Agent Has No Duty to Tell Insured of Pending Nonrenewal: Connecticut High Court

A Connecticut insurance agent has no duty to inform clients that their home insurer intends not to renew their insurance policy, the state’s high court recently affirmed in a case where the homeowners had argued that their long relationship with the agent created a legal duty for their agent to inform them.

The homeowners, Lee and Keleen Deer, who were seeking payment on a claim after a fire destroyed their home, lost their appeal of lower court judgments in favor of their agent Kevin Trahan and his insurance firm, The Trahan Agency.

From 2001 through 2017, Trahan was the Deers’ insurance broker, procuring a homeowners insurance policy from Allstate Insurance Co. that Allstate renewed 15 times. From March 2017 through June 2019, the Deers used a different insurance broker for their homeowners insurance. In 2019, they restarted their relationship with Trahan, obtaining a Century-National Insurance Co. policy through the agency.

Shortly after the policy was issued, Century-National inspected the Deers’ home and found a defect in the exterior siding. The insurer sent an email to Trahan informing the agency of this defect and indicating that the Deers were required to repair the defect and provide notice of the repair no later than three months before the policy was to renew. The parties disputed whether Trahan conveyed this information to the insureds.

After not receiving any notice of repair by the deadline, Century-National sent another email to Trahan informing the agency that it had not received notice of repair and that the Deers’ policy would not be renewed if notice of repair was not received by the policy expiration date. Approximately four weeks later, and two months before the policy expiration date, Century-National sent a nonrenewal notice to the Deers by certified mail, which the insureds claimed they never received. Ultimately, Century-National never received notice of repair, and did not renew the policy.

Shortly after expiration of the policy, the plaintiffs’ home was destroyed by an accidental fire. The plaintiffs made a claim under the policy, but Century-National denied their claim because the home was not insured at the time of the loss. The Deers said they had assumed that their policy had been renewed just as their Allstate policies had been for 15 years.

The Deers sued Century-National, alleging that the insurer had failed to comply with the state’s notice requirements and the notice provisions of the homeowners insurance policy. The homeowners also claimed that Trahan and the agency had violated the Connecticut Unfair Insurance Practices Act and the Connecticut Unfair Trade Practices Act. The trial court rendered judgment in favor of Century-National and Trahan with respect to these claims, and the appellate court affirmed. The Supreme Court denied the Deers’ petitions to hear their appeals as to those claims.

Separately, the Deers sought damages from Trahan in a negligence suit, claiming that the agent had a duty to notify them of communications from Century-National, including a nonrenewal notification, but negligently failed to do so. This Supreme Court opinion is limited to this common-law negligence claim against Trahan.

The Deers argued that Trahan had procured for them insurance policies for more than two decades and that they had built a relationship of trust with Trahan, who would inform them about their insurance and changes to their policies. They alleged that these circumstances created a legal duty requiring Trahan to promptly notify them of communications from an insurance company, including nonrenewal notifications.

Trahan and his agency moved to strike the negligence claim, contending that they were entitled to judgment as a matter of law, insisting that they had no duty under Connecticut law to notify them of the insurer’s impending nonrenewal of their policy.

The trial court sided with Trahan and struck the homeowners’ negligence claim, relying on the general rule in Connecticut that, absent exceptional circumstances, a broker becomes an agent of its client when procuring insurance for that client but that the agency relationship ends once the insurance policy is procured. The trial court reasoned that, after the insurance policy successfully has been procured, a broker has no duty to its client to provide an insurance company’s notice of nonrenewal. The trial court held that the homeowners’ allegations regarding the long-term relationship and their reliance on Trahan were routine and did not establish a special circumstance calling for the imposition of a duty.

The homeowners appealed to the appellate court, which affirmed the trial court’s judgment for Trahan. The Deers then took their case to the state Supreme Court.

The Supreme Court has now held that the lower courts correctly concluded that Trahan did not owe the homeowners a duty to provide them with notice of Century-National’s impending nonrenewal under the circumstances of this case.

The high court acknowledged the general rule that an insurance broker owes no legal duty to the insured after the broker has successfully procured the requested insurance policy, and that a broker is entitled to rely on the insurer to provide notice of nonrenewal to the insured. The high court noted that the primary rationale supporting this general rule is that it is the insurer’s statutory and contractual obligation to notify an insured that the insurer intends not to renew the policy it had issued. Many states, including Connecticut, have statutes mandating that an insurer provide such notice to the insured.

Ordinarily, a broker is justified in relying on the insurer. However, an exception to this general rule arises when a broker agrees, or gives some affirmative assurance, that it will assist in the renewal of an insurance policy for the insured.

In the present case, the court found that there was no evidence that Trahan or the agency had agreed or represented that they would assist in maintaining or renewing the insurance coverage after the issuance of the policy. Also, there was no evidence that Trahan had continued to act on the Deers’ behalf or affirmatively sought to extend their coverage by collecting the necessary information to secure a renewal of their policy.

In addition, the high court rejected the Deers’ claim that the “the long-standing, continued, and ongoing relationship” imposed a legal duty on the agency. The court noted that the relationship was interrupted for two years when they had utilized another insurance broker. In any event, the court continued, such a long-standing relationship, by itself, is insufficient to create a duty in the absence of evidence that the agent or agency had undertaken an additional duty to assist the Deers with their renewals between 2001 and 2017.

“Critically, in cases finding the existence of an extended agency relationship, the record contains evidence that the broker consistently had participated in the renewal process or had taken some affirmative action with respect to renewal of the policy it had procured,” the high court noted.

Two justices —Justice Andrew McDonald joined by Justice Steven Ecker — dissented, arguing in favor of modifying the current common law as it relates to the duty of an insurance agent. They argue that Trahan had a duty to inform the Deers about issues relating to their then existing policy that the agency had already procured for them and whether the insurer declined to continue to insure the risk. That duty was in effect when Century-National sent its first email about the inspection results. “[T}he majority relies on an artificial, bright-line distinction between cancellation and nonrenewal that cannot be maintained under the circumstances of this case,” maintains the dissent.

The dissent concludes that it is “long past time” that the court reexamine the case law that applies “an antiquated understanding of the agency relationship that exists between an insurance agent and an insured, which has not kept pace with the evolution of the insurance industry.”

Topics Agencies Connecticut