. Thereafter, Yankee Pride contacted at least one other insurance agency.

Great West affirmed its non-renewal decision based upon Yankee Pride’s poor safety record. Six days after the policy lapse, Michaud sent an email to Sidelinger, informing Yankee Pride that Yankee Pride could secure insurance by entering an assigned insurance risk pool and provided an estimate for what the policy would cost. Yankee Pride was advised that a 25% down payment would need to be made on the policy’s cost, accompanied by the application for insurance. Yankee Pride “forcefully” declined the assigned risk pool option because it was too expensive.

On Jan. 9, 2019, UIG’s agency manager and Michaud’s supervisor emailed Yankee Pride regarding the renewal problems. The agency manager admitted that UIG had let Yankee Pride “know about the issues in finding coverage way too late.” After the policy lapse, Yankee Pride lost a client, Huber Engineered Woods, because Yankee Pride could not provide proof of insurance.

Yankee Pride sued UIG, alleging negligence, breach of contract, and later added a count in the lawsuit for breach of fiduciary duty. One of Yankee Pride’s allegations was that an implied contract for the procurement of insurance was created by the parties’ prior course of dealings. During the lawsuit, a Huber representative testified at deposition that Huber Engineered Woods would have remained a client of Yankee Pride had Yankee Pride been able to provide proof of insurance.

The trial court granted summary judgment in favor of UIG. The Supreme Judicial Court of Maine affirmed the summary judgment.

Evidence Required

The Court held that Yankee Pride was required to produce evidence showing that UIG’s alleged breach of contract required Yankee Pride to demonstrate that the breach in procuring the insurance proximately caused the injuries that Yankee Pride suffered, i.e., that Yankee Pride’s loss of a flagship client resulting from Yankee Pride’s being uninsured after Dec. 27, 2018, was caused by the alleged breach of contract by UIG.

The Maine court noted that Yankee Pride did not offer any evidence to show that UIG could have found an insurer willing to issue Yankee Pride an adequate, affordable policy before Dec. 27, 2018, had UIG been more diligent and begun its search for replacement coverage sooner. The case facts demonstrated that UIG had located only one other option for replacement coverage — the assigned risk pool — and that Yankee Pride found the cost of that policy unacceptable. Yankee Pride did not identify any insurer that would have provided coverage at an acceptable cost, had UIG started looking sooner. Yankee Pride’s own search also was fruitless. When it contacted another insurance agency in late December 2018, that agency did not find any insurers willing to cover Yankee Pride until late in January 2019.

All three alleged causes of action against UIG failed (breach of contract, negligence, and breach of fiduciary duty) because Yankee Pride failed to produce evidence that same or similar coverage was available at an affordable cost that would have been acceptable to Yankee Pride.

Obviously, UIG should have explored alternative markets for Yankee Pride’s coverage upon receiving Great West’s notice of non-renewal. An agent should never put all the client’s eggs in the same non-renewable basket, hoping an underwriter will change his or her mind regarding a poor safety record. Lucky for UIG, the Maine court correctly found that the breach of the duty standing alone was not enough. The client must also establish that if the insurance agency had explored alternative replacements, reasonable coverage could be found at a reasonable cost.

Topics Maine