Insurance agents and brokers are invariably sued by insuredswho have a loss not covered by the policy. With the advantage of20/20 hindsight, and the motivation of a large out-of pocket loss,the insured will argue that the agent promised or should haveprovided the coverage needed.
In Tennessee, insureds are charged with reading the policydelivered to them and it is not sufficient to claim that "I trustedmy agent" when filing suit for a loss not covered by the policy. Inthe case that follows, the agent was sued because the named-perilpolicy issued to the insured did not cover theft. After a theftloss, the insured claimed the agent represented that the policycontained theft coverage. The agent denied therepresentation.
Although the agent succeeded on appeal, the lawsuit and appealcould have been avoided if the agent had explained the limitationsof the coverage in writing. A named-peril policy provides verylimited coverage and the letter could have been a brief recitationof the perils listed in the policy and a statement that no othercoverages were available. If the insured was not satisfied with thecoverage stated in a clear and short letter, the agent would havebeen in a position to sell an "all risk" or "direct risks ofphysical loss" policy that would have cost the insured more andgained the agent a larger commission.
As you read the following case, consider how the litigationcould have been avoided by a professional agent communicatingcarefully with the insured.
Finchum v. Patterson





theft, except for building damage caused by the breaking in orexiting of burglars."





inter alia







Barry Zalma, Esq., CFE, is a California attorney specializingin expert witness testimony and consulting with plaintiffs anddefendants on insurance coverage and claims handling. He foundedZalma Insurance Consultants in 2001 and serves as its seniorconsultant. He can be reached at[email protected]. He alsopublishes the free Zalma's Insurance Fraud Letter every two weeksatwww.zalma.com.