Filed Under:Agent Broker, Coverage Issues

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Appeals Court rules agents not bound to advise about replacement cost value

A court of appeals found in favor of an insurance agent regarding an insured’s claim that the agent and his agency failed to properly advise the insured regarding replacement-cost coverage for improvements to the insured’s business.

Walter Angermeier and his company, Wolflin LLC, appealed the trial court’s grant of summary judgment in favor of Schultheis Insurance Agency Inc., and agent William Thompson. Specifically, Angermeier and Wolflin argued that a genuine issue of material fact existed as to whether Thompson and Schultheis Insurance Agency breached a general duty of care and whether special circumstances exist to support liability for failure to properly advise Angermeier and Wolflin about purchasing replacement-cost coverage for the improvements to their business. In Walter Angermeier and Wolflin LLC v. Schultheis Insurance Agency Inc. and William Thompson Agent, No. 65A01-1102-PL-68 (Ind.App. 12/28/2011) the Indiana Court of Appeals found against the insured.

Effective Aug. 20, 2005, the policy was renewed and again provided policy limits of $500,000 actual cash value for the subject building. Just as in 2004, Thompson either hand-delivered or mailed the 2005 policy to Angermeier within 30 days of its renewal. Angermeier did not read this policy, either.

In November 2005, at the request of Indiana Farmers underwriter Debbie Smith, who worked with Thompson in this case, Midwest Technical Inspections conducted a survey and appraisal of the improvements to the building at issue. Midwest’s Nov. 29, 2005 report showed a discrepancy between the actual cash value of the building with the improvements and the replacement cost of the building with the improvements finding an actual cash value of $820,475 and replacement cost of $1,189,095. Thompson never saw this report and did not know if Schultheis Insurance Agency received it, either. According to Brett Schultheis, the president of Schultheis Insurance Agency, he never saw this report or any similar type of report in the past for any property insured by Indiana Farmers.

In other words, something more than the standard insurer-insured relationship is required to create a special relationship obligating the agent to advise the insured about coverage. In the absence of a special relationship, the agent does not have a duty to tell the potential insured about the adequacy of the coverage or any alternative coverage that is available.

Elements of Special Relationship

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