The U.S. Court of Appeals for the Eleventh Circuit has ruled that an insurance company did not have to cover a claim against an insurance broker where the broker failed to timely notify the insurer of a claim because of a mailroom employee’s failure to properly process a letter.

Ellen and Joseph Brooks asked Johnson & Bryan, Inc. to procure an insurance policy for their property. In 2011, the Brooks’ property was vandalized to which Johnson & Bryan promptly submitted a claim to Hanover Insurance Company. Hanover denied the claim stating the insureds had failed to comply with a fencing requirement under the terms of their policy. On June 18, 2015, the Brooks sent a demand letter to Johnson & Bryan asserting that they were negligent by failing to provide them with a copy of their insurance policy and failing to make them aware there was a fencing requirement in the policy.

On that same day, the letter arrived at the Johnson & Bryan office, but a mailroom employee believed mistakenly that the letter pertained only to the Brookses’ claim with Hanover. The letter was only placed in the Hanover claim file and forwarded to Hanover.

On August 5, 2015, the insureds filed a suit against Johnson & Bryan who notified their insurance carrier, Republic-Franklin on September 2, 2015. While reviewing the Hanover claim file, Johnson & Bryan discovered the June 18th letter and notified Republic-Franklin it had been unaware of the letter’s contents. Republic-Franklin denied Johnson & Bryan’s claim on the ground that it had failed to timely notify it of the June 18 demand letter. The relevant provision of the policy stated that Johnson & Bryan should “[i]mmediately send [Republic-Franklin] copies of any demands. . .received in connection with the “claim” or “suit”.”1 The claim against the Brookses later settled for $80,000 with Johnson & Bryan hiring their own lawyer.

Johnson & Bryan then sued Republic-Franklin for breach of contract, negligence, bad faith and for attorney’s fees and costs. In granting Republic-Franklin’s motion to dismiss, the 11th Circuit, citing Kay-Lex Co. v. Essex Ins. Co., 649 S.E.2d 602, 606 (Ga. Ct. App. 2007), concluded that Johnson & Bryan had failed to comply with the policy’s notice provision, which was a condition precedent to coverage, and that Johnson & Bryan’s excuse for the delay was unreasonable as a matter of Georgia law and was not sufficiently justifiable.

I leave you with a quote from actress Sophia Loren who said, “[m]istakes are part of the dues one pays for a full life.” This was a mistake I’m sure this mailroom employee won’t make again.
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1 Johnson & Bryan, Inc. v. Utica Mutual Ins. Co., No. 17-15337 (11th Cir. July 11, 2018).

  • Good illustration that E&O claims can originate anywhere in the agency. “Small leaks sink great ships.”