Trotter v. State Farm Mut. Auto. Ins. Co.

Decision Date15 December 1987
Docket NumberNo. 1209,1209
CourtSouth Carolina Court of Appeals
PartiesCurtis R. TROTTER, Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and D. Kim Ledford, Appellants. . Heard

William O. Sweeny, III, and Monteith P. Todd, both of Nelson, Mullins, Riley & Scarborough, Columbia, for appellants.

Greg W. Anderson, of Anderson, Anderson & Anderson, Edgefield, and John C. Bell, Jr., of Bell & Bell, of Augusta, Ga., and Thomas H. Pope, of Newberry, for respondent.

Amici Curiae:

Kathryn Williams, of Greenville, amicus curiae for South Carolina Trial Lawyers Association.

D. Reece Williams and J. Kershaw Spong, Columbia, amicus curiae, for Independent Ins. Agents of South Carolina Inc.

Kay G. Crowe, Columbia, amicus curiae, for South Carolina Defense Trial Attorneys' Ass'n.

BELL, Judge:

Curtis R. Trotter brought this action against State Farm Mutual Automobile Insurance Company and its agent, D. Kim Ledford, alleging: (1) that they negligently failed to advise him of an exclusion in his motor vehicle insurance policy, (2) that they breached their insurance contract with him, (3) that State Farm negligently failed to settle a lawsuit within the policy limits, (4) that State Farm negligently trained Ledford, and (5) that State Farm had engaged in unfair trade practices. State Farm and Ledford answered with general denials and raised the defense that Trotter was contributorily negligent in failing to read his policy. Before trial, the judge granted State Farm's motion for summary judgment as to the unfair trade practices cause of action. At the close of testimony, State Farm and Ledford made motions for directed verdicts on all causes of action. Trotter dismissed his breach of contract claims with prejudice. The judge denied the motions for directed verdicts on the remaining causes of action. The jury returned a verdict against State Farm and Ledford for $753,521.33 actual damages. State Farm and Trotter made motions for judgment notwithstanding the verdict and for a new trial, which the court denied. State Farm and Ledford appeal. We reverse.

When reviewing a jury verdict, we are limited to determining if there is any evidence to support it. Willis v. Floyd Brace Co., Inc., 279 S.C. 458, 309 S.E.2d 295 (Ct.App.1983). The evidence and all reasonable inferences arising therefrom must be viewed in the light most favorable to the respondent. Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Bruce, 284 S.C. 227, 325 S.E.2d 77 (Ct.App.1985).

Trotter is the sole proprietor of an upholstery business in North Augusta. In the operation of his business, Trotter uses a pick-up truck to collect and deliver his customers' furniture.

In 1975, Trotter contacted Ledford, a State Farm agent, about insuring his vehicles. He chose Ledford because friends had spoken well of him and Ledford's office was only one block from his shop.

When Trotter first met with Ledford, he told him that he wanted "full protection" on his truck. He filled out an application and explained about his business, his employees, and how many miles the truck would be driven. Since the truck was used in Trotter's business, Ledford wrote a commercial policy on Trotter's truck and a personal policy on his other vehicles. The commercial policy included a standard exclusion for any injury to an "employee of the insured arising out of his or her employment." 1

Ledford neither reviewed the policy with Trotter, told him about the exclusion, 2 discussed other types of insurance, nor asked whether Trotter needed workers' compensation insurance. 3 3] Ledford did not discuss coverage for employee injuries, because he did not think Trotter's business was eligible for State Farm's business insurance, due to the poor condition of Trotter's building.

Trotter, likewise, neither asked Ledford to assess his insurance needs nor inquired about other types of insurance. He did not communicate a desire for workers' compensation 4 or any other insurance. Their conversation was confined to the procurement of insurance on his vehicles.

Trotter insured his vehicles through Ledford until 1983. He described his relationship with Ledford, between 1975 and 1983, as "ongoing." He testified that during this time he 5 periodically visited Ledford's office to pay premiums, to give notification of a change in vehicles, to discuss insurance, or to conduct other routine business. Normally, he would deal only with Ledford's receptionist, but on two occasions he spoke with Ledford himself. He further testified that, in approximately 1981, Ledford contacted him about increasing his coverage. Acting on Ledford's recommendation, he did so. Trotter admitted, however, that no one insurance agent was ever responsible for all of his insurance needs. Furthermore, there was evidence that Trotter insured other risks through different agencies.

In March, 1983, Trotter and an employee, Charles Brunson, were traveling in Trotter's truck on Highway 25, just north of Edgefield, when Trotter crossed the center line to make a left turn and hit an oncoming truck. Trotter and Brunson were picking up a customer's furniture at the time.

Following the accident, State Farm wrote Trotter a letter denying coverage for Brunson's injuries due to the exclusion. 6 Until he received the letter, Trotter was unaware of the exclusion, as he had not read his policy.

Brunson brought suit against Trotter in the United States District Court for the Southern District of Georgia to recover for his injuries. Brunson's attorney offered to settle the claim for the limits of Trotter's policy, $100,000.00. Based on the exclusion, State Farm refused to settle the claim or defend Trotter. Brunson was eventually awarded a judgment against Trotter in the amount of $660,000.00. This amount was reduced by $40,000.00 to reflect amounts already recovered from the other driver's insurance carrier.


State Farm and Ledford argue that they were under no duty to advise Trotter of the employee exclusion in the policy or to advise him that he needed workers' compensation insurance. For this reason, they maintain the trial judge should have granted their motions for directed verdicts on the cause of action for negligent failure to advise.

Generally, an insurer and its agents owe no duty to advise an insured. Nowell v. Dawn-Leavitt Agency, Inc., 127 Ariz. 48, 617 P.2d 1164 (App.1980). If the agent, nevertheless, undertakes to advise the insured, he must exercise due care in giving advice. See Riddle-Duckworth, Inc. v. Sullivan, 253 S.C. 411, 171 S.E.2d 486 (1969).

An insurer may assume a duty to advise an insured in one of two ways: (1) he may expressly undertake to advise the insured; or (2) he may impliedly undertake to advise the insured. See Bicknell, Inc. v. Havlin, 9 Mass.App. 497, 402 N.E.2d 116 (1980); Precision Castparts Corp. v. Johnson & Higgins of Oregon, Inc., 44 Or.App. 739, 607 P.2d 763 (1980); Northern Assurance Co. of Am. v. Stan-Ann Oil Co., Inc., 603 S.W.2d 218 (Tex.Civ.App.1979). It is the insured, however, who bears the burden of proving the undertaking. See Riddle-Duckworth, Inc. v. Sullivan, supra.

An implied undertaking may be shown if: (1) the agent received consideration beyond a mere payment of the premium, Nowell v. Dawn-Leavitt Agency, Inc., supra; (2) the insured made a clear request for advice, see Precision Castparts Corp. v. Johnson & Higgins of Oregon, Inc., supra; or (3) there is a course of dealing over an extended period of time which would put an objectively reasonable insurance agent on notice that his advice is being sought and relied on. See Nowell v. Dawn-Leavitt Agency, Inc., supra; Northern Assurance Co. of Am. v. Stan-Ann Oil Co., Inc., supra.

It was incumbent on Trotter to prove Ledford agreed to advise him about his insurance needs. Courts cannot create contracts for the parties. There must be a clear oral or written agreement for a court to enforce. Trotter may not seek, after the fact, to have a court or jury create an undertaking favorable to him, if the parties themselves did not enter such an agreement. See Chapman v. Williams, 112 S.C. 402, 100 S.E. 360 (1919); Somerset v. Reyner, 233 S.C. 324, 104 S.E.2d 344 (1958); Texcon, Inc. v. Anderson Aviation, Inc., 284 S.C. 307, 326 S.E.2d 168 (Ct.App.1985).

Trotter presented no evidence to show that either State Farm or Ledford expressly undertook to advise him. He testified that he saw several State Farm advertisements which in effect said that State Farm's agents are well trained and highly qualified individuals, who will advise people with respect to their insurance needs. These advertisements, however, do not amount to an express undertaking. Ordinarily, an advertisement is a mere invitation to the public to contact the advertiser and request its services, as opposed to an offer to perform those services. See Georgian Co. v. Bloom, 27 Ga.App. 468, 108 S.E. 813 (1921). State Farm's advertisements were nothing more than invitations to the public.

There was likewise no evidence of an implied undertaking. Trotter did not contend that State Farm or Ledford received any consideration beyond the payment of premiums from which an implied undertaking could arise. Moreover, he produced no evidence to show he made a clear request which would put Ledford on notice that his advice was being sought and relied on. A request for "full coverage," "the best policy," or similar expressions does not place an insurance agent under a duty to determine the insured's full insurance needs, to advise the insured about coverage, or to use his discretion and expertise to determine what coverage the insured should purchase. See Ethridge v. Assoc. Mut., Inc., 160 Ga.App. 687, 288 S.E.2d 58 (1981) ("full coverage"); Nowell v. Dawn-Leavitt Agency, Inc., supra ("the best policy"). Trotter himself was admittedly aware of workers' compensation insurance before he first went to Ledford. When asked if he...

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