SW Legal studies in Business

Insurer Not Liable for Failure to Provide Policy Requested by Third Party

Appeals court held that an insurer was not liable for failure to provide an insurance policy requested by a home buyer through the home seller. The buyer never directly dealt with the insurer, so the insurer owed no duty to the buyer when a loss was later incurred, and there was no insurance on the property.

Topic Insurance
Key Words

Flood Insurance; Policy Transfer; Negligence

C A S E   S U M M A R Y

Rainey owned a home in New Orleans and had flood insurance. When the house was sold to the Bigelows, they requested the policy be transferred to them. Rainey asked his insurer if the policy could be transferred. The insurer said it could be transferred, and the paperwork could be completed when the sale of the property was finalized. At the closing, the title insurance company failed to have the parties sign the form requesting the policy be changed from the seller to the buyer. Rainey then cancelled his home owner policy. The insurance company also cancelled the flood insurance policy as the change form was not received. The Bigelows did not know the policy had never been issued so when Hurricane Katrina struck, they did not have flood insurance. They sued the title company and settled that claim. They then sued the insurance company for negligence for failing to issue the policy as requested. The trial court awarded $101,300 in damages. Insurer appealed.


Reversed. To recover for losses resulting from an insurance agent’s failure to obtain requested insurance, the plaintiff must establish: 1) an agreement by the insurance agent to procure insurance; 2) failure of the agent to use reasonable diligence to obtain insurance and to notify the client promptly of the absence of coverage; and 3) actions by the agent which warranted the client’s assumption that he was insured. The Rainey’s insurer did not agree to provide flood insurance for the Bigelows and owed them no duty to use diligence to provide insurance. The insurer said the policy could be transferred at closing, but was not asked by Bigelow for a policy and never received paperwork requesting a transfer. Had the request for transfer of the policy been completed at the closing, then the insurer would have had an obligation to provide insurance, but not in this situation.

Citation Bigelow v. Crescent Title, LLC, ---So.2d--- (2008 WL 4724114, Ct. App., La., 2008)

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