Relief But Questions on Agents’ Duties to Insureds After Florida Court Ruling

Florida insurance agents and brokers can breathe at least a little easier after a state appeals court effectively reversed hefty damages in a case that had threatened to expand agents’ duties to insureds as well as their liability in coverage disputes.

The long-running litigation involved Daytona Beach-based Brown & Brown, one of the largest insurance brokerages in the U.S. The case was deemed so important that attorneys for the Florida Association of Insurance Agents penned a friend-of-the court brief, urging Florida’s 5th District Court of Appeals to overturn a jury’s award of $1 million in damages against Brown & Brown.

The court seemed to agree with much of FAIA’s and Brown & Brown’s arguments, sending the damage award back to Volusia County Circuit Court for reconsideration.

“Brown & Brown is pleased that the Fifth DCA reversed the jury verdict and remanded the matter for a new trial,” Brown & Brown said in a statement released by one of its attorneys in the case, Melissa Murphy of the Porter Wright law firm.

But the nuanced ruling leaves some questions unanswered on the full scope of agents’ and brokers’ responsibilities. The brokerage is now reviewing the opinion and contemplating its next steps.

The case stemmed from Hurricane Matthew, which side-swiped Florida’s east coast in 2016. Houligan’s Pub & Club, and Ormond Wine Co., in Ormond Beach, had relied on a Brown & Brown broker to secure hurricane coverage earlier that year. When the storm hit, the restaurant’s sewage system backed up, causing the pub and store to undergo extensive and expensive cleaning and renovations.

After the disaster, the claim was denied. Houligan’s owners discovered that their Lloyd’s of London wind policy, the only coverage available at the time, did not cover losses from sewage and microorganism contamination. The owners blamed the broker for the oversight and filed suit against Brown & Brown for failing to procure adequate insurance, breaching its fiduciary duty and negligently misrepresenting the extent of the policy. In short, Brown’s broker should have known that he was not placing the coverage the client needed, the pub owners claimed.

The Volusia County jury in 2024 found in favor of the brokerage on the question of failing to secure insurance, but against Brown & Brown on the other claims. Brown & Brown appealed. At the crux of the appeal was whether the trial court judge erred in allowing the damages. The court looked to its sister court’s 1998 decision, known as Capell vs. Gamble.

“…The limited issue is whether the analysis of Capell as to causation and damages for a failure to procure insurance claims should extend to breach of fiduciary duty and negligent misrepresentation claims,” the 5th DCA panel of judges noted in the Jan. 2 opinion, available here.

Brown & Brown had shown that in 2016, no coverage was available for sewage backup losses for the restaurant, even though such a policy was procured a year later. And Houligan’s leadership had not requested the sewage/contamination coverage, anyway.

The jury’s $1 million damage award against the brokerage was based in large part on the Lloyd’s policy. But the 5th DCA had already determined in an earlier phase of the litigation that the Lloyd’s policy did not provide the sewer coverage.

That was where the trial court went wrong, the appeals court judges said.

“As such, it was error to allow the jury to calculate damages based on a policy that this Court has said does not provide coverage,” District Judge Scott Makar wrote for the appellate panel. “Because this error is not harmless, the appropriate remedy is to remand this matter for a retrial limited solely to damages without reliance on the Lloyd’s policy.”

Pre-judgment interest will also have to be recomputed, the appellate court said.

The case was closely watched by Florida insurance agents. The FAIA’s lawyers, Breck Brannen, Brian Chojnowski and Thomas Schulte III, of the Pennington law firm, wrote in their amicus brief that the Volusia judge’s decision to allow the large damage award would expand insurance agents’ fiduciary duties beyond what was reasonable. Unless overturned, the trial court ruling would put agents in the position of having to anticipate an insured’s unexpressed needs and become an all-knowing risk manager for the client—or worse, an unlimited guarantor of insureds’ damage when coverage is denied.

“This is not only unjust, but it also puts agents at odds with other fiduciary duties and raises ethical concerns for insurance agents,” the FAIA brief argued. “Certainly, binding an insured to coverage and paying a premium for insurance they did not intend to obtain would constitute a breach of the agent’s duties to the insured. No fiduciary duty would require an agent to substitute their judgment for the insured’s regarding the need for coverage.”

The sewage damage could not have been foreseen or covered, attorneys argued. The Lloyd’s policy was a wind policy, and the sewer backup was due to a confluence of non-wind issues: flooding from the hurricane, a failure by the municipal utility, and a lack of plumbing protections such as backflow prevention valves at the restaurant, the FAIA and Brown & Brown noted.

By law, insureds have a responsibility to read the insurance policy. And the pub’s owner never established at trial how he would have acted differently if sewage backup coverage had been available in 2016, the briefs explained.

The trial jury had based its award on the total limits of the policy obtained a year after the storm, in 2017. Yet, the trial judge erred by not instructing the jury that the 2017 policy had a sublimit of $50,000 for sewer overflow—a more proper yardstick for damages in the case, the FAIA brief and Brown & Brown’s brief explained.

“Houligan’s did not prove its damages or causation for those damages by providing an alternative commercially available insurance policy that Brown & Brown could have procured, which led to a verdict not supported by either competent substantial evidence or the manifest weight of the evidence,” Brown & Brown’s attorneys argued.

FAIA President Kyle Ulrich declined to comment on the appellate ruling until after attorneys have a chance to mull over the subtleties of the opinion. Brown & Brown or the insured pub owners can ask the appeals court to reconsider, or they can ask the state Supreme Court to review, attorneys said.

If the case continues with a new trial in Volusia County, it’s not certain that a new jury will come back with a lesser damages amount.

Other B&B Litigation: Brown & Brown Files Suit Over Alleged Howden Poaching of 200+ Employees

Topics Agencies Legislation Florida