Wording on certificate alone does not grant additional assured status
Insurance agents and brokers must issue certificates of insurance only with the certainty that the certificate accurately states the facts of the particular case. Failure to use caution in the issuance of certificates of insurance can drag the agent or broker into unnecessary litigation. Consider the following marine-insurance case, where an agency issued a certificate which the recipient said gave it the impression it conferred additional-assured status, although the prerequisites for the recipient to qualify as an additional assured had not been met. Fortunately for the insurer and broker, the court decided that no reasonable trier of fact could conclude that the entity claiming coverage qualified as an additional assured.

A company chartered some barges from a barge-leasing company, which gave the company a certificate of insurance as part of the transaction. It listed a number of policies the barge-leasing company held and stated that the certificate “neither affirmatively nor negatively amends, extends or alters the coverage afforded by those policies.”
More than a year later, the charterer received another certificate from the barge company's insurance broker. Like the previous certificate, this one stated that it “neither affirmatively nor negatively amends, extends or alters the coverage afforded by those policies” listed on the certificate. However, unlike the previous certificate, this one contained other language that, following an incident, the company asserted proved it had additional assured status under the policies.
The barge company's insurer disputed this claim, arguing that the charterer did not meet the requirements to become an additional assured as stipulated in the barge company's charter party agreements. The insurer also denied that the certificates of insurance sent by the barge company's broker made the charterer an additional assured under the policies.
The applicable language from the charter party agreement stated: “The insurances agreed to herein and provided by LESSOR shall not name CHARTERER as additional insured unless CHARTERER requests such status in writing to LESSOR and fully executes this charter party and returns same to LESSOR.”
The insurer argued that the charterer never became an additional assured under the barge company's policies because at no time prior to the incident in question did the charterer send a written request to the barge company to name it as an additional assured, nor did the charterer fully execute the charter party agreements. In reply, the charterer argued that it was an additional assured pursuant to its master service agreement. The MSA read, “CONTRACTOR (the barge company) agrees that all of CONTRACTOR'S insurance policies shall name Company Group (the charterer) as Additional Assureds.” In an affidavit, the charterer's purchasing manager further asserted that it was her understanding that the barge company would name the charterer as an additional assured on its policies, as per the MSA.
The court found, however, that the barge company never bound itself to the charterer's MSA, and that no reasonable trier of fact could find otherwise. The evidence presented showed that the charterer's purchasing manager sent two letters to a senior vice president of the barge company, requesting execution of the MSA to remain on the charterer's approved vendors list. However, there was no evidence that the MSA was ever executed or agreed to by the barge company. The e-mails exchanged between the purchasing manager and vice president established that the barge company thought the MSA was inappropriate for its marine business, and that it had no intention of executing it.
The court held that the purchasing manager's “understanding” did not create a disputed issue of material fact, given that her correspondence revealed no final agreement on the MSA was reached. Therefore, no reasonable trier of fact could conclude that the barge company agreed to add the charterer as an additional assured, pursuant to the MSA agreement.
Marmac LLC v. Meridian Resource & Exploration, LLC, No. 06-4905, 2007.ELA.0001098 (E.D.La. 06/07/2007) .
Plaintiffs can't prevail against agency unless relationship is established
When insurance agents and brokers accept the duty of insuring a client, they must fulfill that obligation. However, a mere inquiry about insurance availability without the establishment of agency is not an obligation and should not be the subject of litigation. Nonetheless, sometimes people without insurance face claims or judgments that would have been covered under a policy, and they sue an agent or broker to avoid personal responsibility. The following case teaches that agents and brokers wishing to avoid such lawsuits should do what most lawyers do when queried about a case but not retained: issue a non-engagement letter. When a person requests a quote but fails to follow through with a purchase, the agent should send a letter advising that no insurance was ordered or purchased and the agent has concluded that the customer has decided not to use his or her services.
In August 2000, a man bought a gas station and hired a manager for it. In September, the owner contacted an insurance agent to inquire about liability insurance, and the following day the agent faxed a quote. The agent initiated several further contacts in an effort to complete the application and collect a deposit, but the plaintiffs indicated they wanted to continue shopping and took no further action. The owner would later testify he did not remember entering into an insurance contract with the agency, and the manager testified he didn't either.
On Jan. 3, 2001, a patron of the gas station slipped and fell, suffering personal injuries. The owner had no coverage in force at the time.
More than three months after the patron was injured, the owner and manager again contacted the insurance agent to discuss obtaining coverage. The agent sold them a policy with an effective date of April 18, 2001, although the owner had asked to have the policy backdated to the beginning of the year.
The injured patron eventually received a binding arbitration award of $152,514.50. The owner and manager, without insurance applicable to the loss, sued the agent. The jury returned a verdict in the agent's favor, which the plaintiffs appealed.
In appellate court, the plaintiffs argued that they properly presented evidence that the defendant was an insurance professional. Consequently, they said their request to instruct the jury on the general duties of an insurance agent, which the trial court denied, should have been granted.
The appeals court disagreed. It said the proposed instruction would have required the jury, without legal guidance, to draw a conclusion as to whether an agency relationship existed between the owner and the insurance agent.
The plaintiffs also claimed that the trial court improperly rejected their request to instruct the jury concerning promissory estoppel. They conceded, however, that they failed to allege a distinct cause for promissory estoppel in their complaint.
The plaintiffs also argued that the court improperly granted the defendant's motion to preclude expert witness testimony regarding an insurance agent/broker's duties on the grounds that the proposed testimony would be irrelevant and confusing to the jury. They claimed that such an expert was needed because insurance is a specialized field with specialized knowledge and experience.
As with the plaintiffs' jury instruction claim, the court said this claim presumed the existence of an agency relationship, which was not pleaded by the plaintiffs. “As we stated in part I, the plaintiffs have cited nothing in the record to demonstrate that they either requested or that the evidence supported an explicit instruction on the law of agency,” the court ruled. “Accordingly, we conclude that the court did not abuse its discretion in precluding the proposed expert testimony, as the plaintiffs have failed to demonstrate how the testimony was directly applicable to a matter in issue in the case.”
Al-Janet, LLC v. B and B Home Improvements, LLC, No. AC 27370 (Conn.App.) 2007.CT.0000327.
Barry Zalma, Esq., CFE, is a California attorney. His practice emphasizes the representation of insurers and others in the business of insurance. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He provides expert witness testimony and consults with plaintiffs and defendants concerning insurance coverage, insurance claims handling and bad faith. He has qualified as an expert in state and federal courts in California, Mississippi, Texas and New Mexico, as well as in the Grand Caymans. He can be reached at [email protected]. His consulting practice's Web site is www.zic.bz.