Attorneys beware: Insurance agents generally have no duty to ensure you have the professional liability insurance coverage you need

Attorney Simon Mann settled a legal malpractice claim brought against him for failure to file a wrongful death claim within the statute of limitations.  As part of his settlement he assigned to plaintiff Kenneth Perreault his rights against AON, the malpractice insurance broker that had sold to him or his firms three consecutive insurance policies.  At issue was whether there was a special relationship between Mann and AON, such that AON had a duty to make certain that Mann had adequate malpractice insurance to cover all of his work as an attorney. 

 

In Perreault v. AIS Affinity Ins. Agency of New England, Inc., 93 Mass, App. Ct. 673 (2018), the Massachusetts Appeals Court held that there was no such special relationship. 

 

Like almost all malpractice policies, the three policies sold by AON were claims made and reported policies that required that the alleged misconduct and resulting claim arise during the policy period. 

 

The earliest  policy was issued to a firm that Mann had worked for.  Mann had no involvement in purchasing the policy.

 

The second policy was issued to a firm in which Mann was a partner.  Mann was responsible for acquiring the coverage.  Mann claims that he relied exclusively on the advice of an AON employee, Burns, but Burns was not asked to provide risk management services or consultation with respect to the scope of coverage. 

 

The third policy was issued to a firm in which Mann was the sole partner.  Mann relied on Burns to purchase a new policy.  Although Mann had received a demand on the Perreault claim by this time, he did not disclose the Perreault claim on the application.  He told Burns that he needed coverage for all his past work since he became an attorney.  The policy that was issued did not have prior acts coverage.  The earlier two policies were canceled. 

 

When Perreault sued Mann, the insurer, Liberty, declined coverage under the second policy because it had been cancelled. It declined coverage under the third policy because that policy did not have prior acts coverage.  It agreed to provide a defense (but presumably not indemnity) under the first policy. 

 

The Massachusetts Appeals Court noted that there is no general duty of an insurance agent to ensure that insurance policies provide coverage that is adequate for the needs of the insured.  However, an agent may acquired a greater duty if special circumstances exist.  Among the factors creating such special circumstances are a prolonged business relationship; the complexity and comprehensiveness of the customer's coverages; the frequency of contact between the customer and agent with respect to insurance needs; and the extent to which the customer relies on the advice of the agent by reason of the complexity of the policies. 

 

The court held that no no such special circumstances existed between AON/Burns and Mann.  Their business relationship spanned only three years.  Mann's insurance needs were not complex.  His communications with Burns were perfunctory.  Burns was not asked to provide risk management services or consultation with respect to the scope of insurance. 

Massachusetts Appeals Court holds that contractual limitations period in life insurance policy does not apply to 93A claim

Daniel Brown purchased a life insurance policy from SBLI.  Ten years later, the premium on the policy was due to increase by more than ten times.  An SBLI sales agent left Daniel and his wife Michelle a voicemail message pointing out that the premium was going through the roof and that they had options available to keep the coverage going.  He recommended that they purchase a new policy. 

 

Daniel did not pay the increased premium, so his policy lapsed.  He also did not  purchase a new policy.  When Michelle learned of this, the SBLI agent advised her that Daniel should apply for a new policy.  He did not offer the option of reinstating Daniel's policy pending approval of the new policy.  Daniel's application for a new policy was denied.  Michelle, who had separated from Daniel, was not informed of the denial until after Daniel's death a month later. 

 

Michelle sued SBLI more than two years after Daniel's death, for breach of contract, deceit by failing to recommend that she should continue to pay the premium on the old policy while the application for the new policy was pending, negligent supervision of the agent, and breach of ch. 93A. 

 

SBLI argued that the suit was untimely because the policy set forth a two year contractual limitations period for any suit "brought on or in respect to this policy." 

 

Michelle agreed that her breach of contract claim was time-barred.  In Brown v Savings Bank Life Ins. Co., 93 Mass App. Ct. 572 (2018), the Massachusetts Appeals Court held that the contractual limitations periods did not apply to the deceit and negligent supervision claims.  It also held that the contractual limitations period did not apply to the 93A claim.  The court gave a number of interrelated reasons for that decision.  First, the claim was based on deceit and did not arise "in respect to" the policy.  Second, the term "on or in respect to" is ambiguous and must be interpreted against the insurer.  Third, imposition of a contractually shortened limitations period on a tort-based consumer protection claim would violate public policy.