The Mississippi Supreme Court has held that an agent is not liable for failure to procure insurance where the insured’s intentional misconduct would have precluded coverage. Scruggs Farm & Supplies, LLC v. Bost, 2014 WL 5375946 (Miss. Oct. 23, 2014).
Farmers doing business with a seed supplier were required to enter licensing agreements limiting the use of genetically modified seeds to the growing season, which prevented farmers from reselling or supplying the seed to others. The restrictions also prohibited saving seeds to replant the following year. The insured, a farmer, was sued by the seed supplier for patent infringement when it violated the agreement by saving and replanting seeds the following year. A jury found that the insured had knowingly, intentionally and willfully planted the seeds in violation of patent rights and rendered a verdict against the insured. The insured then sued his insurer and his agent, alleging negligence for failure to advise that he needed patent infringement insurance. The trial court granted partial summary judgment in the insured’s favor holding that there was coverage and that while the insured may have intended to replant seeds, he did not intend to infringe the patent as he reasonably believed he could lawfully replant. On appeal, the Mississippi Supreme Court reversed, finding that, as a matter of public policy, one cannot purchase insurance for illegal acts.
The insured then pursued his claim against his agent. The insured alleged that the agent failed to use a degree of care of a reasonably prudent insurance salesman; had negligently misrepresented to the insured that the policy would provide coverage except as to quality of seed sold to third parties; and breached its contract with the insured. The agent had toured the farmer’s facilities and interviewed the employees and the insured at length. The insured alleged that he requested coverage to protect in the event that he was sued over almost anything, but did not expressly mention patent infringement or ask about such coverage. The agent moved for summary judgment, arguing that no policy would have covered the insured’s conduct. The trial court granted summary judgment, finding that, whether the insured’s actions were lawful or not, they were intentional and Mississippi law prohibits insurance for the conduct that resulted in the claims.
The Mississippi Supreme Court found that it is against public policy for an insurance contract to cover for intentional or willful misconduct. It found that evidence of intentional action was ample in the record, including the insured’s deposition testimony admitting that the replanting of the seeds was not an accident but a conscious decision and that he was aware of the license restrictions. Additionally, the trial court found intentional conduct, and the Supreme Court had previously held (in the litigation against the insurer) that the insured’s pattern of conduct was intentional. The Supreme Court upheld the grant of summary judgment finding that no coverage could have been available because the insured’s actions were intentional, illegal and, thus, uninsurable.