Policy Exclusions and Coverage

Author: Cheryl Wilson

Guest Editor: Wendy Skillman

July 8, 2020 12:00pm

Other than hiring a lawyer, retaining an insurance broker is one of the most critical aspects of  business development in order to protect the investment.  However, due to the numerous options for insurance coverage and the various exclusions of perils, it is necessary to read each and every word of any insurance policy.  Perhaps, even retain an attorney to review the policy terms  so there are no misunderstandings.

The case of Landis v Zellner Insurance Agency, Case No. 2018-12153-CIDL in the Florida Circuit Court is a good illustration of how a coverage dispute can impact a business. Plaintiffs, Sandra and Richard Landis, sued the Racquet Tennis Center, Inc. (“Tennis Center”), alleging they had sustained injury while taking part in athletic activities at the  Tennis Center.  Prior to the incident, the  Tennis Center had a five year relationship with its broker, Zellner Insurance Agency, and had purchased a general policy of coverage worth one million dollars.  However, the policy contained the following exclusion:

“Bodily injury” to any person while practicing for, promoting, participating in, watching or officiating at: a) any sports or athletic contest; b) any athletic endeavor; or c) any sports or athletic exhibition.

Consequently, when the  Tennis Center tendered the defense and indemnity of the lawsuit, the insurance company denied indemnity and the  duty to defend because coverage for bodily injuries during athletic activities were excluded.  Plaintiffs settled their claim against the  Tennis Center for $750,000 and the Tennis Center assigned its claim against Zellner Insurance Agency to the plaintiffs in lieu of payment.

Plaintiffs filed suit against Zellner Insurance Agency as assigns of the  Tennis Center for breach of duty. The Complaint alleged the Tennis Center purchased a million dollar policy of coverage through their long-time insurance broker but it negligently failed to inform the Tennis Center of the “athletic endeavor exclusion.” Plaintiffs alleged the Agency violated duties of care for not explaining properly that athletic activities at the Tennis Center would not be covered in the event of third party injury. Plaintiffs alleged that they had a valid claim of negligence and but for the breach of duty by the Zellner Insurance Agency, they would have been compensated.

Plaintiffs argued that an insurance broker is more than just an “order taker” of insurance based on longstanding Florida law, as established by Seascape of Hickory Point Condo v Associated Insurance Services, 443 So. 2d 488 (1984) that an insurance agent may have a duty to volunteer advice.  In addition, the relationship between the broker and the client is substantially similar to that of an attorney from whom one seeks advice on coverage.

Plaintiffs also argued that an insurance agent or broker may be liable for a negligent failure to obtain coverage which is specifically requested or clearly warranted based on Warehouse Foods, Inc., v Corporate Risk Management Services, Inc., 530 So. 2d 442 (Fl. 1st DCA 1988).  As a result, plaintiffs argued that the Zellner Agency had a duty to ensure the Tennis Center had coverage for athletic activities.

At the time of trial, in order to prevail, plaintiffs needed to prove the underlying negligence case in addition to proving breach of duty by the Zellner Insurance Agency. On February 6, 2020, after a multiple-day jury trial, the jury returned the verdict in favor of the defense.  The  jury found that plaintiffs had not demonstrated any negligence on the part of the  Tennis Center, so there was no need to answer any questions as to the issue of coverage. The plaintiffs were not awarded anything.

So, while this situation meandered down a twisted road, ultimately, the plaintiffs recovered nothing and exclusions control whether a peril is actually covered.

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