A federal court in Mississippi found that an insurance agent’s statement that water damage found in the insured’s home would be “covered” does not create coverage. Martin v. Shelter Mutual Insurance Company, 2016 WL 3648288 (S.D. Miss. July 1, 2016).

An insured made a claim with her insurer when a contractor she hired to renovate her kitchen discovered extensive water damage to the floor. The insured called her insurance agent who allegedly stated that the damage was covered. The next day the insurer’s adjuster observed long-term water damage and determined that the leaks were present and continuously leaking and that damage was caused by rot, mold, deterioration and the lack of a moisture barrier, all of which is excluded under the homeowners’ policy. The adjuster immediately told the insured that the claim would not be covered and sent a denial letter five days later.

The insured sued the insurer and the agent. The claims against the agent were voluntarily dismissed and the insurer moved for summary judgment on the insured’s claims of estoppel and vicarious liability. The insured argued that the insurer waived its policy defenses because of its agent’s statement that the claim was covered so that the insurer was estopped from asserting otherwise. The court held that cases cited by the insured regarding waiver of defenses were inapplicable because none involved an effort to invoke waiver to bypass an exclusion. Further, the court found that no reliance was pled by the insured and distinguished a case relied on by the insured that was limited to “statements or representations made by the insurer’s agents before or contemporaneous with entering into the insurance contract may, if relied upon by the insured, become binding.”

The vicarious liability claim was based on the agent’s alleged representation that the claim was covered, for which the insurer was allegedly responsible. The court found that the alleged representation was not a misrepresentation or omission of fact, but opinion. The court again found no detrimental reliance shown by the insured and that reasonable reliance could not be shown where the agent’s statement was contradicted by the adjuster’s subsequent statement that damage was not covered.