COURT DECISIONS

Rough Notes, Sep 2007

In September 2002, the Green Lake property was destroyed by fire. The Averys, believing that the cost of replacing the residence exceeded $250,000, sued Diedrich and the Diedrich Agency, Westport Insurance Corporation (Diedrich's professional liability insurer) and Auto-Owners Insurance Company (the company that issued the $150,000 policy). AutoOwners eventually was dismissed from the case. Diedrich and Westport claimed that Diedrich had no duty to obtain additional coverage for the Averys because Diedrich never agreed to obtain additional coverage. The trial court found in favor of the Averys, holding that Diedrich, as an insurance agent, had a duty to carry out the Averys' instructions. Diedrich and Westport appealed, and the court of appeals reversed the lower court's decision. The Supreme Court of Wisconsin granted the Averys' petition for review.

The sole question answered by the Supreme Court of Wisconsin was: "If an insured requests an increase in insurance coverage and the insurance agent has not agreed to procure it, does the agent have a duty to procure it?" The Averys argued that an agent who has agreed to procure coverage must procure any requested increase because agents are obligated to carry out insureds' instructions. The court rejected this rule.

According to the court, the Averys' proposal would allow an insured to "unilaterally impose a duty on an insurance agent once the agent has agreed to provide any coverage for a property." The court held that an agent does not have a duty to procure requested insurance until there is an agreement that the agent will do so. In this case, Diedrich did not have a duty to procure the $100,000 additional coverage because he never agreed to do so. Thus, the decision of the court of appeals in favor of Diedrich and Westport was affirmed.

Avery vs. Diedrich-No. 2005AP1730-Supreme Court of Wisconsin-June 27, 2007-734 North Western Reporter 2d 159.

Did insurer waive right to subrogate?

On August 1, 2002, Robert Brewington was riding his motorcycle when he was struck and injured by a vehicle driven by Darrin Hornberger. Brewington filed a claim with his insurer, Farm Bureau Insurance. Hornberger was insured by Citizens Insurance Company.

In September, Farm Bureau wrote a letter to Citizens regarding Brewington's claim. In its letter, Farm Bureau indicated that its investigation had revealed that Hornberger was legally at fault for the accident. Citizens replied that its own investigation showed that Brewington was 50% at fault. Citizens also advised Farm Bureau that it had offered Brewington $50,000 (the policy limit) to settle his bodily injury claim.

In October, Brewington sent a letter to Citizens complaining that Citizens had failed to provide him with proof of Hornberger's policy limits, something he had requested in two previous letters to Citizens. He also complained that Citizens had failed to inform him of its position that he was 50% at fault in the accident. According to Citizens, Brewington told the company that he had "no intention of accepting responsibility for an accident for which [he] was in no way at fault."