By Barry Zalma, founder of Zalma Insurance Consultants

Michael Paul and others sued their insurance agents in Minnesota state court only to have the trial court dismiss their negligence and contract claims against the insurance agency (the “agency”). The Minnesota Court of Appeal, in  Michael Paul, et al v. Wayne Holmgren D/B/A Wayne W. Holmgren & Sons, Noah Insurance Inc., Vineland-Huntsville Mutual Insurance Co. No. A11-1645 (Minn.App. 06/25/2012) found part of the trial court's judgment erroneous and part appropriate.

In July 2009, the Pauls purchased a house for their daughter and son-in-law, the Helgesons. At the time of the purchase, the Pauls and the Helgesons (the “Pauls”) were aware that the foundation needed to be repaired or replaced. The Pauls met with an insurance agent at the agency to obtain insurance to cover the house. The agency is an independent insurance agency that places insurance policies with several different insurance companies, including Vineland-Huntsville Mutual Insurance Co. (“Vineland”). The Pauls initially requested a homeowners' policy. Because the Helgesons did not own the house, they did not qualify for such a policy. The agency procured a renters' policy for the Helgesons and a “named perils” dwelling-owners' policy for Mr. and Mrs. Paul. Vineland placed both policies. The dwelling-owners' policy included an “increase of hazard” provision, stating that Vineland would “not pay for loss if the hazard is increased by any means within the control or knowledge of any insured.”