David Meisel purchased an Allstate Insurance Co. homeowner’s insurance policy from agent Thomas J. Anderson. Some time thereafter, Meisel’s house was totally destroyed due to a faulty electric drop line to his house from the public utility transformer.
Through his insurance agent, Meisel reported the fire loss to Allstate, which referred the claim to its adjuster, Tom Reed. The adjuster told Meisel he had full replacement value on his house for $320,000. After negotiations, Allstate’s recommended contractor agreed to rebuild the house for $354,000.
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Reed told Meisel the $320,000 structure policy limit could be combined with the $145,000 contents coverage to pay for the reconstruction. Based on this representation, Meisel hired the contractor.
But while the house was partially reconstructed, Reed told Meisel the structure was only insured for $220,000 rather than $320,000, and Allstate would withhold substantial sums for depreciation costs on the contents coverage unless Meisel used the entire contents coverage to replace furnishings.
Meisel sued Allstate and agent Anderson for breach of contract due to failure to upgrade his insurance coverage to reflect rising construction costs, negligence, and breach of the implied covenant of good faith and fair dealing by making misrepresentations as to the policy limits and claim payment.
Agent Anderson argued he has no personal liability to Meisel because Anderson is a representative of Allstate rather than policyholder Meisel.
If you were the judge would you rule agent Anderson had a duty to Meisel to recommend adequate replacement cost insurance?
The judge said no!
Although Meisel thought insurance agent Anderson was looking out for the insured’s best interests, the judge began, the evidence shows Anderson was an exclusive insurance agent working for insurer Allstate and not for the insured.
“Plaintiff’s claim for breach of contract against Anderson fails as a matter of law. An insurance agent cannot be held liable for breach of contract, or breach of the implied covenant of good faith and fair dealing because he was not a party to the insurance contract,” the judge explained.
Since agent Anderson was working exclusively for Allstate, and was not acting on behalf of homeowner Meisel, no special duty arose as it might have if Anderson was an independent insurance broker who could arrange insurance with different insurers, the judge emphasized. Therefore, agent Anderson is dismissed as a defendant, but Meisel may proceed against Allstate on his claims, the judge ruled.
Based on the 2005 U.S. District Court decision in Meisel v. Allstate Indemnity Co., 357 Fed.Supp.2d 1222.
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