Teamsters v. Carroon Corp.
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International Brotherhood of Teamsters v. Willis Corroon Corporation of Maryland No. 113, Sept. Term, 2001 Insured who relied on broker to procure policy providing certain coverage has duty to act reasonab ly whe n rec eivin g the policy may in some circ umstance s but need not necess arily requ ire th at ins ured read the p olicy. Circuit Co urt for M ontgom ery County Case No. 212859 IN THE COURT OF APPEALS OF MARYLAND No. 113 September Term, 2001 ______________________________________ INTERNATIONAL BROTHERHOOD OF TEAMSTERS v. WILLIS CORROON CORPORATION OF MARYLAND ______________________________________ Bell, C.J. Eldridge Raker Wilner Cathell Harrell Battaglia, JJ. ______________________________________ Opinion by Wilner, J. ______________________________________ Filed: July 18, 2002 Title 29 U.S.C. § 502(a), which is part of the Federal Labor Management Reporting and Disclo sure A ct (LM RDA ), requires that offic ials of labor o rganization s who h andle funds or other property of the organization be bonded, in order to provide protection against loss by reason of fraud or d ishonesty on the part of those officials, either directly or through connivance with others. The statute requires that the bond of each such person be in an amount not less than 10% o f the funds handled by that person during the preceding fiscal year, up to $500,0 00. See also 29 C.F.R. part 453 (supplementing that requ irement). Petitioner, International Brotherhood of Teamsters (IBT), is a labor organization subject to the requirements of § 502. Amo ng the officers required to be bonded in 1 996 were IBT s President, R on Carey, an d its Directo r of Go vernm ent Af fairs, W illiam H amilton . IBT employed respondent, Willis Corroon Corporation of Maryland (Willis), an insurance broker, to obtain the fidelity bond insurance mandated by § 502. The policy procured by Willis from National Union Fire Insurance Company (National Union) for the period from April, 1996 April, 1997 limited the insure r s liability to $500,000 per loss, rather than $500,000 per person covered. Dur ing that policy year, C arey and Ha milton, acting in concert, misappropriated over $906,000 of union funds as part of an unlawful scheme to help finance Carey s bid for reelection. Their conduct necessitated a new election, which cost the union an additional $2 million. IBT made a claim on its policy to recover $1 million of that loss, $500,000 for each of the two bonded officials, and, when National Union resisted the claim, IBT filed suit on the polic y. We are n ot privy to the rec ord in that case or to all of the various defenses that may have bee n raised b y Nationa l Union, b ut on e of t he defen ses, p resu mab ly, was that the policy limit was $500,000 per loss. Faced at least with that, IBT settled the suit for $425,000 and released National Union from further liability. The release expressly reserved to IBT any claim that it might have against any insurance broker involved in the procurement of th e policy. In an effort to obtain additional compensation for its loss, IBT sued Willis in the Circuit Court for Montgomery County for negligence and breach of fid uciary du ty. 1 It alleged that (1) Willis held itself out to IBT as possessing special expertise, knowledge, and skill in the field of insurance, (2) Willis knew or should have known that LMRDA required IBT to bond each of its officers who handled union funds, separately, in the amount of $500,000, (3) IBT chose Willis as its insurance broker an d relied on its expertise to procure a policy that would comply with LMRDA, (4) Willis procured from National Union a Form A policy that contained a policy limit of $500,000 per loss, rather than the Form B policy offered by National Union that provided separate coverage for each employee, acting alone 1 In Kann v. Kann, 344 Md. 689, 713, 690 A.2d 509, 520-21 (1997), we pointed out that, although the breach of a fiduciary duty may give rise to one or more causes of action, in tort or in contract, Maryland does not recognize a separate tort action for breach of fiduciary duty. Based on the underlying averments, IBT may have been able to plead an action for breach of contract, in addition to its claim for negligence, but it chose not to do so. We shall treat the complaint as one for negligence. -2- or in collusion with others, (5) during the policy year, Hamilton diverted a total of $735,000 in union funds to third parties in exchange for illegal contributions to Carey s reelection campaign and unlawfully transferred an additional $150,000 to the AFL-CIO, (6) it was subseque ntly discovered that IBT was defrauded of an additional $21,532 through improper billing of Carey s election campaign expenses to IBT, (7) rerun of the election cost IBT an additional $2 million, (8) a Form B policy, covering Carey and Ham ilton sepa ratel y, would have covered $1 million of the total loss, but (9) National Union paid only $425,000 of the loss under its Form A policy. Averring that Willis had, and breached, a duty to obtain a policy that c omp lied w ith L MR DA , IBT soug ht $5 75,0 00 in com pensatory damages, plus interest, recovery of commissions and fees paid to Willis, and attorneys fees incurred in the action against National Union. Willis answered the complaint and, relying principally on Twelve Knotts v. Fireman s Ins. Co., 87 Md. App. 88, 589 A.2d 105 (1991), moved for summary judgment on the ground that, by not reading the policy procured by Willis and thereby discovering, at the outset, the limitation of liability contained therein, IBT was contributorily negligent as a matter of law. The Circuit Court credited that d efense, an d, as contribu tory negligenc e is an abso lute defense in Maryland to an action f or negligence, the court granted the motion and entered judgment for W illis. IBT appealed, and we granted certiorari, on our own initiative and prior to any procee dings in the C ourt of Sp ecial App eals, to review that judgm ent. We sh all reverse. -3- THE FACTS Because the case was decided on summary judgment, we must view the evidence presented to the court, and all reasonable inferences fairly deducible from that eviden ce, in a light most fa vorable to IBT . Lovelace v. Anderson, 366 Md. 690, 695, 785 A.2d 726, 728 (2001). The question, then, is whether, viewing the evidence in that light, there was any basis upon which a trier of fact could lawfully find for IBT. Certain facts, at this stage, are essentially undisputed, among them being (1) the statutory requirement, embodied in § 502(a), that IB T have in place, for each officer handling union funds or p roperty, a bond in an amount not less than 10% of the funds handled by that officer in the preceding year, (2) that, for Carey and Hamilton, the required amount was $500,000 each, (3) that the per person coverage required by the statute was not afforded by the Form A policy procured by Willis, and (4) that a Form B policy would have afforded that per person coverage. In resp onse to disc overy reques ts, Willis adm itted that it possessed and held itself out as possessing knowle dge or ex pertise relating to fidelity bond coverage for labor organizations and the procurin g of fidelity bond coverage. It admitted as well that it had knowledge of LMRDA bonding requirements for officers and employees of labor organizations, but denied that it had never asked any insurer to offer a Form B policy and that t he in sure rs it conta cted wer e willing to of fer s uch a policy. Willis began serving as IBT s insurance broker in 1985 and, from that year until 1997, -4- it procured for IBT a Form A fidelity bond providing per loss coverage. From 1985 through 1988, the policy was issued by Delta Insurance Company; from 1988 through 1995, it was issued by Relian ce Insu rance C ompa ny. In 1995, IBT expressed some dissatisfaction with Reliance and requ ested Willis to find another insu rer. Either in connection with that request or at some earlier point, IBT sent to Willis a copy of the LMRDA bonding requireme nt. On Ap ril 3, 1995, W illis sent to IBT a written proposal that contained a brief statement of policy coverage, quotations from Reliance, National Union, and Lloyd s of London, an outlin e of c overage under a p ropo sed N ation al Union policy, a specimen of National Union Form A policy, and a copy of the A.M. Best rating for National Union. The statement of policy coverage noted that the coverage was Emplo yee Dishon esty Coverage - Form A , that the limit was $500,000 (without explanation as to whether that limit was per loss or p er emplo yee ), and that the form was Standard Industry Form, modified by endorsements as applicable by company Simplified Form. The outline of coverage, entitled Propose d Fidelity Bon d Cove rage, stated th at the policy w ould provide coverage for loss of money, securities, or other property resulting directly from one or more fraudulent or dishonest acts comm itted by an Em ployee acting a lone or in co llusion with others. Nothing was said in this statement about the limit of liability other th an that the lim it would not be cum ulative from year to year or period to period. The specimen policy, which conformed to the policy actually issued, contained a Table of Limits of Liability that stated a limit of $500,000 under Insuring Agreement I Employee Dishonesty Coverage - Form -5- A. That Insuring Agreement provided coverage for loss of money, securities, and other property to an amount not exceeding in the aggregate the amount stated in the Table of Limits of Liability applicable to this Insuring Agreement I, resulting directly from one or more fraudulent or dishonest acts committed by an Employee, acting alone or in collusion with others. The specimen policy also stated that [p]ayment of loss under Insuring Agreement I . . . shall not reduce the Comp any s liability for other lo sses unde r the applicab le Insuring Agreement whenever sustained and that the company s total liability [] under Insuring Agreement I for all loss caus ed b y any Employee or in whic h such E mployee is concerned or implicated . . . is limited to the applicable amount of insurance specified in the Table o f Limit s of Lia bility or end orsem ent am endato ry thereto. In furtherance of this proposal, a senior vice-president of Willis met with IBT officials to discuss the matter. With out ever qu estioning the policy limit, IBT accepted the National Union offer. In early April, 1996, when the policy wa s up for ren ewal, Willis and IBT had another meeting, and the decision was made to renew. On or about April 5, 1996, Willis sent a binder to IBT. In an accompanying Fidelity Bond Fact Shee t, it stated the limit o f liability as $500,000 per loss and characterized the coverage as direct loss of money, securities, or other property due to the dishonest or fraudulent act of one or more Employees acting alone or in collusion with others. A cove ring letter infor med IBT that, other than a different policy numbe r, the re w ere n o changes fr om the ex isting policy. -6- Willis s motion fo r summa ry judgment w as based, in part, on the assertion that it had done nothing to misrepresen t or conceal any relevant facts fro m IBT, th at the policy and submissions made clear that the policy limit was on a per loss basis, and that, under the doctrine applied in Twelve K notts, IBT had a duty to read the policy and was negligent in not doing so. Had it read the policy, Willis claimed, IBT would have known that the limit was on a per loss basis. At on e point, it suggested that the statute did no t actually require a per person limit, and one of its officials, Stephen Leggett, testified in deposition th at, until shortly before the deposition, he believed that the policy w as in comp liance with the statute and that, because of that mistaken belief, he did not advise IBT that the poli cy was not in compliance. IBT argued, and produced affidavit evidence to establish, that it had chosen Willis as its broker because of Willis s asserted expertise, that it had informed Willis of the LMRDA requirements, and that it had relied on Willis to assure that the policy conformed to those requirements. An expert witness for IBT, in deposition testimony, faulted Willis for not mak ing c lear t o IBT tha t the p ropo sed N ation al Union policy did not comply with LMRDA. He opined that the information regarding the limit of liability was ambiguous and that providing the actual policy language would not suffice because insureds [do] not necessarily understand all those things, and I thin k it s an obligation for the agent to point those th ings ou t. At a hearing on the motion, the court found the case indistinguishable from Twelve Knotts and, on that basis, granted the motion and directed the entry of judgment for Willis. -7- DISCUSSION Existing Maryland Case Law The appellate courts in Maryland have addressed the issue raised here in four cases, each involving a diffe rent fac tual circu mstanc e that dic tated the outcom e. In Twelve K notts the first of the cases the Court of Special Appeals had before it a complaint by a real estate holding company against two insurance companies and a broker (Co mmercial Lines). When its current fire, general liability, and workers compensation insurance policies were about to expire, Twelve Knotts issued a general request for proposals to replace that insurance. The request specified that policies be quoted on a three-year basis with premiums payable in annual installments but did not require that the premium be fixed or capped for the three-year period. Commercial Lines submitted a written proposal for the various lines of insurance. The proposal for fire insurance showed an annual premium payable in m onthly installments. Although the written proposal submitted by Commercial Lines said nothing about a three-year guarantee of the premium, its president informed Twelve Knotts executive director that the quoted premium was good for three years. The company opted for the Commercial Lines proposal, in part because it was 35% less expensive than the competing proposals and in part because, even though not included in the company s request for proposals, the rate was to be guaranteed for three years. The binder for the property insurance forwarded by C ommercial Lines showed the premium as quoted but said nothing about its being guaranteed. In ordering the permanent -8- policy a month later, Commercial Lines noted that there was to be a three-year guarantee and that the premium was to be paid in monthly installments. The policy that was issued was not consistent with that request, however, but provided, instead, that, unless the full three-year premium was paid in advance, the premiums for the second and third years wo uld be in accordance with the insurer s then applicable schedule. In forwarding the policy to the company two months after receiving it from the insurer, the broker said nothing about the requirement for advance payment a condition that, by then, could not have been met in any event. At the end of the first year, the insurer insisted on a much higher premium for renewal, which u ltimately led to a multi-count action alleging fraud, negligent misrepresentation, and breac h of contra ct. The Circ uit Court en tered judgm ent for the defendants, and the Court of Special Appeals affirmed. With respect to the fraud and misre presentation claims, the C ourt of Sp ecial App eals concluded that there was no evidence to support them none of the defendants had misrepresented or attempted to conceal what was contained in the policy. The relevance of the case lies in the court s discussion of the breach of contrac t and neglig ence claim s both of which were founded on the assertion that the policy did not conform to the proposal that was made by Commercial Lines and accepted by the company or to the terms of Commercial Lines request of the insurer. The insured was promised and expected a policy whose premiums were both guaranteed for three years and could be p aid in installme nts, and it got, instead, a policy whose premiums were guaranteed for three years only if paid in advance. -9- The court noted that the non-c onformance was apparent fro m the policy, however, and adopted what it regarded as the majority rule that, when an insured accepts a policy, he or she accepts all of its lawful terms, and, if the policy differs from the application, the insured has a duty to notify the insurer and either negotiate the matter or reject the policy. In the particular case, it observed that the insure d was a so phisticated b usiness entity w ith previous experience in purchasing insurance, that the offending provision was clear and unambiguous, and that it had an opportunity when the policy was delivered to discover the discrepancy and reject the policy on the ground of non-conformance. There was no indication in Twelve K notts that the insured relied on any particular expertise of the broker to produce a policy with certain specific te rms. It engag ed in competitive bidding to replace various lines of general business insurance with which it was familiar and adopted the Commercial Lines proposal because it offered the best terms, bo th in terms of price and the three-year guarantee of the annual p remium. The one discrepa ncy, as noted, concerned the stability of the premium, and that discrepancy was readily apparent from the policy. It was not necessary for the insured, who had a professional employee charged with procurement of the insuran ce, to have to read the en tire policy or attem pt to fathom complex or technica l provisions in it to become aware that, unless the full three-year premium was paid in advance, the premiums could change at the end of the first and second years. If th e guaran tee w as tru ly mat erial , the insur ed co uld h ave r ejec ted th e policy. The court had before it a quite different situation in Johnson & Higgins v. Hale, 121 -10- Md. App. 426, 710 A.2d 318 (1998). The insured, Hale, was a trucking company that decided to expand its business to include marine transport. Having no experience in that line of business, Hale retained Johnson & Higgins, self-reputed to be one of the most knowle dgeable brokers in the country, and relied upon that broker to obtain proper coverage for the maritime operation. Each of the policies obtained by the broker contained an exclusion for cargo requiring refrigeration unless (1) the space and other conditions w ere surveyed by a competent surveyor prior to the voyage and found fit, and (2) accepted for transportation under a form of contract approve d in writing by the insurer. At some point, Hale chartered a ship to carry certain refrigerated cargo, and after recognizing the practical d ifficulty Hale w ould have in complying with the conditions in the exclusion with respect to a c hartered ve ssel, the brok er persuad ed the insur er to delete that exemption with respect to the chartered ship. It failed to have the clause deleted with respect to the more rou tine tug and barge me thod of tran sport, however. Later, Hale informed the broker that it was no longer using the chartered ship but had reverted to tug and barge and, without expressly requ esting that the exclusion be deleted, asked the broker to make the appropr iate c hanges to the policy. Hale assumed that the coverage would remain the same as it had been for the chartered ship, and was never told to the contrary, but the broker failed to have the exclusion deleted. When Hale suffered a loss because of spo ilage and the insurer, relying on the exclusion, declined to cover it because the two conditions for coverage of refrigerated cargo had not been met, Hale sued the broker for negligence and breach of -11- contract. Relying on Twelve K notts, the broker d efended on the gro und that, had Hale read the policy, it would have known that the exclusion was not deleted, and that, by not doing so, it was contributorily negligent as a matter of law . The lower court rejected that defense and allowed the case to go to a jury, which found for the insured. The Court of Spec ial Appeals affirm ed the judgment, finding that Hale placed a much greater degree of justifiable reliance upon [the broker] than that placed upon Commercial Lines by the limited partnership in Twelve Knotts. Johnson & Higgins, supra, 121 Md. App. at 441, 710 A.2d at 325. It concluded, therefore, that Hale was not negligent and that the breach of contract action was not barred, at least as a matter of law. Part of the evidence, which the appellate co urt found was prop erly admitted, w as an exp ert opinion th at, because of the comp lexity of a marin e insurance policy, Hale, de spite his general business experience, would have difficulty understanding the policy, and, in particular, the requirements of the refrigera tion exclusio n. In the app ellate court s v iew, the jury co uld properly have concluded that the broker had a duty to advise Hale of the terms of the policy and, due to the practical difficulty in complying with its conditions, even in a barge operatio n, to h ave t he ex clusion c lause del eted from the p olicy. In Ben Lew is Plumbing v . Liberty Mutual, 354 Md. 452, 731 A.2d 904 (1999), the dispute concerned a retrospective rating clause in a workers compensation policy. Under that clause, the insured made a deposit in advance toward the premium, but the actual premium was determined by end-of-year adjustments based on the insured s claims -12- experience during the year. The policy allowed up to three such adjustments, depending on whether there were open claims at the time of the first and second adjustments; if the premium was adju sted upw ard, the insure d paid the difference, if it was lowered, the insurer refunded the difference. The disagreement arose from the fact that the insurer was a mutual company that declared dividends to its shareholder-insureds based on its profit/loss experience during the year. The policies in effect for the two years prior to the one in question provided that dividends payable to the insured were not subject to recalculation based on losses determined after the first readjustment. That provision was changed in the 1986-87 policy, to allow recalculation of the divid end base d on a red etermination of the prem ium at any of the adjustments. After the end of that policy year, the insurer reduced the dividend as the result of losses determined in the second and third adjustments, and Lewis sued for negligent misrepresentation, based on an oral assertion by the insurer s employee that the new policy contained the same coverage as the previous policies. Relying on Twelve Knotts, the insurer defended on the ground that the change was noted in the policy, which Lewis had a duty to read. Though expressing neither agreement nor disagreement with the result reached by the Court o f Special A ppeals in Twelve K notts, we found telling the fact that the binder for the 1986- 87 year was accomp anied by a sep arate conf irmation letter th at set forth in clear terms the new dividend redetermination endors emen t, a letter that Lewis was asked to sign -13- and that Le wis did sign an d return to the ins urer. Although we, at least tacitly, adopted the common law rule that insurers have a duty to make the insured aware of any changes inserted in a renewal policy and that, absent notice of such a change, the insured is entitled to assume that the coverage, conditions, and limitations are the same, we noted that, through the confirmation letter, sufficient notice of the change was given.2 Accordingly, we held that there was legally insufficient evidence of justifiable reliance on the oral statement of the insurer s employee. The last case in w hich the issu e of the insu red s duty to rea d the policy w as raised is CIGNA v. Zeitler, 126 Md. App. 444, 730 A.2d 428 (1999), involving a marine insurance policy on a pleasure boat. Until 1994, because the boat was available for charter, it was covered under a fleet policy purchased by the charter company that stored the boat for the owner, Zeitler. That policy covered th e boat wh en cruising in the Caribbean. In the fall of 2 We omitted to note that, since 1981, a Maryland Insurance Administration regulation has required tha t, if an insurer, u pon rene wal or by en dorseme nt, initiates any change in any primary property or casualty policy, other than a change requested by the insured, that eliminates or reduces benefits, the insurer must give the insured written notice of the change. The regulation f urther prov ides, in effec t, that, if the require d notice is no t given and a claim occurs that is affected by the change, the change is not effective. The regulation, by its own terms, is declared inapplicable to commercial risks that use the services of a risk mana ger, broker , or insur ance a dviser. See COMAR 31.08.05, formerly COMAR 09.30.32. -14- 1994, however, the boat was deleted from the fleet coverage and insured separately, with the same company, CIGNA, as a pleasure craft. The new policy excluded coverage for the Caribbean after July 1 the beginning of the hurricane season. Zeitler took the boat to the Caribbean in the fall of 1994 and left it there, on the island of St. Maa rten. In September, 1995, a hurricane hit the island and destroyed the boat. When CIGNA denied coverage, Zeitler sued it and the broker who placed the insurance. Among other defenses, both CIGNA and the broker argued that the breach of contract and negligence claims w ere doomed b y Zeitler s failure to read the new p olicy, which w ould have alerted him to the exclusion. The trial court denied defense motions and allowed the case to go to the jury, which found for Zeitler. Affirming the judgment, the Court of Special Appea ls noted that there w as a genu ine dispute as to whether Zeitler had received the new policy prior to the loss, and, on that basis alone, the issue was properly one for the jury. It concluded, further, that the re was su fficient evid ence to establish that the new policy was, in effect, a renewal and that, as the new term was not pointed out by the broker, Zeitler could reasonably have assumed that the coverage was the same. Analysis and Conclusion It is generally accepted, and not really at issue in this case, that, when an insurance broker is employed to obtain a po licy that covers ce rtain risks and the broker f ails (1) to obtain a policy that covers those risks, and (2) to inform the employer that the policy does -15- not cover the risk s sou ght to be covered , an a ction may lie against the broker, eithe r in contract or in tort. See 3 L EE R. R USS & T HOMAS F. S EGALLA , C OUCH ON INSURANCE 3d § 46:59 (1997); 16A JOHN A LAN A PPLEMAN & S EAN A PPLEMAN, INSURANCE L AW AND P RACTICE § 8831 (1981 & 2002 Supp.); Robin C. Miller, A nnotatio n, Liability of Insurance Agent or Broker on Ground of Inadequacy of Liability-Insurance Coverage Procured, 60 A.L.R. 5th 165 (1998). The issue in the case concerns one of the defenses often asserted in such an action that the omission or provision that serves to limit or eliminate the expected coverage was explicit in the policy and had the employer read the policy, he or she w ould have known of the problem. That defense has been asserted to both breach of contract and negligence claims, sometimes succes sfully, som etimes n ot. In addition to the Maryland cases discussed above, see the cases cited in 60 A.L.R. 5th 165, supra, §§ 6 an d 7. With respect to contract claims, Applem an states that, w hen the insu red accep ts a policy, he accepts all of its stipulations, provided they are le gal and not con trary to pu blic poli cy, that, subject to certain exceptions and cave ats, th e insured has a duty to ex amin e [th e policy] promptly and notify the company immed iately of h is refus al to acc ept it, and that [i]f such policy is accepted or is retained an unreasonable length of time, the insured is presumed to have ratified any cha nges therein and to have agreed to all its terms. APPLEMAN, supra, § 7155.3 The alleged duty to read the 3 The first part of that statemen t that, if an insured accepts a p olicy, he or she a ccepts (contin ued...) -16- 3 (...continued) all of its lawful terms and conditions is probably correct. Whether mere retention of the policy without p rotest constitute s an accep tance is not so clear, how ever. As a general rule of contract law, silence and inaction upon receipt of an offer do not constitute an acceptance of the off er. One exception to that rule is where, because of previous dealings or otherwise, it is reasonable th at the of feree sh ould no tify the of feror if he doe s not inte nd to ac cept. R ESTATEMENT OF C ONTRACTS (S ECOND) § 69 (1981); 1 JOSEPH M. P ERILLO , C ORBIN ON C ONTRACTS § 3.21 (Rev. ed. 1993); cf. Porter v. General Boiler Casing Co., 284 Md. 402, 412, 396 A.2d 1090, 1095-96 (1979); GEICO v. Medical Services, 322 Md. 645, 655, 589 A.2d 464, 468-69 (1991) (silence and inaction can operate as an acceptance of an offer in a few limited circumstances). Corbin observes, in that regard, that it is the custom of insurance agents to send an insured a ren ewal policy with a bill for the prem ium shortly before expiration of the current policy and that the course of dealing between the agent and insured may be such as to justify that procedure and cause the insured s silence and failure to return the policy to o perate a s an acc eptanc e of the renew al offe r. C ORBIN , supra, § 3.21. He points out that a different result is reached, however, if there was no such previous course of dealing or if the new policy that is sent is different from the existing one as to the extent of coverage, the amount of premium, or in other material respects. Id. Compare Golden Eagle Ins. Co. v. Foremost Ins. Co., 20 Cal. A pp. 4th 1372 (Cal. Ap p. 1993) with Preferred (contin ued...) -17- policy also lies at the heart of the contributory negligence defense asserted to a claim of negligence on the part o f the broke r. If that duty is brea ched and the breach constitutes at least a contributing cause of the loss complained of the lack of coverage there can be no reco very. In either case, the focus is on whether, and under what circumstances, the insured has a duty to read the policy and discover for himself or herself whether it contains the provisions he or she applied for or was led to believe the policy contained. Some courts and commentators have, indeed, ind icated that suc h a duty exists and, as we have seen, have, on occasion, found no cause of action against a broker or insurer when the insured has failed to satisfy that duty. That has never been a universal rule, howeve r. Couch opines that an insure d s failure to read the policy has traditionally been held not to be a defense to an action against the agent for failure to procure insurance, on the reasoning that the principal is entitled to assume that the agent performed his or her duty but notes that some courts have allow ed the d efense , especia lly if the ins ured w as kno wledg eable. C OUCH, supra, § 46:69 (1995) (em phasis added). A fair reading of the cases a nd the more recen t commentary as to negligence actions suggests that the duty is no t necessarily to read the p olicy but simply to act reasonably under 3 (...continued) Risk Ins. Co. v. Central Surety & Ins. Corp., 191 F. Supp. 797 (W.D. Ark. 1961). We need not decide this issue here. It is clear that IBT did accept the policy for 1996. It paid the prem iums and soug ht, w ith at least partial su cces s, to e nforce th e policy. -18- the circumstan ces. In som e settings, acting reasonab ly may well requ ire the insured to check parts of the policy or accompanying documents; in m any settings, it will no t. The duty to check the policy is essen tially the flip side of the extent to which the insured reasonably may rely on the agent, broker, or insure r s having produced the terms and coverages for which the insured bargained or applied. Couch notes, in that regard, that [i]n some instances, the question has been recharacterized by courts which have stated that the issue is not whether the insured read the policy but rather is the reasonableness of his or her reliance on the agent s representation that the policy as worded actually covered the risk for which insurance was requested. Id. Citing Darner Motor Sales v. Universal Underwriters, 682 P.2d 388 (Ariz. 1984), Appleman points out that the failure to read a lengthy and forbidding policy has been held not to bind an insured, as a matter of law, to boilerplate policy provisions that are inconsistent with the insured s understanding of the coverage provided resulting from negotiations with and representations made by the insurance agent. APPLEMAN, supra, § 7155 (2002 Supp.). In the supplement to § 8831, Appleman observes: The general rule requiring an insured to read and examine an insurance policy to determine whether the coverage desired has been furnished has exceptions: (1) for when the agent has held himself out as an expert and the insured has reasonably relied on the agent s expertise to identify and procure the correct amount or type of insuran ce, unless an examina tion of the p olicy would have made it readily apparent that the coverage was not issued; and (2) for where the evidence reflects a special relationship of trust or other unusual circumstance(s) which would have prevented or excused the insured from the duty to exercise -19- ordinary diligence to ensure th at no amb iguity existed between the requ ested in suranc e and th at whic h was issued. Id. at § 8831 (2002 S upp.). Because the issue in a n egligence a ction is the reasonableness of the insu red s conduct, it normally will be fact-specific and therefore, w here there is a ny genuine d ispute of relevant fact, for the trier of fact to determine. Relevant considerations would include whether the policy was a new one or a renew al, how m uch relianc e was justif iably placed in the agent or broker by the insured, the nature of any past dealings between the insured and the broker, agent, or insurer, what information the insured was given about the policy, how difficult it would h ave been for the insu red to learn of and appreciate any discrepancy, and whether any conduct on the part of the broker, a gent, or insur er reasona bly served to preclude an investigation by the insured. Applying those principles to the record before us , it is clear that summary judgment was inappr opriate. As we have recounted, there was evidence that IBT chose and relied upon Willis as an expert in the field to procure a policy that complied with the requirements of LMRDA, and, in particular, § 502(a), and, despite Willis s refusal to ad mit the fact, tha t a Form B policy providing the required coverage could have been obtained. Although the Fidelity Bond Fact Sheet supplied to IBT in connection with the 1996 renewal policy stated the limit of liability as $500,000 per los s, when coupled with the policy language itself and the other documents that were supplied by Willis, we are not convin ced, as a matter of law, that union officials having no special exp ertise in insuran ce langua ge and relying on Willis -20- to assure compliance, would have spotted the non-compliance even if they had read the policy carefully. It is signific ant, in that rega rd, that even Willis s employee was una ware of the non-co mpliance . On this reco rd, a jury could re asonably find that IBT acted reasonab ly in relying on Willis to procure a proper policy and in not making its own indepe ndent in vestiga tion. JUDGMENT REVERSED; CASE REMANDED TO CIRCU IT COURT FOR MONTGOM ERY COUNTY FOR FURTHER PROCEEDINGS; APPELLEE TO PAY THE COSTS. -21-
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