Court of Appeals Affirms Determination That Insurance Agent Is Not Liable For Failure To Recommend Underinsured Motorist Coverage

Court of Appeals Affirms Determination That Insurance Agent Is Not Liable For Failure To Recommend Underinsured Motorist Coverage

      In the decision rendered just last week, the Kentucky Court of Appeals affirmed the trial court’s determination that an insurance agent was not negligent in that recommending to his client that they purchase underinsured motorist (UIM) coverage. Watson v. Elswick, No. 2014-CA-000030-MR (Ky. App. Oct. 9, 2015).

      George and Charmin Watson maintained several automobile insurance policies through Farm Bureau Insurance Company; Kenneth Elswick was their agent. Living at home with the Watsons was Dustin, their adult son. When Dustin was injured in an automobile accident involving an unrelated vehicle and an unrelated driver, the Watson’s attorney suggested they check to see whether they had UIM coverage that would go to Dustin’s benefit. When told they did not have UIM coverage, the Watsons filed suit against Elswick, seeking $75,000, the amount of UIM coverage they believe they should have had.

      Essentially, the case turned on whether Elswick had a duty to advise the Watsons of the availability of UIM coverage. “Neither of the Watsons ever specifically asked about the requested UIM coverage, and testified that they did not even know what it was prior to their son’s accident.” Slip op. at 2.

       Notwithstanding positive responses several times from Elswick to questions from Watson as to whether they had “full coverage,”, and in reliance upon the rule that whether there exists a duty as a question of law, the court parsed the statutes governing automobile insurance and determined that UIM coverage is separate and distinct. For example, KRS § 304.39-320(2) provides that UIM coverage is to be made available “upon request.” Further, it was determined that the insurer had complied with certain notice requirements about the ability to acquire additional coverage including UIM.

      As such, it was determined that Elswick, in not recommending to the Watsons UIM coverage, had not failed to discharge an obligation owed.