Lawsuit Against Agent for Inadequate Insurance Limits

 The case of Barrick v. State Farm Mut. Auto. Ins. Co. and Jones, No. M2013-01773-COA-R3-CV (Tenn. Ct. App. June 27, 2014) first begins in 2008, when the Barrick family was sued after their minor son accidentally killed a motorcyclist in a tragic crash while driving his father’s car.  For over 20 years, the Barricks had been insured with State Farm through their insurance agent Thomas Jones. Unfortunately, however, at the time of the crash their policy limits for auto liability coverage was only $100,000 per person. The family of the deceased motorcyclist ultimately settled their lawsuit against the Barricks for a total sum of $200,000, with State Farm paying $100,000 and the Barricks paying the remaining $100,000 in excess of their policy limits.

Thereafter, the Barricks sued State Farm and their insurance agent, Mr. Jones, and asserted claims of negligence, negligent training and supervision (of Mr. Jones by State Farm), assumption of duty (because Mr. Jones had taken additional duties beyond those of an insurance agent by recommending and also selecting the Barricks’ insurance coverage limits), and violation of the Tennessee Consumer Protection Act (“TCPA”).  The trial court eventually dismissed all of the Barricks’ claims by granting State Farm’s and Mr. Jones’ motions for summary judgment, and the Barricks appealed.

On appeal, the Barrick court affirmed dismissal of the negligence claim, based on consideration of two undisputed facts: (1) that the Barricks had procured State Farm insurance through Mr. Jones for over 20 to 25 years, and (2) that the Barricks received copies of their insurance policies, declarations pages, and renewal notices during this time period. Relying on Tennessee precedent from Weiss v. State Farm Fire & Casualty Company, 107 S.W.3d 503, 506 (Tenn. Ct. App. 2001) – which holds that an agent’s duty ends when the agent obtains insurance for plaintiffs and properly provides copies, notices, and declarations – the Barrick court held that State Farm and Mr. Jones did not owe a duty to the Barricks and therefore could not be liable for negligence.

For the assumption of duty claim, the Barricks argued that Mr. Jones, their insurance agent, had assumed responsibility for selecting appropriate insurance coverage for the family by choosing the terms and limits of coverage on all policies during the time the Barricks bought insurance from him. Mr. and Mrs. Barrick each testified that they never selected the coverage or limits on their insurance policies, that they were never advised to increase their limits or to obtain an umbrella policy, and that had they been so advised they would have increased their limits or obtained an umbrella policy. As a result, the Barricks argued that they had a special relationship with Mr. Jones because Mr. Jones had assumed duties beyond those of an ordinary insurance agent thereby obligating him to select appropriate liability insurance and limits.

Significantly, after reviewing the Tennessee Supreme Court’s decision in Bennett v. Trevecca Nazerene Univ., 216 S.W.3d 293 (Tenn. 2007) – which held that “one who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully” – the Barrick court held that the principle of assumption of duty applied to the case. Hence, if Mr. Jones regularly recommended and selected coverage for the Barricks, then he had a duty to do so with reasonable care.

Upon reconsidering State Farm’s and Mr. Jones’ burden on summary judgment under the Hannan standard, the Barrick court ruled that Defendants could not affirmatively negate an element of the Barricks’ remaining claims  nor could they show that the Barricks could not prove an element of the remaining claims at trial.  Therefore, the Barricks’ claims based on assumption of duty, vicarious liability, failure to supervise, and violation of the TCPA all survived and were remanded back to the trial court for further proceedings. 

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