Claims by insureds, against their agents, for failing to obtain insurance that covered a claim, are fairly routine. There are challenges for insureds to prevail in these situations. However, it is not impossible either. The Arizona Court of Appeals, in Delicious Deliveries Phoenix, Inc. v. BBVA Compass Insurance Agency, Inc., No. 1-CA-CV 14-0585 (Ct. App. Az. Feb. 16, 2016) recently addressed a different type of claim by an insured against its agent – for failing to serve as an advocate to get a claim covered. This is an “agent claim” that I’ve never seen made before.

BBVA Compass Insurance Agency, Inc. assisted Delicious Deliveries Phoenix, Inc. in obtaining an insurance policy from Auto–Owners. “Compass thereafter submitted two property-loss claims to Auto–Owners on Delicious’s behalf—one related to an alleged equipment breakdown and one related to an alleged employee theft. Using preprinted forms, Compass provided brief descriptions of the claims (specifically, ‘Insd phone equipment was [out] for over 3 weeks and had significant loss as well as business interruption’ and ‘insd employee [as named]—stole from the insd. employee dishonesty claim’), and identified available coverages and limits.”

Auto-Owners ultimately denied both claims. Delicious turned around and filed an action against Auto-Owners and Compass asserting a host of claims. Putting aside lots of detailed allegations, one claim against Compass was based on a “claims-advocacy theory.” Delicious asserted that “Compass failed to ‘d[o] anything to assist its customer’ when it ‘inserted itself into the process of adjusting the claim,’ and generally failed to ‘do a good job of it .’”

At the heart of Delicious’s claim was an Auto–Owners employee’s deposition testimony that “insurance agents ‘[a]bsolutely’ can advocate for their clients, and that such efforts may affect an insurer’s coverage determination ‘if [the] insurance agent has additional information that ... may change a coverage position.’”

The trial court entered summary judgment in favor of Compass. Delicious, being left with a bad taste in its mouth, appealed.

The appeals court’s decision is less than clear. However, importantly, the court seems to have said that an agent has a duty to serve as a claims advocate. But, here, “Delicious provided no evidence—expert or otherwise—that a reasonable insurance agent in Compass’s position should have and would have acted differently with respect to claims advocacy.”

The court noted that the deposition testimony of the Auto-Owners’s employee established that “an insurance agent may serve as a conduit for the factual information on which an insurer bases its coverage decisions.” However, as the court saw it, “Delicious did not allege that Compass failed to relay factual information to Auto–Owners; Delicious’s theory was instead that Compass should have acted as a more aggressive advocate.”

In summary, the court held: “It is not sufficient merely to point to the fact that coverage was denied to support an inference that an agent breached a duty—a plaintiff must identify evidence that shows what the agent should have done or not done. A general assertion that the agent should have tried harder is not evidence of negligence.”

Lastly, while the court acknowledged that expert testimony was not needed by Delicious, as it was pursuing a claim for general negligence, and not professional negligence [not sure I get that], “[e]xpert testimony identifying precise failings by Compass would no doubt have been helpful to Delicious.”

Delicious Deliveries Phoenix, Inc. v. BBVA Compass Insurance Agency should be a cautionary tale for agents. Here, the agent prevailed because Delicious did not allege that Compass failed to relay factual information to Auto–Owners. Delicious did not identify evidence that showed what Compass should have done, or not done, to get the claim paid. But suppose Delicious did – and with expert testimony -- identify evidence that shows what Compass should have done?

Granted, if the claim wasn’t covered, under any circumstances, then the agent should be relieved of liability, because there is nothing that it could have done. But what if the claim could have been covered – it just needed someone to explain why, based on either additional facts, a better presentation of the facts or a challenge based on case law, or a combination of these? Has this court opened the door to insureds, to make claims against their agents, that they didn’t act, essentially in the role of coverage counsel, to challenge a claim denial?