ANN TAYLOR, INC. VS. HERITAGE INSURANCE SERVICES, INC. , ET AL.
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RENDERED: JULY 11, 2008; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2007-CA-000317-MR
ANN TAYLOR, INC.
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE DENISE CLAYTON, JUDGE
ACTION NO. 05-CI-003723
HERITAGE INSURANCE SERVICES, INC.;
INSURAMAX, INC.; AND FIREMAN’S FUND
INSURANCE COMPANY
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: KELLER, MOORE AND THOMPSON, JUDGES.
MOORE, JUDGE: Ann Taylor, Incorporated, seeks review of Jefferson Circuit
Court’s grant of summary judgment to Heritage Insurance Services, Incorporated,
Insuramax, Incorporated, and Fireman’s Fund Insurance Company. Upon de novo
review, we find no error and affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Ann Taylor and Interstate Motor Carrier, Incorporated (IMC)1 entered
into a Transportation Agreement dated February 18, 2000, which agreed that IMC
would ship cargo from Ann Taylor’s Louisville distribution center to other
warehouse facilities. Regarding motor cargo coverage, the agreement provided that
(a) CARRIER [IMC] shall at all times during the term of
this agreement have and maintain in full force and effect .
. . Cargo . . . Insurance with reliable insurance companies
acceptable to ANN TAYLOR, INC., and in the following
amounts, which amounts may be modified by ANN
TAYLOR, INC. subsequently on thirty days written
notice: . . . $1,000,000 Cargo per shipment; . . .[2]
IMC obtained the coverage required by the agreement from Fireman’s
Fund. Heritage was the “agent of record” for the policy issued by Fireman’s Fund
to IMC, and Insuramax functioned as the broker.
On March 15, 2003, IMC was transporting a shipment of cargo for Ann
Taylor via a tractor and trailer truck, which was driven by Richard Luce. Luce
stopped for a break at an IMC authorized truck stop in Pennsylvania. While Luce
was inside the truck stop, the truck containing the Ann Taylor cargo was stolen.3
Ann Taylor made a claim for the stolen cargo to IMC, which
subsequently submitted the claim to its insurer, Fireman’s Fund. Fireman’s Fund
1
IMC is not a party to the present appeal.
2
Later, Ann Taylor agreed to lower the limits of coverage for cargo liability to $750,000 per
shipment.
3
Ann Taylor submitted a claim to its own insurer, American Home Assurance Company, which
paid Ann Taylor $1,651,668.37 for the stolen cargo and became subrogated to Ann Taylor’s
rights.
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issued a declination of coverage letter based on an exclusion in the policy for
unattended vehicles. According to this exclusion, theft occurring while a cargo
truck is unattended is not covered.
Ann Taylor contends that it requested a certificate of insurance (COI)
to confirm the insurance coverage required in the transportation agreement with
IMC. Heritage and Insuramax responded to this request by preparing a COI,
naming Ann Taylor as a “certificate holder” and that the coverage applied only to
Ann Taylor. The COI did not disclose the attended vehicle exclusion. According to
Ann Taylor, it relied on the COI regarding coverage, yet coverage was denied for an
exclusion not listed on the COI. Ann Taylor subsequently brought a cause of action
against Fireman’s Fund, Heritage and Insuramax4 for negligent misrepresentation on
a theory that they failed to disclose the attended vehicle exclusion.5
Fireman’s Fund, Heritage and Insuramax moved for summary
judgment, arguing that Ann Taylor should not have reasonably relied upon the COI.
Based upon the language of the COI, the circuit court granted the summary
judgments;6 we agree.
ANALYSIS
It is undisputed, however, that Ann Taylor was not the insured. Nor is it disputed that Ann
Taylor was never a party to the contract between IMC and Fireman’s Fund.
4
Other individuals and entities were also named in Ann Taylor’s complaint but were voluntarily
dismissed.
5
The circuit court ruled that Kentucky law applies to this case. This ruling was not appealed by
the parties; thus, it is waived.
6
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Although informally cited to by prior Kentucky courts, the tort of
negligent misrepresentation was first formally adopted in Kentucky in Presnell
Const. Managers, Inc. v. E.H. Const., LLC, 134 S.W.3d 575 (Ky. 2004). The Court
in Presnell followed a majority of jurisdictions that adopted RESTATEMENT (SECOND)
OF TORTS § 552 (1977), as follows:
(1) One who, in the course of his business, profession or
employment, or in any other transaction in which he has a
pecuniary interest, supplies false information for the
guidance of others in their business transactions, is subject
to liability for pecuniary loss caused to them by their
justifiable reliance upon the information, if he fails to
exercise reasonable care or competence in obtaining or
communicating the information.
(2) Except as stated in Subsection (3), the liability stated in
Subsection (1) is limited to loss suffered
(a) by the person or one of a limited group of persons for
whose benefit and guidance he intends to supply the
information or knows that the recipient intends to supply
it; and
(b) through reliance upon it in a transaction that he intends
the information to influence or knows that the recipient so
intends or in a substantially similar transaction.
(3) The liability of one who is under a public duty to give
the information extends to loss suffered by any of the class
of persons for whose benefit the duty is created, in any of
the transactions in which it is intended to protect them.
Id. at 580 (footnote omitted).
We note that Ann Taylor first addresses in its brief the privity of
contract issue in this matter. However, the more elementary element of negligent
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misrepresentation is “justifiable reliance upon the information.”7 See Foremost Ins.
Co. v. Parham, 693 So.2d 409, 421 (Ala. 1997).
As mentioned earlier, Ann Taylor requested a COI for its review to
verify that IMC carried acceptable insurance as required by their transportation
agreement. In response to this request, Heritage provided two sample COIs to
Insuramax, one specifically for Ann Taylor as a certificate holder and one with the
certificate holder information left blank. Insuramax retyped the information from
Heritage’s sample COIs, onto a slightly different ACORD form and provided it to
Ann Taylor.
The sample COI that listed Ann Taylor as a certificate holder and
which was given to Ann Taylor for its review did not specifically include the
attended vehicle exclusion. However, the COI in bold and capitalized print at the
top stated that
THIS CERTIFICATE IS ISSUED AS A MATTER OF
INFORMATION ONLY AND CONFERS NO
RIGHTS UPON THE CERTIFICATE HOLDER.
THIS CERTIFICATE DOES NOT AMEND,
EXTEND, OR ALTER THE COVERAGE
AFFORDED BY THE POLICIES BELOW.
The COI also prominently stated that
THIS IS TO CERTIFY THAT THE POLICIES OF
INSURANCE LISTED BELOW HAVE BEEN ISSUED
We note that parties to this action have cited to unpublished cases failing to meet the
requirements of Kentucky Civil Rule 76.28(4)(c). This is particularly true where the parties have
cited to unpublished cases from other jurisdictions. Kentucky Civil Rule 76.28(4)(c) only allows
citation to unpublished Kentucky appellate opinions rendered after January 1, 2003. Accordingly,
those cases cited in the parties’ briefs failing to meet this criteria were not considered in deciding
this matter.
7
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TO THE INSURED NAMED ABOVE [INTERSTATE
MOTOR CARRIERS, INC.] FOR THE POLICY
PERIOD INDICATED, NOTWITHSTANDING ANY
REQUIREMENT, TERM OR CONDITION OF ANY
CONTRACT OR OTHER DOCUMENT WITH
RESPECT TO WHICH THIS CERTIFICATE MAY BE
ISSUED OR MAY PERTAIN, THE INSURANCE
AFFORDED BY THE POLICIES DESCRIBED HEREIN
IS SUBJECT TO ALL TERMS, EXCLUSIONS AND
CONDITIONS OF SUCH POLICIES. LIMITS SHOWN
MAY HAVE BEEN REDUCED BY PAID CLAIMS.
The sample COI did include policy numbers, dates, and a reference to
coverage of $750,000 per vehicle. It did not list any exclusions or other
information.
The declaration page issued in conjunction with the policy Fireman’s
Fund issued to IMC included that when hauling for Ann Taylor, “[t]he ‘Attended
Vehicle’ wording per Motor Truck Cargo Form—Supplemental Provisions
Endorsement CM 70 55 09 90 applies to this customer only.” Thus, for coverage to
apply, the vehicle must be attended.
We recognize that according to Ann Taylor, the purpose for requesting
the COI was to “verify that IMC carried acceptable insurance as required by the
Transportation Agreement.”8 Therefore, a review of what the agreement required
regarding insurance and exclusions is necessary. The agreement included that:
8. INSURANCE
(a) CARRIER [IMC] shall at all times during the
term of this agreement have and maintain in full force and
effect . . . Cargo . . . Insurance with reliable insurance
8
Ann Taylor brief at p. 4.
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companies acceptable to ANN TAYLOR, INC., and in the
following amounts, which amounts may be modified by
ANN TAYLOR, INC. subsequently on thirty days written
notice: . . . $1,000,000 Cargo per shipment; . . .[9]
(b) CARRIER’S cargo insurance policies shall not
exclude coverage for infidelity, fraud, dishonesty or
criminal acts of CARRIER’S employee’s agents, officers
or directors. In the event said policy contains such
exclusions, CARRIER shall obtain and furnish a surety
bond providing such coverage to the satisfaction of ANN
TAYLOR, INC.
***
(g) Prior to commencement of any services to be
performed hereunder, CARRIER shall deliver to ANN
TAYLOR, INC. copies of such insurance policies for
ANN TAYLOR, INC.’s approval.
Nothing in the agreement between Ann Taylor and IMC required that
the insurance policy could not contain an attended vehicle exclusion. Moreover, the
agreement provided that IMC would provide copies of the policies for Ann Taylor’s
approval, not certificates of insurance.
We agree with the circuit court that the COI clearly set forth that it was
not a complete recitation of the exclusions and applicable provisions of the
insurance policy between Fireman’s Fund and IMC. Further, the COI prominently
set forth that it conferred no rights and should not be relied upon. “Where an entity
requires another to procure insurance naming it an additional insured, that party
should not rely on a mere certificate of insurance, but should insist on a copy of the
policy. A certificate of insurance is not part of the policy – if it states that there is
coverage but the policy does not, the policy controls.” RUSS & THOMAS F. SEGALLA,
Later, Ann Taylor agreed to lower the limits of coverage for cargo liability to $750,000 per
shipment.
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COUCH ON INSURANCE § 242:33 (3d ed. 2008). We find no meaningful difference
when this precept is applied to a certificate holder as compared to an additional
insured.
Although Kentucky courts have yet to speak on this issue, other courts
have. In Tribeca Broadway Associates, LLC v. Mount Vernon Fire Ins. Co., 5
A.D.3d 198, 774 N.Y.S.2d 11, 13 (2004), New York’s Supreme Court, Appellate
Division, ruled that a certificate of insurance does not confer coverage and is only
evidence of a carrier’s intent to provide coverage. And as succinctly stated in Via
Net v. TIG Ins. Co., 211 S.W.3d 310, 314 (Tex. 2006),
[Plaintiff] argues that it acted diligently in obtaining a
certificate of insurance listing it as an additional insured.
But the certificate warned that it conferred no rights and
was limited by the underlying policy. [Plaintiff] argues,
with some force, that there is little use for certificates of
insurance if contracting parties must verify them by
reviewing the full policy. But the purpose of such
certificates is more general, “acknowledging that an
insurance policy has been written, and setting forth in
general terms what the policy covers.” BLACK’S LAW
th
DICTIONARY 240 (8 ed. 2004). Given the numerous
limitations and exclusions that often encumber such
policies, those who take such certificates at face value do
so at their own risk.
Because of the purpose and nature of a COI, the Court in TIG Ins. Co.
v. Sedgwick James of Washington, 184 F.Supp.2d 591, 598 (S.D. Tex. 2001), aff’d,
276 F.3d 754, (5th Cir. 2002), held that the plaintiff could not prevail as a matter of
law for a negligent misrepresentation claim having relied on a COI, rather than the
terms of the policy. Pursuant to TIG,
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the holder of a certificate of insurance, was warned it was
not entitled to rely on the certificate itself for coverage.
The certificate stated to the holder that the certificate did
not create coverage. The certificate of insurance issued by
[Defendant] prominently stated that it was “issued as a
matter of information only” and did not “amend, extend or
alter” coverage provided by the listed policies. Had
Plaintiffs taken the reasonable step of obtaining a copy of
[the] Policy . . ., Plaintiffs would have learned there was
no additional insured coverage in the policy at all.
Thus, the Court finds that Plaintiffs' reliance upon
[defendant’s] representation of [Plaintiff’s] additional
insured status was not reasonable. Accordingly, as a
matter of law, Plaintiffs' claims for negligent and
fraudulent misrepresentation fail.
Id. at 604 (internal citations and footnotes omitted); see also, Donegal Mut. Ins. Co.
v. Grossman, 195 F.Supp.2d 657, 671 (M.D. Pa. 2001) (plaintiffs could not
reasonably rely on the certificate alone).
We agree with the reasoning in this line of cases. The disclaimer
language that is included in the COI at issue in the present case was included in the
cases cited supra. This fact, particularly when taken in light of the purpose of COI,
i.e., to give evidence of the existence of insurance, illustrates that it was not
reasonable for Ann Taylor to rely upon the COI as setting forth all terms and
exclusions of the insurance policies at issue. Moreover, the COI naming Ann
Taylor as a certificate holder met the requirements of insurance provided for in the
transportation agreement.
Ann Taylor has cited to published cases from other jurisdictions
supporting a different viewpoint. However, these cases are distinguishable, and we
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believe the cases we cited supra are the better view based on the specific facts of
this case.
Ann Taylor cites to St. Francis De Sales Federal Credit Union v. Sun
Ins. Co. of New York, 818 A.2d 995 (Me. 2002). In that case, a transportation
agreement included that the carrier would maintain insurance against the loss of
property and annually, at the carrier’s request, the insurer would issue to each
plaintiff a COI to verify that the insurer had issued a policy of insurance to the
carrier “for loss of property of its customers from any cause.” Id. at 999. The COIs
contained disclaimers similar to the ones in the case at bar. However, the COIs
described coverage in the underlying policy as “‘[c]overing liability assumed by [the
carrier] for loss of damage, from any cause whatsoever, to property of customers. . .
.’” (Emphasis added in St. Francis, 818 A.2d at 999). The certificates then listed a
number of exclusions but failed to mention any exclusions for theft. The actual
policy did include an exclusion for certain thefts.
A theft occurred in the St. Francis case but the insurer denied coverage
based on an exclusion in the policy that was not one of the exclusions listed in the
COIs. Based on the specific language of the COIs regarding that loss would be
covered from any cause whatsoever and that certain exclusions, but not all
exclusions, were listed in the COIs, plaintiffs brought suit. A jury found that the
COIs overstated the extent of coverage and returned a plaintiffs’ verdict. Regarding
a fraudulent misrepresentation claim, the appellate court determined that the terms
in the COI that the carrier had insurance to cover its customers for losses “‘from any
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cause whatsoever’ were not mere casual comments or off-hand remarks; rather the
representations contained formalized statements of fact concerning insurance
coverage, complete with seals and signatures that conveyed credibility.” Id. at 1004.
Because of the affirmative overstatement of coverage made in the COIs regarding
coverage that did not exist, the appellate court determined that these representations
were “made in reckless disregard of their truth or falsity.” Id.
Ann Taylor also cites to R.H. Grover, Inc. v. Flynn Ins. Co., 777 P.2d
338 (Mont. 1989). In R.H. Grover, a COI was prepared erroneously, listing plaintiff
as the certificate holder and listing professional liability insurance for errors and
omissions by the insured up to $400,000. Although policy numbers were stated on
the COI, the error on the COI was that the insured did not have professional liability
insurance and never had any such coverage or policy. Thus, the COI listed coverage
that did not exist.
Despite the errors in the COI, the Montana Supreme Court determined
that the insured had not requested from its insurer to procure professional liability
insurance and did not pay any premiums for this type of policy. The Court ruled
that “[i]t is impossible to find that [the insurer’s] erroneous certificate created a
‘contract’ under which they were bound to procure insurance.” Id. at 283-84. The
Court further held that “[i]ssuing the certificate cannot create a ‘duty’ to procure
insurance at a later date.” Id. at 284. The plaintiff argued, however, that the COI
was a promise that the insurance policy existed and that the insured should be
estopped from denying coverage. The Court disagreed, ruling that “[t]he certificate
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cannot be a contract or promise. [The insurer] has promised nothing by issuing the
certificate.” Id.
Despite these rulings, the Court in R.H. Grover, determined that the
record was replete with evidence that the insured was negligent and negligently
misrepresented the coverage based on evidence of: “inadequate supervision of an
employee new to the job, failure to follow other established internal office
procedures which would have caught the error immediately and failure to notify [the
plaintiff].” Id. at 285.
Another case relied upon by Ann Taylor is Marlin v. Wetzel County
Bd. of Educ., 569 S.E.2d 462 (W.Va. 2002). In that case the Wetzel County Board
of Education was to be added as an additional insured pursuant to a construction
contract. The COI listed the board as an additional insured; however, the policy did
not include it as such. In Marlin, the Court held
[w]e therefore hold that a certificate of insurance is
evidence of insurance coverage, and is not a separate and
distinct contract for insurance. However, because a
certificate of insurance is an insurance company’s written
representation that a policyholder has certain insurance
coverage in effect at the time the certificate is issued, the
insurance company may be estopped from later denying
the existence of that coverage when the policyholder or the
recipient of a certificate has reasonably relied to their
detriment upon a misrepresentation in the certificate.
Id. at 472-73.
Ann Taylor also cited to City of Northglenn v. Chevron, U.S.A., Inc.,
634 F. Supp. 217, 225 (D.Colo. 1986), and Fagan v. John Hancock Mutual Life Ins.
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Co., 200 F. Supp. 142, 143-44 (D.C. Kan. 1961). Both of the cases provide that if
there is a conflict between the terms included in the COI and the terms of the policy,
the COIs terms control. In the City of Northglenn case, the COI specifically
included a provision regarding the procedures for presenting a notice of claim that
differed from the procedures for notice in the policy. Because the COI and policy
contained conflicting terms, the Court determined that the two documents must be
construed together to determine the meaning and effect of
the policy. If there is a conflict between the provisions
contained in the master policy and the certificate, the
certificate controls. In such cases, it is especially
significant that the party claiming coverage did not receive
a copy of the master policy but instead was furnished only
the certificate.
City of Northglenn, 634 F. Supp. at 225.
And, regarding Fagan, 200 F. Supp. at 144, the Court cited to Konrad
v. Hartford Acc. & Indem. Co., 137 N.E.2d 855 (1956), for the proposition urged by
Ann Taylor, i.e., “that in the event the terms of a master policy and a certificate are
in conflict, the certificate will control.” However, the Fagan case did not turn on
this.
As examined, Ann Taylor has cited to several cases wherein, despite
disclaimers in COIs similar to the ones presently under review, courts have allowed
recovery because affirmative representations or overstatements of coverage in the
COI and the policy were in conflict. Thus, in each of the published cases cited by
Ann Taylor, the COIs affirmatively set forth provisions that differed from the
language in the respective policies. The case at hand does not deal with conflicting
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language or terms. Accordingly, the situation of conflicting language between a
COI and a policy is not presently before this Court, and we decline to rule on this
issue.
Rather, the COIs at issue gave evidence of the insurance coverage
required in the transportation agreement, as Ann Taylor requested. The COIs did
not include provisions conflicting with the terms of the insurance coverage provided
in the policy at issue. The coverage detailed in the COI listing Ann Taylor as a
certificate holder included the coverage required by the transportation agreement:
$750,000 per cargo. The fact that the COI did not include any exclusions listed in
the policy does not change this. The COI explicitly stated that it should not be
relied upon, and while we do not rule today regarding conflicting terms in COIs and
policies, we follow the line of cases that hold that a COI is only evidence of
insurance coverage and should not be relied upon by a claimant for the full terms of
the policy.
Accordingly, the judgment of the Jefferson Circuit Court is affirmed.
ALL CONCUR.
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BRIEF FOR APPELLANT:
Rebecca Grady Jennings
Louisville, Kentucky
BRIEF FOR APPELLEE HERITAGE
INSURANCE SERVICES, INC.:
Mary Elisabeth Naumann
Lexington, Kentucky
BRIEF FOR APPELLEE
INSURAMAX, INC.:
Christina L. Vessels
Lexington, Kentucky
BRIEF FOR APPELLEE
FIREMAN’S FUND INSURANCE
COMPANY:
Norman E. Harned
W. Greg Harvey
Bowling Green, Kentucky
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