Insurance brokers transact insurance with, but not on behalf of, an insurer. An insurance agent transacts insurance with and on behalf of an insurer. Sometimes a broker also can be an agent with the right and obligation to report claims to the insurer. Insurance professionals must convey the information to the insurer and never, unless authorized by contract with the insurer, give claims advice.
In Florida, Frank Gay and Frank Gay Plumbing Inc. appealed an order entering final summary judgment against them in favor of Assn. Casualty Insurance Co., which found there was no uninsured motorist coverage available to Gay under the policy he had with the Association in Frank Gay and Frank Gay Plumbing Inc. v. Association Casualty Insurance Co., et al, No. 5D10-1906 (Fla.App. 09/21/2012) because he settled with the underinsured motorist before giving notice to the Association.
In August 2005, Gay was involved in an accident with an underinsured motorist while Gay was driving a vehicle owned by his company, Frank Gay Plumbing, which maintained a policy with the Association for uninsured motorist coverage. Gay purchased this coverage through Burkey Risk Services Inc., an insurance agent and broker.
Gay was contacted by the tortfeasor's carrier, GEICO Indemnity Insurance Co., which provided Gay with a settlement check for $10,000 and a settlement release of all claims. In May 2006, before cashing the check or signing the release, Gay contacted a Burkey employee and asked whether he should cash the check. The employee said it was okay to cash the check, but not to sign the release because it might affect Gay's ability to pursue additional claims for underinsured motorist benefits from his own insurer.
In June 2006, Gay cashed the check but did not sign the release until later, although it was never delivered to GEICO. When he cashed the check, Gay sent a letter to Burkey asking whether to sign the release. Gay also asked Burkey to report the underinsured motorist claim to the Association.
The Association denied Gay coverage because he had settled his claim with the underlying tortfeasor contrary to the policy language, and had failed to give written notice to the insurer of the uninsured motorist claim. Gay filed suit for declaratory relief.
After a hearing on the motions for summary judgments, the trial court entered final summary judgment in favor of the Association and against Gay. The court found that Burkey acted as the agent of both Gay and the Association; and found that notice to Burkey was not notice to the Association and that Gay had failed to comply with the expressed policy terms requiring written notice to the carrier regarding an uninsured motorist claim.
The undisputed facts support the trial court's finding that Burkey was an agent of the insured, Gay, and an agent of the Association.
Florida law is clear that notice to the agent is notice to the principal. That is true in the context of insurance. Gay contended that he discussed the matter with an employee of Burkey and there is correspondence between Gay and Burkey that supports his contention. If Gay advised Burkey of his potential settlement and Burkey told him to cash the check, the Association is estopped to deny coverage under the policy because notice to their agent, Burkey, was notice to the Association.
The court found that Gay is not entitled to benefits because there was no written notice as required by the uninsured motorist policy. However, one can waive the written notice requirement when the carrier had actual notice of the claim. It is unclear in this case whether Burkey's employee told Gay to cash the check, but not to sign the release. The employee denies he gave Gay this advice. There is a material issue of fact regarding notice, and summary judgment was not appropriate.
If Gay was not advised by Burkey to cash the check, another issue remains: whether the settlement with GEICO prejudiced the Association. It does not appear that this was considered in the motion for summary judgment. Gay has the burden of showing there was no prejudice to the Association by virtue of his settlement with GEICO and he should have the opportunity to present that proof.
It is undisputed that Burkey was an agent of both Gay and the Association. However, a material issue of fact exists regarding whether Burkey's employee told Gay to cash the check but not to sign the release. Therefore, this matter must be reversed and remanded for a trial on that issue.
The Florida Court of Appeal reversed the trial court because of the actions of the agent who, when asked for advice about a proposed settlement from an underinsured motorist, gave incorrect advice and failed to report the loss to the insurer.
Most underinsured motorist policies have a subrogation agreement that prohibits the insured from releasing or settling with the underinsured motorist without the permission of the insured.
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