Insurance Agent Negligence

December 30, 2012

Grand Prairie insurance attorneys need to understand what constitutes negligence by an insurance agent. A 1987, San Antonio Court of Appeals case looks at this. The style of the case is, Rainey-Mapes v. Queen Charters, Inc.
Here are some facts:
This case involves appeals arising from the non-payment of an insurance claim. William Gordon, president of Queen Charters, Inc., individually and as co-principal with Queen Charters, Inc. contracted to purchase a sailboat from the Estate of Theodore Schmidt (Schmidt). The boat, valued at $150,000.00, was purchased for $100,000.00. Gordon and Queen Charters (Gordon/Queen Charters) paid $5,000.00 down payment on the boat, and executed a promissory note to Schmidt for the balance of $95,000.00. The sales agreement required the buyers to maintain insurance on the vessel, which protected Schmidt as the loss payee. Gordon contacted the Sanger & Altgelt Insurance Agency (Sanger) to procure the required insurance. Sanger, acting as an agent for Gordon/Queen Charters, contacted Rainey-Mapes, an insurance broker, to obtain the insurance as Sanger does not normally handle maritime insurance. Rainey-Mapes contacted Southern Maritime Underwriters Limited who in turn contacted the Colony Insurance Company. Colony ultimately issued the insurance policy to Gordon/Queen Charters.
Gordon/Queen Charters closed the sale of the vessel with Schmidt on February 25, 1983. Prior to the closing, Gordon/Queen Charters contacted Sanger concerning the insurance policy issued by Colony and inquired whether there were any territorial restrictions. Gordon/Queen Charters received an insurance binder on February 18, 1983, prepared by Sanger which stated that the insurance coverage would take effect on February 25, 1983. The binder did not contain any territorial exclusions.
At the closing, Gordon/Queen Charters and Schmidt talked via telephone with Susan Johnson, an employee of Sanger, who told them that coverage was in effect for Gordon/Queen Charters' contemplated voyage from St. Thomas, V.I. (where the closing took place) to Galveston, Texas. No mention of territorial exclusions was made and the parties understood that Johnson had the policy in hand at the time of the conversation.
Sanger received the actual insurance policy on March 1, 1983. Gordon departed from St. Thomas on March 2, 1983. While en route, the sailboat struck a reef off the coast of the Dominican Republic and sank. Gordon notified Sanger of the loss. Sanger in turn contacted Rainey-Mapes. Rainey-Mapes informed Sanger that the policy excluded coverage while the vessel was in the waters of the Dominican Republic, and that, therefore, Gordon/Queen Charters' loss was not covered. Colony ultimately denied coverage based upon this territorial exclusion.
Sanger, Gordon and Queen Charters filed suit against Rainey-Mapes, Colony and Southern alleging actions for breach of the insurance contract, for violations of the Texas Insurance Code and under the Texas Deceptive Trade Practices Act. Schmidt intervened seeking to recover on the $95,000.00 note executed by Gordon/Queen Charters. Schmidt also sought to recover punitive damages from Sanger, as a third party beneficiary of the insurance policy, for misrepresentations concerning insurance coverage on the sailboat and for Sanger's failure to obtain coverage without territorial restrictions.
One of the issues at trial and on appeal concerned the territorial exclusions and the agents negligence, or lack their of, in selling a policy with the exclusions.
Rainey-Mapes argued that there is no evidence that it ever "promised, agreed with, or otherwise undertook to provide an exclusion free policy," but only that it agreed to provide a policy with coverage from St. Thomas to Houston. It contended that such a policy was provided, and a failure to disclose the exclusions constituting a deception did not occur. It further argues that nothing it did precluded the possibility that Colony would choose to limit its exposure.
This court noted that viewing the evidence that Johnson specifically inquired as to territorial exclusions, and that Carpenter confirmed the authority to bind coverage without mention of territorial exclusions, the evidence sufficiently supported the findings that Rainey-Mapes was negligent in failing to procure the requested coverage. The fact that the policy provided coverage from St. Thomas to Houston through areas not otherwise excluded does not preclude a finding of a failure to inform Sanger or Gordon/Queen Charters of the exclusions, especially in light of evidence that Johnson specifically inquired about such exclusions.
There may be times that an insurance company can escape liability on a claim and that is why an experienced Insurance Law Attorney needs to be consulted. He should be able to look at the actions of the agent and determine whether or not the acts of the agent constitute negligence.