Agent Held Liable for Failing to Procure Workers Compensation Insurance Where No Specific Request for Such Coverage Was Made
The California Court of Appeal handed down a ruling which should give all agents and brokers concern. In JOHN DANIEL WILLIAMS v. HILB, ROGAL & HOBBS INSURANCE SERVICES OF CALIFORNIA, INC. 2009 WL 2872403 (9/9/09 Cal.App. 2 Dist.), the court affirmed the judgment of the trial court finding that an insurance agent who purported to offer a custom-made insurance package for Rhino Linings of Santa Fe Springs (Rhino SFS) was negligent for failing to obtain and maintain workers compensation coverage as part of the insurance package for Rhino SFS.Rhino SFS is a dealership for Rhino USA, Inc. (Rhino USA), which installs spray-on truck bed liners. In July, 2001, a fire at Rhino SFS resulted in severe burn injuries to Kendall Mann, a sales manager employed by Rhino SFS. After discovering that Rhino SFS had no workers compensation insurance, Mann sued Rhino USA, Rhino SFS and the owners of Rhino SFS, Daniel Williams and Steven Stuart Simon (collectively Williams).
The jury rendered a verdict against Rhino USA and Rhino SFS (the latter including Williams and Simon jointly and severally) for $11.2 million, with each of the two entities being assessed 50% of the liability.
Williams then sued the broker, Hilb, Rogal & Hobbs Insurance Services (HRH), for negligence in failing to obtain a policy of workers compensation insurance for Rhino SFS. Following a bench trial in the Los Angeles Superior Court, Judge William J. Birney, Jr. ruled that because HRH held itself out as having specialized knowledge in procuring appropriate packages of insurance for businesses such as Rhino SFS, HRH was negligent in failing to procure workers compensation coverage for Rhino SFS.
It was undisputed that Williams never read the policy or requested any particular type of insurance and HRH did not specifically advise Williams as to the type of coverage it obtained and maintained for Rhino SFS. Nonetheless, the trial court awarded Williams almost $6 million, representing WilliamsaEUR(TM) share of the judgment owed to Mann, plus accrued interest from the date of the underlying judgment. This judgment was affirmed by the appellate court in its published decision.
While this case makes no new law, it does serve to highlight that where an underlying uncovered claim is one for bodily injury (as opposed to a claim for purely economic loss), courts have little difficulty in applying the exception to the general rule that an insurance agent does not have a duty to volunteer that an insured should procure different or additional coverage and only has a duty to procure the insurance requested. The general rule is inapplicable where (1) the agent misrepresents the nature, extent or scope of the coverage being offered or provided, (2) there is a request or inquiry by the insured for a particular type or extent of coverage, or (3) the agent assumes an additional duty by either express agreement or by holding herself out as having expertise in a given field of insurance being sought by the insured.
Here, a prudent agent would have at least offered the workers compensation coverage and, if refused, memorialize that the offer was made. It would have saved HRH (and its insurers) $6 million.
By Marc J. Zimet
Jampol Zimet Skane & Wilcox LLP
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