In my previous blog, I discussed whether an insurance agent’s negligence can be imputed to the insurance company that issued the policy. I referenced a case entitled Desai v. Farmer Insurance Exchange,1 where the insured filed suit against the agent and the insurer when he realized that after a loss he did not have the level of coverage he requested. A reader astutely pointed out that the suit could have possibly been avoided had the insured or policyholder read (and understood) the policy declarations and coverages prior to the loss and was able to have any problems rectified. That begs the question: Can an insurance agent assert that an insured’s failure to read the policy as an absolute defense to a negligence claim?
In most jurisdictions, including California, the answer is no. In Williams v. Hilb, Rogal & Hobbs Insurance Services of California, Inc., the court held that an insured’s failure to read his policy of insurance did not preclude a negligence action against his agent for failing to procure the proper insurance.2 The court in Williams found that although the insured did not read the policy, that did not mean it was unjustifiable for the insured to have relied on the agent’s advice regarding the nature, extent, or scope of coverage.3 Moreover, the court stated there is no authority for the proposition that an insured’s failure to read his policy is negligence as matter of law.4 Therefore, in deciding whether failing to read the policy can be a defense, the surrounding facts must be analyzed. If not an absolute defense, the agent may be able to establish that the insured was comparatively negligent.
The takeaway from the above is that it is always prudent for the insured to read the policy and verify that the proper coverage is in place. Importantly, if an insured has questions, then he or she should make sure the questions are answered to their satisfaction.