In Pierce v. Reynolds, Civil Action No. 1:06CV363 LTS-JMR, 2006 WL 1328899 (S.D. Miss. May 15, 2006), the United States Court for the Southern District of Mississippi granted a motion to remand regarding a compensation action stemming from hurricane damage.
Irvin Pierce bought an Allstate homeowners policy from agent Tim Reynolds. Reynolds advised Pierce that he did not need flood insurance. Relying on Reynolds's recommendation, Pierce did not buy flood coverage. Pierce sustained damage from Hurricane Katrina and filed this suit against Reynolds, alleging that Reynolds offered negligent representations that he relied upon and suffered damage.
The court, citing Mississippi law, said that “an insurance agent or broker who undertakes to procure insurance for a customer is under a duty to the prospective purchaser to exercise reasonable care.” The court further said, “An insurance agent or adjuster who acts with gross negligence, malice, or with reckless disregard for the rights of the insured during the process of adjusting a loss or considering the merits of a claim, may incur individual liability for such acts.”
To state a cause for negligent misrepresentation under Mississippi law, the claimant must show that there was a misrepresentation, that it was material or significant, that it was a product of the negligence, and that the claimant reasonably relied on it and suffered damage because of it.
The court said that an insurance agent who advises a client about coverages he should buy, and when the advice is reasonably relied upon by the client, may be liable for damage “if the advice is a product of the failure on the part of the agent to exercise reasonable care.” An agent's representations may also be binding when reasonably relied upon.
While not ruling on the truth of Pierce's allegations, the court found that Reynolds and Allstate did not establish that Pierce had no valid legal theory for his claim against Reynolds. Thus, the court granted the motion to remand for a decision on the facts.