Insurance agents owe a duty to obtain the insurance and thecoverage limits the customer requests. But when someone is hurt bythe insured's actions, can the injured person, who isn't a party tothe contract between the insured and the carrier, sue the agentbecause there wasn't enough insurance coverage to pay for thedamages incurred? That was the question in a recent Ohio case thatconsidered the issue of third-party recovery.

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A criminally negligent dump truck driver caused an auto accidentin which Lisa Emahiser was killed and her son was injured. Itbecame apparent that the driver's employer, the dump truck companyRickey Paving, was inadequately insured under federal and stateregulations as a commercial carrier. Its policy was capped at$50,000 per person and $100,000 per accident.

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Lisa Emahiser's estate claimed that Rickey Paving's agencyComplete Coverage Insurance (CCI) was liable for “negligentprocurement” by failing to have obtained the regulated amount of$750,000 in coverage for its client and that CCI should beresponsible for all this accident's damages.

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To assert a negligent procurement claim in Ohio, a person mustprove first that the insurance agent owed a duty to obtain thecoverage its insured requested.

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Is the Injury Foreseeable?

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There is a basic premise of negligence law regarding foreseeablevictims. A duty is extended to a third party who is a member of alimited class whose reliance on a professional's representation isforeseeable. To be successful with the claim, the injured thirdparty must show that he or she relied on the misrepresentation by aspecific professional and that the reliance was foreseeable by thatprofessional.

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The U.S. District Court for the Northern District of Ohio foundthat while a third party to bring such a claim against an insuranceagent, the plaintiff must prove that he or she was a “direct,intended and specifically identifiable” beneficiary to thepolicy.

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In this case, the plaintiff urged the court to find that thedriving public at large is a sufficiently specific intendedbeneficiary. According to the plaintiff, “that is why legislativeand regulatory bodies pass laws and regulations requiring minimumamounts of insurance—to protect the public.”

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No Duty to Non-Clients

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The court disagreed, noting that imposing such a “far-reachingduty” would impose on agents a duty to a vast number ofnon-clients—literally “all who reside in or travel in the state.”The court also noted that an insurance agent is not the person uponwhom the statutes and regulations impose specific duties; they fallon the trucking company and its driver.

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The court found that the defendant insurance agent's allegednegligence created for the plaintiff a risk of economic lossonly—that is, a risk that the injured party would be unable tocollect on a judgment entered against Rickey Paving. It did notcreate a right to recover for the injury by the driving public. Thecourt concluded that the Emahiser estate had no standing to pursuea negligent procurement claim against the insurance agent.

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Insurance agents owe a duty of professional care to theirclients, but not to the public at large who might be injured by aninsured's actions. CCI may have avoided lengthy litigation if ithad documentation demonstrating that the correct amount of coveragehad been offered to the client, but the client choose a differentamount of coverage.

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