Related: Read Zalma's previous column “Statehouse Trumps Court.”

The Greens claim they own two residences, one in Terrytown, La. (“the Fielding Street property”), and one in Gretna, La. (“the Monroe Street property”), which they acquired in 1991 and 2006, respectively.

After acquiring the properties, the plaintiffs allege that they purchased flood insurance on the properties through Guidry, their Allstate agent. They assert that Allstate would write the flood policies, which were actually NFIP policies, collect the premiums for the policies from the plaintiffs, and reimburse the NFIP. Plaintiffs allege that during the underwriting process, Guidry had actual and constructive knowledge of the correct flood zone for plaintiffs' properties. The plaintiffs claimed the agent allegedly knowingly mis-zoned the plaintiffs' properties, which resulted in the issuance of flood policies with substantially higher annual premiums than what plaintiffs allege they should have paid and higher commissions to Guidry.

The plaintiffs assert that the defendants collected the higher premiums from the dates of the acquisition of the properties, 1991 and 2006, respectively, until plaintiffs filed suit in state court on Aug. 29, 2011, after allegedly learning in June 2011 that a neighbor's flood zone determination resulted in a much lower annual flood premium than plaintiffs were being charged. The Greens claim that after learning about the discrepancy, they contacted the defendants who immediately acknowledged that plaintiffs' properties had been erroneously mis-zoned.
They also claim that Guidry owed the plaintiffs a fiduciary duty in connection with the placement and maintenance of the flood insurance coverage, and, that to the extent the insurance premiums for the residences were overcharged, Guidry breached his legal duties to plaintiffs in the non-exclusive ways:

• Failing to know the different types, terms, and conditions of insurance policies available
• Failing to use reasonable diligence in obtaining insurance that a customer requests
• Failing and neglecting to exercise the degree of care expected of a prudent insurance broker or agent, thereby causing the alleged overpayment.

The Greens further allege that Guidry breached a duty owed to the plaintiffs by failing to inform them that they were eligible for a preferred risk policy (PRP) through the NFIP, which could provide them with maximum policy limits for less than their current premium payments.

In addition to their fraud and breach of fiduciary duty claims, the plaintiffs also assert claims against Guidry for detrimental reliance and payment of a thing not owed. They assert that they reasonably relied on Guidry's expertise and recommendations, that they assumed the policies on the residences were accurate and reasonable, and that the alleged overpayments of premiums constitute payment of a thing not owed under Louisiana law.

Summary judgment is appropriate when the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.

In Louisiana, an agent has no duty to spontaneously identify a client's needs and advise him as to whether he is underinsured or carries the correct type of coverage.
Under Louisiana law, fraud is defined as a misrepresentation or suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Thus, to recover on their fraud claim against Guidry, the plaintiffs must prove that Guidry made an affirmative misrepresentation or remained silent when he had a duty to speak or disclose information.

Related: Read another Zalma column “Giving Notice.”

Although plaintiffs allege that Guidry knowingly mis-zoned their properties to obtain higher premiums and commissions, the Greens conceded in their depositions that they have no evidence that Guidry mis-zoned their property.

Because Guidry had no duty to disclose to plaintiffs that they were eligible for a PRP, his failure to make the disclosure is insufficient to give rise to a claim for fraud. Thus, the court finds that Guidry is entitled to judgment as a matter of law on the plaintiffs' fraud claim in light of the plaintiffs' failure to produce any evidence that Guidry made an affirmative misrepresentation or suppressed the truth.

Louisiana Unfair Trade Practices Act

LUTPA provides in pertinent part that unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce were declared unlawful.

Here, the uncontested evidence shows that Guidry acted consistent with his duties as an insurance agent. Kathleen Green, the only party who interacted with Guidry in reference to the flood policies, testified that when she initially procured the flood policies for both properties, Guidry obtained the specific amount of insurance as she requested. Kathleen Green also testified that whenever she requested increases in coverage for the subject property or changes to her policy, Guidry made those changes as requested.

Negligence and Breach of Fiduciary Duty

An insurance agent who undertakes to procure insurance for another owes an obligation to his client to use reasonable diligence in attempting to place the insurance requested and to notify the client promptly if he has failed to obtain the requested insurance. The client may recover from the agent the loss he sustains as a result of the agent's failure to procure the desired coverage if the actions of the agent warranted an assumption by the client that he was properly insured in the amount of the desired coverage. The insurance agent owes a duty of “reasonable diligence” to his customer that is fulfilled when the agent procures the requested insurance.

Related: Read the column No Harm, No Foul” by Barry Zalma.

The duty of reasonable diligence has not been expanded to include the obligation to advise whether the client has procured the correct amount or type of insurance coverage. It is the insured's responsibility to request the type of insurance coverage, and the amount of coverage needed.

The plaintiffs were charged with knowledge of the existence of the PRP. It was their duty to request a PRP if they wanted one. Kathleen Green testified that she did not recall any discussions with Guidry regarding a PRP before she called requesting a refund in June 2011. Plaintiffs have pointed to no evidence that they ever inquired about a PRP prior to calling and asking for a refund. Plaintiffs have not pointed to any evidence in the record that Guidry failed to procure the type and amount of coverage Kathleen Green requested throughout the duration of the business relationship. Assuming that Guidry failed to offer plaintiffs a PRP, which Guidry disputes, he had no duty to do so, and thus that alleged failure, as a matter of law, does not give rise to a claim for negligence or breach of fiduciary duty.

Even though Kathleen Green increased the coverage under her policies at various renewals, the plaintiffs' alleged damages—the higher premiums—were bound to continue at renewal regardless of the coverage changes. It was unnecessary for Guidry to change the type of flood policy the Plaintiffs carried to increase the coverage on their properties.

Hindsight proved the plaintiffs erred in asking their agent to provide different coverage. But their attempt to make an insurance agent or broker a fiduciary properly failed before this federal court.