District III of the Wisconsin Court of Appeals recently addressed the scope of an insurance agent’s duties to an insured when retained to procure insurance coverage. See Olson et al. v. Wisconsin Mutual Ins. Co. et al., Case No. 2017AP1567 (Oct. 2, 2018) [https://wscca.wicourts.gov/caseDetails.do?caseNo=2017AP001567&cacheId=FD38D2808B90DA8A4890651728193F6B&recordCount=1&offset=0]. By affirming the circuit court’s decision to dismiss the insured’s negligence claim against its agent, the Court confirmed that, absent unique circumstances, in Wisconsin an insurance agent is not obligated to actively advise an insured regarding the appropriate coverages for the insured’s circumstances. Rather, an agent is obligated to exercise reasonable care in procuring only the coverages specifically requested by the insured.
At issue in this case was coverage for injuries suffered by the Olsons due to an automobile collision with Jeffrey Keyes, who was in the process of towing a gooseneck trailer full of cattle between his family farm properties. Keyes was towing the trailer with a truck that he owned personally.
Keyes had in place a personal automobile insurance policy issued by Wisconsin Mutual Insurance Company, as well as a $1 million umbrella liability endorsement attached to a farmowners policy for his family farm issued by Rural Mutual Insurance Company. Keyes submitted a claim to both insurers for the accident with the belief that the umbrella endorsement attached to the Rural policy would cover any damages that exceeded the limit of the Wisconsin Mutual policy.
Rural denied the claim based on an exclusion in the endorsement disclaiming coverage for personal injury or property damage arising from off-farm use of personal automobiles. This exclusion was in line with Rural’s standard business practice of not providing umbrella coverage for personal automobiles unless the insured purchased primary automobile coverage from Rural. While Keyes asserted a contextual ambiguity argument to try to avoid the exclusion, the court found the provision unambiguous and concluded that the Rural policy did not provide coverage for the Olson claim.
In the alternative, Keyes pursued a claim against his agent, Lon Truax, for failure to procure coverage arising from the use of off-farm personal automobiles as part of the umbrella endorsement attached to the Rural policy. In support of his claim, Keyes cited to evidence demonstrating that he had informed Truax that he wanted “full coverage” for “anything and everything,” that Truax sold only Rural insurance products and was aware of Rural’s practice to not offer umbrella automobile insurance unless the insured purchased primary automobile insurance from Rural, and that Keyes and Truax had specific conversations about switching Keyes’ automobile coverage from Western Mutual to Rural. Keyes asserted that, under these circumstances, it was reasonable to expect Truax to inform him of the off-farm automobile exclusion in the umbrella endorsement, which he had failed to do.
The court was not persuaded by this argument. The court noted that in Wisconsin an insurance agent-insured relationship is an ordinary agency relationship in which the agent assumes only a limited duty to carry out the principal’s instructions in good faith and, absent special circumstances, is not obligated to advise the insured regarding the availability or adequacy of coverage. The court found that Keyes’ generalized requests for full coverage were insufficient to put Truax on notice that he specifically sought umbrella coverage for off-farm use of personal automobiles and, despite the specific conversations about switching his primary automobile coverage to Rural, there was nothing in the record sufficient to establish that Truax was obligated to advise Keyes regarding any potential gaps in the procured coverage. The court accordingly held that the circuit court had properly granted summary judgment for Truax on this issue.
The Olson decision demonstrates how important it is for commercial enterprises and businesses to take an active role in procuring adequate insurance to protect their interests. In Wisconsin, insurance agents are not fiduciaries that should be relied on to weigh in regarding the adequacy of an insurance portfolio unless they specifically offer such services and agree to do so (likely for an additional fee). In any event, before procuring insurance products, commercial entities should ensure that their coverage forms are reviewed carefully by those who are familiar with all aspects of their operations and resulting risk profile (either an internal risk management department and/or coverage counsel) to minimize the potential for any coverage gaps.