Court: Alleged negligence didn’t cause injury

The Indiana Court of Appeals affirmed a trial court grant of summary judgment in favor of an insurance agent because it found her alleged negligence was not a cause of injury to the plaintiffs.

At issue in Jerry and Becky French v. State Farm Fire & Casualty Company and Jane Hodson, No. 18A02-0612-CV-1161, is whether the trial court erred in granting summary judgment in favor of Hodson on the Frenches’ claim of negligent advice and procurement of insurance.

The Frenches decided to purchase a manufactured home for their Delaware County plot of land, and Jerry French visited his insurance agent, Hodson, to determine the new homeowner’s insurance policy. The value of the home was just less than $80,000.

Hodson asked Jerry questions about the home and entered his answers into the Insurance-to-Value calculator, which estimated the cost of replacement to be approximately $173,000. Jerry signed off on this figure. Hodson never asked if Jerry’s home was manufactured or stick-built, nor the purchase price, and Jerry never specified the type of policy he wanted. State Farm had different policies for manufactured and stick-built homes.

Under Coverage A of their policy, the Frenches were covered for up to $173,000 to repair or replace with similar construction. Under Coverage B, their personal property was insured, and in the event of a loss they would be awarded 75 percent of the Coverage A amount.

A fire struck the home several months after the Frenches moved in, and a claim representative inspected the loss and told the Frenches they could use up to the total amount of coverage to rebuild their home. The Frenches decided to construct a stick-built home instead of a manufactured home because they believed an electrical issue in the manufactured home caused the fire. The cost to build the new home was more than their policy limit.

The claim representative informed the Frenches the policy would only cover the purchase of a similar or exact unit to the manufactured home. State Farm offered to pay the Frenches $80,000 under the policy to purchase a replacement manufactured home; they accepted the amount and continued to build a new home. They also were paid approximately $130,000 under their Coverage B policy.

The Frenches filed suit against State Farm and Hodson, alleging State Farm breached the terms of the policy by only offering $80,000 and that Hodson negligently failed to procure insurance for the Frenches as requested. Both parties filed for summary judgment, in which the trial court granted summary judgment in favor of Hodson, ruling that the insurance policy did cover the risk and that the Frenches actually received $70,000 more in contents payments than what they would have received with the lower dwelling limits, so Hodson cannot be held liable for negligence with respect to the policy limits.

The Court of Appeals upheld the grant of summary judgment, although it had “serious misgivings” as to whether Hodson actually exercised reasonable skill and diligence in obtaining more than $200,000 worth of coverage on a $76,000 manufactured home.

The Frenches did not suffer an injury proximately caused by Hodson’s alleged negligence, and in fact received a benefit of more than $70,000 from the error. The Frenches decided to construct a stick-built home that cost more than the value of their manufactured home, so they did not rely on Hodson’s conducts knowing there was a coverage dispute when they continued with the construction.

Judge Edward Najam wrote the court expressed no opinion about the ultimate resolution of the Frenches’ claim for breach of contract but held that the trial court didn’t error in granting summary judgment in favor of Hodson.