No Harm, No Foul when Agent Issues False Certificate

Insurance Agent’s Duty Limited to Insured

Plaintiff PWB Development leases its Oklahoma City property to Kampco Foods. The property sustained a March 2015 fire that caused Kampco’s rent to abate during nine months of repairs. Plaintiff alleges that before the fire, it requested Kampco and Frates, Acadia’s insurance agent, to add Plaintiff as a named insured to Kampco’s insurance policy that covers lost rents. Frates never added PWB to the policy, yet it issued “certificate[s] of property insurance” and “evidence of commercial property insurance” listing PWB as insured under the policy covering “business income.”

In PWB Development, L.L.C. v. Acadia Insurance Company and Frates Insurance & Risk Management, L.L.C., Case No. CIV-17-387-R, United States District Court For The Western District Of Oklahoma (August 27, 2018) Plaintiff sought $150,913.29 in lost rents from Defendants for misrepresenting that PWB was covered by the policy and causing PWB to rely on those misrepresentations when it declined to procure its own lost-rents coverage.


PWB’s lease with Kampco requires Kampco to carry “at its own expense” four types of insurance—none of which covers business income or lost rents—for the Oklahoma City property where Kampco operates a Johnny Carino’s restaurant. The lease also requires that PWB be named “as an additional insured” on Kampco’s policy for the coverage.

Given that the lease leaves PWB exposed for lost rents, PWB maintained its own insurance policy for lost rents from 2010 to early 2014, when that policy was cancelled. Without lost-rents insurance, PWB claims that it turned to Defendant Frates for coverage.

Frates issued PWB a certificate of property insurance (“CPI”) on February 12, 2014 covering the Johnny Carino’s property listing PWB as both an “insured” (alongside Kampco) and “certificate holder” on a Valley Forge Insurance Company policy. Below the policy number, the CPI reads “Business Income – Actual Loss Sustained 12 Mo,” but oddly the only “covered property” boxes checked are “building” and “personal property,” not the “business income” and “rental value” boxes.

Frates then issued a CPI identical to the earlier one with Acadia as the insurance provider. Despite that Acadia only bound insurance coverage for Kampco, the CPI again listed Kampco and PWB as “insured” due to what Frates calls “an inadvertent scrivener’s error.” The CPI included the same disclaimers and lack of clarity over coverage for business income or lost rents. Frates issued evidence of commercial property insurance form (“ECPI”) — a form “no differen[t]” than the CPI other than it is “more specific” about coverage — listing PWB as both a “named insured” (alongside Kampco) and “additional interest.” The ECPI’s disclaimers are nearly identical, and it marks “business income” as covered, but not “rental value.”

The Johnny Carino’s restaurant sustained a significant fire in March 2015 that caused rent to abate until repairs finished in December 2015.  Acadia denied PWB’s claim.


The moving party bears the initial burden of demonstrating the basis for its motion and of identifying those portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,” that demonstrate the absence of a genuine issue of material fact. If satisfied, the burden shifts to the nonmoving party to demonstrate the existence of a genuine issue of material fact.

The nonmoving party “may not rest upon mere allegations” in his pleading to satisfy this requirement.

Frates appeared to be soliciting—accepting an insurance application and a proposed amendment to the new policy—when it made the misrepresentations at issue. Therefore, any act done by the agent in connection with the issuing of said policy was the act of the company itself, rendering Acadia liable to the extent of its agent Frates.

A deceit claim, otherwise known as common-law fraud requires (1) a material and false representation; (2) made knowingly false or “recklessly, without any knowledge of its truth”; (3) with the intention that it should be acted upon; (4) which is justifiably relied upon; (5) to Plaintiff’s detriment.

Beginning with the satisfied elements, Frates made false representations in the CPIs and ECPI that PWB was insured under Kampco’s policy with Acadia. These representations were material because had PWB been covered under Kampco’s policy, it would have had coverage for lost rents. Frates did so recklessly, as Defendants present no evidence that Frates ever checked the Acadia policy before making these affirmative representations of coverage. Instead, Frates seems to have relied merely on Kampco’s request to issue the forms.

Frank Smith admitted “[t]here is a significance” to “telling someone they are an insured,” as opposed to a “certificate holder,” and he understands that “people are going to rely on the [CPIs].” Granted, the CPI and ECPI forms showing PWB as insured include “information only” disclaimers that the forms “do[] not . . . amend, extend or alter the coverage afforded by the polic[y]”. The forms list PWB as not only a certificate holder and additional interest, but also as “insured” and “named insured,” and they “certify that the policies of insurance listed have been issued to the insured named above.” Lastly, Plaintiff relied on these representations. PWB claimed had Frates not represented that PWB was insured, PWB would have sought coverage for lost rents elsewhere. Because PWB never procured lost-rents coverage, it lost $150,913.29 in abated rent during fire repairs.

To justifiably rely on Frates’s false representations, they “must have been of such a nature and made under such circumstances that the injured party had a right to rely upon it.”  PWB could not justifiably rely on the certificates:

  1. The representations were equivocal. The forms’ discussion of coverage is also ambiguous. The CPIs have the words “Business Income” typed out below the policy number, but oddly the only “covered property” boxes checked are “building” and “personal property,” not the “business income” and “rental value” boxes.
  2. PWB and Kampco’s lease delineates four types of insurance that Kampco was obligated to procure at its own cost with PWB as the additional insured, none of which covers lost rents.
  3. PWB concedes it never requested or read the Acadia policy to which it claims coverage. It argues that it had no reason to because of the false representations that labeled PWB insured looking to the justifiability of Plaintiff’s reliance, it strains credulity that Plaintiff would expect a certain type of coverage without even requesting the policy to read its terms.
  4. PWB never asked for lost-rents insurance—not to Kampco, not to Frates, and not to Acadia.

To summarize, Plaintiff PWB—after receiving Frates’ forms ambiguously referring to business-income coverage that is not owed to PWB under its lease with Kampco, and having never read the policy or requested lost-rents coverage—believes its decision was “justifiable” not to procure its own lost-rents coverage. Considering all the evidence and Oklahoma’s “clear and convincing” standard for proving a claim of deceit by misrepresentation, the Court found summary judgment appropriate.


Neither could a jury find in favor of Plaintiff on its claim for deceit by nondisclosure or concealment. The claim requires Plaintiff to have concealed or failed to disclose a fact “with the intent of creating a false impression of the actual facts in the mind of [Plaintiff].” Under all of the evidence it is conclusive that the defendants intended to and did overreach the plaintiff.

Plaintiff offers no evidence that Defendants possessed the requisite knowledge to intentionally deceive Plaintiff. To the contrary, Frates never checked the policy to learn that the CPIs and ECPI were incorrect, and Acadia did not learn about any of the erroneous forms until PWB filed a claim in 2016 attaching a CPI labeling PWB as insured on Kampco’s policy. Thus, Defendants are entitled to summary judgment on Plaintiff’s claim for deceit by nondisclosure or concealment.


Plaintiff cannot show that Acadia violated the “duty to deal fairly and act in good faith with its insureds” because PWB was not insured. There is simply no evidence in the record that Acadia acted in bad faith or that had it investigated the claim differently, Plaintiff would not have sustained injury.

Although the court found Frates’s apparent carelessness troubling, issuing several incorrect insurance forms in 2014 and even again in 2016 after the Johnny Carino’s fire, Frates had no duty to PWB. As a result, Frates is entitled to summary judgment on Plaintiff’s multiple claims.


As Mrs. Gump said to her son, Forest: “stupid is as stupid does.”  The agent Frates was stupid in issuing certificates without reading the policy or confirming the coverages represented. The “insured” was stupid in believing it had rental income coverage because it asked for it but never received a certificate or policy that provided the coverage. Frates’ stupidity caused no damage and PWB’s stupidity was honored by its loss of rents it could not obtain from an insurer.

© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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