Where an expert in a professional negligence case against an insurance agent admitted that he had very limited experience with a certain type of policy, he was not qualified to testify as to the standard of care regarding that policy type.
In Littleton v. TIS Insurance Services, Inc., No. E2018-00477-COA-R3-CV (Tenn. Ct. App. Jan. 9, 2019), plaintiffs filed a professional negligence case against defendant insurance agent. The facts of this case revolved around a company, Merit Construction, asking its insurance agent to procure a commercial general liability insurance policy. Merit requested that the policy come from a company with an A rating, and defendant agent provided three options. Merit chose an option from Highlands, which actually had a rating of B++. Defendant procured this policy and also procured a cut-through endorsement, which defendant claimed was “to raise the Highlands policy to an A-rating…” At the time Merit was given the three options, it was not given financial information about any of the potential carriers, and defendant’s agent “indicated that all three companies were A-rated companies with the cut-through endorsement from Highlands[.]” More than a year after the policy was purchased, Highlands’ rating dropped to a B, and defendant did not inform Merit or move the coverage to a different carrier. There were subsequent issues collecting when a claim was made to Highlands because it had been placed in receivership.
Plaintiffs in this case alleged that defendant committed professional negligence, which requires expert proof of both the applicable standard of care and the breach of that standard. Plaintiffs presented an expert who identified three ways in which defendant breached the standard of care for insurance agents—by offering “the Highlands’ policy to Merit even though it did not meet Merit’s requirement that the company be at least A rated, and allegedly incorrectly inform[ing] Merit that the cut-through endorsement raised Highland’s rating…;” by failing to “notify and thoroughly explain the cut-through endorsement to Merit;” and by failing to notify Merit that the carrier’s rating had been downgraded. The background of this case was somewhat convoluted and included multiple assignments of claims, but the issue on appeal was relatively simple. The trial court had granted defendant’s motion to exclude plaintiffs’ expert due to his admitted limited experience with cut-through endorsements, which resulted in summary judgment for defendant due to plaintiffs’ inability to prove their case. The only issue on appeal was whether this exclusion was appropriate.
The Court of Appeals reviewed plaintiffs’ expert’s resume, noting that the trial court was responsible for determining “whether the witness is an expert, either through knowledge, skill, experience, training, or education, in the area he or she is providing testimony.” (internal citation omitted). Here, the expert in question had been a licensed agent in Tennessee since 1971, had worked for 10 years as an insurance agent, and had begun working in risk management in 1981. Since 1988, he had run “his own insurance consulting agency,” giving him “nothing less than extensive” experience with general insurance and risk management. Particularly relevant to this case, however, was the fact that the expert had limited experience with cut-through endorsements, as he had never sold such a policy and only encountered one in his consulting business.
The Court ruled that the trial court did not abuse its discretion by excluding the expert’s testimony regarding how defendant should have presented the cut-through policy to Merit and whether it should have obtained a signed letter confirming Merit’s understanding of the policy. The Court agreed that the expert’s limited exposure to and use of such policies could lead to the reasonable conclusion that he did not have “the necessary qualifications to opine as to the standard of care necessary in a situation involving a cut-through agreement.”
Regarding the other two allegations of professional negligence, however, the Court ruled that the expert should have been allowed to testify. Because the trial court ruled that the expert was “qualified to opine that the cut-through endorsement [had] no effect on Highland’s financial rating,” the Court found that the expert should have also been able to testify “that Highland’s financial rating was incorrectly explained to Merit[.]” Because the cut-through policy did not affect the rating, the expert’s “lack of expertise in [the cut-through] area likewise has no effect on his ability to give an opinion concerning general issues relative to financial ratings of insurance companies.” The Court ruled that plaintiffs “have shown that [the expert] has sufficient experience with general insurance matters and financial ratings to render him qualified to opine as to the remaining breaches alleged against [defendant].” The Court thus vacated summary judgment, as expert testimony could be presented in support of two of the alleged breaches of the applicable standard of care.