Insurance Agent Owes no Duty to a Person Not a Client
In Jeff Fendley v. Sims Norment, No. 06-20-00066-CV, Court of Appeals Sixth Appellate District of Texas at Texarkana (April 29, 2021) an attempt to avoid legal problems by transferring title to a house from Jeff Fendley to his parents created a problem when the house and its contents burned.
After a home owned by Charles and Sallie Fendley was destroyed by fire, they received the full value claimed under an insurance policy issued by Hochheim Prairie Farm Mutual Insurance Association (the Insurance Company). The Fendley’s adult son, Jeff Fendley, who had always resided in the home, deeded it to his parents “for legal reasons” and paid the monthly premium for the insurance (the Policy).
When Jeff asked Sims Norment, an insurance agent if he needed to purchase renter’s insurance to cover loss of personal property in the event of a disaster, Norment believed and represented to Jeff that his belongings were covered by the Policy and that renter’s insurance was unnecessary.
The Insurance Company denied a claim for Jeff’s belongings because he was not an insured. Jeff sued Norment for negligence and alleged that he “had a duty to provide the insurance coverage that [Jeff] needed.” Norment moved for summary judgment on the ground that he did not owe Jeff any duty to provide a particular insurance coverage that he did not apply or pay for. The trial court granted Norment’s summary judgment.
Factual Background and the Summary Judgment Evidence
The summary judgment evidence established that Charles and Sallie never lived in the home that Jeff deeded to them in 2011 “for legal reasons.” Jeff said that he told Norment that he lived in and owned the home even though “the house was in [his] father’s name.” Even so, summary judgment evidence established that Charles applied for the Policy, the down payment receipt for the Policy listed Charles’s name, the Policy was issued to Charles and Sallie, and Jeff, who paid for the insurance premiums, was not an insured under the Policy.
Before the fire Norment told Jeff that it was unnecessary to purchase renter’s insurance since the contents of the home were covered under the Policy. In explaining that he had misadvised Jeff. According to Norment, the Insurance Company denied Jeff’s claim for property loss on the ground that he was not insured under the Policy.
Jeff’s petition alleged only one ground of negligence, namely that Norment “had a duty to provide the insurance coverage that the Plaintiff needed and paid a premium for” and that the “negligence was the direct and approximate cause of [Jeff] not having insurance coverage on his contents when the loss occurred.”
In his motion for summary judgment, Norment argued that Jeff was not his client, did not apply for insurance coverage, was not the insured under the Policy purchased by his parents, and had no agreement with the Insurance Company. Norment stated, “I have done work for Jeff Fendley in the past, but not related to this particular Policy.” The summary judgment evidence showed that Jeff was paying for his parents’ Policy and that they received the coverage paid for, which included compensation for personal property gifted to Jeff and placed in his home. As a result, Norment argued that he had no duty to provide additional insurance coverage that Jeff had neither applied for nor paid for.
The threshold inquiry in a negligence case is duty. An insurance agent generally does not owe a duty unless there is privity between the agent and the putative insured. No evidence showed that Jeff and Norment were in privity with respect to any policy that would provide coverage for Jeff’s personal belongings.
The Court of Appeal, therefore, concluded that there is no Texas case that interposed any duty in favor of a non-client upon a client’s insurance agent regarding the agent’s negligent failure to procure a liability policy with a certificate designating the non-client as an additional insured.
Even accepting Jeff’s argument that he is Norment’s customer based on past, unspecified, dealings, in Texas, an insurance agent owes the following common-law duties to a client when procuring insurance:
- to use reasonable diligence in attempting to place the requested insurance, and
- to inform the client promptly if unable to do so.
Here, neither of those duties was breached because Jeff did not pay for or apply for additional insurance, and the coverage he paid for on behalf of his parents was provided pursuant to the Policy.
Although Jeff asked for Norment’s opinion on the need for renter’s insurance, no legal duty exists on the part of an insurance agent to extend the insurance protection of his customer merely because the agent has knowledge of the need for additional insurance of that customer, especially in the absence of evidence of prior dealings where the agent customarily has taken care of his customer’s needs without consulting him.
Since no evidence showed that Jeff and Norment shared an expectation that the agent habitually would satisfy all of Jeff’s insurance needs without consultation, Jeff had no basis to expect performance from Norment.
Jeff claimed only that Norment had a duty to provide the insurance coverage that the Plaintiff needed and paid a premium for.
The failure to provide coverage claim failed as a matter of law because Texas law imposed no duty on Norment to secure additional insurance not specifically requested or applied for under the facts of this case, and the coverage under the Policy that was paid for was provided and the Court of Appeal, therefore, affirmed the trial court’s judgment.
Jeff was his own worst enemy. He tried to avoid legal problems by transferring title of his home to his parents who did not live there. He occupied the house and when it burned his personal property was damaged or destroyed. Since he was not an insured of the policy the insurer owed nothing to him. He had no privity with the agent who owed him no duty. If there is no duty there can be no negligence case. Jeff was too smart by half and failed to order insurance to protect his insurable interest.
© 2021 – 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 http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4