Reliance Required for Agent’s Alleged False Representations of Coverage


Agent Only Required to Obtain the Policy Ordered

The North Carolina Court of Appeal was asked whether a claim for unfair and deceptive trade practices against an insurance agent, based on the agent’s misrepresentation to a third party of the terms of a policy, can be maintained absent evidence that the plaintiff relied on the misrepresentation in D C Custom Freight, LLC v. Tammy A. Ross & Associates, Inc., No. COA 19-1059, Court of Appeals Of North Carolina (September 1, 2020)


Plaintiff D C Custom Freight, LLC, filed suit against its insurance agent, Defendant Tammy A. Ross & Associates, Inc., after Defendant sent documents to a third party implying that Plaintiff’s coverage was broader than what was contained in the policy. Plaintiff was left without coverage when a truck it rented from the third party was involved in an accident. Plaintiff appealed.

Plaintiff is a freight shipping and trucking company operating in North and South Carolina. Defendant is an insurance agent and broker. In 2016 Plaintiff engaged Defendant to procure commercial automobile insurance coverage, providing Defendant with a list of Plaintiff’s equipment and a copy of its former insurance policy to use as a “go-by.” Through Defendant, Plaintiff purchased a policy from Wesco Insurance Company (“Wesco). Trucks rented on a short-term basis were not individually enumerated and were not covered by the policy.

On 6 December 2017, Rush’s insurance company requested that Defendant send a Certificate of Insurance (“COI”) that showed Plaintiff’s liability insurance limits and physical damage deductibles for leased or rented vehicles. Defendant prepared and sent a COI to the insurer and to Plaintiff. This certificate (the “December COI”) indicated only that the policy provided liability coverage. The certificate did not mention collision coverage. Defendant sent a second COI (the “revised December COI”) to the insurer, revised to add the entry “Specified Perils/Collision Deductibles: $2500.” The revised December COI was not sent to Plaintiff.

The next year, Plaintiff renewed the insurance policy it had purchased through Defendant. Defendant sent a third COI to Rush’s insurer (the “March COI”), which was identical to the revised December COI except that it listed a $3000 deductible for “Specified Perils/Collision.” The March COI, like the revised December COI, was sent only to Rush’s insurer and not to Plaintiff.

In June 2018, Plaintiff rented a truck from Rush on a short-term basis. The short-term rental agreement with Rush required Plaintiffs to provide collision insurance for the truck. In July the rented truck was damaged in a collision. Plaintiff submitted a claim to Wesco. The claim was denied because short-term rentals were not covered by Plaintiff’s policy.

Plaintiff sued Defendant. Following a hearing, the trial court denied Plaintiff’s motion for summary judgment on its UDTP claim, and granted Defendant’s motion for summary judgment on all of Plaintiff’s claims. Plaintiff appealed.


The appeal only contests the trial court’s grant of summary judgment and denial of its motion to amend as to its claims for negligence, breach of contract, and unfair and deceptive trade practices.


Plaintiff contends in its negligence claim that Defendant, because it failed to procure insurance coverage for short-term rental trucks, violated its duty to “use reasonable skill, care and diligence” in procuring insurance for Plaintiff.

An insurance agent’s duty in procuring insurance is limited to securing the coverage that the policyholder has requested. Failure to recommend additional insurance to cover a risk faced by the policyholder does not constitute negligence. Defendant had no duty to procure coverage beyond what Plaintiff actually requested.

The previous insurance policy Plaintiff provided to Defendant as an example of the coverage needed did not include coverage for short-term rentals. Plaintiff presented no evidence that it requested greater or different coverage from that provided in the previous policy.

Breach of Contract

Plaintiff argues that, by failing to procure insurance covering short-term rentals, Defendant breached its contract to act as Plaintiff’s insurance agent and broker. To establish a claim for breach of contract, the party asserting the claim has the burden of showing the existence of a valid contract and a breach of the terms of that contract.

A certificate of insurance is not a policy of insurance and does not amend, extend, or alter the coverage afforded by the policy to which the certificate of insurance makes reference. A certificate of insurance does not confer to a certificate of insurance holder new or additional rights beyond what the referenced policy of insurance expressly provides.

A COI, sent to a third party and never communicated to the insured, without any additional consideration, does not create additional contractual duties owed to the insured.

Unfair and Deceptive Trade Practices

Plaintiff last argues that the trial court erred in granting summary judgment on its claim for unfair and deceptive trade practices. Plaintiff must show reliance and, because Plaintiff has failed to do so, the trial court properly granted summary judgment on this claim.

To prevail on a UDTP claim under Section 75-1.1, a plaintiff must show that (1) the defendant committed an unfair or deceptive act or practice (2) in or affecting commerce which (3) proximately caused injury to the plaintiff.  Determining whether an act is an unfair or deceptive practice that violates Section 75-1.1 is a question of law. Misrepresenting the terms of an insurance policy is a per se deceptive act satisfying the first element of a UDTP claim.

Plaintiff’s claim is likewise based on a misrepresentation by Defendant regarding what was covered under its policy: the policy did not provide comprehensive or collision coverage to short-term rentals, but the revised December COI and the March COI imply that this coverage exists. Misrepresenting the terms of an insurance policy is, as a matter of law, a deceptive act. However, Plaintiff cannot show reliance on the deceptive act because the revised December and March COIs were never seen by Defendant prior to the accident giving rise to this case. A showing of reliance is required to prove causation.

The North Carolina Supreme Court’s decision in Bumpers v. Community Bank of Northern Virginia, 367 N.C. 81, 88, 747 S.E.2d 220, 226 (2013 held that the plaintiffs’ claim was based on a misrepresentation, and they could not show proximate cause without presenting sufficient evidence that they actually relied upon the misrepresentation. Actual reliance requires that the plaintiff have affirmatively incorporated the alleged misrepresentation into their decision-making process.

The Need to Read the Full Policy

The evidence, considered in the light most favorable to Plaintiff, is insufficient to create a disputed issue of fact regarding whether Plaintiff relied on Defendant’s alleged misrepresentations. Since Plaintiff’s representatives could have, at any time, examined the insurance policy and discovered that collision coverage was not provided for short-term rentals, any reliance on such attenuated information was unreasonable. Reliance is not reasonable where the plaintiff could have discovered the truth of the matter through reasonable diligence, but failed to investigate.

In cases of negligent misrepresentation when terms are unambiguously expressed in the policy, reliance on misrepresentations as to those terms is unjustified.

Because the evidence, considered in the light most favorable to Plaintiff, was insufficient to show that (1) Defendant made a misrepresentation to Plaintiff concerning insurance coverage; (2) Plaintiff relied on the representation; or (3) Plaintiff’s attenuated reliance on a third party’s reliance would be reasonable, the trial court did not err in allowing Defendant’s motion for summary judgment.


Every person who acquires insurance is required to advise the agent or broker about the coverages needed. In this case the insured did not ask the agent to obtain collision insurance on short term rentals. Only after a short term rental was damaged in a collision did they seek the coverage the insured neither ordered nor – with a quick perusal of the policy – obtained. This case also teaches that a COI is nothing more than advice as to the existence of some insurance at a particular point in time and cannot modify the existing policy nor can it provide more coverage than the insurer agreed to provide. Since the lack of coverage for collision of short term rentals was obvious by reading the policy the insured’s claim of deception failed.

© 2020 – Barry Zalma

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 52 years in the insurance business. He is available at and

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