We previously posted on the state court of appeals' decision in Emer's Camper Corral, LLC v. Alderman, 2019 WI App 17, in which the court reviewed proofs necessary to proceed on a claim of negligent procurement of insurance coverage. The state supreme court has now affirmed the court of appeals' decision.
In Emer's Camper Corral, LLC v. Alderman, 2020 WI 46, the plaintiff camper dealer sought insurance to cover hail damage to its inventory of campers. The plaintiff had historically procured such coverage for a deductible of $500 per camper through the defendant insurance agent. In 2011, the plaintiff's inventory suffered $100,000 worth of hail damage. Its insurer at the time paid the claim and renewed coverage for 2012. Another $100,000 of damage occurred in 2012, precipitating the insurer’s decision to non-renew the plaintiff's coverage.
The defendant agent procured a $5,000 per camper deductible for the plaintiff for 2013, an expected increase in terms due to the plaintiff's recent claims history. The agent said, however, that should the plaintiff remain claims-free for a couple years, there may be an opportunity to secure coverage for a deductible closer to $1,000 per camper.
The plaintiff went claims-free the following year, and the defendant agent responded by stating he was able to procure coverage at a deductible of $1,000 per camper with a $5,000 aggregate deductible limit. However, the defendant agent’s representations were inaccurate – the new coverage actually provided a per camper deductible of $5,000 and no aggregate limit.
Towards the end of the 2014 policy period, the agent presented two renewal options to the plaintiff: the “same” $1,000 per camper deductible and $5,000 aggregate deductible limit with the plaintiff's current insurer, and another insurer’s offer of a deductible of $1,000 per camper. While contemplating these potential coverages, the plaintiff suffered hail damage to 25 campers, and submitted the claim to its then-current insurer. In submitting the claim, the plaintiff learned the terms of its hail damage coverage were actually $5,000 deductible per camper and no aggregate limit.
The plaintiff sued the agent for $120,000, the difference between the total damages claim and the $5,000 aggregate deductible limit the plaintiff believed it had paid for.
The agent moved for a directed verdict, arguing the plaintiff failed to show a causal link between the plaintiff's damages and the agent’s failure to procure coverage with the desired terms. After considering evidence from the plaintiff's own expert that the plaintiff would not have been able to procure coverage with the desired terms based upon its claims history, the court granted the directed verdict, finding no causation where the plaintiff did not prove it would have been eligible for the more desirable coverage terms, even though such coverage terms may have existed generally.
As noted, the court of appeals affirmed the trial court’s decision.
The supreme court’s review focused on the third element of the traditional negligence case: did the plaintiff adduce any evidence (the standard to survive a directed verdict) showing a causative link between the agent’s negligence and the plaintiff’s alleged damages. The plaintiff argued its actual insurability was irrelevant, and that it only need prove its desired coverage terms were commercially available in the market. In other words, the plaintiff argued it need only show the desired terms of coverage were generally available in the market, and not that the desired terms could have actually been procured by the plaintiff specifically.
In the alternative, the plaintiff argued, damages were provable based upon the idea that had the plaintiff known the defendant agent was not able to procure coverage on the so-called desired terms, the plaintiff would have changed its business practices to mitigate the potential for hail damage (like providing additional physical cover for campers, not purchasing additional campers for retail, etc.).
The court reminded that the test for causation is whether the alleged conduct is a substantial factor in producing the plaintiff's injury. Would the harm have occurred even with the alleged misconduct?
The general commercial availability standard championed by the plaintiff is a necessary component of the causation analysis, but it is not sufficient in and of itself. Any given policy’s coverage depends upon the circumstances specific to the prospective insured. The coverage, terms, and premium depend upon the individual characteristics of the prospective insured; generally, insurance coverage is not available to each and every requesting party without regard to their insurability.
So while commercial availability of an insurance coverage is certainly necessary for a negligent procurement claim like the plaintiff's, it does not complete the analysis. The plaintiff had to also prove it could have qualified for the commercially available coverage. If it could not so qualify, it would not be insurable, regardless of the agent's negligence. Thus, the agent's negligence here was not a substantial factor in producing the plaintiff's injury, and thus did not provide proof for the causation element of the negligence claim.
The plaintiff also contended it could prove causation through its argument of detrimental reliance. It would have acted to alleviate its exposure to hail damage if it knew it was not going to have the insurance coverage it sought. This theory of causation would be independent of any insurability test and thus would allow liability against the defendant agent regardless of whether coverage existed that could have actually insured the plaintiff.
While the supreme court did not foreclose the possibility of the plaintiff's theory of detrimental reliance, it pointed out the plaintiff offered no evidence from the record showing it would have changed its business conduct had it known about its un-insurability.