Agents; Exclusions; All Risks
FG Holdings Inc. v. London Am. Risk Specialists Inc.
No. 09-05-522 (Tex. App. Dec. 13, 2007)

Agent is not liable for failing to obtain requested coverage

The Texas Court of Appeals ruled an insurance agent is not liable for failing to obtain the coverage requested by an insured in view of the insured's failure to read the policy.

Trans-Global Solutions Inc. (TGS) entered into a contract with Clark Refining and Marketing Inc. to build a petroleum coke facility. Under the contract, TGS had to obtain an all-risk insurance policy covering the full contract value of TGS' work, including coverage for damage caused by faulty work. TGS contracted its agent at FG Insurance Services Inc. to obtain such a policy.

FG forwarded the request to London American Risk Specialists Inc., a surplus-line broker, which in turn sent it to Liberty Surplus Insurance Corp. Ultimately, Liberty agreed to provide the insurance. Three months later, London American sent the policy to FG, which forwarded it to TGS.

No one at TGS read the policy, and neither FG nor London American notified TGS that it contained certain exclusions for faulty workmanship. Subsequently, TGS made a claim under the policy for damages incurred in the course of work under the Clark contract, and Liberty denied the claim based on the faulty-workmanship exclusions.

TGS sued London American for failing to obtain the requested coverage. The trial court granted London American's motion for summary judgment, holding that, as the insurer's agent, London American had no duty to explain the policy's terms to TGS. TGS appealed.

The appeals court affirmed the trial court's judgment. London American, as an agent of the insurer, had no duty to TGS to explain the policy terms and coverages included in the application. Texas courts have previously declined to impose on an insurance agent a duty to explain policy terms to an insured.

Texas Insurance Law & Litigation Alert
January 31, 2008