LAW NOTES from the Law Offices of
Kay & Andersen, LLC

February, 2012
What Every Insurer Should Know . . . . . . . . . . . . . . . 
               ABOUT COVERAGE ARISING FROM INSURER/AGENT CONDUCT ​

​​Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.

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Nonpayment of premiums is a legitimate basis for insurance carriers to terminate coverage. But what about instances where the insured fails to make a timely premium payment due to assurances by the carrier and the agent that the payment wasn’t necessary? Those facts arose in Artisan Truckers CasualtyCo. v. Thorson, Appeal No. 2011 AP 2 (Jan. 18, 2012) found at: http://www.wicourts.gov/ ca/opinion/DisplayDocument.html?content=html&seqNo =76637 (recommended for publication). In this case, the insured owned an umbrella policy with $1,000,000 of coverage but no UM/UIM coverage. His insurer, Progressive, notified him that the umbrella policy would expire and be reissued under a different insurer within the Progressive family. The insured was advised in writing, “You don’t have to do anything,” and, “Your coverages, services and premiums will be unaffected.” The insured followed up with his agent and added $500,000 of UM/UIM coverage to the umbrella policy. The day after the agent told the insured that the coverage would be effective, the insured’s daughter (and named insured under the policy) was seriously injured in a car accident caused by an uninsured motorist. The carrier subsequently issued the umbrella policy with an effective date two days after the girl’s accident. The insurer then filed a declaratory judgment action asserting there was no coverage for the accident, while the insured counterclaimed and filed cross-claims against the agent, seeking coverage or damages. The agent subsequently settled with the insured, paying $500,000 in return for an assignment of the insured’s claims against the carrier. The circuit court granted summary judgment against the agent based on the election of remedies doctrine. The Court of Appeals reversed, holding that the claims assigned to the agent against the insurer may proceed. The insurer was bound by its own actions and the actions of its agent, which assured the insured that he didn’t need to do anything to get the coverage, including paying the premium in advance. Id, ¶16. In advising the insured that the carrier switch was an administrative change and in treating the policy as a renewal rather than a new policy, the insured was entitled to coverage. Id, ¶18. The insured had also acted appropriately in following up with the agent when advised to do so. Id, ¶19. This case is significant because it reiterates to insurance carriers that a reviewing court may determine that coverage exists even if a premium has not yet been paid where an insured reasonably relies on the representations from the insurance carrier and its agent as to the existence of coverage. An insurer who wishes to precondition coverage on receipt of a particular premium or some other advance condition should clearly identify that condition in writing and instruct its agents to uphold that requirement in communications with the insured.

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