Court Opinion

ID: 8245688
Source: CourtListenerOpinion
Date Created: 2022-10-16 09:32:21.897971+00
Date Added: 2024-06-11T16:42:42.538083
License: Public Domain

DIETZEN, Justice
(dissenting).
Today, the majority establishes a new cause of action for the negligent procurement of insurance coverage that may be brought by an insured person against an insurance agent. In doing so, the majority offers no legal basis for recognizing a new cause of action for negligent procurement. Because I conclude that the new cause of action established by the majority is contrary to our existing precedent, I respectfully dissent.
Previously, this court has concluded that the promises of an insurance agent are binding on the insurance company, and that an insurance agent has no liability for those promises of insurance coverage. Rather, the acts or conduct of an insurance agent bind the principal to the requested insurance coverage, and the insurance agent is not personally liable. Paull v. Columbian Nat’l Fire Ins. Co., 171 Minn. 118, 120-21, 218 N.W. 539, 540-41 (1927). Put differently, a duly authorized agent binds the insurance company to the requested insurance, even if the agent was negligent. Because the principal is bound by the agent’s actions, the insured is barred from holding the insurance agent personally liable. Id. at 121, 213 N.W. at 541; see also Restatement (Third) of Agency § 6.01 (2006). When an agent binds the coverage, “[t]he omission or mistake ... did no harm to either plaintiff, for in law the company was bound as if proper entries had been made.” Paull, 171 Minn. at 121-22, 213 N.W. at 541.
In Eddy v. Republic National Life Insurance Co., this court considered whether the defendant was acting as an insurance broker and not an insurance agent, and therefore could be held independently liable to the insured for negligence and misrepresentation. 290 N.W.2d 174, 176-77 (Minn.1980). We stated that “an insurance company is liable for the torts of its agents when they are acting within the scope of their employment.” Id. at 176 (citing Morrison v. Swenson, 274 Minn. 127, 142 N.W.2d 640 (1966)). The key question, however, is “whether the person claimed to be an agent was, in fact, acting in that capacity.” Eddy, 290 N.W.2d at 176. Specifically, an insurance agent acts on behalf of a particular insurance company, but an insurance broker acts on behalf of the prospective insured. Id. Thus, “[a] broker is independently liable to the insured in either contract or tort for failing to procure insurance as instructed, but an agent’s liability may be affected by the settlement of his principal.” Id. at 177 (citations omitted). We concluded that whether the defendant was an insurance agent or broker was a question of fact, and remanded for a trial on that issue. Id. at 176-77. Here, there is no question that Swendra acted as an insurance agent and not an insurance broker.
Based upon our decisions in Pauli and Eddy, this court has declined to recognize the existence of a cause of action against an insurance agent for negligent procurement of insurance coverage. The underlying reasoning is that the insured’s remedy to enforce the promises of insurance coverage by the insurance agent is against the insurance company on principles of agency. This principal is sound and has continuing validity today.1
The majority concludes that this court has previously recognized a cause of action *123against an insurance agent for negligent procurement of insurance coverage. The majority relies on Johnson v. Farmers & Merchants State Bank of Balaton, 320 N.W.2d 892 (Minn.1982), to support its determination.2 Supra at 117 (“We now apply that holding to this case.”). In my view, the majority’s reliance on Johnson is misplaced. In Johnson, the narrow issue before this court was whether the evidence in the record supported the jury verdict. 320 N.W.2d at 896-99. In examining the evidence, we stated in dictum that the evidence supported the conclusion that the insurance agent procured the additional line of credit life insurance requested, and therefore did not support a jury verdict that the agent was negligent. Id. at 898. Importantly, we observed:
Even if there were some duty on the part of the Agency to review the insurance coverage annually or periodically, here any failure of periodical review is clearly not the cause of any damages sustained by the respondent because Johnson, at all times, knew he had line of credit life insurance to the maximum amount of $40,000.
Id. Notably, this court did not recognize a new cause of action against an insurance agent for negligent procurement of insurance coverage. Had this court intended to recognize a new cause of action, it would have expressly stated that conclusion and given its reasons for its conclusion. Moreover, this court would have expressly stated the “compelling reason” for overturning, in whole or in part, this court’s decisions in Pauli and Eddy. Oanes v. Allstate Ins. Co., 617 N.W.2d 401, 406 (Minn.2000) (explaining that “we are extremely reluctant to overrule our previous cases” and will only do so for a “compelling reason”). Accordingly, I conclude that Johnson does not recognize a new cause of action for negligent procurement of insurance coverage.
Here, the parties stipulated that Swen-dra was acting within the scope of his agency agreement with American Family at the time he bound insurance coverage for Graff. This stipulation was made in lieu of submitting a special verdict question to the jury asking, “Was Robert Swendra Agency, Inc. acting in the scope of its agency agreement with American Family Insurance at the time of its negligence?” This stipulation is binding upon both parties at trial and on appeal. Lappinen v. Union Ore Co., 224 Minn. 395, 407, 29 N.W.2d 8, 17 (1947). Because Swendra was acting as an agent of American Family at the time he sold the under-insured motorist (UIM) insurance to Graff, American Family, as the principal, was bound to provide the UIM insurance Swendra promised to Graff. See Paull, 171 Minn. at 120-21, 213 N.W. at 540-41. Consequently, American Family was bound to provide Graff with $1,000,000 in UIM coverage under an umbrella policy as promised by Swendra, and Graffs damage claim was limited to American Family’s obligation to provide that coverage.
*124Accordingly, I would conclude that Graff does not have a cause of action against Swendra, and therefore his claim against the Swendra Agency should be dismissed. Consequently, I respectfully dissent.

. Other jurisdictions recognize that an insurance agent representing a disclosed principal insurance company cannot be held primarily liable for failing to procure the promised insurance. See, e.g., Cline v. Atwood, 241 Cal.App.2d 108, 113, 50 Cal.Rptr. 233 (Cal.Ct.App.1966); Marmor v. Bank of Louisville, 262 S.W.2d 173, 173 (Ky.1953); W. & S. Life Ins. Co. v. Vale, 213 Ind. 601, 12 N.E.2d 350, 354 (1938).

. In footnote 4, the majority relies on general agency law to argue that its new cause of action is justified by existing law. But the majority misses the mark. Specifically, in the insurancé context, this court has explicitly declined to recognize such a cause of action. Paull, 171 Minn. at 121-22, 213 N.W. at 541 (concluding that the insurance company is liable for the negligent omission or mistake of the agent to provide insurance coverage, "for in law the company was bound as if proper entries had been made"); Eddy, 290 N.W.2d at 176 (concluding that "an insurance company is liable for the torts of its agents when they are acting’within the scope of their employment”). Rather, the insured’s remedy for an agent's negligent failure to procure insurance coverage is to enforce the promise of insurance coverage against the insurance company, not the insurance agent.