42
Fla. L. Weekly D1071aTop of Form

Insurance
— Agents and brokers — Negligent procurement of commercial property insurance
policy — Plaintiff’s allegation that it requested defendant to procure policy
with $100,000 coverage, but that defendant procured policy that provided less
coverage than requested because of coinsurance provision in policy, stated
cause of action for negligent procurement of insurance policy — Trial court
erred in dismissing action for failure to state cause of action

KENDALL SOUTH MEDICAL CENTER, INC.,
Appellant, vs. CONSOLIDATED INSURANCE NATION, INC., d/b/a INSURANCE NATION,
Appellee. 3rd District. Case No. 3D16-926. L.T. Case No. 13-10766. Opinion
filed May 10, 2017. An Appeal from the Circuit Court for Miami-Dade County,
Antonio Marin, Judge. Counsel: Raul A. Montaner, for appellant. Fowler White
Burnett, P.A., and June Galkoski Hoffman and Rory Eric Jurman (Fort Lauderdale),
for appellee.

(Before ROTHENBERG, LAGOA and
SCALES, JJ.)

(SCALES, J.) Kendall South Medical
Center, Inc. (“Kendall South”), the plaintiff below, appeals a final order
dismissing its Fourth Amended Complaint with prejudice for failure to state a
cause of action against one of the defendants below, Consolidated Insurance
Nation, Inc. d/b/a Insurance Nation (“Insurance Nation”). We have jurisdiction.
See Fla. R. App. P. 9.110(k). Concluding that Kendall South has
sufficiently stated a cause of action for negligent procurement of an insurance
policy, we reverse.

Underlying
Facts1

Kendall South operates a medical
center on leased premises located in North Miami Beach, Florida. On January 3,
2013, the sprinkler system on the leased premises was undergoing maintenance
when a leak occurred, resulting in significant water damage to both the
physical improvements (i.e., walls, flooring, baseboards) and to the contents
(i.e., equipment and machinery) located therein. Kendall South had a commercial
property insurance policy with Nation Insurance — issued in August 2011, and
later renewed — which provided $100,000 of coverage for the physical
improvements and contents of the subject property, and which contained a $1,000
deductible and a 90 percent coinsurance clause.2 As a result of the sprinkler leak,
Kendall South suffered property damaging totaling approximately $260,000.
Kendall South made an insurance claim, purportedly expecting to receive a
$100,000 payout, but received only $16,562.67 due to the policy’s coinsurance
clause.

In March 2013, Kendall South filed a
negligence claim against the management company for the leased premises, Equity
One Realty & Management, FL., Inc., which allegedly undertook the work on
the sprinkler system. As an affirmative defense, the management company
asserted that Kendall South had failed to maintain sufficient insurance on the
subject premises in compliance with the parties’ lease agreement. In April
2013, Kendall South filed an Amended Complaint, adding a negligence claim
against Countryside Power Sweeping, Inc., which allegedly performed the work on
the sprinkler system. The matter was referred to mediation and later set for
trial, which was rescheduled on numerous occasions.

Before the trial was held, on January
20, 2015, Kendall South was granted leave to file a Second Amended Complaint in
order to add claims for negligent procurement of insurance and breach of
fiduciary duty against Kendall South’s insurer, Insurance Nation. The lower
court then struck the pending trial date.3 On February 26, 2015, Insurance
Nation moved to dismiss the two claims against it, claiming that Kendall South
had failed to state causes of action. The trial court agreed, dismissing the
Second Amended Complaint without prejudice.

On July 31, 2015, Kendall South
filed its Third Amended Complaint, again alleging a claim for negligent
procurement of insurance against Insurance Nation, but dropping the claim for
breach of fiduciary duty. Insurance Nation moved to dismiss the Third Amended
Complaint, alleging that Kendall South had again failed to state a cause of
action. The trial court agreed, dismissing the Third Amended Complaint without
prejudice.

On November 18, 2015, Kendall South
filed its Fourth Amended Complaint, once again alleging a claim for negligent
procurement of insurance against Insurance Nation. In this pleading, Kendall
South alleged that it had met with Insurance Nation’s agent, Humberto Torres,
on or about August 10, 2011, in order to obtain a “a commercial property
coverage policy of insurance in the amount of $100,000[.]00 that would cover
the property, equipment, supplies, and improvements” of Kendall South.

At this meeting, after informing the
agent that the subject premises had “office equipment, supplies and furnishings
in excess of $100,000.00 and that [Kendall South] had spent in excess of
$100,000.00 for the buildouts, betterments or improvements” thereon, Kendall
South “requested from [agent] Torres insurance coverage of $100,000.00 to cover
the property, supplies, furnishings, betterments or improvements of Kendall
South Medical Center, Inc.” Thereupon, “Torres informed [Kendall South] that
Defendant Insurance Nation would procure a commercial policy of insurance that
would cover and protect all the property, equipment, furnishings and
improvements of the Plaintiff Kendall South Medical Center, Inc., and as
specifically requested by Plaintiff.”

After Kendall South paid the premium
for a policy that provided property damage coverage of $100,000 with a $1,000
deductible and a 90 percent coinsurance clause, “Defendant Insurance Nation by
and through its agent Torres again assured plaintiff that the policy procured
by Defendant Insurance Nation would cover and fully pay the amount of
$100,000[.]00 that was requested by Plaintiff.” Kendall South renewed the
policy under the same terms in August 2012. As a result of the sprinkler leak in
January 2013, Kendall South’s premises purportedly suffered property damage in
excess of $260,000. The subject policy, however, provided coverage in the
amount of only $16,562.67 as a result of a penalty imposed by the coinsurance
clause.

Kendall South specifically alleged
that Insurance Nation “had the duty to procure the insurance coverage as
requested,” as well as a “duty of reasonable care in . . . properly explaining
the policy of insurance procured on [Kendall South’s] behalf.” This duty was
allegedly breached when the agent “failed to advise and or inform and or
adequately and or properly explain to [Kendall South] the 90% coinsurance
clause” where the agent “knew or should have known that the policy written by
[Insurance Nation] with the 90% coinsurance clause would not cover and pay
[Kendall South’s] property as requested by [Kendall South] in the event” of a
covered claim.

Insurance Nation moved to dismiss
the Fourth Amended Complaint, once again alleging that Kendall South had failed
to allege a claim for negligent procurement of insurance. Insurance Nation
asserted, in pertinent part that: (i) it “explained this policy, including the
coinsurance requirements, to Kendall South in the same way that Insurance
Nation always explains similar policies to its customers as a matter of custom
and practice”; (ii) “[b]y procuring and explaining the insurance requested by
Kendall South, Insurance Nation met its duty”; and (iii) “Kendall South is
attempting to manufacture a broker’s liability claim against Insurance Nation
despite 1) receiving the insurance it requested; and 2) never specifically
asking for a higher level of insurance given the value of its office
equipment.”

This time the trial court dismissed
the Fourth Amended Complaint with prejudice. For the following reasons, we
conclude the trial court erred in finding that the Fourth Amended Complaint
failed to adequately allege a claim for negligent procurement of insurance.

Analysis

“A motion to dismiss tests whether a
cause of action is stated and requires the court to look only to the four
corners of the complaint without considering any affirmative defenses raised by
the defendant, or evidence likely to be produced by either side.” Martin v.
Principal Mut. Life Ins. Co., 557 So. 2d 128, 128-29 (Fla. 3d DCA 1990). To
this end, the trial court must treat as true all of the complaint’s
well-pleaded allegations and consider them in the light most favorable to the
plaintiff. Siegle v. Progressive Consumers Ins. Co., 819 So. 2d 732,
734-35 (Fla. 2002). The trial court’s dismissal for failure to state a cause of
action is an issue of law subject to de novo review. Id. at 734.

It is well settled that “where an
insurance agent or broker undertakes to obtain insurance coverage for another
person and fails to do so, he may be held liable for resulting damages for . .
. negligence.” Klonis ex rel. Consol. Am. Ins. Co. v. Armstrong, 436 So.
2d 213, 216 (Fla. 1st DCA 1983); see also Romo v. Amedex Ins. Co.,
930 So. 2d 643, 653-54 (Fla. 3d DCA 2006) (concluding the insured had stated a
valid cause of action for negligent procurement of insurance); Caplan v. La
Chance, 219 So. 2d 89, 90 (Fla. 3d DCA 1969) (concluding that an “action
charging [insurance agents] with negligence in failing to procure the proper
coverage requested by the insured . . . is a recognized cause of action”). More
specifically, and as applicable here, “[a]n agent is required to use reasonable
skill and diligence, and liability may result from a negligent failure to
obtain coverage which is specifically requested or clearly warranted by the
insured’s expressed needs.” Warehouse Foods, Inc. v. Corporate Risk Mgmt.
Servs., Inc., 530 So. 2d 422, 423 (Fla. 1st DCA 1988). As explained by our
sister court, “[t]his general duty requires the agent to exercise due care in
correctly advising the insured of the existence and availability of particular
insurance, including the availability and desirability of obtaining higher
limits, depending on the scope of the agents undertaking.” Adams v. Aetna
Cas. & Sur. Co., 574 So. 2d 1142, 1155 (Fla. 1st DCA 1991).

Viewing the allegations of the
Fourth Amended Complaint as true and in a light most favorable to Kendall
South, we conclude the allegations sufficiently state a cause of action for
negligent procurement of insurance. Kendall South asserts that, once it
informed Insurance Nation’s agent: (i) that both the physical contents of the
subject premises and the improvements thereon were each valued in excess of
$100,000, and (ii) that it wanted to procure just $100,000 of insurance with
respect thereto, it was incumbent upon the agent to apprise Kendall South of
the effect of the coinsurance clause, and to explain that different coverage
was required to meet Kendall South’s expectations.

In short, Kendall South alleges, albeit
somewhat inartfully, that liability arises here from the agent’s negligent
failure to advise Kendall South at the August 10, 2011 meeting that the
procured policy was inadequate to address Kendall South’s expressed insurance
needs. At this stage of the proceedings, on these allegations, we agree that
Kendall South has stated a valid cause of action for negligent procurement of
insurance.4

In reaching this decision, we do not
at all imply that an agent or broker has a general duty of knowing and/or
valuing the contents and improvements of the premises either before procuring,
or thereafter renewing, a commercial insurance policy. Nor, given the current
state of the pleadings, is this a case where it has been alleged by the
plaintiff that an agent or broker has a general duty to explain a coinsurance
clause to any insured before issuing such a policy. Rather, when an insured
alleges that it specifically communicated its insurance needs to an agent who
then undertook to procure a policy addressing such needs, the insured states a
cause of action for negligent procurement where it also alleges that, without
providing an explanation that different coverage was required, the agent
procured a policy not meeting those expressed needs.

Accordingly, we reverse the final
order dismissing with prejudice Kendall South’s Fourth Amended Complaint
against Insurance Nation and remand this cause for further proceedings.

Reversed and remanded.

__________________

1The facts
presented herein are taken from the underlying Fourth Amended Complaint.

2Generally
speaking, a coinsurance provision in a policy covering real or personal
property imposes a penalty upon an insured who purchases coverage that is far
less than the full value of the covered property, such that the insurer does
not pay the full amount of a covered loss:

“Coinsurance” means a relative division of the risk between
the insurer and the insured, dependent on the relative amount of the policy and
the actual value of the property insured thereby.

The purpose of coinsurance is to increase the risk to the
insured when the insured purchases far less coverage than the full value of the
property; when a coinsurance provision applies, the insurer does not pay the
full amount of loss, but the amount otherwise payable under the policy is
reduced in proportion to the extent to which the property is underinsured. In
fact, properly considered, a coinsurance clause involves a penalty or partial
forfeiture.

31 Fla. Jur. 2d Insurance § 2457
(2017) (footnotes omitted).

3The claims
against Equity One Realty & Management, FL., Inc. and Countryside Power
Sweeping, Inc. remain pending in the lower court.

4As already
noted, Insurance Nation argued in its motion to dismiss that its agent did
“explain[ ] this policy, including the coinsurance requirements, to Kendall
South in the same way that Insurance Nation always explains similar policies to
its customers as a matter of custom and practice,” and that this conduct
satisfied its duty of care. This, of course, is a matter for later
consideration, whether it be raised on a motion for summary judgment or at
trial. Similarly, Insurance Nation’s argument that Kendall South made only
general requests for “full” or “adequate” coverage at the August 2011 meeting
presents a potential factual issue that cannot be resolved on a dismissal
motion. See Commercial Ins. Consultants, Inc. v. Frenz Enters.,
696 So. 2d 871, 872 (Fla. 5th DCA 1997) (concluding that whether there has been
a failure to procure insurance is ordinarily a question of fact). We express no
opinion as to the efficacy of these arguments at this time.

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