The liability of an insurance agent for failure to include coverage for workers compensation in the insured's policy was the issue in Williams v. HILB, Rogal and Hobbs Ins. Serv. of California, Inc., B203691, 2009 Cal. App. LEXIS 1496 (Cal. Ct. App. Sept. 9, 2009).
John Williams and Steve Simon obtained a dealership from Rhino USA to operate in California. Rhino installed spray-on linings onto the beds of pickup trucks. Rhino USA referred Williams to Robyn Thaw, an insurance agent who held herself out as the expert on the insurance needed for Rhino dealerships. Williams did not request any specific type of insurance, but asked Thaw for whatever insurance was needed to operate the business. Thaw was aware that sprayers had a dangerous job and it would be important for an employer to know if it had no coverage for a sprayer's on-the-job injuries. She also knew that workers compensation insurance was mandatory in California.
A policy with Travelers was sent to Williams, who scanned it briefly and assumed it contained all the insurance he needed to operate the business. No workers compensation was included, however. A year later, the policy was renewed with Hartford Casualty Insurance Company, but again it did not contain workers compensation coverage.
Subsequently, employee Kendall Mann suffered severe burn injuries in a fire at the Rhino dealership. When Williams called Thaw to report the accident, he learned for the first time that his Rhino dealership did not have workers compensation coverage. Mann sued and secured a judgment for $11 million, $6.8 of which the Rhino dealership was responsible. Hartford paid $1 million in partial satisfaction, leaving $5.8 million outstanding on the judgment.
Williams and Simon sued Thaw's employer, HRH, for negligence. Thaw testified that she discussed workers compensation coverage with Williams and told him the premium would be $6,204. Thaw wrote no memorandum to the file, however, to indicate that workers compensation coverage had been offered and declined. Her employer had a form entitled "telephone discussion record" which was to be completed for every call, but it was not used to memorialize Thaw's conversation with Williams. The trial court found William's testimony that he was never advised about workers compensation coverage more credible than that of Thaw. The trial court determined that That was negligent "as she failed to use the skill and care that a reasonably careful insurance professionals would have used in similar circumstances." Judgment was entered against HRH for $5.8 million.
The Court of Appeal affirmed. Thaw's failure to advise Williams of the necessity for workers compensation insurance, which was mandatory in California, and not include such coverage in the policy breached the duty she assumed by holding herself out as the expert to satisfy Rhino's insurance needs.