When the insureds purchased their home along the Mississippi Gulf coast, they discussed obtaining property insurance with Richard Schmidt, a Nationwide insurance salesman employed by Felsher Insurance Agency. See Mladineo v. Schmidt, 2010 Miss. LEXIS 569 (Miss. Oct. 28, 2010). The insureds' complaint alleged they told Schmidt they desired a policy with full protection from all weather conditions. Schmidt allegedly informed them they needed a hurricane policy, but would not need a separate flood policy in order to be covered for all wind and water damage. Schmidt further informed the insureds their property was not located in a flood zone.
The insured's agreed to purchase a "hurricane policy," which became effective the day the insureds closed on the purchase of their new home. The policy, however, was not received by the insureds for another six weeks. Upon receipt, the insureds filed the policy without ever reading it. The policy provided that hurricane coverage did not include loss caused by flooding. Further, loss resulting from water was not covered even if other perils contributed directly or indirectly to cause the loss.
Hurricane Katrina caused extensive damage to the insureds' home on August 29, 2005. Nationwide denied coverage for damage to the home caused by water. The insureds alleged that in subsequent conversations, Schmidt admitted he never indicated that an exclusion existed in the policy for water damage. Moreover, the insureds subsequently learned that a portion of their property was in a flood zone. The insureds sued Nationwide, Felsher and Schmidt on a variety of claims for negligence, negligent misrepresentation and tortious breach of contract. The trial court granted defendants' motion for summary judgment on all claims. The insureds' reliance on Schmidt's representations that contradicted the policy was per se unreasonable.
The Mississippi Supreme Court affirmed in part and reversed in part. Having possession of the policy for four months before Katrina hit was enough time to have read the policy. Therefore, the insureds were imputed with knowledge of the policy's contents. Nonetheless, if an insurance agent offered advice, he had a duty to exercise reasonable care. Accordingly, there was a question of fact whether Schmidt breached his duty of care by allegedly stating the property was not in a flood zone and counseling against flood insurance. Further, there was a question of fact whether any such breach proximately caused any damages such as uninsured claims resulting from a lack of flood coverage. Consequently, summary judgment was improperly granted to defendants on the negligence issue.
The trial court properly granted summary judgment on the negligent misrepresentation claim, however. The insureds could not have reasonably relied on the alleged assurances of coverage by Schmidt that directly contradicted the plain language of the policy they had in their possession.
