May v. United Services Ass'n of America

GAMMAGE, Justice,

dissenting.

I respectfully dissent. The majority admits an insurance agent has a duty to advise his customers, but concludes that either the duty in this case was so narrow that there was no evidence Wiley negligently failed to give it, or that if he did *676negligently fail to advise properly, there is no evidence he proximately caused any harm. I disagree with both these conclusions. Wiley was under an affirmative duty to offer advice to the Mays for reasons I set forth below. Because the Mays specifically advised him they wanted to be assured of stable coverage for the children they planned to have, Wiley breached his duty to advise by his insistence on the disastrous Double Eagle policy. Wiley’s own admissions that other types of policies would have kept Jared covered is, in context, some evidence of proximate cause. The trial court judgment based on the jury verdict should be affirmed.

The majority holds there is no evidence to support jury findings favoring the Mays. The standard for review of evidence to support jury findings is well established: the court may consider only evidence and reasonable inferences drawn therefrom in the light most favorable to support the jury findings, and must disregard all contrary inferences and inconsistent evidence. Lofton v. Texas Brine Corp., 777 S.W.2d 384, 387 (Tex.1989); Lucas v. Texas Industries, Inc., 696 S.W.2d 372, 377 (Tex.1984); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965). In crucial instances, the majority fails to properly recognize the evidence and clear inferences from it.

Faith May testified that her inquiry to Wiley concerned available health coverage. The inquiry was initially transmitted through Daryl’s mother, Alice. Faith testified Alice “told us that she would talk to an agent to find out what policies they offered.” Even after questioning and emphasizing her need for the best available and affordable health policy, Faith says the Double Eagle was the sole policy shown. She further testified she emphasized the need for continuing insurance coverage of the children she and Daryl planned to have.

What we are dealing with is the basic duty of an agent to aid his client with affirmative advice.

The principle involved here is simply that a person who holds himself out to the public as possessing special knowledge, skill or expertise must perform his activities according to the standard of his profession. * * *
We are á nation which also prides itself on a tradition of allowing a person to rely upon the words of another who, because of special knowledge, undertakes to act as an advisor. If an agent has an economic self-interest in imparting information, sound policy does require that the agent’s duty to speak without negligence be reinforced by basic tort principles inherent in the common law. [Citation omitted.]

Darner Motor Sales v. Universal Underwriters, 140 Ariz. 383, 682 P.2d 388, 403 (Ariz.1984).

This “duty to speak” may arise in two different contexts — the blackletter law and what are sometimes called “special circumstances.” What I have called the “blacklet-ter” law comes from the usual statement of an insurance agent’s duty.1 Part of that duty is “to have adequate knowledge as to the different companies and the variety of terms available with respect to the undertaking he has assumed.” Annot., Duty and Liability of Insurance Broker or Agent to Insured with Respect to Procurement, Continuance, Terms, and Coverage of Insurance Policies, 29 A.L.R.2d 171,187 (1953). The agent must have reasonable knowledge of the types of policies, their different terms, and the coverage available in the area in which the client seeks to be protected. Seascape of Hickory Point Condominium Ass’n, Inc., Phase III v. Associated Ins. Services, Inc., 443 So.2d 488, 490 (Fla.App. [2d Dist.] 1984, rev. *677den.). The agent has a duty to disclose the information to the client and to advise the client as to the insurance he seeks. Darner Motor Sales, 682 P.2d at 402; Seascape of Hickory Point, 443 So.2d at 490; McAlvain v. General Ins. Co., 97 Idaho 777, 780, 554 P.2d 955, 958 (1976); Kenyon v. Larsen, 205 Neb. 209, 217, 286 N.W.2d 759, 764 (1980); Bates v. Gambino, 72 N.J. 219, 370 A.2d 10 (1977).

There is evidence to support the jury finding that Preston Agency breached this duty. Wiley testified he did not know the differential in premium between the Double Eagle group policy and the policies that could have been obtained outside of a group. Contrary to this admission, the majority asserts the Double Eagle “according to his [Wiley’s] testimony, achieved lower rates and lower deductibles by its group structure and by excluding persons who could not answer the health questions affirmatively.” 844 S.W.2d at 672. Why accept Wiley’s testimony against the jury verdict,2 but ignore his contrary admissions supporting the verdict?

Wiley further admitted he didn’t even do any premium comparisons for the Mays of other “single company” policies that would have avoided the loss of coverage for Jared. The reasonable inference from Wiley’s testimony is that he had such other single company policies available.3 Wiley was attempting to explain his failure. What the evidence shows is that Wiley never determined what the Mays were willing to pay, that he had policies to sell that would have protected them and Jared, but that he failed to disclose them or offer a comparison of premium costs. This is evidence of the breach and harm caused by Wiley’s failure to meet this “blackletter” duty to inform and advise.

All attempts by Wiley to justify his advice to the Mays are suspect. In his pretrial deposition, Wiley testified that he dealt with Faith and Daryl May exclusively through the mother-in-law in procuring their Double Eagle policy; he claimed he never met with them personally. At trial, when confronted with the maternity coverage rider exclusively in his handwriting, Wiley conceded it meant he must have met with the Mays, but he could not recall what was said.

Wiley testified that placing the Mays in a “single company” non-group health insurance policy would have avoided the loss of coverage for Jared, and further admitted that he made no attempt to determine relative cost or show the Mays what the premium difference would be.

There was evidence from which the jury could have reasonably inferred that Wiley had a financial motive to push the Double *678Eagle over other policies.4 The evidence suggested the agent of record started and controlled United Services as a group through which to market the Double Eagle. It selected the underwriters. The underwriters kept changing, but the marketing scheme kept churning out the commissions. Wiley testified selling agent commissions were approximately 15 percent. The Double Eagle went through four underwriters in less than six years, three of which were subject to insolvency proceedings shortly after each withdrew. The Liberty Group was agent of record. A Liberty Group employee testified that it, as agent of record, received commissions from 36 percent to 38 percent of each premium on the Double Eagle.5 The jury could, and presumably did, take notice that this left a very low percentage for actually paying claims, and thereby increased the risk of “changes” in underwriters.

Wiley testified he was “concerned” that the Double Eagle went through two underwriters, both of which were the subject of insolvency proceedings immediately following their Double Eagle connection, but he never communicated that concern to the Mays. Rather, each time the Mays contacted him to express their concern, he reassured them and urged them to stick with the Double Eagle.

There is clearly evidence that Wiley, lacking adequate knowledge regarding health insurance coverage and policies available, may have placed the Mays into the Double Eagle group for his own profit. There is evidence of negligence. As explained in Darner Motor Sales, that is the reason tort law liability should be imposed to require the agent to place his professional duty to advise above his economic interest to sell the client whatever profits the agent, as opposed to what is appropriate for the client’s needs.

The second context in which the affirmative duty to advise arises is sometimes called “special circumstances.” Included in this term is the duty to give advice when the insurance agent has held himself out as an insurance specialist or insurance expert. Hardt v. Brink, 192 F.Supp. 879, 880-81 (W.D.Wash.1961); Gabrielson v. Warnemunde, 443 N.W.2d 540, 543 (Minn.1989); Sobotor v. Prudential Prop. & Cas. Ins. Co., 200 N.J.Super. 333, 491 A.2d 737, 740 (App.Div.1984); Nelson v. Davidson, 155 Wis.2d 674, 456 N.W.2d 343, 347 (1990). Also classified as special circumstances are those occasions in which the agent expressly or by conduct agrees to give advice to select insurance appropriate for the client’s needs. Nelson v. Davidson, 456 N.W.2d at 347. One obvious example of this latter circumstance occurs when the client asks the agent to give advice and the agent agrees to do so.

The evidence supports these two types of “special circumstances.” Wiley testified that Preston Agency advertised that “the insurance professionals at Preston will take care of your insurance needs.” He further admitted the message of their advertising was “something in the concept” that they would tell potential customers to come , in and sit and talk with them, and together they would go over their insurance needs, and “we’ll tell you what type of coverage you need in a given situation.”

Faith May testified they requested advice, and Wiley agreed to give it. The record is replete with evidence that Wiley continued to give the Mays advice long after their initial purchase of the Double Eagle policy.

An insurance agent is liable when he fails to provide accurate information regarding available insurance which he knows or should know the customer desires. Woodham v. Moore, 428 So.2d 280 (Fla.App. [4th Dist.] 1983). By holding themselves out as insurance professionals who would give sound advice, the agents *679with Preston undertook a duty to select appropriate insurance for the Mays.

To distinguish a number of cases, particularly Bates v. Gambino, Seascape of Hickory Point and Sobotor, the majority here creates the “misled” requirement. Under the majority’s analysis, to be actionable a statement must “mislead” about the availability or adequacy of coverage. Thus, if the agent chooses the inappropriate policy or coverage, it is not “negligent.” According to the majority, giving no advice is fine, even if there is a duty to advise, and only giving misleading advice is actionable. The cases do not so limit the agent’s duty to advise. Especially in Sobotor, where there was no express misleading advice, just a failure to advise, the distinction fails. The majority essentially argues that the Mays lost their negligence cause of action when the jury failed to find misrepresentation. That is not the law. The negligence cause of action is distinct from the misrepresentation cause of action.

The majority places much reliance on Jones v. Grewe, 189 Cal.App.3d 950, 234 Cal.Rptr. 717 (1987). Plaintiffs in that case argued the insurance agent had a duty to determine what their worth was, to fix an amount for liability insurance. The obvious distinction is that in Grewe the insureds neither specifically asked for the coverage nor informed the insurance agency of the risk that concerned them. Here the Mays informed Wiley that they wanted to be sure of continuous coverage for any children they might have.

The majority accepts evidence and inferences contrary to the jury verdict, and disregards or substitutes its own gloss on evidence supporting the verdict. There was evidence the Preston Agency under the circumstances of this case had the duty to advise the Mays of their insurance needs. It should have either offered them insurance appropriate for their needs or told them it did not offer what they needed. There was also evidence supporting the jury’s finding that Preston Agency breached that duty, because it did not disclose any insurance options other than the Double Eagle, which was particularly ill-suited to the Mays’ needs. Preston Agency had its duty to disclose both under the blackletter law and because it held itself out as offering expert insurance advice, agreeing to give the Mays such advice. The majority recognizes no minimum standards of due diligence other than to avoid affirmative misrepresentation. The majority denies the Mays both their facts and the protection they should have under the law. I therefore dissent.

MAUZY, J., joins in this dissent.

. Annot., T. Groger, Liability of Insurance Agent or Broker on ground of Inadequacy of Life, Health, and Accident Insurance Coverage Procured, 72 A.L.R.3d 735, 738 (1976):

[A]n insurance agent or broker, employed by a prospective client to effect insurance on behalf of the client, must exercise such reasonable skill and ordinary diligence as may fairly be expected of a person in his profession or situation, in doing what is necessary to effect a policy, in seeing that it effectually covers the property or risks to be insured, in selecting the insurer and ascertaining that it is of good credit and standing, and in obtaining as good terms as are reasonably possible.

. In response to the question about what the differences in premiums between the Double Eagle group policy and "single company” policies with the same coverage were, Wiley’s testified that "I don’t know." The majority asserts we must treat this testimony as not conflicting with Wiley’s claim the premiums were lower because "the question itself is phrased in a manner that acknowledges Wiley’s earlier statement that the premiums were lower.” 844 S.W.2d at 672 n. 14. The majority thus implies that am attorney on cross-examination of an adverse witness may not probe his testimony for truthfulness unless he makes his question so hypothetical that it does not "acknowledge" the testimony sought to be discredited. The majority usurps the jury’s job. Resolving conflicts in the evidence was for the jury, which found against the insurance agent.

. Wiley testified:

Q: [W]hen we read your deposition testimony and it’s in evidence, the question was that. “The way Jared fell between the cracks was this changing of underwriters?"
A: Changing from Hermitage to Keystone is where he fell, yes.
Q: Now, there are underwriters of insurance coverage who put people with a single company, and they stay the insured of that company?
A: Right.
Q: And this problem of changing underwriters and that situation is avoided, isn’t it?
A: Right.
A: But you never even did so much as a premium check to be able to tell the Mays what the difference between one of those types of plans and this type of plan was, did you?
A: I don’t remember whether I did or not.
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Q: Okay. If your deposition says that you didn’t, do you stand by what you said in your deposition?
A: As far as I know, I don't guess I did.

. We do not claim the jury actually found Wiley had a financial incentive, and whether he did is irrelevant to the controlling issue of negligence. The existence of such evidence, however, may well have influenced the jurors’ perception of the case as a whole.

. An agent-of-record employee’s testimony implied the 15 percent writing agent’s commission might have come out of the 36 to 38 percent commission to the agent of record. Even 36 percent is high, as the jury was entitled to recognize.