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Defense Digest

Adequate Notice Requires More Than the Delivery of a Policy

Defense Digest, Vol. 31, No. 1, March 2025

March 1, 2025

Key Points:

  • Supreme Court of Idaho on December 31, 2024, reversed and remanded district court’s grant of summary judgment in favor of builder who asserted negligence claims against its insurance company and sought damages for the insurance agent’s failure to include the real property at issue in renewal of insurance policy. 
  • In BrunoBuilt, Inc. v. Auto-Owners Insurance Co., 2024 WL 5250025 (Idaho 2024), court held, once coverage is procured, an agent can be deemed to be acting as an agent of the insurer when the agent promises to renew a policy, and that something more than the delivery of an insurance policy is required to satisfy notice of policy change. 

A recent decision from the Supreme Court of Idaho on December 31, 2024, reversed and remanded the district court’s grant of summary judgment in favor of a builder who asserted negligence claims against its insurance company and sought damages for the insurance agent’s failure to include the real property at issue in the renewal of the insurance policy. 

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. In February of 2016, BrunoBuilt’s civil and geotechnical engineering expert observed the landslide had reactivated. BrunoBuilt continued working on the construction of the home that was mostly complete. The landslide eventually indicated earth movement and became visible on the Dempsey property. No certificate of occupancy was issued for the residence. BrunoBuilt then initiated the underlying lawsuit. 

Prior to the litigation, BrunoBuilt contracted with Randy Richardson of Richardson Insurance Services to advise on available insurance coverage and obtained a “Tailored Protection Policy” that included builders’ risk coverage, 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. The exclusion did not specify the type of landslide that was excluded. Prior to the renewal date in 2016, the agent sent an email to BrunoBuilt inquiring into whether the Dempsey home would be completed and was informed the job would likely be done by the end of March. The agent did not include the Dempsey property in the 2016 renewal, which revised the exclusion for damage resulting from landslides and provided that damage from both naturally-occurring landslides and landslides 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 and Richardson filed a claim with Auto-Owners. Auto-Owners then informed BrunoBuilt that Randy Richardson deleted the Dempsey property from the renewal. BrunoBuilt claimed that was the first time they were informed that the property was not included in the 2016 renewal, and they requested that coverage be reinstated. Auto-Owners declined and closed BrunoBuilt’s claim. 

BrunoBuilt sued Richardson and Auto-Owners, asserting Randy Richardson was negligent and 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 BrunoBuilt regarding the existence, cost, and need for landslide coverage and that he failed to include the Dempsey property in the 2016 renewal. 

The Idaho Supreme Court considered the district court’s granting of Auto-Owners’ motion for summary judgment that dismissed the claims because Richardson was not acting as Auto-Owners’ agent and Auto-Owners did not provide coverage for landslides. BrunoBuilt argued on appeal that the district court’s decision dismissing the failure-to-renew claim was erroneous because the motion only sought summary judgment on the claim related to the alleged failure to procure landslide coverage. In deciding and reviewing the district court’s decisions, the Idaho Supreme Court considered whether Richardson could have been acting as an agent of Auto-Owners for purposes of the failure-to-renew claim. In doing so, the court reviewed the holding in Bales v. General Insurance Company of America, 53 Idaho 327, 24 P.2d 57 (1933), which stated that an insurance company was an agent at the time the insurance broker failed to renew the policy. Therefore, the Idado Supreme Court held that the Bales cases suggests that once coverage is procured, an agent can be deemed to be acting as an agent of the insurer when the agent promises to renew a policy.

The court then identified “the generally accepted legal principle that, if insurers fail to provide notice of a reduction in coverage upon renewal, then coverage under the preexisting policy continues.” BrunoBuilt, Inc., 2024 WL 5250025, *8 citing, Thomas v. Nw. Nat’l Ins. Co., 973 P.2d 804, 807 (Mont. 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 Idaho 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 found the policies were ambiguous as to the interpretation of landslide and looked to other courts that interpreted similar policy language to only exclude coverage for naturally occurring landslides. It, therefore, concluded that 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 held, “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 and the coverage provided in the 2015 policy remained in effect until 30 days after notice was given or BrunoBuilt obtained replacement coverage. 

This case demonstrates that insurance agents in Idaho can be deemed to be acting as an agent of the insurer when the agent promises to renew a policy. Further, 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. 

 



 

Defense Digest, Vol. 31, No. 1, March 2025, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2025 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

Firm Highlights

Thought Leadership

The Tolling Trap: Filing Alone Will Not Toll the Statute Without Good-Faith Service

The Eastern District of Pennsylvania recently reinforced a critical limitation on bad faith claims, holding that a timely filing alone will not preserve a cause of action absent a good-faith effort to serve the original process. The plaintiff had presented a claim for underinsured motorist benefits to his auto insurer. The insurer evaluated the claim and determined that the plaintiff’s accident-related damages did not exceed the bodily injury liability insurance limits of the at-fault driver and denied his claim. Among other claims, the plaintiff sought to present a claim for insurance bad faith under 42 Pa. C.S.A. § 8371, to which a two year statute of limitation applies. He first filed a praecipe for writ of summons before the expiration of the statute of limitation. However, the plaintiff did not attempt to serve the praecipe or writ until after the statute of limitations had expired. Additionally, the service failed as the plaintiff had mailed the original process to an incorrect address. Despite receipt of the Postal Service’s failure to deliver the original process, the plaintiff did not attempt to re-serve the writ. Two months later, the plaintiff filed a complaint and then successfully served that complaint. The insurer sought to dismiss the plaintiff’s bad faith claim as time-barred by the statute of limitations. The district court agreed. Though the plaintiff had filed a praecipe for a writ of summons prior to the expiration of the statute of limitations, the statute is only tolled if there is a good faith effort to serve that original process. In this case, the court determined that the plaintiff had failed to perform a “good faith effort to serve the original process”. Additionally, though the filing and service of a complaint can serve as alternative original process when the lawsuit is commenced by the filing of a praecipe for a writ of summons, the plaintiff filed his complaint after the statute of limitations had expired. The plaintiff’s bad faith claim was therefore determined to be barred by the statute of limitations and dismissed by the court, with prejudice. A key takeaway for the defense is not to assume that the statute of limitations has been successfully tolled by a plaintiff merely because a praecipe for a writ of summons or complaint has been filed prior to the expiration of the statute. A filed complaint or writ is only part of the equation. The defense should carefully review the docket and filings to confirm that the plaintiff also performed the requisite good faith effort to serve that original process. A thorough review of the docket may reveal that the plaintiff failed to make the good-faith service efforts necessary to toll the statute of limitations.

Thought Leadership

New Jersey Appellate Division Affirms Recreational Immunity for County Under Landowners' Liability Act

In a recent unpublished decision in Matthew Kuzma, etc. v. Middlesex County Parks Department, et al., the New Jersey Appellate Division affirmed summary judgment in favor of Middlesex County Parks Department, holding that the county was immune from liability under New Jersey's Landowners' Liability Act (LLA), notwithstanding its failure to plead the immunity as an affirmative defense in its answer to the Complaint. The case arose from injuries sustained by fourteen-year-old plaintiff, Matthew Kuzma, while playing basketball at Spring Lake Park in South Plainfield on August 23, 2019. The plaintiff observed a crack in the basketball court before beginning to play but did not consider it dangerous. During the game, his foot became caught in the crack, causing him to fall and suffer a significant ankle injury. The plaintiff alleged that the injury resulted in ongoing physical limitations and deprived him of the opportunity to play collegiate basketball. The plaintiff filed suit alleging that the defendants negligently maintained the basketball court. Although the county did not assert LLA immunity as an affirmative defense in its answers, it later moved for summary judgment on that basis. The plaintiff opposed the motion, arguing that the county had waived the defense by failing to plead it. The county maintained that the plaintiff had received sufficient notice of its intent to rely on the LLA through discovery and therefore suffered no unfair surprise or prejudice. The trial court agreed and granted summary judgment, concluding that the county should be permitted to invoke statutory immunity notwithstanding its failure to formally plead the defense. Relying heavily on the New Jersey Supreme Court's guidance in Arias v. Cnty. of Bergen, holding a county park was subject to the immunity of the LLA, the Appellate Division affirmed, holding that the county's failure to plead LLA immunity did not preclude reliance on the defense under the circumstances presented. The court determined that the plaintiff had received adequate notice of the immunity claim through discovery and that permitting the defense furthered the public-policy objectives embodied in the LLA. In affirming dismissal, the Appellate Division acknowledged the seriousness of the plaintiff's injury and the general societal interest in maintaining parks and recreational facilities in a safe condition. However, the court emphasized that both the legislature and the New Jersey Supreme Court have expressed a clear policy choice to limit liability for public and private landowners who make recreational property available for public use. The decision reinforces the courts' continuing adherence to the Landowners' Liability Act and the principle that recreational lands and facilities should be broadly protected from liability exposure, even in cases involving significant personal injuries.

Thought Leadership

Florida Supreme Court Rules Florida Statute §627.70152 Does not Apply Retroactively

In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.