Professional Liability

A December 31, 2024, decision from the Supreme Court of Idaho found that adequate notice to an insured required more than the delivery of a policy and, due to the insurer’s failure to do so, coverage under a pre-existing policy continued.

In BrunoBuilt, Inc. v. Auto-Owners Insurance Co., 2024 WL 5250025 (Idaho 2024), BrunoBuilt asserted claims against various parties following the reactivation of a landslide that damaged the Dempsey home. The Dempseys had entered into a construction contract with BrunoBuilt in 2014 for the construction of a residence on property located on a pre-existing landslide. 

BrunoBuilt had contracted with Randy Richardson of Richardson Insurance Services to advise on available insurance coverage and obtained a “Tailored Protection Policy,” which covered “direct physical loss or damage caused by a covered peril to ‘buildings or structures’ or while in the course of construction, erection or fabrication.” The Dempsey project was added to the policy in August of 2015. At that time, the policy contained a coverage exclusion for loss resulting from landslide. Prior to the renewal date in 2016, the agent sent an email to BrunoBuilt and, in reply, was informed that the Dempsey job would likely be done by the end of March. Therefore, the agent did not include the Dempsey property in the 2016 renewal, thereby revising the exclusion for damage resulting from landslides and providing that damage from both naturally-occurring landslides and those caused by human activity were excluded from coverage.

Damage to the Dempsey property from the landslide became noticeable between April and June of 2016. BrunoBuilt, with Richardson, filed a claim with Auto-Owners. Auto-Owners then informed BrunoBuilt that Randy Richardson deleted the Dempsey property from the renewal. BrunoBuilt claimed it was the first time they were informed that the property was not included in the 2016 renewal and requested that coverage be reinstated. Auto-Owners declined and closed BrunoBuilt’s claim. 

BrunoBuilt sued Richardson and Auto-Owners, asserting that Richardson was negligent and that Auto-Owners was liable for Richardson’s negligence based on the doctrine of respondeat superior. BrunoBuilt alleged Richardson was negligent in that he failed to properly advise them regarding the existence, cost, and need for landslide coverage and that he failed to include the Dempsey property in the 2016 renewal.

The court identified “the generally accepted legal principle that, if insurers fail to provide notice of a reduction in coverage upon renewal, then coverage under the pre-existing policy continues.” Thomas v. Nw. Nat’l Ins. Co., 292 Mont. 357, 973 P.2d 804, 807 (1998) (“[W]hen an insurer renews a previously issued policy, it has an affirmative duty to provide adequate notice to the insured of changes in coverage.”); D. C. Barrett, Annotation, Insurance company as bound by greater coverage in earlier policy where renewal policy is issued without calling to insured’s attention a reduction the policy coverage, 91 A.L.R.2d 546 § 3 (2024 update) (“The general rule is that an insurance company is bound by the greater coverage in an earlier policy where the renewal policy is issued without calling to the insured’s attention a reduction in the policy coverage.”). In their consideration, the court relied on Idado Code section 41-1842(5), which requires an insurer to notify a named insured of, among other things, reductions in limits or reductions in coverages. In doing so, they found that statute applied to the policy at issue here. 

The court then turned to the policies to determine whether there was a change in policy and, in doing so, applied the well-established rules of interpreting insurance contracts. The court construes insurance contracts to the general rules of contract law, and in determining if any ambiguity exists, the court must construe the policy as a whole and not by isolated terms of phrase. If the language used is unambiguous, the plain and ordinary meaning of the words used in the policy must be construed most strongly against the insurer. Here, the court found that the policies were ambiguous as to the interpretation of landslide and, therefore, the 2016 policy reduced the coverage available for landslides by excluding human-caused landslides. 

In determining whether notice was provided, the Idaho Supreme Court found there was a requirement for something more than the delivery of an insurance policy and, in doing so, held that “it is a broadly accepted rule that insurers must provide adequate notice of changes in coverage to insureds in the context of a renewal because the law does not impose a duty on the insured to scour a renewal policy for changes absent notice from the insurer…” As Auto-Owners only mailed a copy of the policy, the court held it did not fulfill the written requirement notice. Therefore, the coverage provided for in the 2015 policy remained in effect until 30 days after notice was given or BrunoBuilt obtained replacement coverage. 

This case sets forth the written notice requirement that can come into play that requires insurers to take additional steps above and beyond mailing a copy of the policy when there is a change in coverage in the context of a renewal. 

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