Claim against insurance agent for failing to adequately insure billing is rejected
Whipperwill & Sweetwater sued their insurance agent and Auto Owners Insurance Co., arguing that Iott Agency, the agent, had breached its contract with the plaintiff by failing to adequate insure plaintiff's building and contents. Although it could not point to a particular contract promise, the plaintiff argued that the agent was contractually bound to secure adequate insurance coverage on the building and contents, and that it breached this implied contract. Whipperwill's office had burned to the ground causing two or three times the insured coverage for damage to structure, contents and loss of business.
The plaintiff didn't file suit until after the negligence limitation period had already run, but before the the six-year contract limitation period had expired. Nevertheless, the court ruled that the gravamen of its claim was negligence, not a breach of contract and dismissed the action. The court pointed to previous cases arising in the context of medical care, where Michigan courts have held that a contract action that involves personal injury or property damage and "sounds" in negligence may not be maintained separately and must be pursued in accordance with the rules and procedures governing negligence actions. In essence, where the case seeks redress for personal injury or property damage, no implied contract action may be maintained--even if an implied contract duty of reasonable care is inherent in the relationship.