Supreme Court Rules for Insured After Mistake by Agent

March 26, 2012

Nashville, Tenn. – The Tennessee Supreme Court ruled today that an insurance company must provide vehicle liability insurance coverage to the insured as he requested from his insurance company’s agent but did not receive because of a mistake by the agent. 

The case, Allstate Insurance Company v. Diana Lynn Tarrant, began after Diana Tarrant was involved in an automobile accident while driving a van belonging to Blue Ribbon Cleaning, Inc., a business owned and operated by Diana Tarrant and her husband, John Tarrant. At the time of the accident, the van was insured by Allstate Insurance Company. John Tarrant had several vehicles insured with Allstate under two policies, a personal policy and a commercial policy, the latter carrying higher liability limits. A few months before the accident, he had contacted Allstate to renegotiate his premium rate and instructed Allstate’s agent to place the van under the commercial policy. However, Allstate’s agent mistakenly listed the van under the personal policy. After the accident occurred, Allstate sought to limit liability coverage to the lower liability limits of the personal policy. 

The Court, in an opinion authored by Justice Sharon G. Lee and joined by Justices Gary R. Wade and Janice M. Holder, ruled that John Tarrant did not approve the mistake of Allstate’s agent because the agent was acting in the place of and for the benefit of Allstate, not John Tarrant, when the van was placed on the personal policy. The Court concluded that Allstate could not deny coverage because an insurance company is generally deemed estopped to deny policy liability on a matter arising out of the mistake of its agent. Although John Tarrant failed to discover the agent’s mistake by reading policy information supplied to him and by paying the premiums, if either party has to suffer from an insurance agent’s mistake, it must be the insurance company. 

Justice William C. Koch, Jr., along with Chief Justice Cornelia Clark, disagreed with the majority’s decision. They relied on the trial court’s finding that there had been a good faith misunderstanding between John Tarrant and Allstate regarding the insurance coverage on John Tarrant’s minivan. They reasoned that John Tarrant should have reviewed his replacement policies as soon as he received them from Allstate to make sure that he had received the insurance coverage he requested. They agreed with the trial court that John Tarrant had accepted his replacement insurance coverage because he paid the premiums to the insurance company without complaining to Allstate about the mistake. 

To read the Allstate Insurance Company v. Diana Lynn Tarrant opinion, visit http://www.tncourts.gov/sites/default/files/allstatetarrant.opn_.pdf.

To read the dissenting opinon by Chief Justice Clark and Justice Koch, visit http://www.tncourts.gov/sites/default/files/allstatetarrant.dis_.pdf