I can solely think about that the proprietor of Opera Block Properties was a scholar of climate when ordering drain backup protection—the day earlier than drains backed up. This submit highlights an agent’s binding authority below Michigan legislation and discusses necessary insurance coverage rules regarding the “completed-loss” and “loss-in-progress” doctrines.
On February 5, 2019, Opera Block’s proprietor, Timothy Fuller, met with Auto-House owners’ 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-House owners, 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-House owners 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. Due to this fact, the completed-loss doctrine utilized to preclude protection for losses that had already occurred earlier than the coverage was modified. Auto-House owners 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 courtroom mentioned these two doctrines which Auto-House owners relied upon:
‘Insurance coverage insurance policies are contracts to indemnify towards contingent losses.’ … Usually, 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. … Additionally it is 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 lined ‘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 danger has additionally been realized.’
…
The loss-in-progress doctrine ‘has its roots within the prevention of fraud.’… An insurer could 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 courtroom disagreed with Auto-House owners as a result of the info 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 might 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 big quantity of water, and Fuller was in a position to treatment it instantly. On these info, 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 part, it was undisputed that the loss at situation occurred, or was within the means 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-House owners till February sixth didn’t negate that she had already certain protection efficient February fifth. The courtroom decided the formal submission was only a technicality since McCauley had binding authority. Auto-House owners 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-House owners 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-House owners, and Auto-House owners’s personal industrial underwriter, Geoffrey Mack, additionally agreed that McCauley had binding authority. Mack acknowledged 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-House owners 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-House owners, the courtroom then utilized these info to indicate that the “assembly of the minds” to bind the protection befell 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, wherein 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 instructed 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-House owners-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 info concerning the requested change and binding settlement. You will need to notice that whereas the insurance coverage agent was technically an impartial agent, Auto-House owners had a contract that offered the company with binding authority. With out that authority, the timing could 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 legislation, which shall be mentioned in a future submit. 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-House owners 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.