In May 2013, SCOTUS came down with a unanimous decision confirming the right of Monsanto to patent genetically altered weed-resistant seeds. The Court ruled that a farmer in Indiana had violated Monsanto’s intellectual property rights by planting "saved seeds." For you city slickers, "saved seeds" is an age-old practice employed by farmers in which the seed from a current year's crop is saved to be planted the following growing season. Monsanto objected to this practice on the premise that its intellectual property rights were being violated and the Supreme Court agreed.
A few years ago, I was involved in a very similar case in which a farmer in Mississippi purchased from Monsanto patented, genetically altered, weed-resistant seeds. The farmer saved the seeds, which he planted the following growing season. Aware of the situation, Monsanto instigated litigation, seeking an injunction against the farmer for growing and harvesting the seeds. Suffice it to say that the Mississippi district court granted summary judgment to Monsanto and awarded damages and legal fees to the company.
Related: Read "King Corn"
How does this impact insurance agencies and agents? Not in many ways, except in this case the farmer sued his insurance agent after the summary judgment was handed down.
The basis of the suit will be familiar to insurance professionals who have been involved in errors and omissions litigation. The charges made by the farmer included the duty to advise and counsel, reliance on an expert, and that insurance coverage for patent infringement was affordable and readily available.
The farmer engaged the services of a licensed insurance professional. The producer served an established insurance agency that advertised itself as an agribusiness risk manager providing excellent insurance counsel. The farmer had consulted the agency because he was seeking a professional review of his insurance portfolio.
The review aimed to identify the risks the farmer faced as a result of the farm’s business operations and to buy the appropriate coverage to mitigate that risk. The agency accepted this assignment. Subsequent to the review, the farmer agreed to purchase an agribusiness comprehensive insurance contract. Based on the review conducted by the agency, the farmer believed that the insurance contract he purchased would respond to any reasonably foreseeable liability risk of which his business organization might face exposure. Based on the agency’s advertised skills as agribusiness experts, the farmer thought it reasonable to believe that the agents were well-qualified agribusiness insurance professionals, not merely insurance salesman completing insurance applications.
An important lesson: It doesn't matter whether you are a big-city insurance producer with multiple agents or a one-man insurance office out in the sticks. Simply stated, ensure that you have done everything you have agreed to do for your clients, including identifying all potential risks.
Cover your bases with a checklist: An in-depth review verifies application responses so the producer and the agency are not only aware of the apparent exposures, but also exposures more familiar to an "insurance expert.” This review should be done by the most senior people in the agency office. The second look should first consider the information contained in the application and encompass the following:
• Are we clear as to client needs and requirements?
• Have we accessed and analyzed foreseeable risks and insure the client against them?
• Did we provide the client information about available coverage?
• Did we provide appropriate advice about available coverage options and risk transfer alternatives?
Related: Read "Bulls-eye on Your Back"
How would this review look in actual practice? Remember that in this particular matter, the producers taking the application are purported to be agribusiness insurance experts and risk managers. Moreover, the root cause of this litigation was the practice of saving seeds—and I have never seen an application that asks questions pertaining to that. However, by applying the second look criterion, an experienced agribusiness producer should certainly be aware of the possibility of saving seeds and the availability of appropriate insurance.
The second look begins with a completed application. Before submitting the application for underwriting, an experienced senior agency person sits down with the producer. They review the application in detail and then examine the "second look" criterion, with specific reference to the nature of the risk.
In this instance, patent infringement insurance would have provided coverage and avoided litigation. This coverage is widely available and affordable. This should have been known by a producer or an agency that holds itself out as an agribusiness expert. Consider the alternative of not taking a second look instead of earning a substantial additional commission: the producer and the agency were involved in 6 years of litigation.
The best way to summarize the duty of a licensed professional insurance person is to quote directly from "Winning by the Rules: Ethics and Success in the Insurance Profession", a text published in 2001 by the National Underwriter Co.:
The agent or broker that meets personally with clients must assess their need for insurance, alternative risk financing, and loss control. The agent or broker's real product is risk analysis and service, not just the sale of insurance products. If the agent or broker is unfamiliar with the insured and the involved risks, he or she should determine what those needs are. Failure to do this can result in selling the wrong product (or no product at all) and result in a professional liability claim against the agent or broker.
The responsibility of professional insurance agents who profess expertise in specific areas of insurance is well settled. Insurance professionals who hold themselves out as experts in the complex field of providing appropriate and proper insurance protection for their client is a responsibility not to be taken lightly.
Related: Read "Moving Target"