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(Article from Insurance Law Alert, November 2019)

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Courts in numerous jurisdictions have ruled that insurance brokers may be liable to insureds for negligent procurement or failure to advise if the broker and insured share a “special relationship.”  See February 2018 Alert; October and March 2014 Alerts; December 2012 Alert.  This month, the Supreme Court of Appeals of West Virginia weighed in, ruling that West Virginia does not recognize a broker’s duty to advise clients or any “special relationship” exception that would trigger such a duty.  Mine Temp, LLC v. Wells Fargo Ins. Servs. of W. Va., 2019 WL 5692296 (W. Va. Nov. 4, 2019).

Mine Temp, a mining company, contracted with Wolf Run Mining to provide independent contractors to work at a coal mine operated by Wolf Run.  Pursuant to the contract, Mine Temp was required to indemnify Wolf Run for claims arising out of the mining operation and to obtain general liability insurance with a $1 million limit.  Mine Temp utilized Wells Fargo’s brokerage services to obtain such insurance and ultimately purchased a policy from Chubb Custom Insurance Company.  When a Mine Temp employee was fatally injured at a Wolf Run mine, his estate sued Mine Temp and Wolf Run.  Chubb refused to defend or indemnify Mine Temp on the basis of an Employer’s Liability Exclusion.  Thereafter, Mine Temp sued Wells Fargo, claiming that the broker breached its duty to act with reasonable care in obtaining the appropriate insurance.  A West Virginia Circuit court granted Wells Fargo’s summary judgment motion.      

The Supreme Court of Appeals of West Virginia affirmed, holding that West Virginia law does not recognize a negligent procurement claim against an insurance agent, even under special circumstances.  The court stated:  “this Court has never recognized an insurance agent’s ‘duty to advise’ . . . nor the ‘special relationship’ exception that would trigger such a duty.”  Further, the court noted that regardless of whether a duty to advise exists, the negligent procurement claim based on the lack of coverage for claims arising out of the mining contract was moot.  The court explained that because the independent contractor agreement had expired prior to the fatal accident, it was no longer an “insured contract” under the policy.