The insurance agent told his client to “read the policy.” It was simple but important advice. More likely than not, the client did not heed the advice. When the insurance policy was received it was probably tossed in a drawer or file cabinet without even a glancing review of its provisions and coverage amounts.
Surprisingly, policyholders generally have no legal obligation to read the insurance policy they purchased. Not in Mississippi, however. The Mississippi courts have adopted two important doctrines regarding the policyholders’ choice to read or not read the insurance policy: (1) the duty to read doctrine and (2) the implied knowledge doctrine.
Under Mississippi law, an insured is charged with the knowledge of the terms of the policy upon which he or she relies for protection. Atlas Roofing Mfg. Co., Inc. v. Robinson & Julienne, Inc., 279 So.2d 625, 629 (Miss. 1973). Under Mississippi law, the “knowledge of an insurance policy is imputed to an insured regardless of whether they read the policy.” Oaks v. Sellers, 953 So.2d 1077, 1083-84 (Miss. 2007). See also, Stephens v. Equitable Life Assur. Soc’y of the United States, 850 So.2d 78, 82 (Miss. 2003) (“insureds are bound as a matter of law by the knowledge of the contents of a contract in which they entered notwithstanding whether they actually read the policy”); Cherry v. Anthony, Gibbs, Sage, 501 So.2d 416, 419 (Miss. 1987) (“even if [the insureds] had not [read the subject insurance policy], knowledge of its contents would be imputed to them as a matter of law”). Thus, the doctrines of “duty to read” and “imputed knowledge” are firmly rooted in Mississippi law.
Where the insured does not read the policy, the insured cannot bring a negligence, negligent-misrepresentation, and failure to procure the requested coverage claims against the insurance agent. Mladineo v. Schmidt, 52 So.3d 1154 (Miss. 2010). The basis for this automatic bar against negligence is that the insured was required to read the insurance policy and, if the insured had read the insurance policy, any mistakes could have been cured. In those cases where the insured does not read the policy, and remains silent, the insured’s silence becomes a bar to suing the agent because that silence was the proximate cause of the ultimate loss which could have been avoided. Stephens v. Equitable Life Assurance Soc’y of the United States, 850 So.2d 78, 83 (Miss. 2003) (the insured “will not as a general rule be heard to complain of an oral misrepresentation the error of which would have been disclosed by reading the contract.”).
There are competing public policy considerations involved with the imposition of a so-called duty to read or imputed knowledge doctrine.
On the one hand, it can be argued that application of the duty to read and imputed knowledge doctrines as an automatic prohibition against claims brought against the agent and the insurance company might induce consumers to purchase policies through misrepresentation. Insurance companies and their agents may induce customers to purchase policies through misrepresentation and face no liability for such behavior by simply delivering to the consumers a policy with different terms after the transaction is complete.
On the other hand, prohibiting the duty to read defense would allow insureds knowingly to underinsure themselves and then complain that they did not get the coverage they requested after sustaining an uncovered loss. Certainly these are theoretical concerns. As a practical matter, neither insureds nor insurance agents and their insurers are motivated to manipulate the transaction in the foregoing manners.
Unfortunately, Mississippi jurisprudence is an anomaly and in most states insureds fail to read their own insurance policy and then after an uncovered loss has occurred, complain that the coverage they actually received was not the coverage requested from the agent. Frequently these types of lawsuits are successful.
One solution is to have a simple one-page statement stating the insured knows the insurance policy is an important document and in order to understand its terms and conditions it must be read. The statement can say that the insured will read the policy when received to make sure the policy contains the coverages requested and further agrees to notify the agent if the policy has any mistakes in coverages and limits.
Most insureds will sign that statement because, without the cares of a given day before them it is an obvious self truth the policy should be read in order to make sure no mistakes have been made. However, where admissible into evidence in a malpractice case, it serves to remind jurors of the obvious – that we all should read our insurance policy and it is simply too late to claim that the policy was issued with incorrect coverages after a loss has occurred.