Insurance Agent Responsible For Failing To Obtain Coverage

An insurance agent was held responsible for failure to obtain workers' compensation coverage.  In a blog post by Tred Eyerly, a summary of the decision is set forth.  Essentially, the agent held herself out as an expert on insurance for certain types of automotive dealerships.  The plaintiffs purchased insurance without specifying any particular type of coverage needed and allowed the agent to select the coverages purchased.

Although the agent was aware California required mandatory workers' compensation coverage, the initial policy provided no such coverage.  One year later, the policy was renewed with another insurer and again no workers' compensation coverage was obtained.

Later, an employee was severely burned in a fire at the dealership.  When he learned there was no workers' compensation coverage available, he sued and obtained a judgment for $11 Million, $6.8 Million of which the dealership was responsible.

The dealership then sued the insurance agent for negligence.  There was a factual dispute over whether or not workers' compensation coverage was discussed and the documentary evidence tended to show the conversation never happened.  Judgment was entered against the insurance agency for $5.8 Million, the outstanding amount of the judgment after one insurer tendered payment of $1 Million in partial satisfaction simply to extricate itself from the situation.

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