Under May v. United Servs. Ass’n of Am., 844 S.W.2d 666 (Tex. 1992), an insurance agent owes the insured two duties: (1) to use reasonable diligent in attempting to place requested insurance, and (2) to inform the client promptly if unable to do so. In a recent case out of the First Court of Appeals, Roland and Karen Garcia v. Hartwig Moss Insurance Agency, Ltd. (No. 01-20-00420-CV), plaintiffs asked the court to expand these duties to include three additional duties: “(1) to keep the [plaintiffs] fully informed ‘so that they could remain safely insured at all times,’ (2) to know that its representations to them were, in fact, true, and (3) in essence, to carry out their instructions correctly such that total reliance on [the agent] would be justified.” Affirming the trial court judgment that the plaintiffs take nothing, the court of appeals refused to do so.
The dispute arose when after Hurricane Harvey flooded their home, plaintiffs discovered that they had no flood insurance. Trying to save money, plaintiffs asked a family friend to find them cheaper coverage. The friend referred them to Hartwig, who accepted the business and issued a new homeowner’s policy at a great reduced cost. Plaintiffs, however, on several occasions failed to provide the agent with a copy of the declaration page of their current flood policy. The agent further told plaintiffs that flood insurance was separately billed and that he could not proceed with a new flood policy if they didn’t provide that information. The new policy ultimately issued included flood extensioncoverage, which plaintiffs understood to mean flood coverage (flood extension coverage applies when an underlying flood policy applies). When the agent emailed the declaration pages of the new policy, he reiterated that he could not provide a quote for flood coverage until plaintiffs provided the information about the old flood policy. Plaintiffs did not respond to this email. Subsequently, Harvey flooded their home, and the plaintiffs found out they didn’t have the coverage they assumed they had. It cost them $700,000 to repair their home.
Plaintiffs sued the agent in Harris County district court. After a trial, the court submitted to the jury negligence charges for both the agent and plaintiffs (although plaintiffs sought jury charges on the expanded duties and were refused). The jury found that the plaintiffs were negligent, not the agent, and entered a take nothing judgment. On appeal, plaintiffs relief on a 1977 Beaumont court of appeals case that found an agent liable when the agent did not renew a policy with an automatic renewal clause and did not inform the insured of the non-renewal (this holding in turn relief on a 1968 federal case from the Southern District of Texas). In other words, an agent holds a duty to the insured to “keep his client fully informed so the client could ‘remain safely insured.’” The court of appeals distinguished this precedent, such as it is, because in this case plaintiffs had coverage but “not the type of insurance that would cover the loss incurred.” Moreover, cases under the DTPA in which agents made affirmative misrepresentations are inapposite.
Finally, Texas case law provides that while there is a presumption that the insured has read the policy and knows what’s in it, the presumption can be overcome by a showing why the insured did not. At that point, the burden shifts back to the agent to prove that the insured was negligent in failing to understand the policy (i.e, because the insured didn’t read it). This is a case-by-case determination. Here the insured’s policy stated that it did not cover flood damage, and plaintiffs ignored the agent’s email. It was thus proper for the trial court to submit negligence issues, and the evidence was legally sufficient to support the jury’s finding.
This case presents a new twist on the Hurricane Harvey claims we have previously reported. But absent any affirmative conduct by an agent to knowingly mislead an insured, it looks like this approach won’t work, nor, in our view, should it.
