Mladineo v. Schmidt
| Docket Number: | 2008-CA-02011-SCT Linked Case(s): 2008-CA-02011-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 10-28-2010 Opinion Author: Pierce, J. Holding: Affirmed in part, reversed in part and remanded. |
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| Additional Case Information: |
Topic: Insurance - Waiver of duty to read - Negligence - Duty of insurance agent - Procurance of insurance - Negligent misrepresentation - Imputed knowledge - Apparent authority - Public policy - Investigation Judge(s) Concurring: Waller, C.J., Carlson, P.J., Dickinson, Randolph, Lamar and Chandler, JJ. Dissenting Author : Kitchens, J., Dissents With Separate Written Opinion. Concur in Part, Dissent in Part 1: Graves, P.J., Concurs in Part and Dissents in Part With Separate Written Opinion. Procedural History: Summary Judgment Nature of the Case: CIVIL - INSURANCE |
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| Trial Court: |
Date of Trial Judgment: 10-31-2008 Appealed from: Jackson County Circuit Court Judge: Billy G. Bridges Disposition: The trial court granted summary judgment to the Schmidts as to all issues. Case Number: 2006-00,277(2) |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | John P. Mladineo and Sherry Mladineo |
CHARLES R. WILBANKS, JR., MATTHEW R. DOWD, FRANK T. MOORE, JR. |
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| Appellee: | Richard Earl Schmidt, Michael Felsher Insurance Agency and Nationwide Property & Casualty Insurance Company | H. MITCHELL COWAN, LAURA L. HILL | ||
Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Insurance - Waiver of duty to read - Negligence - Duty of insurance agent - Procurance of insurance - Negligent misrepresentation - Imputed knowledge - Apparent authority - Public policy - Investigation |
| Summary of the Facts: | John and Sherry Mladineo sued Richard Schmidt, Michael Felsher d/b/a the Felsher Insurance Agency, and Nationwide Property & Casualty Company on multiple counts arising out of noncovered claims made on the Mladineos’ homeowner’s insurance policy after Hurricane Katrina. The trial court granted summary judgment to the defendants as to all issues. The Mladineos appeal. |
| Summary of Opinion Analysis: | Issue 1: Waiver of duty to read The Mladineos argues that, because the defendants did not include the affirmative defense in their denial letters to the Mladineos prior to litigation, failed to plead the “duty-to-read” and “imputed knowledge” doctrines as an affirmative defense in any responsive pleading filed in this case prior to filing the motion for summary judgment, and actively participated in the litigation for more than two years before raising the affirmative defense in the motion for summary judgment, they waived their right to pursue the affirmative defense. The “duty-to-read” and “imputed-knowledge” doctrines are substantive rules of law, not affirmative defenses, as the Mladineos contend. Issue 2: Negligence Knowledge of an insurance policy is imputed to an insured regardless of whether the insured read the policy. The Mladineos had possession of their policy for approximately four months prior to Hurricane Katrina - enough time to have read the policy – and are imputed with knowledge of the policy’s contents pursuant to our precedent. An insurance agent must use that degree of diligence and care with reference thereto which a reasonably prudent person would exercise in the transaction of his own business. It is a question of fact whether Schmidt breached this duty by allegedly informing the Mladineos that their property was not in a flood plain and counseling against flood insurance. Further, it is a question of fact whether any such breach proximately caused any damages to the Mladineos, such as uninsured claims resulting from a lack of flood coverage. A majority of states hold that a special relationship could impose upon an insurance agent an affirmative duty to provide advice regarding the availability or sufficiency of insurance coverage. While their imputed knowledge prohibits the Mladineos from relying on the characterization of their policy as a “hurricane policy” to get coverage not provided on the face of the policy, they may argue that, but for Schmidt’s misrepresentation of the fact that their property was in a flood plain, they would have bought flood coverage. Even actual knowledge and understanding of every word, phrase, and idea of the policy does not preclude the possibility that they may have bought more extensive coverage absent Schmidt’s alleged negligence. Contrary to a minority of jurisdictions, the Court does not find that insurance agents in Mississippi have an affirmative duty to advise buyers regarding their coverage needs. However, if agents do offer advice to insureds, they have a duty to exercise reasonable care in doing so. A jury should be allowed to decide whether reasonable care was exercised here. Therefore, summary judgment was improperly granted as to this issue. The Mladineos argue that Schmidt and the Felsher Agency breached their duty to procure the insurance coverage the Mladineos requested. It is well-settled that if an insurance agent or broker with a view to being compensated agrees to procure insurance for another and through fault or neglect fails to do so, he will be liable for any damage that results thereby. Here, it is disputed whether Schmidt, and through him, the Felsher Agency, breached this duty. The Mladineos clearly have damages, as they have incurred uninsured losses caused by Hurricane Katrina. Mladineo admitted he knew that flood policies can be purchased separately from homeowner’s policies, yet he did not request such a policy at the time of the initial negotiations, or after receipt of the subject policy. The policy language clearly excludes damage from water – and the Mladineos’ silent acceptance of this policy bound them to its terms. Even if Schmidt breached his duty as an insurance agent to procure the requested coverage, the Mladineos’ silence was the proximate cause of their damage. The Mladineos also claim Schmidt negligently misrepresented the terms of their policy, which caused the Mladineos damage. This issue turns on whether the Mladineos’ reliance on any alleged misrepresentations by Schmidt was reasonable. Schmidt’s alleged misrepresentations regarding the need for flood insurance have been discussed in the context of simple negligence. Summary judgment for those claims was improper and those claims also could be brought under a theory of negligent misrepresentation. But as for misrepresentations that could have been cleared up by reading the policy, the court properly granted summary judgment on those claims. The Mladineos rely in part on American Income Life Insurance Co. v. Hollins, 830 So. 2d 1235 (Miss. 2002). Where Hollins is contradictory to the “duty-to-read” and “imputed knowledge” doctrines, it is hereby overruled. The Mladineos reasonably cannot have relied on the alleged assurances of coverage by Schmidt that directly contradicted the plain language of the policy they had in their possession. Because at least one of the elements required for a negligent-misrepresentation claim is not present, the trial court’s grant of summary judgment as to the claim of negligent misrepresentation is affirmed. Issue 3: Apparent authority The Mladineos argue that Nationwide is bound by the alleged representation of its agents that the subject policy covered both wind and water damage to the Mladineos’ Ocean Springs home. Apparent authority exists when a reasonably prudent person, having knowledge of the nature and usages of the business involved, would be justified in supposing, based on the character of the duties entrusted to the agent, that the agent has the power he is assumed to have. To recover under the theory of apparent authority, the following three factors must be present: acts or conduct on the part of the principal indicating the agent's authority, reasonable reliance on those acts, and a detrimental change in position as a result of such reliance. The alleged misrepresentation by the agent was made to the consumer (the Mladineos), not to the insurance company (Nationwide). For four months, the Mladineos had possession of a policy with terms in direct conflict with the alleged misrepresentation, which was enough time to recognize and remedy the deficit in coverage. Further, after receipt of the insurance policy, it was not reasonable for the Mladineos to rely on any oral representations by Schmidt which contradicted the terms of that policy. Nationwide’s denial of claims as to flood damage is in accordance with the terms of that policy. Thus, there is no error on this issue. Issue 4: Public policy The Mladineos argue that if the “duty-to-read” and “imputed-knowledge” doctrines are interpreted and applied as the trial court applied them, insurance companies and their agents may induce consumers to purchase policies through misrepresentation and face no liability for such behavior by simply delivering to the consumers a policy with different terms after the transaction is complete. Mississippi law is very clear: insureds are imputed with knowledge of the contents of their insurance policy, whether or not they have read the policy. It is therefore not against the public policy of this state to hold them to have knowledge of their insurance policy’s contents. Issue 5: Investigation The Mladineos argue that Nationwide had a legal duty to deal fairly and in good faith with its insured in order to conduct a prompt, reasonable, and adequate investigation into whether Schmidt had committed negligence in the procurement of the specifically requested insurance coverage. The Mladineos complain that the investigation of Schmidt’s errors-and-omissions claim was not adequate. However, no duty exists on the part of Nationwide to investigate the errors and omissions of its agents in the present matter. While insurance companies must adequately investigate claims made against the insurance policies they provide, there is no duty imposed on insurance companies to investigate claims against the company itself. |
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