Industry Update - Wisconsin Supreme Court Affirms Agent E&O Win, Strengthens Future Defenses

On May 21st, in Emer’s Camper Corral v. Alderman, the Wisconsin Supreme Court issued a 6-1 majority opinion confirming a rigorous causation standard for negligent procurement E&O claims.

The policy at issue? A garage policy from Western Heritage Insurance. Camper Corral claimed its agent promised a $1,000 per-unit and $5,000 maximum annual deductible for hail claims—a peril that Camper Corral had encountered in both 2011 and 2012, leading to six-figure claims and its previous policy being non-renewed. In fact, the new policy had $5,000 per-unit hail deductible with no aggregate limit, which Camper Corral allegedly learned only when a 2014 hail storm damaged 25 vehicles and it incurred $125,000 in deductibles on the loss.

In the ensuing E&O litigation, Camper Corral tried to prove its case against the agent based on the fact that a policy with a lower hail deductible was “commercially available” in the insurance market—but Camper Corral did not (and likely could not, based on its claims history) prove that it would have been eligible for such coverage. The trial court found, and Supreme Court agreed, that this was a failure of proof of causation of damages, i.e., Camper Corral could not show the agent’s alleged “negligence was a ‘substantial factor’ in causing its loss under the commercial availability theory without evidence that a policy with the requested terms” was actually available to Camper Corral. According to the Supreme Court, Camper Corral needed to prove that an insurer would actually have sold it the lower deductible policy it claimed it was promised by the agent—and Camper Corral’s owner’s testimony that she was shown a quote was not enough.

Camper Corral’s other principal theory was that the agent should have been held responsible under a “detrimental reliance” theory because it relied upon the alleged representation from the agent that he had secured a policy with a lower deductible. According to Camper Corral, if it had it known that its policy actually had the higher deductibles, it would have taken additional steps to protect its inventory. The Supreme Court dispensed with this claim because Camper Corral had introduced no evidence to support it at trial.

The key holding and real win for agents and E&O carriers is the court’s causation holding:

In a cause of action for negligent procurement of an insurance policy, the insured cannot establish the insurance agent’s negligence was a “substantial factor” in causing its loss under the commercial availability theory without evidence that a policy with the requested terms was available to the insured.

Emer’s Camper Corral v. Alderman, et al. 2020 WI 46, ¶45. This clear statement of the burden of proof will bolster the defense of future claims in similar cases. Keep an eye on the Independent Agent for a future column breaking down the Camper Corral decision and its impact.