Opinion ID: 901809
Heading Depth: 1
Heading Rank: 6

Heading: Duty to procure

Text: [¶ 32.] Before the law will impose liability under a theory of negligence, there must be a duty owed by the defendant to protect the plaintiff from injury. Kuehl, 2004 SD 48, ¶ 10, 678 N.W.2d at 812. A duty can arise under statute or common law. Id. [¶ 33.] Coles allege Tschetter had a duty under SDCL XX-XX-XXX(6) and (7). However, SDCL XX-XX-XXX and all its subsections were repealed in 2001 two years before the facts of this case arose. 2001 Sess. Laws ch 286, §§ 279 to 281. As such, Coles' argument that a duty existed by statute fails. [¶ 34.] Next, Coles allege Tschetter owed them a duty under common law as an insurance agent. An insurance agent has a duty to a potential insured to procur[e] insurance of the kind and with the provisions specified by the insured. City of Colton v. Schwebach, 1997 SD 4, ¶ 10, 557 N.W.2d 769, 771 (citing Fleming v. Torrey, 273 N.W.2d 169, 170 (S.D.1978)). The duty owed to a potential insured by an insurance agent asked to procure a particular type of insurance by the insured is to use reasonable diligence to get the insurance specified, or to seasonably notify the potential insured of the agent's inability to do so. Feldmeyer v. Engelhart, 54 S.D. 81, 222 N.W. 598, 599 (1928) (quoting Russell v. O'Connor, 120 Minn. 66, 139 N.W. 148 (1912)). The same duty to procure arises when the potential insured asks an agent to conduct a review of coverage and make a recommendation. City of Colton, 1997 SD 4, ¶ 10-11, 557 N.W.2d at 771. In such instances, the agent has a duty to procure the coverage the agent recommended after conducting the review. Id. [¶ 35.] At issue is whether Tschetter's duty to obey Coles' instructions with regard to submitting the Wellmark application included a duty to procure the insurance or a duty to notify Coles that the insurance could not be procured. Coles suggest Tschetter had a duty to procure the insurance and a duty to notify them that Wellmark had not approved their coverage for failure to sign and return the riders. Coles appear to argue Tschetter's duty was to procure the coverage regardless of any obstacles she may have encountered, including the failure of Coles to sign and return the riders issued by Wellmark. [¶ 36.] Tschetter was asked to assist Coles by providing information about various insurers from which Coles could select health insurance for their family that could be in effect no later than October 1, 2003. Tschetter presented several options and suggested Coles consider purchasing the COBRA coverage Margie was guaranteed through her previous employer. Coles selected Wellmark as the only insurer to which they wanted to apply for coverage based on cost and the ability to select an effective date of October 1, 2003. Coles rejected other insurers suggested due to price, and told Tschetter they did not want to enroll in the COBRA coverage due to the cost. Tschetter assisted them with filling out the application and mailed it to Wellmark along with the first month's premium and authorization form for the automatic deduction of future premium payments from Coles' checking account. Coles provided no direction to Tschetter other than to file the appropriate materials necessary for Wellmark to evaluate their application. After Coles signed the application and acknowledged written approval would be made by Wellmark, they did not ask for further clarification or assistance from Tschetter. Coles did not ask Tschetter to monitor the progress of their application or to provide additional information in the event Wellmark required a rider for their son's allergies. Given that Coles did not ask Tschetter to conduct a review and make a recommendation and then obtain the insurance she recommended, there was no duty created to obtain the insurance or seasonably notify Coles of her inability to obtain the coverage. This is especially apparent given that Tschetter would not be obtaining the insurance for Coles, but rather after the submission of the application by Tschetter Wellmark would be communicating directly with Coles as to whether or not they were approved for coverage. [¶ 37.] Coles suggest that Tschetter was responsible for notifying them of the need to sign the riders. Coles provided no such direction to Tschetter at the time she expressed her opinion that Wellmark would likely require a rider for their son's allergies. Tschetter made it clear to the Coles that Wellmark would require at least one rider, and to watch their mail for correspondence from Wellmark. Coles asked no further questions regarding the rider. [¶ 38.] Furthermore, the duty as outlined in Feldmeyer is to seasonably notify a potential insured that the policy cannot be obtained. 54 S.D. 81, 222 N.W. at 599. In the instant case, the insurance could have been procured conditioned on Wellmark's requirement that the Coles' sign and return the riders. Coles have offered no authority for the proposition that an agent has a duty after the agent has submitted the application on behalf of the potential insured to advise the potential insured that the policy will issue if, an only if, the potential insured takes some additional action specified by the insurer and communicated to the potential insured by the insurer but not to the agent. We can find no authority in our case law that would permit us to place such an onerous duty upon an agent and relieve a potential insured from complying with the formalities of entering into a contract of insurance. [¶ 39.] Furthermore, as noted above, Coles read and signed the application. Margie testified that she only skimmed the application and did not read the quoted language indicating coverage would not be in effect until either Wellmark or USAL approved the coverage and issued written approval. Dellas testified that he did not read the quoted language in full. However, he also testified he understood that until they received written confirmation from Wellmark the coverage would not be effective. [5] Coles gave no indication at the time they met with Tschetter that they did not understand that the approval would come from Wellmark directly. They did not direct Tschetter to do anything else other than submit the application. Coles also did not direct Tschetter to contact them in the event Wellmark did not approve their application. [¶ 40.] Coles asked Tschetter to submit their application to Wellmark, which she did. Coles never asked Tschetter to guarantee Wellmark would grant the coverage, although on appeal that appears to be the nature of Coles' claims against Tschetter. Nor did Coles ask Tschetter to monitor correspondence between Wellmark and Coles. Tschetter did all she was asked to do by Coles as their agent at the time the parties met. [¶ 41.] Coles cite to Coyne & Delany Co. v. Selman, 98 F.3d 1457, n. 15 (4th Cir.1996), for the proposition that an insurance agent may be held liable where he has breached a contract to procure insurance for his principal. However, in the instant case, Coles have not shown facts in the record to support the existence of a contract between them and Tschetter for her to procure health insurance coverage. In Delany, the insurance agency was in the business of writing policies, selling, and procuring coverage using reinsurers in order to meet its customers' orders. 98 F.3d at 1460. In the instant case, Coles understood that Tschetter was one of several agents who could assist them with obtaining a Wellmark policy. Coles did not ask Tschetter to design a plan to suit Coles' insurance needs. Coles also rejected Tschetter's advice that Margie's COBRA insurance might be their best option due to their son's preexisting condition. Despite this advice, Coles retained all control over the specifics of the selection of a policy including the premiums, the deductible, and the effective date of coverage and determined that they would prefer the Wellmark policy due to price. [¶ 42.] Tschetter was an agent authorized by Wellmark to submit applications on behalf of potential insureds who wished to apply for Wellmark coverage. If Coles wanted to create a contract between them and Tschetter for procurement of health insurance coverage, they failed to do so. As such, she had no duty beyond that contained in City of Colton, 1997 SD 4, ¶ 10, 557 N.W.2d at 771, to obey client's instructions in good faith and with reasonable professional skill, which in this case was to submit Coles' Wellmark application. We also agree with the trial court that under Worden there was no duty on the part of Tschetter to procure the insurance as claimed by Coles. We can find no duty on the part of Tschetter to take any additional steps to cause Wellmark to act upon Coles' application.