Louisiana Eastern District Grants Insurance Agent’s Motion to Dismiss COVID-19 Claim
The Court Found That Agent Did Not Owe A Heightened Duty of Care to Recommend Virus-Related Coverage That Was Not Communicated As a Concern or Requested By The Plaintiffs In one of the first rulings in Louisiana in favor of insurance retail agents, the Louisiana Eastern District recently found for the firm’s client, a national retail insurance agent, and dismissed the claims against the retail agent with prejudice. Not only is this ruling a victory for PMB’s client, the Eastern District’s decision provides long-awaited clarification on the heightened duty of care test for insurance agents enumerated in Offshore Production Contractors, Inc. v. Republic Underwriters Insurance, 910 F.2d 224, 229 (5th Cir. 1990). Offshore Production is the only Louisiana case that has held an insurance agent to owe a heightened duty of care. Since that opinion was issued, multiple state and federal courts cited to Offshore Production arguing that it is possible for an insurance agent to owe its client a heightened duty of care, but those courts struggled to extract a true test from Offshore Production to determine when a heightened duty of care applies. The Louisiana Supreme Court ruling in Isidore Newman School v. J. Evrett Eaves Ins. Agency, also called into question the extent of the special relationship and heightened duty contemplated by the Fifth Circuit’s ruling in Offshore. 42 So. 3d at 359 In Coleman E. Adler & Sons, LLC, et al. v. Axis Surplus Ins. Co., et al., the plaintiffs own and operate three jewelry stores and a reception venue in New Orleans and Metairie, which were forced to close or reduce their operations by civil authority orders due to the COVID-19 pandemic. The property insurance carrier was dismissed following a grant of its motion to dismiss finding that the carrier’s policy did not cover the plaintiffs’ COVID-19 related business interruption losses. The plaintiffs then argued that the retail agent and the wholesale broker were liable for breach of contract and negligence arising from their: (1) failure to advise them about the need for broader virus-related coverage; (2) failure to perform due diligence regarding their businesses; and/or (3) failure to recommend appropriate insurance coverage. Both the retail agent and the wholesale broker filed motions to dismiss for failure to allege the breach of any duty owed to them. The Eastern District of Louisiana clarified that, although Offshore Production provides that an insurance agent may have a heightened duty to recommend coverage under Louisiana law, Isidore Newman School held that insurance agents are not obligated “to spontaneously or affirmatively identify the scope or the amount of insurance coverage the client needs.” 42 So. 3d at 359. The Adler Court therefore concluded that “[i]t is clear that Isidore Newman School limits the application of the heightened duty of insurance agents established in Offshore Production to situations where the client, at the least, communicates specific concerns or requests coverage for specific circumstances.” The Court therefore found that because the plaintiffs did not allege that such communications or requests were made to the retail agent, much less the wholesale broker who never communicated with the plaintiffs, the Adler plaintiffs had not asserted a claim that the retail agent breached a heightened duty of care. The Court also concluded that the retail agent had obtained the insurance coverage that the plaintiffs requested and, as a result, the plaintiffs had no cause of action against retail agent.