The insured had purchased coverage from Liberty Mutual from 1998 to 2001 through agent James Lavangie, who had advised the insured to buy blanket coverage as opposed to per-location. Based on that recommendation, the insured purchased blanket coverage. During the 2001 to 2002 policy period, the insured switched to a different carrier. The following year, Lavangie provided a quote to the insured to try to win his business back. The insured asked for comparable coverage to what he had purchased between 1998 and 2001.

Lavangie emailed the insured a quote, but it was on a per-location limit rather than a blanket limit. Robert Orenstein, a member of the Office Furniture Rental Alliance, received the quote. He stated that he did not remember if he read the entire quote, but his normal procedure would have been to review the portion of the quote setting out the premium. He said the agent never informed him that the policy did not contain a blanket limit, and coverage was purchased and renewed from 2003 to 2009.

In 2009, a fire caused extensive damage to the insured's warehouse. Liberty Mutual paid only the location limit on the policy, which was considerably less than the cash value of the loss—an amount that would have been fully covered by a blanket limit.

The insured brought action against Liberty Mutual for claims of breach of contract, negligent misrepresentation, and reformation. While the court stated that a reasonable jury could not find grounds that the parties contracted for blanket limit coverage without evidence of a prior oral agreement for the breach of contract claim, the fact that the written contract did not conform to the oral request for blanket insurance was admissible for the negligent misrepresentation and reformation claims.

Quoting Coppola Const. Co. v. Hoffman Enterprises Ltd. P'ship, 309 Conn. 342 (2013) the court said, “Traditionally, an action for negligent misrepresentation requires the plaintiff to establish 1) that the defendant made a misrepresentation of fact; 2) that the defendant knew or should have known was false; 3) that the plaintiff reasonably relied on the misrepresentation; and 4) suffered pecuniary harm as a result.”

Whether Lavangie and Orenstein discussed the terms of the quote remains disputed. The insurer argued that even if the insured could show that the agent committed negligent misrepresentation by omission, the insured nevertheless had a responsibility to read the quote, along with the policy to confirm the terms.

An expert witness testified that “the language concerning the application of limits is often obscure and would not likely be detected by an untrained policyholder.” He also stated that even agents cannot always distinguish between polices with blanket limits and policies with per-location limits.

The court stated that a reasonable jury could conclude that because Lavangie knew the plaintiff wanted blanket limits but remained silent about the fact he was quoting per-location limits—even though he had previously advised against buying per-location limits and because he never drew the insured's attention to the change—he realized the insured believed he was receiving blanket limits.

A jury could also conclude, according to the court, that the agent renewed the policy knowing the insured still believed he was getting blanket limits, and that, based on the expert's testimony, the policy language was so complex that the insured relied on the agent to explain the terms.

Under Connecticut law, the duty to disclose correct information arises from a closer degree of reliance and trust than in an ordinary business relationship. Quoting De La Concha of Hartford, Inc. v. Aetna Life Insurance Co., No. CV980580129, 2002 WL 31170495 (Conn. Super. Ct. Aug. 23, 2002), the court said, “Accordingly, a claim for negligent misrepresentation can only stand when there is a special relationship of trust and confidence which creates a duty for one party to impart correct information to another.”

This special relationship exists between insureds and agents. Insureds rely on agents to provide correct information about coverage and to properly procure it. Agents' mistakes in failing to provide these services can cost insureds dearly when loss or damage occurs. As you can see, these mistakes result in expensive and time-consuming litigation.