Response to the outcome of this case
John was an experienced agent at a medium sized agency. John placed CGL, Commercial Auto and Work Comp for his longtime client Hannah. John also sold Hannah her homeowners policy. In addition to her business interests, Hannah owned a very large house valued at $950,000 on which there was no mortgage. Hannah paid her insurance premiums directly.
Hannah had an extensive history of neglecting to pay her premiums on both her business and her homeowners policies. Over the years, when Hannah missed premium payments on her business coverages, her agent John would routinely call Hannah and /or write to her and remind her to pay her premium. On certain occasions, the agent even paid the premium on Hannah’s behalf. With respect to her homeowners coverage, Hannah had received 9 notices of cancellation for non-payment of premium in a six year period. On 5 of those 9 occasions, John called Hannah and reminded her to pay her premium.
The agency had an internal procedure in the event that one of its clients received a notice of cancellation. It was the agency’s policy to call the carrier any time a notice of cancellation was received to confirm whether the account had been paid. Then the agency would follow-up either with a letter or a phone call to the insured if the payment was still outstanding.
In this case, Hannah failed to pay her homeowners premium yet again. The carrier properly sent out its notice of cancellation to both the agency and Hannah. The agency did not contact Hannah upon its receipt of the notice of cancellation and the policy was ultimately cancelled. Four months following the cancellation, the home and all of its contents were completely destroyed by fire. Because there was no mortgage on the property, no forced placed coverage had been obtained by a mortgage company. Hannah submitted a claim and proof of loss to the carrier. The carrier denied coverage for the loss based on the cancellation. Hannah then sued both the carrier and John and his agency.