The Sixth Circuit reversed the district court's denial of the insured's claims against an agent for failure to procure proper coverage. Cleveland Indians Baseball Co., L.P. v. New Hampshire Ins. Co. Group, 2013 U.S. App. LEXIS 17629 (6th Cir. Aug. 23, 2013). 

   The Cleveland Indians contracted with National Pastime Sports to put on "Kids Fun Day." As part of the entertainment, National Pastime agreed to provide an inflatable slide. National Pastime was also required to purchase a CGL policy naming the Cleveland Indians as an additional insured. CSI Insurance Group was engaged to procure the policy. The application for coverage indicated a bounce house or inflatable would be part of the entertainment. 

   CSI secured a policy from New Hampshire Insurance Company. The Cleveland Indians were named as a Certificate Holder in the policy.

    Tragically, during the festivities, the slide collapsed and killed an individual. Neither National Pastime nor the Indians had received a copy of the full policy at the time of the accident. 

   When National Pastime notified CSI about the accident, it was learned that CSI had mistakenly failed to procure a CGL policy that expressly covered inflatables. Instead, the policy that was issued excluded inflatables. 

   Suit for declaratory relief was filed by New Hampshire Insurance. The Indians filed a counterclaim and a complaint against CSI for negligence in failing to procure the requested insurance. CSI moved for summary judgment and the district court granted the motion. 

   The Sixth Circuit reversed. Under Michigan law, an independent duty of care was to be exercised by providers of professional services, including insurance brokers, towards third parties where the harm was foreseeable and where the defendant had specific knowledge that its actions might harm a specific third party. Here, it was reasonably foreseeable that an additional insured such as the Indians would be harmed if an insurance agency failed to procure the intended coverage, just as the primary insured would be. CSI knew that it was procuring insurance for the Indians, it knew exactly what dates and events the insurance was for, and it knew that a Certificate of Insurance had been issued to the Indians indicating that the policy was in effect. 

   CSI argued there must be some additional "special relationship" that would make it liable to the Indians. Such a relationship existed here. Therefore, the Indians had adequately stated a negligence claim against CSI. 

   Regarding the claim for negligent misrepresentation, the Indians reasonably relied on the Certificate as a representation by CSI that it had procured the requested policy. Therefore, the matter was remanded to the district court with instructions that the negligent misrepresentation claim proceed along with the general negligence claim.

   Thanks again to my Damon Key blogging colleague, Robert Thomas (www.inversecondemnation.com), for send this case my way.