A North Carolina insurance agent will have to return to court to determine if he or the client acted negligently by failing to disclose details about an insured’s property, the state’s Court of Appeals decided Monday.
In Daniel Jones vs. J. Kim Hatcher and others, the court found that a trial court had erred in dismissing a negligence claim against Hatcher, a licensed producer in Kenansville and Beulaville, in southeastern North Carolina. Jones’ application for homeowners coverage did not mention the fact that the rural property had a pond and was five acres in size, an omission which later prompted the carrier to deny a hurricane claim, the appellate court said in the Sept. 5 opinion.
“Since Hatcher was provided with accurate information and assumed the duty to fill out the application, it was to be completed accurately—which was not done,” the court said in remanding part of the case to the Superior Court in New Hanover County. “In sum, while Plaintiff’s conduct may have played a role in the denial of the claim by the insurer, we cannot say that his conduct was contributorily negligent and caused the agent to improperly complete the application for insurance.”
The lower court had correctly dismissed other allegations against Hatcher and HXS Holdings, a broker; and against Geovera Insurance, the carrier, the appeals court judges found. Those charges included fraudulent concealment, breach of fiduciary duty and unfair trade practices.
The case stemmed from Hurricane Florence, a Category 4 storm that came ashore on North Carolina’s southeastern coast in 2018, at Jones’ doorstep. The winds and relentless rain caused significant damage to Jones’ property. But Geovera, after initially indicating that it would accept the claim, denied it on the grounds that the application never disclosed the pond and acreage.
Jones filed suit, arguing that Hatcher was partly at fault, after the client had agreed to let Hatcher complete the application. The agent had taken photographs of the property, but those apparently did not show all areas of the property.
The appeals court said that the insured had a duty to read the application and the policy, but that does not automatically mean the policyholder contributed to the alleged negligence.
“The allegation that Plaintiff, himself, failed to read the other pages of the insurance application filled out by Hatcher before signing does not establish, as a matter of law, that Plaintiff was contributorily negligent vis-à-vis his negligence claim against Hatcher,” Judge Michael Stading wrote for the majority of the court.
“Plaintiff’s failure to read the application in full may be grounds to excuse the insurer from covering Plaintiff’s loss on a contract claim where the application contained incorrect information about his property,” the opinion reads.
But “it is for the jury to determine whether Plaintiff was contributorily negligent in relying on the agent rather than reading the application himself before signing.”
Appeals Court Judge Allegra Collins dissented, contending that any negligence on the agent’s part was defeated by the insured’s own contributory negligence, as the trial court had found.
The appellate majority also agreed with the lower court that the insured could not, under the law, allege that the agent breached his fiduciary duty – because Jones had signed the insurance application.
“An insurance agent’s legally imposed fiduciary duty does not extend to properly answering the questions on the insured’s application for insurance, particularly when the insured has asserted that the answers are accurate,” the majority wrote. “That duty rests with the insured, and the insured is only excused from their duty in limited circumstances.”
In some cases, if a party to a contract “holds all the cards” or all the information or financial power, a fiduciary responsibility may arise. That was not the case with Jones and Hatcher, who had executed previous insurance contracts for a number of years, the court said.
Jones had also alleged that Hatcher had failed to disclose that Geovera was not an admitted carrier in North Carolina and that claims would not be covered by the state’s insurance guaranty fund in case of insolvency. But the appeals court said that was irrelevant, the insurer was not insolvent and its admitted status did not cause the insured’s alleged injuries.
Topics Agencies North Carolina Property
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