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Ronald Morgan and Cheryl Morgan appealed the district court’s grant of summary judgment in favor of Dickelman Insurance Agency, Inc., Dickelman Insurance, Inc., Jason Dickelman, and State Farm Fire and Casualty Co. (jointly Defendants) regarding Morgan’s complaint for breach of contract, tort, negligence and fraud.
IN Ronald Morgan and Cheryl Morgan v. Dickelman Insurance Agency, Inc., Dickelman Insurance, Inc., Jason Dickelman and State Farm Fire and Casualty Co.., no. 22A-PL-892, Court of Appeals of Indiana (Dec. 30, 2022), the Indiana Court of Appeals made clear that an insured must protect his rights by reading the policy renewal notice.
The facts most favorable to the Morgans as non-movers show that in 2007 they purchased a log home in Lafayette, Indiana. In 2008, they obtained home insurance with State Farm. The Morgans paid insurance premiums through escrow funds held by their mortgage company.
Every year, State Farm sent Morgan “renewal notices.” The insured did not recall viewing the messages.
Dickelman, the State Farm agent, contacted the Morgans several times between 2011 and 2014 “to sit down and meet with him,” but they did not respond, and they never met with Dickelman to discuss their insurance coverage.
In May 2012, Cheryl read that log homes could have higher replacement costs than regular homes and became concerned that their home might be underinsured. Cheryl called Dickelman Insurance and spoke with a female insurance representative. Cheryl initially requested a $250,000 increase in home coverage, but the representative told her “it’s way too much, way too much.” There was no evidence in the record as to the amount of the higher premium. Cheryl never confirmed with Dickelman’s office whether the requested additional coverage had been procured.
In 2015, the Morgans filed a claim with State Farm for extensive water damage to their home with a repair estimate of $712,000 to $800,000. Ultimately, State Farm paid the Morgans $330,034.88 for the claim, which represented their home coverage limit for the April 4, 2015 to 4 April 2016, plus inflation protection and the cost of debris removal.
On September 20, 2017, the Morgans sued the Defendants alleging breach of contract, promissory note misappropriation, negligence and fraud. The trial court entered an order granting summary judgment for the defendants on all of Morgan’s claims.
DISCUSSION AND DECISION
In their complaint, the Morgans alleged that the defendants breached an oral agreement to increase coverage for their home by $150,000. In an affidavit, Dickelman testified that the Morgans never authorized Dickelman Insurance to increase the home limits. Thus, defendant’s pointed evidence established that they did not commit a breach of contract.
The basic requirements of a contract are offer, acceptance, consideration and a meeting of the contracting parties.
The general rule is that the insurer’s delivery of a policy to the insured at the expiration of a policy without a request from the insured is an offer that must be accepted by the insured before an insurance contract becomes effective.
In this case, State Farm sent the Morgans renewal certificates that clearly and unequivocally informed them of the amount of their home insurance coverage.
In Indiana, “[I]nurses have an obligation to read and know the contents of their insurance policies.” [Safe Auto Ins. Co. v. Enter. Leasing Co. of Indianapolis, 889 N.E.2d 392, 397 (Ind.Ct.App. 2008).]
A casual scan by an unsophisticated customer of the first page of the 2013 two-page renewal certificate would inform that person that residential coverage was limited to $297,100 and that the premium charged was for that coverage amount. By keeping the policy and paying the premium through an escrow account held by their mortgage company, the Morgans accepted the offer to renew.
Insured persons have an obligation to read and know the contents of their insurance policies. The traditional rule is that reliance on another’s representation is not justified if the injured party has a written instrument available and fails or neglects to read it. The reason for this exception to the general rule that one is obliged to read and know the contents of one’s policies is that an insurance contract is a detailed and complex instrument, drawn up by expert legal counsel, and has been called a “contract of adhesion” for that reason that the insured is expected to ‘stick’ to it as it is, with little or no choice as to its terms. Also, as I explained in my new book, A an insured rarely reads the policy, and even if the insured did read the policy, it is doubtful that he or she would gain more knowledge “because of the technical language”, but the insured is required to know the non-technical parts such as policy limit and premium .
This case involves a single dollar amount that appears on the first page of the renewal certificates. At least under the facts of this case, the dollar amount does not qualify as technical or complex language.
If the Morgans had looked at the first page of the renewal certificates, they would surely have immediately realized the coverage limit of their policy. By law, the traditional rule is that pleading is not justified when the injured party has a written document available and fails or neglects to read it.
The renewal certificates were simple and the amount of housing coverage was clear. If the Morgans had looked at them, they would have seen that their coverage had not increased by $150,000. Therefore, we conclude as a matter of law that the Morgans’ reliance on the defendants’ alleged statements was not warranted.
My new book is available on Amazon.com as a hardcover here; a paperback here; and as a Kindle book here explains why an insured is required to read and understand, at least, the non-technical part of their policy. Ignoring notices of renewal, paying premium based on those notices and ignoring the fact that the limits were not increased or the premium was increased, is not the basis for a claim of breach of a clear and unambiguous contract which after paying the full limit of insurance still complies with alleging breach of contract and fraud because the insureds refused to admit their own fault and lack of care in their duties as insureds.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and firstname.lastname@example.org
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