Opinion ID: 59472
Heading Depth: 3
Heading Rank: 2

Heading: Negligent Failure to Procure Insurance

Text: In at least three separate cases, the Nevada Supreme Court has recognized the viability of a claim against an insurance broker for negligent failure to procure insurance. Lucini-Parish Ins., Inc. v. Buck, 108 Nev. 617, 836 P.2d 627, 629 (1992); Keddie v. Beneficial Ins., Inc., 94 Nev. 418, 580 P.2d 955, 956 (1978); Havas v. Carter, 89 Nev. 497, 515 P.2d 397, 399 (1973). In Havas, the Nevada Supreme Court recognized that an insurance broker who undertakes to procure insurance for another owes an obligation to his client to use reasonable diligence in attempting to place the insurance and to seasonably notify the client if he . . . is unable to obtain the insurance. 515 P.2d at 399. Regarding the duty element of the claim, the court stated that insurance brokers are not obligated to assume the duty of procuring . . . insurance, but when they [do] so the law impose[s] upon them the duty of performance in the exercise of ordinary care for the rights and interests of the [intended purchasers]. Id. The question of whether a broker exercised the care and diligence that [the] undertaking required is a question of fact for the jury. Id. In Havas, the court held that the plaintiff failed to establish negligence because the broker made reasonable efforts to procure the special type of insurance demanded by the plaintiff, and the broker seasonably notified the plaintiff of his inability to procure it. Id. In Keddie, the Nevada Supreme Court repeated that [o]nce an agreement to procure insurance has been reached the insurance agent is obliged to use reasonable diligence to place the insurance and seasonably to notify the client if he is unable to do so. 580 P.2d at 956 (citing Havas, 515 P.2d at 399). Regarding the causation element, the court stated that [t]he agreement to procure . . . must be one for a policy of insurance which would have covered the loss incurred. Id. Keddie owned a commercial fishing boat, but he submitted an application to his insurance broker for a yacht insurance policy that only covered damage to boats not used for commercial purposes. Id. at 955. In holding that Keddie failed to prove causation, the court observed that the yacht insurance policy would not have covered the loss incurred even if the broker had procured the policy pursuant to Keddie's application. Id. at 956. In Buck, two horse owners (the Bucks) brought an action against an insurance broker for failure to procure equine mortality insurance. 836 P.2d at 628. The Bucks had insured several horses through Lucini-Parish Insurance (LPI) and always followed the same procedures. Id. The Bucks decided to purchase a thoroughbred horse named Bluegrass for $75,000. Id. An employee of the Bucks called LPI and spoke with an LPI representative about adding Bluegrass to the Bucks' existing Lloyds of London policy. Id. After giving the LPI representative the necessary information and faxing her the veterinarian's certificate and bill of sale, the employee believed that Bluegrass was insured. Id. Unknown to the Bucks, LPI lacked binding authority with respect to equine mortality insurance. Id. The LPI representative forwarded the application via regular mail to a local agent with binding authority. Id. at 629. Bluegrass died shortly thereafter, and LPI informed the Bucks that Bluegrass was not yet insured at the time of death. Id. The jury returned a verdict in favor of the Bucks on their breach of contract and negligent failure to procure insurance claims. Id. In affirming the judgment, the Nevada Supreme Court approved of the following jury instruction on the negligence claim: An insurance agency that undertakes to procure insurance for another owes an obligation to its client to use reasonable diligence in attempting to place the insurance and to seasonably notify the client if it, the insurance agency, is unable to obtain the insurance.  Id. at 629 (emphasis in original). The insurance referred to in the jury instructions was the insurance that LPI actually agreed to procure: adding Bluegrass to the Bucks' existing Lloyds of London policy. Id. at 629-30. Thus, as recently as 1992, the Nevada Supreme Court has recognized the viability of a cause of action against an insurance broker for breach of contract and negligent failure to procure insurance.