Strategies, Challenges, and Answers

Nevada Recognizes Duty of Insurance Producers To Use Due Diligence to Place Insurance Or To Seasonably Notify The Client That The Insurance Can’t Be Obtained

Victor Havas’ bad luck with insurance did not start in 1979 as reported here.  He had been having insurance issues long before that.

Back in the late sixties, Mr. Havas owned a used car lot.  Some of his used cars came up missing.  He hired Richard Carter of Insurance Agency, Inc. to find him an “open lot insurance” that would cover his inventory against fire, theft and other losses.

Carter had some success and placed the policy which later cancelled.  He tried again and again the policy was later cancelled.  Carter was unable to place the policy before the loss of a Cadillac from the lot.

Havas sued Carter hoping to recover the value of the lost Cadillac.  Havas v. Carter, 515 P.2d 397, 89 Nev. 497 (Nev., 1973).  Havas didn’t sue for breach of an insurance policy.  He knew there was none.  He didn’t sue alleging that Carter had led him to believe that there was a policy.  Havas himself was an insurance agent.  Instead, Havas sued based upon a breach of duty of an insurance producer or agent.  As the court explained, “This is not an action on a contract of insurance. The appellant is in effect seeking damages for the respondents’ failure to obtain open lot insurance. The breach of duty alleged was the failure of the respondents to use due diligence to obtain such a policy.”

The lawsuit went forward.  Havas lost.  Havas appealed citing cases affirming the concept of insurance producer negligence.  Insurance agent malpractice if you will.  Bates v. Bowles White & Co., 50 Wash.2d 374, 353 P.2d 663 (1960); Derby v. Blankenship, 217 Ark. 272, 230 S.W.2d 481 (1950); Franklin v. Western Pac. Ins. Co., 243 Or. 448, 414 P.2d 343 (1966); Oney v. Barnes, 5 Ariz.App. 460, 428 P.2d 124 (1967); Burroughs v. Bunch, 210 S.W.2d 211 (Tex.Civ.App.1948).

The Nevada Supreme Court upheld the finding of the trial court.  The Court affirmed that the Carter acted reasonably in attempting to place the insurance and that he had given Havas reasonable notice when the insurance was cancelled.

Even though Mr. Havas did not prevail, he pioneered the cause of action for insurance producer liability in Nevada.  The Nevada Supreme Court reconfirmed an agent’s duty to procure insurance in the case of Keddie v. Beneficial Ins., Inc., 580 P.2d 955, 94 Nev. 418 (Nev., 1978).  Now, doctors, lawyers and accountants aren’t the only ones who can be sued for malpractice.  Mr. Havas extends his personal welcome to insurance agents and producers to the club of professionals.