I can solely think about that the proprietor of Opera Block Properties was a pupil of climate when ordering drain backup protection—the day earlier than drains backed up. This put up highlights an agent’s binding authority below Michigan regulation and discusses vital insurance coverage ideas regarding the “completed-loss” and “loss-in-progress” doctrines.
On February 5, 2019, Opera Block’s proprietor, Timothy Fuller, met with Auto-Homeowners’ agent, Lydia McCauley, and requested the “absolute best protection” for Opera Block’s buildings, together with including a “premier, property-plus endorsement” that offered $50,000 in protection for drain backups per location. McCauley, who had binding authority from Auto-Homeowners, agreed to the protection adjustments requested by Fuller throughout their February fifth assembly. Each Fuller and McCauley testified they thought the requested adjustments grew to become efficient that day. The drain backup losses in Opera Block’s constructing basements didn’t start till the early morning hours of February 6, 2019, after McCauley certain the protection adjustments.
Auto-owners denied protection. Auto-Homeowners argued the losses have been full earlier than its agent, Lydia McCauley, formally submitted the request to alter Opera Block’s protection on February 6, 2019. Subsequently, the completed-loss doctrine utilized to preclude protection for losses that had already occurred earlier than the coverage was modified. Auto-Homeowners additional maintained the loss-in-progress doctrine defeated Opera Block’s declare as a result of the losses had already begun or have been in progress earlier than McCauley formally requested the protection adjustments on February 6, 2019.
The court docket mentioned these two doctrines which Auto-Homeowners relied upon:
‘Insurance coverage insurance policies are contracts to indemnify towards contingent losses.’ … Typically, a celebration can’t buy insurance coverage for a contingency that has already occurred; the contingency have to be unknown on the time the events enter into the insurance coverage settlement. … It is usually opposite to public coverage to permit an insurance coverage agent to bind an insurance coverage firm to insure a loss that has already occurred. …Accordingly, a ‘accomplished loss’ can’t be coated ‘below an after-acquired insurance coverage coverage…’
The loss-in-progress doctrine acknowledges that, as soon as a loss is in progress, ‘the occasion is not fortuitous and the chance has additionally been realized.’
…
The loss-in-progress doctrine ‘has its roots within the prevention of fraud.’… An insurer might assert the loss-in-progress doctrine as an affirmative protection to protection. See Koppers Co, Inc v Aetna Cas. & Surety Co., 98 F.3d 1440, 1446-1447 (third Cir. 1996) (a loss have to be fortuitous—not anticipated—to be insurable; the insurer bears the burden to show the insured knew concerning the loss or anticipated it to happen earlier than procuring the insurance coverage). 1
The court docket disagreed with Auto-Homeowners as a result of the information didn’t help both doctrine:
The proof didn’t allow an inference that the loss had already occurred on February 5, 2019, or that it was in progress. Even assuming that Fuller may need been on discover of the likelihood that the little little bit of water he discovered on February 5, 2019 got here from the drains, the proof demonstrated it was not a major quantity of water, and Fuller was capable of treatment it instantly. On these information, there was no dispute that the loss at situation had not but begun on February 5, 2019. Consequently, on the proof introduced on the summary-disposition section, it was undisputed that the loss at situation occurred, or was within the strategy of occurring—on the earliest—on February 6, 2019 at 3:49 a.m. It was additionally undisputed that Opera Block knew the loss was occurring on the time. 2
The truth that McCauley didn’t formally submit the protection change request to Auto-Homeowners till February sixth didn’t negate that she had already certain protection efficient February fifth. The court docket decided the formal submission was only a technicality since McCauley had binding authority. Auto-Homeowners agreed to offer McCauley with binding authority on its behalf.
Though Kiebler Insurance coverage was an impartial insurance coverage agent that bought insurance coverage insurance policies for numerous insurers, it’s undisputed that Auto-Homeowners entered into an company settlement with Kiebler Insurance coverage. The settlement gave Kiebler Insurance coverage the ‘authority to obtain functions for contracts of insurance coverage written by [Auto-Owners] and to bind protection[,]’ topic solely to sure limitations not related right here. McCauley testified she had the authority to bind Auto-Homeowners, and Auto-Homeowners’s personal business underwriter, Geoffrey Mack, additionally agreed that McCauley had binding authority. Mack said that binding authority gave the agent the power to ‘place protection with [Auto-Owners] previous to [Auto-Owners] reviewing it.’ Accordingly, it was undisputed that, as an impartial insurance coverage agent, McCauley—appearing on behalf of Kiebler Insurance coverage—was Opera Block’s agent for procuring insurance coverage, however was additionally an Auto-Homeowners restricted agent by advantage of her authority to bind it to an insurance coverage settlement with out first acquiring its permission. 3
Making use of the standing of McCauley as having binding authority for Auto-Homeowners, the court docket then utilized these information to point out that the “assembly of the minds” to bind the protection passed off earlier than the loss:
The proof reveals that Fuller and McCauley had a gathering of the minds on the adjustments to Opera Block’s protection throughout their morning assembly on February 5, 2019, by which they mentioned particular protection adjustments. McCauley testified that Fuller needed the absolute best protection, and she or he felt the ‘premier property-plus endorsement’ would fulfill this request. Fuller confirmed McCauley recognized a ‘tremendous duper’ endorsement that will give him the additional protection he needed, together with $50,000 in drain-backup protection. Fuller additionally testified that, when he left McCauley that morning, he felt he had effected a protection change, ‘[a]nd it was [his] understanding that they offered [him] as a lot and the perfect protection that was attainable,’ which included $50,000 in water-backup protection. Furthermore, McCauley prompt that she too felt the assembly ended with a change in protection:
Q. And out of your perspective, when as—once more, as an Auto-Homeowners-appointed agent and producer, out of your perspective, when Mr. Fuller left your workplace on February 5, 2019, he had—that change request out of your perspective was efficient, was energetic, proper?
A. Sure. 4
This case is a detailed name due to the timing of the loss and the information relating to the requested change and binding settlement. It is very important observe that whereas the insurance coverage agent was technically an impartial agent, Auto-Homeowners had a contract that offered the company with binding authority. With out that authority, the timing might have been delayed sufficient {that a} loss was in progress or had occurred, stopping protection.
There’s a second a part of the case involving insurance coverage agent negligence below Michigan regulation, which shall be mentioned in a future put up. We beforehand mentioned the loss in progress doctrine in The Loss in Progress Doctrine: Deconstructing the All-risk Coverage.
Thought For The Day
Higher three hours too quickly than a minute too late.
—William Shakespeare
1 Opera Block Properties v. Auto-Homeowners Ins. Co., No. 365213, — N.W.3d —, 2024 WL 3907171, *3 (Mich. App. Aug. 22, 2024).
2 Id. at *4.
3 Id. at *5.
4 Id. at *6.