The U.S. Fifth Circuit Court of Appeals affirmed summary judgment in favor of a property insurer and an agent on claims the insurer and agent negligently failed to secure a sufficient amount of insurance. Emerald Coast Finest Produce Co. v. Alterra Am. Ins. Co., 864 F.3d 394 (5th Cir. 2017).
A warehouse lease required the lessee to provide and maintain fire and extended coverage property insurance for the leased premises equal to “100% of the replacement value of the building.” The lessee represented to its insurance agent certain replacement values, and insurance was placed accordingly. A fire substantially damaged the building, and the property insurer’s adjuster determined that the replacement value of the building far exceeded the limits obtained. The lessor sued the agent for negligently failing to determine the actual replacement-cost value before placing coverage and for failing to procure the required replacement-cost coverage. The lessor also asserted a negligence claim against the insurer for failing to determine the actual replacement cost of the warehouse and for respondeat superior liability for the agent’s negligence. The district court granted summary judgment to all defendants.
On appeal, the Fifth Circuit acknowledged Mississippi law recognizing claims for negligent procurement of insurance but noted that the Mississippi cases discussing an agent’s negligence in procuring insurance have done so only for a duty owed to the insured. The lessor argued it was a third-party beneficiary to the insurance contract, and was therefore owed a more general duty. The Fifth Circuit held that because, at best, the policy is the source of any promise to the lessor as a third-party beneficiary, nothing in the policy such as the amount of coverage could be a breach of an already existing obligation. It ultimately found no authority under Mississippi law supporting the lessor’s claims against the agent and insurer, and affirmed the trial court’s grant of summary judgment.