Wording on certificate alone does not grant additionalassured status
Insurance agents and brokers must issue certificates ofinsurance only with the certainty that the certificate accuratelystates the facts of the particular case. Failure to use caution inthe issuance of certificates of insurance can drag the agent orbroker into unnecessary litigation. Consider the followingmarine-insurance case, where an agency issued a certificate whichthe recipient said gave it the impression it conferredadditional-assured status, although the prerequisites for therecipient to qualify as an additional assured had not been met.Fortunately for the insurer and broker, the court decided that noreasonable trier of fact could conclude that the entity claimingcoverage qualified as an additional assured.

A company chartered some barges from a barge-leasing company, whichgave the company a certificate of insurance as part of thetransaction. It listed a number of policies the barge-leasingcompany held and stated that the certificate “neither affirmativelynor negatively amends, extends or alters the coverage afforded bythose policies.”
More than a year later, the charterer received another certificatefrom the barge company's insurance broker. Like the previouscertificate, this one stated that it “neither affirmatively nornegatively amends, extends or alters the coverage afforded by thosepolicies” listed on the certificate. However, unlike the previouscertificate, this one contained other language that, following anincident, the company asserted proved it had additional assuredstatus under the policies.
The barge company's insurer disputed this claim, arguing that thecharterer did not meet the requirements to become an additionalassured as stipulated in the barge company's charter partyagreements. The insurer also denied that the certificates ofinsurance sent by the barge company's broker made the charterer anadditional assured under the policies.
The applicable language from the charter party agreement stated:“The insurances agreed to herein and provided by LESSOR shall notname CHARTERER as additional insured unless CHARTERER requests suchstatus in writing to LESSOR and fully executes this charter partyand returns same to LESSOR.”
The insurer argued that the charterer never became an additionalassured under the barge company's policies because at no time priorto the incident in question did the charterer send a writtenrequest to the barge company to name it as an additional assured,nor did the charterer fully execute the charter party agreements.In reply, the charterer argued that it was an additional assuredpursuant to its master service agreement. The MSA read, “CONTRACTOR(the barge company) agrees that all of CONTRACTOR'S insurancepolicies shall name Company Group (the charterer) as AdditionalAssureds.” In an affidavit, the charterer's purchasing managerfurther asserted that it was her understanding that the bargecompany would name the charterer as an additional assured on itspolicies, as per the MSA.
The court found, however, that the barge company never bound itselfto the charterer's MSA, and that no reasonable trier of fact couldfind otherwise. The evidence presented showed that the charterer'spurchasing manager sent two letters to a senior vice president ofthe barge company, requesting execution of the MSA to remain on thecharterer's approved vendors list. However, there was no evidencethat the MSA was ever executed or agreed to by the barge company.The e-mails exchanged between the purchasing manager and vicepresident established that the barge company thought the MSA wasinappropriate for its marine business, and that it had no intentionof executing it.
The court held that the purchasing manager's “understanding” didnot create a disputed issue of material fact, given that hercorrespondence revealed no final agreement on the MSA was reached.Therefore, no reasonable trier of fact could conclude that thebarge company agreed to add the charterer as an additional assured,pursuant to the MSA agreement.
Marmac LLC v. Meridian Resource & Exploration, LLC, No.06-4905, 2007.ELA.0001098 (E.D.La. 06/07/2007) .
Plaintiffs can't prevail against agency unless relationshipis established
When insurance agents and brokers accept the duty of insuring aclient, they must fulfill that obligation. However, a mere inquiryabout insurance availability without the establishment of agency isnot an obligation and should not be the subject of litigation.Nonetheless, sometimes people without insurance face claims orjudgments that would have been covered under a policy, and they suean agent or broker to avoid personal responsibility. The followingcase teaches that agents and brokers wishing to avoid such lawsuitsshould do what most lawyers do when queried about a case but notretained: issue a non-engagement letter. When a person requests aquote but fails to follow through with a purchase, the agent shouldsend a letter advising that no insurance was ordered or purchasedand the agent has concluded that the customer has decided not touse his or her services.
In August 2000, a man bought a gas station and hired a manager forit. In September, the owner contacted an insurance agent to inquireabout liability insurance, and the following day the agent faxed aquote. The agent initiated several further contacts in an effort tocomplete the application and collect a deposit, but the plaintiffsindicated they wanted to continue shopping and took no furtheraction. The owner would later testify he did not remember enteringinto an insurance contract with the agency, and the managertestified he didn't either.
On Jan. 3, 2001, a patron of the gas station slipped and fell,suffering personal injuries. The owner had no coverage in force atthe time.
More than three months after the patron was injured, the owner andmanager again contacted the insurance agent to discuss obtainingcoverage. The agent sold them a policy with an effective date ofApril 18, 2001, although the owner had asked to have the policybackdated to the beginning of the year.
The injured patron eventually received a binding arbitration awardof $152,514.50. The owner and manager, without insurance applicableto the loss, sued the agent. The jury returned a verdict in theagent's favor, which the plaintiffs appealed.
In appellate court, the plaintiffs argued that they properlypresented evidence that the defendant was an insuranceprofessional. Consequently, they said their request to instruct thejury on the general duties of an insurance agent, which the trialcourt denied, should have been granted.
The appeals court disagreed. It said the proposed instruction wouldhave required the jury, without legal guidance, to draw aconclusion as to whether an agency relationship existed between theowner and the insurance agent.
The plaintiffs also claimed that the trial court improperlyrejected their request to instruct the jury concerning promissoryestoppel. They conceded, however, that they failed to allege adistinct cause for promissory estoppel in their complaint.
The plaintiffs also argued that the court improperly granted thedefendant's motion to preclude expert witness testimony regardingan insurance agent/broker's duties on the grounds that the proposedtestimony would be irrelevant and confusing to the jury. Theyclaimed that such an expert was needed because insurance is aspecialized field with specialized knowledge and experience.
As with the plaintiffs' jury instruction claim, the court said thisclaim presumed the existence of an agency relationship, which wasnot pleaded by the plaintiffs. “As we stated in part I, theplaintiffs have cited nothing in the record to demonstrate thatthey either requested or that the evidence supported an explicitinstruction on the law of agency,” the court ruled. “Accordingly,we conclude that the court did not abuse its discretion inprecluding the proposed expert testimony, as the plaintiffs havefailed to demonstrate how the testimony was directly applicable toa matter in issue in the case.”
Al-Janet, LLC v. B and B Home Improvements, LLC, No. AC 27370(Conn.App.) 2007.CT.0000327.
Barry Zalma, Esq., CFE, is a California attorney. His practiceemphasizes the representation of insurers and others in thebusiness of insurance. He founded Zalma Insurance Consultants in2001 and serves as its senior consultant. He provides expertwitness testimony and consults with plaintiffs and defendantsconcerning insurance coverage, insurance claims handling and badfaith. He has qualified as an expert in state and federal courts inCalifornia, Mississippi, Texas and New Mexico, as well as in theGrand Caymans. He can be reached at [email protected]. Hisconsulting practice's Web site is www.zic.bz.