The Iowa Supreme Court has sided with an insurance agent in a case involving whether or not the agent had a duty to advise his clients as to the need for insurance coverage about which the clients had not inquired.
In considering an appeal brought by plaintiffs Timothy L. Merriam and Justine Merriam against their insurance agent, Steven Stonehocker, the high court affirmed a decision by a lower court that determined Stonehocker had not “breached his duty of care to act as a reasonably prudent insurance agent when he failed to advise and recommend that Timothy Merriam, a self-employed over-the-road truck driver, procure self-employment workers’ compensation insurance.”
In the written opinion filed by the Iowa Supreme Court on Feb. 4, 2011, Chief Justice Cady wrote that the “primary issue in this case is whether Stonehocker had an affirmative duty to inquire or advise the Merriams on Timothy’s need for self-employed workers’ compensation insurance coverage.”
Timothy Merriam was a driver for Landstar Ranger. In previous jobs his workers’ compensation insurance had been provided by employers, but as a self-employed person he had not purchased workers’ compensation coverage for himself.
The Merriams carried homeowners insurance through Farm Bureau Insurance. When Stonehocker joined Farm Bureau Insurance Agency as an independent contractor he was assigned the Merriams’ account.
Upon reviewing their homeowners’ and other property coverage with the Merriams, Stonehocker suggested that they insure their personal vehicles with Farm Bureau as they would benefit from a package policy with a better rate. They discussed other coverages as requested by the Merriams, but not workers’ compensation coverage, which was not inquired about by the insureds.
Several weeks after the initial visit, Timothy Merriam was severely injured in an accident caused by the malfunction of the dump truck he was operating. He did not have workers’ compensation coverage through Landstar Ranger.
According to court document, the Merriams alleged that “Stonehocker was negligent in failing to advise them that, as a self-employed over-the-road truck driver, Timothy had no workers’ compensation insurance unless he purchased the additional coverage himself. They claimed Stonehocker was in a position of superior knowledge pertaining to available insurance products and was negligent for failing to initiate a conversation with them regarding this issue. The Merriams allege Farm Bureau was vicariously liable for Stonehocker’s inaction because he works as its agent.”
In the Court’s written opinion, Justice Cady noted that at the time of Timothy Merriam’s accident “the relationship between Stonehocker and the Merriams had been one of short duration.” Nevertheless, the Merriams asserted that Stonehocker’s awareness of Timothy’s self-employment status combined with the insurance agent’s unsolicited recommendation for other insurance coverage, supported “a conclusion that Stonehocker, a licensed agent with more knowledge than the plaintiffs, was holding himself out as an insurance specialist, thus enlarging his duty to make recommendations to the Merriams regarding workers’ compensation coverage.”
The Iowa Supreme Court disagreed with that assertion.
“The Merriams made no specific inquiry with respect to self-employed workers’ compensation insurance and did not expressly or impliedly seek Stonehocker’s assistance in assessing any of their insurance needs other than those specifically requested,” Justice Cady wrote. “To the extent Stonehocker made suggestions regarding personal vehicle coverage, the record establishes he did so only in an effort to obtain a more favorable rate for the property the plaintiffs sought to insure, the residences.”
The Court further refuted the Merriams’ assertion that Stonehocker had an expanded duty to inquire about the insureds’ additional insurance needs beyond those that about which the Merriams inquired. The Court stated: “If that were the case, then every trained and licensed insurance agent would have a duty to provide an assessment of all of an insureds’ insurance needs, whether requested or not. As previously discussed, we have never held this to be the law in this state.”
Finding that Stonehocker was not liable to the plaintiffs, the Court also determined that Farm Bureau could not “be vicariously liable.”
The case is: Timothy L. Merriam, An Individual; Justine Merriam, Both Individually and as Next Friend of Christopher Merriam, A Minor, Kayla Merriam, A Minor, and Collin Merriam, A Minor, Appellants, vs. Farm Bureau Insurance, A Corporation and/or Farm Bureau Insurance Services, A Corporation; and Steven C. Stonehocker, An Individual, Appellees. No. 08–1635
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